Diversification path of the hottest newsprint gian

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From thin to thick: the diversified path of paper giants

on thin paper, a large comprehensive group with an annual operating revenue of 18billion yuan has been incubated. This Huatai Group, located in Shandong Province, has now set foot in a wide range of fields, which is due to the diversification it began to practice ten years ago. If it did not expand its layout around the upstream and downstream industries of the paper industry, this local enterprise might still be printed with the label of a paper mill

started from papermaking in 1976, started to dabble in paper in 2001, became the world's largest paper base in 2006, built the country's largest chlor alkali chemical base in 2011, and then entered the new energy Huatai Group. The plan is to create a comprehensive business kingdom with a revenue of 100 billion yuan to better benefit the people of both sides in 2015

Huatai's ambition began in the paper field. Relying on intensive capital investment and project layout, Huatai has achieved one of the three best in China's paper market. Now it has promoted heavy asset projects in a number of industries and sought business territory in many fields such as chemical industry and new energy. However, this development path is also thought-provoking: the diversified expansion relying on a large amount of capital investment, and the business segments invested have a certain periodicity. Can past successes be replicated

Benjamin Piney, the managing director of Boston Consulting Company, reminded that any move into a new field should consider the potential risks and consider whether the company has the elements to successfully implement the strategy, not only capital or other tangible resources, but also responsiveness, such as business system, process and customer base. It should be considered from all dimensions, including the case of Huatai, He believes that success is not impossible, but there are also certain risks in the strategic process

Huatai Paper expansion in 1999, lijianhua went abroad to investigate the coated paper project. An equipment supplier gave him a message: a German company was preparing to stop production of a paper production line and sell the equipment. He asked if he was interested in taking a look. Lijianhua saw that the equipment operated normally and the asking price was not expensive. He wanted to buy it

a senior executive of the other party was an executive vice president. When he saw the Chinese guests, he didn't take his seat. He just looked up at lijianhua and them. At that time, Chinese enterprises often traveled in the name of going abroad for investigation. He thought this was the 19th business tour group and was not ready to do business seriously. So lijianhua invited him to China to show his sincerity. The Germans really came here and specially saw Huatai's most backward production line. However, the paper machine was clean and tidy, and there was no strong odor in the workshop, which impressed the Germans. The German told lijianhua that you have first-class employees and on-site management, but the equipment is too backward. Then, the transaction is concluded

what the Germans saw was no accident. Chiyuxiang, deputy general manager of Huatai Co., Ltd., commented that his boss was a perfectionist. It seemed uncomfortable to drop a tile in the aisle, so he must go and do something about it. After that, Huatai sent more than 50 people to Germany to study paper manufacturing, numbered and photographed all the equipment of the production line, and then disassembled and transported it to China for assembly. The production line with an annual output of 160000 tons was moved home in the simplest way

at that time, Huatai might not exist if it did not enter the paper manufacturing field. Lijianhua said. Huatai, which established its factory in 1976, had an annual income of hundreds of millions of yuan at that time. It was concentrated in low-end categories such as cultural paper, which had good benefits but no industrial status. Many similar enterprises were later washed out because of competition and environmental protection policies. However, around 2000, China's print media was in a period of rapid development, and a large number of urban media rose. Paper was once expensive in Luoyang and relied heavily on imports. Huatai just caught up with the opportunity of import substitution. A ton of paper could have a net profit of thousands of yuan, and the introduced production line recovered all the costs in less than two years

From 2001 to 2006, lijianhua successively invested more than 8 billion yuan and introduced four high-grade paper production lines with an annual output of 400000 tons and 450000 tons, laying a leading position in the paper field. As of 2010, Huatai Group's annual paper production capacity has reached 3million tons, of which the annual paper production capacity is 2million tons. It has become the largest high-grade paper base in the world and the largest paper manufacturer in China

with an investment of more than 10 billion yuan, we have completed the import substitution of Chinese paper. Now almost all major newspapers use Huatai Paper, and the Central Literature Publishing House and other important documents also use Huatai Paper. Lijianhua said

in addition to continuously expanding production capacity, Huatai has continuously promoted industrial integration in the paper industry in recent years, completing and consolidating its three-point and one-line strategic layout in the Yellow River, Yangtze River and Pearl River Delta

the purpose of regional layout is to reduce transportation costs and promote industry integration. Chi Yuxiang explained that the annual paper consumption in Guangdong market is more than 1million tons. In addition, the demand in Hong Kong and Macao is quite high. One ton of paper transported from Shandong to there is a freight of 400 yuan. The local factory construction cost is very low. Wherever Huatai goes, other enterprises are facing strong competitive pressure. The cost of Huatai Paper products is low, because it first uses waste paper deinking and pulping equipment in China, and all raw materials are waste paper. Other enterprises generally add about 20% of wood pulp to their raw materials. Huatai has the advantage of low cost when the pulp price is expensive; Secondly, a large number of chemical raw materials, electric power and other resources required for papermaking are provided by the group's subsidiaries, and the cost is relatively reduced

although Huatai has gained a firm foothold in the paper field, it still needs to answer the question of sustainable development. On the one hand, the supply side is subject to overcapacity in the whole industry, and the price competition is fierce, while the price of the main raw material American waste (waste paper from the United States) is unable to control; On the demand side, the growth of print media represented by newspapers is slowing down, and even has been partially replaced by new media. In recent years, the profit performance of Huatai Paper business has been average. According to the 2010 annual report of Huatai Co., Ltd., the paper operating income was 3.356 billion yuan, the operating profit was 414million yuan, and the gross profit margin was 12.33%, a decrease of about 1.5 percentage points compared with 2009

now, Huatai's internal statement on the development of the paper sector is to steadily improve on the basis of the existing scale. Chi Yuxiang said that papermaking will always be Huatai's main business. We will make some moves in the industry, but there will be no large-scale expansion like before. After all, the money is limited. In the next five years, Huatai will focus on chemical industry

diversified layout

for quite a long time, Huatai's chlor alkali chemical business was developed as a papermaking supporting business

