Fuwei Films (Holdings) Co. Ltd., which makes biaxially oriented PET film, is delaying the addition of a third production line.
The Beijing-based company introduced plans June 20 for the line in its Weifang plant. The line was supposed to be installed by the end of December.
Chief Financial Officer Cindy Lu said in a conference call the company is $15 million short of capital needed to buy and install the 50.7 million-pound-per-year line.
The company has been looking for financing opportunities in the United States since late July, according to a Nov. 12 news release, but it has received limited response from commercial banking lenders due to China's investigation of Fuwei's three major shareholders.
On Sept. 28, Chinese authorities issued an arrest warrant for shareholders Jun Yin, Duo Wang and Tongju Zhou for suspected irregularities including favoritism and the sale of state-owned assets at low prices.
Zhou resigned as a board director Oct. 18. Effective on the same day, director Mark Stulga also resigned from his posts as chairman of Fuwei's audit committee, compensation committee and corporate governance and nominating committee.
The company's independent auditor, Murrell, Hall, McIntosh & Co. PLLP, also resigned in early November.
He Xiaoan, Fuwei chairman and chief executive officer, said the company has interviewed four candidates for the board posts, and expected to fill two vacancies by the end of November.
Fuwei announced its third-quarter financial results Nov. 12. For the three-month period ended Sept. 30, the company showed a 2.1 percent decline of net profit, to $14.3 million (105.8 million yuan), compared with the same period a year ago. Sales over the same period grew 12.8 percent.
Lu said weak demand from export customers is hindering Fuwei's growth. The firm reported overseas sales of $2.5 million (18.5 million yuan) in the third quarter, or 17.6 percent of total sales, down from 22.5 percent in third quarter of 2006.
That's a result of China's reduction of value-added tax refunds for exported plastic products, Lu said. The government cut the refund rate from 11 percent to 5 percent July 1.
``We plan to raise export prices to offset the impact and also shift the sales structure to higher-margin regions,'' she said.
Fuwei opened a sales office in Osaka, Japan, in October. Average prices for BOPET film are 10-15 percent higher in Japan than in China, according to the company.
The Chinese domestic market for BOPET film is oversupplied, according to the China Plastics Processing Industry Association. Production capacity totaled 1.5 billion pounds in 2006, twice as much as domestic demand.
An official recently said machines run at 60 percent of capacity on average.
In the third quarter, Fuwei ran one line at 88 percent of capacity, another at 65 percent, and a leased one at 54 percent.
Fuwei filed an initial public offering Dec. 19 on Nadaq. Since the IPO, its share price has dropped from $8.28 to $3.60.
