In the first half of this year, although the paper industry has heard the price increase from time to time, the rising cost of wood pulp squeezes corporate profits, resulting in insufficient market confidence in the entire industry. However, on July 18th, the first half-year report of the paperboard block of the Shanghai-Hong Kong-Shenzhen city was released. The net profit of Vinda International increased by 30% year-on-year during the reporting period. Is it only Vodafone's unique show, or is it a collective rejuvenation?
On July 18th, Vinda International disclosed the performance of the China Daily. The company achieved a revenue of HK$7.334 billion (the same unit), a year-on-year increase of 16.3%; net profit of 417 million yuan, a year-on-year increase of 30.1%. According to the announcement, the company's tissue segment revenue was 5.928 billion yuan, a growth rate of 16.9%, accounting for 81% of the group's total revenue.
Vinda International said that due to strong sales in various regions, revenue and net profit increased. In addition, although the cost of wood pulp increased significantly, the gross profit margin in the second quarter continued to rise after price hikes and optimized product mix. Vincent International Finance and company secretary Tan Yiyi said in the interim results conference that the price of wood pulp remained at a high level, but the company is confident to maintain the gross profit margin in the second half of this year.
The environmental protection high-pressure superposition to capacity, the concentration of the paper industry continues to increase, regardless of which papermaking sector. In the past year or so, the prices of raw materials and finished papers in the entire domestic paper industry have risen and increased. The soaring prices of raw materials, including pulp and waste paper, once worried the market for the profits of paper companies. We first explored the entire industry from Vinda International's mid-year report.
Consumer paper consumption is strong, Vinda's profit has increased by 30%
On July 18, 2018, Vinda International disclosed the performance of the China Daily: revenue of HK$7.334 billion, up 16.3% year-on-year; net profit of HK$417 million, up 30.1% year-on-year; gross margin was 29.7%, down 0.83 percentage point year-on-year .
Vinda International said that revenue and net profit increased due to strong sales in various regions. In addition, despite the significant increase in the cost of wood pulp, the gross profit margin in the second quarter continued to rise after raising prices and optimizing product mix.
The price of pulp continued to rise, and the leading advantage was highlighted. In the first quarter of 2018, revenue was HK$3.781 billion, up 21.8% year-on-year; gross profit was HK$1.077 billion, up 14% year-on-year. The picture below shows the revenue and profit of Vinda International over the years:
It can be seen that the gross profit margin from 2013 to 2016 has increased slightly year by year, from 29% in 2013 to 31.66% in 2016. The background of the increase in gross profit margin was that the international pulp price continued to decline during the same period. By the time of the international pulp price surge in 2017, Vinda International's gross profit margin fell slightly to 29.66%. However, in the long run, Vinda International's gross profit margin is basically stable at around 30%.
Although the paper industry is generally defined as a strong cyclical industry, it is considered a weak cyclical sector in the paper industry due to its strong consumerism.
According to the Vida International Financial Report, there are currently two main businesses, namely tissue paper and personal care. The revenue in the first half of 2018 was 81% and 19% respectively.
In fact, the performance of Vinda International's performance in recent years has increased, on the one hand, because of the growth of China's tissue paper industry, and on the other hand, its multiple mergers and acquisitions in Asia.
The other side of Vinda: continuous mergers and acquisitions, the assets of major shareholders are put into the listed company
In 2007, Vinda International landed on the Hong Kong Stock Exchange. At that time, the company's largest shareholder was Fu'an International. The second largest shareholder was SCA, the global paper giant, Ai Shengya. Its famous paper towel brand is “Tempoâ€. ".
In 2013, SCA increased its holdings to Vinda International, with a shareholding ratio of 51.4%, which officially became the controlling shareholder of Vinda International. In 2017, SCA split its paper business and listed it separately with Essity. Since then, Essity has become the controlling shareholder of Vinda International.
After the birth of SCA, Vader International opened the integration process with SCA's Asian business, and Vader International also entered the field of personal care.
