Hong Kong-based paper group Lee & Man has seen its half year profits fall following an increase in costs plus the impact of Chinese covid restrictions.
Revenue was up a touch for the six months to 30 March 2022 at HK$15.28 billion (£1.61 billion) from HK$15.18 billion (£1.60 billion) in the same period in 2021.
But profit dropped from HK$2 billion (£210 million) in the first half of 2021 to HK$863 million (£91 million) in the six month period up to 30 March 2022.
Lee & Man Paper chair Li Wenjun said: “Entering 2022, there has been a new round of covid outbreaks, the United States sharply raised interest rates to curb high inflation, and the market worries about the economic outlook have heated up again.
“Mainland [China] paper companies have faced the price of raw materials such as wood pulp and energy rising, and the cost of logistics and transport has been high.
“The urban closure and control because of the epidemic have led to a significant weakening of demand.
“Profits are under pressure. During the period, the Group continued to develop businesses covering pulping and waste paper recycling by integrating upstream resources. We have also developed our vertical business model and the implementation of industrial chain integration to ensure the supply of raw materials.
“At the same time, the Group continues to seek development opportunities, controls to reduce costs, and strive to bring into play the advantages of economies of scale and consolidate profitability.”
The company continues to invest and is developing pulp production lines in Jiangxi and Chongqing to improve the supply of raw materials. These are expected to be in operation in 2023. It is also preparing to acquire land and construct mills in Cambodia.
It also announced it is close to 1 million tonnes of tissue paper production and plans to add another 300,000 tonnes of capacity via a new factory in Guangxi.
Lee & Man chief executive Li Wenbin added: “As the epidemic gradually improved in June, the mainland implemented a number of measures to stabilise the economy and protect the people.
“The consumption environment is expected to recover steadily. The Group will continue to optimise the industrial chain to realise the diversification of the the paper and pulp business.
“To further enhance the operational stability and strengthen profitability, the Group is responding to the ‘One Belt, One Road’ strategy [of the Chinese Government] and is targeting the South East Asian market, expanding international industrial layout, make good use of local resources and optimise operational efficiency.
“The Group has grown in Vietnam, Malaysia and other countries respectively. In order to increase revenue and production efficiency, the Group is confident in the long-term development of the paper industry.”