Lee & Man Paper and Japan’s Hokuetsu jointly proposed to invest 3 billion US dollars in the project

September 17, 2020

According to the Saigon Times, Lee & Man Paper and Hokuetsu of Japan jointly proposed to develop a US$3 billion comprehensive facility in Ha Tinh, a coastal province in north-central Vietnam, including a deep-water port, a logistics center, and a paper mill. If the construction is successful, the annual production capacity of Lee & Man Paper's household paper will be increased from the current 795,000 tons to 1 million tons. But the project still needs further discussion with Vietnamese officials because they did not reach a conclusion at the last meeting. The bank believes that this plan is very preliminary and unlikely to be realized soon.

Citi pointed out that although management is studying the feasibility, the project is unlikely to be realized soon due to the huge investment budget. Lee & Man Paper is actively looking for various investment opportunities in ASEAN, but the top priority is still to convert solid OCC into OCC pulp that can be imported into China, in response to China's policy changes that may prohibit the import of solid OCC from 2020 at the earliest. From this perspective, the Ha Tinh project investment proposal does not seem to be the top agenda.

Lee & Man's ton profit is expected to rebound in the third quarter

In addition, Citigroup said that due to seasonal demand and downstream customers' replenishment of inventory, Lee & Man Paper’s net profit per ton will rebound slightly in the third quarter, with an average of 600 Hong Kong dollars per ton in the first half of the year. Under the current economic situation, there are still downside risks in the demand decline cycle and profits, and given that current profits are higher than the historical average from 2001 to 2018 (HK$482/ton), the bank believes that there is limited room for further profits to rebound. On the other hand, Lee & Man Paper's new tissue factory in Jiangxi will start operations at the end of this year, which will increase the company's total production capacity of tissue paper by 100,000 tons to 895,000 tons.

Vietnam Lee & Man's annual production line of 400,000 tons of containerboard paper was officially put into operation in March 2017. At present, the factory has nearly 1,000 employees and a production line. According to the long-term development plan, the company will continue to expand its investment.

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