PHOENIX PLAN
(Mid-Term Revival Plan)
ẔFiscal Years 2005 - 2007ẕ

November 2005
Takeshi SatoPresident and CEO
Mitsubishi Paper Mills Ltd.

Contents
Target of Phoenix Plan
Current Situation and Countermeasures
5 Policies for Revival
Target Figures
Ordinary Profit: Approach to the GoalPlans

Ὁ Turn Around and Stabilize Kitakami Hitec Paper
Ὁ Exit from High Cost StructureὉ Concentrate on Paper BusinessίStrengthen Hachinohe MillὸὉ Strengthen Distribution
Ὁ Improve Financial Structure

Organizational Structures to Promote Phoenix Plan
Resolution of the President1

Target of Phoenix Plan
Transformation to Expansion
 Become Competitive Printing

Paper Manufacturer
 Expand Specialties and New
Products Based on
Mitsubishi’s Proprietary
Technologies
GrowthGrowth andand Expansion
Expansion Period
PeriodPhoenix Plan
(Fiscal Years 2005 – 2007)
Establishing Solid Company FoundationὉẅReform Cost StructureὉẅImprove Financial Structure

Preparation
Preparation Period
Period2Current Situation and Countermeasures
Current Situation
External Environment
Saturated
Saturated Domestic
Domestic Market
MarketIncreased
Increased Paper
Paper Import
Import andandCompetition
Competition
Raw
Raw Material
Material Prices
Prices Increase
Increase
DueDue toto Spike
Spike ofof Oil
Oil Price,Price, etc.
etc.

Internal Environment
Necessity
Necessity ofof Profitability
Profitability
Improvement
Improvement
MaturedMatured ProductProduct Portfolio
Portfolio Due
Due totoDelay
Delay inin Shifting
Shifting toto Growing
Growing Areas
Areas

Necessity
Necessity ofof Stop
Stop Bleeding
Bleeding atat
Kitakami
Kitakami Hitec
Hitec Paper
Paper

Countermeasures
Exit
Exit fromfrom HighHigh Cost
Cost
Structure
Structure
Improve
Improve
Financial
Financial Structure
Structure
Concentrate onon Paper
Paper BusinessBusiness
Self Concentrate(StrengthenHachinohe(Strengthen Hachinohe Mill)Mill)
andandRevival
Strengthen New BusinessesStrengthen New Businesses
Turn
Turn AroundAround andand Stabilize
Stabilize
Kitakami
Hitec
Paper
Kitakami Hitec Paper

Necessity
Necessity ofof Strengthening
Strengthening Sales
Sales
Reestablishment
Reestablishment ofof Trust
Trust after
after
MergerMerger Cancellation
Cancellation

Strengthen
Strengthen Distribution
Distribution3

5 Policies for Revival
Approach to the Goalvs. 2005

Exit from High CostStructureὉ Cost Structure ReformὉ 5% Total Cost Reduction

8.3 Billion Yen
EffectImprove
Financial Structure

Reduce Interest Bearing Debt by
20% through Sale of Assets

Reduce Interest
Bearing Debts by
40 Billion Yen

Concentrate on Paper
Business(Strengthen Hachinohe Mill)and Strengthen NewBusinesses

Ὁ Concentrate on Paper Business
20 Billion Intensive Investment
to Hachinohe MillὉ Increase New Product Ratio
Ὁ Concentrate R&D Resources toStrengthen New ProductDevelopment

Improve ROI
2.5 Billion Yen
New Product Ratio
Up to 25%
New Business Growth Rate
ẅẅ50% CAGRẅẅẅ
ό

Turn Around and Stabilize
Kitakami Hitec Paper

Strengthen Distribution

ὉThorough Rigorous Cost Reductions Profit Improvement
ὉFlexible Production System> 5 Billion Yen
ὉProduce Other than RC Paper
όvs. KHP 2004
ὉPromote Collaboration withMitsubishi Corporation
ὉAdvantage of exclusive agent όόvs. Sales subsidiary 2004

Profit Improvement> 1 Billion Yen
4Target Figures
Plan (Consolidated Base)
Fiscal Year(Ref.)
2004

Revenue (Billion Yen)

234.7

230.0

230.0

235.0

Ordinary Profit (Billion Yen)

1.7

3.5

4.5

7.0

Ordinary Profit on Revenue

0.7%

1.5%

2.0%

3.0%

194.0

174.0

164.0

154.0

D/E Ratio

83%

76%

71%

66%

ROI

0.5%

1.1%

1.5%

2.3%

Equity Ratio

17%

20%

22%

24%

4,800

4,800

4,700

Interest Bearing Debt (BillionYen)

