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Higher costs leads to lower profits for Nine Dragons Paper


Chinese mill giant Nine Dragons Paper has reported lower profits due to higher costs, despite revenue increasing in its 2022 financial year.

Although revenue was up 4.8% to RMB64.5 billion (£7.8 billion), pre-tax profit fell by 60.2% to RMB3.3 billion (£399 million) in FY2022 compared to RMB8.48 billion (£1.03 billion) in FY2021.

Nine Dragons Paper chair Cheung Yan said higher costs and continued impact of Covid in China had hit profits.

She added: “During FY2022, with the persistent global pandemic and the Russia-Ukraine conflict, the fuel and transportation costs remained at a high level.

“Given the high inflation rate and the heightened risk of interest rate hikes, the depreciation of Renminbi, the sporadic Covid-19 outbreaks across China with consumption and supply chains disrupted by the lockdown measures, the economy was astonishingly hit.”

She added that despite being able to raise sales prices of finished goods, weak market demand meant that Nine Dragons Paper was not able to pass on all rising costs of raw materials and energy to customers.

Due to the continued Chinese ban on imported recycled fibre, she noted that the company continued to seek other sources of pulp such as from wood fibre.

She said: “

She said: “With the thorough implementation of the ‘zero import quota on recovered paper’ policy, the short supply of quality recovered paper in the market has become an issue that needs to be immediately tackled.

“In order to alleviate the concern about raw materials and raise the proportion of high-margin products in the long run, we pressed on with the fully-integrated pulp and paper mill projects in Hubei, Liaoning, Guangxi of China and Malaysia to increase the production capacity for wood pulp and recycled pulp.

“Besides, we made proactive effort in scaling up the production capacity of wood fibre as an alternative raw material to effectively curb the paper manufacturing costs.

“Upon the successive completion of these projects, it is estimated that an additional production capacity of 3.12 million tonnes for wood pulp, 0.60 million tonnes for recycled pulp and 1.10 million tonnes for wood fibre will be added to the Group, which will further optimise our fibre and raw material mix as well as strengthen upstream capacity.”