Lee & Man Group will leverage on the manufacturing facilities in Malaysia and Vietnam and local resources to improve its operational efficiency

Lee & Man Group will leverage on the manufacturing facilities in Malaysia and Vietnam and local resources to improve its operational efficiency

- Zero Tariff: paper manufacturing companies in China generally adjusted their prices downward in the face of the competition
- The Group’s new pulp production lines in Chongqing, Jiangxi and Guangxi commenced operation in succession, with an additional annual production capacity of 950,000 tons and a total pulp production capacity of 1.2 million tons
- Developing a vertical business model covering pulp-making and waste paper recycling, with a view to ensuring raw material supply and controlling its costs

The Pulp and Paper Times | Annual Progress Report of Lee & Man Group for FY 2023

In 2023, the economy in China gradually returned to a recovery path as the government relaxed the pandemic prevention and control measures. Although the paper manufacturing industry as a whole performed below expectations owing to the combined effect of a weak downstream demand and a surge in newly added production capacity, the market recovery is gathering pace during the second half of the year.

For 2023, the Lee & Man Group recorded total revenue of HK$24.9 billion, representing a decrease of 14.5% from that of the previous year, while the profit for the year decreased by 12.4% to HK$1.2 billion as compared with that for the previous year. The earnings per share for the year were HK24.39 cents (2022: HK27.46 cents).

“During 2023, as the PRC government implemented the “zero tariff” on the import of various paper products, and the industry’s newly-added production capacity was progressively put into operation, paper manufacturing companies generally adjusted their prices downward in the face of the competition. On the other hand, weak market demand and the industry’s destocking cycle in the first half of the year put pressure on operating efficiency. During the second half of the year, the traditional peak season saw a rebound in demand for paper products, and the profitability of the entire industry improved in line with the gradual increase in paper prices. Stated by Dr. Lee Man Chun Raymond, Chairman, Lee & Man Paper Manufacturing Limited in the annual report for FY 23.

He further stated, “In the face of changes in market supply and demand and policy adjustments, the Group actively consolidated its upstream resources to develop a vertical business model covering pulp-making and waste paper recycling, with a view to ensuring raw material supply and controlling its costs so as to improve profitability. During the year under review, the Group’s new pulp production lines in Chongqing, Jiangxi and Guangxi commenced operation in succession, with an additional annual production capacity of 950,000 tons and a total pulp production capacity of 1.2 million tons”

The overseas production bases that the Lee & Man Group’s previously established have demonstrated their cost advantages and generated substantial profits during the year under review. To further penetrate into the Southeast Asian market, the Group’s fourth paper-making machine production line in Malaysia has commenced operation during the year, with an annual production capacity of 350,000 tons. Currently, the total production capacity of the production base in Malaysia is 1.4 million tons.

BUSINESS PROSPECTS
Packaging paper remains the Group’s core business. In response to the carbon emission reduction target, the State Council successively promulgated the policies of the Notice on Further Strengthening the Control of Excessive Packaging of Commodities and the Circular of the General Office of the State Council on Printing and Issuing the Development Plan for Modern Logistics during the 14th Five-Year Plan Period to tighten control on plastic packaging and promote the use of paper packaging as a substitute, which will benefit the Group’s packaging paper business. As the PRC government has placed greater emphasis on supporting economic recovery, domestic consumption sentiment is expected to improve, and demand for key paper products such as packaging paper will also gradually pick up.

Regarding the overseas markets, the Group will leverage on the manufacturing facilities in Malaysia and Vietnam and local resources to improve its operational efficiency. Meanwhile, the Group will continue to support the “Belt and Road” initiative to boost its export sales so as to fully explore business opportunities in countries and cities along the Belt and Road, and expand its presence in international markets in order to broaden its profit base.

With respect to the tissue paper business, the Group upholds its business philosophy of the pursuit of high quality and environmental friendliness and thus it introduced the natural bamboo unbleached tissue to the market in order to satisfy consumers’ needs for environmental protection and health. The economic outlook in Mainland China is expected to gradually improve, resulting in a steady increase in demand for tissue paper. Currently, the Group’s total annual production capacity of tissue paper has reached approximately 1.1 million tons. The Group will continue to proactively tap the potential of its tissue paper business based on consumer demand in order to expand the market shares of the Group’s tissue paper business.

The Group has also devoted substantial resources to the pulp business and actively integrated the pulp production lines in Chongqing, Jiangxi and Guangxi. By implementing the vertical integration strategy, the Group has further secured the stable supply of raw materials for tissue paper and optimized production costs, thereby maximizing the profit of its pulp business and tissue paper business
 

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