Orient Paper, Inc. Reports Second Quarter 2013 Results

            Orient Paper, Inc. Reports Second Quarter 2013 Results

PR Newswire

BAODING, China, Aug. 12, 2013

BAODING, China, Aug. 12, 2013 /PRNewswire/ -- Orient Paper, Inc. (NYSE MKT:
ONP) ("Orient Paper" or the "Company"), a leading manufacturer and distributor
of diversified paper products in North China, today announced unaudited
financial results for the second quarter ended June 30, 2013.

Financial Highlights:

US$ million               2Q 2013  YOY Change  1H 2013 YOY Change
Revenue                   33.0     -7.0%       52.8    -24.5%
Revenue excluding PM1*    33.0     17.0%       52.8    -3.9%
Corrugating medium paper  20.6     -4.6%       33.2    -18.3%
Offset printing paper     11.3     -6.9%       17.7    -31.6%
Digital photo paper       1.2      -35.8%      1.9     -44.9%
Gross profit              6.1      5.4%        7.7     -42.9%
Gross margin              18.5%    2.2pp       14.6%   -4.7pp
Corrugating medium paper  20.0%    4.0pp       15.6%   -4.8pp
Offset printing paper     15.8%    0.5pp       13.1%   -3.8pp
Digital photo paper       16.5%    -9.2pp      11.6%   -14.0pp
Operating income          5.2      2.2%        6.0     -49.6%
Net income                3.7      1.3%        4.0     -52.3%
EBITDA                    7.1      -1.4%       9.4     -40.9%
*PM1 suspended operation since 31 December 2012 for modernization
Pp represents percentage points.

Key Highlights for Second Quarter 2013:

  oSecured RMB150 million (approximately US$24 million) financing
    arrangement to fund new tissue business expansion
  oConstruction of tissue paper production facility on schedule
  oMaintain 2013 net income and EPS guidance

Chairman and Chief Executive Officer of Orient Paper, Mr. Zhenyong Liu
commented, "We are pleased to report that our businesses have started to
recover with production ramping up steadily from the previous quarter and the
decline in raw material costs. As a result, the Company's overall
profitability has improved even though the economic environment remains

Mr. Liu added, "Our expansion into the tissue paper segment is also
progressing well. The construction works in the Wei County Economic
Development Zone site is on schedule to be completed by the end of 2013, and
we have successfully obtained the $24 million financing arrangement, which
reflects creditable rating of Orient Paper as a Company especially in the
midst of tight credit conditions in China. This financing will provide
adequate working capital for the later stage of the expansion plan critical to
driving our mid to long term business growth."

Mr. Liu concluded, "Orient Paper is committed to establish a track record for
solid financial performance. With product prices gradually stabilizing, we
reiterate our commitment to meeting our 2013 guidance.

Financial Review:
Quarter ended June 2013 Financial Results compared with quarter ended June

Changes in revenues, sales volumes, and Average Selling Prices ("ASPs") for 2Q
2013 are presented as follows:

                       Sales Volumes YOY    Revenue        YOY    ASP   YOY
                       (Tonnes)      Change                Change       Change
                                            (US$millions)        (US$)
Corrugating Medium     55,025        -5.8%  20.6           -4.6%  374   1.4%
Offset Printing Paper  16,424        -1.2%  11.3           -6.9%  686   -5.8%
Digital Photo Paper    311           -36.4% 1.2            -35.8% 3,870 1.0%


Total Revenue in the second quarter of 2013 was $33.0 million, decreased 7.0%
from $35.5 million.

Corrugating Medium Paper ("CMP")

  oRevenue from CMP decreased 4.6% to $20.6 million, representing 62.3% of
    total revenue. The decrease was mainly due to the suspension of operation
    of CMP production line PM1 for modernization since the end of 2012.
  oVolumes sold were down 5.8% to 55,025 tonnes, which were solely produced
    from PM6. No CMP was produced from PM1, which contributed 20,269 tonnes to
    the second quarter 2012 sales revenue.
  oASP increased 1.4% year-over-year to $374/tonne, as the downward pressure
    in the Chinese packaging paper industry started to ease off.

Offset Printing Paper

  oRevenue from offset printing paper in the quarter decreased 6.9% to $11.3
    million, representing 34.1% of total revenue. The decrease is mainly
    attributable to the decline of the ASP in the second quarter of 2013.
  oVolumes sold were down 1.2% to16,424 tonnes.
  oASP decreased 5.8% year-over-year to $686/tonne.

