China's Huayi Brothers Reports 17 Percent Profit Fall for 2016

The pioneering Chinese studio also expects a loss of at least $9 million in the first quarter of this year.

Hit by a downturn in local box-office growth, leading Chinese film studio Huayi Brothers Media Co. reported last week that it had suffered its first decline in net profit since going public on the Shenzhen stock exchange eight years ago.

In an annual report released Tuesday, Huayi said net profit for 2016 was RMB 808.1 million ($117 million), down 17 percent from the year prior. The company, which is headed by brothers Wang Zhongjun and Wang Zhonglei, also saw a 9 percent year-on-year slide in its film and entertainment business revenues.

"This year we've experienced substantial regression both in our film box office and our market share," Wang Zhonglei, the company's chief executive, said in an open letter to staff.

Huayi pointed to a major market correction at the Chinese box office as the driving cause of the downturn. After expanding 48 percent in 2015, Chinese movie ticket revenue stalled at just 3.7 percent growth in 2016.

In a separate regulatory filing, the group said its net profit in the first quarter of 2016 was 262.5 million yuan ($38.2 million), but that it expects a loss of at least $9.2 million to $9.9 million in the first quarter of this year.

The profit slide doesn't appear to be putting a damper on Huayi's outward ambitions, however. Last week, the studio said it is looking to expand its collaboration with Robert Simonds’ STX Entertainment, despite the recent clampdown by Beijing regulators on China-Hollywood dealmaking.

"We'd like to renew and deepen our cooperation with STX beyond slate financing," Huayi co-founder and CEO James Wang Zhonglei said in an interview.

Huayi signed a landmark three-year deal with STX in 2015 to co-produce and co-finance most of STX Entertainment’s slate for three years. But that agreement is set to expire in the first quarter of 2018.

Wang said he has held in-depth discussions with STX on further collaboration.