Results of Operations for the Fiscal Year
Ended March 31, 2020

Hijiridake

Tokushu Tokai Paper Co., Ltd.

(View from Hyakkendaira)Contents
・ Company Outline(p1)

FY3/20 Financial Summary
・ FY3/20 Consolidated Financial Results・ Components of Changes in Operating Income (FY3/20)
・ Segment Information

Growth Strategy/Overseas Strategy
(p2)
(p3)
(p4)

(p5)
(p6)

・ Summary of the Fourth Medium‐term Management Plan
(p7)
・ Progress during the NEXT 10 Medium‐term Plan
(p8)
・ Change in Operating Income during the Medium‐term Plan (p9)・ The Fifth Medium‐term Management Plan
(p10)

Business Foundation Reinforcement and Reforms‐ Development of technologies at Try‐Fu Co., Ltd. ‐

(p11)
(p12)
(p13)

(p14)

・ Overseas Growth:
(p15)
(p16)

・ Strengthen Operations in the Package Category:Establishment of Package Planning Div.
New product development

・ Try‐Fu Co., Ltd. Growth Strategy
・ Development of Coronavirus Products

Results of the Fourth Medium‐term Management Plan

・ Industrial Materials Business Div.
・ Specialty Materials Business Div.
・ Households Products Business Div.

New applications for sheets that go beyond paper
Fancy paper
Conservation paper and anti‐counterfeit paper

FY3/21 Consolidated Forecast
・ FY3/21 Consolidated Forecast
・ Components of Changes in Operating Income(FY3/21 Forecast)

・ R&D Achievements:

(p17)
(p18)
(p19)
(p20)

Environment Related Business・ Resource Reuse Div. : Acquisition of Suruga Service K. K.
Expand recycling business

(p21)
(p22)

・ Practical‐Use of Natural Environment Div.:
1. Spin‐off of operations involving owned forest
2. Start of whisky business

(p23)
(p24)

Other Activities
・ Sustainable Development Goals Activities (1)
(2)

(p25)
(p26)

Company Outline
 Company name

Tokushu Tokai Paper Co., Ltd Head office4379 Mukaijima‐cho, Shimada‐shi, Shizuoka

 Newly established April 2007(note 1)
 Representative

Yuji Matsuda, President & Chief Executive Officer Capital¥11,485 million

 Employees

1,576 (consolidated, March 2020)

 Business

Manufacturing, processing and sales of paper and pulp
products

 Mills

Mishima, Shimada, Gifu, others

Note 1: Merged by Tokai Pulp & Paper Co., Ltd (foundation: December 1907) and Tokushu Paper Mfg. Co., Ltd.
(foundation: November 1926)
1

FY3/20 Financial Summary

FY3/20 Consolidated Financial Results(Millions of yen)

FY3/19results

FY3/20results

ChangeNet sales

81,90180,603‐1,298Operating income

3,142

2,870

‐272

Ordinary income

5,353

5,389

36

Profit attributable toowners of parent

4,212

3,694

‐518

Operating income to
net sales

3.8%

3.6%

‐

*The presentation method for financial statements was revised in FY3/20.
Sales and earnings for FY3/19 have been revised accordingly for consistency.
2Components of Changes in Operating Income (FY3/20)(Millions of yen)

6,000

(Ref.)

5,000

5,389

4,000

3,142

2,870

3,000

Non‐
operatingincome
2,519

2,000

1,000

Sales
activities

Materials

Factory
efficiency

+5

+319

‐100

Fixed cost,
etc.
‐223

Growthstrategy
expenses‐68

Others‐205
Ordinary
income0
FY3/19
前期

FY3/20
当期

3

Segment Information
FY3/19(Millions of yen)

FY3/20ChangeIndustrial
Materials
Business

Net sales

41,10739,159‐1,948Operating income

1,125

1,039

‐86

Specialty
Materials
Business

Net sales

22,566

21,911‐655

Operating income

1,668

1,271

‐397

Households
Products
Business

Net sales

18,132

17,860

‐272

280

536

256

Environmental
relatedbusiness

Net sales

6,958

6,759

‐199

406

121

‐285

(6,865)(5,087)

1,778

(338)

(97)

241

Net sales

81,90180,603‐1,298Operating income

3,142

2,870

‐272

Operating income

Operating income
Net sales

Elimination
Operating income
Total*The presentation method for financial statements was revised in FY3/20.
Sales and earnings for FY3/19 have been revised accordingly for consistency.