Digital Photo Paper

  oRevenue from digital photo paper decreased 35.8% to $1.2 million,
    representing 3.6% of total revenue.
  oVolumes sold dropped 36.4% to 311 tonnes, resulting from the suspension of
    night-time operations that started since October 2012, due to intensifying
    restrictions from government urban planning officials and rising pressure
    from the residential community, owing to the increasing presence of
    residential buildings in the neighborhood.
  oASP increased 1.0% year-over-year to $3,870/tonne.

Cost of Sales

Cost of Sales in the second quarter of 2013 was $26.9 million, down 9.4%,
primarily due to the decrease of revenue and declining raw material cost
during the quarter. Costs per tonne for CMP went down by 3.6% to $299, due to
the drop of the recycled paperboard cost correlated to the sudden decline in
price of the imported recycled paper, which is a result of the Chinese
government's "Green Fence" policy lifting the import standards for all
recycled materials. The policy has been implemented since February and will be
in force till the end of 2013.

Gross Profit

Gross profit in the second quarter of 2013 was $6.1 million, up 5.4% from $5.8
million for the second quarter of 2012. The improvement was mainly due to the
decline of raw materials costs and a slight increase of ASP for CMP.

Overall gross margin in the second quarter of 2013 was 18.5%, up from16.3% for
the second quarter of 2012. Gross profit margins for CMP, offset printing
paper and digital photo paper for the second quarter of 2013 were 20.0%, 15.8%
and 16.5%, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") were $0.9 million for
the second quarter of 2013, up 29.2% from $0.7 million for the second quarter
of 2012.The increase was mainly due to land lease payment for the Wei County
industrial park facilities, which was not present until the fourth quarter of

Income from Operations & Operating Margin

Income from operations was $5.2 million for the second quarter of 2013, up
2.2% from $5.1 million for the second quarter of 2012, primarily due to the
increased gross profit margin. Operating margin improved to 15.8% from 14.4% a
year ago, as well as 3.8% from the previous quarter.


Excluding the impact of interest expenses, income tax expenses, depreciation
and amortization, EBITDA, a non-GAAP measurement, was $7.1 million, down 1.4%
from $7.2 million. See Note 2 hereto for a reconciliation of Net Income to

Net Income

Net income was $3.7 million, up 1.3% from $3.6 million. Basic and diluted
earnings per share for the second quarter of 2013 were $0.20, compared to
$0.20 for the corresponding period of 2012.

Cash, Liquidity and Financial Position

As of June 30, 2013, cash and cash equivalents were $22.5 million, compared to
$13.1 million at the end of 2012.In the second quarter of 2013,Orient Paper
generated net cash flow from operating activities of $9.1 million,
representing a decrease of 34.1%, from $13.9 million for the corresponding
period of 2012.

Working capital was $19.3 million at the end of June 30, 2013. Short-term debt
was $4.0 million, and long-term debt was $30.3 million, of which $24.5 million
are long-term obligations under capital lease. As of June 30, 2013,
shareholders' equity totaled $149.7 million, compared to $142.8 million at the
end of 2012.

Operations and Business Updates

PM6 ramp up on track

The average utilization rate in the second quarter of 2013 was 61.1%, compared
to 36.8% in the previous quarter. The Company will continue to focus on the
ramp up of PM6 in the second half of 2013 to achieve the goal of an average
utilization rate of 70% by the end of fiscal 2013.

PM1 Modernization Plan

As announced earlier, Orient Paper has voluntarily shut down PM1 as part of
its facility upgrade plan. The modernization will transform PM1 into a more
energy-efficient production line, producing higher quality and higher profit
margin products. The management is evaluating the feasibility of different
options for the modernization, including the possibility of moving the
location of the production line from Baoding to the Wei County industrial
park, the site of the new household/tissue paper production facilities.

Tissue Paper Expansion on schedule

Orient Paper has started building the factory and other infrastructures for
the household / tissue paper production facilities located in the Wei County
Economic Development Zone in Hebei Province since mid- February this year. The
building of the factory is set to be ready by the end of the third quarter for
the installation of PM8, the first 15,000 tonnes-per-year production line.
Installation of PM8 is targeted for completion by the end of the second
quarter of 2014.