Employees ẅẅYear Begin

5,260ẅẅẅẅYear End4,902

ẅ

2005

2006

2007ẔNoteẕẅIncluding the risk of 3.0 Billion Yen loss on Ordinary Profit in 2006 and 2007, respectively.
5

Ordinary Profit: Approach to the Goal

Ordinary Profit (Consolidated Base)ί100 million yenὸ

Ordinary Profit70ᵖᵎ
Ordinary Profit
45 Investment

ᵔᵎOrdinary Profit
35ᵒᵎ
Depreciation
Reduction
26ᵐᵎ

ᵎ

ᵋᵐᵎ

Material
2004
Ordinary Cost
ProfitPersonnel(16) Personnel
17
Cost,Cost, etc.
etc.
115
5
VolumeandProductMix etc.
(ᾆ)
Cost
Reduction
30
RiskRisk(30)(30)

Effect7
Depreciation
Reduction2

Depreciation
Increase(8)Interest etc.
(6)

2005
OrdinaryProfit35Investment
Effect18

Depreciation
Increase(11)2006
OrdinaryProfit
Personnel
Personnel
Restructuring45
Restructuring
66
Cost
Reduction
39

Depreciation
Reduction
10
Personnel
Restructuring
4
Cost
Reduction
34

Risk
Risk
(30)
(30)
Risk
Risk
(30)
(30)

ᵋᵒᵎ
2005
2005

2006
2006

2007
2007
6

Turn Around and Stabilize
Kitakami Hitec Paper
ί100 million yenὸᵏᵎ

Ordinary Profit(2.6)

Ordinary Profit(48)

Ordinary Profit
4.6
2005
OrdinaryProfitᵎOrdinaryProfit
(2.6)

ᵋᵏᵎ

ᵋᵐᵎ

Maintenance
Cost
Reduction
6.3
2004
OrdinaryProfit
(48)

2004
OrdinaryProfit

PersonnelReduction
12.1

Depreciation
Increase(2.4)
Volume, Price &Product Mix
3.2
Productivity
Improvement
6.5

Ordinary Profit
92006
OrdinaryProfit

Depreciation
Increase(0.2)
Volume, Price& Product Mix
3
Productivity
Improvement
6.6

Volume,Price &Product Mix
3.2
Productivity
Improvement
1.2
Personnel
Reduction
0.2

ᵋᵑᵎ
Depreciation
Reduction
19.2
Oil Price
Increase(1.9)ᵋᵒᵎẅ“Productivity Improvement” mainly comes from:ẅὉYield ImprovementsẅὉEnergy Cost Reductions
ẅὉChemicals, Chip and Formulation Changes
ẅὉOutsourcing Cost Reductions

ᵋᵓᵎ2004
2004

2005
2005

2006
2006

2007
2007
7

Exit from High Cost Structure
Improvement Compared with 2005
Effect83

ί100 million yenὸᵗᵎ
Volume, Price& Product Mix
29ᵖᵎ
ᵕᵎᵔᵎEffect45

ᵓᵎLogistics
Cost 8Volume, Price& Product Mix
16ᵒᵎᵑᵎ

Production
Cost 30

Logistics Cost5ᵐᵎᵏᵎ

Production
Cost
18

Work Force
Productivity
6ᵎPersonnel
Cost 6

Personnel
Cost 10

2005
2005

2006
2006

2007
2007

8

Concentrate on Paper Business(Strengthen Hachinohe Mill) Ṟ
Selecting Businesses to Be Strengthened
Fundamental Plan
Printing Paper

Communication &Specialty Paper

New BusinessὉ Realize Global Competitiveness through Cost Reductions
Ὁ Intensive Investments in Hachinohe MillὉ Strengthening Non-Price CompetitivenessὉ Increase Production and Sales with Superior Technologies(Inkjet with its top market share, Thermal, RC Paper, etc.)

