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Nine Dragons Paper (Holdings) Ltd., Hong Kong, has announced it achieved a sales volume of 8.5 million metric tons for the six months ended Dec. 31, 2019, which is an increase of 13.3 percent year over year. According to a news release from Nine Dragons on its 2020 interim results, the company achieved a gross profit margin of 17.1 percent for the six months ended Dec. 31, 2019, a year-over-year increase of 1.4 percent and a half-year-on-half-year increase of 1.6 percent.
During the six months ended Dec. 31, 2019, the group added a total production capacity of 0.95 million metric tons per year for linerboard in Shenyang and Quanzhou, China, the company says. As of Dec. 31, 2019, the group’s total design production capacity for paper amounted to 16.5 million metric tons per year and is expected to increase to 18.1 million metric tons per year by 2021.
In response to changes to China’s recovered paper policy, the group has broadened its collection scope and entered into long-term cooperation agreements with “reputable recovered paper suppliers in mainland China so as to step up its efforts in procuring low-end domestic recovered paper,” according to the company. At the same time, Nine Dragons has “actively sought” for raw material substitutes as well as established recycled pulp production facilities overseas to “lay a solid foundation for stable raw material supply in the long run.” As of Dec. 31, 2019, the company had a total design production capacity of 0.9 million metric tons per year for pulp.
Regarding the downstream industry supply chain, Nine Dragons reports that it has expanded its scope of business to include the production of corrugated sheets and corrugated boxes by acquiring packaging plants. The company also launched the River Dragon brand to expand its market share in mid- to low-end markets, which helped to increase the company’s overall sales volume.
Coronavirus concerns
However, sustained uncertainties on global economic growth and the recent outbreak of the coronavirus, or COVID-19, have posed additional challenges to China’s packaging industry, Nine Dragons says.
According to Nine Dragons, the company “is confident in the Chinese government’s epidemic prevention and control. It has also rendered its full support for the country’s effort in fighting the plague” with a donation of more than RMB 33 million (or about $4.7 million), including RMB 30 million in cash (or about $4.3 million in cash) and medical supplies (including about 30,000 items of protective clothing and 10,000 N95 masks).
Nine Dragons reports that it believes the market “will have a swift recovery under both the support and favorable policies of the state.”
The company adds that the phase-one signing of the U.S.-China trade agreement and commencement of phase two of negotiations will benefit Chinese export and the RMB exchange rate.
Goals for the first half of 2020
Nine Dragons has set a few goals to enhances its profitability in the first half of 2020. First, the company wants to step up its efforts in the procurement of low-end recovered paper. According to Nine Dragons, the company wants to continue “to explore expansion opportunities in overseas markets for recycled pulp and strengthen the control on cost and quality.”
Additionally, the company wants to optimize the customer mix while increasing market share for its River Dragon brand. Finally, the company also aims to optimize its debt portfolio “to strike a balance between borrowing costs and exchange risks” to sustain a healthy level of gearing ratio, cash flow and capital management.
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