Zengyong Wang - Chairman and CEO Yong Jiang - Corporate Secretary.

Analysts:.

Greetings and welcome to Fuwei Films’ First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host [Gabriel Tall]. Please go ahead, Gabriel..

Thank you. Let me remind you that today's call is being recorded. A replay of this call will be made available shortly after the conclusion of today's call.

Before we start, I would like to remind you that certain statements that are not of historical facts made during the course of this conference call about future events and projected financial results constitute forward-looking statements that are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

You should note that the Company's actual results may differ materially from those projected in these statements due to a variety of factors affecting the business. Forward-looking statements are subject to risks and uncertainties. Discussion of the factors that may affect future results is contained in our filings with the U.S.

Securities and Exchange Commission. We undertake no obligation to correct or update any forward-looking statements provided as a result of new information, future events or changes in our expectations. Joining us on today's call is Mr. Yong Jiang, Corporate Secretary. Before I walk you through our financial results, Mr.

Jiang will deliver his opening remarks and I will translate Mr. Zengyong's remarks. Sir, please go ahead..

Hello everyone and thank you for joining us today. While we continue to face headwinds due to oversupply in marketplace, we are encouraged by continued positive trends in overall sales, sales of specialty films and our gross margin improvement.

We believe our commitment to innovation and R&D has expanded our end-user applications that will enable the Company to capitalize on these opportunities despite challenging industry and economic conditions. Now I'll read to you our financial results for the first quarter of 2018. Then Mr. Jiang will begin the Q&A session.

I'll now provide you with an overview of our key financial numbers in quarter one 2018. Then I'll offer you some updates on operations followed by the management Q&A.

Net sales during the first quarter ended March 31, 2018 were RMB76.9 million or $12.3 million, compared to RMB67.9 million, during the same period in 2017, representing an increase of RMB9 million or 13.3% mainly due to sales price increases.

In the first quarter of 2018, sales of specialty films were RMB32.9 million or $5.3 million or 42.8% of our total revenues as compared to RMB21.9 million or 32% in same period of 2017. The increase was mainly due to increases in sales volume.

Overseas sales were RMB11 million or $1.8 million, or 4.3% of total revenues compared with RMB13.2 million or 19.4% of total revenues in the first quarter of 2017, representing a decrease of RMB2.2 million or 16.7%.

While a decrease in sales volume caused a decrease of RMB2.9 million, this was offset by an increase of RMB0.7 million caused by the increase of sales prices.

Our gross profit was RMB9.5 million or $1.5 million for the first quarter ending March 31, 2018, representing a gross margin of 12.3% as compared to a gross margin of 5.5% for the same period of 2017. Correspondingly, gross margin increased by 6.8 percentage points compared to the same period in 2017.

Our average cost of goods sold increased by 5.1% compared to the same period in 2017, due to the price increase of main raw materials, while our average product sales price just increased by 13%, compared to the same period in 2017.

Consequently, the increase in average product sales prices were significantly higher than that in average cost of goods sold during the first quarter ending March 31, 2018, which contributed to the increase in our gross margins compared with the same period in 2017.

Operating expenses for the first quarter ended March 31, 2018 were RMB15.8 million or $2.5 million, which was RMB2.2 million or 8% higher than the same period in 2017. This increase was mainly due to the increased allowance for doubtful accounts receivable and increased expense in R&D.

Net loss attributable to the Company during the first quarter ended March 31, 2018 was RMB8.2 million or $1.3 million, compared to the net loss attributable to the Company of RMB12.2 million during the same period in 2017.

Basic and diluted net loss per share was RMB2.51 or $0.40, and RMB3.72 for the same three-month period ending March 31, 2018 and 2017 respectively. Total shareholders' equity was RMB210.8 million or $33.6 million as of March 31, 2018, compared with RMB221 million as of December 31, 2017.

As of March 31, 2018, the Company had 3,265,837 basic and diluted ordinary shares outstanding. In conclusion, we would like to thank our shareholders for their continued loyalty and support. We believe we are well positioned to face the current challenges and are committed to providing value to our shareholders and customers.

We will keep you informed of our progress. With that, Mr. Jiang will be happy to answer questions. We require your patience, as we translate each question and each answer. Operator, please begin the Q&A..

Operator:.

Thank you for joining us on this conference call. We look forward to being in touch with you and will keep you updated about our progress..

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..