Orient Paper (NYSE AMEX:ONP)

First Quarter 2013 Results

• Total Revenue in the first quarter of 2013 was $19.7 million, decreased 42.6% from $34.4 million.
• Basic and diluted earnings per share for the first quarter of 2013 were $0.02 compared to $0.25 for the corresponding period of 2012.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "We are pleased that our facilities passed the rigorous governmental inspection as we are committed to a business model that complies with the governmental initiative of building an environment-friendly operation."

Mr. Liu added, "Despite the challenges and the financial impact of the Chinese New Year and a 20-day suspension of production due to government environmental inspection in this quarter, we are pleased that our cash position has continued to improve, supported by the Company's ability to generate cash consistently and maintain a competitive cost structure."

"With demand slowly picking up, as reflected in a slight sequential increase of the average selling price of corrugating medium paper, raw material prices trending towards a normalized level, and the ramp up of our new production line PM6, we reiterate our commitment to our net income guidance for 2013," continued Mr Liu.

Full Year 2013 Guidance

Thanks to recent raw material pricing decreases, the Company is maintaining its guidance on most of the financial benchmarks, including net income and earnings per share, for the full year of 2013. Revenues for the full year are expected to be in the range of between $125 million and $138 million, gross profit to be between $17 million and $19 million, net income to be between $9 million and $10 million, and basic and diluted earnings per share to be between $0.51 and $0.56.

Fourth Quarter 2012 Results

• Quarterly Revenue of $43.5 million, driven by accelerating ramp-up of new 360,000 tonnes-per-year Corrugating Medium Paper ("CMP") production line (PM6)¹ with sales volume up by 154% YoY.
• Gross profit in the fourth quarter of 2012 was $6.7 million, down 20.0% from $8.4 million for the fourth quarter of 2011. The decline was mainly due to the falling average selling prices of the offset printing paper and CMP.
• Net income was $2.0 million, down 63.6% from $5.5 million. Basic and diluted earnings per share for the fourth quarter of 2012 were$0.11 compared to $0.30 for the corresponding period of 2011.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "2012 has been a difficult year for the paper industry in China and product prices have been weak for the most part. As we disclosed to the market in previous quarters, there were also operational disruptions back in the second and early third quarters that have all been resolved.  Nevertheless, we were able to record the highest quarterly revenue ever in the fourth quarter for $43.5 million and also successfully began the ramp-up of our new CMP production line PM6, which boosted our sales volume by 154% in the fourth quarter. We will continue to accelerate this ramp up for 2013.

"As China continues to develop, we see a sustainable long term growth demand for paper, and prospects remain bright for Orient Paper, particularly in North China, where we have strengthened our cost-leadership position. With CMP as our core business, we have just begun the renovation of our legacy 150,000 tonnes-per-year production line PM1 in anticipation of increased regulatory concerns on energy efficiencies and to further upgrade the quality of our CMP products. The renewal program will provide us with an increased annual capacity of 250,000 tonnes for PM1 upon completion next year. As a result, the Company has made a provision of a one-off impairment loss of US$2.8 million for 2012 in anticipation of this renovation," continued Mr. Liu.

Mr. Liu added, "Furthermore, we are pleased that our cash position has improved significantly, supported by strong recurring cash flows from operations that will give us the necessary fuel to fund our business expansion plans. In the last quarter, Orient Paper also made head-start progress in our tissue business expansion where we are aiming to capture the growing demand in the underpenetrated market especially here in North China."

Business Outlook

While the overall economic situation has yet to see significant improvements, the industry is expecting further consolidation and tightening of supply with strict reinforcement of environment protection requirements by the Chinese government. It is also widely expected that the ongoing mandatory closure of outdated capacities by the government will be continued in 2013. Furthermore, as there is a strong growing public demand for a clean and healthy environment, it is expected that all levels of the Chinese governments will elevate their reinforcement of environmental protection guidelines to protect the quality of air and water. Although our production has been affected by environmental inspections in the last few fiscal quarters, we place the environmental issues at top priority and are confident that our environmental protection measures and practices can withstand any public scrutiny.

Our gross profit margins have been squeezed by resistance over efforts to raise paper product ASPs, as well as rising raw material costs since the fourth quarter of 2012. However, due to the increasingly stringent environmental policy reinforcement efforts on paper mills, particularly the smaller operators, it is widely expected that paper supply will be noticeably suppressed in 2013 and may help push the ASP higher. We are cautiously optimistic about the mid-to-long term prospect of the Chinese paper market but will closely monitor our pricing policy and continue to improve the production efficiency in year 2013.

Looking ahead, Orient Paper will continue to focus relentlessly on business execution:  increasing the ramp up of the new production line PM6 to increase sales volume and extract greater synergies and cost efficiencies in all aspects of its operations, while undertaking the renewal program of its legacy line. The Company will also speed ahead as planned with the building of its new tissue paper machines, which will start operating its first production line in mid-2014, while maintaining strong cash flows to support our investments.

2013 Guidance

In view of the production disruption for the government's environment inspection in March, the Company expects revenues to be lower for the first quarter of 2013, compared to the corresponding period in 2012. Coupled with the suspension of the renovated legacy line PM1 and the prevailing low ASP rates, we believe 2013 will continue to be a challenging year in terms of earnings growth.

Revenues for the full year are expected to be in the range of between $144 million and $159 million, gross profit to be between $17 million and $19 million, net income to be between $9 million and $10 million, and basic and diluted earnings per share to be between$0.51 and $0.56.