4FY3/21 Consolidated Forecast

FY3/21 Consolidated Forecast(Millions of yen)

FY3/20results

FY3/21
forecasts

Change81,000Net sales

80,603Operating income

2,870

Ordinary income

5,389

Undetermined

Profit attributable toowners of parent

3,694

Undetermined

Operating income to
net sales

3.6%

2.5%

Initial plan: 83,000

2,000
Initial plan: 3,100
Initial plan: 4,700
Initial plan: 3,300

397
‐870
‐
‐
‐

* The initial plan did not incorporate any effects of COVID‐19.
Assumptions: Foreign exchange rate: 1H: ¥110/US$; 2H: ¥110/US$
Crude oil price (Dubai) 1H: $65/B; 2H: $65/B

5

Components of Changes in Operating Income(FY3/21 Forecast)(Millions of yen)

5,000

Materials
+724

4,000

3,000

2,870

Factory
efficiency+65

Fixed costs/
general andadministrative
expenses‐268

Growthstrategy
expenses‐271

Others‐29

Sales
activities
+9

3,100
Initialforecast
2,000

2,000

Current
forecast
1,000

Sales
activities‐1,0910
FY3/20Materials+724

Factory
efficiency+65

Fixed costs/
general andadministrative
expenses‐268

Growthstrategy
expenses‐271

Others‐29

FY3/21(forecast)6

Results of the Fourth Medium‐termManagement Plan (FY3/18‐FY3/20)‐ The Next Phase of Growth and the Next Challenges ‐Summary of the Fourth Medium‐termManagement Plan
• Under the Fourth Management Plan, titled “NEXT 10 ‐ The next phase of growth and the next challenges ‐,” weplanned and took actions for growth that look ahead 10 years• Many accomplishments in the three core businesses.

Progress in the three core businesses

Accomplishments

OngoingIndustrial
Materials
Business

 Implemented and completed as planned cost cutting and other measures to build astronger foundation
 Consistently benefited from synergies created by the joint venture with Nippon
Paper Industries Co., Ltd.

Specialty
Materials
Business

 Implemented a broad range of measures for upgrading technologies and sales
activities for core products
 Completed preparations for new product development and mass production

Households
Products
Business Strengthened processing capabilities by purchasing new waste paper recycling
equipment
 Focused on developing new laminated products for food Developed environmentally responsible and highly functional types of paper towels

Specialty
Materials
Business

 Commercialize sheets made of new materials and increase sales of theseproducts
 Seek opportunities in new markets, including downstream sectors

Households
Products
Business Develop paper towels with specific functions
7

Progress during the NEXT 10 Medium‐term Plan
Fourth Medium‐term Management Plan
FY3/17

FY3/18

FY3/19FY3/20results(Billions of yen)

FY3/20targets(final yearof the plan)

Net sales

77.7

79.1

81.9

80.6

85.0

Operating income

4.7

3.9

3.1

2.9

5.5

Ordinary income

5.1

3.2

5.4

5.4

‐

Operating margin(Ordinary income ratio)

6.1%

5.0%

3.8%

3.6%

(6.5%)(6.7%)

6.5%

ROE

5.6%

3.3%

6.1%

5.2%

5.0 ‐
6.0%

TSR

156.4%

154.2%

156.6%

167.7%

‐

1.1

1.1

1.3

0.0

‐

(Total shareholder return)Sales of cross‐shareholdings* The TSR is the five‐year return based on the stock price at the end of March 2015.

