Fengfan Co., Ltd. Business Report FY2008

Business Highlights

Financial overview (in million yuan)
  FY2008 FY2007 Rate of change(%) Factors
Sales 3,149.71 2,627.33 19.9%

- Sales increased from a year ago, because the company cultivated new markets by developing new products and reinforcing its marketing activities.

Operating profit (291.26) 142.12 (304.9%)

The Company plunged into the red because of the following factors:
- A drop in stock value because of falling materials prices
- An increase in sales costs and management costs
- The company posted a bad-debt loss of 144.2 million yuan, since export proceeds for electrolytic lead became unrecoverable

Ordinary profit (283.95) 142.66 (299.0%)
Net profit (287.37) 116.21 (347.3%)

New joint-venture company
- In September 2008, the Company and Amelio Solar Inc. of the U.S.A. will establish Baoding Fengfan Photovoltaic Power Co., Ltd. (tentative name) in the High Technology Development Zone in Baoding City, Hebei Province. The new company will manufacture thin film amorphous silicon solar cells and photovotalic (PV) system parts. The total investment in the new company is planned to reach around 15 million US dollars. The facility will be capitalized at 10 million US dollars, of which 75 percent will be provided by Fengfan and 25 percent by Amelio. The plant's annual production capacity for thin film amorphous silicon solar cells will be 5MW initially, which is scheduled to go up top 25MW by 2010, and 100MW in the future. Production engineering technology will be offered free of charge by Ameilo. (From an announcement made by the company, September 15, 2008)

Joint-venture project with Johnson Controls Inc
- In July 2007, the Company and Johnson Controls Inc. signed a memorandum of understanding, under which they will establish a joint-venture company to engineer, manufacture, sell, and provide after-sales services on maintenance-free lead-acid automotive batteries in Sichuan Province, Chongqing City, Guizhou Province, Yunnan Province, and the Tibet Autonomous Region. The two companies are likely to hold equal shares in the joint-venture corporation. The talks on the joint-venture project are under way as of 2008.

- In 2008, the Company was awarded contracts to supply its products to new vehicle models including the FAW-VW Golf A6, the Audi Q5, commercial models built by Guangqi Hino, and the FAW Car Hongqui A501.
- In 2008, the Company won exclusive supply programs from Kia and Nanjing Iveco to manufacture products for the Kia Sportage/TDC/AMCs and Nanjing Iveco's models destined for export.


R&D activities
- The Company conducts its development activities at Fengfan Technical Center.

Development activities based on OEM contracts
- In 2008, the Company developed batteries for use in Shanghai GM's Buick New Regal, These batteries passed GM's PPAP standard.
- In 2008, the Company developed batteries for use in FAW-VW's Audi B8. It began trial production after passing product inspections.

Investment Activities

Capital investment projects using raised funds (as of Dec. 2008) (in million yuan)
Capital investment projects Planned investment amount Funds Progress (%) Status report as of Dec. 2008
Construction project for lithium-ion battery production facilities 200.00 Funds raised 70.0% The Company completed the first phase and already launched production. 
*It, however, has been unable to meet its earnings target due to the changing market environment.
Construction project for production facilities to make sealed maintenance-free lead- acid batteries 270.00 Funds raised 0.27% This facility is now under construction. 
(Percentage of completion: 0.3 percent)
Construction project for production facilities to manufacture both thin-film amorphous silicon solar cells and photovoltaic (PV) power generation systems 100.0 Own funds 2.37% The company established a joint-venture company