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Onp fact sheet Onp fact sheet Document Transcript

  • Orient Paper, Inc.Investor Fact Sheet, March 2013 About Orient Paper, Inc. QUICK FACTS Orient Paper, Inc. (“ONP”) is a leading paper manufacturer in Stock Ticker NYSE MKT: ONP North China. Using recycled paper as its primary raw Stock Price US$1.82 (3/22/2013) material, ONP produces and distributes three types of paper products namely, packaging paper (corrugating medium paper Share Outstanding 18,459,775 or “CMP”), offset printing paper, and other paper Market Cap US$34.3M products, including digital photo paper and the Ownership household/tissue paper that the Company is currently • Insiders 28.5% expanding into. • Public float 71.5% With production operations based in Baoding in North China’s Fiscal Year End December 31 Hebei Province, ONP is located strategically in close proximity to Beijing and Tianjin, home to a growing base of industrial Production Capacity 452,500 tonnes/year and manufacturing activities and one of the largest markets Website www.orientpaperinc.com for paper products consumption in the country. Our Goal: To be sustainably the profitable cost leader in manufacturing paper in North China.Our Business Model Our Growth Strategies Pulping from recycled paper products for 1. Optimize and scale up performing business to ride on  CMP and Offset Printing Paper, growth opportunities arising from regulatory closures of  and coating base paper for Digital Photo Paper outdated capacities 2. Diversity to tap unmet market and benefit from the  urbanization of China’s rural areas Manufacturing of CMP, Offset Printing Paper  3. Investing for future growth in higher margin businesses and Digital Photo Paper 4. Maintain stringent cost structure Our Roadmap 1. Perform consistently Sales of the paper products to customers in  ‐ Business performance Beijing, Tianjin, Hebei Province, and other regions ‐ Ramp up new 360,000 tonnes/year CMP production line ‐ Operational efficiency: industry leading operating metric 2. Grow strategically ‐ Leverage on continued industry consolidation to increase  Dividend market share ‐ 2012 quarterly dividend: US$0.0125 ‐ Renew and enhance CMP production capacity to deepen  ‐ Our policy is to generate long‐term  market penetration shareholder value and we intend to pay  ‐ Tap unmet market needs in North China regular dividend as long as our cash  3. Maintain costs competitively flows permit 4. Breakout into tissue paper segmentValue Propositions1. Enormous Growth Opportunities in North China2. Favorable Regulatory Environment3. A Sustainable Business Model with Strong Growth Catalysts and Improved Mix of Growing End Users4. Cost Competitive Assets with Industry Leading Growth and Profitability Metrics5. Steadfastly Upholding Solid Corporate Governance 1
  • Orient Paper, Inc.Investor Fact Sheet, March 2013Value Propositions1. Enormous Growth Opportunities China Paper and Paper Board Production and Consumption CAGR 2007‐2011*:  Corrugating Medium Paper 91.7  97.5  ‐ production: 10.3% 85.7  84.9  ‐ consumption: 10.1% Million Tonnes 79.4  99.3  72.9  92.7  66.0  54.4  59.3  79.8  86.4  86.9  Coated Printing Paper 48.1  73.5  36.8  43.3  65.0  ‐ production: 12.4% 56.0  43.0  49.5  ‐ consumption: 12.0% 37.8  32.0  Household/Tissue Paper ‐ production: 8.4% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 9M 2012 ‐ consumption: 9.0% Production Consumption Source: China Paper Association Revenues are growing*: ‐ China’s pulp and paper industry for the first 8 months of 2012 was a RMB796.3 billion market, up 10.0% YoY • Paper and board industry revenue for the first 8 months of 2012 was a RMB449.6 billion market, up 8.5% YoY ‐ China’s paper products industry revenue for the first 8 months of 2012 was RMB333.8 billion market, up 12.1% YoY Lower Penetration Means Greater Potential for Growth Chinas Consumption per capita still lags far behind those of neighboring countries in the region China’s consumption of CMP per capita  Chinas consumption of household/tissue per capita  35 25 30 kg/year 25 15 15 kg/year 20 10 15 3.9 4.2 2.7 2.95 3.14 3.48 10 5 0Source: Deutsche Bank Source: Credit Suisse, CNHPIA2. Favorable Regulatory Environment Paper manufacturing is subjected to strict environment regulations as processes may generate pollutants  including waste water and gaseous emissions ‐ Any tightening of environmental regulations is likely to have more severe impacts on smaller producers o Any changes to environmental policies could involve additional costs o New large‐scale production facilities require central government approval, and any delays in obtaining approvals  could delay expansion plans ‐ Chinese government has mandated the closure of small paper mills due to environmental protection and operating  efficiency concerns o 10.0M tonnes of outdated paper milling capacities were forced to close down across China o 128 companies with total capacities of 2.0M tonnes (or 20% of total closure) are based in Hebei Province, where  Orient Paper is located Government‐mandated closures is transforming the industry landscape that will benefit more  scalable and quality players like Orient Paper ∗Source: China Paper Association  2