8

Change in Operating Income during the Medium‐term Plan

6.0

✔ Profitability of the three core businesses improved but pulp and other materials had a much larger negative impact
than expected.
✔ No growth involving development/sales of functional sheets, entering new markets, environmental activities(involving mag‐lev line construction, etc.) and other activities.
(Billions of yen)

5.5
Materials
‐0.4

5.0

4.7

Growthstrategy‐0.6

4.0

New market
development
Functional+0.3
sheets+0.7
Environment
relatedExisting businesses‐0.2

InitialPlan

Existing businesses
+0.5

+1.0

2.9

3.0

Results

2.0

FY3/172016年度Materials Growthstrategy‐1.6‐0.3

Fixed Functional New market Environment Functional Specialty Specialty House
costs
sheets development related (REX) wrapping printing functional products
‐0.2
0.0
0.0
(Try‐Fu,
paper
paper
paper
+0.1
+0.7
‐0.4
‐0.2
Ecology)
+0.7

Other
Otherssubsidiaries ‐0.3
‐0.3

Operatingincome0.0

Operatingincome1.0

FY3/202019年度見込

9

The Fifth Medium‐term Management Plan

The announcement of the Fifth Medium‐term Management Plan has
been postponed because of uncertainty about market conditions
after the COVID‐19 crisis settles down. We will announce the date andmethod for this announcement as soon as a decision has been made.
We apologize for any problems this delay may have caused. Thank you
for your understanding.

10Business Foundation Reinforcement andReforms

Business Foundation Reinforcement and Reforms:
Industrial Materials Business Div.

Industrial
Materials

NaSFA

1. Maintain efficient manufacturing structure to contribute to sales company earnings••

For cardboard, highly efficient manufacturing structure at Shin Tokai
Paper (Shimada Mill) makes a big contribution to the earnings ofsales company Nippon Tokai Industrial Paper Supply Co., Ltd. (NTI)
For kraft paper, the goal is to maintain a reliable supply by using thesteadily growing output of UKP.
Reference: UKP output

When alliance started(Apr. ‐ Sep. 2017)

Current output(Oct. 2019 ‐ Mar. 2020)

68,71677,555t

Growth12.9%

2. Develop new products that reflect social issues and trends••

Started developing new wrapping materials for packages used for e‐commerce shipments
due to the outlook for more growth of the e‐commerce market.
Demand is increasing for materials to replace polyethylene. Work is progressing on
development of recycled kraft paper. The launch date is not yet determined, but potential
users give this paper high marks for ease of processing and other characteristics.
11

Business Foundation Reinforcement and Reforms:
Specialty Materials Business Div.

Specialty
Materials

NaSFA

1. Use more TANT colors and thicker paper to increase fancy paper sales••

The market for fancy paper is shrinking because of weakness in the publishing industry.
The goal is to offer more colors and thicker paper in the core TANT category in order to create
demand for this paper for packaging in order to capture market share.
Any color you can imagine••

Goal is more than 1,000
tons/year for the TANT Series
within three years
Plan to launch TANT BOARD‐F
and TANT KIRA in the second half

Ream weight 300kg, ideal forhigh‐end packaging

Features a beautiful gloss and sparkle

2. Improve glass interleaving paper for a stronger position in this market••

Big changes are taking place in the Flat Panel Display (FPD) market, mainly as production shifts
from Korea to China. Our goal is to increase our global market share of the glass interleaving
paper market by strengthening the relationships with customers and supplying paper thatexactly meet customers’ requirements. (maintain major share in this market)
Quality requirements are becoming even more exacting because of advances in display
technologies. We will constantly improve the quality in order to supply the glass interleaving
paper with the best quality in the world.

12

Business Foundation Reinforcement and Reforms:
Households Products Business Div.

Households
Products

NaSFA‐ Development of technologies at Try‐Fu Co., Ltd.‐ Progress and evolution in the paper towel business

Shifting from “quantity to quality” = Developing paper with functions to supply
products competitors cannot match
1. Developed a paper that dissolves in water• A paper towel that can be flushed down a toilet• Even when wet, the paper has the strength for
wiping hands and can still be discarded in a toilet

2. Crepe paper• Developed a highly functional paper consisting primarily of paper
but also including chemical fibers• More strength and elasticity for wiping• Used the N2 paper towel machine made by Try‐Fu to create thisadded‐value paper

3. An antimicrobial resin product for food (to be patented)
Drips

Drips

• Developed a sheet with an antimicrobial resin for storing fresh
fish and meat
• Based on Try‐Fu’s crepe paper that absorbs drips