Ὁ Strengthen Product Development

Ὁ Concentrate R&D Resources to Realize Customer’s BenefitsὉ Develop Highly Profitable Products in Growing and ValueAdded Markets
Ὁ Strengthen Business Development Organization
Ὁ Focus on Filter, Rewritable Thermal Paper, Non-WovenFabric, Heat Storage Capsule, Silver-halide Electronic Parts
9

Concentrate on Paper Business(Strengthen Hachinohe Mill) ṟEffect of Strategic and Intensive Investments
Between 2005 and 2007, 27.5 billion Yen out of 42.5 billion Yen of total
investment shall be strategically invested.
(Hundred Million Yen)
Investment

2005

2006

2007

Total

Maintenance
Strategic

5050501502550200275

Total

75100250425

2005

2006

2007

2008

-72539Effect ofInvestment

Investment to be focused on Hachinohe Mill.
20 billion Yen (73% ) will be invested in Hachinohe Mill to improve its
competitiveness in the printing paper market.
(Hundred Million Yen)
Mills
Strategic Investments
2005 - 2007

Hachinohe

OthersTotal20075275
10

(Reference) Hachinohe Overview
Strength1.
2.
3.
4.
5.

Private QuaySimple Layout with Expandability
Superior Technology in Coated Paper
High Speed & Wide MachinesFirst FSC Certificate Awarded Mill in Japan

Major ProductsẅCoated and Other Printing PaperẅWhite Paper Board
Capacity of major printing & communication papermills (Volume in 2004)ᵮᶐᶇᶌᶒᶇᶌᶅᴾᵄᵡᶍᶋᶋᶓᶌᶇᶁᵿᶒᶇᶍᶌᴾᵮᵿᶎᶃᶐ
ᵏᵎᵎᵎ

Aggressive marketing of FSC Certified Paper
Promotion of FSC Certificate Systemᵡᶍᵿᶒᶃᶂᴾᵮᶐᶇᶌᶒᶇᶌᶅᴾᵮᵿᶎᶃᶐ
ίT tonὸᵖᵎᵎ

Many companies started using FSC Paper

GlobalPromotion of Sustainable Forest Management

ᵔᵎᵎὉEnvironmental Protection (Ecology)
ὉLocal Community (Human Rights and Life)
ὉSustainable Economy (Material Recycling)
Contributionᵒᵎᵎᵐᵎᵎᵎ
Hokuetsu Niigata

OJIOJIOJI
NPIMPM
Daio
NPI
Mishima IshinomakiHachinoheIwakuni Tomioka Kasugai Yonago

Mitsubishi Paper Mills
ὉRealize non-price competitivenessὉMaintain First-Mover Advantage ḷ“FSC = Mitsubishi Paper Mills”
ὉAll Mitsubishi Paper products are environment
friendly

11

Strengthen Distribution Ṟ
Business Expansion of Mitsubishi Paper Sales

Shareholders
Shareholders
13%
䋨% shows current shareratio, and will be changed
after the merger䋩

Mitsubishi
Mitsubishi Paper
Paper Mills
Mills
67%

Mitsubishi PaperSales

Mitsubishi
Mitsubishi CorporationCorporation
20%

Mitsubishi Shoji
Packaging CorporationPaper Division
July 1, 2006 (Planned)

䂹Agreed to conduct a feasibility study of merger with Paper Divisionof Mitsubishi Shoji Packaging Corporation
䂹Promote collaboration with Mitsubishi Corporation
䇭 Strengthen proposal sales
Seek synergy effects
Expand supply sources䇭䇭䇭䇭῍ẅ Strengthen total sales capabilities with diversified supply sourcesẅ῍12

Strengthen Distribution ṟMaterialize Merits of Exclusive Agent, andImprove Profitability through Full Business Restructuring Support Ongoing Mitsubishi Paper Sales’ Business Restructuring ActionPlanẅẅAchieve 1% Return on Sales (Ordinary Profit/Sales)ẅẅOrdinary Profit Target: 1 Billion Yen (Promoting sales of higher margin
products and reducing overhead cost) Further Business Restructuring through Sharing Sales, Production andInventory Information among Parent and Sales Subsidiaries
Ṟ Efficiency improvement through supply chainsẅ ṟ Realization of optimum customer relationshipẅẅὉStrengthen proposal sales
ὉImprove logistics efficiency

13

Improve Financial Structureίήὸ(Billion Yen)

Interest-Bearing Debt
Interest-Bearing
Debt && D/E
D/E Ratio
Ratio

200

194

100
83

Reduce 40 Billion Yen76

71

8060

174

150

66

164
154

40
20100

Financing
Financing andand UseUseEnd 2004

March 2006
March 2007
March 2008

End 2005

End 2006

End 2007

ᾋUseᾍᾋFinancing ᾍ
PeriodicalProfit0

3.5 Bill.Yen
4.5 Bill.Yen
7.0 Bill.Yen

March 2006 13.0 Bill.Yen
Depreciation March 2007 13.5 Bill.Yen
March 2008 13.5 Bill.Yen
Marketable Securities
Sale ofReal estates
AssetsOthersTotalẅẅ90.0 Billion Yen

