Sateri Holdings aims to reshuffle its product mix and further integrate business chains to enhance profitability, its chief executive said on Wednesday after the fibre producer posted a 41 percent fall profits in its debut full-year results.
The firm, which produces fibres used for textiles, and specialty materials used in everything from eyeglasses to cigarette filters, said net profit dropped to $155 million in 2011. Sateri blamed the lower earnings on weaker demand and prices for its textile-related fibre products as a result of the global economic slowdown and on foreign exchange losses stemming from changes in Brazil's currency exchange rate.
"Sateri plans to produce more specialty-grade pulp this year, which has lower price volatility," Sateri chief executive Will Hoon told Reuters in an interview. "It is a completely different industry. It has nothing to do with textile".
Shares in the company, controlled by Indonesian billionaire Sukanto Tanoto and his family, tumbled nearly 7 percent to HK$2.30 on Wednesday - representing a fall of 65 percent from its initial public offering price of HK$6.6 at the end of 2010.
Hong Kong-listed Sateri, whose competitors include Rayonier Inc, Buckeye Technologies Inc and Sappi Ltd, produces rayon-grade pulp and specialty grade pulp in Brazil using wood from eucalyptus trees it grows there. The rayon-grade pulp is supplied as raw material feedstock to Sateri's viscose staple fibre (VSF) plant in China and other textile companies there.
The specialty grade pulp is sold to customers mainly in the West and Japan, who use it to make products from cigarette filters to sausage casings. "We sold less rayon-grade pulp last year, which resulted in higher inventories," Hoon said. The spot price of rayon-grade pulp declined to about $1,100 per metric ton by the end of 2011, after hitting a record high of $2,600 per metric ton in the first quarter of 2011.
The prices of VSF fell from $3,700 per metric ton in the first quarter of last year to below $2,200 per metric ton by the fourth quarter. Sateri is expanding its VSF capacity in China to absorb more rayon-grade pulp it produces in Brazil, further integrating the value chain of its products and helping reduce the volatility of its VSF business, Hoon said. "We have seen bargaining power shift almost every year between rayon-grade pulp players and VSC fibre players".
Sateri raised the annual production capacity of its Jiangxi VSF plant by 30,000 metric tons to 160,000 metric tons last year, he said. Sateri is also building its second VSF plant in China's Fujian province. The 3.5 billion yuan ($555 million) project is expected to be operational in the second half of 2013, with a design capacity of 200,000 metric tons per annum.
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