Last Year's Loss of 235 Million! Yueyang Paper's Performance Takes a Sharp Downturn

(Source: First Wind)

Recently, Yueyang Forest & Paper (600963.SH) released its 2025 annual report, showing overall revenue growth but losses in profit. In 2025, the company’s operating revenue was 8.665 billion yuan, a year-on-year increase of 6.78%; net profit attributable to shareholders was -235 million yuan, turning from profit to loss compared to the previous year.

Notably, the company’s net profit after deducting non-recurring gains and losses was -281 million yuan in 2025, continuing two years of losses, indicating a persistent decline in the core business’s profitability. Although the company is actively developing forestry carbon sink projects and has signed multiple agreements, progress has been slow, and some projects have been canceled, adding uncertainty to the outlook of this new business.

From quarterly performance, the company’s results in the fourth quarter last year dragged down the overall performance. The net profit attributable to shareholders was positive in the first three quarters, but the growth rate slowed. In the first three quarters of 2025, revenue reached 6.568 billion yuan, down 5.07% year-on-year; net profit was 162 million yuan, down 31.49%. The fourth quarter was even more difficult, with revenue of 2.097 billion yuan, but net profit attributable to shareholders was -397 million yuan, and net profit after deducting non-recurring gains and losses was -419 million yuan. The net cash flow from operating activities was -240 million yuan.

Paper industry downturn and shrinking landscaping business

Decreasing gross profit margin

Yueyang Forest & Paper was founded in 2000 and listed on the Shanghai Stock Exchange in 2004. The company is headquartered in Yueyang, Hunan Province, and is controlled by the State-owned Assets Supervision and Administration Commission of the State Council. It is a leading integrated pulp and paper enterprise among domestic listed paper companies, engaged in the research, production, and sales of cultural paper, packaging paper, industrial paper, and commercial cellulose, with a pulp and paper capacity of 2.4 million tons per year (including self-use pulp).

Regarding the loss in 2025, the company’s analysis states that in recent years, domestic cultural paper capacity has been concentrated, and capacity continued to expand in 2025, mainly driven by large-scale paper companies’ expansion, intensifying market competition. During the reporting period, fierce market competition led to a decline in selling prices compared to the previous year, resulting in a decrease in gross profit margins for paper products. The subsidiary Chengtong Kaisheng’s landscaping and ecological projects remain sluggish; existing project contract assets are gradually entering settlement, and profits have decreased compared to the previous year. Based on the performance of the landscaping ecological industry and Chengtong Kaisheng, the company conducted impairment testing and recognized goodwill impairment.

Currently, the paper industry is gradually moving toward intensive, large-scale, and intelligent development. With new capacity coming online, competition in the cultural paper sector is intensifying. Driven by the deepening of the “dual carbon” strategy, consumption upgrades, and technological innovation, the industry is undergoing structural adjustments and green transformation. Traditional demand growth has slowed, domestic cultural paper capacity has been heavily invested, and paper prices are at low levels in 2025. According to data from the National Bureau of Statistics, in 2025, the national production of mechanical paper and cardboard reached 164 million tons, a new high and an increase of 2.9% year-on-year. However, the total profit of the paper and paper products industry above designated size decreased by 13.6% compared to the previous year.

Currently, the company’s pulp products account for over 90% of revenue, with printing paper accounting for 51.06% and packaging paper for 15.89%.

Data shows that for printing paper, after the 450,000-ton project was put into production, 2025 saw increases in production, sales, and inventory, by 41.05%, 34.90%, and 65.34%, respectively. In packaging paper, the company seized market opportunities and expanded actively, with sales increasing by 38.96% and inventory decreasing by 30.29%. Production and sales of industrial paper increased, while office paper production and sales decreased, mainly due to product structure adjustments based on market demand.

Intense competition, shrinking demand, and falling prices have led to reduced profits. Over the years, the company’s gross profit margin has declined from 23.87% in 2017 to 10.49% in 2025, with a low of 8.53% in 2023.

