It has been reported that Nine Dragons Paper (Holdings) Limited, Asia’s largest containerboard manufacturer, expects to be immune from any further depreciation in the yuan, by the end of the year after an adjustment in its debt portfolio, according to chairwoman Cheung Yan, who described the currency’s recent falls as the company’s “biggest negative impact on earnings”.
Shares in the Guangdong-based company jumped 8.3 per cent to HK$7.44 on 22nd September, their highest level since June 2015, a day after the company posted record full-year sales and the payment of a special dividend.
Ms Cheung said with a strong cash position, its yuan-denominated debt will make up 80 per cent of its total debt portfolio by the end of the year, up from 59 per cent as of June 30, as the firm progressively converts its foreign debt into yuan-denominated debt.
Its US Dollar debt composition is expected to fall from 8 per cent to 6 per cent, and debts in Euro will drop from 33 per cent to 16 per cent, said executive director Zhang Chengfei. With most of its demand and supply from within the country, as a result the company will not be as affected by currency risks, he said.
Nine Dragons’ revenue for the financial year ending 30th June grew 6.6 per cent to 32.1 billion yuan, a historic high since listing in 2006, with sales reaching their best level. Gross profit rose to 18.3 per cent from 15.7 per cent a year earlier thanks to a drop in the price of chemicals and coal. But net profit fell 20.5 per cent year on year to 1.12 billion yuan, due to exchange-rate losses following the central bank’s decision to improve its central parity system to better reflect market development in the exchange rate between the Chinese yuan against the US Dollar in August 2015.
The company plans to raise the price of its paper by 50 yuan per tonne in December, following a similar price rise in September.