Orient Paper, Inc. Reports First Quarter 2014 Results

            Orient Paper, Inc. Reports First Quarter 2014 Results

PR Newswire

BAODING, China, May 15, 2014

BAODING, China, May 15, 2014 /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 its financial
results for the first quarter ended March 31, 2014.

Financial Highlights:

US$ million              1Q 2014 YoY Change
Revenue                  25.8    30.4%
Corrugating medium paper 17.1    35.6%
Offset printing paper    7.4     14.3%
Digital photo paper      1.3     85.6%
Gross profit             4.7     186.5%
Gross margin             18.1%   9.8pp
Corrugating medium paper 16.0%   7.5pp
Offset printing paper    21.4%   13.1pp
Digital photo paper      27.5%   24.2pp
Operating income         3.8     406.3%
Net income               2.5     735.9%
EBITDA                   5.7     111.1%
Pp represents percentage points

Key Highlights for First Quarter 2014:

  oSignificant improvement year-over-year of key financial metrics with an
    over sevenfold increase in net income
  oPM1 conducting test runs to prepare for trial production. Early completion
    of PM1 renovation is expected during the second quarter.
  oPM6 monthly annualized utilization reached 80% in March2014
  oFull year 2014 guidance unchanged

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper,
commented, "Our first quarter results for 2014 has shown significant
improvement on top-line and bottom-line figures. This is largely due to the
normalization of operations in the period for both CMP and offset printing
paper, which were affected by the county-wide environmental inspection in the
first quarter of 2013."

Mr. Liu continued, "In addition, we are pleased to report a successful ramp up
of PM6 with a utilization rate of 80% for March after our seasonally slower
months of January-February due to the Chinese New Year break and scheduled
annual equipment maintenance. This has contributed to the increase of our CMP
sales volumes in the quarter, compared to the same period a year. We have also
completed PM1 installation and are currently conducting test runs to prepare
for trial production before we commence actual commercial production of
insulation liner paper."

"Furthermore, we are very pleased to report that, through our continued
efforts to optimize the production schedules at our digital photo paper
facility since the second half of 2013, we are seeing an increase in digital
photo paper production and a 76% growth in sales volumes, while minimizing
disturbance to the neighboring residents," added Mr. Liu.

Financial Review:

Quarter ended March 2014 Financial Results compared with quarter ended March
2013

Changes in revenues, sales volumes, and Average Selling Prices ("ASPs") for 1Q
2014 are presented as follows:

                                               YOY    Revenue       YOY    ASP   YOY
                         SalesVolumes(Tonnes) Change                Change       Change
                                                      (US$millions)        (US$)
CorrugatingMediumPaper 45,335                +37.1% 17.1           +35.6% 377   -1.1%
Offset Printing Paper    10,860                +14.9% 7.4            +14.3% 678   -0.4%
Digital Photo Paper      326                   +76.2% 1.3            +85.6% 3,970 +5.3%

Revenue

Total Revenue in the first quarter of 2014 was $25.8 million, an increase of
30.4% from $19.7 million for the previous year.

Corrugating Medium Paper ("CMP")

  oRevenue from CMP increased 35.6% to $17.1 million, representing a 66.4% of
    total revenue.
  oVolumes sold during the first quarter wereup37.1% to 45,335 tonnes. The
    increase is mainly due to the interruption of operation at our Xushui
    Paper Mill for government environment protection inspections in February
    and March 2013.
  oASP dropped slightly (by 1.1%) year-over-year to $377/tonne.

Offset Printing Paper

  oRevenue from offset printing paper in the quarter increased 14.3% to $7.4
    million, representing 28.6% of total revenue.
  oVolumes sold were up 14.9% to 10,860 tonnes. The increase is mainly due to
    the interruption of operation at our Xushui Paper Mill for government
    environment protection inspections in February and March 2013.
  oASP decreased 0.4% year-over-year to $678/tonne.

Digital Photo Paper

  oRevenue from digital photo paper increased 85.6% to $1.3 million,
    representing5.0% of total revenue.
  oVolumes sold increased 76.2% to 326 tonnes, as a result of our continued
    efforts to optimize the production schedules at our digital photo paper
    facility since the second half of 2013,  while minimizing disturbance to
    neighboring residences.
  oASP increased 5.3% year-over-year to $3,970/tonne.

