Good day ladies and gentlemen, and welcome to this Fuwei Films First Quarter 2021 Earnings Conference Call. All lines have been placed on a listen-only mode. [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host Shiwei Yin. Sir, the floor is yours..

Thank you, Kat. 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 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 know that a company's actual results may differ materially from those projected in the 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. To join 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. Sir, please go ahead. Continue. .

Hello, everyone and thank you for joining us today. Despite the oversupply in the marketplace and the ongoing Coronavirus pandemic, we achieved positive trends in overall sales, especially sales of specialty films, including base film for dry film which accounted for 63.9% of our total revenues.

Base film is a high value-added and differentiated product, which is used to produce dry film that is used in printed circuit boards. The sales increase of base film for dry film demonstrates the quality of our products is well recognized by our customers. We believe that the order growth also helps improve the Company's financial performance.

For the future, we remain committed to innovation and differentiated marketing strategy and expanding the end user applications of our films products. We will continue with these efforts and expect that they will enable the Company to capitalize on new opportunities despite challenging industry and economic conditions. .

Thank you, Mr. Jiang. Net sales during the first quarter were RMB101.6 million US$15.5 million compared to RMB83.2 million during the same period in 2020, representing an increase of RMB18.4 million or 22.1%, mainly due to increased sales volume.

The increase of sales volume led to an increase of RMB12.2 million and the increase of sales price resulted in an increase of RMB6.2 million. In first quarter sales of specialty films were RMB65.0 million US$9.9 million or 63.9% of total revenues as compared to RMB39.9 million or 47.9% in the same period of 2020.

The increase was mainly due to increased sales volume. Overseas sales were RMB9.0 million or US$1.4 million or 8.9% of total revenues, compared with RMB5.8 million or 6.9% of total revenues in the first quarter of 2020, representing an increase of RMB3.2 million or 55.2%. The increase was mainly due to increased sales volume.

Gross profit was RMB42.5 million US$6.5 million, representing the gross margin of 41.8%, as compared to a gross profit of RMB29.8 million and gross margin of 35.8% for the same period in 2020. Average product sales price increased by 6.5%, while average cost of goods sold decreased by 3.5% compared to the same period in 2020.

Consequently, the increase in average product sales price and the decrease in average cost of goods sold during first quarter ended March 31, 2021 contributed to the increase in gross profit and gross margin during the period. Operating expenses were RMB10.5 million US$1.6 million which was RMB4.5 million or 30.0%, lower than the same period in 2020.

This decrease was mainly due to the decreased depreciation on a Dornier Production Line and the trial production line as assets of these two production lines were classified as assets held for sale.

Net profit attributable to the company was RMB31.4 million US$4.8 million compared to net profit attributable to the company of RMB13.0 million during the same period in 2020. Basic and diluted net benefit per share was RMB9.60 US$1.47 and RMB3.97 for the three months period ended March 31, 2021 and 2020 respectively.

Total shareholder’s equity was RMB259.2 million or US$39.6 million as of March 31, 2021 compared with RMB227.8 million as of December 31, 2020. As of March 31, 2021 the company had 3,265,837 basic and diluted ordinary shares outstanding. In conclusion, I would like to thank our shareholders for their continued loyalty and support.

We are well positioned to face to 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 your questions..

Thank you. Yes, thank you. The floor is now open for questions. [Operator Instructions]. And our first question comes from Steve Mantel from Mercury Capital. Go ahead, Steve..

Yeah. So, wonder if you could talk about the sustainability of margin [Indiscernible] in this most recent quarter, going forward into the next few quarters? Thank you. .

Hi, Steve. Your line is a bit muffled.

Can you just speak a little louder and a little slower, please?.

Yes.

Could you speak to the sustainability of the margin improvements seen in this most recent quarter?.

Oh, yeah, sure. Okay. Okay, Steve. Yeah, thanks for questions.

So, the change in the margin that you witnessed recently is due to the change in product mix and also the price so it’s specifically the portion of the differentiated products that we are selling is we see that as stable with room for improvements, while also we're seeing some increase in price as well.

So overall, that gives us what we think the margin should be sustainable in the near future..

So, that addresses the gross margin, but what about the material decline in our packs? How should we model that as a percent of sales going forward?.

Okay, Steve so, there might be some uncertainty on the raw material film but aside from that, we see the operating cost being stable going forward..

And a final question, with respect to sales mix via geography I see in this quarter, approximately 90% was China and approximately 10% was rest of world.

Do we expect that mix, which saw quite a rise in rest of world to continue to increase?.

Okay, Steve so, the main market for our products will remain for China for the foreseeable future. And for two reasons. Number one being, still the uncertainty with the pandemic, especially in the rest of the world. And number two is that because of the anti-dumping measures in Korea and the U.S., against our products.

So, there is a possibility for some slight increase in the export but overall, China will remain our main market for the time being..

Great.

If I could squeeze one more in, when do you expect the sales during for product line to complete?.

Yeah Steve, so those are – yeah, so that is already complete. .

Okay, thank you very much. .

Yeah. Thank you, Steve..

[Operator Instructions]. And I'm not seeing any further questions. At this time, I would now like to turn it back to management for any closing remarks. Thank you..

Thank you, Kat. And thank you all for joining us on today's conference call. We look forward to being in touch with you and we'll keep you updated of our progress. Thank you and have a great day..

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day..