During FY2025, the international economy and trade accelerated its restructuring. China’s economy underwent structural adjustments, with consumer confidence remaining persistently sluggish. Compounded by sharply volatile costs and selling prices under more intense competition, the profitability of the paper making industry was posed with multiple stresses.

Facing the challenging and complex business conditions, the Group focused the concerted efforts of all and forged ahead with unwavering strategic plans to advance its transformation of raw material, delivering a highly impressive annual results. During the year, the Group made a breakthrough in sales volume which exceeded 20.0 million tonnes for the first time, and increased by 9.6% to a new record high of 21.5 million tonnes. Net profit per tonne of paper for the year amounted to approximately RMB102.5, driving total net profit to grow by 177.3% year-on-year to RMB2.2 billion against headwinds, outperforming the industry. This not only demonstrates the exceptional resilience of the Group in its operations, but also highlights the foresight and effectiveness of our strategic deployment plan.

The Way To Transformation: Comprehensive Upgrades from Raw Materials to Products

Our transformation is fundamentally a profound strategic reform centered on achieving self-sufficiency in raw materials.

China’s paper making industry is undergoing a pivotal transition, where both core challenges and opportunities hinge on the mastery of raw materials. Pushing forward the development of our wood pulp footprint and integrating the entire industrial chain is not merely about scaling up. It is rather a strategic choice to fundamentally foster cost advantages and resilience in supply chain. By achieving self-sufficiency in raw materials, it will not only significantly mitigate the price volatility risks associated with external purchase of wood pulp, but also lay a solid foundation for the Group’s products to evolve toward high-end and differentiated supply. Upon the commencement of production of all the new projects, our annual design production capacity for fibre raw materials will amount to 10.2 million tonnes (wood pulp of 7.4 million tonnes, recycled pulp of 0.7 million tonnes and wood fibre of 2.1 million tonnes), which will continue to optimize our raw material mix and strengthen the Group’s control and competitiveness in the industrial chain.

In terms of products, leveraging the advantages in integrated pulp and paper production of its two new bases in Beihai and Hubei, the Group has comprehensively increased the proportion of high-end paper grades, thereby optimizing its profit structure. These two major bases are progressively becoming the profit safeguard and growth engines of the Group. During the year, a production capacity of 1.2 million tonnes for bleached folding boxboard and 0.6 million tonnes for printing and writing paper was successfully achieved in Beihai base and Hubei base respectively. During Q3 of 2025, a production capacity of approximately 0.4 million tonnes for printing and writing paper in the Beihai base and 1.2 million tonnes for bleached folding boxboard in Hubei base was achieved successively. This has further enriched the Group’s high-end product portfolio and promoted its annual design production capacity of paper to the milestone of exceeding 25.0 million tonnes, consolidating its position as the world leader. Through vertical integration of the wood pulp supply chain, the Group has effectively controlled costs and enhanced quality, supporting the performance upgrades and brand premium for high-end paper categories while reinforcing our core competitiveness in the premium paper market.

The Way to High-Quality Development: Lean Operations and Technological Innovation

In the face of radical changes and uncertainties externally, the Group continued to enhance its core strengths by adhering to high-quality development as the main objective. While deepening the refined management internally, the Group promoted technological innovation and digital transformation, bolstering its risk tolerance and resilience of profitability.

In terms of operational management, the Group further implemented the refined management and control system, enabling horizontally benchmarking and vertically tapping the potential of all its processes ranging from raw material procurement, commissioning of production, operational management, sales and after-sales services to logistics and transportation across 13 domestic and international bases against the peer bases in the industry. By fostering collaborations and sharing of best practices among its bases, it realized cost reduction and efficiency enhancement through resources coordination, striving to achieve sustainable supply of quality paper that embodies the characteristics of Nine Dragons Paper.

In terms of technological innovation, the Group persisted to fulfil its cost reduction and efficiency enhancement initiatives oriented with technology innovation by focusing on technological breakthroughs and product upgrades in the industry. Meanwhile, the Group actively introduced cutting-edge technologies such as big data and artificial intelligence to promote its digital transformation. The use of technologies to enhance overall management and decision-making efficiency has introduced new momentum into the Group’s development, thereby further enhancing its profitability.

The Way Ahead: Maximizing Profit with our Best Efforts

Against the current backdrop of escalating tensions in international relations, the economy and consumer confidence were still recovering at a slow pace. However, we believe that with the launch of a series of more aggressive policies by the Chinese government to expand domestic demand and promote consumption, coupled with the advocacy of anti-involution in the paper-making industry, the industry demand will remain stable. Amidst both challenges and opportunities, Nine Dragons Paper will leverage its core competitive advantage of integrated pulp and paper production to tap profit growth points, with a view to maximizing profits with its best efforts. Stepping into FY2026, our core strategies are as follows:

Exercise stringent control over production costs — While pushing ahead with the smooth commencement of production of wood pulp projects in full steam, we will optimize our procurement strategy to minimize the purchase price of major raw materials such as recovered paper and woodchips; we will also ensure precise commissioning of resources to optimize the yield of recovered paper and the cost of wood pulp per tonne;

Promote product differentiation and high-end development — By giving full rein to our core advantages of integrated pulp and paper production oriented with technological innovation, we will continue to achieve sustainable supply of exemplary quality paper that embodies the characteristics of Nine Dragons Paper, while raising the proportion of high added-value products and expanding domestic and international sales channels to further increase our share in the high-end markets;

Deepen lean management — We will utilize big data to reinforce lean management, taking into account the characteristics of the Group’s business. Besides, we will closely track the market dynamics of raw materials and sales to optimize inventory levels and maximize profitability, and strengthen capital management to ensure a balance between business development and liquidity security;

Uphold bottom-line management — We will incorporate bottom-line management in aspects such as security, fire safety, environmental protection and integrity into the scope of our regular operation in order to establish a sound, long-term management mechanism.

Last but not least, on behalf of all members of the Board, I would like to express my sincere gratitude to all shareholders for their unwavering support and longstanding trust. In the face of opportunities and challenges in the new stage, I will closely work with all employees of Nine Dragons Paper to focus our concerted efforts to forge ahead so as to repay the trust and expectations of our shareholders with outstanding results and sustainable growth. Thank you.