Orient Paper, Inc. Announces Fourth Quarter and Fiscal Year 2015 Financial Results

BAODING, China, March 24, 2016 /PRNewswire/ -- Orient Paper, Inc. (NYSE MKT: ONP) ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in North China, today announced its audited financial results for the fourth quarter and fiscal year ended December 31, 2015.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "The rate of economic growth in China has continued to slow down. Additionally, in the fourth quarter, we had to suspend our production from December 14 to December 29, 2015, to comply with an anti-smog governmental mandate. Despite these difficulties, we grew our gross profit by 22.3% for the year ended December 31, 2015. Our sales volumes for light-weight CMP were up 55.6% in 2015. Also, our newly launched tissue paper packaging business generated $1.7 million in sales for the year ended December 31, 2015. Looking ahead, China's economic growth rate is expected to see a further slow-down. In addition, as the central government ramps up its anti-smog efforts in Beijing and the surrounding provinces, we may be subject to additional government mandated temporary production suspensions. Despite these potential challenges, we anticipate that the sales of our light-weight CMP and tissue paper products will continue to grow because of the strong demand for these products and the closures of small-scale manufacturers."

Fourth Quarter 2015 Financial Highlights

• Despite the government mandated temporary production suspension from December 14 to December 29, 2015, revenue increased by 7.4% to $35.1 million, primarily attributable to an increase in sales of offset printing paper and contribution from sales of the newly launched tissue paper products, partially offset by a decrease in sales of regular CMP.
• Gross profit increased by 7.1% to $6.0 million.
• Gross margin slightly decreased to 17.0%, primarily due to the low gross margin for tissue paper products, partially offset by an increase in gross margin for light-weight CMP.
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $7.1 million, an increase of 16.5% from the same period of last year.
• Net income was $2.2 million, or $0.11 per diluted share, both of which remained unchanged from the same period of last year.
• The newly launched tissue paper product business generated revenue of $1.4 million with shipment volume of 1,099 tonnes and average selling price ("ASP") of $1,313/tonne.

Revenue

For the fourth quarter of 2015, total revenue increased by $2.4 million, or 7.4%, to $35.1 million from $32.7 million for the same period of the last year. The following table summarizes revenue, volume and ASP by product for the fourth quarter of 2015:

Revenue from CMP, including both regular CMP and light-Weight CMP, decreased by $0.6 million, or 2.4%, to $23.7 million, and accounted for 67.6% of total revenue for the fourth quarter of 2015, compared to $24.3 million, or 74.3% of total revenue for the same period of last year. The Company sold 70,640 tonnes of CMP at an ASP of $336/tonne in the fourth quarter of 2015, compared to 65,592 tonnes at an ASP of $370/tonne in the same period of last year.

Of the total CMP sales, revenue from regular CMP decreased by $0.8 million, or 4.0%, to $19.5 million, resulting from sales of 58,343 tonnes at an ASP of $334/tonne during the fourth quarter of 2015, compared to revenue of $20.3 million, resulting from sales of 54,922 tonnes at an ASP of $370/tonne for the same period of last year. Revenue from light-weight CMP increased by $0.2 million, or 5.9%, to $4.2 million, resulting from sales of 12,297 tonnes at an ASP of $343/tonne for the fourth quarter of 2015, compared to revenue of $4.0 million, resulting from sales of 10,670 tonnes at an ASP of $373/tonne, for the same period of the last year.

Revenue from offset printing paper increased by $1.4 million, or 16.6%, to $9.7 million for the fourth quarter of 2015, from $8.4 million for the same period of last year. The Company sold 14,592 tonnes of offset printing paper at an ASP of $668/tonne in the fourth quarter of 2015, compared to 12,110 tonnes at an ASP of $690/tonne in the same period of last year.

Revenue from tissue paper products was $1.4 million. The Company sold 1,099 tonnes tissue paper products at an ASP of $1,313/tonne for the fourth quarter of 2015.

Revenue from digital photo paper was $0.2 million for the fourth quarter of 2015, compared to $0.04 million for the same period of last year. The Company sold 77 tonnes of digital photo paper at an ASP of $2,582/tonne in the fourth quarter of 2015, compared to 13 tonnes at an ASP of $3,069/tonne in the same period of the last year. In October 2014, we shut down and disassembled our digital photo paper production facilities (the PM4 and PM5 production lines) for the relocation mandated by the local county government to a new workshop that we built across the street from our main production base, Xushui Paper Mill. We completed the relocation and resumed commercial production of our digital photo paper in August 2015.

