BRUSSELS, May 1, 2015 (PPI Magazine) - An interview with Li Hongxin, Chairman and CEO of Sun Paper
RISI announced that Sun Paper's Chairman and founder, Li Hongxin has been named Asian CEO of the year for 2015. Li also won the honor in 2010 and 2013, and is the first three-time winner since voting began in 2008. Respondents to the annual RISI survey, including investment analysts and portfolio managers covering the forest products industry, selected Li based on leadership, vision and strategic accomplishments.
"The paper industry was not doing well on the whole in 2014. However, Sun Paper's financial performance did the best in the year, thanks to the company's strategies in cutting cost, diversifying their products, as well as good management visions. The company has successfully tagged into xylitol and xylose production, as well tissue production," one analyst commented.
PPI interviewed Li, who shared his views of Sun Paper's strategic plans, the trend of paper industry in China as well as China's economy on the whole.
The RISI Asian CEO of the year award will be presented to Li at RISI's 16th Annual Asian Conference taking place from June 1-3, 2015 at the Le Meridien Hotel in Shanghai, China.
PPI: First of all, congratulations on being named 2014 Asian CEO of the Year by RISI. You are now a three-time winner since voting began in 2008. Could you please let us know your feelings on receiving news that you have won the award?
Li: I had mixed feelings after receiving the news. On one hand, this is the third time that I have been given this award, and this is recognition for everyone's work at Sun Paper. On the other hand, the whole industry is still quite weak and China's paper industry is still struggling to climb up, especially amid the current difficult economic situation, which is called the "New Normal". How to follow the trends, how to improve industry levels, how to help China transform into a country which is strong in papermaking rather than being big, how to contribute to the development of China's and even the world's paper industry, these are the issues that we are thinking of every day.
Could you please comment on your company's financial performance in 2014?
We are quite satisfied with the company's financial performance in 2014. While Sun Paper's income dipped a little bit in the year, our profit increased more than 60%. This was mainly due to the fact that we accelerated our transformation and upgrading, carried out structural adjustments and implemented the "two innovations": management innovation and technological innovation.
On the management innovation front, we had some management changes, which made the company more energetic and improved quality as well as efficiency. On the technology innovation front, we made our products closer to the market and better suited to the customer's needs. All of these measures helped us to achieve good results in a generally low market.
We all understand that the paper industry has not done well in recent years with overcapacity issues as well slowing growth in the domestic economy. Could you please share with us how Sun Paper can buck the trend in a tough market? What have you done exactly to make a profit in 2014?
Every coin has two sides. In a crisis, you can find big opportunities. China's macro economy is slowing down, with supply periodically surpassing demand in certain industries, causing industry recession in general, and accelerating industry consolidation.
In this challenging environment, we maintained our strategic strength in papermaking, extended our industrial chain, diversifying and differentiating our products, and maximized value. With these measures, the reputation of our products increased with our customers and we achieved a win-win result. The key to making a profit was having the ability to react quickly to changing conditions to meet the needs of the market efficiently.
We noticed that Sun Paper entered the tissue market with PM 28 (60,000 tonnes/yr) starting up on March 9, following PM 27. Could you please let us know your strategy in the tissue sector? We understand that you are a newcomer in a market that is already quite competitive. How can you stand out among your competitors in the industry, especially the veterans? Do you have any further expansion plans?
Entering into the fast moving consumer goods (FMCG) market was an important strategic move for us, and we will follow the path of technological innovation, research and development-led production and product differentiation. We will adopt internet-based strategies, accelerate network buildup for promotion and bring new technology including cloud computing as well as big data into our projects. All these will make our products better suited to meeting the needs of the market and the customer.
Of course, our tissue projects have just started and in the future we will tap into baby diapers, feminine hygiene articles, medical supplies, as well as incontinence products. Meanwhile, we will cooperate with international brands, learn from advanced cooperation, and carve out our own uniqueness, with an aim to stand out in the FMCG products market.
What is your view on the tissue market in China in general?
China's tissue market is still very vast, with more potential due to an improvement in people's living standards, urbanization, a relaxation of China's family planning policies, as well as an ageing population.
We also understand that Sun Paper has plans to raise RMB 1 billion for a greenfield 500,000-tonne/yr recycled linerboard mill in Zoucheng City, Shandong Province. What is the progress so far？Could you please tell us your strategies in tapping into the recycled linerboard market? Which markets do you aim for? Do you have plans for any other new P&B grades?
