First Half of Year-Ended March 31,2010

Business Report

Part-1: Financial Review, 2010 First half
Part-2: Enhanced Countermeasures

November 17, 2009
Mitsubishi Paper Mills Ltd.

PART - 1

Financial Review for the First Half ofThe Fiscal Year-ended March 31. 20101

Key Figures＜Consolidated＞（unit:100million yen）

FY2008First-Half

FY2009First-Half（単位：億円）OriginalForecast（published5/8/09）

Increment％

AmountSales Profit %Amount

1,343－

1,083－

▲260

▲19.3

1,150

Operating Profit

392.9121.1▲ 27▲68.820

Ordinary Profit

312.320.2▲ 29▲92.15Net Profit

32

2.4▲16▲1.5▲ 48－▲10Revenue

Revenue

Sales Profit %Operating Profit

AmountAmount

Net Profit

Ordinary Profit
100

3,000
2,500

FY

2,285

First-Harf

120

2,585 2,531
2,443

FY

First-Half

100

9380

10080

1,135

1,185

1,264

1,343

7371

60

4860

1,083

1,000

40500

200071
60

65

30

3133

45

12202421252006

3007

2008

2009

2006

2007

2008

2009

6137

32

6

1200

2005

60

2022005

73404531217253

40

39First-Half

First-Half
80

2,260

2,000
1,500

FYFY

2005
-20200520062007

2008

20092006

2007

02008
△162009

2Segment Information by Product＜Consolidated＞（unit:100million yen/%）
FY2008First-HalfRevenue
Operating Profit

2,000940▲249▲21.0

Photosensitive

174147▲ 27▲15.2Others

114107▲7▲ 5.7

Internal Transfer▲134▲11123－Total

1,343

1,083

▲260

▲19.3

Pulp & Paper

3614▲ 22▲61.4

Photosensitive▲ 1▲ 5▲ 4－Others3302.8Internal Transfer

10▲ 1－Total

3912▲ 27▲68.8

1,000500

Operating Profit（unit:100million yen）

2,129

2,27180

2,219First-Half

1,5001030

98111041189

Pulp&Paper
Photosensitive

50409403482006

Pulp & Paper
49164

171672007

2008

2009

1476545362822 21810174（unit:100million yen）

Photosensitive

3034202005

70

18 2120333
151

FY60

Photosensitive
333%

1,189

Pulp & Paper
1,971

Increment

Pulp & Paper

Revenue
2,500

FY2009First-Half

14

115-10-1-2-10

2005

2006-52007

2008

2009

3

Segment Information by Regions ＜Consolidated＞（unit:100million yen/%）
FY2008First-Half

FY2009First-Half

Revenue
Operating Profit

1,068

893

▲175

▲16.3

Europe269175▲ 94

▲34.9

U.S.A

4337▲6▲14.3

Internal Transfer▲37▲2215－Total

1,343

1,083

▲260

▲19.3

Japan359▲ 26▲74.0Europe

110

20.3

U.S.A

110

31.6

Internal Transfer

21▲ 1－Total

3912▲ 27

▲68.8

（unit:100million yen）
90

2,500

Japan
1,822

1,950

2,051

500

909

1,001

942

First-Half

60
50

219233

2006

2007

2008

6663Japan
35

24 Europe 25

27

20475
26255

4026902005

Japan

893

526

（unit:100million yen）
82

70

30477

446

FYEurope

1,068

EuropeOperating Profit

80

2,037

1,500

1,000%

Japan

Revenue

2,000Increment

2009

175

5104402005

2006

9630320072008112009

4

Breakdown of Increase/Decreaseof Consolidated Ordinary Profit
First-Half of FY2009

100million yen

First-Half of FY2008
31

Sales
（Quantity・Product mix）
▲76Others First-Half of FY2009
Cost Reduction ▲22＋3
Fixed costand others＋8
Raw Material &Energy Cost
＋36

