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Nine Dragons Forges Ahead Regardless of Bumps
2020-09-29 09:40chinapaperonline.com
On September 22, Nine Dragons Paper (holdings) Ltd. – a world class paper company widely known as “Nine Dragons” - released its July 2019 to June 2020 fiscal year performance report. In spite of a -6.0% decline in revenue to RMB51.34 billion, gross margin grew +17.6% growth to nearly RMB9.03 billion. The company’s EBIT also rose +9% from the previous year to RMB5.3 billion, which helped net earnings go up +8.4% to RMB4.23 billion. While inventories were trimmed to RMB5.25 billion, or -32%, trade related accounts receivables increased +15.4% to nearly RMB4.6 billion. With more out-flows than in-flows, the company’s cash and equivalent balance fell to RMB5.6 billion at end-June 2020, -33.3% from the previous period.

The gains and losses have not stopped the company’s forward moves, including the investment of two green-field pulp mills at 600,000/mtpy capacity each in central and upper China. The planned commencement of the two mills in late 2022 will expand the company’s total virgin and recycled pulping capacity to 2 million/mtpy in China. At the same time, the company also plans to install a 1.2 million/mtpy packaging paperboard complex in central China.

Since the start of its first linerboard machine at the capacity of 200,000/mtpy in Dongguan, Southern China in 1998, Nine Dragons has embarked on an amazing growth. Company production expanded from containerboard to coated duplex board in 2003 and to marketable wood pulp in 2004. In March 2006, Nine Dragons went public and was listed in the Hong Kong Stock Exchange. And in 2008, Nine Dragons acquired a containerboard mill in Vietnam, officially extending its business into the Southeast Asian markets. Further, Nine Dragons acquired 4 pulp and paper mills in the USA between 2018 and 2019, adding 1 million/mtpy of capacity to the company. By end-June 2020, Nine Dragons’ pulp, paper and paperboard capacity worldwide already exceeded 17 million/mtpy. It is expected that Nine Dragons’ overall capacity will come close to 20 million/ mtpy after 2022 when new mills in China and Malaysia start running. This will enable the company to replace International Paper (IP) to become the biggest pulp and paper company in the world.

In an effort to boost revenue and earnings, Nine Dragons has launched a number of price increases in China since the 3rd Quarter this year. Affecting not only containerboard, the latest round expands to coated duplex board from all of its mills in China. The RMB100/mt rise in rolls and RMB200/mt more in sheets will drive the price of its prime coated duplex board to the RMB4,900/mt range. Already, a number of paper and board producers and converters joined the run. However, market analysts seem cautiously optimistic in fear of demand wane after October into its traditionally low season.

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