Lee & Man’s annual net profit soars 22.7% year on year
(Hong Kong, March 07, 2017) Lee & Man Paper Manufacturing, one of China’s leading containerboard producers and a huge consumer of recovered fibre sourced from around the world, has reported total sales volumes of 5.63 million tons in calendar year 2016 as compared to 5.44 million tons in the previous 12 months.
The group’s annual net profit soared 22.7% year on year to HK$ 2.86 billion (US$ 372 million), roughly the same percentage increase as Lee & Man Paper achieved in 2015 when earnings totalled HK$ 2.33 billion (US$ 303 million). The group’s revenues climbed to HK$ 18.34 billion (US$ 2.38 billion) in 2016 from HK$ 17.62 billion (US$ 2.29 billion) in the previous year.
• Revenue for the year of HK$18,342 million (2015: HK$17,616 million)
• Net profit for the year of HK$2,863 million (2015: HK$2,332 million)
• Net profit per ton about HK$508 for the year
• Stable payout ratio of about 35%, with proposed final dividend of HK11 cents per
BUSINESS REVIEW AND OUTLOOK
For the year ended 31 December 2016, the Group recorded a total sales volume of 5.63 million tons and total revenue of HK$18.34 billion. Its annual net profit strongly increased by 22.7% year-on-year to HK$2.86 billion, while its net profit per ton was HK$508.
The Chinese government’s efforts to eliminate obsolete production facilities while embarking on environmentally-friendly policies has gradually reduced overcapacity in the industry over the last year. The recovery in demand within the paper industry has also notably improved the demand and supply situation within the industry. The price of paper has increased in recent months as a result of the surge in energy, raw materials and transportation costs. The higher demand plus the value-added tax refund policy have enabled the Group to achieve growth in both sales revenue and profit despite the depreciation of the Renminbi.
The Group will expand into overseas packaging paper markets and invest in the construction of overseas paper factories to keep pace with the expansion of the Southeast Asian markets. It is expected that the paper machine project in Hau Giang, Vietnam with an annual production capacity of 400,000 tons will begin operation in March this year. As the overseas packaging paper market offers enormous potential, the Group may invest more resources in this sector. The PM21 paper machine with an annual production volume of 400,000 tons at the Jiangxi plant is also under construction and will begin operation in August this year. Upon commencing full production, the annual production capacity of the Group’s packaging paper will exceed 6 million tons.
In order to address the overcapacity and the environmental issues in the paper industry, obsolete production capacities have steadily been eliminated in China as approval standards for new production capacities have become more stringent in recent years. Local government authorities intend to impose more stringent environmental monitoring policies and implement stricter requirements on environmental protection, which will lead to shutting down even more obsolete production capacities which fail to measure up to environmental standards. Despite the slowdown in the economic growth of the Mainland economy, the demand for packaging paper in China is expected to grow steadily in the long run. In addition, the rapid development of e-commerce and online shopping has led to fundamental changes in consumption and logistics models, benefitting the packaging paper industry which is currently undergoing consolidation. Looking ahead, overall paper consumption still possesses considerable room for growth, thus the Group is optimistic about the outlook of both the packaging paper segment and the paper industry as a whole.
As for the tissue paper business, the eight tissue paper manufacturing machines with a total annual production volume of 355,000 tons located in the Chongqing Industrial Park have commenced full production since last year. The Group will be able to further reduce the production cost of tissue paper through economies of scale leveraging the increase in production volume and utilizing its pulp production facilities in Chongqing. The Group will also expand tissue paper business in Jiangxi, Guangdong and Chongqing Provinces. Another six new production lines with a combined annual production capacity of 330,000 tons will commence production within this year. After all of the production lines ramp up operation, the Group’s annual production capacity for tissue paper will reach 685,000 tons. The tissue paper business is therefore expected to contribute a considerable profit to the Group as it becomes another new growth driver in the future.
Adhering to its long-held prudent strategies and with debts maintained at a reasonable level, the Group will monitor the pace of economic development while it continues to bolster the production capacity in packaging and tissue paper. The management will proceed with efforts to enhance production efficiencies, strictly control costs and strengthen capital operation in order to maintain the Group’s competitiveness in the paper industry. The experienced and capable management team will continue to lead the development of the Group’s businesses
and exert its best efforts to raise profitability.
To download complete report Go To: www.leemanpaper.com (Source: press release)