Aiming to be a World TOP 5

Transcription

1 Aiming to be a World TOP 5 Masayuki Hayashi Director (Engineering, R&D) UBS Global Paper & Forest Products Conference September,

2 Agenda 1. Introducing the Nippon Paper Group 2. Business environment 3. Group Vision 2015 and current initiatives 4. 2 nd MTBP summary and the image of next steps Forward looking statement Any 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 statement All rights reserved. Copyright 2007 Nippon Paper Group, Inc. Unauthorized use or reproduction of this material in part or in whole is strictly prohibited. 2

3 1. 1. Introducing the Nippon Paper Group Basic information Establishment: March 2001 Group net sales: JPY1.2 trillion (FY07) Total assets: JPY1.6 trillion Production of paper & paperboard: 7.7 million tons Number of employees: 13, ,000 10,000 15,000 20,000 25,000 ($ million) IP Stora Enso P&G SCA UPM OJI Weyco Smurfit Kappa KC NPG (Source: PPI Annual Review, Sept. 2007) Net sales of pulp, paper & converting operations World Top 10 Pulp&Paper companies 3

4 1. 1. Introducing the Nippon Paper Group Corporate history Holding Company 1972, Est. Sanyo-Kokusaku pulp 2001, Est. Nippon Unipac Holding 2004, Change in trade name Nippon Paper Group, Inc. 1949, Est. Jujo Paper 1938, Est. Daishowa Paper Manufacturing 1913, Est. The Japan Paper Industry 1964, Est. Jujo Paperboard Industries 1938, Est. Tohoku Paper 1993, Merger Nippon Paper Industries 1997, Merger Japan Paperboard Industries Nippon Paper Industries Operating Companies 2003, Restructuring Nippon Daishowa Paperboard Paper Paperboard Nippon Paper Crecia 2008, Restructuring Household Tissue Nippon Paper Specialty Papylia Paper Listed/Ex-listed company 1918, Est. Mishima Paper 4

5 1. Introducing the Nippon Paper Group Our position in Japan Paper Paperboard 1992 Hokuetsu Honshu 31% 3% 4% 4% 5% 6% Kanzaki Others Mitsubishi Oji 16% Daio 8% Jujo 12% Daishowa 11% Sanyo Kokusaku Pulp Others 33% Honshu 14% Settsu 9% Rengo 6% 5% Daio Jujo 2% Tohoku 2% 5% Hokuetsu Daishowa 2% 3% 5% Takasaki 3% 4% Sanko Japan 3% 4% Chuo Tokai Koa 2007 Chuetsu 5% 24% Others Marubeni 5% Mitsubishi 5% 5% Hokuetsu Daio 11% Nippon Paper Group No.1 31% Oji 25% Hokuetsu Marubeni Tokai 3% 4% 4% Daio 7% 20% Others Rengo 18% Nippon Paper Group No.3 15% Oji 28% Source: JPA etc. 5

6 1. Introducing the Nippon Paper Group Performance history Net sales EBITDA* Operating income Net income Net sales (JPY billion) 1, , , , , , , ,200 1, (JPY billion) 1, Income FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008E *EBITDA=Ordinary income + interest paid - interest received + depreciation 6

7 2. 1. Business environment Production growth in Japan (million t) 35 P&PB production Maturing domestically Population (million) Total Population Paper Paperboard (CY) 7

8 1. 2. Business environment Imports and exports trend Import flux recently stabilizing Export to pick up with long-term focus 10% 8% 6% Paper Import/Export ratio Import Ratio= Imports/(Domestic shipment+imports) Imports in % * 4% 2% 0% Export Ratio= Exports/Domestic production Exports in % (CY) * Excluding newsprint from Japanese manufacturers overseas operations (approx.90kt in 2007) 8

9 1. 2. Business environment Raw materials/fuels price trend Input cost trend Jan price = 100 Woodchip, Wastepaper, Pulp, Fuel Rapid increase in input cost Few signs of peaking out Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 woodchip ONP OMG OCC NBSK Dubai crude oil Coal 9

