Results of Operations for the First Half of
the Fiscal Year Ending March 31, 2021

Tokushu Tokai Paper Co., Ltd.

Akaishidake(View from Maedake)1H FY3/21 Results of Operations

Contents
Financial Information
I.

II.

III.

Business Progress

1H FY3/21 Financial Summary

I.

・Consolidated Financial Results

4・Components of Changes in Operating Income

5・Segment Information

6(1) Shin Tokai Paper (Shimada Mill)II.

FY3/21 Consolidated Forecast
・Vs. FY3/20

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

9

III.

Assets Efficiency
Cross-shareholdings

11Five-year ROE and Shareholder Distributions

12

Industrial Materials Business

IV.

14

Specialty Materials Business(1) Fancy Paper and Glass Interleaving Paper

16(2) R&D Action Plans

17(3) Package Strategy TT-PACKAGE

19

Household Products Business(1) Try-Fu’s Household Products Business

23(2) Try-Fu’s Paper Towel Business24(3) Try-Fu’s Processed Products Business

25

Environment Related Business(1) Resource Reuse: REX Co., Ltd.

27(2) Resource Reuse: Suruga Service K. K.

28(3) Practical-Use of Natural Environment: JUZAN’s
Whiskey Business29

I. 1H FY3/21 Financial Summary

1H FY3/21 Financial Summary

Consolidated Financial Results(Millions of yen)

1H FY3/20
results
Net sales

1H FY3/21
results

Change39,87036,663

3,207

Operating income

821

864

43

Ordinary income

2,075

2,177

102

Profit attributableto owners ofparent

1,290

3,057

1,767

Operating income
to net sales

2.1%

2.4%

-

4

1H FY3/21 Financial Summary

Components of Changes in Operating Income (1H)
(Millions of yen)

Ref.
2,177

2,200

1,800
Sales
activities

1,400-1,263

1,000

821

Materials+852

Factory
efficiency

Fixed cost,
etc.

-96

+256

Inventories

Others+395-101

Ordinary
income864
Nonoperating
income
1,313

600
200
-200

1H
FY3/20
前2Q

1H FY3/21
当2Ｑ

-600
5

1H FY3/21 Financial Summary

Segment Information(Millions of yen)
1H FY3/20
Industrial
Materials
Business
Specialty
Materials
Business
HouseholdProducts
Business
Environment
RelatedBusiness

Elimination/
adjustment
Total

1H FY3/21

ChangeNet sales

19,711

18,348-1,363Operating income

370

516

146

Net sales

10,9768,414-2,562

Operating income

338

175

-163

Net sales

8,984

8,243

-741

Operating income

200

318

118

Net sales

2,745

4,024

1,279

Operating income

(53)

(81)

-28

Net sales(2,548)(2,366)

182

Operating income

(34)

(63)

-29

Net sales

39,87036,663-3,207

Operating income

821

864

43

* Beginning in 1Q FY3/21, the method for determining business segment profit or loss has been revised due to areexamination of the standards for allocating corporate expenses. Prior year operating income have beenadjusted to reflect this revision.

6II. FY3/21 Consolidated Forecast

FY3/21 Consolidated Forecast

Vs. FY3/20 Results(Millions of yen)

FY3/20results
Net sales

80,603Operating income

2,870

Ordinary income

5,389

Profit attributable toowners of parent

3,694

Operating income to
net sales

3.6%

FY3/21
forecasts

Change76,000-4,603

1,800-1,0703,600-1,789

6,800

3,106

(81,000)(2,000)(Undetermined)(Undetermined)

2.4%(2.5%)-

Figures in parentheses were at the time of the earnings announcement on May 21.
September 24: Foretastes for net sales, operating income, ordinary income and profit were revised.
November 12: The profit forecast was changed from ¥4,000 million to ¥6,800 million because a gain on sales ofinvestment securities is expected.
Assumptions: Foreign exchange rate: 1H: ¥110/US$; 2H: ¥110/US$

