Lee & Man sees “unabated” demand for paper as it reveals big profit growth

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Lee Man PM23 Malaysia
Celebrations for the commissioning of the Lee & Man PM23 machine in Malaysia

Chinese mill group Lee & Man Paper has announced half-year profit increases of 42.8% and said there is “unabated” demand for paper and cardboard.

In the six months to 30 June 2021, Lee & Man said its revenue was up 37.1% to HK$15.2 billion (£1.41 billion) compared to the same period in 2020. Profits increased by 42.8% to HK$2 billion (£185 million).

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Lee & Man Paper chairman Wenjun Li said: “China’s ‘waste ban’ was officially implemented in January 2021. There is no solid waste [imported] including waste paper.

“The supply of waste paper in mainland China is limited, and the prices of raw materials have been raised.

“In addition, due to the limited international shipping under the epidemic, transportation costs have skyrocketed. Industry profit margins are under pressure.

“On the other hand, the ‘Plastic Restriction Order’ has promoted the trend of replacing plastic with paper, superimposed on the recovery of consumer market demand. The demand for paper products in increasing unabated.

“In the case of tight supply and demand, the paper industry ushered in a wave of price increases. In response to market changes, the group continues to communicate through the integration of upstream resources, the development of a vertical business model covering pulp and waste paper recycling, and the development of industrial chain integration to ensure raw material supply.

“At the same time, on the basis of our existing business, we continue to expand scale, control costs, increase production capacity and bring more business to the group. [There are] opportunities for performance growth.”

Lee & Man intends to increase its toilet paper business having reached 900,000 tonnes per year of production, mostly from bamboo fibre.

But it also plans to develop its core packaging paper business due to the increasing popularity of online shopping in China and overseas. It said in its results statement that it will actively expand the recycled pulp business in South East Asia to replace the import of waste paper into China, and enhance its collection of raw materials and focus on production costs.

Its second paper machine was put into operation in April this year in its Malaysian plant with an annual production capacity of 350,000 tonnes. It also said that the group has invested in Cambodia during this period to expand its local papermaking business.

Lee & Man chief executive Li Wenbin added: “Looking forward, the group will continue to actively optimise the industrial chain to achieve paper and pulp. The diversification of business further enhances operational stability and strengthens the foundation of profitability.

“We also respond to the [Chinese Government’s] ‘One Belt, One Road’ strategy, targeting South East Asia, expand the international industrial layout, make good use of local resources, and optimise operational efficiency.

“In the future, the group will continue to be in Belt and Road counties and cities to explore business opportunities and we are confident in the long-term development of the paper industry along the Belt and Road.

“In the long run, the paper industry still has a relatively large development space. The group will seize the opportunity to expand the market scale and maintain the group’s market competitiveness in the paper industry.”

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