The board of directors at Nine Dragons Paper Holdings (ND) has announced that its interim figures for the six months ending on 31 December 2018 show an increase in sales of 18.2%.
These unaudited consolidated interim stats show that the Group achieved a revenue of approximately RMB30,328.0 million (£3,420.09 million) for the period.
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A major contributor of the company’s revenue was its packaging paper business, including linerboard, high performance corrugating medium and coated duplex board, which made up 86.2% of the revenue, with the remaining revenue of 13.8% coming from its printing and writing paper and high value speciality paper and pulp items.
Nine Dragon’s total design production capacity in packaging paperboard, printing and writing paper, and high value speciality paper and pulp was 15.3 million tonnes per annum (tpa), compromising of 7.6 million tpa of linerboard, 3.4 million tpa of high-performance corrugating medium, 2.6 million tpa of coated duplex board, 1.1 million tpa of printing and writing paper and 0.6 million tpa high value specialty paper and pulp products.
The new paper machine in Chongqing base has also commenced production, adding a further 0.55 million tpa to the firms’ capacity.
During the period, the Sino-Us trade war has created “conservative sentiment” in the manufacturing industry and has slowed down product demand.
Significantly reduced quota and tightened quality requirements on imported recovered paper, which show strict government environmental policies, resulted in extreme volatility in the supply and cost of recovered paper, both import and domestic, said ND.
As the Group’s product selling prices fell during this period while inventory took time to process, profitability also declined from the peak in 2018.
By leveraging various ranges of products, trusted relationships with its customers over the years, and quality and reliable pre-and after-sales services, at the same time as using the advantage of its geographical coverage by cross-selling items, the firm has maintained sales growth and reduced inventory. This has resulted in a half-year total sales volume of 7.5 million tonnes during this period, a new historical high.
Throughout the period, a subsidiary of the company in the United States, ND Paper LLC, completed its first acquisition of two pulp mills, Fairmont Mill in West Virginia and Old Town Mill in Maine.
The Fairmont Mill manufactures and distributes recycled pulp with a production capacity of 0.22 million tpa. While the Old Town Mill which currently manufactures and distributes bleached hardwood kraft pulp, with a capacity of 0.16 million, will be converted to produce unbleached kraft pulp.
Combined with Rumford Mill and Biron Mill acquired by ND Paper LLC in 2018, these four mills in the US, are expected to offer access to high quality raw material for the company’s primary business, with significant synergies, including cost savings.
The Group is also pursuing the goal of completing the construction of four new paper machines in China in 2019.
With the start of this production, the four machines will add 2.05 million tpa to ND’s total design production capacity, while ND Paper LLC plans to implement a series of equipment upgrades and expansion projects, which will possibly be completed before the end of 2021.
By then, the Group’s production capacity in the US will increase by 1.4 million tpa, bringing its global total production capacity to over 19 million tpa.
While the construction of new equipment and the above development plan resulted in a period of high capital expenditure, with total debts and finance costs increasing, the support of a strong operating cash flow, the net debt and debt ratio at the end of the period were lower than those at the end of the last financial year.
The net debt to total equity ratio decreased from 65% to below 63%.
Nine Dragons chair Cheung Yan said: “For future market outlook, it is expected that China will continue to implement stringent environmental policies, making the advantages of large enterprises becoming more prominent. Yet, the Group is confident about the fundamental of domestic consumption and industry demand in China, and believes that there is some growth potential in market demand.
“Meanwhile, the Group remains cautiously optimistic and positive about the Sino-US trade war. The Group will continue to put strenuous efforts to drive production and procurement diversification globally and expand the integration of value chain upstream and downstream, with a view to further enhancing its cost effectiveness and increasing the efficiency of daily operations, thereby maximising the corporate values for its shareholders in a volatile and changing environment.”