Crude oil price (Dubai) 1H: $65/B; 2H: $65/B

8

FY3/21 Consolidated Forecast

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

4,000
Sales
activities

3,600

Materials+724-1,091

3,200

Factory
efficiency+65

Fixed cost/
general andadministrative
expenses-268

Growthstrategy
expenses

Others
-29

-271

2,800
2,400
COVID-

2,000
1,600

2,000

19

2,870
1,800

1,200
800
400
0

FY3/20
前期実績
Results

Sales
activities--2,154

Materials+1,378

Factory
efficiency-147

Fixed cost/
general andadministrative
expenses+135

Growthstrategy
expenses-254

Others-28

FY3/21

通期見込み
Forecast
9III. Assets Efficiency

III. Assets Efficiency

Cross-shareholdings○ Periodic review of stock holdings• Every year, the Board of Directors reviews stock held as cross-shareholdings.
• The benefits of owning the stock are compared with the cost of ownership, which is derived fromthe cost of capital. Industry trends and many other factors are also considered. The directors thenreach a decision about retaining or selling each stock holding.
☑ About ¥6,100 million of stock was sold between the end of March 2017 and the end of
September 2020.
☑ Plan to sell an additional ¥5,300 million (approx.) of stock by the end of March 2021. If
this stock is sold, total sales during the five-year period ending in March 2021 will be
about ¥11,400 million.
More actions are planned to increase the liquidity of Tokushu Tokai Paper stock and continue
streamlining the balance sheet.

○Decline in cross-shareholdings as pct. of net assets
FY3/17
Consolidated net
assets A

FY3/18

FY3/19FY3/201H FY3/21

74,67072,76775,71377,67876,544

Cross-shareholdings B

16,781

17,635

15,366

14,444

10,841

Ratio B/A

22.5%

24.2%

20.3%

18.6%

14.2%

11

III. Assets Efficiency

Five-year ROE and Shareholder Distributions (forecast for FY3/21)○Five-year ROE Summary
FY3/17

FY3/18

FY3/19FY3/20FY3/21 *forecast

Profit(millions of yen)

3,852

2,193

4,212

3,694

6,800

Shareholders’ equity(millions of yen)

68,426

66,34569,04270,90869,842

5.6%

3.3%

6.1%

5.2%

9.7%

ROE (%)○Five-year Shareholder Distribution Summary
FY3/17

FY3/18

FY3/19FY3/20FY3/21 *forecast

Earnings per share(yen)

258.89153.91303.55266.07503.28Dividends per share
(yen)

75.0

50.0

75.0

75.0

50.0

Payout ratio (%)

29.0%

32.5%

24.7%

28.2%

9.9%

Stock repurchase(millions of yen)
Total return ratio (%)

FY3/17 – FY3/21 (5-year cumulative)＝ ¥6,592 million
5-year average = 53%

12

I. Industrial Materials BusinessI. Industrial Materials Business(1) Shin Tokai Paper (Shimada Mill)
Shin Tokai Paper〇Develop new products that reflect social issues and trends☑ Wrapping materials for packages (for e-commerce, etc.) ⇒Progressing as planned, next step is prototypes☑ Recycled kraft paper ⇒ Preparing to start sales activities
Goal is even more superiority in the industrial paper sector
both during and after the COVID-19 crisis(↑Reel No. 9 at the Shimada Mill)〇Programs for a lower environmental impact

Shimada Mill: CO2 Emissions(tons/ton of paper)☑ “The J-Credit Scheme” *Started in 2019
Switching boiler No. 12 from fuel oil to biomass fuelreduced CO2 emissions. The reduction was sold as acredit to external organizations.

☑ Tradable Green Certificate*Started in 2019

Electricity generated using biomass fuel at the Shimada
Mill has been certified by a third-party as “environmental
added value.” This value was sold in the form of a green
certificate to external organizations.

Tons CO2
emissions per
ton of paper

Start ofoperations ofboiler No. 12*Emissions fell to less than half thepaper industry average
FY3/16

FY3/17

FY3/18

FY3/19FY3/20* Tokushu Tokai Paper estimate

14

II. Specialty Materials BusinessII. Specialty Materials Business(1) Fancy Paper and Glass Interleaving Paper
Fancy paper〇Considering measures to streamline the product lineup
To respond to the declining volume of publications and the deteriorated market due to the COVID-19 crisis,
studies have started to reduce the types of fancy paper, which have increased in recent years. Actions may
include eliminating slow-selling types and reducing inventories. Aiming for a more efficient lineup regarding
everything from production to sales operations.
〇Add new products to stop the sales downturn
Despite the challenges of the COVID-19 crisis, the decline in sales of TANT, where 50
colors were added, was smaller than the declines of other fancy paper.
Plan to start selling TANT KIRA, featuring a beautiful gloss, in 2H FY3/21.

