Wanda Film to build new theaters despite $668M loss

By Zhang Rui
0 Comment(s)Print E-mail China.org.cn, April 26, 2020
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China's biggest film company, Wanda Film Group, is struggling with a huge loss in 2019 according to its annual report, yet still plans to build new cinemas this year though the COVID-19 epidemic has shut down all entertainment facilities.

A photo shows a Wanda Cinema in Changzhou, Jiangsu province. [Photo/VCG]

It issued a series of announcements on the evening of April 21, including the 2019 annual report.

This shows the company achieved a revenue of 15.435 billion yuan in 2019, down 5.23% year-on-year; the net profit attributable to shareholders of the listed company was actually a loss of 4.73 billion yuan (US$668 million), a fall of 324.87% year-on-year. The net cash flow generated from operating activities was 1.89 billion yuan, down 13.56% from 2018.

At the end of the reporting period, Wanda Film Group's total assets totaled 26.49 billion yuan, net assets attributable to shareholders of the listed company were set at 13.83 billion yuan.

One of the most important events in 2019 was to acquire a 95.7683% stake in Wanda Pictures valued at 10.52 billion yuan, in order to implement the latter's restructuring. However, judging from the 2019 annual report, the performance of Wanda Pictures after consolidation of accounts fell below expectations.

In 2019, Wanda Pictures led or participated in the production and distribution of a total of 25 films of various types, from "The Crossing", "Sheep Without a Shepherd", "Boonie Bears: Blast into the Past", "The Bravest" to "My People,My Country". However, during the reporting period, the number of films in which it was the major investor and thus controlled was relatively small, and the box office performance in some cases did not meet expectations, so the related business revenue and profits fell significantly year-on-year.

Nevertheless, the Group's Wanda Cinema Line will continue to build more cinemas, according to a separate announcement.

Along with Wanda Film's 2019 annual report, there is also an announcement of its non-public offering of A-shares. The announcement said Wanda Film Group intended to issue A-shares to no more than 35 specifically-targeted investors, and the total amount of funds raised (including distribution costs) would not exceed 4.35 billion yuan, of which it is planned to invest about 3.05 billion yuan in new cinema projects.

Specifically, the cities chosen as sites for the new cinemas include Beijing, Shanghai, and Guangzhou. According to the future development goals of Wanda Film Group, it plans to build 162 new cinemas from 2020 to 2022, with a total of 1,258 screens.

Statistics show that, in 2019, Wanda Film Group established 73 new cinemas across the country, raising the number of domestic cinemas it owns to over 600. As of the end of 2019, the company has put 349 IAMX screens and 45 Dolby theaters into operation. In 2019, the company's own cinemas' cumulative box office total took over 13.3% share of the Chinese film market. However, in 2019, Wanda Film Group also shut down 11 cinemas whose operating performance did not meet expectations.

Things have gotten even worse since the beginning of 2020 as the COVID-19 pandemic emerged. First the Chinese movie industry and then that of the entire world struggled for months, with cinemas being shut down and film releases being postponed. The cinemas in China currently have not set any date for reopening.

In recent days, Wanda has been quick to quash various rumors, from whether it will lay off 20% - 30% of its employees, to whether the largest American theater chain AMC Theaters, a majority-owned subsidiary of Wanda Group, will file for bankruptcy.

According to statistics compiled and released by Economic Daily on April 15, since the beginning of 2020, 5,328 film and television companies have been closed down or have suspended operations.

Wanda Film Group's 2020 first quarter performance forecast report projects a net loss of 550 million to 650 million yuan. Compared with a profit of 400 million yuan made from the same period last year, a decline of more than 200% year-on-year.

The company said that due to the epidemic, the entire industry chain of the film industry was under great pressure in the short term, and some small and medium-sized theaters would withdraw from the market, further accelerating the speed of market clean up and integration. It is expected that the market share of the leading cinema companies will accelerate increase after the epidemic.

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