In 2014, Vinda International acquired 100% of the shares of some of SCA's companies for HK$1.14 billion, thereby integrating SCA's tissue and personal care businesses in Mainland China, Hong Kong and Macau.
In terms of toilet paper, it won the high-end brand Tempo and the commercial paper brand Tork; in the feminine care products, it got the light curve (Libresse); in the baby care products, it got the Sealer, Dryper, Libero; adult incontinence care products, received the addition of TENA and Dr.P.
In 2015, Vinda International acquired SCA's three companies in Malaysia, Taiwan, and South Korea for HK$2.8 billion, and has basically completed business coverage in Asia. However, the main income of Vinda International still comes from the mainland of China, accounting for about 75%.
With the increase in domestic per capita consumption of household paper, from 4.2 kg/year in 2012 to 5.7 kg/year in 2016, the competition in the tissue industry has become increasingly fierce. Since the gross profit margin of household paper is relatively high in the paper industry, it has attracted many companies to join the war in recent years. For example, Lee & Man Paper, which has been focusing on packaging paper, has joined the team of tissue paper and started to increase in 2014. With the income of tissue paper, the proportion of tissue paper revenue in 2017 has increased to 10%.
China's four paper towels: "Hengjin Dashun"
At present, the industry concentration of CR4 in China's tissue paper enterprises is 39%, compared with 70% of the US CR4, there is room for improvement.
However, in the process of increasing industry concentration, the pattern of the paper industry giants is relatively stable. According to revenue, China’s top four are Hengan International, APP Golden Leaf, Vinda International and Zhongshun Jierou. The following table shows the revenue and gross profit margin of the TOP4 tissue business organized by Bakery Finance:
It can be seen that, except Vida International's gross profit margin is less than 30%, the gross profit margins of the other three paper towel faucets are above 30%. Hengan International and Vinda International's annual revenue from paper towels are more than 9 billion yuan, and APP Golden Leaf is close to 9 billion.
At present, among the four household paper faucets, except for APP Golden Leaf, the other three have been listed. However, from the point of view of market value, Vinda International and Zhongshun Jierou are in the 10 billion class, and the business scope of Hengan International has a higher market value, exceeding 70 billion.
However, to talk about the global consumer paper giant, it is sure to circumvent Kim Kumly (KMB.N), its paper towel brand "Shu Jie" is widely known, the current total market value of about 36 billion US dollars, equivalent to about 240 billion yuan.
Kimberly-Clark's business covers three major segments: care products, tissue paper towels and consumer products, with care products and household tissue papers accounting for 49% and 32% respectively. In recent years, Kimberly-Clark's overall gross profit margin has remained above 35%, but it has plummeted to 28% in the first quarter of 2018, a decrease of nearly 9 percentage points year-on-year.
More than 60% of the raw material cost of household paper is pulp cost. In 2017, international pulp prices opened up the soaring pattern and are still in the price hike. As a result, the industry is worried about the profit of tissue paper companies.
Crazy pulp: More than 40% increase, it’s time to test pricing power
Pulp is mainly divided into wood pulp, waste paper pulp and non-wood pulp. At present, China's household paper is mainly divided into three grades: high, medium and low. The higher the wood pulp content, the higher the grade. China's large papermaking enterprises mainly purchase imported pulp, so the fluctuation of international pulp prices has a greater impact on the business performance of papermaking enterprises.
According to customs data, from January 2017 to June 2018, the average unit price of imported pulp in China increased by 43.5%, and the increase in the first half of this year was close to 10%. The average unit price in June 2018 was $807.28/ton.
The gross profit margin trend of the four domestic leading paper companies, in the soaring raw material prices, the gross profit margin can still remain stable without major fluctuations. This is largely related to the price hikes of these household paper companies starting from the second half of 2017, and the pressure to increase the price of some raw materials has been transferred through price increases.
When the market is not good, it depends on who can smash it. When the market price rises, the test is the pricing power.
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