Industrial papermaker Long Chen Paper Co (榮成紙業) on Thursday said it would halt the operation of a paper machine at a plant in Hubei Province, China, mainly due to the Chinese government’s tighter control over waste paper imports.
The machine, with an annual capacity of 450,000 tonnes of high-quality industrial paper products, would undergo planned maintenance from Thursday to mid-April, the company said in a statement.
Total production volume of the Hubei plant would decrease by 103,000 tonnes due to the temporary shutdown, the statement said.
As a result of the lower production volume, Long Chen’s revenue is forecast to fall by NT$1.6 billion (US$54.4 million), which represents 3.46 percent of last year’s sales, the company said.
The decision was made because the company’s Hubei-based subsidiary, Hubei Long Chen Recycling Technology Co Ltd (湖北榮成), has not yet obtained permits to buy wastepaper from overseas markets.
Papermakers in China rely on imports of wastepaper, which are the most important material for industrial paper products, but Beijing imposed a ban on wastepaper imports in the second half of last year amid pollution concerns.
The Hubei subsidiary, which began production in October last year, is expected to receive China’s approval for importing wastepaper by the end of March at the earliest, Long Chen said.
“We feel that a dramatic fluctuation in wastepaper prices for the Chinese market has put pressure on the company’s profitability,” a Long Chen official, who declined to be named, said by telephone on Thursday.
Long Chen last month saw pretax earnings plunge 91.3 percent year-on-year to NT$136.96 million from NT$1.58 billion, hit by rising material costs.
Last month’s revenue increased 35.44 percent to NT$4.78 billion, from NT$3.53 billion a year earlier, but operating income declined 70.2 percent annually from NT$511.04 million to NT$152.52 million, company data showed.
The company’s revenue jumped 42.62 percent from NT$32.4 billion to NT$46.2 billion for all of last year, and operating income expanded 76.98 percent year-on-year to NT$5.1 billion — both record-high levels. Pretax earnings grew 38.8 percent to NT$4.54 billion from NT$3.27 billion, or NT$4.09 per share, data showed.
Long Chen also plans to shut down a paper machine at its Wuxi plant in Jiangsu Province this quarter for improvements, which could add pressure to its operation in the first half of this year, Jih Sun Securities Investment Consulting Co (日盛投顧) said in a note on Friday.
Shares in Long Chen on Friday closed 3.44 percent lower at NT$36.45 in Taipei trading. The stock has retreated by 30 percent from a historical high of NT$52.4 on Sept. 12 last year, Taiwan Stock Exchange data showed.
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