  • Orient Paper, Inc.Investor Fact Sheet, March 20133. A Sustainable Business Model with Strong Growth Catalysts and Improved Mix of Growing End Users Product Focus: Corrugating Medium Paper  Offset Printing Paper Digital Photo Paper (“CMP) Segment Growth Production estimated to  Production grew 13.3% YoY  Production of specialty  grow 2.0% YoY to reach  to reach 7.3M tonnes in  paper and paperboard grew  20.2M tonnes by end 2012 2011 16.7% YoY to reach 2.1M  Consumption estimated to  Consumption grew 9.1% to  tonnes in 2011 grow 2.0% to reach 20.3M  reach 6.0M tonnes in 2011 Consumption grew 9.2% to  tonnes by end 2012 reach 1.8M tonnes in 2011 Product Description Wavy center of the wall of  Coated and brightened  Semi‐matte photo paper  corrugated container, made  papers fine tuned to the  and glossy photo paper to  from old corrugated  needs of offset printing print high quality pictures cardboard Major Applications Corrugated boxes and  Text books and other  Digital photo inkjet printing,  shipping containers commercially marketed  poster printing books End Users Packaging companies,  Printing and publishing  Paper distributors, Photo  manufacturers of consumer  houses shop, advertisers, and  goods household printing Production Capacity 360,000 90,000 2,500 (tonnes/year) (Legacy line of 150,000 – under renovation) FY 2012 Revenue US$95.8M US$49.1M US$6.2M (63.4% of net revenue) (32.5% of net revenue) (4.1% of net revenue) Utilization rate FY 2012 53% for Legacy line; 75% 63% 49% for New Line;  4Q 2012 Overall 50% 75% 36.7% (decline due to  69% for New Line suspension of night‐time  operations) Strategic Focus: Solidify market position to become leading manufacturer focused in North China •Identify untapped opportunities to meet growing demand in the region •Leverage the government’s elimination of outdated, polluting mills to increase capacity and market share •Continue CMP as key revenue driver and cash cow Enhance cost leader position •Maintain cost discipline •Enhance competitive cost base Build a sustainable long‐term business •Scalable to establish strong market leadership in North China •Disciplined and strategic production expansion to deepen market penetration •Strong cash flows to support investment 3
  • Orient Paper, Inc.Investor Fact Sheet, March 2013 Growth Catalysts: Longer Term: •New Business Expansion into  Household/Tissue Paper •Build two 15,000 tonnes/year  Near Term: production lines in 2013‐2014 in Wei  CMP Production Expansion County, Hebei •Tap the mass market growth potential  •Ramp up utilization of new 360,000  in North China region tonnes/year CMP production line •CMP Production Expansion •Renew old CMP production line to  support policy of energy efficiencies  with new 250,000 tonnes/year line4. Cost Competitive Assets with Industry Leading Growth and Profitability Metrics Operating Margin Comparison Net Debt/Equity Ratio Comparison 22.0% 1.6 1.4 20.0% 1.2 18.0% 1.0 16.0% 0.8 0.6 14.0% 0.4 12.0% 0.2 10.0% 0.0 2H 10 1H 11 2H 11 1H 12 2H12 2H 10 1H 11 2H 11 1H 12 2H12 ONP Peer A Peer B Note: Operating margin for ONP in 2H12 excludes the one‐off  impairment loss of $ 2.8 million Industry‐leading Operating Metrics Low Debt Ratio Compared with Industry Leading Peers Consistent Track Record in Financial Performance Gross and Operating Margin Revenue Breakdown Provision of  3rd parties’ printing paper  impairment  sales discontinued US$ Millions 0.9  loss 2.2  23.4% 22.5% 1.9  21.2% 21.6% 21.5% 2.0  1.9  1.9  1.6  11.7  2.2  18.1% 16.3% 11.5  15.4% 13.8  12.1  20.6% 20.3% 28.3  23.3  19.5% 19.7% 19.5% 24.4  22.5  16.4% 30.9  boiler and water  14.4% 24.3  19.1  21.6  treatment issues and  6.9% 13.7  government inspection 8.5  11.0  10.7  Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2011 2012 Gross Margin Operating Margin CMP Offset Printing Digital Photo 4
  • Orient Paper, Inc.Investor Fact Sheet, March 2013 Net Income and Margin 14.6% 14.1% 14.7% 14.1% 13.6% US$ Millions 11.6% 5.9 10.2% 5.4 5.5 4.9 4.7 2.8  4.4 3.6 4.6% 2.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 Net Income Impairment Loss Net Margin5. Steadfastly Upholding Solid Corporate Governance The Company is committed to good corporate governance to enhance long term shareholder value, with an emphasis on  transparency, responsibility, independence, accountability, and a quality board. Mr. Zhenyong Liu • Chairman since 1996 • Founder of Orient Paper and also serves as Chief Executive Officer Chairman & CEO • Over 20 years of entrepreneur experience in paper manufacturing Mr. Fuzeng Liu • Executive Director since 2007 Executive Director & Vice  • Also serves as Vice President since 2002 President • Over 10 years of experience in paper manufacturing • Independent Director since 2009 Mr. Drew Bernstein • Chair of Audit Committee Independent Director • Certified Public Accountant, with over 30 years of experience in financial  management Mr. Wenbing Christopher  • Independent Director since 2009 Wang • Chair of Nominating Committee Independent Director • Over 15 years of experience in corporate financing and business development • Independent Director since 2009 Ms. Zhaofang Wang • Chair of Compensation Committee Independent Director • Certified senior economist, and previously served as Director of R&D at China  National Pulp & Paper Research InstituteBoard of Directors StructureSafe Harbor StatementThis fact sheet contains forward‐looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this fact sheet are forward‐looking statements, including but not limited to, anticipated revenues from the digital photo paper business segment; the actions and initiatives of current and potential competitors; the Companys ability to introduce new products; the Companys ability to implement the planned capacity expansion of corrugate medium paper; market acceptance of new products; general economic and business conditions; the ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Companys filings with the Securities and Exchange Commission. These forward‐looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. The Company undertakes no obligation to update forward‐looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.Contacts:Winston Yen, CFO Fleishman‐HillardOrient Paper, Inc. T: +852‐2530‐0228e: ir@orientpaperinc.com 5