Glass interleaving paper〇First half sales volume and outlook
Flat panel display factories temporarily stopped operating in China, the primary producer of flat panel display,
because of COVID-19. LCD production volume was down as a result, causing first half sales volume of thispaper to decrease year on year.
Flat panel display factories restarted operations in August and TV demand increased as people spent moretime at home for safety. As a result, demand for glass interleaving paper increased more than expected and2H FY3/21 sales are expected to recover to the prior-year level.
16II. Specialty Materials Business(2) R&D Action Plans
Non-cellulose sheets have properties that surpass those of paper〇 Started sales of some products in 1H FY3/21; Started development of other new products☑ Dec. 2019: Started sales of extreme heat-resistant sheets☑ Jun. 2020: Started sales of sheets for electrical/electronicmaterials

Steady progress with R&D for new products,
an important step toward creating sheets
made of new types of fibers

Goal is annual sales of ¥800 million in FY3/23,
the final year of the next medium-term plan;☑ Started development of other non-cellulose sheets
the long-term vision goal is to achieve annual
sales of ¥3,000 million
Heat resistant, strong, elasticity, low… Aiming for new functions for more differentiation
dielectric constant and other characteristics
from competing materials

Mixed paper incorporating synthetic fibers〇 Sales and development activities☑ Started sales of some products in FY3/21 (for bags)☑ Developing more versions for cargo transport, building
materials, cards and other new applications☑ Goal is annual sales of ¥300 million in FY3/23

Dimensional
stability

Durable17

II. Specialty Materials Business(2) R&D Action Plans
Anti-counterfeit paper〇More variations of paper that prevents counterfeiting☑ In addition to paper for security seals, sold overseas starting in FY3/20, moreversions of anti-counterfeit paper are planned to meet upcoming needs.
(1) Increasing use of digital technologies is altering the market for paper thatprevents counterfeiting.
Target more markets that can be served using existing technologies andcreate new ideas for the prevention of counterfeiting. Expand applications
for this paper to attract new customers.

Fluorescent textile
coating

Advanceexisting
technologies(2) The merchandise certificates in Japan are the primary use of this paper, but
this market is not expected to grow.
Use knowledge associated with counterfeiting prevention technologies tostart developing products for applications currently not covered. Aiming
to begin sales of new products in FY3/22.
(3) Changes in markets and the social climate are creating new needs involving
the prevention of counterfeiting

Develop newtechnologies

Start to consider the development of new technologies that combine thestrengths of digital technologies and paper.
18

II. Specialty Materials Business(3) Package Strategy TT-PACKAGE〇 The Package business = Focus on the launch of TT-PACKAGE☑ A package business with substantial added
value backed by the diverse materials andprocessing equipment of the Tokushu Tokai
Paper Group☑ Start TT-PACKAGE as a new category of thespecialty materials business and placepriority on this field as one of the primarystrategies of this business.
Schedule
・ Aug. 2020
Started sales of TT-SPARKLE, which combines
embossing, lamination and coating
technologies
・Nov. 2020
Announcement of TT-PACKAGE in a press
release about the TOKYO PACK 2021
international packaging show
・Feb. 2021

Embossingtechnology
Thin paper
technology

Dyeingtechnology

Anticounterfeiting
technology

Lamination
processing
technology

Oil resistanceand light
blocking
technologies

Coating andimpregnation
technologies

Clean
environment

R&D capabilities
Quality
management
infrastructure

Plan to exhibit TT-PACKAGE at TOKYO PACK 2021
19

II. Specialty Materials Business(3) Package Strategy TT-PACKAGE
Specialty Materials Business
Categories

Series nameProduct name
●Yurayura ●Dandan ●Pochipochi

Fancy Paper

High-Grade Printer Paper
Canvas Paper

High-end paper
Artistic designs/Brand
protection●Paper cushion ●Honey paper
Cushioning material
Artistic designs, replaces plastics,
excellent recycling/reuse

Paper for Protection and
Preservation
Functional Paper●Counterfeit prevention coating●Color lamination
Brand protection
Distinctive properties●Watermark●PVA lamination●Virus-resistant lamination

Information-Use Paper
Barrier characteristics
Replaces plastics, excellent
recycling/reuse, ideal for foodproducts