Sales
（Price）＋25

Balance Sheet＜Consolidated＞（unit:100million yen）

Ended of March 31,2009
Amount%Ended of Sept. 30, 2009
Amount%Increment
Amount

2,943

100.0

2,927

100.0

▲16

Current Assets

1,166

39.6

1,127

38.5

▲39

Fixed Assets

1,777

60.4

1,800

61.5

23

Tangibles

1,362

46.3

1,359

46.4

▲ 3Intangibles

140.5

120.4

▲ 2

Investment and Others

401

13.6

429

14.7

282,238

76.1

2,239

76.5

11,588

54.0

1,512

51.7

▲76650

22.1

727

24.8

77705

23.9

688

23.5

▲171,635

－

1,675

－

40

AssetsLiabilities
Current Liabilities
Long-Term Liabilities
Net Assets

Interest Bearing Debts（including accrued expenses）

6

Statement of Cash Flow ＜Consolidated ＞（unit:100million yen）

FY2008First-Half

FY2009First-Half

Increment

AmountAmountAmountCash Flow from Operating Activities

114231

Cash Flow from Investing Activities▲40▲66▲26Cash Flow from Financing Activities

4522▲23

Effect of Exchange Rate Fluctuation on Cash & CashEquivalents

000Net Increase/Decrease in Cash and Cash Equivalents

16▲ 2▲18Cash and Cash Equivalents at the Beginning of the Year

2335

12

Cash and Cash Equivalents at the End of the Year3933▲ 67

Forecast for FY20098

Forecast ＜ Increase/Decrease Factors ＞（unit:100million yen）
FY2008

1STHalf

2ndHalf

Forecast of FY2009

FY2008

Increment

2nd Half

1STHalf

1STHalf

2nd Half

FY2009（Forecast）（Forecast）(Actual)FY (Forecast)(Forecast)

Amt%

Amt%

Amt%

1,343

1,188

2,531

1,083

1,177

2,260

▲260

▲19.3

▲11▲0.9▲271▲10.7

Pulp & paper

1,189

1,030

2,219940

1,010

1,950▲249▲21.0▲20▲1.9▲269▲12.1

Photosensitive

174

168342147

170317▲ 27▲15.2

21.0▲ 25▲ 7.2

Others114102216107

110

217

▲ 7▲ 5.78

7.5

10.6

InternalTransfer▲134▲112▲246▲111

▲113

▲224

23－

▲ 1－

22－

Operating Profit

393271

123345▲ 27▲68.8

11.5▲26▲36.7

Ordinary Profit31144522325▲ 29▲92.1

958.0▲20▲44.4

Net Profit

32▲ 2012▲ 16160▲ 48－36－▲12▲100.0Revenue

Forecast of the 2nd Half: ¥95/$、Dubai crude oil $70/barrel

9Breakdown of Increase/Decreaseof Consolidated Ordinary Profit
Comparison of the 2ND Half (Forecast)Comparison of the 1ST Half (Actual)
1ST Half of FY2008+31
Sales（Quantity・Product mix）
▲76

Cost
Reduction＋3
Fixed Cost＋8

ST Half of FY2009

Others 1▲2+2

2ND Half of FY2009+23
Others2nd Half of FY2008+14CostReduction＋6Sales（Price）▲30＋8Raw Material& Energy Cost
Sales＋39（Quantity・Product mix）
▲9Raw Material& Energy Cost＋36
Sales（Price）＋2

Fixed Cost
▲5Comparison of FY2008 and FY2009(Forecast)
FY2008FY2009+45Sales（Quantity・Product mix)
▲85

Cost Reduction
Fixed Cost＋9＋3Others＋6+25

Raw Material& Energy Cost＋75
Sales（Price）▲2810

Key Indices＜Consolidated＞（unit:100million yen）

FY2008First-Half
Interest Bearing Debts(including Accrued Expenses)

FY2009First-Half

FY2009(Forecast)

1,640

1,675

1,650

Depreciation

6465130

Investment

9055804,599

4,6324,470

Number of Employees

11Key Indices ＜Non-consolidated＞（unit:100million yen/%）
FY2008

Sales Data

1STHalf

FY20091STHalf

Fiscal Year

Fiscal Year

（単位： 千t ）Sales Qty. Sales Amt. Sales Qty. Sales Amt. Sales Qty. Sales Amt. Sales Qty. Sales Amt.

Paper

Uncoated (Wood-free, etc)
Coated (Coated & IJ Paper,etc)
Business Communication
Paper (Thermal,Carbonless Paper, etc)
White Card Board
Others (Leaf paper,
Hygiene Paper, Non-Woven
Fabric ,etc)

Total

92

113

179

221

79

98

160

195

328

446616

826

246

328

532

7014710587202409379183

2427455322274553

950

17988431694

500

741

944

1,400395589

832

1,226

1ST Half of FY2008
Exchange Rate

1ST Half of FY2009¥106.23/US＄¥95.27/US＄

Annual Usage of Woodchips(Import Ratio)

607Tｔ
（66％）

500Tｔ
（67％）

Annual Usage of Purchased Pulp
(Purchase Ratio)

45Tｔ
（11％）

23Tｔ
（7％）

Annual Usage of Oil

20Tｋｌ

19Tｋｌ

Annual Usage of Coal

155千ｔ

131Tｔ

Purchase Electric Power(Self-Generation Ratio)

144MWH（80％）

130MWH（79％）

RE：The raw materials & energy usage quantities are included Kitakami High Tech Paper usage

12

PART - 2- Coping with an increasing severe Business Environment -［Enhanced Countermeasures］
From “Scale” to “Cost Competitiveness” and “Value Added”～”Countermeasures to meet the structural change of the markets ”
and “Survival in Core Businesses”～

Nov. 17, 2009
Kunio Suzuki,
President and CEO
Mitsubishi Paper Mills Ltd.

