Shares of Cheng Loong Corp (正隆紙業), the nation’s biggest industrial papermaker, yesterday rose 3.93 percent to NT$17.20 after the company said it expects to book nearly 520 million yuan (US$80.81 million) from the sale of its Chinese subsidiaries.
Cheng Loong is to sell Hong Kong Chung Loong Ltd (香港中隆) and Shanghai Chung Loong Paper Co Ltd (上海中隆紙業) to China Vanke Co (萬科), China’s biggest property firm, for 1.31 billion yuan, it said in a filing with the Taiwan Stock Exchange.
The transaction is expected to contribute earnings of NT$2.15 per share, based on the company’s 1.11 billion outstanding shares, data showed.
“The company will recognize the gains in the second quarter of this year at the earliest,” a Cheng Loong official said by telephone.
The official, who spoke on condition of anonymity, said the disposal of the Shanghai-based paper mill was partly due to tighter environmental regulations and rising costs in China.
Cheng Loong had invested US$130 million in the Shanghai unit, which posted losses of US$25 million last year, the official added.
The disposal is not expected to affect the company’s shipments, as it has 11 other paper box plants in China.
However, Cheng Loong is relatively conservative about the Chinese market’s outlook, considering increasing uncertainty over material costs.
Wastepaper prices in China have fluctuated dramatically since last year, when Beijing introduced a ban on imports of wastepaper, the main material used in industrial paper products.
Cheng Loong said it might not be able to raise product prices to reflect soaring costs this year, adding that it would give greater priority to increasing the efficiency of its existing Chinese plants instead of building new factories
The target is to lift the average utilization rate of its Chinese units from nearly 60 percent to 75 percent this year, it said.
Cheng Loong is also shifting its focus to Vietnam, where a new paper mill is expected to become operational in the second quarter with an installed annual capacity of 300,000 tonnes.
Over the next decade, the company plans to build a production base in Southeast Asia, it said.
The company’s revenue totaled NT$42.56 billion (US$1.44 billion) last year, up 6.17 percent from NT$40.09 billion in 2016.
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