Antimicrobial
ingredients

Substrate (absorbs water)

13

Growth Strategy/Overseas Strategy

Specialty
Materials

R&D Achievements‐ New applications for sheets that go beyond paper‐ NaSFA Finished developing a non‐cellulose sheet that surpasses paper Developed mass production technology and now creating applications
1. A non‐cellulose sheet• Started sales of some products in December 2019• Goal is annual sales of ¥800 million in FY3/23, the final
year of the next medium‐term plan
• Our long‐term vision goal is to increase sales volume toachieve annual sales of ¥3,000 million

Heat resistant
Suitable for electrical/
electronics applications

2. Mixed paper incorporating synthetic fibers• Plan to start selling some products in FY3/21• Used for cargo transport, building materials, cards andother applications• Goal is annual sales of ¥300 million in FY3/23

Heat seal

Strength withdimensional
stability
14

Specialty
Materials

Overseas Growth‐ Fancy paper‐ Highly specialized activities
utilizing innovative technologies

NaSFA Increase interest in Japanese fancy
paper in China
KAMI Lab.
Activities to raise brandawareness

EuropeFive trade shows and two
seminars in FY3/20
KAMI Lab. seminar at BEIJINGINSTITITE OF GRAPHICCOMMUNICATION

China

ASEAN

New product development
Luxe Pack plans to announce in 2020 a two‐sided embossed paper with a textile‐likeappearance
A new design created for a broad range of uses

Seeking new forms of cooperation
Europe: Using unique technologies to enter new markets
ASEAN:

Seeking opportunities from a medium/long‐term
perspective and in markets of the future

Cooperation with a Japanese trading company andChinese converter
Increase sales of our fancy paper by using new distribution formats,including the use of IT, to offer customers even more convenience.
15

Overseas Growth

Specialty
Materials‐ Conservation paper and anti‐counterfeit paper‐

NaSFA

1. Conservation paper Aim for a higher market share in Asia, the region with the best growth prospects• In China, boxes made of neutral or slightly alkaline paper are widely used at museums.
• We will continue to use our strong relationships with museums in Beijing
while looking for new partners and using FENKO to develop new markets
in Asia.
A storage box made of neutral orslightly alkaline paper

Conservation paper market in Asia
China
About ¥1.0 billion

Japan
About ¥0.5 billion

2. Anti‐counterfeit paper Developed the first anti‐counterfeiting paper
technology in Japan and have started selling thispaper in other countries••

Taiwan/Southeast Asia
*Numbers are Tokushu Tokai Paper estimates of annual conservation paper
sales based on museum storage boxes

Started overseas sales in FY3/20 as paper for
security seals
A major new product with annual sales of morethan ¥100 million

Fluorescent textile coating

16

Strengthen Operations in the Package Category

Specialty
Materials‐ Package Planning Div. ‐NaSFA

 Established the Package Planning Div. to create new sources of demandfor paper products.
 The division has the goal of creating new packaging markets by leveraging our expertise increating high‐performance paper and coordination across the entire supply chain.

Consolidation and fusion of high‐performance technologies (Joint creation)
Anti‐
counterfeiting
technology
Hazardous gas
absorption
technology

Protection
storagetechnology

Alliance/M&A
Oxygen/humid
ity barrier
technology

Innovativetechnologies
Humidity
control
technology

Brandedmaterials

Develop materials for high‐performance packages

Pharma‐ceuticals
Cosmetics

Liquid absorption
fineness retention
technology
Aluminum vapor
deposition film
technology

Cushioning
material processing
technology

Lamination technology

Packaging converters

Liner/core/kraft
wrapping paper
technology

Create new markets

Users of packages

High‐end
materials

Tea
Sweets17

Strengthen Operations in the Package Category

Specialty
Materials‐ New product development ‐NaSFA

 Create new forms of added value by combining technologies
The new product development process

