Fuwei Films (Holdings) Co., Ltd.

Ladies and gentlemen, good day and thank you for joining this Fu Wei Films second quarter 2020 earnings conference call. As a reminder, all phone lines are in a listen-only mode, but after today's prepared remarks, you will have the opportunity to ask questions. To get us started with opening remarks and introductions, I am pleased to yield the floor to Xue Yan. Please go ahead, sir.

We remind you that today's call is being recorded. A replay of today's call will be made available shortly after the conclusion of today's call. I would also like to remind you that certain statements that are none 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. We should know that a 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 subjective risks and uncertainties. Discussion of the factors that may affect future results is contained in our findings 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 the call today is Mr. Yong Jiang, Corporate Secretary. Before I walk you through our financials, Mr. Jiang will deliver his opening remarks. Sir, please go ahead. Thank you, Secretary.

Hello, everyone. Thank you for attending today's meeting. Although we are still facing an unfavorable market environment, the outbreak of COVID-19 has had a major negative impact on the world economy. However, what amazes me is that our overall sales revenue is relatively stable, and the number of sales in the special mode continues to increase to 58%. In addition, we have achieved positive profits for five consecutive seasons. We believe that this is due to the continuous innovation and development of the company and the implementation of the product strategy. I will answer your questions after reading the financial performance of the second quarter of 2020.

Thank you for joining us today. It's oversupply in the marketplace and the outbreak of the COVID-19 pandemic, which has caused significant and adverse effects on the global economy. We achieved positive trends in our mix of sales, especially sales, uh, uh, which accounted for 58% of our total revenues. In addition, we achieved net profit for five consecutive quarters. We believe these results benefit from our commitment to innovation and differentiated marketing strategy, which have expanded the end user applications of our film's 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. Here are our financial results for the second quarter of 2020. Quarter were RMB $82.9 million, US $11.7 million, compared to RMB $88.1 million during the same period in 2019. A decrease of average sales price caused a decrease of RMB $3.6 million, and lower sales volume caused a decrease of RMB $1.6 million. 2020 sales and specialty firms were RMB $48.1 million, US $6.8 million, or 58% of our total revenues as compared to RMB 42.0 million or 47.6% in the same period of 2019, which was an increase of RMB 6.1 million or 14.5% year over year. The increase of sales volume caused an increase of RMB 8.9 million and the decrease in the average sales price caused a decrease of RMB 2.8 million. Were RMB 7.5 million or US 1.1 million, or 9.1% of total revenues compared with RMB 14.3 million or 16.3% of total revenues in the second quarter of 2019. The increase of average sales price caused an increase of RMB 0.5 million and the decrease in sales volume cost resulted in a decrease of RMB 7.3 million. RMB 34.4 million, US 4.9 million for the second quarter representing a gross profit rate of 41.6% as compared to a gross profit rate of 21.1% for the same period in 2019. Correspondingly, gross profit rate increased by 20.5% each point compared to the same period in 2019. Our average product sales price decreased by 4.2% compared to the same period last year, while the average cost of goods sold decreased by 29% due to the decrease in raw material costs. It resulted in an increase in our gross profit. For the second quarter were RMB 18.7 million, US 2.7 million, as compared to RMB 15.0 million in the same period in 2019. The decrease was mainly due to the change of accounting estimate, which caused the increase of accrual depreciation of their production line. The company during the second quarter was RMB 14.1 million, US 2.0 million, while net profit attributable to the company was RMB 1.0 million during the same period in 2019. Next month's results. Net results during the six-month period ended June 30, 2020, where RMB 166.1 million, U.S. 23.5 million, compared to RMB 169.2 million in the same period in 2019. The increase in average sales price caused an increase of RMB 0.7 million and a decrease in sales volume caused a decrease of RMB 3.8 million. Sales of specialty films were RMB 88.0 million, U.S. 12.5 million, or 53% of our total revenues as compared to RMB 74.2 million, or 43.8% in the same period of 2019, which was an increase of RMB 13.8 million, or 18.6% year over year. The volume caused an increase of RMB 17.7 million, and the decrease in the average sales price caused a decrease of RMB 3.9 million. The first six months were RMB 13.3 million, U.S. 1.9 million, or 8.0 percent of total revenues compared with RMB 30.6 million, or 18.1 percent of total revenues in the same period of 2019. and resulted in a decrease of RMB 18.2 million and was mainly due to the anti-dumping measures while higher average sales price caused an increase of RMB 0.9 million. Our gross profit was RMB 64.2 million, US 9.1 million for the first six months, representing a gross margin rate of 38.7% as compared to a gross margin rate of 18.3% for the same period in 2019. Margin rate increased by 20.4 percentage points. Average product sales price increased by 0.4 percent compared to the same period last year, while the average cost of goods sold decreased by 24.6 percent. Correspondingly, it resulted in an increase in our gross margin. For six months, we're RMB 33.8 million, U.S. 4.8 million, compared to RMB 28.5 million in the same period in 2019. This increase was mainly due to the change of accounting estimate, which caused the increase of accrual depreciation of their production line. The company during the first half of 2020 was RMB 27.0 million, U.S. 3.8 million, compared to net loss attributable to the company of RMB 2.4 million during the same period in 2019, representing an increase of RMB 29.4 million from the same period due to the factors described above. and restricted cash totaled $81.3 million, U.S. $11.5 million as of June 30, 2020. Was RMB $235.2 million, U.S. $33.3 million. Management will be happy to answer your questions. We require your patience as we translate to question and answer. Jim?

Certainly. Thank you. And thank you for your remarks today, gentlemen. To our audience, if you would like to ask a live question, please press star and 1 on your telephone keypad. Pressing star and 1 will place your line into a queue, and we will take your questions one at a time. Once again, ladies and gentlemen, that is star and 1 on your telephone keypad if you would like to ask a question. Also, one more friendly reminder that if you're joining us today on a speakerphone, Please return to your handset prior to pressing star and one to be certain that your signal does reach our equipment. Once again, ladies and gentlemen, that is star and one. Thank you, Shoei. We'll give just a few seconds for everyone to signal us. I'll let you know if we have any questions. We'll just take a moment. And again, ladies and gentlemen, if you have a question or need clarification on anything covered today in the FUE Films Second Quarter Earnings Conference, please press star and 1 on your telephone keypad now. We'll allow just a few more seconds. And we have no signals from the audience your way.

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 remain committed to providing value to our shareholders and customers. We will keep you informed of our future progress. Thank you. Have a good day.