Preliminary Financial results for the fourth quarter 2012

• Revenue from CMP in the quarter increased 125.4% to $30.9 million, representing 71.0% of total revenue.
• Gross profit in the fourth quarter of 2012 was $6.7 million, down 20.0% from $8.4 million for the fourth quarter of 2011.
• Net income was $2.0 million, down 63.6% from $5.5 million. Basic and diluted earnings per share for the fourth quarter of 2012 were $0.11 compared to $0.30 for the corresponding period of 2011.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "2012 has been a difficult year for the paper industry in China and product prices have been weak for the most part. As we disclosed to the market in previous quarters, there were also operational disruptions back in the second and early third quarters that have all been resolved. We have also successfully begun the ramp-up of our new CMP line, which boosted our sales volume by 154% in the fourth quarter, and we will continue to accelerate this ramp up for 2013."

"As China continues to develop, we see a sustainable long term growth demand for paper, and prospects remain bright for Orient Paper, particularly in North China, where we have strengthened our cost-leadership position. With CMP as our core business, we have just begun the renovation of our legacy 150,000 tonne-per-year-line in anticipation of increased regulatory concerns on energy efficiencies and to further upgrade the quality of our CMP products. The renewal program will provide us with an increased annual capacity of 250,000 tonnes upon completion next year. As a result, the Company has made a provision of a one-off impairment loss of US$2.8 million for 2012 in anticipation of this renovation," continued Mr. Liu.

Mr. Liu added, "Furthermore, we are pleased that our cash position has improved significantly, supported by strong recurring cash flows from operations that will give us the necessary fuel to fund our business expansion plans. In the last quarter, Orient Paper also made head-start progress in our tissue business expansion where we are aiming to capture the growing demand in the underpenetrated market especially here in North China."

Financial Results for the third quarter ended September 30, 2012.

• Total Revenue in the third quarter of 2012 was $37.7 million, increased 1.6% from $37.1 million.
• Net income was $4.4 million, down 19.4% from $5.4 million. Basic and diluted earnings per share for the third quarter of 2012 were $0.24 compared to $0.3 for the corresponding period of 2011. Weighted average shares used in the calculation of diluted earnings per share were 18,459,775 in the third quarter of 2012 compared to 18,350,186 in the corresponding period of 2011.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "In the third quarter, the paper industry continued to suffer from a weak pricing environment, which affected the margins of all our products. Coupled with the production disruptions that occurred from the second quarter to early part of the third quarter that have impacted our revenues in August particularly, our results have declined and fallen short of expectations. In view of this, we have revised down our full year guidance.

"However, we are pleased to have resolved all these operational interruptions, and to be able to ramp up the new production line to achieve of over 72% utilization in September. The Company will continue to focus on enhancing our operational efficiency together with maintaining our position as the cost leader in Northern China with our stringent cost management discipline.

"Looking ahead, we will expand our business further to higher value products including tissue paper which potentially offer high gross margins and will be a key future growth driver to the Company. With the rise of growing consumerism in China, the currently low penetration of tissue paper in rural areas of North China offers us tremendous potential for growth."

Commenting further on the future of the Company, Mr. Liu said, "Orient Paper is still in the investment stage but we have confidence in its future prospects riding on our unique market position as the cost leader in North China, demonstrated by our industry leading margins and strong cash flow. On behalf of the board of directors, I reiterate that there are no plans for privatization and in fact, the Board is pleased to approve the payout of dividends to shareholders on a regular basis."

Business Outlook

The overall outlook for the paper industry remains soft with slowdown of China's economy, coupled with the correction of the construction and real estate market in North China. Pressure on prices will remain low with continuing weakened demand and structural overcapacity, which the Company believes, will lead to further consolidation within the industry in the coming 12 months.

While the combined effect of increased sales and production volume, as well as increasing economies of scale generated from the ramp-up of the new production line can partially offset the downward pressure on prices, the Company has prudently revised down its full fiscal 2012 guidance in view of the current headwinds. Revenues are now expected to be in the range of between $146 million and $148 million, gross profit to be between $26 million and $28 million, net income to be between $15 million and $17 million, and basic and diluted earnings per share to be between $0.90 and $0.92.

Second Quarter 2012 Results

• Revenue declined 14.5% year-over-year to $35.5 million 
• Gross profit was $5.8 million with gross margin of 16.3%
• Operating income declined 37.0% year-over-year to $5.0 million
• Net income was $3.6 million, or $0.20 per fully diluted share
• EBITDA, a non-GAAP measurement, decreased 21.8% year-over-year to $7.2 million 
• Corrugating medium paper tonnage sales grew 116.2% year-over-year
• Monthly production of corrugating medium paper produced by the new 360,000 tonnes/year production line reached 18,000 tonnes in June 2012. 
• In June 2012, Orient Paper's Board of Directors declared a quarterly cash dividend of $0.0125 per share 
• In June 2012, Orient Paper reached a proposed settlement of the securities class action lawsuit pending against the Company and certain current and former officers and directors of the Company 

"During the second quarter we became aware of certain malfunction of the biological treatment process at our water treatment plants. We promptly replaced the damaged parts and resumed operation of our production lines. However while resolving this we observed a 17 day voluntary shutdown of our major production lines, resulting in loss of production and revenue. We also faced pricing pressure for both our offset printing paper and corrugating medium paper products which impacted our revenue and margin performance," stated Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper. "Our new 360,000 tonnes per year corrugating paper production line is ramping up productivity and was operating at 56% monthly capacity in July 2012. We anticipate the run rate utilization to improve significantly after the new 75-ton boiler is up and running, which we now estimate will occur by the end of August 2012," added Mr. Liu.