Cost of Sales

Cost of Sales in the first quarter of 2014 was $21.1 million, up16.4%, due to
declining raw material price and the increased production quantities. CMP cost
per tonne decreased from $349 in the first quarter of 2013 to $317 in the
first quarter of 2014.

Gross Profit

Gross profit in the first quarter of 2014 was $4.7 million, up193.7% from $1.6
million for the first quarter of 2013. We benefited from the cheaper raw
material unit cost and the resulting lower unit cost of sales relative to the
very slight drop in product ASPs.

Overall gross margin in the first quarter of 2014 was 18.1%, up from8.3% for
the first quarter of 2013. Gross profit margins for CMP, offset printing paper
and digital photo paper for the first quarter of 2014 were 16.0%, 21.4% and
27.5%, respectively, compared to 8.5%, 8.3% and 3.3% respectively in the same
period last year due to the low utilization of production capacity.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $908,916 for the first
quarter of 2014, compared to$887,166 for the first quarter of 2013.

Income from Operations& Operating Margin

Income from operations was $3.8 million for the first quarter of 2014, up
406.3% from$743,071 for the first quarter of 2013, primarily due to the
below-normal level of production activities in the first quarter of 2013 for
the government environmental inspection.

EBITDA

Excluding the impact of interest expenses, income tax expenses, depreciation
and amortization, EBITDA, a non-GAAP measurement, was $5.7million, up111.1%
from $2.7 million. See Note 2 hereto for a reconciliation of Net Income to
EBITDA.

Net Income

Net income was $2.5 million, up 735.9% from $303,055. The increase was
primarily attributable to the below-normal level of production activities in
the first quarter of 2013 for the government environmental inspection. Basic
and diluted earnings per share for the first quarter of 2014 were $0.14,
compared to $0.02 for the corresponding period of 2013.

Cash, Liquidity and Financial Position

As of March 31, 2014, cash and cash equivalents were $5.8million, compared to
$16.6 million twelve months ago.

As of March 31, 2014, we had $31.5 million of current assets and $32.2 million
of current liabilities (including $2.3 million of various related party
payables), resulting in a working capital deficit of$648,599. As of March 31,
2014, shareholders' equity totaled $162.2 million, compared to $161.1 million
at the end of 2013.

Operations and Business Updates

PM1 Modernization Plan

We have completed the installation of the new PM1 and are now conducting test
runs to prepare for trial production of insulation liner paper. As announced
earlier, Orient Paper has voluntarily shut down PM1 as part of its facility
upgrade plan. The modernization plan is to convert PM1 into a more
energy-efficient production line, producing insulation liner paper, which is
used to sandwich certain insulation materials as a construction material for
wall and floor insulation. Revenue contribution from PM1 when operation
commences is expected to be in the range of between $7 million to $9 million
for 2014.

Tissue Paper Expansion (PM8 and PM9)

Building of the factory and other infrastructures for the tissue paper
production facilities located in the Wei County Industrial Park in Hebei
Province is largely completed while installation of PM8, the first 15,000
tonnes-per-year production line is underway with expected completion on or
before the end of the second half of 2014.

The Company has also started planning for the installation of PM9, the second
15,000 tonnes-per-year tissue paper production line. If cash flow permits,
installation could start by the end of the year, with a target to roll out
production by the second half of 2015.

Outlook

Industry analysts expect market demand to remain around the same pace as the
last quarter, while continued action by the government to eliminate outdated
capacity would help to curb surplus capacity in certain sectors in the paper
industry. Raw material prices for domestically sourced recycled paper may
remain lower but may show some volatility going forward, as paper mills in
China attempt to reduce the imported OCC and take advantage of the domestic
recycled paper.

Looking ahead, the Company intends to maintain strong operating cash flows,
look for opportunities to restructure its short term liabilities, and to best
utilize its available cash to support our investments and expansion. We plan
to achieve this in the remaining quarters of the year by executing our
business strategy. This includes the ramp up of PM6, commencing commercial
production of the renovated PM1 and ramping up production thereafter. At the
same time, we believe our future growth lies very much in our tissue business
expansion and we would strive to complete the installation and launch of PM8
by the end of the year within our available resources.