Huatai entered the chemical business by accident. In 1997, the local government promoted Huatai to acquire Dongying chemical plant. This is a hot potato. The chemical plant is actually insolvent and overstaffed. The plant leaders still hold the title of department level cadres. After the acquisition, lijianhua, who usually works at 6 o'clock, asked the chemical management of wood plastic composite new materials to participate in the 6 o'clock headquarters morning meeting together. Huatai's headquarters is located in Guangrao, a suburb of Dongying County, which means that the senior executives of the chemical plant have to get up and start at more than 4 o'clock. In this way, some people quit in the face of difficulties, and the gloss of the surface of the parts also changed. They asked for transfer, and the middle-level backbone who wanted to do things basically stayed. The atmosphere of the enterprise changed, and the chemical plant realized profits in the year of acquisition

according to the 2011 bond prospectus of Huatai Group Co., Ltd. (hereinafter referred to as the bond prospectus), Huatai chemical industry has a production unit with an annual output of 575000 tons of caustic soda and 160000 tons of hydrogen peroxide, which can produce more than 20 varieties of chlor alkali chemical products, such as caustic soda, liquid chlorine, hydrochloric acid, hydrogen peroxide, waste paper deinking agent, etc. 30% of the caustic soda products, 5% of the liquid chlorine products and 85% of the hydrogen peroxide products produced are directly supplied to the papermaking business applications. AKD, waste paper deinking agent and other papermaking additives are all supplied to the issuer's internal papermaking industry. In fact, the chemical business has amplified Huatai's cost advantage in the papermaking field

one of the unique advantages of Huatai's large-scale march into chlor alkali chemical industry is the rich local salt resources. Dongying underground contains a large number of high concentration salt brine, which can be extracted and evaporated to produce salt. Salt is the most important raw material of chlor alkali chemical industry, accounting for 40% of the cost. Chi Yuxiang said that the most powerful trump card for Huatai to enter the salt chemical industry is the salt mine, which is a resource that no one else has. The group has received the support of the municipal government and Shengli Oilfield. It has developed a 100 million ton salt mine in the mining area of the oilfield, and the cost of obtaining a ton of salt is less than half of the market price

according to the bond prospectus, the 2million ton/year deep salt mining project jointly invested by Huatai, Shandong Haihua, Shengli Yellow River Drilling and cementing Corporation and Dongying District State-owned assets operation company is under construction. The geological reserves of the salt mine are as high as 290million tons, and the prospective reserves are about 5billion tons. Huatai's shareholding ratio is 15%. The whole project plans to produce 2million tons of brine annually, including 1million tons in the first phase, The produced brine is directly supplied to Shandong Haihua and Huatai Group. After the completion of the project, the mining cost per ton of salt will be less than 100 yuan

due to the low-cost brine resources in the upstream and the paper sector being able to digest part of the demand, Huatai started the 500000 ton ion-exchange membrane caustic soda project in 2008. The second phase of the project was successfully put into operation in January 2011, with a chlor alkali production capacity of 620000 tons, making it the largest chlor alkali salt chemical base in China. Us DuPont Dongying project has selected Huatai chemical as its chlor alkali raw material supplier

of course, Huatai is not satisfied with the manufacturing of basic chemicals. An important way for Huatai to enter high-end chemicals is to join hands with world-class giants, which is in line with its idea of obtaining high-end papermaking equipment. In June, 2010, the food grade electronic hydrogen peroxide project jointly constructed by Huatai and Solvay group of Belgium was officially started, with an investment of 300million yuan. It is expected to be completed and put into operation in June this year. It is said that the profit margin of the project is much higher than that of papermaking

in Li Jianhua's overall idea, during the 12th Five Year Plan period, the chemical industry sector will invest 5billion yuan to build a double million ton chemical park, that is, the overall deployment of 1million tons of chlor alkali and 1million tons of downstream new material projects, and complete the industrial chain connected by chemical raw materials, synthetic materials and fine chemicals. Li Jianhua once said that all chlor alkali hazardous chemicals can be dried and squeezed in the park, The polycrystalline silicon project of 3000 t/a polycrystalline silicon is also an important link in this industrial chain. Once these strategic deployments are completed, the revenue scale of Huatai chemical industry will exceed that of the paper business. Said Chi Yuxiang

however, it seems that the expansion of the chemical industry is not enough to meet Huatai's ambitions. In 2010, the overall revenue scale of Huatai Group was 18.1 billion yuan. Its established goal is that in 2015, the group's sales revenue will exceed 80billion yuan and strive to reach 100billion yuan. It will become a comprehensive 1000 brand group covering multiple industries and further increase its popularity by 100 million yuan

in addition to the two main industries of papermaking and chemical industry, Huatai Group's investment catalogue also includes various projects such as 3billion yuan invested in seaweed oil refining, 3billion yuan invested in Dongying real estate, 2.59 billion yuan invested in catering tourism, and 600million yuan invested in logistics parks. So the corresponding question is, where does the money come from? How to perform group control? Is the enterprise development promoted by such large projects sustainable

control challenges

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