First Quarter 2012 Highlights

• Revenue increased 3.6% year-over-year to $34.4 million
• Gross profit remained flat year-over-year at $7.8 million, with gross margin of 22.5%
• Operating income declined 2.0% year-over-year to $6.7 million
• Operating margin decreased to 19.5% from 20.6% in the first quarter of 2011
• Net income decreased 3.5% year-over-year to $4.7 million, or $0.25 per fully diluted share
• EBITDA, a non-GAAP measurement, increased year-over-year by 9.3% to $8.7 million
• Monthly production of corrugating medium paper produced by the new 360,000 tonnes/year production line reached 14,085 tonnes in March 2012.

"The first quarter of the year is typically a slow quarter due to the extended Chinese New Yearholidays in China," stated Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper. "We are pleased to see our new 360,000 tonnes per year corrugating paper production line steadily ramping up productivity. During the quarter, we dealt with some moderate pricing pressure on our printing paper products and have temporarily discontinued printing paper trading activities. Overall, we anticipate a sizeable revenue growth and profitability driven by our capacity expansion plans and favorable market conditions in fiscal 2012," added Mr. Liu.

Business Outlook

During the first quarter of 2012, the Company's new 360,000 tonnes corrugating medium paper production line was operating at approximately 30% capacity, despite the disruption in production caused by the Chinese New Year holidays and equipment maintenance activities. Orient Paper anticipates the run rate utilization to improve significantly after the new 75-ton boiler is up and running by the end of the second quarter.

In April 2012, the Ministry of Industry and Information Technology of the People's Republic of China announced the 2012 program of mandatory capacity closures in 19 different industries inChina, including 9.7 million tonnes outdated and inefficient paper production capacities across the country. Orient Paper is waiting for the details of the 2012 government program, which may have a significant impact on many of the Company's smaller competitors in China.

Despite the temporary impact of the malfunction of the biological treatment process at its water treatment plants, Orient Paper reaffirms its 2012 guidance to revenues of between $185 million and $204 million, gross profit to be between $39 million and $43 million, net income to be between $25 million and $27 million, and basic and diluted earnings per share to be between$1.35 and $1.49.

Mr. Liu concluded, "Our new corrugating medium paper line made a sizeable contribution to our sales volume in the first quarter. We expect this new line to contribute to our revenue growth over the next few quarters as we focus on ramping up production and reach our target annualized utilization rate of approximately 70% by the end of 2012. Additionally, we anticipate market demand for packaging paper to continue to grow driven by regional economic growth and shortage in supply due to government mandate closures."

Preliminary First Quarter 2012 Results

• For the three months ended March 31, 2012, total unaudited revenue increased 3.6% to approximately $34.4 million from $33.2 million in the first quarter of 2011.
• The Company expects to report unaudited net income of approximately $4.7 million, or $0.25 per diluted share, down 3.5% from $4.9 million, or $0.26 per diluted share, for the same period last year.

On April 22, 2012, Orient Paper became aware of certain malfunction of the biological treatment process at its water treatment plants. The Company has promptly notified related government environment protection agencies of the situation and voluntarily shut down operations of all its production lines (excluding the digital photo paper coating lines) to replace the damaged parts of the waste water treatment station. Management estimates that all affected production lines will resume operation by May 9, 2012.

"During the first quarter of 2012, our new 360,000 tonnes corrugating medium paper production line was operating at approximately 30% capacity, despite the disruption in production caused by the Chinese New Year holidays and equipment maintenance activities. Our new production line accounted for approximately 60% of the quarter's total corrugated medium paper revenue and we are pleased to see the production output reach more than 14,000 tonnes for the month of March 2012. We anticipate the run rate to improve substantially when our new 75-tonne boiler is up and running by the end of the second quarter," commented Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper.

"Historically, the first quarter is off to a slow start due to the extended holidays in China. During the first quarter of 2012, we dealt with some moderate pricing pressure on our printing paper products and decided to discontinue trading activities. On the other hand, we are pleased to see the packaging paper price holding well, especially in our region of northern China, as well as the ramp up of our new corrugating medium paper production line. We believe the regional shortage in paper products will continue to benefit our business as we ramp up capacity utilization of our new line over the next few quarters. In April 2012, the Ministry of Industry and Information Technology of the People's Republic of China announced the 2012 program of mandatory capacity closures in 19 different industries in China, including 9.7 million tonnes outdated and inefficient paper production capacities across the country. We are waiting for the details of the 2012 government program, which may have a significant impact on many of our smaller competitors in China. We anticipate sizeable revenue growth and profitability driven by our capacity expansion plans in fiscal 2012 and favorable market conditions," added Mr. Liu.

