Nine Dragons Paper’s profit doubles as supply chain integration pays off

2689.HK

Packaging paperboard products maker Nine Dragons Paper (Holdings) Ltd. (2689.HK) announced on Wednesday that its profit rose 102.6% year-on-year to 3.58 billion yuan ($534 million) for its fiscal year through June.

The company’s revenue for the year rose 18.6% to 75 billion yuan, driven by a 14% increase in sales volume to 24.5 million tons and a 4% rise in the average selling price. Its gross profit grew 50.8% to 10.93 billion yuan, while its gross margin rose to 14.6% from 11.5%.

The company attributed the strong profit growth mainly to cost advantages from the vertical integration of its raw-material supply chain, as well as a higher proportion of premium products that lifted its average selling price. Packaging paper accounted for 88.1% of total revenue, with the remaining 11.9% coming from printing and writing paper, high-value specialty paper and pulp products.

Nine Dragons produces linerboard, high-performance corrugating medium, white cardboard and printing and writing paper, and is one of China’s leading packaging paper producers. The company had total annual design capacity of about 24.8 million tons for papermaking and about 5.4 million tons for wood pulp at the end of June.

The company’s shares opened higher on Thursday and traded at HK$6.05 by the midday break, up 2.02%. The stock is down about 14.9% over the past six months.

By Lee Shih Ta

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