First MidーTerm
Management Plannd
2 Half FY 2011 - 2014

August 26, 2011
Mitsubishi Paper
Mills Ltd.

Earthquake and Reconstruction Status
Tohoku Region Pacific
Earthquake
Massive tsunami hits Mill’s groundfloor, stopping all machines

March 11, 2011, 2:46PM
HachinoheMill※Intensity 5 upper
Massive tsunami(over 8 meters high)Full operationfrom April 14

Kitakami HiTec Paper※Intensity 5 upper

seismic center
Shirakawa Plant

Full operationfrom March 24※Intensity 6 lower

Target: Full resumption of7 paper machines and 3 coaters
Operatingstatus

Early Apr.

Power plant restarted

Early MayEnd May

Power supply to Tohoku ElectricPower, Inc.
PM №1, 2 and CM № 2 restarted

15%

Mid Jun.

PM № 7 restarted

35%

Mid Jul.

PM № 3 and CM № 3 restarted

55%

End Aug.

PM № 4 with on-machine coater

70%

End Spt.

PM №5 and CM №5 restart is planned 90%

・Resumption almost complete
・Ready to begin production onmain products line
Nov..

PM № 6 restart is planned

100%Complete resumption※ on Japanese seismic scale1Financial Result Highlights <consolidated>（Unit:100 million yen）
FY2010 Actual

FY2009 Actual2011 Forecast

FY2009SalesRatio（%）

1STHalf2ndHalf

FY2010

Sales
Ratio
（%）

Increment

2,197－

1,067

1,041

2,108－(89)(4.0)

OperatingIncome

43

1.9

191635

1.6(8)

Ordinary
Income27

1.291221

1.0NetIncome

(16)

(0.7)

(9)

(136)

(145)

(6.9)

－

133

133

Sales

Earthquake
Loss

FY

3,000
2,500

Sales

Operating Income
110First-Half

2,585 2,531
2,443
2,197 2,108

73

1,185

（％）

900

1,100

2,000

(5.1)

(18.2)

(5)

35

30

(13.7)(6)(20.4)(15)2510(52.7)

(129)

－(50)

20(30)

－

44

549

FY80

FYFirst-Half601,083 1,067

50900

3931433030192012500(Forecast)-1021211210.3

11.3

09.3 △16△16△910△60△ 15△14012.3△30△50007.3 08.3 09.3 10.3 11.3 12.3(Forecast)(Forecast)32△402△507.3 08.3 09.3 10.3 11.3 12.3

279100312473

3740
20 61
60
△20 07.3 08.3

53403533

First-Half

80

71

45

1,264 1,343

Net income

60

71

70

1,500

FY2011

Ordinary Income

90

2,000

1STHalf

First-Half

93

2,0001,000

FY

2ndHalf（％）-20△14507.3 08.3 09.3 10.3 11.3 12.3(Forecast)

2Assuming Changes to External Environmental (1)○ Earthquake effect★Forecast for domestic economy (domestic demand down→Recovery by year end?)

・Up trend since Jul-Sep, return to positive growth in 2nd half
2011

2012

Apr-Jun

Jul-Sept

Oct-Dec

Jan-Mar(1.3)％

0.4%

2.9%

2.6%

FY2011FY2012FY2013

0.2%

2.0%

NA

（Real GDP growth rate）[Bank of Tokyo-Mitsubishi UFJ]

（Real GDP growth rate）[Mitsubishi Research Institute]★Reconstruction demand in Tohoku region
・Industrial facility loss from earthquake: ¥8.2 trillion
Actual reconstruction demand since Apr-Jun, demand to peak in early 2012,
then peak out
3rd Qtr

4th Qtr

1st Qtr2nd Qtr

3rd Qtr

4th Qtr

Total

0.8

1.2

1.6

1.6

1.2

0.8

7.2

402 May 2011

（SupplementaryBudget Overview)

1st Suppl. Budgetnd〃

225 Jul 2011

3rd〃

10Sept 2011

2（Unit: trillion yen）

3

Assuming Changes to External Environmental (2)○ Economic trends in Europe, North America, China and rest of world・Prolonged economic slowdown of EU and the US, sovereign risk is expected
・The highest concerns over appreciation of Yen and gold price – temporary
or long-term. However, no soaring oil prices.
・New era for India and ASEAN countries due to GDP growth.
India is where China was 10 years ago.
（Real GDP growth rate）
Japan

China

India

ASEAN

NIEs

USA

EuropeLatin/SouthAmerica

Russia
/EE

2010

4.0%

10.3%

8.5%

6.9%

8.3%

3.0%

1.7%

6.1%

3.7%

2011

(1.0)%

9.5%

7.6%

5.3%

4.6%

1.5%

1.6%

4.8%

4.3%

2012

2.2%

9.4%

8.0%

5.6%

4.3%

1.8%

1.0%

4.4%

4.1%

＊ASEAN4 （Indonesia, Malaysia, Thai, and the Philippines）＊NIEs （South Korea, Taiwan, Hong Kong, and Singapore）

