HONG KONG: Lee & Man Paper Manufacturing Ltd, the second largest containerboard maker on the mainland, said net profit for the fiscal year 2009 will record a "significant decline" due to sharp market contraction, which severely weighed down on customer orders and selling prices for its products.
Chief Executive Officer Raymond Lee said the company's operation from October to December 2008 was hard hit by the global financial turmoil, which took a heavy toll on its full-year earnings in the fiscal year ended March 31.
"During that period, the average selling price for containerboard plunged to HK$2,200 from HK$3,400 per ton, while the price of old corrugated cardboard also slumped to HK$700 from HK$1,700 per ton," Lee told reporters in a press conference in Hong Kong yesterday.
The company's sales, however, have started to pick up in January this year, as the economic situation gradually improves, boosting customer orders, Lee added.
"The worst has already passed, though the global economy is still in recession," he said, "Our operation is in a recovery stage and both our gross profit margin and operation rate have increased."
During the first quarter this year, the gross profit margin of the linerboard production unit bounced back to around 20 to 25 percent, while the operation rate was maintained at over 90 percent.
"Overall, the condition of the paper industry is improving due to strong growth in domestic consumption and significant improvement in export demand," Lee said.
The average production capacity of Lee & Man currently reaches 300,000 tons a month. The company hopes to increase its output to 4.2 million tons per year through a restructuring of its output of products and production plants.
"We plan to boost our production capacity by 10 percent by manufacturing higher margin products," Lee said.
At the end of March this year, Lee & Man's net debts rose to HK$7.2 billion, while the company's gearing ratio also jumped to 90 percent.
Head of finance Tony Hui said the company has HK$300 to HK$400 million net cash on hand. The amount will reach HK$2 billion, if loans from banks are also taken into account.
"The company will only spend around HK$3 billion to HK$4 billion in the coming two fiscal years, mainly on maintenance work," Hui said.
Concerning Lee & Man's expansion in Vietnam, Lee said the new project will be postponed for 2 years, though the company has already purchased a plot of land and built part of the infrastructure there.
"We will focus on reducing our debts in the next 24 months," Lee said. The company hopes to maintain its net debts and gearing ratio at HK$5.2 billion and 55 percent in 2011, respectively.
Shares in Lee & Man dropped 1.32 percent, or HK$0.12, to close at HK$9 yesterday, while the benchmark Hang Seng Index finished down 0.39 percent, or 68.19 points, at 17,475.84. |
