Nine Dragons reports half-year sales and profit increases

Nine Dragons reports half-year sales and profit increases

Containerboard producer cites its ability to source 57 percent of its recovered fiber from within China.

February 28, 2018
Edited by Brian Taylor
China Financial Paper

Hong Kong-based Nine Dragons Paper (Holdings) Ltd. has announced its unaudited results for the six-month period ending Dec. 31, 2017. The company reports a sales increase of 34 percent to $4 billion in the half year, and gross profits that rose by 80 percent compared to the second half of 2016. Nine Dragons also indicates its profit margin rose from 18.3 percent in late 2016 to 24.5 percent in late 207.

In its management discussion and analysis, the firm’s executives say they have developed strategies to cope with the Chinese government’s recovered fiber import restrictions.

The analysis authors write, “As government environmental policy becomes more determined and stringent, and environmental enforcement becomes more extensive and rigorous, [the] group has adopted a proactive strategy to achieve the appropriate balance between selling prices, sales volume and inventory levels for optimal profitability, and has recorded historical high sales revenue and profits during the period.”

In describing its strategy, Nine Dragons’ managers write, “Although the import of recovered paper into China has become more restrictive, the group is still able to maintain a flexible procurement strategy that is based on the selection and purchase of raw materials offering the most optimal cost-value relationship by closely monitoring the market price trends of different sources. The purchase value of domestic recovered paper accounted for approximately 57.3 percent of the total value of the group’s purchase of recovered paper in the period.”

In the outlook section of its analysis, the company’s managers portray Nine Dragons as a firm that can benefit from paper mill capacity cuts in China and also hints that the scrap import restrictions may yet pose problems.

“Noncompliant capacities in the packaging paperboard industry will continue to be shut down,” write the company’s managers. “New capacities of Nine Dragons Paper will offer more high-quality products to replace low-quality products in the market. Nevertheless, new capacities are expected to emerge during certain periods and imported raw materials will also be tightened, representing challenges to be met by the group.”

Projecting optimism, the managers add, “Nine Dragons Paper will adopt an effective strategy to adjust for changing supply-demand dynamics in the market, and enhance upstream and downstream integration along the supply chain in order to create the optimal synergy for the best shareholders’ value in the long term.”

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