Dear Shareholders,

In the first half of FY2025, the global economic growth momentum slowed down. However, China’s economy, driven by targeted macroeconomic policies and accumulated internal impetus for rebound, showed a mild turnaround with moderate recovery in domestic consumption. In addition, with the support of export growth and peak season factor, the demand for packaging paper saw an uptick and the industry’s inventory level continued to improve. The industry sentiment also started to pick up slightly. Despite this, the overall consumer confidence in the market has yet to be fully restored, and the effective consumer demand remained insufficient.

In view of the complex and volatile operating environment, the Group actively adjusted its production and business strategies, optimized its management and expanded its market coverage, which has yielded remarkable results with the Group successfully fulfilling its goal of capturing high-end markets and boosting both sales volume and price. During the Period, the sales volume of the Group increased by 14.0% year-on-year and hit a new record high, which contributed to a year-on-year increase of 9.3% in revenue.

Meanwhile, we continued to improve our operating efficiency by striking a balance between production and sales, optimizing inventory management and enhancing the efficiency of resource utilization. We also kept a close tab on prices of raw materials and sales in a bid to further enhance our profitability. All these efforts contributed to continuous improvement of the Group’s fundamentals and a substantial increase in its profitability. As such, the Group’s net profit after taxation for the Period increased by over 1.2 times year-on-year, leading the industry in terms of profit.

Strengthened Brand Building Efforts to Give Full Play to the Brand Value of Nine Dragons Paper
The paper-making industry is undergoing profound changes. To accelerate the realization of integrated pulp and paper production not only is a crucial path for solving the bottleneck of raw materials, but also a strategic decision aiming to reshape the competitive landscape of the industry and capture the sustainable markets. On the one hand, the vertical integration at the raw material end will enable us to effectively mitigate risks relating to the fluctuation of procurement costs of wood pulp. On the other hand, by leveraging the standardized quality control system, we will be able to support performance upgrade of products such as high-end food-grade bleached folding boxboard and light weight high performance packaging paper, building up a brand that embodies the characteristics of Nine Dragons Paper and boasts industry-leading customer satisfaction, thereby giving full play to the brand value of Nine Dragons Paper. Upon the commencement of production of the new projects, our annual design production capacity for fibre raw materials will amount to 8.19 million tonnes (wood pulp of 5.43 million tonnes, recycled pulp of 0.70 million tonnes and wood fibre of 2.06 million tonnes), which will continue to optimize our fibre and raw material mix and strengthen the Group’s ability to control and compete in the industrial chain.

In terms of products, we adhered to the development path towards high value-added products and high effectiveness, and continued to promote value creation and profit growth of the Group. The Group is investing in Beihai, Guangxi Zhuang Autonomous Region and Jingzhou, Hubei Province with a total of 3.70 million tonnes of annual design production capacity for bleached folding boxboard and printing and writing paper. Upon the commencement of production of all projects, the Group’s annual design paper production capacity will reach 25.37 million tonnes, further enhancing its product mix.

Tapping Profit Growth Points to Maximize Profit
Against the current backdrop of escalating tensions in international relations, the economy and consumer confidence were still recovering at a slow pace. However, we believe that the Chinese government’s special campaign to boost consumption will continue to unleash consumption potential, which will in turn support the demand in the packaging paper industry. Amidst both challenges and opportunities, Nine Dragons Paper will tap profit growth points to maximize profits with its best efforts. Stepping into the second half of the financial year, our core strategies are as follows:

1. Exercise stringent control over production costs — While pushing ahead with the commencement of production of the wood pulp projects in full steam, we will also optimize our procurement strategy to minimize the purchase price of major raw materials such as recovered paper and woodchips;
2. Strengthen our brand effect — We will further promote standardization and uniformity of pulp and paper production quality by giving full rein to our strategic advantages with regard to such production. At the same time, we will continue to achieve sustainable supply of exemplary quality paper that embodies the characteristics of Nine Dragons Paper, while raising the proportion of high added-value products to further increase our share in the high-end markets;
3. Increase the operating efficiency and effectiveness — We will utilize big data to promote innovation in management, taking into account the characteristics of the Group’s business. Besides, we will closely track the market dynamics of raw materials and sales to maximize profitability, and strengthen capital management to ensure a balance between business development and liquidity security; and
4. Reinforce bottom-line management — We will incorporate bottom-line management in aspects such as security, fire safety, environmental protection and integrity into the scope of our regular operation in order to establish a sound, long-term management mechanism.

Last but not least, on behalf of all members of the Board, I would like to express my sincere gratitude to all shareholders for their unwavering support. In the face of opportunities and challenges in the new stage, I will closely work with all employees of Nine Dragons Paper to forge ahead and stay at the forefront of the industry so as to repay the trust and expectations of our shareholders with even more remarkable operating results. Thank you.

Cheung Yan
Chairlady

27 February 2025