ubs conf 2008 · 1,290.0 1,165.5-200-200 400 600 800 1,000 1,200 fy2001 fy2002 fy2003 fy2004 f...

All Rights Reserved. Copyright (C) 2008 Nippon Paper Group, Inc. 1

Aiming to be a “World TOP 5”

Masayuki Hayashi Director (Engineering, R&D)

UBS Global Paper & Forest Products ConferenceSeptember, 2008


Agenda

Forward looking statementAny statements in this presentation document, other than those of historical fact, are forward-looking statements which are based on management’s assumptions and beliefs in light of information currently available, and involve risks and uncertainties. Actual results may differ materially from these forecasts.

Financial information Financial information presented in this presentation material is prepared based on the Japanese Accounting Standard, if for no additional statements specifying the calculating method.

Copyright statementAll rights reserved. Copyright © 2007 Nippon Paper Group, Inc. Unauthorized use or reproduction of this material in part or in whole is strictly prohibited.

1. Introducing the Nippon Paper Group

2. Business environment

3. Group Vision 2015 and current initiatives

4. 2nd MTBP summary and the image of next steps


0 5,000 10,000 15,000 20,000 25,000

IP

Stora Enso

P&G

SCA

UPM

OJI

Weyco

Smurfit Kappa

KC

NPG

1. Introducing the Nippon Paper GroupBasic information

Establishment: March 2001Group net sales: JPY1.2 trillion (FY07)

Total assets: JPY1.6 trillionProduction of paper & paperboard: 7.7 million tonsNumber of employees: 13,666

Net sales of pulp, paper & converting operations

(Source: PPI Annual Review, Sept. 2007)

NPG

World Top 10 Pulp&Paper companies

($ million)

1.


1. Introducing the Nippon Paper Group Corporate history

1993, Merger

1997, Merger

2001, Est.

2003, RestructuringThe Japan

Paper IndustryThe Japan

Paper Industry

Nippon Unipac Holding

Nippon Unipac Holding Nippon Paper Group, Inc.Nippon Paper Group, Inc.

2004, Change in trade name

Sanyo-Kokusaku pulpSanyo-Kokusaku pulp

Jujo Paperboard Industries

Jujo Paperboard Industries

Holding Company

Operating CompaniesJujo PaperJujo Paper

PaperPaper

PaperboardPaperboard

Tohoku PaperTohoku Paper

Japan Paperboard Industries

Japan Paperboard Industries

Nippon Paper Industries


Daishowa Paper Manufacturing

Daishowa Paper Manufacturing

Listed/Ex-listed company

Household Tissue

Household Tissue

2008, Restructuring

1972, Est.

1949, Est.

1938, Est.

1913, Est.

1964, Est.

1938, Est.

1918, Est.Mishima

PaperMishima

Paper

Specialty Paper

Specialty Paper

Nippon PaperPapylia

Nippon PaperPapylia



Nippon Daishowa Paperboard

Nippon Daishowa Paperboard

Nippon Paper Crecia

Nippon Paper Crecia

1.


25%11%

5%5%

5%5%

24%

31%

28%

18%

7%

4%4%3%

20% 15%

16%

12%

11%

8%

3%4%

4% 5%6%

31%Others33%

Honshu14%

Settsu9%

Rengo6%

5%

5%4%

4%3%

3%3%

2%2%

2%5%

1992

Oji

Daio

Mitsubishi

Nippon Paper GroupNo.1

HonshuKanzaki

1. Introducing the Nippon Paper Group Our position in Japan

1.

Source: JPA etc.

Sanyo Kokusaku Pulp

Daishowa

Jujo

OjiDaio

Mitsubishi

Others

Hokuetsu

Hokuetsu

Others

Jujo

2007

Daishowa

Japan

Tohoku

Nippon Paper GroupNo.3

Oji

RengoDaio

Daio

HokuetsuTakasaki Sanko

ChuoKoaTokai

Marubeni

Paper Paperboard

OthersHokuetsu

TokaiMarubeni

Chuetsu


131.9 135.5142.6 146.0

125.8 120.9 122.1

17.2 23

133

4332.8

55.765.2

44.748.450.542.4

5.7 1624.4

4.9-0.624.3

1,211.4 1,192.6 1,179.7 1,152.2 1,175.3 1,211.71,290.0

1,165.5

-200

-

200

400

600

800

1,000

1,200

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008E

-25

-

25

50

75

100

125

150

Introducing the Nippon Paper GroupPerformance history

(JPY billion)(JPY billion)

Net sales EBITDA* Operatingincome Net income

1.

