China’s crackdown on small mills helps Orient Paper

Source: The Paper Stock Report / Paper Recycling Online

The Chinese government claims its mandated closure of hundreds of small, independent paper mills is due to the pollution caused by these mills. Is that the real reason, or is the government squashing small business to the advantage of giant, publicly traded paper making corporations?

May 10, 2011

Double digit growth in revenue and net income for China’s Orient Paper Inc. was partially attributed to the government’s crackdown on small mills. Orient Paper, a leading manufacturer and distributor of diversified paper products in northern China, said first quarter revenue increased 25.6 percent year-over-year to $33.2 million and gross profit increased 60.6 percent year-over-year to $7.8 million, with gross margin of 23.4 percent. Net income increased 55.2 percent year-over-year to $4.9 million.

"Our double digit growth in revenue and net income during the first quarter of 2011 was largely due to higher selling prices resulting from factors related to inflation on commodity costs in China and strong market demand and a supply shortage caused by the government-mandated closure of smaller paper manufacturers in the second half of 2010," said Zhenyong Liu, chairman and CEO.

Due to the loss of an old corrugating medium paper production line since June 2010 to make room for the new production line under construction, revenue from corrugating medium paper amounted to $8.5 million in the first quarter of 2011, representing a decline of 10.5 percent compared to $9.5 million in the year ago period.

Despite a decrease of 9,139 tons in total quantity sold, ASP for corrugating medium paper rose 26.6 percent from $304 per ton in the first quarter of 2010 to $385 per ton in the first quarter of 2011 as a result of increasing customer demand and regional shortage in supply of paper products, caused by government mandated closures of other smaller paper manufacturers Orient said.

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