Youbisheng Green Paper AG: Further improvement of profit margins

(PresseBox) ( Munich, )
In the first nine months of 2013 Youbisheng Green Paper AG showed a slight decline in revenues but improved profit margins. Furthermore, Youbisheng has started the preparational works on the construction of the new production line in Huanggang city, which is expected to significantly expand the company's production capacities in order to meet the rising demand for its linerboard products.

In total, the revenues of Youbisheng decreased slightly year-on-year by 3 per cent from 74.0 million Euros to 71.8 million Euros. In RMB terms the sales decline was 3.3 per cent. In the course of the reporting period, the operating income (EBIT) remained relatively stable at 18.1 million Euros (9M 2012: 18.3 million Euros) bringing EBIT margin up 0.5 percentage points to 25.2 per cent. The Group's net profit in the first nine months was also fairly stable at 13.6 million Euros compared to last year's 13.8 million Euros. Correspondingly, the net profit margin increased from 18.6 per cent to 18.9 per cent.

The development of the Group's revenues is a result of the limited production capacity but especially of the decline in average selling prices, caused by lower prices for recycled paper, the main raw material for Youbisheng's products. However, these lower prices were only partly passed on to the customers. As a result of this and in connection with strict cost control as well as enhanced efforts to sell higher margin products, the company managed to improve its profit margins against the market trend.

Average gross profit margin grew in all product segments

In the first nine months of 2013, Youbisheng recorded rising gross profit margins in all product segments. Additionally, a look at the segment split shows that the company managed to grow the share of higher-margin products, offsetting the negative impact of the price reductions. While revenues in those segments increased steadily in the reporting period, revenues of lower-margin products slightly declined. The sales of own-produced single-sided testliner decreased by 10.9 per cent from 34.5 million Euros in 2012 to 31.1 million Euros in in the first nine months of 2013. This was mainly due to a limited capacity for the production and partly due to declining average selling prices. However, the average gross profit margin increased from 28.2 per cent to 29.1 per cent year-on-year. Sales of sub-contracted testliner also fell by 2.7 per cent from 22.8 million Euros to 22.2 million Euros, while the average gross profit margin still increased from 21.0 per cent to 21.6 per cent in the reporting period. The decline in sales value was due to a lower average selling price, despite a slight increase in sales volume.

Contrary to this, sales of double-sided testliner increased by 8.6 per cent from 15.2 million Euros in previous year's reporting period to 16.5 million Euros in 2013. Simultaneously, the average gross profit margin for this product segment improved from 32.6 per cent to 33.5 per cent. A similar development was recorded for the sales of anti-counterfeit testliners. While the average selling price decreased, sales increased by 33.3 per cent from 1.5 million Euros to 2.0 million Euros year-on-year. The average gross profit margin in the first nine months 2012 was 35.6 per cent and rose to 36.1 per cent in the corresponding reporting period 2013.

Strong balance sheet despite investments

The cash flow from operations and investing activities was influenced by the planned new production facility. On the one hand there were deposits e.g. for the project contractor amounting to 23.2 million Euros and on the other hand investments to secure the land amounting to 12.3 million Euros. Nevertheless, Youbisheng recorded a cash position of 28.5 million Euros as at 30 September 2013.

The equity position of Youbisheng also remained strong and rose from 64.0 million Euros as at 31 December 2012 to 78.3 million Euros as at 30 September 2013. This represents an equity ratio of 72.9 per cent as at 30 September 2013.

Outlook for the full financial year 2013

On the basis of the nine months report and the current market development, Youbisheng's management board expects revenues to be lower than previously projected. Currently, the forecast for the full year amounts to revenues of 96 million Euros. The anticipated lower revenues are mainly due to lower average selling prices. However, the management expects prices for recycled paper to stabilize. As a result, last quarter's negative time lag effect from falling raw material prices compared to product selling prices should evaporate. Nevertheless, overall profitability of the company has not been compromised since the EBIT margin has gained slightly, which is expected to be sufficient to offset the effects from current selling price levels. The EBIT margin is expected to be around 25.0 per cent instead of 24.0 per cent as reported before.

In the mid term, Youbisheng expects revenues growth through the removal of production limitations when the new production facility in Huanggang city goes into operation. This ensures that Youbisheng is able to meet the rising demand for linerboard and to take advantage of the fragmented market segment in the mid-west of China.

The full 9M 2013 report of Youbisheng is available on the website at http://www.youbisheng-greenpaper.de/en/investor-relations/publications.html

Disclaimer concerning prognoses

This communication contains forward-looking statements Forward-looking statements are statements that are not historical facts instead they reflect the current views and expectations of Youbisheng Green Paper AG and the assumptions underlying them about future events. Forward-looking statements are subject to many risks and uncertainties. If any of such risks and uncertainties materialize or if the assumptions underlying any of the forward-looking statements of Youbisheng Green Paper AG are proving to be incorrect, the actual results of Youbisheng Green Paper AG may be materially different from those expressed or implied by such forward-looking statements. Youbisheng Green Paper AG does not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made.
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