Nine Dragons records high revenue in 2021 interim results

Nine Dragons Paper (Holdings) Ltd., Hong Kong, has announced unaudited interim results for the first six months of its 2021 fiscal year, which ended Dec. 31, 2020. According to Nine Dragons’ latest earnings report, revenue increased by 7.1 percent year over year to a historical high of RMB30.9 billion (or about $47.8 billion). Sales volume achieved a record high of 8.6 million metric tons per year, while net profit was RMB4 billion (or about $6.2 billion), a year-over-year increase of 75.6 percent. Gross profit margin was 20.9 percent, a year-over-year increase of 3.8 percent.

“In 2020, the global economy remained distressed,” the company states in its earnings report that it released the last week of February. “Coupled with factors such as the soon-to-be-launched ‘zero import quota on recovered paper’ policy and the volatile renminbi exchange rate, the packaging paper industry in China has been faced with severe tests. Facing the challenges, Nine Dragons has leveraged its edge as a leading enterprise.”

According to the earnings report, selling price and sales volume recorded an increase during the period, with revenue and sales volume reaching record highs during the period. Gross profit and net profit increased by 31.3 percent and 75.6 percent, respectively, while gross profit margin and net profit margin rose by 3.8 and 5.1 percent, respectively. Cash flow remained at a considerably healthy level.

In response to China’s “zero import quota on recovered paper” policy during the first half of its 2021 fiscal year, Nine Dragons says it developed “a comprehensive plan” that focused on upstream resources, including adjustment of raw material and product mix and actively sought for various raw material substitutes, such as wood pulp, wood fiber and recycled pulp. As of Dec. 31, 2020, Nine Dragons says it has a total design production capacity of 0.85 million metric tons per year for pulp (both wood pulp and recycled pulp). For paper production, a total of the group’s new capacity of 2.05 million metric tons per year started production in Quanzhou, Shenyang, Dongguan and Hebei, China, during the period. As of Dec. 31, 2020, the group’s total design production capacity for paper was at 17.57 million metric tons per year.

With the support of various local governments, Nine Dragons reports that it will carry out fully integrated pulp and paper projects in Hubei, Liaoning, Guangxi and other regions in the future. The company says its future paper production capacity expansion plan will achieve greater economies of scale and support its raw material supply and new development opportunities arising from China’s plastic ban order policy. The group will increase the production capacity of virgin kraftliner, food-grade bleached folding boxboard and sack kraft paper. The group plans to increase production capacity for wood pulp by 3.12 million metric tons per year in China by the end of 2022 and for recycled pulp by 0.6 million metric tons per year in Malaysia by the end of 2023. Furthermore, the group says it plans to increase its production capacity for paper in China and Malaysia by 5.35 million metric tons per year and 0.9 million metric tons per year, respectively, in the next two years.

In terms of its downstream production chain, Nine Dragons says it plans to increase production capacity for its packaging plants by 1.21 billion square meters by the end of 2021, which would maximize the efficiency brought by the vertical integration of the production chain and allow the group to provide one-stop premium services to end customers.

Future outlook and plans

Looking ahead to 2021, as coronavirus vaccines become more widely available, global economic recovery and a further boost on domestic consumption and export are expected. Benefited by the launch of the “zero import quota on recovered paper” and “plastic ban order” policies in China, the entire paper manufacturing industry will embrace new business opportunities arising as a result, the company says.

In 2021, Nine Dragons says it plans to expand the volume of recycled pulp and domestic procurement channels for fiber raw materials, as well as to ensure the execution of production capacity projects for upstream raw materials to more effectively control cost and quality. The company also plans to devote more efforts in segment markets with a focus on high value-added products, supporting raw material supply and capitalizing on new opportunities arising from China’s “plastic ban order” and at the same time increasing the supply of white linerboard for food packaging and paper shopping bags. Finally, the company says it plans to reinforce efforts on environmental protection and research and development of pulp and paper production.

In addition, Nine Dragons is investing RMB5.4 billion (or about $8.3 billion) in Malaysian paper mills, according to an announcement from the Malaysian Investment Development Authority (MIDA) based in Kuala Lumpur, Malaysia.

“As of December 2020, a total of 572 manufacturing projects with China interest with investments of RMB78.61 billion have been approved by MIDA. Nine Dragons Paper (Holdings) Ltd. and its subsidiaries are among the major paper and paperboard producers in Asia, engaging in the manufacturing of containerboard products, including linerboard, high-performance corrugating medium, coated duplex board and carton box,” says Tan Sri Muhyiddin Yassin, prime minister of Malaysia.

MIDA reports that Nine Dragons’ investment in Malaysia consists of two manufacturing facilities, namely ND Paper (Malaysia) Sdn. Bhd. in Bentong, Malaysia, involving the acquisition of an existing pulp and paper mill with a total investment value of RMB1.2 billion, and ND Paper Malaysia (Selangor) Sdn. Bhd. in Banting, Malaysia, with an investment value of RMB4.2 billion that will focus on test liner, kraft liner, corrugated medium paper, paper and pulp. MIDA reports that these projects will create 2,180 jobs. The project in Banting is expected to be in operation by 2022.

“The investment environment in Malaysia is attractive,” says Nine Dragons Chairlady Cheung Yan. “The country’s strategic location and infrastructure; established local supply chains that are well-integrated into the global value chain as well as the strength of its skilled talent pool offer an undeniable competitive advantage to our business. Moreover, Malaysia’s business-friendly policies such as its latest initiative of the One Stop Center (OSC) for Business Travelers managed by MIDA to ease travel for businesses further strengthened our confidence in investing here. I am very grateful to make this investment decision based on these fundamentals. We believe governments and enterprises need to mutually support and collaborate with each other. We are ready to be part of Malaysia’s diverse industry.”