Packaging material made ofthin paper
Replaces plastics, excellent
recycling/reuse●Used for packaging food●Ideal for pillow packaging●Thin transparent version

20

II. Specialty Materials Business(3) Package Strategy TT-PACKAGE

Artistic designs using the new“D-motion” embossing technology

Cushioning paper technology withartistic designs

Kraft paper and films with virus
prevention and other functions

Coating technology that prevents
counterfeitingThin paper and lamination (pillow packaging)21III. Household Products BusinessIII. Household Products Business(1) Try-Fu’s Household Products BusinessBusinesssummary

Strong sales of paper towels due to the higher interest in hygiene due to COVID-19. A big decrease insales of laminated products because of downturns in foreign tourists in Japan and travel within Japan.
Sales of laminated products for tourism souvenirs began to recover in October, partly due to the Go
To Travel campaign of the Japanese government.

〇 Try-Fu business structure
Recent activities
Try-FuApr. 2020 Merged with Tokushu Maetel, which manufactures and sells paper diapers andother household products
May Moved the main production equipment of Tokushu Maetel to the Fuji Mill
(operation started in November)
Nov. Integration of the paper towel sales operations of Try-Fu and Nippon Paper Crecia

Paper towelbusiness

Processed
products business

Combined the paper towel sales operations of
Try-Fu and Nippon Paper Crecia
Goal is to establish a more stable base for thisbusiness

A strategy of supplying products with
substantial added value backed by a broad
range of products using lamination and coating
technologies

23III. Household Products Business(2) Try-Fu’s Paper Towel Business〇Business Alliance with Nippon Paper Crecia
Background: Although growth is continuing, the paper towel market in Japan is becoming increasingly difficult because
of intense competition, new competition from small/midsize companies, the higher cost of cargotransportation and other reasons.
Combining the paper towel sales operations of Try-Fu and Nippon Paper Crecia is expected to result in more
growth of the paper towel business.
◎ Powerful paper towel brands
Strengths:◎ Mutually complementary products (Try-Fu: Recycled paper + Nippon Paper Crecia: Pulp)◎ Respect for each other’s autonomy and skills〇Integration of Sales Operations✓ Nippon Paper Crecia will handle external sales of all paper towels and other products covered by this alliance.
✓ No change is expected in the current level of operating income from sales of paper towels and other products due to this alliance.

Try-FuSales
activities

Integrate sales functions

Paper towels

Transfer
Sales activities＋ Sales activities

Manufacture☑ Expand the product mix＝Shimada Mill

☑ Acquire new customers using sales networks ofboth companies

Manufacture

Nippon Paper Crecia

Paper towels☑ More efficient distribution of products24III. Household Products Business(3) Try-Fu’s Processed Products BusinessResearch and Development Activities☑ Develop environmentally responsible products by using thin film technology andresins with a small environmental impact☑ For food safety, develop products with FDA-approved materials and antimicrobial
properties☑ Develop products spanning two or more business units by cooperating with
TT-PACKAGE of the specialty paper packing planning unit
〇 Paper launched in 1H FY3/21 (selected items)
・ High-barrier coating paper (PVCD coating)Resistance to water and oil and a barrier to oxygen(Applications: tea bags, chocolate candy packaging,and others)
・ Heat seal paper
Formulated to attach to surfaces when heated(Applications: packaging materials for food and otheritems, heat seal tape, and others)

・ An antimicrobial resin product for foodThis innovative material combines Try-Fu’s dripabsorbing crepe paper with an antimicrobial resin
coating. *Patent pending(Applications: packaging for fresh fish and meat)

Antimicrobial
ingredients

Drips

Drips

・ Antimicrobial paper
Treated to be resistant to bacteria and other microbes(Applications: packaging for prepared food items, andothers)〇 Current R&D projects (selected items)

Substrate (absorbs water)25

IV. Environment Related BusinessIV. Environment Related Business(1) Resource Reuse: REX Co., Ltd.
REX Co., Ltd. ☑ Strengthen the current RPF manufacturing operations☑ Contributing to increase internal procurement of boiler fuel〇 A refuse paper/plastic fuel (RPF) factory at the
Nagaizumi Logistics Center

・ Operations started in March 2020. Started supplying materials
to fuel the Mishima Mill boiler No. 10. Higher productivity allowedraising output while still using two shifts.
(FY3/20: About 900t/month → 1H FY3/21: About 1,100t/month)・ The supply of used plastics, the feedstock for RPF, has been low
because of COVID-19. The start of three-shift operations planned for2H FY3/21 has been postponed to FY3/22 or afterward.

