May 16, 2012 Oji Paper Co., Ltd. Contents
Demand in the Paper Industry - FY2011...... 1 Trends in Sales Prices...... 2 Trends in Key Raw Materials and Fuel Prices...... 3 Financial Highlights of FY2011...... 4 Sales by Major Types of Products (Consolidated)...... 5 Breakdown of Increase/Decrease of Consolidated Operating Income (FY2010 to FY2011)...... 6 Financial Forecast for FY2012...... 7 Breakdown of Increase/Decrease of Consolidated Operating Income (FY2011 to FY2012)...... 8 Trends in Ordinary Income (Consolidated)...... 9 Trends in Consolidated Interest-bearing Debt...... 10 CAPEX and Depreciation (Consolidated)...... 11 Management Target...... 12 Business Portfolio Transition (Pursuing Efficiency in Domestic Business) 1...... 13 Business Portfolio Transition (Pursuing Efficiency in Domestic Business) 2...... 14 Business Portfolio Transition (Expanding Overseas Business) 1...... 15 Business Portfolio Transition (Expanding Overseas Business) 2...... 16 Investment Strategies...... 17 The Outline of Company Structure after Reorganization into Holding Company...... 18 Demandxxx in Paper Industry - FY2011
7ELRP>KAPLCQLKP^
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:B>OLK:B>O :B>OLK:B>O :B>OLK:B>O
'LKQ>FKBO?L>OA 8,688 100.5% 108 89.7% 8,795 100.4% &LU?L>OA 1,650 100.8% 219 102.9% 1,869 101.0% 3QEBOM>MBO?L>OA 645 98.2% 26 63.1% 672 96.1% 7LQ>IM>MBO?L>OA 10,983 100.4% 353 94.2% 11,336 100.2%
6>KFQ>OVM>MBO 1,762 97.2% 102 158.2% *2 1,864 99.3% 4>@H>DFKDM>MBO 804 96.4% 11 80.1% 815 96.1% 2BTPMOFKQ 3,217 98.6% 101 79.8% 3,319 97.9% 4OFKQFKD'LJJRKF@>QFLKM>MBO 8,213 96.2% 1,805 151.9% 10,018 103.0% 1FP@BII>KBLRPM>MBO 729 95.4% 20 111.0% 749 95.7% 7LQ>IM>MBO 14,725 96.8% 2,040 144.5% 16,765 100.9%
7LQ>IM>MBO>KAM>MBO?L>OA 25,708 98.3% 2,394 133.9% 28,101 100.6%
]m2 mil.^
'LOORD>QBA@LKQ>FKBOP *3 13,216 100.9%
Source : Japan Paper Association-Statistics on Paper and Paperboard, Trade Statistices of Ministry of Finance Japan. *1 : Statistics for customs cleared imports of paper refer to April 2011 - March 2012. *2 : The figure shown in customs cleared imports of sanitary paper includes secondary products (processed goods). *3 : The figure shown in Corrugated containers is volume of sheet production.
1 Trends in Sales Prices
¥/ ㎏ Coated Wood Free Sack Kraft Coated duplex board (left scale) Test Liner (right scale) ¥/ ㎏ 140 70
130 60
120 50
110 40
100 30 07/4 7 10 1 08/4 7 10 1 09/4 7 10 1 10/4 7 10 1 11/4 7 10 1
¥/5P Tissue paper 325 315 305 295 285 275 265 07/4 7 10 1 08/4 7 10 1 09/4 7 10 1 10/4 7 10 1 11/4 7 10 1
2 Trends in Key Raw Materials and Fuel Prices
NBKP (Import) LBKP (Import) Pulp Prices Domestic price Export price Used Container board （¥/kg） （¥/kg） 100 23 21 90 19 17 80 15 13 70 11 60 9 7 50 5 07/1 08/1 09/1 10/1 11/1 12/1 07/1 08/1 09/1 10/1 11/1 12/1 Source : Nippon Keizai Shimbun, Inc.