Net

sal

esIncom

e

*EBITDA=Ordinary income + interest paid - interest received + depreciation


-

5

10

15

20

25

30

35

55 60 65 70 75 80 85 90 95 00 050

20

40

60

80

100

120

140

1. Business environmentProduction growth in Japan

(CY)

(million t)

Paperboard

Paper

Total

Population(million)

Population

Maturing domestically

2.

P&PB productionP&PB production


0%

2%

4%

6%

8%

10%

95 96 97 98 99 00 01 02 03 04 05 06 07

Export Ratio=Exports/Domestic production

Import Ratio=Imports/(Domestic shipment+Imports)

Exports in 074.7％

Imports in 07 4.7％

（CY）

*

* Excluding newsprint from Japanese manufacturers’ overseas operations (approx.90kt in 2007)

1. Business environmentImports and exports trend

2.

Paper Import/Export ratioPaper Import/Export ratio

Import flux recently stabilizingExport to pick up with long-term focus


0

50

100

150

200

250

300

350

Jan-

05

Apr

-05

Jul-0

5

Oct

-05

Jan-

06

Apr

-06

Jul-0

6

Oct

-06

Jan-

07

Apr

-07

Jul-0

7

Oct

-07

Jan-

08

Apr

-08

woodchip ONP OMG OCC NBSK Dubai crude oil Coal

1. Business environmentRaw materials/Fuels price trend

2.

Woodchip, Wastepaper, Pulp, Fuel

Rapid increase in input costFew signs of peaking outInput cost trend

Jan. 2005 price = 100Input cost trend

Jan. 2005 price = 100


～Group Vision 2015～

Sustainable growth of corporate value through development of each group company

Be one of the top 5 pulp&paper groups worldwide by 2015

Sales turnover JPY1.5—2 trillion

Operating margin > 8—10%

ROE > 8%

Overseas sales > 30%

Market cap. JPY1 trillion

Group Vision 201510-year target of the group

3.


Evolution to be a truly global player• Continuous replacement to

state-of-the-art paper machines• Expand overseas business• Tie up with foreign players

Group Vision 2015Road Map to the Group Vision 2015

Solidified corporate base

1st MTBPFY03-05

1st MTBPFY03-05

Strengthening domestic businesses

Group Vision 2015Group Vision 2015

Expanding overseas businesses

2nd MTBPFY06-08

2nd MTBPFY06-08

4th MTBPFY12-14

4th MTBPFY12-14

Reformation to survivein the global competition

• Reduce oil consumption• Conserve resources• Large-scale scrap and build• Form alliances• Business realignment

Achieve integration effects and stabilize financial base•Reform manufacturing structure•Reduce interest-bearing debt•Improve productivity

3rd MTBPFY09-11

3rd MTBPFY09-11

2001Integration

2001Integration

3.


－

200

400

600

800

1,000

1,200

2004H1 H2 2005H1 H2 2006H1 H2 2007H1 H2 2008H1 H2 2009H10

20

40

60

80

100

120

C Heavy oil consumption(12months)Dubai crude oil price

2004Sep. Nakoso

2006Oct. Ishinomaki

2007Oct. Fuji2008Jan. IwanumaFeb. Iwakuni

2008May YoshinagaJun. AkitaAug. ShiraoiSep. AsahikawaSep. Gotsu

2009May Otake

Hea

vy o

il co

nsum

ptio

nC

rude oil price？

* 2010 target

Current initiativesEnergy shift

3.

Heavy Oil25%

Coal27%

Other biomass7%

Purchase 11%Electricity, LNG, etc.

Black liquor

31%

Heavy Oil8%

34%

17%

31%

Installing biomass/new energy boilersto cut heavy oil consumption

10%

(000kl) ($/bl)

FY

Heavy oil consumptionHeavy oil consumption

Cutting emission of CO2 from fossil fuels by 13%* compared to 1990


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY2000 FY2002 FY2004 FY2006 FY2008E

WastepaperWood chip

Market pulp

P&PBproduction

(000 t)

Current initiativesSecuring fiber

3.

Improved recycled fiber utilization,minimizing dependency on market pulp

Fiber material consumptionFiber material consumption


S.Africa Oceania

S.America40

12

18

27

JapanN.America

1

2

24

Asia, Russia

16

8

12

28

13

NPG

(FY2008E)

Japanese excl. NP

G(2007)

Composition by region(%)

Equator Equator

3. Current initiativesSecuring fiber

-32 carriers support stable procurement of wood chip mainly from southern hemisphere.

