China’s Wanda Film To Build More Cinemas Despite Heavy 2019 Losses, Coronavirus Impact

Undeterred by the current state of the industry, and despite posting a $668M profit loss for 2019, China’s Wanda Film is betting big on the local theatrical business. The division of Dalian Wanda Group said that it intends to spend about $431M raised in a non-public offering of A shares to build more Middle Kingdom movie theaters over the next two years. This comes at a time when the parent company recently declared bankruptcy speculation about its AMC Entertainment as “pure rumors.”

Per Wanda Film’s annual report and other filings to the Shenzhen Stock Exchange, the company at the end of 2019 had 603 mainland cinemas, repping 5,343 screens. The plan is to add 162 new cinemas from 2020 to 2022, for an additional 1,258 screens, local media noted. A Deadline source suggested such a move is not surprising, believing the Chinese government is keen to support local companies.

Wanda’s box office, admissions and market share have ranked first in China for 11 consecutive years. It stated in its filings that it “hopes to meet the rising demand for movie watching by building more high-standard comprehensive modern theaters, and establish a relatively complete construction and service standard for China’s cinema industry.”

All theaters have been shuttered in China since mid-January when the coronavirus crisis was rapidly growing there. This resulted in a first-quarter box office market dip of 91% versus the previous year, an impact of over $2.5B so far.

While the lockdown begins to ease in China, there is still no timetable for the reopening of cinemas. There is a stockpile of homegrown titles the Middle Kingdom can begin programming, though Hollywood isn’t expected to come back online until the summer.

A recent survey by Maoyan, however, showed that 72% of local moviegoers polled were eager to get back to the multiplex, up from 54% in February. Maoyan CEO Zheng Zhihao said last week that COVID-19’s impact on the entertainment industry is “only temporary.” He also predicted the industry “will rebound earlier” than others that rely heavily on the global market. Further, he suggested, “There is no need to worry that theater screening will be replaced after the pandemic.”
Overall, Wanda Film’s 2019 revenues were RMB 15.435B, down 5.23% on 2018. Net profit attributable to shareholders was a loss of RMB 4.73B ($668M), a 324.9% drop on the previous year.

Said Wanda Film in one of its flurry of filings, “The market competition in the movie theater industry is fierce, and there is huge room for development in China’s lead theater companies.” It added that due to the impact of the coronavirus, “the theater industry and the film industry are under great pressure in the short term, facing the stage of dilemma of insufficient cash flow. The operating pressure of small and medium-sized theaters is particularly prominent.”

This appears to jibe with a report by the South China Morning Post today which said analysts are seeing large cinema chains with ample cash reserve pushing out smaller players to grab an even bigger market share going forward.

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