Li Hongxin was chosen as the RISI Asian CEO of the Year by a group of investment analysts and portfolio managers covering the forest products industry. The analysts responded to a survey organized by RISI and the criteria for nomination included leadership, vision and strategic accomplishment. Analysts noted that they chose Li Hongxin as the winner due to Shandong Sun Paper's healthy financial performance and also its exploration in upstream development (including forest plantation abroad). "Sun Paper's financial performance doubled in 2009, and the company has expanded its raw material plantation base to cater for the company's needs," commented one analyst.
Mr. Li will be attending RISI's 11th Asian Pulp & Paper Outlook Conference to accept the award in Shanghai, China to be held on June 7-9, 2010 where he will also be giving the keynote speech
Other CEOs who got high votes this year include: Ms. Cheung Yan, chairman of Nine Dragons, as well as Sino Forest's chairman, Allan Chan.
PPI: Congratulations on being awarded RISI Asian CEO of the Year Award for 2010, as chosen by Asian financial analysts in the pulp and paper industry. How does it feel to be awarded such a prestigious title?
Li: I feel really happy to receive the RISI Asian CEO of the Year Award and I also feel honored and inspired. It is not only my honor; it is Sun Paper's honor as well as China paper industry's honor!
PPI: Sun Paper's net profit in 2009 doubled compared to the previous year, according to Sun Paper's recent press release. To what factors do you attribute such fast growth? (Some analysts believed that Sun Paper stocking up on pulp at low prices helped the company to achieve a healthy financial performance in 2009. What do you think?)
Li: Sun Paper grew very fast in 2009 due to a recovery of China's micro economy after the government's successive economic incentive plans which improved the environment for further development greatly. Other than this, we adopted measurements and took the opportunity for further expansion amid a difficult time. For example, we adjusted the portfolio in forestry resources and products, which led to an upturn in profit growth. Thirdly, we were implementing management and technology innovation which in turn lifted the company's competitiveness.
PPI: Can you tell us about your experience over the last two years at Sun Paper? Has the financial crisis had any impact on the company? How did you tackle it?
Li: Sun Paper grew very fast in the past two years with the strategy of development focused on "High (speed), Perfection and Specialization". We changed methods and adjusted the structure of the company. In addition, on the environmental front, we tried to eliminate discharges, and to improve the industrial chain, aiming to develop a low carbon economy and a green paper industry. We focused on the above in the past two years.
The world financial crisis caused turbulence in raw material prices which squeezed the company's profits. However, the crisis made us realize the shortfalls of the company and to accelerate our pace in adjusting our raw material portfolio and product structure.
We focused our strategy on "One Center and Two Accelerations" amid the severe challenges of the international financial crisis. "One Center" means to focus on technology innovation in order to lift the company's profits, while "Two Accelerations" means to accelerate our capacity in pulp production and make new products with high competitiveness. Secondly, the strategy was focusing on "Going Out", accelerating development in forestry, pulp and paper production in foreign countries.
Meanwhile, we have been improving our innovation systems in the company, establishing a post-doctoral research center and academic work center and have claimed more than 20 patents in China. New products we developed include stainless lining paper, bulky printing and writing paper, and specialty papers, to name is just a few. Among these, the non bacterial liquid packaging board for food packaging filled in the gap in Asia. This top quality carton board has been used by world class fast food suppliers including McDonald's and KFC. Three projects, including zero draining of waste water in mechanical pulp production, environmental book paper as well as matt coated printing and writing paper were approved by the Shandong Technology Office. And among them, zero draining of waste water in mechanical pulp production reached advanced international levels.
PPI: Various analysts that we spoke to when receiving nominations for this award told us that Sun Paper is very active in securing pulp resources both at home and abroad. Can you update us with the latest developments in Laos and Vietnam? How is Vietnam's 300,000 tonne/yr bleached hardwood kraft (BHK) pulp mill doing? Any advantages or disadvantages in developing business abroad?
Li: For us, to realize forestry-pulp-paper integration is our goal in the future. Currently, the projects in Laos and Vietnam are going smoothly. The Laos forestry-pulp-paper integration project has been approved by the State Development and Reform Commission and Ministry of Commerce in China, as well as by the Laos government. This year we will develop 10,000 hectares of plantations, and the first phase is planned at 100,000 hectares. Vietnam's woodchip sawmill and a dedicated wharf has been approved by Vietnam's government as well. We will start to build them this year.
The advantage of developing forestry abroad is the massive amount of unused land for forestry, where there are few people. The disadvantages include different government policies in foreign countries as well as culture and ethnic differences. The environment for project instruction is also quite complicated relatively speaking.
PPI: Does Sun Paper have other strategic plans in securing raw materials in the near future other than Vietnam and Laos? How about in the domestic market, any further expansion in pulp lines?