-Coastal mill locations to optimize logistics

Wood chip sourcing mapWood chip sourcing map


0

50

100

150

200

250

Today Expandable

“Tree Farm Initiative”Expanding overseas afforestation -targeting over 300,000 hectare, -over 200,000 hectare by 2015, with advanced biotechnology, i.e. clonal propagation of “Elite” trees

South AfricaFSC

12Kha(Acacia etc.)

AustraliaAFS

78Kha(Eucalyptus)

ChileCertforChile

14Kha(Eucalyptus)

BrasilAcquired in

Nov.0662Kha+70kha

(Eucalyptus)

S.Africa

Brasil

Australia

Chile

(kha)

Expanding plantation area166kha 239kha

Self sufficiency 1/4 1/3

Current initiativesSecuring fiber

3.

(1 hectare = 2.59 acre)


Current initiativesPaper production restructuring

1. Startup :November 20072. Product :Lightweight coated paper3. Annual capacity :350,000t (daily capacity of 1,005t)4. Machine type :High-speed on-machine coater5. Wire width :9,450mm6. Operating speed :1,500m/min (designed speed: 1,800m/min)7. Operating personnel :8persons/shift (cutting to 6)

Introducing the latest technologywith Ishinomaki PM #N6

targeting the global market

3.


-

200

400

600

800

1,000

1,200

Nov

-07

Dec-07

Jan-08

Feb-08

Mar-

08

Apr-

08

May-08

Jun-08

Jul-

08

Aug-

08

Sep-08

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

DailyProduction(Planned)

DailyProduction(Result)

Machine Speed(Planned)

Machine Speed(Result)

Current initiativesPaper production restructuring

Successfully started up Ishinomaki PM #N6 operation

3.

Expertise in on-machine coater operationto support smooth start up

(t/day) (m/min.)

Dai

ly P

rodu

ctio

n Machine speed


PM/Coater ⊿Capacity Coating cap.・Ishinomaki N6 + 350 + 350・Ishinomaki 3 - 50・Ishinomaki 5 - 50・FCP 30 - 100 - 100・FCP 31 - 70 - 70・FCP 32 - 70 - 70

Sub total + 10 + 110・Fushiki 4 - 10 　　

・Fushiki 5 - 50・Fushiki 6 - 60 - 50・Komatsushima - 60・Waki 3 - 10・Waki 4 - 40 - 20

Sub total - 230 - 70Total - 220 + 40

• Raise operation rate overall• Shift product lineup to:

- growth category- higher margin

• Spread impact over the industry

Reduction by grade・Newsprint - 20・Uncoated - 70・Coated - 70・PPC - 40・Packaging etc. - 30

Total - 230

(000 t)

Current initiatives Paper production restructuring

3.


0

10

20

30

40

50

60

70

80

NPG Daio Oji Hokuetsu Export Domesti

Current initiatives Paper production restructuring

3.

Minimizing Supply/Demand gap in the coated paper marketwith capacity removal/grade shift and export drive

*Domestic 2008 demand estimated by JPA, and assumed to stay flat after 2008Export estimated by NPG based on Apr-Jul results, internal budget and other information** Based on announcements and analyst reports

New Capacity ** Shipment increase*

Incr.

Incr.

Japanese coated paper market balanceJapanese coated paper market balance

Net capacity increase matchesshipment increase forecast

ScrapIncr. Grade

shift

Incr. ScrapIncr.

800

700

600

500

400

300

200

100

0

(000 t/year)


Created Overseas sales divisionExploring “New” markets – Oceania, USA

Successfully expanding coated paper exports, and further this year

Current initiatives Overseas expansion strategy

3.

NPI Coated paper ExportNPI Coated paper Export

113196

295 (000 t)


Put through across the grades last yearUnderway…1. Newsprint April 1-2. Printing, Communication, etc. June 1-3. Tissue June 21-4. Containerboard, boxboard, etc. September 21-

More to go…1. Newsprint 2nd round2. Other paper grades depending on cost situation

Current initiatives Price increase

3.

• Pricing power enhanced through consolidations in manufacturers and distributors

• Shared vision to prioritize “Price” in the flat growth market• Input cost environment to eliminate room for discounting


80

90

100

110

120

130

140O

ct-0

5

Dec

-05

Feb-

06

Apr

-06

Jun-

06

Aug

-06

Oct

-06

Dec

-06

Feb-

07

Apr

-07

Jun-

07

Aug

-07

Oct

-07

Dec

-07

Feb-

08

Apr

-08

Jun-

08

Aug

-08

A2A3BitokoWFSCoated paper imports

Current initiatives Price increase

3.

