Chung Hwa Pulp Co (CHP, 中華紙漿) yesterday reported its net income for last quarter plunged 50.9 annually to NT$78.02 million (US$2.4 million), with earnings per share falling to NT$0.07, due to falling pulp prices in the international market and devaluation of the New Taiwan dollar.
“International pulp prices hit their lowest levels last month, at US$505 per metric tonne,” company chief financial officer Lin Guu-fong (林谷豐) said yesterday at an investors’ conference in Taipei.
He said that pulp prices have been declining for eight consecutive months — the second worst performance since the financial crisis in 2009 — according to industry researcher RISI.
FORECAST
“We predict that the situation will not be as bad as it was in 2009, as pulp prices this month are expected to rebound by US$10 per million tonnes,” Lin said.
CHP’s pulp costs are between US$520 and US$530 per metric tonne, significantly lower than the US$600 benchmark in 2011, Lin said, adding that he is confident that the company can rein in losses and has not ruled out a return to the black in the coming quarters.
As to last quarter’s devaluation of the NT dollar against the US dollar, which resulted in a foreign exchange loss of NT$36.05 million, Lin said that the losses are expected to be reversed this quarter, based on the company’s projections last week that remittances this month could convert into an income of NT$16 million.
Last quarter, the company’s operating margin decreased to 9.1 percent from 11 percent in the same period a year ago, which the company attributed to a significant margin drop in its pulp segment and a slight decrease in its cultural paper segment, CHP said.
“Operating margin of our specialty paper business, on the other hand, increased by 1 percent to 16 percent this quarter,” Lin said, adding that the business drove the company’s revenue last quarter to increase 6 percent annually to NT$5.27 billion.
PRODUCTS
CHP has been adjusting its product portfolio in high-end paper manufacturing since last year, which has increased its operating margin last year to 10.9 percent from 9.9 a year earlier, company data showed.
Specialty paper segment, which accounted for about 30 percent to 40 percent of CHP’s revenue last quarter, is expected to introduce two new applications every year as the company continues to seek growth in the segment, CHP said.
The cultural and art-use paper segment, the company’s largest revenue source with a contribution of 50 percent of total sales last quarter, would decrease gradually with operating margin staying at 9 percent, Lin said.
CHP shares yesterday dropped 4.37 percent to close at NT$9.42 in Taipei trading.
Meanwhile, CHP’s parent group — YFY Inc (永豐餘控股) — saw its net income last quarter drop 28.1 percent annually and 86.2 percent quarterly to a loss of NT$120 million, with earnings per share falling to minus-0.07, mainly because of profit losses from its industrial-use paper business at its Yangzhou plant in China’s Jiangsu Province.
YFY’s consolidated revenue increased 0.3 percent to NT$15.01 billion from a year earlier.
YFY shares yesterday dropped 0.1 percent to close at NT$9.84 in Taipei trading.
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