Industrial papermaker Long Chen Paper Co (榮成紙業) and its affiliate Paolung International Co (寶隆國際) yesterday announced a land deal aimed at expanding production capacity in Taiwan.
Long Chen is to purchase nine land parcels in Yunlin County from Paolung for up to NT$92 million (US$3 million) to expand production of corrugated packaging and cardboard boxes, the companies said at a news conference.
The purchase would add 4,894.4 ping (16,179.8m2) to Long Chen’s local production base, with the purchase price capped at NT$18,700 per ping, the companies said.
The transaction, which requires the approval of the two firms’ boards on Monday next week, is expected to generate NT$65 million in profit for Paolung.
“The purchase is not entirely due to ongoing trade tensions and the company has increased its investment in Taiwan since 2015” to more than NT$4.6 billion, Long Chen vice president Tsou Yung-fang (鄒永芳) said.
Long Chen has an annual corrugated packaging capacity of about 360 million square meters, ranking second among local suppliers, Tsou said, adding that the land purchase would further bolster its hold on the domestic market.
Paolung, a major distributor of Long Chen’s industrial paper products, also announced that its board has approved plans to participate in Long Chen’s capital increase plan.
Paolung said it plans to purchase 5.16 million Long Chen shares at NT$16.2 each for a total of NT$83.64 million, raising its stake in Long Chen to 19.44 percent.
Long Chen swung into the red at the end of last month, with a pretax operating loss of NT$140.22 million.
Aggregate pretax earnings were NT$1.54 billion in the first 10 months of this year, plummeting 68.32 percent from a year earlier, Long Chen said on Tuesday.
Facing headwinds in China, due to its weakening currency and slowing demand, revenue last month also fell 24.57 percent annually to NT$4.1 billion, while aggregate revenue in the first 10 months of the year rose 16.9 percent to NT$43.71 billion, the company said.
Long Chen in September canceled plans to list its Chinese subsidiary in Shanghai, as Beijing’s newly imposed limits on recycled paper have rocked the unit’s prospects.
The limits are part of Beijing’s drive to curb pollution, and Long Chen has said that its Chinese subsidiary is unable to acquire the raw material it needs, as import quotas have been exhausted by larger Chinese rivals.
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