Relocation and sale of headquarters estate

As announced separately today, in order to comply with the recent Xushui
County urban development plan mandates to develop the area where the Company's
Headquarters Compound is located into residential area, the Company's Audit
Committee and the Board of Directors have approved the sale of the land use
rights of the Headquarters Compound, the office building and all
industrial-use buildings (the "Industrial Buildings"), and three employee
dormitory buildings located within the Headquarters Compound (the
"Dormitories") to Hebei Fangsheng Real Estate Development Co. Ltd. ("Hebei
Fangsheng") on August 7, 2013 for a total sales prices of $8.23 million.

In connection with the sale, Hebei Fangsheng agrees to lease the Industrial
Buildings back to Orient Paper for a term up to three years, while the Company
explores different options to relocate its office and Digital Photo Paper
workshop for PM4 and PM5.

The net proceeds from the sale were approximately $7.84 million and are
expected to be used to fund the Company's household and tissue paper business

Government continued to push for industry efficiency and environment

Following the Ministry of Industry and Information Technology's ("MIIT") April
2013 announcement to retire a total of 4.6 million tonnes of old and
inefficient paper production capacities in China, the Hebei Province also
announced in May its target to close 2.15 million tonnes of paper production
capacities in 2013. In July, the MIIT released its list for the first phase of
the 2013 closures for 6.2 million tonnes in the country, with 0.9 million
tonnes of such capacities located in the Hebei Province. This has led to the
expectation in the market that the actual closures for 2013 may eventually
exceed the earlier announced target plan. While this will curb surplus
capacity, several industry analysts view that paper ASPs are not likely to
recover significantly for the rest of the year.

As a leading player in the fragmented North China packaging paper segment,
Orient Paper is committed to both efficiency and environmental conservation,
and believes it is well positioned to take advantage of the mandatory closures
to increase market share and further establish its leadership in the industry

Full Year 2013 Guidance

The Company is maintaining its guidance on most of the financial KPI or
metrics, including net income and earnings per share, for the full year of
2013. Revenues for the full year are expected to be in the range of between
$117 million and $129 million, gross profit to be between $17 million and $19
million, net income to be between $9 million and $10 million, and basic and
diluted earnings per share to be between $0.51 and $0.56.

Conference Call

The Company will host a conference call for institutional and retail investors
at 8:30 am US Eastern Time (5:30 am US Pacific Time /8:30 pm Beijing Time) on
Tuesday, August 13, 2013, to discuss its quarterly results and recent
business, operational and corporate activities.

To participate in the conference call, please dial the following number five
to ten minutes prior to the scheduled conference call time:

China:  400-120-0654
Hong Kong:        800-903-737
United States:         1-855-500-8701
International:        +65-6723-9385
Passcode:      2212 4989

A replay of this conference call will be available by dialing:

China:  400-120-0932 / 800-870-0205
Hong Kong:        800-963-117
United States:         1-855-452-5696
International:        +61-2-8199-0299
Passcode:     2212 4989

The replay will be archived for fourteen days following the earnings
announcement until August 27, 2013.

This conference call will be broadcast live over the Internet and can be
accessed by all interested parties by clicking on
http://www.orientpaperinc.com/. Please access the link at least fifteen
minutes prior to the start of the call to register, download, and install any
necessary audio software. A replay will be archived for one year shortly after
the call by accessing the same link.

About Orient Paper, Inc.

Orient Paper, Inc. ("Orient Paper") is a leading paper manufacturer in North
China. Using recycled paper as its primary raw material, Orient Paper produces
and distributes three types of paper products namely, packaging paper
(corrugating medium paper), offset printing paper, and other paper products,
including digital photo paper, and household/tissue paper that the company is
currently expanding into.

With production operations based in Baoding in North China's Hebei Province,
Orient Paper is located strategically close to the Beijing and Tianjin region,
home to a growing base of industrial and manufacturing activities and one of
the largest markets for paper products consumption in the country.

Orient Paper's production facilities are controlled and operated by its wholly
owned subsidiary Shengde Holdings, Inc., which in turn controls and operates
Baoding Shengde Paper Co., Ltd., and Hebei Baoding Orient Paper Milling Co.,
Ltd for manufacturing digital photo, printing and packaging paper.

Founded in 1996, ONP has been listed on the NYSE MKT Board since December
2009. (Please visit http://www.orientpaperinc.com.)

