Nov 09, 2012. /Lesprom Network/. Orient Paper, Inc. ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in northern China, today announced financial results for the third quarter ended September 30, 2012, as the company said in the press release received by Lesprom Network. Total Revenue in the third quarter of 2012 was $37.7 million, increased 1.6% from $37.1 million. Corrugating Medium Paper Revenue from corrugating medium paper in the quarter increased 125.1% to $24.3 million, representing 64.5% of total revenue. The increase was a direct outcome of the ramp up of the new production line. Volumes sold during the third quarter were up 157.6% to 66,956 tonnes, of which 47,091 tonnes, or 70.3%, of total corrugating medium paper sold in the third quarter of 2012 were produced by the new production line. The ASP for corrugating medium paper decreased 12.1% year-over-year to $363/tonne in the third quarter of 2012. The decline in ASP was mainly attributable to overall contraction of the manufacturing sector in China due to the sovereign debt crisis in Europe, as well as the Chinese government's effort to cool off domestic construction activities. Offset Printing Paper Revenue from offset printing paper in the quarter decreased 52.8% to $11.5 million, representing 30.6% of total revenue. Volumes sold during the quarter were down 45.1% to 16,295 tonnes. The ASP for offset printing paper decreased 14.0% year-over-year to $706/tonne in the third quarter of 2012. The decrease in revenue from offset printing paper was mainly due to softening demand for printing paper in the North China region, and production interruption in the month of August 2012 due to the installation and official inspection of the new boiler. In view of the very low ASPs that would have squeezed the margins substantially, the Company have suspended trading activities of offset printing paper since the first quarter this year. Digital Photo Paper Revenue from digital photo paper in the quarter decreased 5.9% to $1.9 million, representing 4.9% of total revenue. Volumes sold during the quarter were down 3.2% to 480 tonnes. The ASP for digital photo paper decreased 2.8% year-over-year to $3,865/tonne in the third quarter of 2012. The decline was mainly due to softening customer demand resulting from the weakening economy. Cost of Sales Cost of Sales in the third quarter of 2012 was $30.8 million, up 6%, primarily due to the increase in sales and revenue of corrugating medium paper in the quarter, while costs per tonne for corrugating medium paper edged down by 1.7% to $294, as a result of increased economies of scale derived from the ramp-up of the new production line. Gross Profit Gross profit in the third quarter of 2012 was $6.8 million, down 14.7% from $8.0 million. The decline was mainly due to the falling average selling prices of the offset printing paper and corrugating medium paper. Overall gross margin in the third quarter of 2012 was 18.1%, down from 21.6%. Gross profit margins for corrugating medium paper, offset printing paper and digital photo paper for the third quarter of 2012 were 18.9%, 15.3% and 24.8% respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") were $0.7 million for the third quarter of 2012, up 52.6% from $0.5 million. The increase was mainly due to the currency exchange gain/loss between inter-company transactions and increase in depreciation of properties and land use rights amortization, and the increase in wages and salary in the third quarter 2012. Income from Operations & Operating Margin Income from operations was $6.2 million for the third quarter of 2012, down 18.2% from $7.5 million, primarily due to weakened demand, lowered ASPs and sales. Despite the difficult operating environment, the Company achieved a respectable operating margin of 16.4%, compared to 20.3% a year ago, which continues to lead the industry, reaffirming its cost-competitive edge in this sector. EBITDA Excluding the impact of interest expenses, income tax expenses, depreciation and amortization, EBITDA, a non-GAAP measurement, was $8.3 million, down 3.7% from $8.7 million. *(Refer to Table 1 for a discussion of non-GAAP financial measures, including the reconciliation EBITDA to net income.) Net Income Net income was $4.4 million, down 19.4% from $5.4 million. Basic and diluted earnings per share for the third quarter of 2012 were $0.24 compared to $0.3 for the corresponding period of 2011. Weighted average shares used in the calculation of diluted earnings per share were 18,459,775 in the third quarter of 2012 compared to 18,350,186 in the corresponding period of 2011. Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "In the third quarter, the paper industry continued to suffer from a weak pricing environment, which affected the margins of all our products. Coupled with the production disruptions that occurred from the second quarter to early part of the third quarter that have impacted our revenues in August particularly, our results have declined and fallen short of expectations. In view of this, we have revised down our full year guidance. "However, we are pleased to have resolved all these operational interruptions, and to be able to ramp up the new production line to achieve of over 72% utilization in September. The Company will continue to focus on enhancing our operational efficiency together with maintaining our position as the cost leader in Northern China with our stringent cost management discipline. "Looking ahead, we will expand our business further to higher value products including tissue paper which potentially offer high gross margins and will be a key future growth driver to the Company. With the rise of growing consumerism in China, the currently low penetration of tissue paper in rural areas of North China offers us tremendous potential for growth." Commenting further on the future of the Company, Mr. Liu said, "Orient Paper is still in the investment stage but we have confidence in its future prospects riding on our unique market position as the cost leader in North China, demonstrated by our industry leading margins and strong cash flow. On behalf of the board of directors, I reiterate that there are no plans for privatization and in fact, the Board is pleased to approve the payout of dividends to shareholders on a regular basis."