The company’s main targets for 2026 include a paper production of 1.48 million tons, 329,000 tons of commercial pulp, and operating revenue of 9.257 billion yuan. The goals are pragmatic, but whether they can be achieved remains to be tested by the market.

Municipal landscaping business once became a growth point but has entered a downturn in recent years, with continued decline in scale. The 2025 annual report shows that revenue from municipal landscaping grew from 636 million yuan in 2017 to 1.63 billion yuan in 2021, but then shrank sharply each year, down to 982 million yuan in 2022, and further to 129 million yuan in 2025.

The company’s overall operation in the ecological landscaping industry remained severe in 2025, and subsidiary Chengtong Kaisheng actively shrank its municipal landscaping business. In 2025, Chengtong Kaisheng achieved main business revenue of 140.524 million yuan, with main business costs of 189.319 million yuan, and a main business loss of 53.389 million yuan. Its main business revenue fell by 70.17% year-on-year, with net profit dropping by 4,158.58%.

For years, the company’s M&A assets have also experienced impairments. Audited figures show that in 2025, the company recognized goodwill impairment of 348 million yuan, with total asset impairment provisions of 439 million yuan.

Uncertainty in the carbon sink business

Traditional paper and landscaping businesses have been under long-term pressure, prompting Yueyang Forest & Paper to seek new breakthroughs. Against the backdrop of carbon neutrality and emission reduction, the company is leveraging its advantages to develop forestry carbon sinks. Since 2021, it has announced multiple signing agreements for carbon sink development projects nationwide. The 2025 annual report mentions that subsidiary Chengtong Carbon Sink accelerated project accumulation, with the highest number and variety of contracts signed in history, pushing 20 projects into development stages and consolidating its early-mover advantage.

On December 30, 2025, its wholly owned subsidiary Chengtong Carbon Sink signed a cooperation development contract for afforestation carbon sink resources with Mulan Wuchang State Forest Farm in Hebei Province. The state-owned forest farm currently manages 1.58 million acres, with an initial forestry area meeting national afforestation standards of 77,800 acres.

In November 2025, the company stated during a survey that Chengtong Carbon Sink, relying on abundant forestry resources and technological empowerment, is confident in seizing opportunities. The carbon sink business is expected to become the company’s second growth engine. From a business synergy perspective, the carbon sink sector can complement the existing pulp and paper business, enhancing land use efficiency; in terms of income stability, it can effectively hedge the cyclical fluctuations of traditional paper-making; and in long-term development, with the advancement of “dual carbon” goals and improvement of carbon market mechanisms, the strategic value of forestry carbon sinks will further emerge, potentially becoming a new significant profit source.

However, the company’s carbon sink projects have faced setbacks, casting uncertainty on their future. On January 28, 2026, the company announced the termination of a long-term signed carbon sink project. The announcement stated that subsidiary Chengtong Carbon Sink had signed a “Forest Carbon Sink Development Cooperation Contract” with the Shigatse Municipal Government and Tibet State-owned Assets Management Co., Ltd. in July 2022, covering approximately 27.5 million acres of forest/land for carbon sink development over 22 years.

On January 24, 2026, Chengtong Carbon Sink received a termination notice due to policy adjustments in Tibet regarding forest and grassland carbon sink resource development and trading. After negotiations, all parties agreed to terminate the contract. The company clarified that the project had completed project design documents and incurred minor labor and research costs, and the termination would not cause significant adverse effects. The long cycle and policy dependence of the carbon sink business mean that, although the company started early, its future progress and contribution remain uncertain.

The company also stated in response to investors that the long development cycle of carbon sink projects and the termination of the Shigatse project due to policy adjustments in Tibet are ongoing, and other projects are proceeding normally.

Regarding Yueyang Forest & Paper’s 2025 losses, how to break through in the main paper business, and progress in the carbon sink sector, Windfall Finance sent an interview letter to the company. As of press time, no response has been received.

Editor / Windfall Finance Editor Tian Liang