Taiwan's Big Three Paper Companies Post Half-Year Results: Who Profited the Most

Recently, Taiwan's three major paper companies - Yuen Foong Yu Paper, Rong Cheng Paper and Cheng Loong Paper - separately announced their business results for the first half of the year and for July. According to the reports, Yuen Foong Yu Paper remained the leader in revenue, with first-half revenue of about 10.205 billion yuan, followed by Rong Cheng Paper and Cheng Loong Paper with 5.868 billion yuan and 5.079 billion yuan respectively. In terms of net profit, Yuen Foong Yu ranked first among the three with 757 million yuan, while Cheng Loong Paper and Rong Cheng Paper ranked second and third with 558 million yuan and 330 million yuan respectively. In terms of net profit margin, Cheng Loong Paper ranked first among the three with 10.99%, Yuen Foong Yu Paper ranked second with 7.42%, and Rong Cheng Paper's net profit margin was only 5.62%.

1. Yuen Foong Yu's first-half revenue was about 10.205 billion yuan, with net profit of about 757 million yuan

Yuen Foong Yu's after-tax net profit attributable to the parent company in the second quarter was 1.696 billion yuan, up 8.9% quarter-on-quarter and 33.9% year-on-year. Cumulative first-half consolidated revenue reached 43.865 billion yuan (about 10.205 billion yuan), up 30.8% year-on-year, with net profit attributable to the parent company of 3.254 billion yuan (757 million yuan) and after-tax earnings per share of 1.96 yuan, up more than 70% year-on-year. Yuen Foong Yu said that rising demand in various paper product markets, together with the impact of the global pandemic on market supply and demand, drove up product prices and demand and boosted first-half operating performance.

In the second quarter, Yuen Foong Yu's operating profit reached 3.164 billion yuan on the back of a larger revenue scale and an optimized product mix, up 15.5% quarter-on-quarter and 156.5% year-on-year, with after-tax earnings per share of 1.02 yuan for the quarter. The company said that although its business groups faced pressure from rising raw material costs, the pulp and paper business group, high value-added specialty paper products and the industrial paper and paper container business group saw higher shipments of packaging paper and cartons, which lifted profit compared with the same period last year. In addition, Shenfeng Specialty Applied Materials saw its profit rise substantially thanks to strong market demand for raw materials for medical latex gloves.

In addition, on July 12, Yuen Foong Yu Investment Holding issued a press release on behalf of its subsidiary Yuen Foong Yu Industrial Paper. The company's board of directors resolved that its subsidiary YFYCayman would acquire the 44.84% stake in WillpowerIndustriesLimited (hereinafter Willpower) held by GreatPacific, a subsidiary of Pou Chen Corporation, for USD 62.5 million. After the acquisition, Willpower will become a 100% subsidiary of Yuen Foong Yu Industrial Paper and will continue to contribute profit.

Yuen Foong Yu Industrial Paper said that Vietnam surpassed Malaysia and Singapore in 2020 to become the fourth-largest economy in Southeast Asia. Bullish on Vietnam's economic development and packaging market demand, the company has been increasing investment in Vietnam in recent years and currently has 6 paper container plants there with annual capacity of about 620 million square meters. To expand its footprint in the Vietnamese market, it resolved to buy the stake from Pou Chen and to accelerate investment in Vietnam to respond to market growth.

In 2004, Yuen Foong Yu, Pou Chen and Taiwan Paper jointly established Willpower, a paper container holding company for southern Vietnam, and invested in setting up paper container plants in southern Vietnam. To deepen its southbound footprint, Yuen Foong Yu acquired the Willpower stake held by Taiwan Paper (10.32%) in 2018 and continued to develop the southern Vietnam paper container market. This year it reached an agreement with Pou Chen again, and Yuen Foong Yu Industrial Paper acquired all of Pou Chen's stake in Willpower. At this point, Willpower became a wholly owned subsidiary of Yuen Foong Yu Industrial Paper.

