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1
NIPPON PAPER GROUPThird Medium-Term Business Plan
FISCAL 2009 – 2011
“Accelerating restructuring for GV2015”
Analyst MeetingNovember 9, 2009
NIPPON PAPER GROUP, INC.
2
1.Business environment and objectives of the 3rd MTBP
2.Outline of the 3rd MTBP
3.Financial targets
Contents
3
China's Domestic Demannd
21.43 23.44 25.48 26.94 29.19 31.64 33.5
21.8924.62
28.9132.36
36.8141.26
45.85
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007 2008-China Papaer Association -
(million tons)
Paperboard
Paper
Japan's Domestic Demand
19.45 19.25 18.57 17.07
12.48 12.46 12.1811.19
0
5
10
15
20
25
30
35
2006 2007 2008 2009-Japan Paper Association-
(millon tons)
Paperboard
Paper
- Fast-growing Asian market- Increased threat of imports
- Shrinking domestic paper market- Drastic changes in demand structure after Lehman Shock
1.Business environment and objectives of the 3rd MTBP
Business Environment ①
42012 20132008 2009 2010 2011
Demand growth became
negative
Demand growth became
negative
2014 2015
Restructuring to meet demand shiftRestructuring to
meet demand shift
Lehman
ShockIncreased paper
ImportsIncreased paper
Imports
Assumed timingAssumed timingActual Actual
1.GV2015 anticipated increased paper imports and negative demand growth, but2.Lehman Shock brought such changes much earlier than anticipated.3.Expedited restructuring is critical.
Bus
ines
s E
nviro
nmen
tM
anag
emen
tPo
licy
1. Business environment and the objectives of the 3rd MTBP
Business Environment ②
5
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2007 2008 2009 2010 2011
(1,000 tons) Paper
Paperboard
FY2011 Domestic SalesVolume Forecast(compared with FY2007)
Paper= 80%
Paperboard= 100%
NPG Domestic Sales OutlookNPG Domestic Sales Outlook
1. Business environment and the objectives of the 3rd MTBP
Domestic demand outlook
6
GroupVision2015
Secure solid domestic revenue base
FY2009~2011Third Medium-Term
Business Plan
Acceleratingrestructuring for
GV2015
FY2006~2008
Second MTBP
FY2012~2014
Fourth MTBP
Grow by expanding overseas business
1. Business environment and the objectives of the 3rd MTBP
The 3rd MTBP Objectives
■Domestic paper market to shrink to the 80% level of FY2007➣Revise management resource allocation
■Non-”pulp & paper” segments to support the bottom line
7
Ⅰ.Downsize domestic paper business to 80% (Restructuring for surviving import competition)
Ⅱ.Promote overseas business(Utilizing overseas subsidiaries and alliances for expansion)
Ⅲ.Propel resource procurement strategy(Securing resources to support long-term business growth)
Ⅳ.Improve group mobility and management efficiency(Maximizing group synergy and rationalizing overhead)
Ⅴ.Develop new business(Nurturing new business outside paper domain)
2.Outline of the 3rd MTBP
Main Policy of the 3rd MTBP
8
Downsizedomestic
paper businessto 80%
Optimizing production capability
Enhance competitive advantages against imports by:
Streamlining back office operation
NipponPaper
Industries
Company Main Policy Measures
Reducing further costs of logistics and sales
Emphasizing more on resource-saving andeco-friendly products
Pulp and Paper Business (1) Pulp and Paper Business (1)
2.Outline of the 3rd MTBP
Ⅰ.Downsize domestic paper business to 80% ①
9
➣15 machines shut-down to secure sustainable operation rate <saving an ¥8 billion fixed cost>
(depr.1.9, energy 1.5, maintenance 1.1, labor 3.5)
➣Improve operation efficiency of existing machines
Continued restructuringContinued restructuring
NPG capacity and FY2011 domestic sales outlook
2.Outline of the 3rd MTBP
Ⅰ.Downsize domestic paper business to 80% ②
(,000 tons)
Before Shut-down※ After
Paper 5,766 ▲742 5,024 4,500Paperboard 1,963 ▲133 1,830 1,600
TOTAL 7,729 ▲875 6,854 6,100※Including temporary shut-downs during maintenance period.
