China's Nine Dragons warns of big profit slump, blames yuan weakness

Nine Dragons Paper (Holdings)

22/01/2016 01:45

HONG KONG, Jan 22 (Reuters) - Chinese cardboard maker Nine 
Dragons Paper (Holdings) Ltd  2689.HK  said its profit likely 
halved in the second half of last year, hit by foreign exchange 
losses due to a devaluation of the yuan.  
    The company's preliminary net profit for the period slid 54 
percent to 310 million yuan ($47 million), hurt by foreign 
exchange losses of 1.01 billion yuan, it said in a statement 
late on Thursday. 
    That compares to a 679 million yuan profit for the same 
period a year earlier. 
    If foreign exchange losses were excluded, profit would have 
jumped 144 percent, the company added. 
    "During the period, the middle exchange rate for RMB to US 
dollars and other currencies experienced significant changes as 
a result of the reform of the RMB middle exchange rate quotation 
regime, which affect the profit of the company for the period," 
Chairwoman Cheung Yan said in the statement. 
    Cheung was referring to a devaluation of almost 2 percent in 
the yuan last August. The yuan is down around 2.8 percent since 
Nov. 30 when the currency was admitted to the International 
Monetary Fund's benchmark basket. 
    The decline was mainly due to foreign exchange losses on 
Nine Dragons' non-yuan debt, Jefferies Equity Research wrote in 
a note to clients, adding the company's business was still 
growing very strongly. 
    Nine Dragons, which will publish its interim results late in 
February, said it expected revenue for the period to have 
climbed 4 percent from a year ago to 16.32 billion yuan on 
increased sales of cardboard for packaging and recycled printing 
and writing paper. 
($1 = 6.5794 Chinese yuan) 
 
 (Reporting by Donny Kwok; Editing by Edwina Gibbs) 
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters 
Messaging: donny.kwok.reuters.com@reuters.net)) 
 
Keywords: ND PAPER OUTLOOK/