Note 1: Production Facilities of Orient Paper
PM#   Paper Product             Designed Capacity  Location
PM1*  Corrugatingmediumpaper  150,000            Xushui County, Baoding
PM2   Offset printing paper     50,000             city, Hebei province
PM3   Offset printing paper     40,000
PM4   Digital photo paper       2,500              ONP's Headquarters Compound
PM5   Digital photo paper       2,500**
PM6   Corrugating medium paper  360,000            Xushui County, Baoding
PM7*  Specialty paper           10,000             city, Hebei province
PM8*  Tissue paper              15,000             Economic Development Zone
                                                   in Wei County, Hebei
PM9*  Tissue paper              15,000             Province
*: Paper machines under renovation or under construction, or in the planning
**: PM4 and PM5 have a total coating capacity of 2,500 tonnes per year.

Note 2:
Reconciliation of Net Income to EBITDA
(Amounts expressed in US$)
                           For the Three Months Ended For the Six Months Ended
(in millions)
                           June 30                    June 30
                           2013          2012         2013        2012
Net income                 $     3.6     $     3.6    $    4.0    $    8.3
Add: Income tax                  1.3           1.3         1.1         3.1
Add: Net interest expense        0.2           0.2         0.4         0.4
Add: Depreciation and            2.0           2.1         3.9         4.1
EBITDA                     $     7.1     $     7.2    $    9.4         15.9

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact in this
announcement are forward-looking statements, including but not limited to,
anticipated revenues from the digital photo paper business segment; the
actions and initiatives of current and potential competitors; the Company's
ability to introduce new products; the Company's ability to implement the
planned capacity expansion of corrugate medium paper; market acceptance of new
products; general economic and business conditions; the ability to attract or
retain qualified senior management personnel and research and development
staff; and other risks detailed in the Company's filings with the Securities
and Exchange Commission. These forward-looking statements involve known and
unknown risks and uncertainties and are based on current expectations,
assumptions, estimates and projections about the companies and the industry.
The Company undertakes no obligation to update forward-looking statements to
reflect subsequent occurring events or circumstances, or to changes in its
expectations, except as may be required by law. Although the Company believes
that the expectations expressed in these forward looking statements are
reasonable, it cannot assure you that its expectations will turn out to be
correct, and investors are cautioned that actual results may differ materially
from the anticipated results.

JUNE 30, 2013 AND 2012
                                                                   Three Months Ended              Six Months Ended
                                                                   June 30,                        June 30,
                                                                   2013            2012            2013           2012
Revenues  $ 33,038,512    $ 35,521,672     52,785,168     69,930,671
Cost of Sales                                                        (26,940,117)    (29,736,008)   (45,056,536)   (56,391,835)
Gross Profit                                                         6,098,395       5,785,664      7,728,632      13,538,836
Selling, general and administrative                                 (886,556)       (686,130)      (1,773,722)    (1,730,802)
Income from Operations                                               5,211,839       5,099,534      5,954,910      11,808,034
Other Income (Expense):
Interest income                                                      35,796          5,994          54,789         10,710
Interest expense                                                     (252,393)       (220,761)      (478,718)      (425,635)
Income before Income Taxes                                           4,995,242       4,884,767      5,530,981      11,393,109
Provision for Income Taxes                                           (1,339,106)     (1,273,977)    (1,571,790)    (3,100,628)
Net Income                                                           3,656,136       3,610,790      3,959,191      8,292,481
Other Comprehensive Income:
Foreign currency translation                                         2,236,487       92,341         3,200,061      761,834
Total Comprehensive Income                                         $ 5,896,623     $ 3,703,131      7,159,252      9,054,315
Earnings Per Share:
Basic and Fully Diluted Earnings per                               $ 0.20          $ 0.20           0.21           0.45
Weighted Average Number of Shares
Outstanding- Basic and Fully Diluted                                18,456,995      18,459,775     18,458,377     18,453,754