Capacity SaleOutlook
10
➣Further reduction in fixed costs
➣Additional cost cutting in logistics and sales
➣More emphasis on R&D for resource saving products and eco-friendly engineering
Strengthening competitive advantagesStrengthening competitive advantages
2.Outline of the 3rd MTBP
Ⅰ.Downsize domestic paper business to 80% ③
11
Company Main Policy
Pulp & Paper Business (2)Pulp & Paper Business (2)
Establish cost-competitivenessas the container board supplier
Optimize production capability(reorganization)
Focus on thinner grades
Nippon Daishowa
Paperboard
Reduce dependency on mass-production grades Promote health(elder)care products
Expand to medical-related supply (Flu-prevent products)
Nippon PaperCrecia Restructure business model
to meet societal change
Measures
Nippon PaperPapylia
Promote cigarette related paper globally
Encourage R&D for new products
Strengthen sales force utilizing group network
2.Outline of the 3rd MTBP
Major group companies’ strategies ①
12
Company Main Policy Measures
Nippon PaperChemical
Add higher value to main products
Focus on products withhigh potential
Encourage investment on added value DP business
Strengthen functional film business
Paper Related BusinessPaper Related Business
NipponPaper-Pak
Improve margin by cost-cuts Promote in-house supply of milk-carton board
Shift from export to local production
Exploit new/replacing demand by developing new products
Enter into Asian market
2.Outline of the 3rd MTBP
Major group companies’ strategies ②
13
Company Main Policy Measures
Improve profit marginunder NPG’s 100% ownership
Capital investment to increase competitiveness
(in-house production/streamlining)
Close collaboration with group companies
ShikokuCoca-Cola
Bottling
Other businessOther business
2.Outline of the 3rd MTBP
Major group companies’ strategies ③
14
Company/Partner Main Policy Measures
Maximize NPG brand presence in Oceania and its neighboring
areasImprove operation control
Increase market share by utilizing mutual sales network
Bringing in NPG’s management resources and know-how
AustralianPaper
Yuen Foon Yu(Taiwan)
SCG Paper(Thailand)
Expand paperboard business in fast-growing
China marketInvesting in YFY’s paperboard business
Exploit business opportunity in
Southeastern AsiaMutual OEM sales in each market
2. Outline of the 3rd MTBPⅡ.Promote overseas business
15
Secure forestry resources to support
mid- to long-term growth
Streamlining woodchip carriers
Main Policy Measures
Restructuring woodchip sourcesDownsize
procurement system
2. Outline of the 3rd MTBPⅢ.Promote resource procurement strategy
Expanding own forestry resources(Tree Farm Initiative – 200,000 ha overseas)
Utilize domestic forestry resources(sawmill waste and logs from thinning, etc.)
16
Improve operation efficiency
Utilizing shared-service and out-sourcing
Streamlining administrative sections
Objectives Measures
Relocating major group companies atnew headquarters building (Takebashi)
Reduce overhead cost by cutting head-count
2.Outline of the 3rd MTBPⅣ.Improve group mobility & management efficiency
17
Other
Allocating management resource to promising area
Allocating management resource to promising area
●Developing health related products by utilizing active ingredients contained in wood resource●Converting wood resource into feed●Joint study/venture in agricultural area
■Food &Healthcare
●Development from nano-fibered cellulose
■New Materials
●Selective plant breeding to expand biomass resource●Developing cellulose-based material to replace plastics
■Reducing CO2 emission
Housing & construction
materials
2.Outline of the 3rd MTBP
Ⅴ.Develop new business
Pulp & Paper
Paper-related
Biobusiness
Wood-relatedchemicals
Agribusiness
18
FY2010-2011 Outlook(vs. FY2009)FY2010-2011 Outlook(vs. FY2009)
3.Financial Targets
Premises
Paper Paperboard Recoverd Paper Woodchips
Paper Paperboard Oil (Dubai) Coal
US$ A$
\95.00 \75.00Exc
han
geR
ate
Sal
es
Price
Dom
est
icD
em
and
Raw
Mat
erial
sFuel
19
65.2
44.7
32.8
20.0
48.436.0
55.0
0
10
20
30
40
50
60
70
2004 2005 2006 2007 2008 2009E 2011t
(\bn)
(FY)
Historical Trend
FY2011 Operating Income Target: ¥55 billionFY2011 Operating Income Target: ¥55 billion
3.Financial Targets
Consolidated operating income target
20
20
(¥ bn)
Sales Price▲100
FY2009E vs. FY2011FY2009E vs. FY2011
30Sales Volume
+200
40
50 Depreciation etc.
+70
10
3.Financial Targets
Factor analysis – Impact on operating income
0
Input Cost▲120
Cost Cut
+140
¥55 bn
FY2011P
Increase by ¥19 bn(¥36bn ⇒ ¥55 bn)
¥36 bn
FY2009E
21
4%
70%
11%
15%
0%
8%
12%
80%
Pulp & Paper Paper related Housing & Construction Materials
Other
-FY2009-¥36 billion
-FY2011-¥55 billion
More contribution from non-“pulp and paper” segments excepted and required
3.Financial targetsSegment information: Operating income contribution
22
GroupVision2015
Strengthening domestic business foundation
FY2009~2011Third Medium-Term
Business Plan
Acceleratingrestructuring for
GV2015
FY2006~2008
Second MTBP
FY2012~2014
Fourth MTBP
Growth by expanding overseas business
1. Business environment and the objectives of the 3rd MTBP
The 3rd MTBP Objectives
■Domestic paper market to shrink to the 70% level of FY2007➣Revise management resource allocation
■Non-“pulp and paper” segments to support the bottom line
23
3. Financial targetsDepreciation, Capex and Debt
■Depreciation(FY2010-FY2011 total)
¥150 billion
■Capex(FY2010-FY2011 total )
¥65 billion
■Interest-bearing Debt (←cut by ¥80billion) 31 Mar.2012(E) 31 Mar.2010(E)
¥690 Billion ¥770 billion
■D/E Ratio31 Mar. 2012(E) 31 Mar.2010(E)
×1.5 ×1.8
24
予測に関する注意事項等Disclaimer
These materials include company-related forecasts, plans, and management targets. Forward-looking statements are based on assumptions about the future and trends at the time of producing these materials and contain uncertainties. Actual results could differ significantly from what is presented here.
These materials do not represent an offer or solicitation of an offer to purchase securities, and the contents do not constitute an agreement or promises of any kind.