2014 Guidance

The Company is maintaining its full year guidance for 2014, with revenue
ranging between $146 million and $161 million, gross profit to be between $27
million and $30million, net income to be between $15million and $17million,
and basic and diluted earnings per share between $0.81and $0.90.

Conference Call

Orient Paper's management 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 Friday, May 16, 2014, 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:

Mainland China:  400-120-0654
Hong Kong:               800-903-737
United States:                 1-855-500-8701
International:              +65-6723-9385
Passcode:               32473080

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

Mainland China:  400-632-2162 / 800-870-0205
Hong Kong:               800-963-117
United States:                 1-855-452-5696
International:              +61-2-9003-4211
Passcode:            32473080

The replay will be archived for fifteen days following the earnings
announcement until May 31, 2014.

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

                              Designed Capacity
PM#  Paper Product                              Location
                              (tonnes/year)
PM1* Insulation liner paper   50,000            Xushui County, Baoding city,
                                                Hebei
PM2  Offset printing paper    50,000
PM3  Offset printing paper    40,000            province
PM4  Digital photo paper      2,500             ONP's Headquarters Compound
PM5  Digital photo paper      2,500**
PM6  Corrugatingmediumpaper 360,000           Xushui County, Baoding city,
                                                Hebei
PM7* Specialty paper          10,000
                                                province
PM8* Tissue paper             15,000            Economic Development Zone in
                                                Wei
PM9* Tissue paper             15,000
                                                County, Hebei Province


*: Paper machines under renovation or under construction, or in the planning
stage.

**: 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
(in millions)
                                   March 31
                                   2014          2013
Net income                         $     2.5          0.3
Add: Income tax                          1.0          0.2
Add: Net interest expense                0.3          0.2
Add: Depreciation and amortization       1.9          1.9
EBITDA                             $     5.7          2.7

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 tissue 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.

ORIENT PAPER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THETHREE MONTHS ENDED

MARCH 31, 2014 AND 2013

(Unaudited)


                                       ThreeMonthsEnded
                                       March 31,
                                       2014             2013
Revenues                               $ 25,753,864     $ 19,746,656
Cost of Sales                            (21,083,028)     (18,116,419)
Gross Profit                             4,670,836        1,630,237
Selling, general and administrative
                                         (908,916)        (887,166)
 expenses
Income from Operations                   3,761,920        743,071
Other Income (Expense):
Interest income                          5,397            18,993
Interest expense                         (275,292)        (226,325)
Income before Income Taxes               3,492,025        535,739
Provision for Income Taxes               (958,731)        (232,684)
Net Income                               2,533,294        303,055
Other Comprehensive Income:
Foreign currency translation
                                         (1,375,490)      963,574
 adjustment
Total Comprehensive Income             $ 1,157,804      $ 1,266,629
Earnings Per Share:
Basic and Fully Diluted Earnings per
                                       $ 0.14           $ 0.02
 Share
Weighted Average Number of Shares
Outstanding- Basic and Fully Diluted    18,753,900       18,459,775



ORIENT PAPER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2014 AND DECEMBER 31, 2013

(Unaudited)


