Papermaker Nine Dragons’ profit sinks 51 per cent as it gets caught in the US-China trade war

The Guangdong-based company paid 650 million yuan in tariffs to the Chinese government for waste paper imports from the US

Company plans to reduce imports from the US to 15 per cent from 25 per cent currently, cut tariff bill to under 300 million yuan next year

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Catalyst Paper’s mill in Rumford, Maine, which was bought by Nine Dragons Paper in May 2018. Photo: Alexis Horatius

Published: 7:30pm, 25 Sep 2019Updated: 10:55pm, 25 Sep 2019

Nine Dragons Paper (Holdings), Asia’s largest containerboard manufacturer, reported a 51 per cent decline in profit mainly because of tariffs on waste paper imports from the US, lower selling price and reduced profit margin, even as revenue and volumes rose to record highs.

The entire tariff bill of 650 million yuan (US$91.2 million) was paid to the Chinese government for importing recycled paper, recycled pulp and virgin pulp, the papermaker said.

The Chinese government applies 25 per cent tariffs on recycled paper and 20 per cent on recycled pulp.

The Hong Kong-listed company’s profit attributable to shareholders stood at 3.86 billion yuan for the year ended June 2019, compared with 7.85 billion yuan last year. It fell short of analysts’ expectations of 4.07 billion yuan in a Bloomberg survey.

Yan Cheung, chairwoman of Nine Dragons Paper (Holdings), said the company will focus on the domestic market to make up for the loss of exports. Photo: Bloomberg

Sales grew 3.5 per cent year on year to 54.65 billion yuan, missing estimates of 55.18 billion yuan. Volumes rose 8.5 per cent year on year to 14.1 million tonnes.

With the trade war showing no signs of ending soon, the company plans to lower the ratio of imported waste paper from the US to 15 per cent from 25 per cent in the next financial year, reducing the impact of tariffs to below 300 million yuan next year, chief financial officer Armstrong Zhang said.