Fourth Quarter 2011 Results

• Revenue increased 7.3% year-over-year to $38.9 million 
• Average Selling Price ("ASP") of corrugating medium paper was $415/ton, which is 12.9% higher than the ASP in the fourth quarter 2010 and 0.5% higher than the ASP in the third quarter 2011.
• ASP of offset printing paper was $801/ton, which is 2.6% higher than the ASP in the fourth quarter 2010 but 2.5% lower than the ASP in the third quarter 2011.
• Gross profit was $8.4 million, with gross margin of 21.5%
• Operating income rose 2.6% year-over-year to $7.6 million, with operation margin of 19.7%
• Net income increased 3.6% year-over-year to $5.5 million, or $0.30 per diluted share vs $0.29 in prior year
• Completed the construction and launched production of the new 360,000 tons per year corrugating medium paper production line

"Our revenue and net income growth in 2011 was largely due to rising selling prices in the first three quarters of 2011 and due to lower than normal level of total offset printing and corrugating medium paper production and sales in 2010," commented Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper. "In recent years, the PRC government's move towards consolidation of the paper industry has led to regional shortage in supply of paper products, resulting in higher product ASPs across the board for at least the first 10 months of year 2011. Starting in the fourth quarter of 2011, we have seen softening ASPs continuing into the first two months in year 2012 as the effect of industry consolidation and capacity elimination on regional paper supply phased out. We have also completed the construction and launched production of our new 360,000 tons per year corrugating medium paper production line in the fourth quarter. With this new production line, we are well positioned to capitalize on the growing market demand and increase our market share in 2012 and beyond."

Business Outlook

In December 2011, Orient Paper launched production of its new 360,000 tons corrugating medium paper production line. The Company is currently ramping up production of this new line and projects production of approximately 150,000 tons in 2012. In addition, the Company has completed the renovation of a small production line which has been idle since 2007. Orient Paper intends to utilize this renovated production line to begin producing up to 10,000 tons of digital photo base paper in the second quarter of fiscal 2012.

Orient Paper expects fiscal year 2012 revenues to be in the range of $185 million and $204 million, gross profit to be between $39 million and $43 million, net income to be between $25 million and $27 million, and basic and diluted earnings per share to be between $1.35 and $1.49.

Mr. Liu concluded, "We are confident that the recent softening in paper product ASPs is a temporary adjustment to the market, where high paper prices are constantly on the rise since the end of year 2009. We believe that regional economic development and the growth of Chinese domestic consumption will quickly push the pricing of paper products to reflect the growing demand in year 2012. Meanwhile, we plan to gradually ramp up production of our new corrugated medium paper line and expect to achieve our target annualized utilization rate of approximately 60% by the end of 2012. In 2012, our revenue and net income growth will largely be driven by our capacity expansion initiatives, and growth in market share. We believe our new production line will significantly contribute to our fiscal 2012 revenue growth and profitability."

BAODING, China, February 16, 2012 /PRNewswire-Asia/ -- Orient Paper, Inc. (AMEX: ONP) ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in northern China, today announced unaudited preliminary results for the three months and full year ended December 31, 2011. The Company plans to release full financial results and file its Form 10-K on or before March 15, 2012 and will hold an earnings conference call to discuss its results.

For the fiscal year ended December 31, 2011, total unaudited revenue increased 21.6% to approximately $150.7 million from $124.0 million in the year ended December 31, 2010. In fiscal year 2011, the Company sold 108,174 tons and 122,320 tons of corrugating medium paper and offset printing paper, respectively, up 0.91% and 8.34% compared to fiscal 2010, respectively. In addition, the average selling prices of the Company's corrugating medium paper and offset printing paper products rose 24.93 % and 8.31 %, respectively, compared to fiscal 2010. The Company expects to report unaudited gross profit of approximately $33.0 million for fiscal year 2011, compared to $26.2 million in fiscal 2010. The Company is expecting unaudited net income to be approximately$21.5 million, or $1.17 per diluted share, up from $15.6 million, or $0.89 per diluted share, in fiscal 2010.

"Our strong financial performance in fiscal 2011 was largely due to robust growth in market demand and favorable pricing trends in 2011. The production launch of our new 360,000 tons corrugating medium paper production line marked an important milestone for Orient Paper in 2011," commented Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper.

"In fiscal 2012, we anticipate sizeable revenue growth and profitability driven by our capacity expansion, growing market demand for our products, and tightening regional supply conditions as a result of the PRC government's move toward industry consolidation. Over the next few quarters, we expect to ramp up capacity utilization of our new line, expand our market share, and strengthen our brand recognition in our target markets. We believe our new production line will significantly contribute to our fiscal 2012 revenue growth and profitability," added Mr. Liu

Third Quarter 2011 Results

• For the three months ended September 30, 2011, Orient Paper is expecting to report total unaudited revenue increased 61.2% to approximately $37.1 million from $23.0 million in the third quarter of 2010.
• The Company is expecting unaudited net income to be approximately $5.4 million, or $0.30 per diluted share, up from $1.8 million, or $0.10 per diluted share, for the same period last year.

The Company revised its 2011 guidance with projected revenue for fiscal year 2011 to be between $147 million and $163 million, gross profit of between $32 million and $35 million., However, the Company reaffirmed its guidance for 2011 net income of between $21 million and $23 million, and basic and diluted earnings per share of between $1.16 and $1.28.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, stated, "Our strong performance in the third quarter reflects the continued favorable pricing trends. We are currently conducting extensive testing procedures on our new 360,000 tons per year corrugating medium paper production line and expect to begin commercial production in the fourth quarter of 2011. The more extensive testing and troubleshooting period has led us to slightly reduce our revenue forecast for 2011, while tight cost controls on G&A expenses have enabled us to maintain our bottom line target for the year. With the additional production capacity coming on line in the near term and favorable industry dynamics, we expect to ramp up capacity utilization of our new corrugating paper line over the next few quarters."

BAODING, China, July 29, 2011 /PRNewswire-Asia/ --  (AMEX: ONP) ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in northern China, today announced unaudited preliminary results for the three months ended June 30, 2011. The Company will release full financial results and file its Form 10-Q on or before August 9, 2011 and will hold an earnings conference call to discuss its results.

