Paper price slump hits Hadera Paper

Hadera Paper

Hadera Paper's profit plunged 90% to NIS 2 million in the third quarter.

The new drop in the global price of paper for corrugated cardboard continues to weigh on the financial results of Hadera Paper. The company's net profit plunged from NIS 20 million in the third quarter of 2018 to just NIS 2 million in the third quarter this year. Hadera Paper, controlled by FIMI Opportunity Funds with a 60% stake, is the leading company in Israel in paper for printing, paper for cardboard, cardboard manufacturing, and packaging, as well as in collecting paper and cardboard for recycling. Hadera Paper's net profit in the first nine months of 2019 was NIS 22 million, 67% less than in the corresponding period last year.

Hadera Paper's current market cap is NIS 875 million, following a 46% decline in its share price this year in response to the company's worsening financial results. This loss of value wiped out most of the share's surge since FIMI, managed by Ishay Davidi, acquired the company in late 2015.

"The trade war between the US and China caused a severe crisis in the paper for cardboard industry, and steepest drop in sale prices since the global financial crisis," explains Hadera Paper CEO Gadi Cunia. "We believe that the negative impact of the event, which is exogenous to the market in which we operate, was in the tens of millions of shekels. At the same time, in the opinion of the company's management, the decline in demand and the current state of the market are temporary."

Cunia added, "The consistent upward trend in demand in the market over the past 30 years gives us confidence in the market's long-term strength. The company is taking a number of measures to deal with this event.

"Among other things, we're taking advantage of the company's strong balance sheet and financial situation to speed up our acquisition of companies and capital investment in order to continue improving our profits."

Hadera Paper CFO Lior Hellman commented, "Since the beginning of 2019, the company has generated NIS 150 million in cash flow from current activity, considerably more than last year. This cash flow enables the company to continue making acquisitions and carry out long-term investment plans without high leverage."

Meanwhile, Hadera Paper is still reporting a decrease in revenue as a result of the sale prices for paper for cardboard, and in the writing and printing paper sector, which Hadera Paper plans to exit. Hadera Paper's revenue dropped 10% to NIS 386 million in the third quarter and 6% to NIS 1.245 billion in the first nine months of 2019.

Published by Globes, Israel business news - en.globes.co.il - on November 24, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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