FAST NEWS: Nine Dragons Paper returns to profit on cost cuts

The Latest: Nine Dragons Paper (Holdings) Ltd. (2689.HK) announced on Wednesday it recorded a net profit of 750 million yuan ($107 million) for its fiscal year through June, reversing a net loss of 2.38 billion yuan in the previous fiscal year.

Looking Up: The company benefitted from an 18% increase in sales volume to about 19.6 million tons, along with a more optimized raw material structure and its close monitoring of raw material prices. It also implemented a series of cost cuts and took other efficiency-enhancing measures to return to profitability.

Take Note: The company reported a 90.2% surge in its trade and bill receivables to 8.48 billion yuan as its customers faced growing difficulties with China’s economic slowdown.

Digging Deeper: Nine Dragons Paper is China’s and one of the world’s largest producers of containerboard products. It was listed on the Hong Kong Stock Exchange in 2006. The company posted its first loss since going public in its fiscal year through June 2023 due to the impact of Covid control measures in China and a slow economic recovery, which led to weak demand for packaging paper. Looking ahead, the company’s management said it believes China’s combination of policies aimed at stabilizing the economy, boosting domestic demand, and promoting consumption will help to boost consumer confidence and drive growth in the packaging paper industry.

Market Reaction: Nine Dragons Paper shares rose on Thursday, closing up 3.5% at HK$3.25 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by A. Au

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