Goals, Set in Post Phoenix Plan
（Mid Term Plan）
Targeted position in our Industry

Business Portfolio

Obtain the highest Profitability in ourindustry through establishing the uniqueposition of MPM as “High Grade andInformation Media”

Business group with balanced growth of
3 business areas i.e. Printing &Communication Paper, DI Media, andNew Products

Basic Target
Sales

300 Bill Yen

Ordinary Profit

15.0 Bill Yen

ROS5%

Keep the Target unchanged as the company vision１Countermeasures to Date
Strategic alliances

Strategic Alliances

Alliance with FUJIFILM＜Sales expansion of RC base paper＞→ Supplying Resin Coated base paper for photo papers
The Alliance with OJI Paper＜Consolidation of Communication paper＞→ Supplying a part of Non-Carbon base paper produced at Hachinohe mill
Expansion of Printing paper supply sources→ Sales alliance of ‘Mitsubishi Paper Sales co.’( paper sales agent)
with ‘Hokuetu・Kishu Paper’ and ‘Daio Paper’

Strengthening of Domestic Sales

Strengthening ofDomestic Sales

Expansion in theGlobal Market

Platform for Future Growth

Expansion of ‘FSC certified paper’ <Sales increase in Printing andCommunication Paper>→ FY2009 forecast Build up 10,000ｔ／M
Development of High value added Ink Jet Media→ Development and Sales Promotion of High Quality Photo Ink Jet Paper

Expansion in the Global Market
Restructuring of German Operation→ Review of Product Portfolio and realignment of Product mix

Platform for Future Growth

Cost Structure
Reformation
Promotion
Promotion ofof CSR
CSR Management
Management
Further
Further effort
effort forfor Environment
Environment && Forest
ForestResource
Resource Protection
Protection

Strengthening
Strengthening ofof GroupGroup
Consolidation
Consolidation Management
Management

Investment in Production infrastructure at Hachinohe Mill <considering future
expansion of energy supply>→ Under review in light of future market demand
Set up the converting base in China <Developing overseas market and costdown>
→ Start up of the Filter Unit assembly facility in Zhuhai, China

Cost Structure Reformation
Minimizing the cost at each mill <Profit improvement under the production
curtailment>

２Changes in business environment
after 2nd Half 2008 and its countermeasures
Hard environmentof the customer

Lowered competitivenessin export

Tighter Purchase policy
Low cost oriented consumers

Importedpaper

Strong Yen

Shrunk Market

Another Hike in Raw Materialand Energy Costs

Severe Market
Competition

Strong Euro

Printing andCommunication paper

German Operation

Digital Imaging

Imbalance of supply anddemandContinuous Profit
Deterioration

Plunge in revenue

Drastic production
curtailment

Fundamental
Restructuring

Strengthening
businessconstitution

Changes in business environment
・Drastic drop in world demands → Drastic sales drop in Printing paper and D&I business.
Also on Overseas Business (include German Operation).
・Strong Yen → Dropping export sales → Low Profit of DI Division. Increasing pressure from
Imported Paper.
・Change of the Market Structure → Impact on the Sales of Printing Paper and Printing Plate
Materials.

３Countermeasures against the Changesin business environment(1) Printing & Communication PaperPrinting and Communication Paper to be continued Drastic
production curtailment- Hachinohe Mill FY2008
3Q

10%cutTotal
Production cutback

25,000 t

4Q

15%cut33,000 ｔ

FY2009 (Act)
1Q
2Q

FY2009 (Forecast)
3Q
4Q

1ST HALF 25% CUT
2ND HALF 20% CUT
32%
cut

18%
cut

67,000 t 35,000 t
Apr.-Sept.: tentative shutdownof machines according todemands
MAY ： tentative mill closure for 10 days

20%
cut

48,000 t

20%
cut

45,000 t

Nov.-Mar.：tentative shutdown ofmachines according to demands-Production curtailment for
maximized energy efficiency(Golden Week period)
JUNE： tentative mill closure for 14 days
(coincident with scheduled maintenance)■ Relocate Production Sites for Communication Paper■ Further pursuit of cost minimization
４Countermeasures against the Changes
in business environment(2) German Operation