4

Our Challenges◎ Reconstruct Hachinohe Mill (printing paper business)◎ Raise funds for Hachinohe reconstruction◎ Strengthen weak financial position◎ Build better-balanced business portfolio

5First Mid-term Business Plan – Basic Policies
First Mid-term Plan
FY2011 2nd half

FY2013

FY2012

Reconstruction
Reconstruction

Second Mid-term Plan
FY2014

Strengthen
Strengthen revenue
revenue base
base forfor growthgrowth【１1/2 years】

FY2015～Strengthen growth
sectors【２ years】① Quickly recover printing paper business market share, build efficient finishing lines② Promptly repay sharply increased interest bearing debt (¥30 billion), normalize financial
positiona) Normalization of earnings  Sales recovery Reform fixed cost structureb) Cash reserve

 Inventory reduction
 Zero-based budgeting of capital investment③ Policies by business segment

 Printing paper business – Maintain profitability, expand revenue opportunities
 Imaging business – Maintain revenue structure, develop overseas markets
 New business development – Accelerate growth, prioritize business resource investments
 German operation – Maintain stable operation, increase prices
 KJ Specialty paper – Achieve synergistic effects, develop overseas markets
 Emerging countries – Invest business resources
6

Basic Plan Values（Unit:100 million yen）

1st half

2nd half

FY2011FY2012FY2013

FY2014

Sales

900

1,100

2,000

2,300

2,350

2,400

Operating Income(5)

35

30

75

80

100

Ordinary Income(15)2510455070

Interest Bearing
Debts

－－

1,700

1,700

1,600

1,500

Ｄ／Ｅ Ratio

－－

3.7

3.4

3.0

2.6

4,380

4,275

4,186

4,186Employees （※）

FY2011FY2012FY2012FY2014

Exchangerate

US$
€
AUS$

¥８２/８２/＄¥１２０/１２０/€
¥８６/
８６/Ａ＄

¥８０/８０/＄
¥１１５/
１１５/€
¥８５/
８５/Ａ＄

OilDubai$１１５/
１１５/ＢＢＬ$１１０/
１１０/ＢＢＬ

Dividend payments to be resumed（※） Since October 2011, 200 employees have been
added due to consolidation of KJ Specialty
Paper Co., Ltd.
7

Sales Ratio by Business Segment/Operating Income Changes
Sales ratio
FY 2008
New Business
Development
Division 2%DigitalImaging
Division

FY 20104% Others

New BusinessDevelopment
Division 3%DigitalImaging
Division13%Others

New Business
Development
Division

4% Others

9%DigitalImaging
Division

13%13%80%

74%

Paper Division

Paper Division

Paper Division¥253,100 million¥210,800 million（down 17% compared with FY2008）¥240,000 million（down 5% compared with FY2008）

81%※Sales

4%FY 2014

Operating Income
70707060

60

6050505040404030303020
100-1020

New Business
Digital Development
Imaging
Paper

Others0-10PaperDigitalImaging

20New Business
Digital Development
Imaging10（Unit:100 million yen）

New Business
Development

10Others

0-10PaperOthers

8Ordinary Income Forecast ①（Unit:100 million yen）
60

Sales
(Quantity・Product mix)

5040

43021Paper

20-1100-1010-3

Cost

3Digital
Imaging
New Business
Development

1545-8Interest
paymentetc.

24Others
Raw Material& Energy Cost

Raw Material& Energy Cost

Cost-43-2050
Sales(Quantity・Product mix)-30

-17-40FY 2010

FY 2011

FY 2012Reconstruction
Reconstruction9Ordinary Income Forecast ②80

Sales(Quantity・Product mix)

70
60

4550-2423Digital
Imaging
Cost New Business
Development

40（Unit:100 million yen）

Sales
(Quantity・Product mix)

Paper-250

37DigitalImaging

325PaperCost70Others

New BusinessDevelopment

Others3020
100-10-20

FY 2012FY 2013

FY 2014

Strengthen
Strengthen revenue
revenue base
base forfor growth
growth10Financial Improvement Targets
Financial improvement measures
 Revenue recovery
 Reduce fixed costs

Target at end of FY2014

 Inventory reduction
 Zero investment

・Interest-bearing debt
¥150,000 million
・D/E ratio

２.６ times（Unit:100 million yen）

2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
04

Ｄ／Ｅ ratio

1,700

1,616

1,598

1,700

3.7

1,600

1,500

1,435

3.5

3.42.42.533.0

2.9

2.6

Interest-bearing debt
(Actual)(Forecast)

2.5
21.5

FY2008FY2009FY2010FY2011FY2012FY2013

FY201411

Financial Summary
Interest-bearing debt
-bearing debt/sales
Interest-bearing
debt andand interest
interest-bearing
debt/sales ratio
ratio（Unit:100 million yen）