Yuen Foong Yu Industrial Paper said that the six paper container plants in Vietnam are located in northern and southern Vietnam, with four of the southern plants under Willpower's subsidiaries. The four southern plants mainly operate corrugated board, cartons and paper boxes, with consolidated revenue of about USD 160 million and after-tax net profit of about USD 14 million in 2020. After becoming a 100% subsidiary of Yuen Foong Yu Industrial Paper, it will continue its business expansion plan, strengthen business cooperation between the parent and subsidiary companies in Taiwan and Vietnam, and further expand its southbound operating bases and business scope.

Yin Guotang said that although Southeast Asia is currently suffering from the pandemic, ASEAN is becoming increasingly important in the long term. Vietnam is closest to Taiwan and the mainland, and given the existing footprint, the company hopes to gain greater flexibility through wholly owned operations and will evaluate further increases in Vietnamese capacity going forward. Overall, Yuen Foong Yu believes that in the second half of the year, as the global pandemic continues to intensify, some customers will be constrained by changing pandemic conditions in various regions and order volumes will fluctuate, so it will carefully assess operating risks arising from raw material supply and demand, labor and logistics.

1. Rong Cheng Paper's first-half revenue was about 5.868 billion yuan, with net profit of about 330 million yuan

Major industrial paper maker Rong Cheng Paper benefited from brisk demand across the Taiwan Strait, with capacity utilization near full and smooth cost pass-through. Its after-tax net profit in the second quarter of 2021 was 911 million yuan, hitting a nearly 15-quarter high, with earnings per share of 0.71 yuan. Total after-tax net profit for the first half was 1.42 billion yuan (about 330 million yuan), still up nearly 11.55 times year-on-year and the second-highest for the same period on record, with earnings per share of 1.11 yuan. Institutional investors are optimistic that peak-season operations in the second half will hold steady at a high level.

Rong Cheng Paper's second-quarter consolidated revenue was 14.044 billion yuan, up 25.3% quarter-on-quarter and 43.8% year-on-year, a new high for the same period and the third-highest in history. Gross margin was 17.71% and operating margin 8.67%; although lower than 18.75% and 9.25% in the first quarter, they were better than 12.35% and 1.35% in the same period last year, holding steady at a high level and marking a nearly 4-year high for the same period.

With brisk core operations and a 55.34% quarter-on-quarter and 11.53% year-on-year reduction in non-operating losses, Rong Cheng Paper's second-quarter after-tax net profit attributable to the parent company was 911 million yuan, up 78.8% quarter-on-quarter and a sharp turnaround to profit from a loss of 38 million yuan in the same period last year, a nearly 15-quarter high. Earnings per share (EPS) were NT$0.71, also a nearly two-and-a-half-year high.

Rong Cheng Paper's first-half consolidated revenue was 25.225 billion yuan (about 5.868 billion yuan), up 50.63% year-on-year and the second-highest for the same period on record. Gross margin was 18.19% and operating margin 8.94%, both a nearly 4-year high for the same period. Although non-operating losses rose slightly by 12.42%, after-tax net profit attributable to the parent company was 1.42 billion yuan (about 330 million yuan), still up nearly 11.55 times year-on-year and the second-highest for the same period on record, with earnings per share of 1.11 yuan.

Thanks to improving demand in markets across the Taiwan Strait and rising industrial paper prices, Rong Cheng Paper's operations have improved markedly since the second half of last year. Since the start of this year, Taiwan has continued to face supply shortages with capacity utilization near full, while the mainland also saw industrial paper quotes rise on stronger demand, with the per-tonne spread widening month by month. Smooth cost pass-through kept operations strong through the traditional off-season, with revenue in line with expectations and operating margin better than expected.

Rong Cheng Paper's self-settled consolidated revenue for the first seven months was 30.14 billion yuan, up 47.08% year-on-year and the second-highest for the same period on record, with operating margin jumping from 3.58% to 8.96%. Pre-tax net profit attributable to the parent company was 1.996 billion yuan, up nearly 10.35 times year-on-year, and pre-tax earnings per share were 1.56 yuan, far better than 0.14 yuan in the same period last year, both the second-highest for the same period on record after 2018.

