Orient Paper Begins Construction on First of Two New Tissue Lines

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Orient Paper, Baoding, China, a producer and distributor of diversified paper products in northern China, this week announced that it has secured the land lease for its new household/tissue paper production facilities as well as signed the construction and installation contract for the first production line in these facilities, through its subsidiary Hebei Baoding Orient Paper Milling Co.

Orient secured the lease of a 300 mu parcel of land (or approximately 200,000 sqaure meters) in the Wei County Economic Development Zone in Hebei Province. Under the land lease agreement, Orient Paper HB has the usage rights for 15 years starting from Nov. 27, 2012, for lease payment of RMB 3.6 million ($580,000) annually.

The construction and installation contract with a paper manufacturing equipment provider in China is for the first of its two household/tissue paper production lines, each having a designed capacity of 15,000 metric tpy. The consideration for the first production line under the contract is RMB 31 million ($5.0 million), funded by the company out of cash on hand, with installation scheduled to be completed by the end of the second quarter of 2014. The company estimates that the total cost of the two tissue paper production lines and related facilities will be approximately $43.5 million. When in full production, the company expects the two production lines to generate up to $30 - $34 million of revenue annually.

"Orient Paper is making steady progress with our business expansion into the tissue paper sector, as previously announced," said Zhenyong Liu, chairman and CEO of Orient Paper. "Our strategy is to tap on under-served markets and benefit from the growing urbanization of China's rural regions, and we see great potential in the household/tissue market in North China. The tissue paper business is one of our key future growth drivers and we are confident that the expansion into this sector can provide long-term value for our shareholders."

Orient Paper produces and distributes three types of paper products—packaging paper (corrugating medium), offset printing paper, and other paper products, including digital photo paper and household/tissue papers that the company is currently expanding into.