Sateri’s VSF production volume up by 76% in 2011
April 02, 2012 - Hong Kong
Sateri Holdings Limited, a leading global specialty cellulose company, announced its audited results for the year ended 31 December 2011. In the second half of 2011, the economic slowdown negatively impacted demand and prices for the Group’s dissolving wood pulp (DWP) products, particularly in the fourth quarter.
In this weak business environment, the Group sold reduced volumes of rayon-grade pulp, which gave rise to elevated inventory levels at the 2011 year end. The weak exchange rate of the Brazilian Reais against the US Dollar at year-end led to unrealized foreign exchange losses on open currency hedging positions of US$31 million.
In addition, the Bahia Specialty Cellulose (“BSC”) plant in Brazil experienced certain manufacturing process challenges which reduced operational availability and resulted in a lower level of DWP production than expected.
Mr. Will Hoon, CEO and Executive Director of Sateri, said, “Although we experienced several challenges in 2011, particularly in the fourth quarter, we continued to execute our business strategy and succeeded in maintaining the highest EBITDA margin, net margin, operating cash flow yield, and one of the lowest debt levels in the global industry. In addition, we achieved substantial progress in integrating our rayon operations and expanding our specialty-grade pulp business, resulting in more stable margins in the years to come.”
For the 12 months ended 31 December 2011, the Group reported total revenue of US$807 million, compared to US$802 million in 2010 on a like-for-like basis (excluding results from DP Macao which was disposed of by the Group on 30 September 2010).
Gross profit declined 17% to US$323 million and EBITDA by 25% to US$288 million, compared with the same period last year. Profit attributable to shareholders for the year decreased by 41% to US$155 million, and earnings per share was US$0.05 compared to US$0.09 last year on a like-for-like basis. The Board has recommended a final dividend of HK2.5 cents per share for the year ended 31 December 2011.
John Ying, Chairman of Sateri commented, “The Board is pleased to recommend our first dividend payment to shareholders. Considering our earnings for the year, our cash position and our future business prospects, we are delighted that we can take this opportunity to reward our shareholders for their continued support.”
For its Dissolving Wood Pulp (DWP) business, Sateri firmly established itself as a significant global player in specialty grades, which enjoy more stable margins and pricing than rayon grades. Sales volume increased by 60% to 92,231 metric tons in 2011 from 57,590 metric tons in 2010. BSC’s current design capacity allows it to produce up to 320,000 metric tons of specialtygrade pulp per annum, and the Group’s strategy is to expand further in this market.
In view of the rapidly deteriorating market, the Group sold reduced volumes of rayon-grade pulp in the fourth quarter of 2011, which gave rise to elevated inventory levels at year end.
The volume of rayon-grade pulp sold to third parties decreased by 51% to 164,396 metric tons in 2011. The Group’s internal sales of rayon-grade pulp to Sateri Jiangxi doubled to 100,070 metric tons in 2011 as part of its ongoing strategy to further integrate DWP and VSF businesses.
Revenues in 2011 for the DWP segment decreased 27% to US$444 million and segment profit dropped by 54% to US$115 million compared with the same period last year.
In 2011, the Group continued to enhance the quality of its Viscose Staple Fiber (VSF) products and gained market share. The production volume for VSF increased by 76% to 140,576 metric tons in 2011, whilst sales volume increased by 81% to 140,260 metric tons in 2011, of which 60% were sold in the second half of the year.
In 2011, the Group’s VSF business recorded 85% increase in segment revenue to US$363 million. Segment profit was US$36 million, a decrease of 27%, due to the significant volatility in VSF prices in 2011, which dropped sharply from US$3,700 per metric ton in the first quarter to below US$2,200 per metric ton by the fourth quarter as a result of the global economic slowdown.
For DWP, Sateri will continue its strategy to produce and sell more specialty-grade pulp, in view of its lower pricing volatility and superior positioning within the value chain.
