Orient Paper Ramps Up Renovated PM1 and Provides Operation and Market Updates
BAODING, Hebei, China, July 2, 2014
BAODING, Hebei, China, July 2, 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 the
Company has ramped up its renovated PM1, and provides operation and market
updates to shareholders and investors.
Orient Paper has recently commenced commercial production of the newly
renovated PM1, producing corrugating medium paper ("CMP")-based packaging
paper with specification of 40 to 80 gram per square meter ("g/s/m"). PM1 has
successfully ramped up production in the month of June, achieving more than
3,500 tonnes of paper with specification of mostly 60g/s/m, instead of the
originally budgeted 1,000 tonnes.
PM1's 40-80g/s/m CMP-based packaging paper products have a wide range of
commercial applications. For example, they can be used to sandwich certain
insulation materials as a construction material for wall and floor insulation
and to manufacture moisture-proof packaging materials for transportation of
books and magazines by the publishing industry in China. It can also be used
as corrugating medium to make corrugated cardboard for packaging solutions
where a customer requires light-weight boxes. The40-80g/s/m light weight CMP
is considered a niche product in the packaging paper market and enjoys a
higher margin than the conventional CMP and steady demand from end-users while
the supply of this special specification CMP is relatively limited.
Essentially all of the Company's PM1 products are 60g/s/m CMP used as
packaging paper at current stage. However, the Company has begun selling
60g/s/m CMP as insulation liner and may switch to other product specifications
based on customer demand or changes in market condition.
While the Average Selling Price ("ASP") for the 60g/s/m packaging paper is
lower than that of the 40-50g/s/m insulation liner, which was originally
planned for the renovated PM1, the annual production capacity of PM1 is
expected to increase from approximately 50,000 tonnes to at least 60,000
tonnes if we continue to ramp up PM1 for producing the 60g/s/m CMP-based
packaging paper. With the shift of products and the ramp up, the new PM1 is
now expected to contribute approximately $9 million to $11 million to the
Company's annual revenue for 2014, instead of the previous estimated range of
$7 million to $9 million.
Operations and Market updates
Since April 2014, there has been a downward pressure on the price of CMP in
China due to weaker domestic demand. It is reported that in some regions, the
market is seeing the price of CMP decrease by 200-350 yuan per tonne^1. While
the ASP of our offset printing paper has held up reasonably well, we have
reduced the ASP of our high-strength CMP produced by PM6 during the second
quarter of 2014 by approximately 4% and 5% as compared to the CMP ASP for the
second quarter of 2013 and the previous quarter ended March 31, 2014,
respectively. While we have not fully determined the effect of the ASP
reduction in our cost of sales, we expect our gross profit margin for the
quarter ended June 30, 2014 to be somewhat lower than the comparable period in
the previous year.
Despite the lower CMP ASP, monthly run rate at our PM6, which produces more
than 60% of our total revenue, has been consistently held at about 75%
throughout the second quarter of 2014. We produced and sold more than 67,000
tonnes of high-strength CMP from PM6 during the second quarter of 2014,
representing a gain of 23% as compared to 55,025 tonnes sold from PM6 during
the same period a year ago. We expect the increase in quantities sold will
compensate the lower gross profit margin and mitigate any substantial changes,
if any, in quarterly gross profit and net income.
Some industry experts in China, which includes those quoted by SCI
International, are optimistic that the price of CMP may recover in the second
half of 2014, as the government-mandated closure of outdated paper mills are
being carried out sequentially in different regions this year^1, with
additional impact of new and stricter environmental regulations being launched
that would further curb supply.
"We are monitoring the market closely," said Mr. Zhenyong Liu, Chairman and
Chief Executive Officer of Orient Paper. "In the meantime, we will continue to
ramp up PM1 production to generate increased revenues for the Company.
Nevertheless, we are reasonably confident that our 2014 financial guidance
should remain unchanged, given our observation of the market situation and
other factors such as stable raw material costs," Mr. Liu added.
1. SCI International
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-based), 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
(Please visit http://www.orientpaperinc.com.)
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.
SOURCE Orient Paper, Inc.
Contact: Investor and Media Contacts: Orient Paper, Inc., 1-562-818-3817,
email@example.com; or FleishmanHillard, +852-2530-0228,
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