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Orient Paper (ONP) – Comments & Business Outlook
Financial Results for the third quarter ended September 30, 2012.
- Total Revenue in the third quarter of 2012 was $37.7 million, increased 1.6% from $37.1 million.
- Net income was $4.4 million, down 19.4% from $5.4 million. Basic and diluted earnings per share for the third quarter of 2012 were $0.24 compared to $0.3 for the corresponding period of 2011. Weighted average shares used in the calculation of diluted earnings per share were 18,459,775 in the third quarter of 2012 compared to 18,350,186 in the corresponding period of 2011.
Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, “In the third quarter, the paper industry continued to suffer from a weak pricing environment, which affected the margins of all our products. Coupled with the production disruptions that occurred from the second quarter to early part of the third quarter that have impacted our revenues in August particularly, our results have declined and fallen short of expectations. In view of this, we have revised down our full year guidance.
“However, we are pleased to have resolved all these operational interruptions, and to be able to ramp up the new production line to achieve of over 72% utilization in September. The Company will continue to focus on enhancing our operational efficiency together with maintaining our position as the cost leader in Northern China with our stringent cost management discipline.
“Looking ahead, we will expand our business further to higher value products including tissue paper which potentially offer high gross margins and will be a key future growth driver to the Company. With the rise of growing consumerism in China, the currently low penetration of tissue paper in rural areas of North China offers us tremendous potential for growth.”
Commenting further on the future of the Company, Mr. Liu said, “Orient Paper is still in the investment stage but we have confidence in its future prospects riding on our unique market position as the cost leader in North China, demonstrated by our industry leading margins and strong cash flow. On behalf of the board of directors, I reiterate that there are no plans for privatization and in fact, the Board is pleased to approve the payout of dividends to shareholders on a regular basis.”
Business Outlook
The overall outlook for the paper industry remains soft with slowdown of China’s economy, coupled with the correction of the construction and real estate market in North China. Pressure on prices will remain low with continuing weakened demand and structural overcapacity, which the Company believes, will lead to further consolidation within the industry in the coming 12 months.
While the combined effect of increased sales and production volume, as well as increasing economies of scale generated from the ramp-up of the new production line can partially offset the downward pressure on prices, the Company has prudently revised down its full fiscal 2012 guidance in view of the current headwinds. Revenues are now expected to be in the range of between $146 million and $148 million, gross profit to be between $26 million and $28 million, net income to be between $15 million and $17 million, and basic and diluted earnings per share to be between $0.90 and $0.92.
2012-11-09 18:21:09
Source: http://geoinvesting.com/companies/onp_orient_paper/research/comments_business_outlook/0040550
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