Chinese mill group Lee & Man has said that profits were down 11% in its 2021 financial year as a result of higher costs.
Profits fell to HK$3.25 billion (£317 million) from HK$3.65 billion (£356 million) in 2020. This was despite revenue rising in 2021 by 25.7% to HK$32.51 billion ($3.17 billion).
Lee & Man Paper chair Raymond Lee said: “In 2021, the novel coronavirus pandemic situation remained unstable and a new variant of the virus brought further uncertainties to global economic recovery. The ongoing political tensions between the US and Chinese governments, rising energy prices and intensifying inflationary pressures all meant that enterprises still faced challenges that could impact their business and operations.
“In 2021, the ‘waste ban’ was fully implemented in Mainland China. As a result, waste paper has been in tight supply and pulp prices continued to rise.
“In addition, the restricted international shipping capacity has caused a supply chain bottleneck and transportation costs have skyrocketed as a result. After the National Development and Reform Commission published the Proposal for Modifying the Mechanism of Dual Control of Energy Consumption Intensity and Volume various local governments imposed restrictions on power supply and production activity, resulting in a surge in energy prices which in turn led to a sharp rise in paper manufacturing costs.
“In the face of changes in market supply and demand and government policies, the Group has continued to consolidate upstream resources and develop a vertical business model covering pulp manufacturing and waste paper recycling in order to integrate the industrial chain and ensure the supply of raw materials. At the same time, the Group has continued to expand its scale, control costs, and increase production capacity, creating more opportunities for growth in its results.”