US softwood Australian hardwood Imported Woodchip Prices Domestic price Export price Used Newsprint （¥/kg） chips chips （¥/kg） 24 25 23 22 21 20 19 17 18 15 13 16 11 14 9 7 12 5 07/1 08/1 09/1 10/1 11/1 12/1 07/1 08/1 09/1 10/1 11/1 12/1 Source : Trade statistics of Ministry of Finance Japan
（$/t） Coal（BJI price） (left scale) LNG (right scale) Prices of Key Fuels Domestic price Export price Used Magazine （$/bl） Dubai crude oil (left scale) （¥/t） （¥/kg） 200 90,000 21 180 19 80,000 160 17 140 70,000 15 120 100 60,000 13 11 80 50,000 60 9 40,000 40 7 20 30,000 5 07/1 08/1 09/1 10/1 11/1 12/1 07/1 08/1 09/1 10/1 11/1 12/1 Source : [Coal] Global COAL NEWC INDEX [LNG] Trade statistics of Ministry of Finance Japan 3 Financial2011 Highlights of FY2011
]¥ Bil.^ *: *: -K@OB>PB(B@OB>PB
2BQ6>IBP 1,180.1 1,212.9 32.8
3MBO>QFKD-K@LJB 65.4 53.8 (11.6)
3OAFK>OV-K@LJB 60.2 48.4 (11.8)
2BQ-K@LJB 24.6 22.2 (2.4)
(BMOB@F>QFLK 79.6 76.0 (3.6)
)U@E>KDBO>QB]<86^ 85.7 79.1 (6.6)
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'E>KDBFK@LJM>KFBPFK>CCFIF>QBA$_ 2BTIV>AABA @LJM>KV ,>OQ>DOLRM @LJM>KV;6QL@H>@NRFPFQFLK%RD =
4 Sales by Major Types of Products (Consolidated)
*: *: -K@OB>PB(B@OB>PB
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7LQ>IM>MBO?L>OA 3,059 66.27 202.8 3,075 66.47 204.4 15 0.5% 0.19 1.6
[[6>KFQ>OVM>MBO 216 203.62 43.9 213 209.22 44.5 (3) (1.4) % 5.59 0.6
[[4>@H>DFKDM>MBO 288 101.69 29.3 276 102.73 28.4 (12) (4.1) % 1.04 (0.9)
[[+BKBO>IM>MBO 3,017 109.80 331.3 2,832 111.41 315.5 (185) (6.1) % 1.61 (15.8)
[[6MB@F>IQVM>MBOBQ@ 238 229.97 54.8 232 220.75 51.3 (6) (2.6) % (9.22) (3.6)
7LQ>IM>MBO 3,760 122.18 459.4 3,554 123.74 439.7 (206) (5.5) % 1.55 (19.6)
7LQ>IM>MBO>KA4>MBO?L>OA 6,819 97.10 662.1 6,628 97.17 644.1 (191) (2.8) % 0.07 (18.0)
2LQB$*FDROBP>?LSB>OB>DDOBD>QFLKPLCMOLAR@QFLKPR?PFAF>OFBPRKABO@LKPLIFA>QFLKTEF@EFK@IRABFKQBOPBDJBKQ@LKPRJMQFLK
'LOORD>QBA@LKQ>FKBOP 214.4 209.7 (4.7)
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5 Breakdown of Increase/Decrease of Consolidated Operating Income (FY2010 to FY2011)
FY2010 ¥65.4bil. FY2011 ¥53.8bil. (¥11.6bil. Decrease)
¥65.4bil.
60 Impact of higher ¥11.6bil. raw materials and Decrease fuel prices Negative Factors (¥15.3bil.) (¥27.8bil.) ¥53.8bil.
50 Lower sales Positive factors Cost reduction volume + ¥16.2bil. + ¥11.8bil. (¥5.1bil.)
Others (¥7.4bil.) Higher in sales 40 price + ¥4.4bil.
