Road
Map to 2015 and position of Second Medium-Term Business Plan
Nippon Paper Group embarked on its Second
Medium-Term Business Plan (MTBP) covering the three years from fiscal 2006 to
fiscal 2008, in April 2006. This plan represents the first step toward achieving
the operating income target of ¥100 billion established in the Group Vision 2015*.
Nippon Paper Group has decided to devote the first half of the time until 2015
to strengthening its domestic pulp and paper business and then focus on expanding
its overseas business during the second half. The Second MTBP is positioned as
an important starting point for achieving the group vision.
*
Group Vision 2015 outlines the goals
of Nippon Paper Group in 2015 and provides a guideline for group management going
forward. Group Vision 2015 (HTML)
Business
environment affecting Nippon Paper Group
Japan faces the further aging of its society
and the advent of a declining population. Consequently, the growth rate of the
domestic paper and paperboard market is expected to remain flat or decline.
Rising
raw material and fuel prices, including persistently high crude oil prices and
higher woodchip prices, are pressuring earnings.
We believe the business environment
affecting Nippon Paper Group will grow more severe due to intensifying international
competition, including an increase in the amount of paper imported into Japan,
and to fierce competition between domestic manufacturers. We must independently
reform our business structure to ensure stable earnings amid changes in the external
environment.
Independent
reforms to compete successfully in Asian markets
The primary challenge in the Second MTBP
is to strengthen the foundation of domestic
businesses through a scrap-and-build program and measures to address the cost
of raw materials and fuel. We must pursue
independent reforms in terms of size, cost, and technology in order to compete
successfully in Asian markets.
During the plan period, we will concentrate
investment on domestic core mills to fully leverage the group's strengths and
create a robust manufacturing structure with the best manufacturing facilities
to compete successfully in Asian markets. Specifically, we will overhaul our
domestic manufacturing structure by quickly implementing a scrap-and-build program
that centers on the installation of new paper machine at the Ishinomaki Mill
of Nippon Paper Industries Co., Ltd.
We will also actively invest in new energy boilers as a response to energy costs
and means to reduce carbon dioxide emissions. We will create a foundation for
future growth by pursuing a variety of initiatives that marshal the collective
strength of the group.
Some specific measures are cited below.
<Strengthen core businesses>
(Paper business)
•
Establish the most competitive manufacturing facilities in Asia,
including installing the world's most advanced paper machine at the Ishinomaki
Mill of Nippon Paper Industries.
•
Enhance the basic level of competitiveness of each mill by reducing energy
costs with new energy boilers that do not use heavy oil and by augmenting de-inked
pulp equipment.
•
Lead the market in terms of quality competitiveness by utilizing accumulated
technologies, including technology for lightweight, low density printing paper.
•
Pursue a more thorough-going distribution and logistics strategy.
(Paperboard business)
•
Move to stabilize sales by bringing downstream operations into
the group.
(Household tissue business)
•
Work to enhance productivity and expand sales while pursuing
streamlining with an emphasis on reducing logistics and labor costs.
<Lay groundwork for restructuring business portfolio>
(Raise percentage of overseas sales to 30%)
Bolster the overseas business planning department, set up business locations
in target overseas markets, and actively pursue M&A.
(Raise percentage of non-pulp and paper sales to 30%)
Actively pursue M&A and establish new businesses, such as the agribio business.
<Strategically allocate personnel at the group level>
•
Rectify any misallocation or duplication of personnel from the
standpoint of achieving optimal group-wide allocation.
•
Actively reassign personnel to strategic and growth businesses.
•
Pursue measures to pass on skills
and enhance personnel training for overseas and non-pulp and paper businesses.
<Capital policies and financing>
Implement the following measures to secure the capital investment funds needed
to enhance management and operating platforms.
•
Maintain credit rating while continuing large-scale investments.
•
Effectively use assets and sell idle assets, non-performing or low-performing
assets, and unprofitable and non-strategic businesses.
•
Diversify fund procurement.
<Group environmental response program>
We are pursuing an environmental response program based on our product strategy
in accordance with Action Guidelines of the Nippon Paper Group Charter on the
Environmental. This environmental response program is part of our product strategy
and involves the integrated management of environment-related factors in all
aspects of our business from the procurement of raw materials and fuel to the
sale of products. We launched this program at Nippon Paper Industries in 2006
and will expand it to other group companies going forward.
<Reforms to organization and group governance structure>
•
Strengthen the functions of Nippon Paper Group, Inc.
•
Develop corporate functions.
Business targets and performance indicators
We have set the following business targets for fiscal 2008, the
final year of our Second MTBP.
We also target the following performance indicators in fiscal 2008.
Cash flow plan
We have set the following three-year cash flow plan.
Main capital expenditures
•
New energy boilers (reduce oil
consumption) ¥60 billion
Scrap and build paper manufacturing facilities (seek international competitiveness)
¥63 billion*
*
The ¥63 billion figure for scrapping and
building paper manufacturing facilities includes about ¥8 billion of the ¥15
billion figure for augmenting de-inked pulp equipment.