BAODING, China, June 8, 2011 /PRNewswire-Asia/ -- Orient Paper, Inc. (AMEX: ONP) ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in northern China, today announced that the Company is nearing the completion of the renovation of one of its idle paper production lines, which can be used to manufacture digital photo base paper and other higher profit margin specialty papers. The Company is also making significant progress towards beginning trial production of its new corrugating medium paper production line in early July 2011.

http://www.orientpaperinc.com/Renovated-Production-Line.html

http://www.orientpaperinc.com/Picture.html

BAODING, Hebei, China, May 2, 2011 /PRNewswire-Asia-FirstCall/ -- Orient Paper, Inc. today announced unaudited preliminary results for the three months ended March 31, 2011. The Company will release full financial results and file its Form 10-Q on or before May 10, 2011 and will hold an earnings conference call to discuss its results.

For the three months ended March 31, 2011, the Company is expecting to report total unaudited revenue increased 25.6% to approximately $33.2 million from $26.5 million in the first quarter of 2010.  During the quarter, the Company experienced lower tonnage sales of corrugating medium paper and lower gross profit margin from sales of offset printing paper sourced from third party suppliers. The Company is expecting unaudited net income to be approximately $4.9 million, or $0.26 per diluted share, up 55.2% from $3.1 million, or $0.21 per diluted share, for the same period last year.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, stated, "We experienced robust growth in market demand and higher selling price of our products during the quarter as a result of the government-mandated capacity elimination in the second half of 2010. Regional demand for corrugating medium paper and medium-grade offset printing paper continued to grow in the first quarter of 2011 resulting in average selling price increases of over 26% and 12%, respectively, compared to the year ago period. Sales of our digital photo paper products experienced significant year-over-year growth as a result of our aggressive pricing strategy, and sales and marketing efforts.  We produced 231 tons of digital photo paper in the month of March 2011, operating at over 100% of the original estimated production capacity of our photo paper coating lines. With continued favorable market conditions, we will be able to further ramp up our photo paper production during the rest of the year."

Mr. Liu, added, "We are pleased to begin fiscal year 2011 on a positive note and anticipate strong revenue growth and profitability to be driven by our capacity expansion initiatives, growing market demand, attractive performance of our digital photo paper business, and tightening regional supply conditions. We are in the final stage of the new production equipment installation and look forward to beginning trial production of our new 360,000 tons per annum corrugating medium paper production line in June 2011 and commercial production at the beginning of the third quarter of 2011."

Due to the delay in the commercial production of its new corrugating medium paper production line and adjustments for anticipated effect of inflation on its production costs and selling prices, the Company is revising 2011 guidance to

• revenues of between $172 million and $190 million
• gross profit of between $35 million and $38 million
• net income of between $22 million and $25 million
• basic and diluted earnings per share of between $1.22 and $1.35.

Fourth Quarter Highlights:

• Revenue for the fourth quarter of 2010 increased 15.7% to $36.3 million compared to $31.4 million for the same period last year
• Operating income was $7.5 million, up 64.2% from $4.5 million in the fourth quarter of 2009.
• Net income was $5.3 million, up 69.5% from $3.1 million in the same period last year.
• Basic and diluted earnings per share for the fourth quarter of 2010 were $0.29 compared to $0.21 for the same period a year ago.

"In 2010, demand for corrugating medium paper and offset printing paper continued to exhibit strong growth in northern China," stated Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper. "In addition, the PRC government's initiatives to eliminate inefficient and polluting paper production further contributed to a regional shortage of paper supply and an increase in the average selling price ("ASP") of various paper products.  In 2010, we achieved double-digit revenue and net income growth and initiated expansion plans for future growth, including the launch of our new digital photo paper production line and construction of our new 360,000 tons per year corrugating medium paper production line, which we expect to commence operations in the second quarter of 2011 and, upon completion, will significantly expand our production capacity."

The Company continues to expect 2011

• revenues of between $186 million and $206 million,
• gross profit of between $36 million and $40 million,
• net income of between $24 million and $27 million,
• basic and diluted earnings per share of between $1.33 and $1.46.

For fiscal year 2011, the Company expects

• revenues of between $186 million to $206 million 
• gross profit of between $36 million and $40 million 
• net income of between $24 million and $27 million 
• basic and diluted earnings per share of between $1.33 and $1.46.  

As previously announced, for the fourth quarter of 2010, the Company expects revenues of approximately $33 million and adjusted net income of at least $5 million, which excludes certain legal and other professional expenses that are expected to be non-recurring.        

The Company's new 360,000 tons per annum corrugating medium paper production line is expected to begin production in the first quarter of next year.  For fiscal year 2011, the Company expects corrugating medium paper production of between 260,000 tons and 288,000 tons, of which up to 168,000 tons is expected to be contributed by the new production line; medium grade offset printing paper production of between 104,000 tons and 110,000 tons; and digital photo paper production of between 2,300 tons and 2,500 tons.  The Company expects that by the end of 2011, the monthly production of the new 360,000 tons per annum corrugating medium paper production line will be ramped up to approximately 20,000 tons, representing an approximate 67% annualized utilization rate.  

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "As 2010 comes to a close and we look to fiscal year 2011, we expect our growth to be driven by the launch of our new 360,000 tons per year corrugating medium paper production line in the first quarter of next year, the continued production ramp-up of our digital photo paper line, and strong average selling prices as a result of growing market demand for paper products in China and tightening supply conditions resulting from government-mandated closures of regional paper mills.  Overall, we are optimistic about our business prospects and look forward to capitalizing on the attractive growth opportunities in our market."

