Nine Dragons Paper to hike product prices

Nine Dragons Paper (Holdings), the largest container board producer in China, said on Tuesday that higher raw material costs would force the company to increase product prices.

Due to the Chinese government’s stringent efforts to reduce recovered paper imports (the raw material of container board), the price of the recovered paper has been rising, said Cheung Yan, chairwoman of Nine Dragons Paper.

To make up for raw material needs, the company will purchase more recovered paper domestically, and at the same time set up factories abroad for recycled pulp manufacture, said Cheung.

Looking ahead, Cheung said she remained positive about the market environment this year.

“The average selling price of finished goods in the paper industry has increased by 50 to 100 yuan ($15.85) per metric ton before the Spring Festival, and was up another 200 yuan per ton after that,” said Zhang Chengfei, executive director of Nine Dragons, adding that currently the average selling price is between 2,400 yuan and 2,500 yuan per ton.

Zhang believed the average selling price will continue to rise in the second half of this year, depending on the raw material cost trend.

Thanks to the increase in the product-selling price, the company reported 126 percent year-on-year growth in net profit to 4.33 billion yuan for the six month period ending Dec 31, 2017. If exchange losses on the company’s operating and financing activities were excluded, the net profit was 4.35 billion yuan. Basic earnings per share for the period reached 0.93 yuan.

Nine Dragons proposed an interim dividend of 0.1 yuan, compared with 0.05 yuan during the same period in 2016.

Nine Dragons will continue to expand its production capacity in the country to satisfy increasing demand. Three new paper machines in Chongqing, Fujian and Hebei are expected to commence production before the end of this year. There will be another three new paper machines commencing production in Shenyang, Dongguan and Quanzhou before the first half of 2019.

“The addition of new capacity in the market during certain periods and tightening control over import of raw materials will expose the company to stern challenges,” said Cheung. “However, the company has confidence in the ability to address such challenges by adjusting to supply-demand dynamics according to market changes.”