Gross Profit and Gross Margin

Total cost of sales increased by $2.0 million, or 7.4%, to $29.1 million for the fourth quarter of 2015, from $27.1 million for the same period of the last year. Cost of sales per tonne was $337 for the fourth quarter of 2015, compared to $349 for the same period of last year. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, tissue paper products, and digital photo paper were, $281, $249, $558, $1,103, and $3,968, respectively, for the fourth quarter of 2015, compared to $311, $279, $577, $nil, and $5,946, respectively, for the same period of last year.

Total gross profit increased by $0.4 million, or 7.1%, to $6.0 million for the fourth quarter of 2015, from $5.6 million for the same period of last year. Total gross margin slightly decreased to 17.0% for the fourth quarter of 2015 from 17.1% for the same period of last year, primarily due to the lower gross margin for tissue paper products, partially offset by increase in gross margin for light-weight CMP.

Gross margin for regular CMP, light-weight CMP, offset printing paper, tissue paper products, and digital photo paper was 15.8%, 27.4%, 16.5%, 16.0% and -53.7%, respectively, for the fourth quarter of 2015, compared to 15.9%, 25.2%, 16.5%, nil, and -93.0%, respectively, for the same period of last year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") was $2.3 million for the fourth quarter of 2015, compared to $2.0 million for the same period of the last year. The increase was primarily due to an increase in the depreciation costs associated with disassembling the digital photo production lines for relocation that was charged to SG&A and our temporarily idle property, plant and equipment at our new tissue paper plant in the Wei County Industrial Park.

Income from Operations

Income from operations increased slightly to $3.7 million for the fourth quarter of 2015 from $3.6 million for the same period of last year. Operating margin was 10.4% for the fourth quarter of 2015, compared to 11.0% for the same period of last year.

Net Income

Net income was $2.2 million, or $0.11 per basic and diluted share, for the fourth quarter of 2015, which remained unchanged from the same period of last year.

EBITDA

EBITDA increased by $1.1 million, or 16.5%, to $7.1 million for the fourth quarter of 2015, from $6.0 million for the same period of last year.

Full Year 2015 Financial Results

Revenue

For the year ended December 31, 2015, total revenue decreased by $1.7 million, or 1.3%, to $135.3 million, from $137.0 million for the fiscal year of 2014. The decrease in total revenue was primarily due to a decrease in sales of regular CMP, digital photo paper and offset printing paper, which were partially offset by increase in sales of light-weight CMP and contribution from the sales of the tissue paper products. The following table summarizes revenue, volume and ASP by product for the year ended December 31, 2015:

Revenue from CMP, including both regular CMP and light-weight CMP, increased by $0.4 million, or 0.4%, to $96.9 million, and accounted for 71.6% of total revenue for the year ended December 31, 2015, compared to $96.5 million, or 70.4% of total revenue, for the fiscal year of 2014. The Company sold 268,222 tonnes of CMP at an ASP of $361 for the year ended December 31, 2015, compared to 265,132 tonnes at an ASP of $364/tonne for the year ended December 31, 2014.

Of the total CMP sales, revenue from regular CMP decreased by $5.3 million, or 6.2%, to $80.8 million, resulting from sales of 224,302 tonnes at an ASP of $360/tonne during the year ended December 31, 2015, compared to revenue of $86.1 million, resulting from sales of 236,906 tonnes at an ASP of $363/tonne for the year ended December 31, 2014. Revenue from light-weight CMP increased by $5.7 million, or 54.6%, to $16.1 million, resulting from sales of 43,920 tonnes at an ASP of $367/tonne during the year ended December 31, 2015, compared to revenue of $10.4 million, resulting from sales of 28,226 tonnes at an ASP of $369/tonne for the year ended December 31, 2014.

Revenue from offset printing paper decreased by $1.2 million, or 3.3%, to $36.3 million for the year ended December 31, 2015, from $37.6 million for the year ended December 31, 2014. The Company sold 53,137 tonnes of offset printing paper at an ASP of $684/tonne in the year ended December 31, 2015, compared to 54,774 tonnes at an ASP of $686/tonne in the year ended December 31, 2014.

Revenue from tissue paper products was $1.7 million. The Company sold 1,307 tonnes at an ASP of $1,315/tonne for the year ended December 31, 2015. The Company began the commercial production of tissue paper products in June 2015, and did not sell any tissue paper products in 2014.

Revenue from digital photo paper was $0.4 million for the year ended December 31, 2015, compared to $3.0 million for the year ended December 31, 2014. The Company sold 121 tonnes of digital photo paper at an ASP of $3,107/tonne in the year ended December 31, 2015, compared to 763 tonnes at an ASP of $3,907/tonne in the year ended December 31, 2014. As discussed above, we resumed commercial production of digital photo paper in August 2015.