Investment advisory institutions noted that Rong Cheng Paper benefited from the mainland's implementation of the waste import ban, which eliminated the previous slump caused by shortages in obtaining imported waste paper quotas, and its operating momentum has clearly recovered, with July profit still holding steady at a high level. As the second half enters the traditional peak season, a recovery in demand is expected to keep the per-tonne spread stable, and the new 200,000 tonnes of board capacity at the Erlin plant in Taiwan is expected to keep the operating margin at a high level.

1. Cheng Loong Paper's first-half revenue was about 5.079 billion yuan, with net profit of about 558 million yuan

Recently, Cheng Loong Paper disclosed that the group's second-quarter consolidated revenue in 2021 was 11.545 billion yuan, up 12.23% quarter-on-quarter and 20.53% year-on-year, a nearly six-and-a-half-year high. Gross margin was 26.27% and operating margin 13.15%, slightly lower than 27.51% and 13.91% in the first quarter but still better than 25.65% and 11.7% in the same period last year, with core profit holding steady at a high level.

Cheng Loong's first-half consolidated revenue was 21.831 billion yuan (about 5.079 billion yuan), up 17.04% year-on-year and the second-highest for the same period on record. Gross margin fell from 27.21% to 26.85%, but operating margin rose from 12.7% to 13.51%, a new high for the same period. After-tax net profit attributable to the parent company was 2.397 billion yuan (about 558 million yuan), up 40.91% year-on-year, with earnings per share of 2.16 yuan, both the second-highest for the same period on record.

Among these, Cheng Loong's second-quarter revenue in Taiwan was 7.794 billion yuan, up 11.44% quarter-on-quarter and 14.41% year-on-year, with operating profit of 1.394 billion yuan, up 3.02% quarter-on-quarter and 52.66% year-on-year. Southeast Asia revenue was 2.015 billion yuan, up 20.44% quarter-on-quarter and 60.64% year-on-year, with operating profit of 116 million yuan, up 0.44% quarter-on-quarter and 5.91% year-on-year. Mainland revenue was 1.735 billion yuan (about 403 million yuan), up 7.16% quarter-on-quarter and 14.84% year-on-year, but the operating loss was 54 million yuan (about 12.56 million yuan), a clear swing to loss from the first quarter and the same period last year.

Cheng Loong's first-half revenue in Taiwan was 14.788 billion yuan, up 12.96% year-on-year, with operating profit of 2.748 billion yuan, up 34.58% year-on-year. Southeast Asia revenue was 3.688 billion yuan, up 43.33% year-on-year, with operating profit of 233 million yuan, up nearly 1.77 times year-on-year. Mainland revenue was 3.354 billion yuan (about 780 million yuan), up 12.29% year-on-year, with operating profit of 123 million yuan (about 28.62 million yuan), up 1.13 times year-on-year.

Cheng Loong's self-settled consolidated revenue in July was 3.741 billion yuan, down 3.86% month-on-month and up 11.23% year-on-year. Cumulative consolidated revenue for the first seven months was 25.571 billion yuan, up 16.14% year-on-year, a new high for the same period. Looking ahead to the second half, as the pandemic remains uncertain, the company takes a cautious view of future operating developments and stressed that it will continue to expand the circular economy at home and abroad and to promote its "S.M.A.R.T low-carbon smart paper" layout for green business opportunities.

Cheng Loong noted that the group's annual capacity for paper and paperboard in Taiwan, the mainland and Vietnam will increase by 400,000 tonnes to 2.502 million tonnes next year, while annual paper container capacity will increase by 180 million square meters to 1.907 billion square meters. The new 66,000-tonne recycled white pulp line at the Dayuan plant in Taiwan will further expand the supply of high-value white-faced paper products.

At the same time, Cheng Loong is actively entering the household cleaning products market. Last year it launched "Dandelion" eco-friendly detergents and alcohol wipes, and it will continue to launch new products to boost operating momentum. General Manager Tsai Tung-ho noted that Cheng Loong is actively building its presence in Southeast Asia, and the second-phase industrial paper capacity of 400,000 tonnes at its Binh Duong paper mill in Vietnam is expected to be completed before the end of the year, with planning for the third phase already underway.

Note: Unless otherwise specified, all currencies in this article are in New Taiwan dollars.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378032.html