HONG KONG: Nine Dragons Paper, the mainland's biggest containerboard maker, said it believes the worst is over as the company has shown signs of recovery from its toughest time ever. Company sales during Jan and Feb improved over the end of last year.

Zhang Yin, chairwoman of Nine Dragons, said output in Jan-Feb this year was 78,0000 tons. Production output was balanced by sales volume.

The operating environment improved in the first quarter over the fourth quarter, she told reporters in Hong Kong yesterday.

The company's targeted capacity in 2009 is 8.55 million tons. Jan-Feb output accounted for 9.1 percent of the year's total capacity.

However, Zhang admitted that global markets remain sluggish. Growth of mainland domestic consumption will be crucial for the company's future.

"We see challenges in global markets, and exports will continue to shrink," Zhang said. Turnover attributed to exports accounts for 20 percent of the company's total sales.

Last year exports accounted for 50 percent of the company turn over, she added.

The global recession dragged the containerboard manufacturing industry downward last year as demand for packaging slumped.

Nine Dragons reported a 69.4 percent drop in 6-month earnings ended Dec 31, to 323.45 million yuan.

Nine Dragons' outstanding bank loans and borrowings at the end of last year amounted to 14.96 billion yuan.

The company's net debt-to-equity ratio rose to 102.7 percent.

The heavy debts and slumping sales among paper making companies caused considerable concern among analysts earlier.

Zhang said the company plans to lower its net debt-to-equity ratio to about 60 percent in the fiscal year 2010/11.

The company adds however, it is unlikely to affect a substantial lowering of the ratio this year.

She said the company has paid for some future projects, "we are not going to take out more loans."

Nine Dragons announced the buy back $284 million in corporate bonds due in 2013.

The discounted price of last month's buy back could cost the company as much as $160 million.

Zhang said the company will be able to lower its borrowing costs as a result of the buy back.

She expects the cost to be in the neighborhood of 900 million yuan, stressing that the financial well being of the company is improving.

She added that the company will not seek to cut costs by laying off staff.ons.

(HK Edition 03/18/2009 page16)