The Group’s strategy is to become a global leader in this market, particularly in the acetate segment.
Sateri is also committed to investing further in its vertically integrated business platform, which it believes is a source of competitive advantage. The Group will continue to manage dynamically the production and sales mix of its DWP and VSF products in order to maximize shareholder value from its integrated business platform. Sateri will continue to broaden its customer base in North America and Europe in targeted segments for DWP and increase its market share in VSF in China.
In 2011, the Group obtained all necessary regulatory licenses to proceed with its Greenfield VSF project in Fujian, China, which is expected to be operational in the second half of 2013, with a design capacity of 200,000 metric tons per annum.
Sateri will also continue to explore the feasibility of further greenfield or brownfield expansions, particularly at its existing manufacturing locations, and/or acquisition opportunities, if they meet our stringent strategic and financial return targets.
Whilst prospects for the global macroeconomic environment in 2012 and their impact on our business remain unclear, Sateri is confident that it has the right business strategy in place to position itself optimally to meet the challenges that lie ahead.
Although the current market remains soft, with spot market prices in the first quarter of 2012 for rayon-grade pulp and VSF significantly lower than the average selling prices in 2011, the Group believes that it is well positioned to operate more profitably than its competitors owing to its flexible and integrated business model, and competitive cost structure. Investment in the Fujian project will also deliver a better balance between the Group’s DWP and VSF manufacturing capacity. Strong operating cash flow and conservative balance sheet management will also support the Group’s ability to grow further in future and deliver attractive long-term returns to its shareholders.
Mr. Hoon concluded, “We will continue to execute inexorably our two-pronged strategy of integrating our rayon operations and expanding our specialty-grade pulp business. Despite the pricing volatility experienced in 2011, end-user demand for VSF products in China continues to grow, driven by the rising middle-class and continued urbanization across the country. We believe that we have the best platform not only to withstand current market headwinds but also to capture future opportunities when the market improves.”
Sateri Holdings Limited is a leading global specialty cellulose company, producing dissolving wood pulp and viscose staple fiber in its mills in Brazil and China, namely Bahia Specialty Cellulose and Sateri (Jiangxi) Chemical Fiber, respectively.
In this weak business environment, the Group sold reduced volumes of rayon-grade pulp, which gave rise to elevated inventory levels at the 2011 year end. The weak exchange rate of the Brazilian Reais against the US Dollar at year-end led to unrealized foreign exchange losses on open currency hedging positions of US$31 million.
In addition, the Bahia Specialty Cellulose (“BSC”) plant in Brazil experienced certain manufacturing process challenges which reduced operational availability and resulted in a lower level of DWP production than expected.
Mr. Will Hoon, CEO and Executive Director of Sateri, said, “Although we experienced several challenges in 2011, particularly in the fourth quarter, we continued to execute our business strategy and succeeded in maintaining the highest EBITDA margin, net margin, operating cash flow yield, and one of the lowest debt levels in the global industry. In addition, we achieved substantial progress in integrating our rayon operations and expanding our specialty-grade pulp business, resulting in more stable margins in the years to come.”
For the 12 months ended 31 December 2011, the Group reported total revenue of US$807 million, compared to US$802 million in 2010 on a like-for-like basis (excluding results from DP Macao which was disposed of by the Group on 30 September 2010).
Gross profit declined 17% to US$323 million and EBITDA by 25% to US$288 million, compared with the same period last year. Profit attributable to shareholders for the year decreased by 41% to US$155 million, and earnings per share was US$0.05 compared to US$0.09 last year on a like-for-like basis. The Board has recommended a final dividend of HK2.5 cents per share for the year ended 31 December 2011.
John Ying, Chairman of Sateri commented, “The Board is pleased to recommend our first dividend payment to shareholders. Considering our earnings for the year, our cash position and our future business prospects, we are delighted that we can take this opportunity to reward our shareholders for their continued support.”