6 2012 Financial Forecast for FY2012
]¥ Bil.^ *: *: ) -K@OB>PB(B@OB>PB
2BQP>IBP 1,212.9 1,270.0 57.1
3MBO>QFKDFK@LJB 53.8 68.0 14.2
3OAFK>OVFK@LJB 48.4 60.0 11.6
2BQFK@LJB 22.2 28.0 5.8
(BMOB@F>QFLK 76.0 70.1 (5.9)
)U@E>KDBO>QB]<86^ 79.1 80.0 0.9
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2LQB$7EB>?LSBCLOB@>PQP>OB?>PBALKNote : The above forecasts are based on estimatesBPQFJ>QBP madeJ>AB>QQEBQFJBLCMR?IF@>QFLK@LK@BOKFKDCRQROBB@LKLJF@@LKAFQFLKP>KALQEBOC>@QLOP at the time of publication concerning future economic conditions and other factors. It-QFPMLPPF?IBQE>Q>@QR>IOBPRIQPTFIIAFCCBOCOLJQEBPBCLOB@>PQPCLOS>OFLRPOB>PLKP is possible that actual results will differ from these forecasts for various reasons.
7 Breakdown of Increase/Decrease of Consolidated Operating Income (FY2011 to FY2012)
FY2011 ¥53.8bil. FY2012E ¥68.0bil. (¥14.2bil. Increase)
70 ¥68.0bil.
60 ¥14.2bil. Positive factor Sales factors Increase + ¥32.5bil. + ¥18.8bil.
¥53.8bil.
50 Impact of higher raw materials and fuel prices Negative factors (¥13.3bil.) (¥18.3bil.) Cost reduction + ¥13.7bil. 40 Others (¥5.0bil.)
8 Trends in Ordinary Income (Consolidated)
¥ Bil. Operating income (left scale) Midterm (left scale) Operating income ratio (right scale) ％
120 7.0 6.4 110 6.1 6.0 100 5.5 5.4 90 5.0 5.0 80 4.4 73.9 73.7 70 68.0 65.4 4.0 63.2 60 3.2 53.8 50 2.6 3.0 42.1 40 32.8 2.0 34.9 30 33.1 31.5 30.8 30.0 27.3 20 1.0 18.5 10 15.7
0 0.0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012E
9 Trends in Consolidated Interest-bearing Debt
¥ Bil. Consolidated Interest-bearing debt (left scale) D/E Ratio (right scale) ％
1,000 2.5 930 900 852 820 2.2 799 799 800 800 776 785 2.0 1.8 1.7 1.7 1.7 1.7 700 1.6 1.4 600 1.5
500
400 1.0
300
200 0.5
100
0 0.0 Mar.31, 2006 Mar.31, 2007 Mar.31, 2008 Mar.31, 2009 Mar.31, 2010 Mar.31, 2011 Mar.31, 2012 Mar.31, 2013E
10 CAPEX and Depreciation (Consolidated)
¥ Bil. CAPEX Depreciation
140 129
120 111
101 100 96 89 87 86 79 80 89 80 80 76 70 70 70
60 55
40
20
0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012E
11 Management Target
Basic Operating Accomplish Business Portfolio Transition Through Innovation and Promotion of Growing Businesses Strategies Pursuing efficiency in domestic business and expanding overseas business
Growing Businesses Component of sales ¥ Bil. 1,500 Overseas Business 10% others Resources and 10% Environmental Business 7% Resources and Functional 7% 4% Functional Materials 4% 20% Business Environmental Materials 1,000 17% Business Business 17% Printing & Communications 20% 25% Media Business Active investment of human resources 36% and capital into growth businesses 500
Stable Business Mature Business 40% Household and Industrial 46% Materials Business Domestic Domestic 36% Household and Industrial Printing & Communications Materials Business Media Business 0 FY2004 FY2012 Goal for FY2015 overseas Strength both stable and mature business to retain consistent revenue and earnings 8% 13% 25% sale