                                                                             March 31,         December31,
                                                                             2014              2013
ASSETS
Current Assets
Cash and cash equivalents                                                    $ 5,840,226       $ 3,131,163
Restricted cash                                                                4,494,418         2,454,108
Accounts receivable (netofallowancefordoubtfulaccountsof
 $59,435and $67,592 as of March 31, 2014 and December                    2,912,313         3,327,494
 31, 2013, respectively)
Inventories                                                                    12,894,835        11,428,405
Prepayments and other current assets                                           876,768           1,068,031
Assets held for sale                                                           4,096,411         4,130,590
Deferred tax assets- current                                                  410,115           413,537
Total current assets                                                           31,525,086        25,953,328
Prepayment on property, plant and equipment                                    1,479,751         1,492,098
Property, plant, and equipment, net                                            177,961,502       178,535,259
Recoverable VAT                                                                3,129,650         3,277,188
Deferred tax asset- non-current                                               103,806           268,329
Total Assets                                                                 $ 214,199,795     $ 209,526,202
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term bank loans                                                        $ 6,490,135       $ 6,544,288
Current portion of long-term loan from credit
                                                                               1,646,872         1,660,613
union
Current obligations under capital lease                                        8,193,163         8,264,795
Accounts payable                                                               964,263           926,571
Notes payable                                                                  9,086,189         4,908,216
Security deposit from a related party                                          1,622,534         1,636,072
Due to a related party                                                         104,576           64,546
Accrued payroll and employee benefits                                          432,920           498,010
Other payables and accrued liabilities                                         1,730,466         2,651,472
Income taxes payables                                                          1,902,567         1,218,140
Total current liabilities                                                      32,173,685        28,372,723
Loan from credit union                                                         4,218,588         4,253,788
Loan from a related party                                                      2,369,859         2,389,633
Deferred gain on sale-leaseback                                                1,035,603         1,160,271
Long-term obligations under capital lease                                      12,191,108        12,296,639
Total liabilities                                                              51,988,843        48,473,054
Commitments and Contingencies
Stockholders' Equity
Commonstock,500,000,000sharesauthorized,$0.001parvalue
 per share, 18,753,900 and 18,753,900 shares issued and                   18,754            18,754
outstandingasofMarch31,2014andDecember31,2013,respectively
Additional paid-in capital                                                     46,909,543        46,909,543
Statutory earnings reserve                                                     6,038,406         6,038,406
Accumulated other comprehensive income                                         15,770,818        17,146,308
Retained earnings                                                              93,473,431        90,940,137
Total stockholders' equity                                                     162,210,952       161,053,148
Total Liabilities and Stockholders' Equity                                   $ 214,199,795     $ 209,526,202



ORIENT PAPER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(Unaudited)


                                                                                                 Three Months Ended
                                                                                                 March31,
                                                                                                 2014            2013
Cash Flows from Operating Activities:
Net income                                                                                       $ 2,533,294     $ 303,055
Adjustments to reconcile net income to net cash provided
byoperatingactivities
Depreciation and amortization                                                                      1,938,794       1,932,853
Recovery from bad debts                                                                            (7,654)         (9,285)
Deferred tax                                                                                       163,509         50,058
Changes in operating assets and liabilities:
Accounts receivable                                                                                398,185         463,799
Prepayments and other current assets                                                               305,382         1,012,752
Inventories                                                                                        (1,572,609)     669,641
Accounts payable                                                                                   45,697          321,979
Notes payable                                                                                      4,249,964       (557,600)
Accrued payroll and employee benefits                                                              (61,855)        (88,404)
Other payables and accrued liabilities                                                             (866,457)       113,080
Income taxes payable                                                                               699,672         161,728
Net Cash Provided by Operating Activities                                                          7,825,922       4,373,656
Cash Flows from Investing Activities:
Purchases of property, plant and equipment                                                         (4,703)         (2,888)
Payment for construction in progress                                                               (2,960,341)     (1,319,122)
Net Cash Used in Investing Activities                                                              (2,965,044)     (1,322,010)
Cash Flows from Financing Activities:
Proceeds from related party loans                                                                  123,500         358,197
Repayment of related party loans                                                                   (123,500)       (358,197)
Payment of capital lease obligation                                                                (6,039)         -
(Increase) Decrease in restricted cash                                                             (2,075,943)     278,800
Net Cash (Used in)Provided by Financing Activities                                                (2,081,982)     278,800
Effect of Exchange Rate Changes on Cash and Cash Equivalents                                       (69,833)        99,254
Net Increase in Cash and Cash Equivalents                                                          2,709,063       3,429,700
Cash and Cash Equivalents - Beginning of Period                                                    3,131,163       13,140,288
Cash and Cash Equivalents - End of Period                                                        $ 5,840,226     $ 16,569,988
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of capitalized interest cost                                         $ 111,290       $ 62,833
Cash paid for income taxes                                                                       $ 95,550        $ 20,899

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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