Fundamental Restructuring at MPB
MPB : Mitsubishi HiTec Paper Bielefeld GMBH

1. Shut down of No.1 Paper Machine (30,000t/y) at the end of July,
consolidation to No.3 Paper Machine (120,000t/y).
2. Shut down of 4 cast coater machines by the end of Aug.
3. About 120 personnel cuts by the end of 2009.
4. Review of product portfolio, realignment of Product mix.
5. Drastic organization reform, consolidation (MPF+MPB).
(1) Improvement of sales, purchase and logistic organization(2) Consolidation and improvement of R&D organization(3) Consolidation of management organization

Aiming for Profit Improvement 1.5 billion Yen for FY2009,
Right On Track５

Countermeasures against the Changes
in business environment(3) I & D Company

Strong Yen

Drop in Demands

Digital Imaging Business

World Demands shrinkage

Specialty material Development Business Both “Digital Imaging business” and “Specialty Material

Lowered competitivenessin export

Developmentbusiness” are Development Intensive business Promotion of R&D ,Production, and Sales activities in an integrated manner Organization and resource input in accordance with the changes in businessenvironment
 Strengthening Marketing
I&D = Imaging &Development

Consolidation into I&D Company■ Further Pursuit of Cost Minimization ■2 Billion Yen Profit Improvement
６Basic Idea ofEnhanced Countermeasures
Change in Business environment
Structural Change in DemandCommunication Media
Paper to electric media (internet etc.)
Scale of Paper Products
From “mass” to “middle”

Countermeasures(1) “Demand expansion” cannot be expected
make profit under low machineutilization and look for the additional value(2) Development to meet the era of “Digital Printings” using Paper Media
Meets the demand for the digital printing (incl. commercial printing)
Simplification and Total Cost down of Light Printing system ( e.g. ThermalDigiplate)(3) Create a “Value” onto the Products
Fits to the diversified user Values such as Environmental and Artistic Needs(4) Expansion and Strengthen of “Non Communication Media”
New Business Development using Non-woven fabric
New Business Development for e.g. Electronics Field

７

Seven Enhanced Countermeasures
1. Architect an Production System suitable for Demand （Capacity reduction andEmployees relocation / curtailment）• Shut down No.12 Paper Machine at Takasago Mill：Capacity 66,000t/year、thermal and carbonlessbase paper• Relocate production of Communication base paper from Takasago Mill to Hachinohe• Transfer personnel of I&D Company( I&D = Imaging & Development ）2. Minimize cost through out the company• Realize the ultimate of low cost structure for I&D Company(1) Cost Cut through out the company, i.e. Kyoto mill, Kitakami Hitec Paper, subsidiaries and headquarters, (2) Restructure of Finishing operation, (3) Optimization of Logistic system, and(4)Discontinuation non-profitable items• Explorer possibilities further Cost Reduction at Hachinohe and Takasago Mill• Trim Logistic Costs for Printing & Communication Paper

3. Drastic Cost Reduction of Overhead cost
• Stream Line R&D sysytem• Cost Reduction at the Head quarters and subsidiaries

4. Shift to High value added Products on Printing and Communication Paper• Develop Markets of New Digital Printing Paper• Develop New Generation “Premium Art Paper”• Promote FSC certified paper and paper made of thinned wood８

Seven Enhanced Countermeasures
5. Launch New Products from I&D Company, and Develop market in noninformation media field• Promote Thermal Digiplate (TDP)• Promote New Ink Jet media on global scale• Develop functional Non-woven fabric

6. Stabilize Overseas Operations and Capitalize on Overseas Business Base
• Fulfill Restructuring of German Operation• Capitalize on the Business Base in China
7. Realize Effect of the Alliances・ The Alliance with FUJIFILM
・ The Alliance with OJI Paper related to Communication Paper

Effects of Countermeasures：４.５ Billion Yen in 2 Years
Minimum 2 Billion Yen in Next FY2010（After the countermeasures: 300 personnel cuts）
９Forecast <Ordinary Profit Consolidated>
100 million yen70
Measures next fiscal
year

45

Improve product mix
New products

25

Effect ofCountermeasures(2ND Year)

Effect of
Cost reductionCountermeasures
Reduction(1ST Year)
fixed cost

Forecast (Nov. 05 2009)

FY2009FY2010FY2011
１０This slide contains forward-looking statements withrespect
tofuture
results,performance
andachievements that are subject to risks and uncertainties
and reflect management’s views and assumptions
formed by available information. All data other thanhistorical facts are data that could be consideredforward-looking data. Should one or more of these risks
or uncertainties materialized or should underlying
assumptions prove incorrect, actual results may varymaterially from those described herein. Mitsubishi
Paper Mills does not intend or assume any obligation to
update this forward-looking data.