6 measures to accomplish Business Portfolio Transition ● Enhance global competitiveness through cost reduction ● Establish integrated business model from raw material to end-user finished goods ● Growth through incubating R&D oriented business ● Promote Resources and Environmental Business ● Expand Overseas Business ● Enhance Trading Business
Income Target Achive 100 billion yen in operating income and 50 billion yen in net income
12 Business Portfolio Transition (Pursuing Efficiency in Domestic Business) 1
Promotion of Business Portfolio Transition while addressing reduction in the domestic printing and communication paper Promotion of Business Portfolio Transition Effects of reorganization Decrease of domestic shipment of Reduce cost in Printing and Communication Paper Reduce Fixed Cost Printing and Communications and consumption of fuel oil Media Business Suspension of 17 paper making machine Expand Power Generation Business from the year 2008 for sale of surplus power Idle production facilities for printing Economic Benefits of around 230 million/year and communication paper. (including paperboard and specialty paper) Remodel production facilities to Develop new and innovative products support growth businesses providing enhancement to specialty paper
Expand and Enhance Resources and Environmental Business ●Examine New power generation business (water, biomass, wind and solar power) Chitose Hydroelectric Power Plant
●Expand Biorefinery business ➡for more information refer to next page
Expand and Enhance ●Actively invest in Research and Development Resources (Human, Capital), Functional Materials development of new technologies and materials Business ●Install new capacitor production line for thin film to strengthen film business (Shiga) ●Develop Functional Non-Woven Fabric to adsorb radioactive materials
➡for more information refer to next page Expand and Enhance Household and Industrial ●Expand and reorganize paper converting sector Materials Business ●Increase disposable diaper production Construction of new plant (Fukushima) Modification of existing equipment and installing new equipment (Nagoya) ●Reconstruct Sendai Corrugated Box Plant
13 Business Portfolio Transition (Pursuing Efficiency in Domestic Business) 2
Expand and Enhance Resources and Environmental Business Demonstrate, Implement and Evaluate valuable resources and their commercialization (Ministry of Economy, Trade and Industry) [The Innovation Center Establishment Assistance Program: Subsidy for Advanced Technology Demonstration and Evaluation Facility Development] (relevant project)
Remodel existing pulp facility in Yonago Mill, Expand Resources and Environmental Business Valuable biorefinery
Furfural xylooligosacchaide Timber chip Hemi Celluose Considered as a solvent for petroleum refining. xylose Also expected as raw materials for Biomass-derived chemical products and next-generation bio-plastic in the future. ethanol
Dissolving pulp (90000t/year from the production development of January 2014) Make a partial remodel of Celluose Aim to enter into the market of special purpose areas such as chemical and medical focusing on high value added products. existing Pulp making facility These products will be commercialized for goods using general rayon in near future.