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012
                                               June 30,       December 31,
                                               2013           2012
Current Assets
Cash and cash equivalents                      $ 22,488,260   $ 13,140,288
Restricted cash                                  -              1,585,138
Accounts receivable (net of allowance for
 accounts of $63,324 and $57,643 as of     3,150,784      2,836,335
June 30,
 2013 and December 31, 2012,
Inventories                                      13,452,703     15,104,101
Prepayments and other current assets             4,409,472      5,401,705
Total current assets                             43,501,219     38,067,567
Prepayment on property, plant and equipment      1,477,354      1,445,645
Property, Plant, and Equipment                   147,298,914    122,391,456
Deferred tax asset                               982,681        941,646
Total Assets                                   $ 193,260,168  $ 162,846,324
Current Liabilities
Short-term bank loans                          $ 4,049,763    $ 3,962,844
Current portion of long-term debt from
credit                                          5,855,958      4,168,912
Current obligations under capital lease          8,206,234      -
Accounts payable                                 1,193,562      1,012,906
Security deposit from related party              1,099,198      1,075,606
Notes payable                                    -              3,170,276
Accrued payroll and employee benefits            499,274        292,638
Other payables and accrued liabilities           2,219,276      1,262,284
Income taxes payables                            1,088,358      1,255,457
Total current liabilities                        24,211,623     16,200,923
Loan from credit union                           -              1,561,361
Loan from a related party                        2,366,020      2,315,239
Deferred gain on sale-leaseback                  758,257        -
Long-term obligations under capital lease        16,243,120     -
Total liabilities                                43,579,020     20,077,523
Commitments and Contingencies
Stockholders' Equity
Common stock, 500,000,000 shares authorized,
 $0.001 par value per share, 18,456,900
 18,459,775 shares issued and              18,457         18,460
outstanding as of
 June 30, 2013 and December 31, 2012,
Additional paid-in capital                       46,119,820     46,135,975
Statutory earnings reserve                       5,963,960      5,963,960
Accumulated other comprehensive income           15,527,500     12,327,439
Retained earnings                                82,051,411     78,322,967
Total stockholders' equity                       149,681,148    142,768,801
Total Liabilities and Stockholders' Equity     $ 193,260,168  $ 162,846,324

                                               Six MonthsEnded
                                               June 30,
                                               2013            2012
Cash Flows from Operating Activities:
Net income                                     $ 3,959,191     $ 8,292,481
Adjustments to reconcile net income to net
cash provided by
operating activities
Depreciation and amortization                    3,921,450       4,050,749
Allowance for/ (recovery from) bad debts         4,370           (16,875)
Stock-based expense for service received         (16,158)        378,065
Deferred tax                                     (20,155)        -
Changes in operating assets and liabilities:
Accounts and notes receivable                    (253,929)       806,855
Prepayments and other current assets             1,508,193       594,872
Inventories                                      1,961,617       1,478,010
Accounts payable                                 156,755         (2,045,625)
Notes payable                                    (3,205,385)     -
Accrued payroll and employee benefits            199,139         (73,871)
Other payables and accrued liabilities           1,125,684       1,247,500
Income taxes payable                             (192,567)       (829,437)
Net Cash Provided by Operating Activities        9,148,205       13,882,724
Cash Flows from Investing Activities:
Prepayment/deposit for purchase of property,
plant and                                        (24,231,749)    (4,263,157)
Refund of prepayment for purchase of
property, plant and                              -               3,111,240
Purchases of property, plant and equipment       (161,148)       (10,245,764)
Proceeds from disposal of property, plant and    -               -
Net Cash Used in Investing Activities            (24,392,897)    (11,397,681)
Cash Flows from Financing Activities:
Proceeds from related party loans                779,386         500,000
Repayment of related party loans                 (779,386)       (700,000)
Proceeds from bank loans                         -               1,979,696
Proceeds from sale-leaseback financing           24,158,461      -
Repayments of bank loans                         -               (2,058,884)
Payment of lease obligation                      (1,348,571)     -
Release of restricted cash                       1,602,693       -
Dividend paid                                    (230,747)       (230,747)
Net Cash Provided by/ (Used in) Financing        24,181,836      (509,935)
Effect of Exchange Rate Changes on Cash and      410,828         18,138
Cash Equivalents
Net  Increase  in Cash and Cash Equivalents      9,347,972       1,993,246
Cash and Cash Equivalents - Beginning of         13,140,288      4,165,446
Cash and Cash Equivalents - End of Period      $ 22,488,260    $ 6,158,692
Supplemental Disclosure of Cash Flow
Cash paid for interest                         $ 135,556       $ 357,974
Cash paid for income taxes                     $ 1,784,515     $ 3,930,064

SOURCE Orient Paper, Inc.

Website: http://www.orientpaperinc.com
Contact: Orient Paper, Inc., +1-562-818-3817, ir@orientpaperinc.com; or
FleishmanHillard, +852-2530-0228, ir@orientpaperinc.com
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