Orient Paper, Inc. today commented on the conclusion and summary results of the independent investigation conducted by the Company's audit committee with the assistance of Loeb & Loeb, LLP ("Loeb"), Deloitte & Touche Financial Advisory Services Limited ("Deloitte"), and other legal and industry expert advisors.

"In January of 2010, our company was visited by representatives of a research firm known as W.A.B. Capital (http://www.growthequities.com), which is owned by Mr. Bill Block. The two representatives of W.A.B. Capital, Mr. Carson Block, who is Mr. Bill Block's son, and Mr. Sean Regan, toured our plant for less than an hour and then offered to publish a positive research report in exchange for a large sum of money and equity compensation. We refused their offer. The next we heard from these gentlemen was on June 28, 2010, when they published a 30 page report under the name of a new firm named Muddy Waters, LLC ("Muddy Waters"), alleging that our company was a fraud and that management had misappropriated investors' money," stated Mr. Zhenyong Liu, Chief Executive Officer of Orient Paper, Inc.

"We said at that time that this report was categorically false and provided extensive documentation to prove this. However, Muddy Waters and their confederates ignored the evidence and continued to publish false and misleading information regarding our company in a reckless manner that appears to have been designed to enrich themselves and other unknown parties while disrupting the orderly trading in our stock," Mr. Liu continued.

"Given the severity of the allegations, our independent board appointed the audit committee to conduct an independent investigation with the assistance of Loeb, Deloitte, and other experts. This investigation has now concluded and determined that there is no evidence to support the allegations made by Muddy Waters that Orient Paper misappropriated funds from investors, no evidence that we overstated our revenues, no evidence that we overstated the number of workers we employed and no evidence that our disclosures regarding our top 10 customers support charges of fraud. Orient Paper has been caused significant damages by the false and irresponsible reports published by Muddy Waters. But we were resolute in following best practices in corporate governance to put this matter finally behind us and provide our shareholders assurance as to the correctness of our actions. Our heart goes out to the hundreds of investors who suffered financial damages as a result of Muddy Waters and other unknown parties. We are now firmly focused on the future and executing our plans to grow our business and build long term value, just as we were on the day Muddy Waters first came to visit us, about ten months ago," concluded Mr. Liu.

Summary of Major Findings

The Muddy Waters allegations were specifically delineated in its reports.  The following is a summary of the major findings of the investigation generally keyed to those allegations:

• No Evidence Found to Indicate Misappropriation of $30 million since October 2009.  For the period from October 2009, the Audit Committee has not found, through a review that included Company books and records and bank records, any evidence to support the allegation of misappropriation of $30 million made by Muddy Waters.  Bank records showed that funds acquired from recent capital raises were either still in the bank or had been used for valid, corporate purposes.  Any material wire transfers disbursed from the Company's bank account during this period were used for capital expenditures and other obligations.
• No Evidence to Indicate ONP Overstated Revenue.  With respect to fiscal years 2009 and 2008, the Audit Committee has not found any evidence that ONP overstated revenue.  The Audit Committee was able to satisfy itself that reported revenue was consistent with bank records and the Company's books and records, cash receipts, and sales invoices.  In addition, bank records demonstrated that the Company made VAT payments to the tax bureau on a basis consistent with the revenue reported to the public for 2009 and 2008.  In addition, Muddy Waters has alleged that there are discrepancies between the revenues for 2009 and 2008 set forth in ONP's Annual Report on Form 10-K, and the revenues for the corresponding periods set forth in the PRC audited financial statements of ONP's principal operating subsidiary, Hebei Baoding Orient Paper Milling Company Limited ("HBOP").  The Audit Committee, however, has reconciled to its satisfaction revenue and income shown on the PRC audited financial statements of HBOP for 2009 and 2008 (in each case, using financial statements stamped by the PRC State Administration for Industry and Commerce ("SAIC")) as well as the HBOP general ledger to the ONP's audited financial statements for 2009 and 2008 contained in the Company's public reporting documents.  
  
• No Evidence to Indicate that ONP's Claim to Have 600 Workers is Inaccurate.  Muddy Waters alleges that ONP does not have nearly the number of workers it claims.  The Audit Committee, however, based on site visits, a review of Company records, including payroll records, and a random sampling of employees, determined that there is no evidence that ONP's claims as to the number of its workers is incorrect.
  
• No Evidence to Indicate that ONP's Claims About Its Top 10 Customers Supports Fraud.  Muddy Waters points out that ONP's customers changed by 80% between 2008 and 2009, and that certain ONP customers have disclosed, on their SAIC reports, revenue for 2009 or 2008 that is less than their purchases from the Company over the same periods.  First, based on the Committee's review of Company and bank records with respect to which Muddy Waters does not have access, the Audit Committee confirmed and reconciled to its satisfaction the names of the Company's top 10 customers for 2009 and 2008 to wire transfers made from bank accounts owned by those customers, and found wire transfer amounts made by customers to be consistent with reported sales for those customers.  The Committee also tied top 10 customer names and amounts to Company books and records, cash receipts, and sales invoices, which are also not available to Muddy Waters.  Second, based on the Committee's review of Company records with respect to which Muddy Waters does not have access, ONP's customers remained relatively consistent between 2008 and 2009.  The Committee determined that, even though public reporting documents show that the top 10 ONP customers changed completely (except for two) between 2008 and 2009, (i) 8 of the top 12 customers from 2008 were ranked within the top 15 customers of the Company in 2009, and (ii) 4 of the top 10 customers from 2009 were ranked within the top 12 customers in 2008, showing a more consistent pattern of customer activity year over year than suggested by Muddy Waters in its publications.  Third, even though SAIC reports of certain customers do not necessarily support ONP's level of sales to certain customers, the Audit Committee believes that the strength of the evidence in the bank records outweighs any deficiency to SAIC records.  The Audit Committee is not in a position to comment on the SAIC reports of other companies.
  