Li: Currently, we don't have any concrete plans; however, Sun Paper is open. We will adopt all kinds of cooperation should there be some more suitable land for production to enrich our raw material portfolio. In addition, we will revamp our pulp lines to cater for paper products, improving techniques and consolidating "zero draining" of waste water.
PPI: In addition to the pulp sector, Sun Paper is expanding quickly in paper and board in China, especially in uncoated paper in recent years. Sun Paper of China is set to raise its total annual capacity of uncoated paper to 1.1 million tonnes in 2011 by ordering PM 24, a 300,000 tonne/yr uncoated mechanical paper machine. Why uncoated paper? What is your strategy in developing the paper/board business?
Li: In China, uncoated paper is very fragmented and there is a high need to eliminate outdated capacity and we would like to take the responsibility in developing in this grade. We will take advantage of our technique, technology and equipment to produce new products. We hope we can produce the best printing and writing paper in China through unremitting efforts within a few years time.
Li Hongxin, Chairman, Shandong Sun Paper
PPI: Which paper grade do you think more profitable in the upcoming two years?
Li: Distinguished products are the ones that can generate good profit.
PPI: Some analysts expect that there might be some oversupply concerns in some paper grades in China, for example coated woodfree paper and also uncoated woodfree paper, with fast expansion among big or medium sized players. What are your views?
Li: Some paper grades are over supplied with fast expansion in capacity, but it is only temporary and won't last. China's fast growing economy has provided a vast room for further development for the paper industry, not to mention the country is also eliminating outdated and polluting capacity. Currently, China's paper consumption is only 60 kg per capita and has huge room for further growth. We have to provide unique products with high quality to compete in the market and win customers.
PPI: The US Department of Commerce (DOC) has slapped duties on imports of Chinese and Indonesian coated paper after a probe found that the Asian countries' governments were subsidizing their paper industries. Does this affect your company? What are your views towards the issue?
Li: The "Anti dumping and anti subsidiary" policies conducted by the U.S. impacted Sun Paper's exports of coated wood free paper at certain grades. Moreover, in the long run, DOC's policies are trade protectionism and can do harm for both ways.
The cost advantage of China's coated woodfree paper is not relying on subsidy from the government, but on home made raw material and advanced equipment. The Chinese government encourages paper producers in order to meet domestic demand rather than for export purposes.
PPI: How about the Asian industry in general? In your opinion, what are the challenges the region faces in the future?
Li: I think the Asian paper industry mainly has three challenges. Firstly, raw material. Paper producers in Asia, especially China, are lacking of forest and the majority of them don't have their raw material base. They rely on imported market pulp and waste paper, so the cost of raw material is heavily affected by the international market. Secondly, there is a lack of research. There is still a big gap compared to the advance areas of the world in terms of technology innovation and quality of staff. Thirdly, environmental protection. There is still a lot of work needed on energy saving and carbon emissions reduction, for a low carbon economy, improvement of the environment, and a sustainable development model.
PPI: Do you think investment in environmental issues in paper mills is worthwhile? Why?
Li: It is a must. Investment in the environment is an engine for a company's sustainable development. Life quality can be improved with less impact on the environment and protection of ecology. Concessive investment and promotion are necessary with an aim to change the traditional paper industry development model of "High Pollution, High Discharge and Resource Consumption", and to take off the "Big Polluter" hat, and to build an advanced paper industry with low carbon and recycled economy concept. All the fast developing paper producing companies in China are benefiting from investment in the environment and support from the government and also the public.
PPI: What are your long term goals for Sun Paper, and how do you see the company's long term prospects?
Li: Sun Paper plans to increase the pulp and paper capacity from current three million in 2010 to five million by 2012. I have every confidence for Sun Paper's long term goals and further development. The next step is that we will build Sun Paper into a low carbon, green and recycling company. We will build forests, and green and ecologically sound production facilities allowing our staff to live and work in peace and contentment and work happily in a good environment. We hope we can contribute greatly to the environment, the industry and also society. Sun Paper will become a well managed, environmental friendly and forest-pulp-paper integrated world class company with sustainable growth.
PPI: Please comment on your management style.
Li: My management style is open and humanistic and focused on communication and discussion. I encourage managers and staff to be initiative taking and creative. Sun Paper has attracted a national level first class technology team due to this kind of management model. Influenced by Confucianism, our company is growing steadily and solidly with high morale as well as innovation advanced with the times. We don't rush too quickly or want to win in a short time. Furthermore, I really cherish any help that we get from others and have a big heart. There is a Chinese saying, "when you drink the water it reminds you of the source of the stream", meaning be grateful for favors received and not to forget one's origins. I bear this in mind and want to contribute more to society.
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