The recycled linerboard project actually is the extension and expansion of our line of packaging products. Shandong Province is a major producer of vegetables, seafood, and household appliances, and the market potential is huge. It is also a big logistics distribution center, featuring quite attractive transportation advantages.
Each of our developments is not aiming at expansion, but is rather a strategic adjustment determined by market trends.
What is your view of the packaging market in China in general?
China's packaging market has a vast potential with a big market volume.
With the development of e-commerce, as well as an improvement in living standards, demand for packaging paper will become higher and higher. The market's demand for different products as well as personalized products will increase year by year in China.
Some analysts say that Sun Paper's success in 2014 was partly related to its diversity in production, for example, xylitol and xylose production. We understand that you are building a new 350,000-tonne/yr dissolving pulp (DP) line at a greenfield mill in Zoucheng City, Shandong province. Could you please also share us your thoughts behind this project?
Diversification was only one factor. Sun Paper's success in 2014 was attributed to our strategic adjustment transformation and upgrading, as well as our management and technological innovation.
We are building the dissolving pulp line at Zoucheng because this product has a big market volume in China, but there were no products that could meet international first class levels. For many years, China relied heavily on imports. So we regard natural cellulose (or dissolving pulp) as one of the directions to develop. We will make this product as a benchmark in terms of recycling economy. We will move towards the direction of bio-refinement, recycling current resources, reducing the impact on the environment and making our products more competitive.
Sun Paper is a main producer of uncoated woodfree (UWF) paper, and we heard that there is an ongoing anti-dumping complaint from the US. What is your view on this? What is your strategy in handling this issue? Sun Paper is also erecting a 350,000-tonne/yr P&W PM, which will produce mainly UWF paper. The PM will start up by September. If the duties are imposed, how will you deal with this new capacity? Will there be any changes to the new PM's startup?
America's anti-antidumping complaint will affect our uncoated woodfree paper, but America is not our main market. Meanwhile, strategically speaking, to transport our products to the US is not economical, as it involves high transportation costs, so the effect of America's anti-dumping measure on us is limited. Meanwhile, this anti-dumping complaint is not good, not just for the American consumers, but also for the American manufacturing industries in general. The protection is also temporary. On the other hand, it will prompt Chinese companies to make their products better and more competitive, and to reach an extremely high technical level. The aim of papermaking in China is not for exports, but to better solve internal needs. There won't be any changes for this project.
What is your view on China's coated woodfree paper market on the whole? We heard some people say that the market is picking up now and we would like to hear your thoughts.
China's coated woodfree paper market will certainly become better because there isn't any new production right now and the consumption is increasing. People are more and more rational in competing in the current market. The market demand for paper used in children's education is increasing every year, so coated woodfree paper will surely grow towards a better direction and we can say that it has bottomed out.
We would also like to know your progress at Laos. How many trees you have planted so far? When can they be used for a planned pulp line there?
The Laos's project is progressing smoothly, and the wood grows well, better than expectation. Now we are focusing on forest cultivation. We will build a pulp plant once conditions are matured.
What is your view on China's economy on the whole? At China's National People's Congress, Premier Li Keqiang said that China's GDP will grow around 7%, which is slower than the growth in recent years. What do you think its influence means for the paper industry as a whole? What is your company's vision in the coming five years?
China's economy has entered into the era of a "New Normal", which is a relatively steady and healthy way for further growth. It will have a positive impact on our industry's development and we are confident about China's economy.
Now China becomes more and more serious about environmental protection and new environmental laws have been issued. China will accelerate its progress in shutting down old and outdated capacity and market consolidation will increase as well. These changes will be good for us, who do well in environmental protection, and will also be good for China's paper industry, for healthier growth.
In the next five years' time, we will continue to extend our industry chain, realizing product diversification, differentiation and maximizing value. We will move towards new products, including bio products, FMCG products, adapting to market needs and following development trends. We will turn Sun Paper into a sustainably growing, world class company respected by others.
Please comment your management style? We asked you the same question three years ago and has your management style changed or not?
Sun Paper is located at the home town of where saints used to live, like Confucius and Mencius. And our management is highly influenced by the Confucian culture.
We believe that to be moral is the basic rule in society, and we are always focusing on caring for others, trying our best to benefit our staff, being socially responsible, etc. These can all be included in our management style.
In recent years, my management style hasn't changed greatly, and I continue to study and innovate, with an aim to go beyond myself.
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