Enhance and Expand Functional Materials Business Develop and Commercialize Non-woven fabric zeolite that can absorb radioactive cesium
Develop and commercialize non-woven fabric using unique technology of Oji Group [TDS Process] (Totally Dry System) [Features of TDS process] Capable of producing non-woven low density high substance (~3,500g/m2) without using any water Allow for holding large amounts of zeolite in non-woven fabric This process enhance and maximize the function of zeolite Professor Hitoshi Mimura from Department of Quantum Science and Energy Engineering, Graduate School of Engineering, Tohoku University confirmed the effect through empirical evaluation and is schedule to present in the conference of Atomic Energy Society of Japan (September, 2012) and International Conference on radioactive waste disposal (February, 2013) Using a wide range of possible applications such as decontamination of polluted water, trees and soil interposing polluted water and many more
14 Business Portfolio Transition (Expanding Overseas Business) 1
Accelerate business expansion in emerging market as well as resource-rich countries
Trend in capital investment and interest-bearing debt Active involvment in Business through M&A From 2010, concluded 4 M&A transactions in packaging business (GSPP, United, Kotak, S.Pack, Harta) Domestic Capital Investment (left scale) interest-bearing debt (right scale) Commissioned start up new adhesive laminator for OJI Label (Thailand) Overseas Capital Investment (left scale) Southeast Established joint venture with Chuntang for afforestation and ¥ Bil. ¥ Bil. Asia timber converting 160 1,000 Summer of 2012: start up afforestation project in Cambodia April 2013: Scheduled to start up new Corrugated Box plant in Vietnam Beginning of 2013: Scheduled to start up new Corrugated Box plant 140 900 in Cambodia ➡for more information refer to next page
Established subsidiary for the development of 120 India 800 Corrugated Box business ➡for more information refer to next page
100 Established Qingdao Oji Packaging 700 Established Oji Paper International Trading (Shanghai)
80 Nantong Mill In 2013: Scheduled to start up Kraft pulp manufacturing facility China 600 (Completion of First phase of project) Develop Business concept which include industrial and functional materials 60 (Second Phase Project) July 2012: Scheduled to start up Oji Packaging (Wuhan) 500 and expand production in inland China 40
Increase production capacity of BCTMP at PANPAC and 400 New Zealand 20 Strengthen comprehensive forest business
Brazil Expanded Imaging Media business through implimentation of 0 300 successful M&A activity (OPE) FY2007 FY2008 FY2009 FY2010 FY2011
15 Business Portfolio Transition (Expanding Overseas Business) 2
Construction of New Corrugated Box Plant in Cambodia Entering into Indian Corrugated Box Market
Real GDP Growth rate of 6.1% in 2011* Real GDP Growth rate of 7.2% in 2011* Domestic share of Oji Group: 30% Started to examine Corrugated Box Business in India where further Since the existing plant doesn’t have room to increase production capacity, increasing demand of high quality Corrugated Boxes are expected measures are needed to respond to increasing demands
Scheduled to establish a local subsidiary, (2012/6) which helps in acquisition of land for the new plant Scheduled to establish new plant in Sihanoukville site for the plant is planned in Neemrana Industrial Area in Rajasthan State ・The only International deep-water port, where industrial parks are rapidly developing [Neemrana Industrial Area] → Increasing in the demands for Corrugated Boxes after the development ・120km South West of Delhi, many Japanese companies (around 35) of the industrial area ・The 3rd development area is developed specially for Japanese companies ・Request to increase production from the major local beverage companies ・A technological demonstration project to combine solar with diesel power which are one of our main customers for stable power supply is planned by NEDO ・Improvement of transportation efficiency Armed with good quality and service, we are seeking for Importing base paper → converting new customers other than Japanese companies → sales are all completed in Sihanoukville
Scheduled Production site
Existing Plant New Plant (Harta Cambodia) New Plant Delhi
Sihanoukville Harbour Neemrana Production industrial area Production site Phnom Penh site Industrial Area (Japanese Industrial area) Rapid expansion of business in the main Sihanoukville Ho Chi Minh City Gujarat, Mumbai industrial cities Production Sheets: 67 million m2/year Production Sheets: 48 million m2/year Capacity Boxes: 40 million m2/year Capacity Boxes: 25 million m2/year