For its Dissolving Wood Pulp (DWP) business, Sateri firmly established itself as a significant global player in specialty grades, which enjoy more stable margins and pricing than rayon grades. Sales volume increased by 60% to 92,231 metric tons in 2011 from 57,590 metric tons in 2010. BSC’s current design capacity allows it to produce up to 320,000 metric tons of specialtygrade pulp per annum, and the Group’s strategy is to expand further in this market.
In view of the rapidly deteriorating market, the Group sold reduced volumes of rayon-grade pulp in the fourth quarter of 2011, which gave rise to elevated inventory levels at year end.
The volume of rayon-grade pulp sold to third parties decreased by 51% to 164,396 metric tons in 2011. The Group’s internal sales of rayon-grade pulp to Sateri Jiangxi doubled to 100,070 metric tons in 2011 as part of its ongoing strategy to further integrate DWP and VSF businesses.
Revenues in 2011 for the DWP segment decreased 27% to US$444 million and segment profit dropped by 54% to US$115 million compared with the same period last year.
In 2011, the Group continued to enhance the quality of its Viscose Staple Fiber (VSF) products and gained market share. The production volume for VSF increased by 76% to 140,576 metric tons in 2011, whilst sales volume increased by 81% to 140,260 metric tons in 2011, of which 60% were sold in the second half of the year.
In 2011, the Group’s VSF business recorded 85% increase in segment revenue to US$363 million. Segment profit was US$36 million, a decrease of 27%, due to the significant volatility in VSF prices in 2011, which dropped sharply from US$3,700 per metric ton in the first quarter to below US$2,200 per metric ton by the fourth quarter as a result of the global economic slowdown.
For DWP, Sateri will continue its strategy to produce and sell more specialty-grade pulp, in view of its lower pricing volatility and superior positioning within the value chain.
The Group’s strategy is to become a global leader in this market, particularly in the acetate segment.
Sateri is also committed to investing further in its vertically integrated business platform, which it believes is a source of competitive advantage. The Group will continue to manage dynamically the production and sales mix of its DWP and VSF products in order to maximize shareholder value from its integrated business platform. Sateri will continue to broaden its customer base in North America and Europe in targeted segments for DWP and increase its market share in VSF in China.
In 2011, the Group obtained all necessary regulatory licenses to proceed with its Greenfield VSF project in Fujian, China, which is expected to be operational in the second half of 2013, with a design capacity of 200,000 metric tons per annum.
Sateri will also continue to explore the feasibility of further greenfield or brownfield expansions, particularly at its existing manufacturing locations, and/or acquisition opportunities, if they meet our stringent strategic and financial return targets.
Whilst prospects for the global macroeconomic environment in 2012 and their impact on our business remain unclear, Sateri is confident that it has the right business strategy in place to position itself optimally to meet the challenges that lie ahead.
Although the current market remains soft, with spot market prices in the first quarter of 2012 for rayon-grade pulp and VSF significantly lower than the average selling prices in 2011, the Group believes that it is well positioned to operate more profitably than its competitors owing to its flexible and integrated business model, and competitive cost structure. Investment in the Fujian project will also deliver a better balance between the Group’s DWP and VSF manufacturing capacity. Strong operating cash flow and conservative balance sheet management will also support the Group’s ability to grow further in future and deliver attractive long-term returns to its shareholders.
Mr. Hoon concluded, “We will continue to execute inexorably our two-pronged strategy of integrating our rayon operations and expanding our specialty-grade pulp business. Despite the pricing volatility experienced in 2011, end-user demand for VSF products in China continues to grow, driven by the rising middle-class and continued urbanization across the country. We believe that we have the best platform not only to withstand current market headwinds but also to capture future opportunities when the market improves.”
Sateri Holdings Limited is a leading global specialty cellulose company, producing dissolving wood pulp and viscose staple fiber in its mills in Brazil and China, namely Bahia Specialty Cellulose and Sateri (Jiangxi) Chemical Fiber, respectively.