Nine Dragons Paper Profit Rises 70% as Capacity Expansion and Consolidation Accelerate

From August onward, papermakers have rolled out repeated price increase notices, with corrugated paper prices drawing particular attention. This helped the papermaking sector outperform other sectors overall. Nine Dragons Paper (02689), a Hong Kong-listed leader in China's paper industry, unveiled its fiscal-year results on Monday, posting a 70% year-on-year increase in net profit. The company said strong demand is behind the construction of several projects and continued capacity expansion.

By capacity, Nine Dragons Paper is the world's second-largest paper group. For the fiscal year ended June 30, 2021, revenue reached approximately RMB 61.574 billion, up 19.93% year on year. Profit attributable to shareholders was about RMB 7.101 billion, up 70.35%, while earnings per share stood at RMB 1.51. A final dividend of RMB 0.33 per share has been proposed.

The announcement showed that packaging paper—covering carton board, high-strength corrugated paper and coated grey-backed white board—remained the group's core revenue source, representing about 91.5% of sales. The remaining roughly 8.5% came from culture paper, high-value specialty paper and pulp products. In FY2021, group sales revenue rose 19.9%, driven mainly by an approximately 7.8% year-on-year increase in sales volume and an approximately 14.4% rise in selling prices.

Gross margin also edged up, from 17.6% in FY2020 to 19% in FY2021. The company attributed the improvement mainly to product price increases outpacing raw material cost increases.

Despite the strong profit growth, Nine Dragons Paper did not fully capture the benefits of soaring paper prices in the past fiscal year, as domestic paper prices began another upward wave after August. Industry insiders said corrugated paper prices have climbed repeatedly since August and currently remain between RMB 3,850 and RMB 4,000. A sharp rise in domestic waste paper raw material prices this year is one of the main factors pushing corrugated paper prices higher.

They added that about 15 to 20 million tonnes of foreign waste paper enter China annually. With the full implementation of China's ban on solid waste imports, many papermakers have been forced to halt waste paper imports, tightening domestic waste paper and pulp supply.

In addition, Nine Dragons Paper said multiple papermaking projects are under construction. It expects annual papermaking capacity to reach 23.82 million tonnes by the end of June 2024, adding 6.25 million tonnes, to meet substantial demand anticipated ahead. The company is also expanding pulp projects in China and Malaysia, with combined capacity of 3.72 million tonnes, to be completed successively over the next two years.

The company noted that the global pandemic is still evolving and the external environment remains complex and severe. Looking ahead to the next year, broader vaccine roll-out is expected to help stabilize the pandemic and put the global economy back on track. Under China's new dual circulation development pattern, domestic demand and the export industry are set to be revitalized. Over the medium and long term, paper-for-plastic substitution and consumption upgrading will drive demand for high-end packaging paper such as white card and high-end kraft linerboard, while tight raw materials and stricter environmental policies should support higher industry concentration.

Source: China Packaging Network (pack.cn); original link: http://news.pack.cn/show-378337.html