Fuwei Films (Holdings) Co., Ltd.

Ladies and gentlemen, and welcome to the Fouet Films second quarter 2021 earnings conference call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Xue Yin. Sir, the floor is yours.

Thank you, Kat. Let me 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. 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 public statements that are made pursuant to the safe harbor provisions of the Public Security Litigation Reform Act of 1995. We 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 subjective risks and uncertainties. Discussion of the factors that may affect future results is contained in or found with the U.S. Security 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 today on the call is Mr. Yong Jiang, Corporate Secretary. Before I walk you through our financials, Mr. Jiang will deliver his opening remarks. Sir, please go ahead. Mr. Jiang, please go ahead.

Hello, everyone. Thank you for attending today's meeting. Although we are still facing an unfavorable market environment, and despite the outbreak of the epidemic, it has had a major negative impact on the world economy. However, what makes us happy is that our domestic sales income is relatively stable. The number of sales in the special model continues to increase. In 2019, the sales of the special model accounted for 60% of the total income. We believe that this will contribute to the company's continued innovation and development, as well as a cross-industrialization strategy to help the company expand its middle and rear-end scope. We will continue to work together to make the company in the challenging industry and in the modern financial world a new opportunity in the future. Xiamen City will be the second largest financial industry in the first six months of 2021. Hello, everyone, and thank you for joining us today.

We continue to achieve positive trends in our mix of sales, especially sales of specialty films, which accounted for 68.6% of our total revenues for the second quarter, ended June 30, 2021. We believe these results benefit from our commitment to innovation and the friendship marketing strategy, which have expanded the end-user applications of our film products. We will carry on with these efforts and expect that They will enable the company to capitalize on new opportunities despite challenging industry and economic conditions. Now I will read to you highlights of our financial results for the second quarter for six months. Net sales during the second quarter were RMB $106 million, U.S. $15.6 million, compared to RMB $82.9 million during the same period in 2020, representing a year-over-year increase of RMB $17.7 million, or 21.4%. The increase of average sales price caused a year-over-year increase of RMB 15.6 million, and higher sales volume caused an increase of RMB 2.1 million. In the second quarter, sales and specialty firms were RMB 69.0 million, U.S. 10.7 million, or 68.6% of our total revenues as compared to RMB 48.1 million, or 58.0% in the same period of 2020. which was an increase of RMB 20.9 million or 43.5 percent as compared to the same period in 2020. The increase in sales volume caused an increase of RMB 16.0 million, and the increase in the average sales price caused an increase of RMB 4.9 million. Overseas sales were RMB 13.4 million or US 2.1 million or 13.3 percent of total revenues compared with RMB 7.5 million or 9.1 percent of total revenues in the second quarter of 2020. The increase of average sales price caused an increase of RMB $0.6 million, and the increase in sales volume resulted in an increase of RMB $5.3 million. Gross profit was RMB $39.9 million, U.S. $6.2 million for the second quarter, representing a gross profit rate of 39.6%, as compared to a gross profit rate of 41.6% for the same period in 2020. Operating expenses for the second quarter were RMB 14.0 million, U.S. 2.2 million, as compared to RMB 18.7 million for the same period in 2020. This decrease was mainly due to the decrease of accrual depreciation of the third production line and trial production line as these two production lines were sold. Net profit attributable to the company during the second quarter was RMB 19.8 million, U.S. 3.1 million, while net profit attributable to the company was RMB 14.1 million, during the same period in 2020. Now, moving on to first six months results. Net sales during the first six months were RMB 202.2 million, U.S. 31.3 million, compared to RMB 166.1 million in the same period in 2020, representing an increase of RMB 36.1 million, or 21.7%. The increase in average sales price caused an increase of RMB 22.0 million, and the increase in the sales volume caused an increase of RMB 14.1 million. In the first six months, sales and specialty firms were RMB 133.9 million, U.S. 20.7 million, or 66.2% of our total revenues as compared to RMB 88.0 million, or 53.0% in the same period of 2020. which was an increase of RMB 45.9 million, or 52.2%, as compared to the same period in 2020. The increase in sales volume caused an increase of RMB 41.6 million, and the increase in average sales price caused an increase of RMB 4.3 million. Obviously, sales during the first six months were RMB 22.4 million, or US 3.5 million, or 11.1% of total revenues compared with RMB 13.3 million, or 8.0%, of total revenues in the same period in 2020. This was RMB 9.1 million higher than the same period in 2020. The increase in sales volume resulted in an increase of RMB 8.1 million while higher average sales price caused an increase of RMB 1.0 million. Our gross profit was RMB 82.3 million, US 12.7 million for the first six months ended June 30th, 2021. representing a gross margin rate of 40.7% as compared to a gross margin rate of 38.7% for the same period in 2020. Operating expenses for the first six months were RMB 24.4 million, U.S. 3.8 million, compared to RMB 33.8 million in the same period in 2020, which was RMB 9.4 million, or 27.8% lower than the same period in 2020. This decrease was mainly due to decreased accrual depreciation of the third production line and trial production line. Net income attributable to the company during the first half of 2021 was RMB $51.2 million, U.S. $7.9 million, compared to net income attributable to the company of RMB $27.0 million during the same period in 2020, representing an increase of RMB $24.2 million from the same period in 2020 due to the factors described above. Cash, cash equivalent, and restricted cash totaled RMB $11. $576.1 million, U.S. $27.3 million as of June 30, 2021. Total shareholders' equity was RMB $279.0 million, U.S. $43.2 million. 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 on our progress. With that, management would be happy to answer your questions. Kat, please begin the Q&A.

Thank you. The floor is now open for questions. If you do have a question, you may press star 1 on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, it's star 1 to ask a question on the phone. Please hold while we poll for questions. Again, it's star one. And it appears there are no questions at this time. I would now like to turn the floor back over to management.

Thank you for joining us on the conference call today. We look forward to being in touch with you and keep you updated about 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.