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Profits Drop 13% as IMAX China Suffers Box Office Headwinds

In a year of highs and lows, IMAX China suffered a drop in profits, but booked a record number of orders for new screens.

The company, which is controlled by IMAX Corp. but has a separate Hong Kong Share listing, reported adjusted profits of $37.6 million. That was down 13% compared with 2015. Group revenues were up by 7% at $119 million, despite a 7% depreciation of the Chinese currency, compared with the U.S. dollar.

In a statement the company pointed to decreased box office and to an increase in the number of revenue sharing theaters it opened. These come with greater long term revenue than sites which are sold or leased, but higher initial costs.

At the end of 2016, IMAX China operated 407 commercial screens in the Greater China region, compared with 290 at the end of 2015.

Box office revenue at IMAX theaters slipped from $312 million in 2015 to $295 million in 2016. Per screen box office dropped from $1.34 million to $932,000. (In comparison, China’s nationwide box office grew by 4% in revenue terms in 2016 and by 9% in admissions.)

The company enjoyed orders for 238 new screens, a figure that exceeded the score for the two previous years. For 2017 IMAX China expects to install a further 120 screens, of which 85 will be revenue sharing sites.

“We still see a big runway ahead for growth in China,” said Rich Gelfond, IMAX China chairman, speaking on a conference call with financial analysts after the regulatory announcement.

Gelfond blamed the 2016 “box office headwinds” on weaker content, especially in the second half. “A weaker slate leads to weaker ticket prices.”

The company said that it expects to open a further 120 screens in 2017, of which 85 will be revenue share screens.

Gelfond expressed confidence that per screen averages would pick up again in the current year and that the upcoming slate in 2017 will be more favorable. Imported movies that it expects to handle in China this year include “Beauty & The Beast” and “Kong Skull Island” in March, “The Fate of the Furious” in April; “Guardians of the Galaxy II” and “Transformers: The Last Knight” in June, as well as “Spider-Man: Homecoming,” “Wonder Woman,” and “Justice League” at later dates — with the proviso that all movie import decisions are made by state regulators.

 

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