Orient Paper Inc. announces record Q4
Tuesday, March 30, 2010
Press release from the issuing company
Baoding, China - Orient Paper, Inc. ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in Hebei, China, which controls and operates Hebei Baoding Orient Paper Milling Co., Ltd. ("HBOP") and its wholly- owned PRC subsidiary Baoding Shengde Paper Co., Ltd. ("Baoding Shengde"), today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.
Fourth Quarter 2009 Highlights
Full Year 2009 Highlights
"Our strong revenue and net income growth in 2009 was largely driven by strong market demand for corrugating medium paper and medium-grade offset printing paper," commented Mr. Zhenyong Liu, Chairman and Chief Executive Officer. "Because of the skyrocketing price of pulp, demand for our medium- grade offset printing paper, which uses recycled white or printed scrap paper as a raw material substitute for pulp, exhibited tremendous growth in the fourth quarter of 2009. We converted our writing paper capacities to produce more medium-grade offset printing paper in 2009 to meet this growth in demand.
"With our recent digital photo paper assets acquisition, we have now begun production of high-margin digital photo paper products. We are optimistic about the growth potential of the digital photo paper segment and believe it will enhance our revenue and, more importantly, net income growth in 2010. During the fourth quarter, we enhanced our corporate governance with the appointment of three new independent directors and the establishment of board committees, followed by a successful uplisting of our common stock on the NYSE AMEX market. We are pleased with our exciting growth and development in the past quarter."
Fourth Quarter 2009 Results
Gross profit for the fourth quarter of 2009 increased 21.9% to $5.6 million compared to $3.5 million for the fourth quarter of 2008. Gross margin was 17.9% compared to 21.9% in the same period last year. The temporary decrease in gross margin during the quarter was primarily due to increase an in coal prices, which generally accounts for 8.0% to 10.0% of the total cost of sales or 5.0% to 7.0% of total sales. Due to severe winter weather conditions, the cost of coal increased substantially in the fourth quarter of 2009 and accounted for 13.0% of total cost of sales and 11.0% of total sales for the quarter ended December 31, 2009.
Selling, general and administrative expenses for three months ended December 31, 2009 were $1.1 million, up 450% from $0.2 million in the same period last year. The significant increase was primarily attributable to an increase in expenses related to the Company's status as a public company and expenses related to the October 2009 private placement transaction. These additional fourth quarter 2009 expenses include items such as legal, accounting, consulting, investor relations, and officers/directors compensation.
Operating income for the fourth quarter of 2009 was $4.5 million, up 37.7% from $3.3 million in the fourth quarter of 2008. The increase was primarily attributable to the revenue and gross profit growth in the quarter ended December 31, 2009.
Net income in the fourth quarter of 2009 was $3.1 million, up 42.4% from $2.2 million in the same period last year. Basic and diluted earnings per share for the fourth quarter of 2009 were $0.21 compared to $0.20 for the same period a year ago. Weighted average shares used in the calculation of diluted earnings per share were 14,630,912 in the quarter ended December 31, 2009 compared to 10,769,896 a year ago.
Full Year 2009 Results
Net accounts receivable as of December 31, 2009 was $2 million, up 44.3% from $1.4 million a year ago. Despite the increase in the accounts receivable balance, days in accounts receivable, a measurement of sales and collection turnover rate, improved to 6.22 days for 2009 from 7.11 days for the previous year. The very short days in accounts receivable and quick collection turnover are attributable to the strong demand for the Company's paper products. The Company is currently experiencing production backlogs and is requesting more customers prepay their purchase orders before production is started. The Company anticipates that days in accounts receivable should remain low as long as market demand for paper products is strong.
Inventory totaled $6.9 million, up from $2.8 million at year end 2008. Approximately 91.3% of the inventory was raw materials, as the Company increased its stock of recycled paper board, recycled printed paper, and coal in anticipation of rising raw material prices, the growing demand for medium- grade offset printing paper, and any possible interruption of supplies caused by severe weather conditions. As of December 31, 2009, shareholders' equity was $56.3 million, up 65.1% from shareholder's equity of $34.1 million as of December 31, 2008. In 2009, the Company generated net cash flow from operating activities of $15.0 million. The Company paid $9.2 million from the cash generated from operating activities (in addition to the funds raised in the October 2009 private placement) to acquire the digital photo paper equipment in 2009.
Orient Paper reaffirms its ability to achieve the make good target of $18.0 million in adjusted net income, or $1.21 per fully diluted share, for fiscal year 2010.
Mr. Liu added, "We continue to hold a positive outlook on China's paper industry. We believe our revenue and net income growth in 2010 will be largely driven by regional economic development, increased capacity utilization, and the very-much-anticipated earnings contribution from our new digital photo paper production capacity. We are confident in our ability to increase and diversify our customer base as we acquire a greater market share in northern China. We will continue to seek strategic investment opportunities to accelerate our growth and expansion in the long-term."
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