Nine Dragons to source more overseas recycled pulp as it announces big profit drop

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Chinese recycled paper and board giant Nine Dragons Paper has announced that its profits have fallen by 48.9% in its annual results.

Annual profit attributable to equity holders was approximately RMB4.02 billion (£455 million) after exchange losses on operating and financing activities were excluded.

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Although sales volume increased by 8.5% year-on-year to 14.1 million tonnes, and total sales increased 3.5% year-on-year to RMB54.65 billion (£6.19 billion), profits were hit by the challenging macro-economic environment and the Chinese Government policy of reduced import quotas.

As a result, the Chinese recycled paper and board giant has shifted its strategy with the aim of diversifying its raw material sources and expanding its business downstream to establish a vertical industry chain.

This has meant investing in recycled pulp capacity to gain better control over the stability of raw material supply as well as the quality and cost efficiencies of production.

It has also acquired packaging businesses and engaged in production of corrugated cardboard and carton boxes.

In its results, Nine Dragons also revealed it had bought an unnamed company in Malaysia this month with a production capacity of 0.48 million tonnes per annum of recycled paper pulp.

This takes the Group’s total design production for paper and pulp to 16.37 million tonnes per annum, including 15.52 million tonnes of paper capacity and 0.85 million tonnes of pulp capacity.

Nine Dragons plans to commence additional production capacity of 2.05 million tonnes per annum in China and 0.55 million tonnes per annum in Malaysia for linerboard.

It also plans to increase its production capacity of its existing mills in United States for recycled pulp by 0.56 million tonnes per annum, and kraft pulp by 0.20 million tonnes per annum.

All of this will take its total design capacity for paper production to 18 million tonnes per annum, and pulp production to 1.61 million tonnes by end of 2021.

There was no mention of its plans for mills in India.

Chair Cheung Yan said: “Looking ahead, consolidation of the papermaking industry will be accelerated, driven by factors such as environmental protection, raw materials and market conditions, which will offer vast room for the development of large enterprises such as us.

“In order to seize the market opportunities, Nine Dragons Paper has been well-prepared. In the coming year, we will strengthen our efforts in expanding the domestic sourcing channels for recovered paper purchase, and continue to explore opportunities to expand the production capacity of recycled pulp overseas in order to ensure we have sufficient supply of raw materials with good quality.

“As we continue to satisfy the needs of the mid-to-high-end market, we will also devote greater resources to the research and development, production and sales of mid-to-low-end products with higher value for money so as to further increase our overall market share to continuously reinforce our winning edges as a market leader.”

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