15.0
Bill.
Yen
40.0
Bill.
Yen
35.0
Bill.
Yen

Reduction of Debt

40.0
Billion Yen

Investments

42.5
Billion Yen

Others7.5
Billion Yen

Totalẅẅ90.0 Billion Yen
14Organizational Structure to Promote
Phoenix Plan
Phoenix
Phoenix Plan
Plan Promoting
Promoting CommitteeCommittee
Profit Structure Reform
Mr. Iguchi
Executive Director

R&D System Reform Project
New Business Development
Reinforcement Project

Chairman
ChairmanMr.
Mr. Sato
Sato
President
President
Administration
Administrationᵟᶁᶒᶇᶍᶌᴾᵮᶊᵿᶌᵟᶁᶒᶇᶍᶌᴾᵮᶊᵿᶌᵡᶍᶍᶐᶂᶇᶌᵿᶒᶇᶍᶌ
ᵡᶍᶍᶐᶂᶇᶌᵿᶒᶇᶍᶌ

Business Structure Reform
Mr. Uemura
Executive Director
Business Structure Reform
Mr. Tokuda
Executive Director
Distribution Structure Reform
Mr. Iwasawa
Senior Executive Director

De-Centralized Management
Project
Business Process
Reengineering (BPR) Project
Distribution Reinforcement
Project
Logistics Reinforcement
Project
Human Resources System
Reform ProjectManagement Structure Reform
Mr. Tamura
Corporate Governance Reform
Senior Executive Director
Project

Members SelectedSelected fromfrom BusinessBusiness Units
Units andand Mills
MillsMembers

Cost Structure Reform Project15Key Targets of Projects
PROJECT

Cost Structure Reform
ProjectR&D System Reform Project

Key Targets (Against 2005)
Productivity improvement and cost review ḷ Total: ¥4.1 Bill./’06 (incl.

¥0.7 Bill. Investment effect) and ¥8.4 Bill./’07 (Incl. ¥2.5 Bill. Investment
effect)Organization Reform: Consolidate and improve its technologies
Review R&D system

New Business Development
Reinforcement Project
De-Centralized Management
Project
Business Process
Re-Engineering (BPR) Project

Establish new organizations: Promote 5 growing businessesḷ¥5.0 Bill. sales in ‘07

Distribution Reinforcement
ProjectProfit improvement: Ordinary profit ¥1.0 Bill.
Collaboration: Collaboration with Mitsubishi Corporation (improvedproduct portfolio and customer needs recognitions, etc.)

Logistics Reinforcement
Project

Establish new organization: New logistics company handles entire
MPM logistics ḷ Logistics cost reduction by ¥800 Mill.in ’07 = Total of¥1,600 Mill reduction including ongoing measures

Human Resources System
Reform ProjectIntroduction of new human resources system: System based on
management-by-results and Incentives ḷ ¥1.0 Billion personnel cost
reduction (Total: ¥1.8 Bill.)

Corporate Governance
Reform Project

Separate responsibilities between board of directors and executive
officers
Tighten Corporate Compliance Management, and enrichment ofinternal audit functions

Corporate Spin-offs: Spin off and reorganize all mills
Business Process Re-Engineering : Reduce volume of work. ḷ ¥600
Mill. Reduction in ’07 by improving working efficiencies

16

Determination to Realize the Plan
Mitsuibshi Paper Mills, since its establishment, has been striving as an R&D
focused company, continuously providing new products which meet current
market demand.
Going forward, we will aim to be a “distinctive paper manufacturer” by utilizing
technical development capabilities.
1. Concentrate strategic investments in Hachinohe Mill to become a “competitiveprinting paper manufacturer in the market.”䇭
2. Make the best use of accumulated technologies and develop further to“expand Mitsubishi’s Specialty Paper business and new business development”.
The Phoenix Plan has been established to enable us to realize our above
objectives.
Through its term, we will establish “firm and solid management foundations”.
Board members will take a leadership role and the entire company, as a unifiedteam, will be called upon to unanimously promote the plan.
November 2005
Chairman of Phoenix Plan Promoting Committee
Mitsubishi Paper Mills Ltd. President and CEO
17

Note about forecasts:
Forecasts of future performance contained in thesestatements are based on the current expectations, estimatesand assessment of the markets in which it operates.
A number of factors, many beyond the Company's control,
could cause actual results to differ materially from theforecasts contained in these statements.

18