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Lee & Man Paper achieves net profit of HK$1.40 billion for the first half of 2020

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On August 4, 2020, Lee & Man Paper Limited announced that in the first half of 2020, the company achieved operating revenue of HK$11.07 billion, down 14.5% year-on-year; net profit of HK$1.40 billion, down 16.6% year-on-year; earnings per share of HK30.68 cents (first half of 2019: HK38.35 cents); declared an interim dividend of HK12 cents per share (first half of 2019 first half year: HK13 cents); total sales volume of 2.78 million t and average net profit of HK$505 per tonne of product.

In the first half of 2020, the global economy as well as the paper industry was deeply affected by the global New Coronavirus epidemic and the continued rise in tensions between the United States and China. Both the Group's sales revenue and profit decreased in the first half of the year, but both were within expectations and the Group's strategic objectives remained unchanged.

 

Business Review

Starting from the second half of 2018, with the advancement of supply-side reform in the Mainland, coupled with the tightening environmental protection policy restricting the launch of new production capacity, the supply and demand status of the industry started to tighten. Internationally, at the end of August 2018, the trade war between the US and China started to unfold, which restricted the supply of raw materials while the downstream demand was sluggish. With the signing of the first phase of the trade agreement between the US and China this year, uncertainty was reduced, but at the same time it was also affected by the new coronavirus epidemic and tensions between the US and China. Under the influence of the above series of factors, the paper industry profits have declined.

The paper industry still faces certain pressure in 2020. In addition, the trade friction between the United States and China is still ongoing and the cost of paper manufacturing is escalating, which affects consumer confidence. The Group has been actively responding to market changes and has been committed to developing a vertical business model covering pulp making and waste paper recycling by actively integrating upstream resources and moving towards the integration of the industrial chain to ensure the supply of raw materials; at the same time, the Group has been expanding its scale, controlling costs and enhancing production capacity on the basis of its existing business, bringing more opportunities for the Group to grow its performance.

 

Business Prospects

The novel coronavirus outbreak in China is now under control and the market has recently responded with a recovery in demand as companies gradually resume work and economic activities start to return to normal. The Group is actively optimizing its industrial chain in order to diversify its paper and pulp businesses. At the same time, on the basis of the original production scale, the Group has responded to the "One Belt, One Road" strategy by targeting the Southeast Asian market, expanding the international industrial layout and increasing new production capacity, and will continue to explore business opportunities in the "One Belt, One Road" countries and cities in the future. The Group has confidence in the long-term development of "One Belt, One Road".

The Group attaches great importance to the household paper business and has built up a full product chain. In the first half of 2020, Lee & Man's household paper business generated sales revenue of HK$2,047 million and profit of HK$267 million. The overall development of the household paper business is stable, and the Group's total annual production capacity has now reached 900,000 t. The Group will continue to adopt effective strategies to develop the household paper business with the needs of customers in mind.

 

The Group is committed to providing high quality products to the public and adheres to the principle of placing equal emphasis on production and operation as well as environmental protection, strengthening environmental management, increasing emission reduction and achieving energy saving and consumption reduction. In the long run, the paper industry still has relatively large room for development. The Group will seize the opportunity to expand its market scale and maintain the Group's market competitiveness in the paper industry.

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