Price trend of major gradesApr.2006=100%

Price trend of major gradesApr.2006=100%

• Price gap between domestic and imported coated paper squeezed • No threat of imports to resurge

(%)


Target Overseas MktFocus on LWC

Alliance between Hokuetsu Paper

Secure world-class domestic production networkand strengthen competitiveness of international product lineup

Current initiatives Strategic alliances in Japan

NPI IshinomakiN6

Hokuetsu NiigataN9

•Competitive coastal mills•State-of-the-art on-coater machines•Expertise in coated paper production

3.

ProgressMutual OEM－Started to supply from Ishinomaki N6. Jan. 2008-－Procure from Hokuetsu N9. Aug. 2008-Technology exchange in various fields and manners


Complement strengths in paperboardand corrugated product areas Envision deeper relationship

Alliance between Rengo and Sumitomo Corporation

Current initiatives Strategic alliances in Japan

•Sites with competitive market access•Best match to integrate packaging business•Platform to solidify the industry foundation

Container board

Corrugated products

NPG

Rengo

3.

ProgressIncreasing use of NDB containerboard Accommodating wastepaperCollaborating in packaging business


Yuen Foong Yu Paper Mfg. Co., Ltd.(Taiwan)-Biggest in Taiwan. -P&PB production: 1.3 million ton/year-Strong foothold in Greater China region-Date of agreement: Nov. 2007

SCG Paper PLC(Thailand)-Biggest in Thailand.-P&PB production: 2.7 million ton/year-Leading position in the ASEAN region-Date of agreement: Feb. 2008

Expanding ties beyond borders-Started mill visits and other exchanges-Explore opportunities of collaboration

Afforestation, OEM, Cultivating new markets, etc.

Current initiatives Strategic alliances overseas

3.


20

40

60

80

100

120

140

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007FY2008E

Capitalinvestment

Depreciation

2nd MTBP summary and the image of next steps Capital investment

4.

(JPY billion)Capital investment and DepreciationCapital investment and Depreciation

Intensive strategic investments to drive reformation

•

•

•

Scrap &Build 63

DIP 7

BiomassBoilers 76

JPY200 bn of strategic investments

in 2nd MTBP

and other


2nd MTBP summary and the image of next steps OP targets and results

4.

50

(JPY billion)

100

0FY2006 FY2008EFY2007FY2005

2nd MTBP Period

32.844.748.4

43.0

50.0

64.0

80.0

-37.0

Original targets

Estimation

Operating profitOperating profit


2nd MTBP summary and the image of next steps OP targets and results by factor

4.

• Input cost impact by far exceeding the assumption• Further price hikes needed • More drastic measures must be implemented

(JPY billion)

0

-100

Raw materials,

Fuels

Depreciation Sales priceOther Sales volumeCost cuｔ

4.3

104.7

8.8

Estimation-147.0

38.8

-12.2 1.5

14.5

45.8

-8.2

-49.0

Originalplan

+31.6 48.4 +31.6= JPY80bn48.4 - 5.4= JPY43bn

-5.4

OP change factors (against 2005 results= JPY48.4billion)OP change factors (against 2005 results= JPY48.4billion)

24.2-37.0


2006 2007 2008 2009 2010 2011

2nd MTBP

3rd MTBP

Measures

海外展開への本格展開・収益拡大

Ishinomaki Ｎ６

Energy shift(Building boilers)

Biz realignment

Hokuetsu alliance

Rengo alliance

Investment in Ishinomaki

Yuen Foong yu alliance

SCG Paper alliance

Overseas afforestation expansionAMCEL acquisition

Strengthen domestic base,Strategic move to overseas businesses

Expand and improve profitability of overseasbusiness,

Move

on to

th

e 2

nd

stage o

f ove

rseas e

xpansio

nSetting a course for sustainable growth•Solidify footing for overseas expansion

1.Cultivate markets (own and collaborative work)2.Building optimal production structure through alliances

•Further enhance int’l competitiveness of domestic units1.Replace production facilities2.Deepen ties with alliance partners •Secure resource

1.Expand afforestation2.Diversify sources

2nd MTBP summary and the image of next steps Formulating the 3rd MTBP

4.


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ubs conf 2008 · 1,290.0 1,165.5-200-200 400 600 800 1,000 1,200 fy2001 fy2002 fy2003 fy2004 f...

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