Lee & Man Paper Manufacturing ,one of the containerboard manufacturers in China, announced its annual results for the twelve months ended 31 December 2015.
During the period, the Group recorded a total sales volume of 5.44 million tons, a total reve nue of HK$17.6 billion, annual net profit of HK$2.33 billion, and the average net profit of the pr oducts was HK$429 perton.
The Board of Directors declared payment of a final dividen d of HK9.5 cents per share. Together with the interim dividend of HK8.5 cents per share already paid, t otal dividends for the year amounted to HK 18 cents per share, representing a stable payout ratio of about 35% of net profit.
Dr Raymond Lee, Chairman of Lee & Man Paper , said, "The PM20 paper machine with an annual production volume of 320,000 tons and four tissue paper m achines with an annual production volume of 135,000 tons -- all of which are located in the Chongqing Industrial Park -- have commenced full production since last year. Benefitting from factories bein g shutdown in Dongguan which reduced overcapacity, falling fuel and raw material prices, and refund policies for value-added taxes, both sales revenue and profit recorded growth."
The Group has entered the tissue paper market in 2014 to expand its business. Apart from establishing the brand name of its products, the tissue paper with the corporate brand "Hanky" has commenced production in the fourth quarter of 2015. The Group's four tissue paper machines with a production volume of 135,000 tons has been operating at full capac ity since 2015. In order to cope with market demand, the Group is planning increasing its production cap acity by 220,000 tons by the fourth quarter in 2016.
The Group will be able to reduce the production cost of tissue paper by utilizing its pulp production facilities in Chongqing, and it expects that the profit contribution from the tissue paper business will increase. The Group is also considering the possibility of d eveloping the tissue paper business in other locations.
Apart from the tissue business, the Group will expand into o verseas packaging paper markets and invest in the construction of overseas paper factories to stay in lin e with the expansion of the Southeast Asian markets. It is expected that the paper machine project in H au Giang, Vietnam -- which can provide 400,000 tons of production capacity -- will begin operatio ns in the second half of 2016. As the overseas packaging paper market possesses enormous potential, the G roup may invest more resources in this sector.
In order to solve the overcapacity and the environmental issues for the paper industry, the PRC Government has steadily closed down obsolete production capa cities in previous years. Local government authorities will impose more stringent enviro nmental monitoring policies, which will shut down even more obsolete production capacities, thereby all eviating the supply over demand situation for the paper industry and restoring the industry's bargaining power.
Despite the slowdown in the growth of the domestic economy and the consumption for packaging pa per, the demand for packaging paper in China is expected to grow steadily in the long run. In a ddition, the rapid development of online shopping has led to fundamental changes in consumption and logist ics models, benefitting the packaging paper industry which is currently in the process of consolidation.
Hence, the Group is optimistic about the outlook of the paper industry. As at 31 December 2015, the Group maintained a strong fin ancial position with bank balances and cash of HK$2,959 million (31 December 2014: HK$2,033 million ). The Group's net gearing ratio maintained a healthy level of 66%.