Gross Profit and Gross Margin

Total cost of sales decreased by $6.8 million, or 6.0%, to $107.4 million for the year ended December 31, 2015, from $114.3 million for the year ended December 31, 2014. Cost of sales per tonne was $333 for the year ended December 31, 2015, compared to $356 for the year ended December 31, 2014. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, tissue paper products, and digital photo paper were $288, $255, $557, $1,135, and $5,121, respectively, for the year ended December 31, 2015, compared to $311, $269, $558, $nil, and $3,215, respectively, for the year ended December 31, 2014.

Total gross profit increased by $5.1 million, or 22.3%, to $27.9 million for the year ended December 31, 2015, from $22.8 million for the year ended December 31, 2014. Total gross margin was 20.6% for the year ended December 31, 2015, compared to 16.6% for the year ended December 31, 2014. Gross margins for regular CMP, light-weight CMP, offset printing paper, tissue paper products, and digital photo paper were 20.1%, 30.3%, 18.6%, 13.7%, and -64.8%, respectively, for the year ended December 31, 2015, compared to 14.4%, 27.2%, 18.6%, nil, and 17.7%, respectively, for the year ended December 31, 2014.

Selling, General and Administrative Expenses

SG&A was $9.7 million for the year ended December 31, 2015, compared to $4.8 million for the year ended December 31, 2014. The increase was primarily due to an increase in the depreciation costs associated with disassembling the digital photo production lines for relocation that was charged to SG&A and our temporarily idle property, plant and equipment at our new tissue paper plant in the Wei County Industrial Park.

Income from Operations

Income from operations increased by $0.8 million, or 4.5%, to $18.2 million for the year ended December 31, 2015, from $17.4 million for the year ended December 31, 2014. Operating margin was 13.3% for the year ended December 31, 2015, compared to 12.7% for the year ended December 31, 2014.

Net Income

Net income decreased by $0.2 million, or 1.4%, to $11.5 million for the year ended December 31, 2015, from $11.7 million for the year ended December 31, 2014. Basic and diluted earnings per share for the year ended December 31, 2015 were $0.57, compared to $0.61 for the year ended December 31, 2014.

EBITDA

EBITDA increased by $6.3 million, or 24.5%, to $32.2 million for the year ended December 31, 2015, from $25.7 million for the year ended December 31, 2014.

Cash, Liquidity and Financial Position

As of December 31, 2015, the Company had cash and cash equivalents, short-term debt (including notes payable and related party loan), current capital lease obligations, long term debt(including related party loans) and non-current capital lease obligations of $2.6 million, $27.7 million, $6.9 million, $19.0 million and $3.2 million, respectively, compared to $3.9 million, $28.5 million, $12.3 million, $15.6 million and $4.1 million, respectively, at the end of 2014.

Net cash provided by operating activities was $21.2 million for the year ended December 31, 2015, compared to $32.3 million for the year ended December 31, 2014. Net cash used in investing activities was $19.3 million for the year ended December 31, 2015, compared to $36.3 million for the year ended December 31, 2014. Net cash used in financing activities was $2.8 million for the year ended December 31, 2015, compared to net cash provided by financing activities of $4.7 million for the year ended December 31, 2014.

Earnings Conference Call:

The Company's management will host a conference call to discuss its fourth quarter and fiscal year of 2015 financial results at 8:00 am US Eastern Time (5:00 am US Pacific Time/ 8:00 pm Beijing Time) on Thursday, March 24, 2016.

To attend the conference call, please dial-in using the information below. When prompted upon dialing-in, please provide the conference ID or ask for the "Orient Paper Fourth Quarter 2015 Earnings Conference Call."

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking http://www.orientpaperinc.com/, or http://edge.media-server.com/m/p/v5hdx4gq.

Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.

A playback will be available through April 8, 2016. To listen, please dial +1-855-452-5696 if calling from the United States, or +61-290-034-211 if calling internationally. Use the passcode 63069503 to access the replay.

About Orient Paper, Inc.

Orient Paper, Inc. ("Orient Paper") is a leading paper manufacturer in North China. Using recycled paper as its primary raw material (with the exception of its digital photo paper and tissue paper products), Orient Paper produces and distributes three categories of paper products: corrugating medium paper, offset printing paper, and other paper products, including digital photo paper and tissue paper products.

With production based in Baoding and Xingtaiin North China's Hebei Province, Orient Paper is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country.

Orient Paper's production facilities are controlled and operated by its wholly owned subsidiary Shengde Holdings Inc, which in turn controls and operates Baoding Shengde Paper Co., Ltd., and Hebei Baoding Orient Paper Milling Co., Ltd.

Founded in 1996, Orient Paper has been listed on the NYSE MKT under the ticker symbol "ONP" since December 2009. For more information about the Company, please visit http://www.orientpaperinc.com.

Safe Harbor Statements

This press release may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company's public filings with the Securities and Exchange Commission, including the Company's latest annual report on Form 10-K. All information provided in this press release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements.

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