Chinese tissue producer C&S Paper reported a sharp improvement in profitability during the first half of 2026, even as revenue remained almost flat.

C&S Paper Co., Ltd. (SZ: 002511) recorded revenue of RMB4.410 billion, up 1.85% year on year, while net profit attributable to shareholders increased 50.13% to RMB225 million.

The divergence between modest sales growth and substantially higher earnings highlights an important development in China’s household tissue market: falling pulp costs are providing manufacturers with margin relief, but C&S Paper is also attempting to reduce its longer-term exposure to commodity pulp through product upgrades and upstream integration.

The question is whether those changes can sustain profitability when the pulp cycle eventually turns.

Lower Pulp Prices Provide Immediate Margin Relief

Pulp remains one of the largest cost components for tissue manufacturers.

According to C&S Paper’s interim report, pulp represents approximately 40% to 60% of operating costs, making changes in market pulp prices particularly important for profitability.

The first half of 2026 provided favorable conditions.

China Galaxy Securities data showed the daily average price of northern bleached softwood kraft pulp in China at RMB4,742 per tonne on June 25, down 18.99% year on year. Earlier in January, average softwood pulp prices in Shandong had remained above RMB5,600 per tonne.

For a large tissue producer purchasing substantial quantities of pulp, that decline can translate directly into lower manufacturing costs.

C&S Paper’s operating costs decreased 1.28% year on year during the first half, while its overall gross margin increased 2.07 percentage points to 34.69%.

The company attributed the improvement partly to lower raw-material and manufacturing costs.

But pulp prices alone do not explain the entire earnings increase.

Higher-Margin Tissue Products Gain Ground

C&S Paper has also been changing what it sells.

The company continued developing higher-margin and differentiated categories alongside its traditional household tissue portfolio.

Products identified by the company as high-margin, trend-driven or new categories generated approximately RMB1.557 billion, accounting for 35.31% of total first-half revenue.

Growth was particularly strong in newer personal-care categories.

Sales of wet toilet paper increased 130.08% year on year, while cotton-soft tissues increased 68.13%. The company also reported progress in developing its feminine-care business.

This product mix matters because China’s tissue market is increasingly difficult to compete in through volume alone.

If differentiated products can command better margins or strengthen customer retention, they provide manufacturers with another route to profitability beyond simply waiting for lower fibre costs.

Financial expenses also helped. C&S Paper reported a 72.68% year-on-year decline in financial expenses, primarily because of lower interest expenses.

Profit Is Recovering From a Low Base

The 50% increase should nevertheless be viewed against C&S Paper’s longer-term earnings history.

Net profit attributable to shareholders reached RMB906 million in 2020, before falling repeatedly as high pulp costs and intense market competition pressured the business.

By 2024, profit had dropped to only RMB77 million.

A significant recovery began in 2025, when net profit increased 312.80% to RMB319 million.

The additional 50.13% increase during the first half of 2026 therefore continues a pronounced recovery from the company’s recent trough.

However, first-half profit of RMB225 million remains far below the company’s 2020 full-year peak.

The recovery is substantial, but it does not yet represent a return to C&S Paper’s historical profitability.

China’s Tissue Industry Still Faces Excess Capacity

The larger challenge is the supply-demand balance across China’s household tissue industry.

According to figures cited from the China National Household Paper Industry Association, domestic household tissue consumption increased only 1.95% in 2025.

Meanwhile, approximately 1.136 million tonnes of additional production capacity is expected to enter the market during 2026.

Between 2026 and 2030, planned new capacity could exceed 6 million tonnes.

If capacity expands substantially faster than consumption, competition for market share could continue to constrain tissue pricing even when raw-material conditions improve.

C&S Paper itself describes the industry as entering an accelerated restructuring phase, with smaller manufacturers potentially exiting, suspending production or converting capacity.

Recent financial results already show divergence among major producers.

Hengan International reported first-half revenue of RMB11.091 billion, down 6.07% year on year, while net profit declined 8.66% to RMB1.254 billion, according to Wind data cited in the source material.

Against that environment, C&S Paper’s 1.85% revenue increase takes on greater significance.

What Happens When Pulp Prices Recover?

The durability of C&S Paper’s margin recovery will ultimately face a more difficult test if pulp prices rise.

Pulp is cyclical, and the conditions that supported first-half margins cannot be assumed to continue indefinitely.

If market pulp prices recover while tissue producers remain unable to pass higher costs fully through to customers, margins could again come under pressure.

That makes C&S Paper’s product-mix strategy increasingly important.

Higher-margin tissue and personal-care categories could provide one buffer.

The company’s larger structural response, however, is taking place upstream.

C&S Paper Builds Bamboo Pulp Integration in Sichuan

C&S Paper is developing a 300,000-tonne integrated pulp-and-paper project in Quxian, Dazhou, Sichuan province, a region with significant bamboo resources.

On April 22, the project’s third paper machine began operation.

Its commissioning brought the first phase to its planned 100,000 tonnes per year of household tissue capacity.

Once the overall project is completed as planned, C&S Paper expects the site to establish an integrated production chain based partly on locally sourced bamboo.

Strategically, this could give the company greater control over part of its fibre supply.

Producing pulp internally does not remove raw-material costs, and the ultimate economic benefit will depend on bamboo procurement, pulp yields, operating efficiency, capital costs and other factors.

But vertical integration could reduce dependence on externally purchased market pulp and therefore change C&S Paper’s exposure to international pulp-price fluctuations.

That strategy is already familiar elsewhere in China’s paper industry, where large producers have expanded upstream to secure fibre and improve cost control.

For a household tissue manufacturer, however, integrating local bamboo resources into pulp and tissue production represents a particularly significant strategic move.

Management Transition Adds Another Variable

C&S Paper is simultaneously undergoing changes in corporate leadership.

In January, Yang Yuzhao succeeded Liu Peng as chairman. Yang has a long history with the company, having joined the group in 1996.

Founder Deng Yingzhong’s sons, Deng Guanbiao and Deng Guanjie, were appointed vice chairmen.

Meanwhile, Gao Bo, who became president in December 2025, brings financial and paper-industry experience, including previous work with Gold Hongye Paper and APP China.

The resulting management structure combines long-serving company executives, the founder’s next generation and externally experienced professionals.

The Real Test Comes With the Next Pulp Cycle

C&S Paper’s first-half results contain both cyclical and potentially structural improvements.

The decline in pulp prices provided immediate margin support. That advantage could reverse.

But the growth of differentiated products, lower financing expenses and development of an integrated bamboo pulp-and-paper operation could have longer-lasting implications.

This distinction will determine how the current recovery should ultimately be viewed.

If profitability weakens sharply when pulp prices rise again, the recent earnings improvement will largely have reflected favorable commodity conditions.

If C&S Paper can maintain stronger margins through product differentiation and greater fibre integration, the recovery may instead indicate a deeper change in the company’s earnings structure.

With first-half net profit already up 50.13%, C&S Paper has demonstrated that its profitability can recover rapidly when raw-material conditions improve.

The next pulp-price cycle will provide the more important test: how much of that profitability can the company keep when those conditions are no longer favorable?

Last Updated on 25/08/2026 by Jota Machinery