1002000
81

74

6965
1,700

1500

6380

（％）

60

1,700
1,600

1,435

1,500

40
20

1000

0
FY2010FY2011FY2012FY2013

FY2014

Hachinohe-bearing debt
Hachinohe reconstruction
reconstruction andand funds
funds forfor interest
interest-bearing
debt repaymentrepayment（Unit:100 million yen）

＜Purpose＞＜Funds＞
New borrowing

265

Profit for theperiod

175

Depreciation

426

Total

Hachinohereconstruction
Repayment
Maintenance/Renewal

866
Others300
200
110Additionalrunning costs
Extraordinary
loss and tax
Total 866110
146
12Strategy by Business Segment –Paper DivisionBusiness environment
Coated printing
paper demand

Short term

Decrease by 5% in 2011 due to earthquake,with positive growth expected in 2012

Mid- to long-term

No major decrease expected over medium term,
gradual decrease expected over long term
Concerns of shrinking
demandElectronic media

E-book market growth
65 billion yen in 2010 → 200 billion yen in 2015.
Richer content and environment in 2-3 years.
Expansionary phase expected from 2013.

Strategic
Strategic planplan
Recover from emergency sales
system implemented after earthquake・ Leverage brand strength and product appeal (FSC/NVM)

Strengthen sales of printing andinformation paper・ Improve sales capability by leveraging the advantages
offered by exclusive sales subsidiary

Sales shift to higher value added/new products

Expand sales of digital printing paper, FSC-certified
paper, and paper using forest thinnings

Strengthen alliance with Oji Paper

Maintain alliance for carbonless paper・ Build stronger relations with highly loyal customers

13Measures Taken at Hachinohe Mill
＜Capacity Utilization＞
1,000 tons

900

850

800
700

94%

700
80%

600

750
82%

500

820

810

800

91%

90%

89%

FY2012FY2013

FY2014

500
400

55%

300
200
1000FY2008

FY2009FY2010FY2011

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

－Maintain appropriate inventory levels Reduction of Hachinohe inventories improves cash flow by ¥5 billion－Reduce distribution costs－
Increase percentage of direct delivery from mill to customers
14Strategy by Business Segment –Imaging DivisionBusiness environment
Market decline trend of photo-sensitivematerials
Raw material and energy costs/othermaterial costs remain at high levels

Specifically, photo paper decreasing by 6-9% per annum
Cost pressure, losing competitiveness

Find way to develop emerging markets (India, Southeast Asia, Middle East,China) where the market growth is expected

Strategic
Strategic plan
plan
Enhance product lineup with newly
developed products

Develop new products through application of photosensitive technology and expand sales (including noninformation media)

Promote sales to emerging countries

Invest business resources in Thailand, Indonesia and India

Improve revenue structure of
Kitakami HiTec Paper

New product developments and sales promotion of
Kitakami HiTec Paper

Strengthen alliance with Fuji Film

Strengthen alliance for photopaper, photo base paper, pulp
and ＧＡＭ

15

Strategy by Business Segment –New Business DevelopmentBusiness environment
Rapid market growth inemerging countries

Reverse osmosis membrane substrate, separator, filter etc・Seawater desalination2005⇒2015 2.3 times [Source: Global Water Intelligence]

・Lithium-ion battery market
Threat2010⇒2015 2.8 times [Source: Yano Research Institute]

Fierce competition from new entrants from various industries

Strategic
Strategic planplan
Early startup of new machine for functional
materials at Takasago mill

Investment for non woven fabric startup – Phase Ⅰ:¥2 billion, feasibility study for Phase Ⅱ investment

New product/new market development
Create new revenue streams [3 - 5 streams]

Battery separator for rechargeable batteries,development and sales of new non-woven
products to auto industry

Expand business in China (Zhuhai)Phase Ⅱ investment review

16Strategy by Business Segment –OthersＫＪ
ＫＪ Specialty
Specialty Paper
Paper Co.,
Co., Ltd.
Ltd. -- Basic
Basic policies
policies
Create synergistic effects
Promote overseas sales of decor base paper,
which has highest domestic market share (80%)

ＫＪＳＰ Committee established

Promote overseas sales of tape base paper

PromotePromote businessbusiness withwith emerging
emerging countries
countries -- Basic
Basic policies
policies
Target market for photosensitive products
and functional materials

Invest business resources to promote sales ofphotosensitive materials in Jakarta and Mumbai

Phase１ Establish sales bases in emerging countries
Phase２ Establish sales channels
Phase３ Strategic business start-up plan including
overseas transfer of production

Emerging Countries
Committee established

GermanGerman operation
operation -- Basic
Basic policies
policies
Maintain stable operation and raise prices

Stabilize business, use as base to other EU and EEmarkets

17

These slides contain forward-looking statements with respect tofuture results, performance and achievements that are subject torisks and uncertainties, and reflect management’s views andassumptions formed based on available information. All data otherthan historical facts are data that could be considered forwardlooking data. Should one or more of these risks or uncertainties
materialize or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein.
Mitsubishi Paper Mills does not intend or assume any obligation to
update this forward-looking data.

18