10 3. Group Vision year target of the group ~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 10

11 3. Group Vision 2015 Road Map to the Group Vision 2015 Group Vision th MTBP FY rd MTBP FY nd MTBP FY06-08 Expanding overseas businesses Strengthening domestic businesses Evolution to be a truly global player Continuous replacement to state-of-the-art paper machines Expand overseas business Tie up with foreign players Reformation to survive in the global competition Reduce oil consumption Conserve resources Large-scale scrap and build Form alliances Business realignment 1 st MTBP FY Integration Solidified corporate base Achieve integration effects and stabilize financial base Reform manufacturing structure Reduce interest-bearing debt Improve productivity 11

12 3. (000kl) 1,200 Current initiatives Energy shift Other biomass 7% Heavy Oil Black liquor 25% 31% Purchase 11% Electricity, LNG, etc. Coal 27% Installing biomass/new energy boilers to cut heavy oil consumption Cutting emission of CO 2 from fossil fuels by 13%* compared to %? 17% Heavy Oil 8% 34% 10% ($/bl) 120 Heavy oil consumption 1, Heavy oil consumption C Heavy oil consumption(12months) Dubai crude oil price Crude oil price -FY 2004H1 H2 2005H1 H2 2006H1 H2 2007H1 H2 2008H1 H2 2009H Sep. Nakoso * 2010 target 2006 Oct. Ishinomaki May Yoshinaga Oct. Fuji May Otake Jun. Akita 2008 Aug. Shiraoi Jan. Iwanuma Sep. Asahikawa Feb. Iwakuni Sep. Gotsu 12 0

13 3. Current initiatives Securing fiber Improved recycled fiber utilization, minimizing dependency on market pulp (000 t) 8,000 Fiber material consumption 7,000 6,000 5,000 4,000 3,000 Waste paper Wood chip Market pulp P&PB production 2,000 1,000 0 FY2000 FY2002 FY2004 FY2006 FY2008E 13

14 3. Current initiatives Securing fiber Wood chip sourcing map Japan Asia, Russia N.America Japanese excl. NPG (2007) NPG(FY2008E) Composition by region(%) 13 2 Equator Equator S.Africa Oceania S.America -32 carriers support stable procurement of wood chip mainly from southern hemisphere. -Coastal mill locations to optimize logistics 14

15 3. Current initiatives Securing fiber 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 Expanding plantation area 166kha 239kha Self sufficiency 1/4 1/3 (kha) Brasil Australia S.Africa Today Chile Expandable South Africa FSC 12Kha (Acacia etc.) (1 hectare = 2.59 acre) Australia AFS 78Kha (Eucalyptus) Chile CertforChile 14Kha (Eucalyptus) Brasil Acquired in Nov.06 62Kha +70kha (Eucalyptus) 15

16 3. Current initiatives Paper production restructuring Introducing the latest technology with Ishinomaki PM #N6 targeting the global market 1. Startup :November Product :Lightweight coated paper 3. Annual capacity :350,000t (daily capacity of 1,005t) 4. Machine type :High-speed on-machine coater 5. Wire width :9,450mm 6. Operating speed :1,500m/min (designed speed: 1,800m/min) 7. Operating personnel :8persons/shift (cutting to 6) 16

17 3. Current initiatives Paper production restructuring Successfully started up Ishinomaki PM #N6 operation (t/day) 1,200 (m/min.) 1,800 Daily Production 1, ,600 1,400 1,200 1, Daily Production (Planned) Daily Production (Result) Machine Speed (Planned) Machine Speed (Result) - - Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Machine speed Expertise in on-machine coater operation to support smooth start up 17

18 3. Current initiatives Paper production restructuring (000 t) PM/Coater Capacity Coating cap. Ishinomaki N Ishinomaki 3-50 Ishinomaki 5-50 FCP FCP FCP Sub total Fushiki 4-10 Fushiki 5-50 Fushiki Komatsushima - 60 Waki 3-10 Waki Sub total Total 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 Total

