The Lucky Film Group denied reports yesterday that its subsidiary, Lucky Film Co Ltd, had agreed to set up a joint venture with Japan's Fuji Photo Film Co Ltd.

Lucky is the only domestic film maker which has managed to cope with competition from the industry's international giants -- Kodak and Fuji.

Although company spokesman Zhang Gu expressed annoyance over reports that the joint venture agreement would be signed this month, he admitted that Lucky Film Co Ltd is in talks with several major foreign firms, including Eastman Kodak Co, Fuji Film Photo and Konica Corp.

But he remained tightlipped over the content of the talks.

"As a listed company, Lucky Film Co Ltd will release information about any major company events to the public,'' Zhang said.

China Business newspaper reported on Monday that Lucky Film and Fuji have agreed to set up a venture to make digital film related products, with Lucky holding a 60 per cent stake and Fuji holding the remaining 40 per cent.

China Business said Fuji hopes to enter China's film products market through its venture with Lucky Film, taking advantage of Fuji's advanced technology and strong financial backing.

As the only domestic film maker, Lucky is very popular with foreign companies, who have been courting it for possible joint ventures.

Those vying for Lucky's attentions included Kodak, Fuji, Konica and Belgian firm Agfa.

Establishing a joint venture with Lucky is seen as a short-cut to winning a bigger market share in China.

A spate of reports last year said Lucky would sign a deal with Fuji, but, so far, there has been no result.

Lucky now is co-operating with Epson to offer digital image processing services in its local outlets.

A spokeswoman for Lucky Film Co Ltd, the Shanghai-listed unit of the group, said the company will intensify its promotion on new products in a bid to protect its current market share.

"We have to increase our sales in the market to maintain our over 20 per cent share and offset the negative impact of reduced prices,'' she said.

In April, the Shanghai-listed company reported a decline in its annual revenue and profits of its major businesses -- film and printing paper.

The revenue of its main business last year fell by 7.08 per cent to 593 million yuan (US$71.64 million). The profit dropped by 11.23 per cent to 245 million yuan (US$29.63 million).

Some 33.61 per cent of the main business revenue comes from film and the remainder from printer paper.

She said its drop in profits last year was largely due to declining sales because of fierce competition from foreign rivals and rampant film smuggling.

"This year, we want to launch more new products to expand the film sales,'' the spokeswoman said.

She said Lucky will pay more attention on promoting its Super 200 and Super 400 film.

"We hope the higher-level products will help us expand our market share and earn more profits,'' she added.

Besides keeping its shares in northeastern cities, where Lucky has traditional advantages, the company has targetted cities in other parts of the country, such as Lanzhou and Zhengzhou, as key positions in the promotion, she said.

"We are confident of holding our current market share in 2003 and maintaining the net profit we recorded last year,'' the spokeswoman said.

Lucky's net profit totalled 124 million yuan (US$14.98 million) last year.

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