Paper costs weigh on Lee & Man profit by Alice Zhao
Wednesday, June 13, 2012
Lee & Man Paper Manufacturing (2314), the second largest containerboard manufacturer by output in the mainland, reported a 26.9 percent decrease in net profit due to rising operating costs and keen competition.
The company's net profit amounted to HK$1.35 billion, or 28.82 HK cents per share, in the year ended March 31, 2012, down by 26.9 percent from the previous year.
As a result, it recommended a final dividend of 5.2 HK cents per share, down by 35 percent from the previous year.
"As oversupply continues in the short term, operations will be very difficult," said chief executive Raymond Lee Man-chun. "I don't know whether the worst is past."
Total revenue grew by only 4.9 percent to HK$14.72 billion. But rising costs in raw materials hurt its margins as earnings per tonne shrank by 28 percent to HK$363.
Lee & Man Paper's gearing ratio climbed to 65 percent, up from 55 percent a year earlier due to capacity expansion. But the firm said that level is still controllable and may ease next year.
Two new production lines with a capacity for 1.1 million tonnes will start operating this year, boosting the annual potential to 6.55 million tonnes by the end of next March.
A total of HK$1.6 billion will be spent on building plants this year.
"We are confident of selling five million tonnes this year," said Lee.
He added that the coming quarter is a boom season for the industry.
Lee & Man shares fell 1.8 percent to HK$3.21.
http://www.thestandard.com.hk/news_deta ... 20613&fc=4