Authorized Authorized Share Capital 1.2 billion Yen Planned New plant site Share Capital 1.8 billion Yen Bangalore, Chennai Operation Beginning of 2013 Operation Second half of FY2013 Start up Start up
*Real GDP growth rate: World Economic Outlook April 2012 (IMF)
16 Investment Strategies
Complete business portfolio transition, by reducing investment in existing Domestic Business, and concentrating investment in higher priority areas
Interest-Bearing Debt Maintaining 800 billion yen Assumption ・ ・EBITDA Same level as in the FY2011
New Projects FY2012~FY2014 Investment Balance Refresh Over 100 billion Yen Cost reduction Implementation by Environment & Assessing priority Safety New 50 billion Yen Investment in existing businesses 100 billion Yen Under consideration 50 billion Yen
Ongoing 100 billion Yen
Household and Industrial Materials, The main projects in progress Functional Materials, Resources, Environment, ・Nantong Project Nantong Project, Overseas M&A ・New Corrugated Box plant in Cambodia and India ・Biorefinery business ・Remodelling for Specialty paper in Ebetsu Mill
17 The Outline of Company Structure after Reorganization into Holding Company
Oji Paper Co., Ltd
Safety Environmental Corporate Research & Corporate Corporate International General Affairs Administration Management Compliance Development Technology Human Resources Planning Administration Trade Indirect Divisions
Boxboard and Packaging Papers Newsprint Imaging Media Strategic Resource Management Present Administration of Packaging, Printing and Writing Paper Business Divisions Boxboard and Corrugated Container- related companies
Oji Holdings Corporation Note1
Safety Environmental General Affairs Administration Management Corporate Research & Compliance Development
Forest Resources and Household and Industrial Printing and Communications Functional Materials Environment Marketing Corporate Management Group Shared Service Materials Company Media Company Company Company & Independent businesses companies
Oji Materia Co., Ltd. Oji Paper Co., Ltd. Oji Imaging Media Co., Ltd. Oji Green Resources Co.,Ltd Oji Management Office Inc. Note2 Note5 Note6 Note9 Note10
Oji Package Innovation Oji F-Tex Co., Ltd. Center Inc. Note7 Note3
Oji Functional Materials Oji Packs Partners Consolidated subsidiaries: 4 Co., Ltd. Progressing Center Inc. Note8
Oji Container Co., Ltd. Note4 Packaging, Boxboard and At time of transition to HD structure Corrugated Container- related companies
Consolidated subsidiaries Other consolidated subsidiaries: 9 Other consolidated subsidiaries: 12 Other consolidated subsidiaries: 7 Other consolidated subsidiaries: 48 other than the above with names: 44
Note1 : Plan to change the trade name from Oji Paper Co., Ltd. effective October 1, 2012 Note6 : To be incorporated in association with the transition to a H.C. structure (Scheduled date of succession: October 1, 2012). : Successor Company Note2 : Plan to change the trade name from Oji Paperboard Co., Ltd. effective October 1, 2012 Note7 : Plan to change the trade name from Oji Specialty Paper Co., Ltd. effective October 1, 2012 Note3 : To be incorporated in association with the transition to a H.C. structure Note8 : To be incorporated in association with the transition to a H.C. structure (Scheduled date of succession: October 1, 2012). (Scheduled date of operation commencement: October 1, 2012). To succeed the business of indirect support operations for planning and technology of the Functional Materials Company within the Group Note4 : Plan to change the trade name from Oji Chiyoda Container Co., Ltd. effective October 1, 2012 Note9 : To be incorporated in association with the transition to a H.C. structure (Scheduled date of succession: October 1, 2012). Note5 : Plan to change the trade name from Oji Paper Company Split Preparation Co., Ltd. effective October 1, 2012 Note10 : To be incorporated in association with the transition to a H.C. structure (Scheduled date of succession: October 1, 2012). H.C:Holding Company *The number of consolidated subsidiaries are based on information as of March 31, 2012. 18 This document does not constitute a disclosure document under the provisions of the Financial Instruments and Exchange Law, and no guarantees are provided concerning the accuracy or comploeteness of the information contained therein. Forecasts and other forward-looking statements in this document represent judgements by Oji Paper Co., Ltd. based on information available at the time of the briefing, and they may be affected by unforeseeable events. You are therefore urged not to make investment decisions solely on the basis of this document. Oji Paper Co., Ltd. will not accept any liability whatsoever for losses incurred as a result of use of this document.