Innovation

Functional
paper

Materials

× Functionality ＝××Specialty film

Materials＝

Packaging paper with
innovative functions

Innovative cushioning
materials

Functional
packaging paper

Packaging materials
with strong barriers

Textured
packaging paper

Materials with a newfeel and texture＝18

Try‐Fu Co., Ltd. Growth Strategy
 Replacing plastic with paper

Households
Products

NaSFA

Develop products that reduce the use of plastic and areenvironmentally responsible
Continue to create environmentally responsible products• More types of environmentally responsible paper (added Snook, which uses
recycled paper)• Consider the use of plant‐derived resins in the exterior film of
paper towels• Consider the use of water‐based painting ink
Develop an environmentally responsible resin products for laminating (to be patented)• Develop a way to utilize plant‐derived materials (no petroleum‐based materials)• Create ways to use biodegradable materials (materials that are broken down by
microbes)• Create ways to use oxygen degradable materials (materials that are broken down
by atmospheric oxygen)
High‐barrier coating materials (paper + coating)• Water and oil resistance and a gas barrier to preserve food longer• PVCD • Water/oil high barrier coating • Heat seal + Water resistant coating
19

Development of Coronavirus Products

NaSFA Develop products associated with the COVID‐19 pandemic
Develop socially responsible products that precisely match changes inmarket conditions and user needs

We have started studies for the development of coronavirus products
Our
technologies

Materials

Specialty function
paper research

Photocatalysis(Titanium dioxide)×
Anti‐viralfunctional coating

Many coating
technologies
Laminate/paper
towel production
skills• Develop products
quickly by using theTokushu Tokai Group’s
expertise andtechnologies

20Environment Related BusinessEnvironment Related Business (Resource Reuse Div.)‐ Acquisition of Suruga Service K. K. ‐A stronger upstream recycling business

Environment
RelatedBusiness domain
expansionAcquisition of Suruga Service K. K

Time of acquisition: January 2020
Acquisition cost: About ¥1.8 billion
Business: Collection, transport and disposal of general and industrial waste, building demolition

Demolition of buildings

Industrial waste processing

Reuse of incinerator ash

Incinerator ash

A more advanced recycling process

Analysis of composition

Mixing and otherprocessing

Soil improvement and other ways
for reuse

21

Environment Related Business (Resource Reuse Div.)‐ Expand recycling business of REX Co., Ltd.
Strengthen REX existing businesses

Environment
RelatedStrengthen RPF
production

Constructed a refuse paper/plastic fuel (RPF) factoryat the Nagaizumi Logistics Center
Operations started in March 2020
Raising output in 2H by shifting to a 3‐3 system, which will
help protect the environment by increasing the effective
use of waste plastics processed by Mishima Mill boiler No.
10.
(1H: About 900t/month → 2H: About 1400t/month)

Plan to upgrade the pulverizer to raise output at the
Shimada Mill* Nagaizumi Logistics Center
Rotating blades

Improve pulverizer fixed blades = Higher RPF output
Raise hourly output at the Shimada Mill in the 2H(5.37t/h → 5.60t/h)
Will increase monthly output to about 100 tons
22

Environment Related Business(Practical‐Use of Natural Environment Div.)‐ Spin‐off of operations involving owned forest ‐Environment
RelatedPurpose Whisky and other B‐to‐C businesses at our Ikawa Forest require a perspectivethat differs from paper manufacturing, a B‐to‐B business.
 Use joint activities for invigorating the Ikawa region, where we have a long
history and many strong relationships.

NikengoyaJUZAN Head office
Sawarajima

Overview
Trade nameJUZAN Co., Ltd.

Business

Management of the owned Ikawa Forest, production and sale ofalcoholic beverages, management of entertainment, lodging and Shizuoka prefectureother facilities

Split method

Simple incorporation‐type spin‐off

Established

April 1, 2020

Location

1301‐1 Tashiro, Aoi‐ku, Shizuoka‐shi, Shizuoka (Sawarajima)

Capital¥90 million (wholly owned subsidiary)* The Tokushu Tokai Forest will continue to operate lodges and huts

Hatanagi Dam
No. 1

23

Environment Related Business(Practical‐Use of Natural Environment Div.)‐ Start of whisky business ‐Environment
Related The initial investment for construction of the Ikawa
Distillery at the Ikawa Forest was about ¥1.14 billion.
 Preparations for starting operations scheduled to begin
in July 2020.
 The whisky business, which will take advantage of its
location in a beautiful forest, is expected to produce
synergies by producing whisky and through tourism,
including tours of the distillery.