• No Evidence Found to Indicate Differences in Reported Inventory Turnover or Gross Profit.  Based on a review of Company's books and records, including, among other things, inventory ledgers, stock take records and production reports, as well as site visits and a limited review of comparable companies, the Audit Committee found no evidence that the Company's report of inventory turnover for 2009 and 2008 and gross profit for 2009 or 2008 is false.
  
• Digital Photo Paper Lines Show Production Capacity Consistent with Public Reports. Based upon a review performed by an independent, third-party expert, the Audit Committee has determined that the estimated production capacity for the digital production lines is consistent with the production numbers set forth in the Company's public reporting documents.
  
• Production Capacity Checks on Corrugating Medium Production Line and Two Printing Paper Production Lines Are Deferred Due to Pending Boiler Installation. The Audit Committee recognized that any testing of production capacity of the Company's currently operating corrugating medium production line and two printing paper production lines would yield unreliable results because of the absence of two boilers that had been taken out of service in connection with the Company's upgrade of its facilities and the installation of a new corrugating medium production line.  Accordingly, the Audit Committee recommends that production capacity checks on these other lines occur as soon as those boilers are installed, which is expected in the fourth quarter of 2010.  The Audit Committee also recommends a production capacity check with respect to the new corrugating medium line shortly following its completion and installation.
  
• Price for New Operating Line Deemed Fair and Reasonable.  Based on a review by an independent, third party expert of the specifications for the new corrugating medium production line being purchased from Henan Qinyang First Paper Machine Limited, the Audit Committee believes that the purchase price of RMB 190 million for this line to be fair and reasonable.
  
• No Formal Valuation Appraisals Performed on Currently Operating Production Lines or Inventory.  The Audit Committee has requested access to the facilities for the conduct of formal, independent valuation appraisals of all currently operating production lines, together with a formal, independent appraisal of the Company's inventory.  Such access, however, has not yet been granted.  As a result, although the Audit Committee has found no evidence of irregularities, the Audit Committee cannot at this time corroborate the soundness of the carrying value of any such equipment or inventory, or come to any conclusion about the fair value of the original purchase price for any such equipment or inventory.  The Audit Committee recommends that these appraisals be conducted as soon as practicable; however, it recognizes that the appraisals of the currently operating corrugating medium and printing paper lines may yield more reliable results if conducted following the installation of the new boilers.
  
• Further Review of Raw Material Purchases from Xushui County Dongfang Trading Company Limited ("Dongfang").  Chairman Liu has produced evidence that he disposed of his 96% equity interest in Dongfang, the Company's largest supplier of raw materials in 2004, as indicated by a transfer agreement reviewed as part of the investigation.  Nevertheless, since SAIC records indicate that Mr. Liu did not transfer his interest until August 2010, the Audit Committee has determined that it would be prudent for the Board of Directors as soon as practicable to retain an expert in the paper industry to review and evaluate the pricing of raw material purchases made by the Company from Dongfang over the preceding year.  This person will report directly to the Audit Committee, which may seek additional analyses depending on the expert's report.
  
• The Company's Land Purchase for a New Facility and Related Deposit May Be Subject to Ordinary but Nonetheless Disclosable Risk.  As part of an effort to acquire land for a new facility, the Company has already made an initial payment of approximately $11 million (less than the land's recent appraisal value as determined by an independent expert retained by the Audit Committee) as part of a land requisition and purchase process being administered by certain PRC governmental entities.  This land acquisition process is subject to additional legal approvals, an open auction process, and a risk of not being consummated.  These risks are ordinary and common in connection with the requisition and purchase of land in some PRC rural areas.  Nonetheless, given the risk, the Audit Committee is recommending additional disclosure be included in the Company's public reporting documents to clarify this risk.

The Audit Committee believes that the investigation, which used the services of a team of independent professionals and involved the review of documents and the conduct of interviews, has been extensive and thorough.  Nonetheless, the Audit Committee recognizes that additional matters may come to its attention and that additional information may need to be reviewed.  The Audit Committee also recognizes that the investigation was tailored to investigate the claims made Muddy Waters, and was not designed to be the equivalent of an audit conducted by the Company's independent accountants.

Recommendations to Management in Response to Investigation

As a result of its report, the Audit Committee has recommended to the ONP Board of Directors that a number of measures be taken in response to the investigation:

• the completion of production capacity checks on the currently operating production lines (other than the digital paper production lines) as soon as new boilers are installed, expected in the fourth quarter of 2010;
• the completion of a production capacity check with respect to the new corrugating medium line shortly following its completion and installation;
• formal, independent valuation appraisals of all currently operating production lines, together with a formal appraisal of the Company's inventory; and
• the retention of an expert in the paper industry to review and evaluate the pricing of raw material purchases made by the Company from Dongfang over the preceding year.

