Mar 18,2008
Nine Dragons Paper (Holdings) Ltd, run by China's second-richest person, said first-half profit rose 11.4 percent, less than expected, as the cost of recycled paper climbed. The stock fell the most in two years.
Net income rose to 1.06 billion yuan (US$150 million), or 0.24 yuan a share, in the six months ended December 31 from 948 million yuan, or 0.22 yuan, a year earlier, the Hong Kong-based firm said yesterday in a statement to the city's stock exchange. Sales grew 44 percent to 6.69 billion yuan.
The company's profit margin shrank to 15.8 percent from 20.4 percent as the price of imported recycled paper, which makes up the majority of production costs, increased, the statement said. Profit margin is the percentage of sales a firm earns after deducting some or all of its costs and expenses.
"The gross profit margin is apparently so small because of the raw material cost, which has gone up so much," said Karen Li, a Hong Kong-based analyst at JPMorgan Chase & Co. "They won't be able to pass this on to customers for another three months."
The company's gross profit margin was 24 percent, compared with Li's estimate of between 25 percent and 26 percent, she said.
Two other analysts surveyed by Bloomberg News had predicted an average net income of 1.43 billion yuan, or 0.35 yuan a share.
Nine Dragons' shares fell 40 percent to close at HK$6.39 (82 US cents), the lowest level since August 2006, in Hong Kong. The stock has dropped 68 percent this year, against a 24- percent fall in the key Hang Seng Index.
|