The Whisky Business Quality is the highest priority
The business aims to produce whisky with consistently
outstanding quality by utilizing the knowledge gained in thepaper business that extends from organic raw materials to the
manufacture of products with consistent quality.
 Utilization of the forest location
Whisky will be marketed by emphasizing its aroma and othercharacteristics that reflect the distillery’s beautiful forest
location.
 Long fermentation
The distillery will produce a single malt whisky and use longfermentation.

The beautiful forest setting of the Ikawa Distillery

Pot stills for first (in back) and second (front) distillation

24

Other Activities

Sustainable Development Goals Activities (1)1. Activities for developing skills and for diversity•

Following receipt of the 2020 Nadeshiko Brand designation, which is
given to companies that encourage the success of women in theworkplace, we have increased measures for women and diversity.
Another priority involving human resources is providing support forachieving career goals in order to give all our employees rewarding andstimulating jobs.

2. Activities for workplace health and safety and disaster preparedness••

Recognized as an Outstanding Health and Productivity Management
Enterprise for 2020 by Japan’s Ministry of Economy, Trade and Industry.
We are continuing to strengthen health management programs. Examples
include support for employees with health concerns and programs toprevent mental health issues.
Disaster preparedness measures at all business sites. We are reviewing
our programs for disaster mitigation for minimizing damage from natural
disasters and for establishing a system for restarting business operations
as quickly as possible.
25

Sustainable Development Goals Activities (2)3. Improve equipment for environmental responsibility•

The biomass boiler at the Shimada Mill and the larger boiler capacity and natural gas‐powered
generator at the Mishima Mill significantly reduce the amount of heavy oil used and CO2 emissions.

Shimada MillMishima MillUse of Heavy Oil (KL/ton of paper)

Use of Heavy Oil (KL/ton of paper)
Higher capacity of boiler
No. 10 reduced the use ofheavy oil

FY3/16

FY3/17

FY3/18

FY3/19Heavy oil used
(KL/ton of paper)

Heavy oil used
(KL/ton of paper)

Start of operations ofboiler No. 12 reduced
use of R1B heavy oil

FY3/20FY3/16

CO2 Emissions (tons/ton of paper)

Tons CO2
emissions per
ton of paper

FY3/17

FY3/18

FY3/19FY3/20FY3/18

FY3/19FY3/20CO2 Emissions (tons/ton of paper)

Emissions decreased
because the use of heavy
oil declined

FY3/16

FY3/17

Emissions decreased
because the use of heavy
oil declined
A new natural gas‐powered
generator further reduced
emissions
FY3/16

FY3/17

FY3/18

FY3/19Tons CO2
emissions per
ton of paper

FY3/2026

(Reference) NaSFANaSFANaSFA is the abbreviation for the four categories oftechnologies that we use to develop products
1. Nano technology (New directions)
ＮａＳＦＡとは→Using the poten al of nano technology to develop sheets that surpasses
paper
2. Security (Use of anti‐counterfeiting technology for global growth)→ New products with black watermarks, sophis cated thread inser ontechnology and other advances→ Develop new technologies associated with products for the Tokyo Olympics
3. Fusion (Use the fusion of technologies to create new markets)→ Fuse the technologies behind the dis nc ve strengths of the group’s business
units and companies
4. Art (Use new processing technologies to take on new challenges)→ Use innova ve process technologies for adding func ons and cost cu ng

Inquiries:
Finance & IR Div.
Unizo Yaesu Building 2‐4‐1 Yaesu,
Chuo‐ku, Tokyo
Tel: +81‐3‐3281‐8581
Fax: +81‐3‐3281‐8591
E‐mail: a.minegishi@s.tt‐paper.co.jp

Plans, actions and other statements in this presentation are based on management decisions
using information that was available as of the date of this presentation. As these statements
include numerous risk factors and other uncertainties, actual results of operations may differ
from the information in this presentation.