Greetings and welcome to Fuwei Films’ Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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, Shiwei Yin.

Thank you. You may begin..

Thanks, Melissa. Let me remind you that today’s call is being recorded. A replay of the 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 provisions 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 our businesses. Forward-looking statements are subject to risks and uncertainties and 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 are continuing to be adversely affected by intense competition and increases by our demand in China’s BOPET market our net sales and the sales in specialty films increased.

We are glad to announce that the sales in specialty films accounted for 52.2% of total revenues for the third quarter of 2018. We believe the improvement on our financial metrics benefit from continuing implementation of differentiation strategy.

Looking ahead, encouraged by this positive trend, we believe our commitment to innovation and R&D will enable us to capitalize on market opportunities and as a result expect to realize profits despite challenging industry and economic conditions.

Now I will provide an overview of our financial results for the third quarter and first 9 months of 2018, then we will begin the Q&A session..

Thank you, Mr. Zengyong. Net sales during the third quarter ended September 30, 2018 were RMB86.9 million, US$12.6 million compared to RMB73.9 million during the same period of 2017 representing an increase of RMB13.0 million or 17.6%.

The increase of average sales price caused an increase of RMB18.6 million and the sales volume decrease caused a decrease of RMB5.6 million.

In the third quarter of 2018, sales of specialty films were RMB45.3 million, US$6.6 million or 52.2% of our total revenues as compared to RMB28.5 million or 38.6% in the same period of 2017, which was an increase of RMB16.8 million or 58.9% as compared to the same period in 2017.

The increase in average sales price caused an increase of RMB2.9 million and the increase in the sales volume caused an increase of RMB13.9 million. Overseas sales were RMB8.5 million or US$1.2 million or 9.8% of the total revenues compared with RMB15.2 million or 20.6% of total revenues in the third quarter of 2017.

The increase in average sales price caused an increase of RMB2.3 million and a decrease in sales volume resulted in a decrease of RMB9.0 million.

Our gross profit was RMB17.1 million, $2.5 million for the third quarter ended September, 30, 2018, representing a gross margin rate of 19.6% as compared to a gross margin rate of 9.1% for the same period in 2017.

Correspondingly, gross margin rate increased by 10.5 percentage point compared to the same period in 2017 mainly due to the increase in average sales price. Operating expenses for the third quarter ended September 30, 2018, were RMB17.8 million, $2.6 million which was RMB1.5 million or 9.2% higher than the same period in 2017.

This increase was mainly due to increased expenses on research and development. Net loss attributable to the company during the third quarter was RMB1.8 million, $0.3 million compared to net loss attributable to the company of RMB12.1 million during the same period in 2017, representing a decrease in loss of RMB10.3 million.

Basic and diluted net loss per share was RMB0.57, $0.08 and RMB3.7 for the three months period ended September 30, 2018 and 2017 respectively.

Now moving on to our first nine months fiscal and financial results, net sales during the first nine months were RMB243.4 million, $35.4 million, compared to RMB211.9 million during the same period in 2017, representing an increase of RMB31.5 million or 14.9%.

The increase in average sales price caused an increase of RMB35.6 million and the decrease in the sales volume caused a decrease of RMB4.1 million.

In the first nine months, sales of specialty films were RMB109.0 million, $15.9 million or 44.8% of our total revenues as compared to RMB75.8 million or 35.8% in the same period of 2017, which was an increase of RMB33.2 million or 33.8% as compared to the same period in 2017.

The increase of average sales price caused an increase of RMB2.8 million and the increase in the sales volume caused an increase of RMB30.4 million. Overseas sales during the first nine months were RMB36.1 million or $12.3 million or 14.8% of total revenues as compared with RMB44.2 million or 20.9% of total revenues in the same period in 2017.

This was RMB8.1 million lower than the same period in 2017. The decrease in sales volume resulted in a decrease of RMB12.7 million and the increase in average sales price caused an increase of RMB4.6 million.

Our gross profit was RMB33.3 million, $4.9 million for the first 9 months, representing a gross margin of 13.7% as compared to a gross margin of 7.3% for the same period in 2017. Correspondingly, gross margin increased by 6.4 percentage points.

Our average product sales prices increased by 17.2% compared to the same period last year, while the average cost of goods sold increased by 9.1% compared to the same period last year.

Consequently, the amount of increase in the sales prices was higher than that in cost of goods sold during the first 9 months ended September 30, 2018 compared with the same period in 2017, which resulted in an increase in our gross profit.

Operating expenses for the first 9 months ended September 30, 2018, were RMB47.0 million, $6.8 million compared to RMB44.3 million in the same period in 2017, which was RMB2.7 million or 6.1% higher than the same period in 2017. This increase was mainly due to increased expenses on research and development.

Net loss attributable to the company was RMB18.7 million, $2.7 million compared to net loss of RMB35.9 million during the same period in 2017, representing a decrease in loss of RMB17.2 million. Total shareholders equity was RMB200.26 million or $29.16 million as of September 30, 2018 compared with RMB221.03 million as of December 31, 2017.

As of September 30, 2018, the company had 3,265,837 basic and diluted total ordinary shares outstanding. In conclusion, we would like to thank our shareholders for their continued loyalty and support. We believe that 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. Zengyong will be happy to answer your questions. We require your patience as we translate each question and answer. Melissa, please begin the Q&A..

Thanks for joining us on today’s conference call. We look forward to be in touch with you and keep you updated about our future progress. Thank you and have a nice day..

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