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Oji's quarterly profit doubles on global pulp shortage

Papermaker's international footprint to generate record earnings for the year

Wood pulp has grown pricier due to a tightening of supply, and Oji earns more by selling it to other paper companies in China and elsewhere.

TOKYO -- Japan's largest paper manufacturing company Oji Holdings is sailing toward record profit in the fiscal year ending in March 2019, reaping the fruits of international expansion. 

In the April-June quarter, operating profit appears to have doubled on the year to over 25 billion yen ($223 million), the highest for the period, thanks to greater margins overseas on wood pulp.

Sales are estimated to have grown about 10% to around 380 billion yen. Oji was able to command higher prices in selling wood pulp to paper companies in China and elsewhere amid a tight market. Forest fires in Canada and a production halt by a big supplier in Brazil have reduced supply.

In 2017, the price of pulp sold to China averaged $680 per ton. The Japanese company had projected that the average price would rise to the $700 level this fiscal year. The actual price in the first quarter often exceeded that level.

Since the end of World War II, Oji has continued to expand through M&A. Its overseas expansion accelerated after it entered China in 2007. The ratio of overseas income, which was just 8% in fiscal 2004, is projected to balloon to over 30% this fiscal year. 

Today, Oji's pulp factories overseas appear to be operating at full capacity. The company's efforts to grow international pulp sales has helped Oji differentiate itself from domestic rivals. 

In Japan, price hikes for cardboard products paid off. As the cost of waste paper used to make fresh cardboard rose, Oji raised the price of container boards last August. From October, it raised the prices of cardboard containers in phases.

Thermal paper, used to print bar code labels, fared well in emerging markets like Brazil, as logistics handling volume increased. Special paper with fire resistance sold well, mainly for construction applications.

The company is to announce its April-June results on Aug. 1. It is expected to keep the fiscal 2018 projection, calling for an operating profit jump of 41% to 100 billion yen on sales of 1.53 trillion yen, up 3%.

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