In recent years, Vietnam paper industry witnessed substantial expansion plans from big players in the sector to capture Vietnam’s growing paper demand. Paper consumption in Vietnam is growing in-line with the country’s transition from a centrally-planned to an open economy since 1987 and enjoying strong growth prospect as the country steadily narrows the gap in paper consumption with the world. Tissue consumption in Vietnam is now just 1 kg per capita per year compared to the world average of 4.2 kg.
While large paper producers in Vietnam are backed up by either foreign or state owned investment, Saigon Paper is the first local private paper manufacturer posted solid growth prospect, reflecting their efforts to position their business profiles through sizeable investments in two fast growing segments and through cost cutting.
Saigon Paper is forecasted to increase revenues by 260% over the next 5 years, which will translate into a revenue of $200 million in 2019 compared with $57 million in 2014 as Saigon Paper has successfully executed the plan to invest $116 million to expand tissue and paper packaging production at its My Xuan mill in Ba Ria – Vung Tau province in Vietnam in the fourth quarter of 2014.
The investment adds an incremental 28.080 tons of tissue capacity (facial tissue, napkins, toilet tissue, mini jumbo rolls and jumbo rolls) and 179.400 tons of industrial paper capacity (medium, testliner and chipboard which are key inputs for carton-board and paper packaging products).
The diversified product focuses on these two grades which are registering strong growth rates will enable Saigon Paper to overcome substantial challenges and execution risks as they seek to improve their business prospects in 2015 and beyond. World demand for paper packaging and tissue is continuing to increase. Virtually all indicators are pointing to a much higher growth rate for tissue usage. Tissue consumption is continuing to expand in all regions in the world. The world paper demand growth will accelerate with the expectation on a better performance of the general economy in the medium and long term.
The integrated operations with best in class facilities put Saigon Paper in the position to capture market share as majority of local mills are facing the threat of the closure of old, inefficient capacity by government edit over time.
“Typically, only paper producers with more or less 30 years of operations or corporation will be in a positon to expand production at a level of investment like Saigon Paper. With 18 years of operation, Saigon Paper is younger, but goes faster and sooner, and as thus, faces more pressure. That is why we opt for M&A and organizational restructuring. The experiences enable Saigon Paper to be well equipped with global integration, anticipate global trends and become competitive in terms of technology, machinery, market and management. Our disadvantage is higher cost of capital compared to producers in the region. They raise debt capital with the lending interest rate of 4-5%, while we incur two times higher interest rates, so the challenges are inevitable. With our product quality and competitive advantages, we are actively growing our export customer base. Nowadays, Saigon Paper’s products are Asia, Europe, and American. We are confident to conquer new markets”, said Cao Tien Vi, the Founder and CEO, Saigon Paper.