〇 Progress with activities to upgrade the pulverizer toraise output at the Shimada MillA small delay in work to modify the pulverizer’s fixed
blades, but still aiming for higher RPF output starting in
December.
(Modifications are expected to raise monthly output by
about 100 tons.)*※長泉物流センター内
Nagaizumi Logistics Center

Rotating blades27IV. Environment Related Business(2) Resource Reuse: Suruga Service K. K.
Resource
Reuse…

☑ Suruga Service, acquired in January 2020, is contributing to consolidated earnings☑ Investments for growth of the resource reuse business are a key component of thegrowth strategies of the Tokushu Tokai Paper Group☑ Develop more technologies for the more effective use of discarded resources

Suruga Service K. K.
〇 Main factory: Industrial waste processing
Processes building materials, plastics and other waste materials from construction
sites and other business sites
Although the volume of waste materials from these sites has decreased because of
COVID-19, sales are higher than one year earlier due to the receipt of high-volume
contracts

Industrial waste processing
at the main factory〇Matsuda factory: Industrial waste processing
Processes wood and other waste materials from construction sites
Sales are higher than one-year earlier due to the receipt of high-volume contracts(separate from the main factory’s contracts).

Industrial waste processing
at the Matsuda factory〇 Demolition business (Building demolition for reconstruction)

Demolition of buildings for reconstruction projects and other purposes
Sales are lower than one year earlier because the smaller number of homereconstruction and other projects due to COVID-19 has reduced the volume ofdemolition orders.

Demolition business28

IV. Environment Related Business(3) Practical-Use of Natural Environment: JUZAN’s Whiskey Business
Whiskey Business … Started producing whiskey in November and aims to start selling “Long Fermentation
Japanese Whiskey” in 2026
○Production Schedule

Construction of the Ikawa Distillery has been delayed due to highway damage caused by heavy rain. Fullscale operations started in November although the operations were planned to start in July. Work is
proceeding as planned despite initial concerns about challenges of the mountainous site with an elevationof 1,200 meters.
Technicians are currently performing tests on the outstanding spring water at this location. Operations
with about 100 production runs per year is expected to begin in FY3/22.
○ Whiskey Strategy(1) Operations will include tourism, such as distillery tours, and activities centered on the surrounding area,
which is a UNESCO Eco Park (Biosphere Reserve).
(2) Substantial added value by producing long fermentation single-malt whiskey(3) Continue making large development expenditures until the start of sales■Launch of products in stages for scarcity■Logo

2026: Trial sale of “five-year old” whiskey (small volume)ｋ↓

2028: Plan to sell “seven-year old” whiskeyｋ↓2033: Plan to sell “twelve-year old” whiskey

Ikawa Distillery●Located on a river in the Southern Japanese Alps

29

IV. Environment Related Business(3) Practical-Use of Natural Environment: JUZAN’s Whiskey Business
Reference: Whiskey Production(1) Malting
The germination and dryingof barley beans. The Ikawa
Distillery will use malt
produced in Scotland.

(2) Milling and mashing
A sweet barley juice calledwort is obtained from thegerminated malt.

★Malted barley producedin Scotland★Saccharification tank(3) Fermentation
Yeast is used to transform thesugar in malt to alcohol.

★Temperature control function ofcooling and heating(4) Distilling (two times)
The alcohol level is raisedby this process, whichuses a pot still.

★Simple distillation(5) Maturation
During maturation, the aroma of the wood barrels is added to thewhiskey. About 99% of all whiskey is aged in barrels, a process that cantake 10 to 30 years or even longer.
(6) Blending
This step is used to add complexity and balance to whiskey. Experts
use their sense or smell and taste to combine whiskeys from different
types of barrels.
★The Ikawa Distillery’s barrels use wood from many types of trees in this region.

30

Inquiries:
Finance & IR Div.
Sumitomo Fudosan Yaesu Building
2-4-1 Yaesu, Chuo-ku, Tokyo
Tel: +81-3-3281-8581
Fax: +81-3-3281-8591
E-mail: ttp.ir@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 thispresentation.