19 3. Current initiatives Paper production restructuring (000 t/year) Minimizing Supply/Demand gap in the coated paper market with capacity removal/grade shift and export drive New Capacity ** Japanese coated paper market balance Incr. Scrap Incr. Shipment increase* Incr. Scrap Incr. Grade shift Net capacity Incr. increase matches shipment increase forecast NPG Daio Oji Hokuetsu Export Domesti *Domestic 2008 demand estimated by JPA, and assumed to stay flat after 2008 Export estimated by NPG based on Apr-Jul results, internal budget and other information ** Based on announcements and analyst reports 19

20 3. Current initiatives Overseas expansion strategy Created Overseas sales division Exploring New markets Oceania, USA NPI Coated paper Export (000 t) Successfully expanding coated paper exports, and further this year 20

21 3. Current initiatives Price increase Put through across the grades last year Underway 1. Newsprint April 1-2. Printing, Communication, etc. June 1-3. Tissue June Containerboard, boxboard, etc. September 21- More to go 1. Newsprint 2 nd round 2. Other paper grades depending on cost situation 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 21

22 3. Current initiatives Price increase (%) 140 Price trend of major grades Apr.2006=100% Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 A2 A3 Bitoko WFS Coated paper imports Price gap between domestic and imported coated paper squeezed No threat of imports to resurge Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 22

23 3. Current initiatives Strategic alliances in Japan Alliance between Hokuetsu Paper Secure world-class domestic production network and strengthen competitiveness of international product lineup Competitive coastal mills State-of-the-art on-coater machines Expertise in coated paper production NPI Ishinomaki N6 Hokuetsu Niigata N9 Target Overseas Mkt Focus on LWC Progress Mutual OEM -Started to supply from Ishinomaki N6. Jan Procure from Hokuetsu N9. Aug Technology exchange in various fields and manners 23

24 3. Current initiatives Strategic alliances in Japan Alliance between Rengo and Sumitomo Corporation Complement strengths in paperboard and corrugated product areas Envision deeper relationship Sites with competitive market access Best match to integrate packaging business Platform to solidify the industry foundation Container board Corrugated products Rengo NPG Progress Increasing use of NDB containerboard Accommodating wastepaper Collaborating in packaging business 24

25 3. Current initiatives Strategic alliances overseas Expanding ties beyond borders -Started mill visits and other exchanges -Explore opportunities of collaboration Afforestation, OEM, Cultivating new markets, etc. 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 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

26 4. 2 nd MTBP summary and the image of next steps Capital investment (JPY billion) Intensive strategic investments to drive reformation Capital investment and Depreciation JPY200 bn of strategic investments in 2 nd MTBP Scrap & Build 63 Biomass Boilers 76 DIP 7 and other Capital investment Depreciation FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007FY2008E 26

27 4. 2 nd MTBP summary and the image of next steps OP targets and results (JPY billion) 100 Operating profit 80.0 Original targets Estimation 0 FY2005 FY2006 FY2007 FY2008E 2 nd MTBP Period 27

28 4. 2 nd MTBP summary and the image of next steps OP targets and results by factor (JPY billion) 0 OP change factors (against 2005 results= JPY48.4billion) = JPY80bn = JPY43bn Original plan Estimation Raw materials, Fuels Depreciation Other Cost cut Sales volume Sales price Input cost impact by far exceeding the assumption Further price hikes needed More drastic measures must be implemented 28

29 4. 2 nd MTBP summary and the image of next steps Formulating the 3 rd MTBP Setting 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 units 2nd MTBP 3rd MTBP Measures 1.Replace production facilities 2.Deepen ties with alliance partners Strengthen domestic base, Strategic move to overseas businesses Expand and improve profitability of overseas 海外展開への本格展開 収益拡大 business, Ishinomaki N6 Energy shift(building boilers) AMCEL acquisition Biz realignment Hokuetsu alliance Rengo alliance Yuen Foong yu alliance SCG Paper alliance Overseas afforestation expansion Secure resource 1.Expand afforestation 2.Diversify sources Investment in Ishinomaki Move on to the 2 nd stage of overseas expansion 29

30 Thank you! Please visit our website 30