Revenue for the three months ended September 30, 2010 was $23,006,314, a decrease of $7,542,297 or 24.69% from $30,548,611 for the comparable period in 2009. The decrease was substantially attributable to the following temporary adjustments in production:

(1) Beginning in late June 2010, we shut down and later demolished one of our two corrugating medium paper production lines. We had originally planned to build a new 360,000 ton/year new corrugating medium paper production line and other facilities on some 667,000 square meters of land across the street from our current main manufacturing compound, but due to certain changes in the plan, we decided to instead build the new production line in our current manufacturing compound. To make room for the new production line and related pulping facilities, we tore down two existing buildings and an existing corrugating medium paper production line. We estimate the lost capacity could be approximately 34,000 tons per year. The new corrugating medium paper production line is expected to begin production in the first quarter of 2011.

(2) In connection with the government’s approval of our pending new corrugating medium paper production line, the Baoding City Environmental Protection Agency requires that we replace two of our four steam boilers with new and more energy-efficient models. We removed the two old boilers in July 2010. Because of the loss of steam pressure, production quantities were lowered during this quarter. The new boilers are expected to be fully installed and inspected by the government’s environmental protection agency during the fourth quarter of 2010.

As a partial remedy for the lost production, in August 2010 the Company entered into three printing paper supply agreements and one corrugating medium paper supply agreement with paper manufacturers in Hebei Province and the neighboring Shandong province. These paper supply agreements are all effective through the end of year 2010. During August and September 2010, revenue generated from sales of offset printing paper and corrugating medium paper finished goods purchased from these vendors pursuant to the supply agreements are in the amounts of $4,964,588 and $1,066,545, respectively, representing 31.85% and 17.41% of sales revenues of offset printing paper and corrugating medium paper in the third quarter of 2010.

Second Quarter 2010 Highlights and Recent Events 

• Revenue increased 70.8% to $38.3 million.
• Gross margin increased 610 basis points to 23.9%.
• Operating income increased 100.5% to $7.4 million .
• Excluding the $1.1 million non-cash charge related to the disposal of property, plant and equipment, non-GAAP operating income increased 129.8% to $8.5 million, or 22.2% of sales (*)
• Net income increased 116.3% to $5.4 million, or $0.30 per share
• Excluding the non-cash charge non-GAAP net income increased 160.0% to $6.4 million, or $0.36 per share

"We achieved strong revenue and earnings growth during the second quarter," commented Mr. Zhenyong Liu, Chief Executive Officer. "Our performance was driven by increased pricing in both our medium-grade offset printing and corrugating medium paper businesses, a significantly higher volume of sales in our medium-grade offset printing paper business, and the contribution made by our new digital photo paper business. We are also very pleased with our bottom line performance, which benefited from our strong sales growth, and the contribution of our higher margin digital photo paper business."

Business Outlook

Mr. Liu added, "Due to the rapidly increasing prices of wood pulp and the government's environmental protection initiatives, the demand for medium-grade offset printing paper as a substitute for the high-grade printing paper that consumes wood pulp continues to exhibit robust growth. We are confident that the strong market demand, partly caused by the government-mandated elimination of inefficient capacities, may continue into the second half of the year."

"We expect some minor delays in the installation of our new 360,000 tons annual capacity corrugating medium paper production line, which was expected to be completed in October 2010. Our current expectation is that trial production will begin at the end of the year. We expect this new facility will ramp up to achieve an annualized utilization rate of approximately 60%-70% by the end of fiscal year 2011.

"In connection with the government's approval of our new corrugating medium paper production line, the Baoding City Environmental Protection Agency requires that we replace two of our four steam boilers with new more energy- efficient models. We removed the two old boilers in July 2010. Our production in the third quarter may be lower until the new boilers are installed and inspected possibly in the fourth quarter. As a result of all of the above mentioned factors, we now expect fiscal year 2010 adjusted net income of $16.2 million compared to our previously provided guidance of $18.0 million."

Orient Paper reaffirms its ability to achieve the make good target of $18.0 million in adjusted net income, or $1.21 per fully diluted share, for fiscal year 2010. Mr. Liu added, "We continue to hold a positive outlook on China's paper industry. We believe our revenue and net income growth in 2010 will be largely driven by regional economic development, increased capacity utilization, and the very-much-anticipated earnings contribution from our new digital photo paper production capacity. We are confident in our ability to increase and diversify our customer base as we acquire a greater market share in northern China. We will continue to seek strategic investment opportunities to accelerate our growth and expansion in the long-term.

Source: PR Newswire (March 29, 2010)

'We posted solid financial results in the first half of 2009, and expect to maintain our growth momentum in revenue and operating income in the second half of the year. We are constantly seeking solutions to enhance our production efficiency and allow us to increase utilization and improve output of our existing fixed assets,' said Mr. Liu Zhenyong. 'Our strategic location near the printing industry in Beijing and Tianjin provides us with ready access to our primary raw materials, recycled paper, lower freight costs and better opportunities to market our diversified product portfolio. In the coming months, will pursue opportunities to introduce new, high-end paper products in the market and strengthen our position in the industry.'

Source: PR Newswire (August 17, 2009)

Guidance Report: 

Despite the recent global economic slowdown, we continue to experience strong demand for its products especially for cultural paper. We expect total sales for 2009 to increase approximately 30% compared to 2008. These projections do not take into account any impact related to future financings or acquisitions. We believe we can continue to grow and improve our company's operating results. We believe that accelerated growth could be achieved by strengthening our operational foundation through efforts focused on issues such as internal cost control, improved logistics coordination, advanced technology import, new product development and an increase in the overall managerial efficiency of the Company. We will continue to monitor customer demand carefully and take decisive action to preserve and strengthen our core-competence to achieve our objectives for long-term growth in earnings and stockholder value.

Full Year Fiscal 2009 Guidance Ending December

Source: PR Newswire (March 27, 2009)