Nation's leading containerboard producer unveils expansion plans

Nine Dragons Paper (Holdings) Ltd, China's largest containerboard producer, said it also expects to become the world's biggest by 2011 as the group is undertaking aggressive expansion plans across its major production sites.

Total design capacity is expected to exceed 10 million metric tons per annum (tpa) and 12 million tpa in 2011 and 2012 respectively - the largest in the world by then - the Hong Kong-listed containerboard paper producer said Monday.

"The recovery of the global economy, state policies to stimulate domestic demand as well as vigorous environmental regulatory policies will bring vast opportunities to the large-scale paper manufacturers," said Nine Dragons chairwoman, Cheung Yan, at a media briefing in Hong Kong announcing the company's annual results for the year ended June 30, 2010.

Nine Dragons posted a net profit of 2.17 billion yuan or 0.48 yuan a share, up 30 percent from 1.66 billion yuan or 0.38 yuan per share seen a year earlier.

Sales increased 36.7 percent to 18 billion yuan last year and the company recommended a final dividend of 0.10 yuan. Together with the 0.02 yuan per share interim dividend, the total dividend adds up to 0.12 yuan per share, compared with 0.035 yuan for the previous financial year.

The group's fourth production site in Tianjin, which started operations in September 2009, has achieved its targets, the company said. Meanwhile, three new paper machines at the Tianjin plant are under construction and are expected to be online by early 2011, Nine Dragons said.

Production capacity at its other sites in Taicang, Dongguan and Chongqing are also expected to see a notable lift, after the completion of an upgrade in its equipment and optimization of its product mix due in 2012 .

The company also plans to build a medium-sized paper manufacturing base in Quanzhou, with two paper machines expected to start production before the end of June 2012.

Cheung said the fast expansion and upgrading plans saw the group's capital expenditure climb to 4.4 billion yuan this year, and is expected to reach 5 billion yuan in 2011 and 3.5 billion yuan in 2012 .

She said the company now holds 2.3 billion yuan in cash and possesses about 18 billion yuan of untapped bank loans. However, the company is not planning to sell shares to raise capital as it says its financial status is still sound.

"Our debt ratio stands at 73 percent now, and it is likely to reach 80 percent by the year-end due to new equipment put into operation. However, we expect the ratio to start declining next year, to 60 or 70 percent by the end of 2011," Cheung added.

China Daily

(HK Edition 09/28/2010 page3)