Fuwei Films (Holdings) Co., Ltd.

Greetings. Welcome to the FUA Films first quarter 2019 earnings conference call. At this time, all participants are in a listening mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Xue Yin. Mr. Yin, you may begin.

Thank you, Omar. Let me remind you today 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 also 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 Security Litigation Reform Act of 1995. You should know that the company's actual results may differ materially from those projected in these statements due to a variety of factors affecting our business. Forward-looking statements are subject to risks and uncertainties. Discussion of 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 financials, Mr. Jiang will deliver his opening remarks, and I will translate Mr. Jiang's remarks. Sir, please go ahead. Mr. Jiang, please.

Thank you, Secretary. Hello, everyone. Thank you for attending today's meeting. Although we are still facing the disadvantage of market supply, the overall sales of the company and the sales of special products We believe that this is because of the continuous innovation and development to help the company expand its mid-range customer range. In the future, the company will continue to focus on new opportunities in the challenging industry and the bright economic field. Next, the city committee will read for you the financial performance of the first quarter of 2019. After that, I will answer your questions.

Hello everyone, and thank you for joining us today. While we continue to face headwinds due to oversupply in the marketplace, we are encouraged by continued positive trends in overall sales, sales of specialty films, and improvement in gross margin. We believe our commitment to innovation and R&D has expanded the end-user applications of our films that will enable the company to capitalize on new opportunities despite challenging industry and economic conditions. Now, if we will read to you our financial results for the first quarter of 2019, then I will begin the Q&A session. Thank you, Mr. John. I will now provide you with an overview of our key financial numbers in the first quarter of 2019. Net sales during the first quarter ended March 31, 2019, where RMB 81.1 million, U.S. 12.1 million, compared to RMB 76.9 million during the same quarter in 2018, representing an increase of RMB 4.2 million or 5.5%, mainly due to the increased sales price. In the first quarter of 2019, sales of specialty films were RMB 32.2 million, US 4.8 million, or 39.7% of our total revenues as compared to RMB 32.9 million, or 42.8% in the same period of 2019. The decrease was mainly due to decreased sales volume. Overseas sales were RMB 16.2 million, or US 2.4 million, or 20.0 percent of total revenues, compared with RMB 11.0 million, or 14.3 percent of total revenues in the first quarter of 2018, representing an increase of RMB 5.2 million, or 47.3 percent. Higher sales volume resulted in an increase of RMB 4.2 million in overseas sales, an increase in sales prices, led to an increase of RMB 1.0 million. First profit was RMB 12.4 million, US $1.8 million for the first quarter, representing a gross margin of 15.3% as compared to a gross margin of 12.3% for the same period in 2018. Correspondingly, gross margin rate increased by 3.0 percentage points compared to the same period in 2018. Our average product sales prices increased by 3.8% compared to the same period in 2018, while our average cost of goods sold increased by 0.3 percent compared to the same period. Consequently, the increase in average product sales prices was significantly higher than that in the average cost of goods sold during the first quarter, which contributed to the increase in our gross margin compared to the same period in 2018. Operating expenses for the first quarter ended March 31, 2019, were RMB $13.5 million US $2.0 million, which was RMB $2.3 million, or 14.6% lower than the same period in 2018. This decrease was mainly due to the decreased allowance for downfall accounts receivable and increased expenses in R&D. Net loss attributable to the company during the first quarter ended March 31, 2019, with RMB $3.4 million, US $0.5 million, compared to net loss attributable to the company of RMB $8.2 million during the same period in 2018. Basic and diluted net loss per share was RMB 1.03, U.S. 15 cents, and RMB 2.51 for the three-month period ended March 31, 2019 and 2018, respectively. Net cash provided by operating activities was RMB 5.6 million for the three months ended March 31, 2019, as compared to net cash provided by operating activities of RMB 4.0 million for the same period in 2018. Cash and cash equivalents on March 31st, 2019 was RMB 30.3 million or US 4.5 million compared with RMB 8.9 million as of December 31st, 2018. 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'll keep you informed of our progress. With that, Mr. Chan would be happy to answer your questions. We require your patience as we translate each question and answer. Mark, please begin the Q&A.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove the question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. As a reminder, we are now conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. There are no questions at this time, and I would like to turn the call back over to Xueyin for closing remarks.

Thank you for joining us today on today's conference call. We look forward to being in touch with you and will keep you updated about our progress. Thank you and have a good day.

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