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Andy Chen

Shares of Nine Dragons Paper (Holdings), the containerboard maker controlled by the mainland's second-richest woman, Cheung Yan, fell as much as 8.38 per cent yesterday after the company announced full-year earnings rose a slightly slower than expected 45.7 per cent.

Net income for the year to June reached two billion yuan   from 1.37 billion  a year earlier. Sales rose 24.5 per cent to 9.84 billion yuan. Earnings per share were 47.94 fen against 40.72 fen a year earlier.

Earnings were lower than the 2.11  billion yuan mean estimate of a Thomson Financial poll of 14 brokers, or growth of 53.6 per cent.

'As a manufacturing business, Nine Dragons' earnings are already very impressive. Personally, I feel very satisfied with  the result,' she said, adding that price movements by the shares were 'normal'.

Shares of Nine Dragons, which have surged 86.19  per cent this year, fell to as low as HK$24.05 yesterday after the release of the earnings announcement, before closing at HK$24.95, down 4.95 per cent.

On February 13, the company's shares fell as much as 10.8 per cent despite announcing a 69 per cent jump in first-half net profit.

As the largest maker of container board, Nine Dragons was able to better  bargain with customers, boosting gross profit margin 2.2 percentage points to 23.5 per cent. It was also helped by increased economies of scale.

The company's annual capacity increased 36 per cent to 4.5 million tonnes in the fiscal year, it said.

Looking forward, Nine Dragons plans to spend  11 billion yuan  between next year  and 2009 to double  capacity to 11.5 million tonnes.

Ms Cheung said the company did not rule out issuing  shares to fund expansion, but said there was no immediate need to do so.

The company  will set up a 2.3 billion yuan production base in Ninghe county, Tianjin, which will raise annual output by 800,000 tonnes.  Nine Dragons, which also operates in Dongguan, Guangdong and is building another plant in Chongqing, is in talks with Ninghe county  on 50-year land use rights.

The project, to be operational by June 2009, will have a capacity of  450,000 tonnes of linerboard paper and 350,000 tonnes of corrugating medium paper a year. Nine Dragons is also in talks with  Ninghe  on a water treatment venture for paper production.

The company offered a final dividend of 10 fen.

Smaller rival Lee & Man Paper Manufacturing, the mainland's second-largest containerboard maker,  said net profit rose 68.3 per cent to HK$1.01 billion for the year ended March as turnover rose 36.6 per cent to HK$5.16 billion.



Nine Dragons shares tumble as pace of earnings growth slows