26 A-Share Paper Makers' H1 2021 Snapshot: Three Firms Capture Half of Industry Revenue, Sun Paper Leads on Profit

With two-thirds of 2021 now behind them, papermakers are heading into autumn with a solid six-month harvest in hand.

China's paper industry has just watched 26 A-share listed companies release their 2021 interim reports one after another. How did the sector actually perform in the first half? Those filings hold the answer.

Revenue: three players break RMB 10 billion, Chenming Paper out front

Revenue first.

Only three companies cleared the RMB 10 billion mark in H1 2021 — Chenming Paper, Sun Paper and Shanying International — and each landed above RMB 15.1 billion. Together they booked roughly RMB 48.2 billion against an industry total of RMB 95.1 billion, which is how three names came to account for half the pie.

On growth, 23 of the 26 posted positive revenue gains, with seven lifting revenue by more than 50% year on year.

Sun Paper takes the profit crown, Qingshan Paper grows fastest

On profitability, all 26 companies stayed in the black.

Sun Paper booked the largest net profit at RMB 2.232 billion. Four companies cleared RMB 1 billion in net profit: Sun Paper, Chenming Paper, Bohui Paper and Shanying International.

Notably, Bohui Paper's revenue came in at under half of what each of the other three recorded, yet its profit reached RMB 1.514 billion — clear evidence of strong earning power.

Looking at profit growth, 21 companies increased net profit, and 14 of them delivered year-on-year gains of more than 100%.

Qingshan Paper posted the steepest climb of all, up 887.31% year on year.

A recovering industry backdrop is underwriting earnings

Papermaking concerns the national economy and people's livelihood, and it moves closely with the macroeconomic environment. These satisfactory report cards stem in large part from a broader recovery in industry sentiment. In the first half of 2021, with the pandemic under control in China and the macro economy rebounding on all fronts, demand for paper products as basic production and living materials was gradually unlocked. Figures from the Ministry of Industry and Information Technology show that from January to June 2021, nationwide revenue from papermaking and paper products reached RMB 714.2 billion, up 24.7% year on year, while total profit hit RMB 48.43 billion, up 77.2%.

Industrial chain integration becomes the competitive dividing line

The pandemic pushed upstream raw material prices higher and lifted overall industry costs — a major test for every papermaker. For companies running a complete industrial chain, however, cost advantages surface far more easily.

Chenming Paper began positioning for industrial chain integration two decades ago. Drawing on the raw material cost edge of its 4.3 million tonnes of self-produced pulp, plus supporting water and road transport, the company keeps costs firmly in check. Its own wood pulp costs several hundred yuan less than the general market price, and its overall transport spend beats peers as well. Sun Paper has pursued a diversified layout around the papermaking chain, building three major bases in Shandong, Guangxi and Laos; as paper and pulp projects at the Guangxi base come onstream in the second half of this year, its combined pulp and paper capacity will exceed 10 million tonnes. After Bohui was acquired by APP (China), it can draw on the cost advantages of the group's forestry-pulp-paper integration, strengthening its pulp cost position and profitability at the same time.

Technology and product innovation seize the initiative

Sustained innovation in products and technology also added to these companies' competitive strength. In the first half, Bohui Paper seized the openings created by policy shifts toward "replacing grey with white" and "replacing plastic with paper," stepping up new-product R&D and upgrades. It successfully launched high-grade food board, cupstock base paper and coated cupstock paper, along with anti-counterfeit cigarette packaging, specialty art board, premium name card paper, white-top kraft linerboard and blister board to serve the differentiated needs of specific customers. Chenming Group accelerated its shift from old growth drivers to new ones and upgraded high-end capacity, lifting the share of high-end products above 95%. To pursue product differentiation, Sun Paper is adjusting its business strategy as needed; it has built a fairly complete science and technology innovation system for R&D and fields a professional, efficient and highly capable research team, with its annual R&D investment ratio ranking among the highest in the industry.

This round of results brought joy to some and worry to others — the worry being that the profits all landed in someone else's pocket.

As noted above, whether it is deepening the industrial chain or innovating processes and products, companies need sufficient cash flow to keep investing — something non-leading players find hard to sustain. It is easy to imagine that, with environmental rules tightening and costs rising, small and medium-sized enterprises lacking a real voice will face mounting pressure to survive. Mid- and downstream packaging and printing plants feel the squeeze most acutely. As Carton Talk puts it,

"Midstream board and box makers saw turnover rise appreciably, yet profit margin growth stayed modest." The feeling that upstream hikes prices at will while downstream suffers is a fair reflection of many people's state of mind.

With the traditional peak demand season of "Golden September and Silver October" at hand, the current trend remains unclear and the outlook hard to call, leaving a strong wait-and-see mood across the market.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378161.html