Chinese board makers report profits

nine dragon

Nine Dragons exceeds profit forecast; Lee & Man earnings rise nearly 36 percent.

Two Hong Kong-based paper and board producers, who primarily serve the Chinese market, have each reported profitable results for the period ending June 30, 2018.

That date marked the end of fiscal year 2018 for Nine Dragons Paper Ltd., which has reported 45 percent growth in profits, and the end of 2018’s first half for Lee & Man Paper Manufacturing Ltd., which has reported a 36 percent rise in profits compared to the first half of 2017.

In August, Nine Dragons alerted investors that it expected its fiscal year 2018 profits to “to increase not less than 60 percent” compared to the prior year.

Its final numbers show that its gross profits rose by 45.2 percent while the company’s “profit attributable to equity holders” of  RMB7.85 billion ($1.1 billion) increased by approximately 79 percent. The company’s sales for the year reached RMB52.8 billion ($7.7 billion).

In comments accompanying the results, Nine Dragons Chair Cheun Yan writes that “the import of recovered paper into China has become more restrictive during the year, [but] the group was still able to maintain a flexible procurement strategy.”

Adds Cheun,  “As a large buyer of recovered paper in the market, the group is able to secure relatively larger government import quotas . . . allowing optimization of its raw material costs during periods of price fluctuations.”

Nine Dragons increasingly is relying on domestic Chinese fiber, according to Cheun. “The purchase value of domestic recovered paper accounted for approximately 66% of the total value of the Group’s purchase of recovered paper,” she writes.

Raymond Lee, chairman of Lee & Man Paper, in his remarks also refers to Chinese government-led consolidation in the paper and board sector, writing “The mainland government has carried out supply-side reform and tightened [its] environmental protection policy in recent years, enabling further regulation and consolidation in the paper manufacturing industry.”

Adds Lee, “With the gradual pick-up in the demand for paper products, and the improved demand and supply situation, the group is expected to be able to benefit from the product price hike. Given this favorable industry environment, it is believed that the group will be able to further solidify its leading position in the paper manufacturing industry by dint of its robust technology advantage.”

In addition to its 36 percent year-on-year profit growth in the first half of 2018, Lee & Man also has reported net sales of HK$16.37 billion ($2.09 billion), representing percent growth from sales of HK$11.44 billion ($1.46 billion) in the first half of 2017.

Lee & Man operates at five paper mill sites in China and one in Vietnam. Nine Dragons operates from six production bases in China, one in Vietnam and in 2018 has acquired three pulp or paper mills in the United States.

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