SECTION 02

Achieving Sustainable Growth —Strategy for Continuing to Provide Value—

Daio Group’s Vision and Medium-Term Business Plans

SECTION 01

SECTION 02

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

The Group made a fresh start as the restructured Daio Group in 2012, and has since primarily pursued
structural reforms and overseas expansion under its Medium-Term Business Plans. The Group set out its

Customers

Net sales

Management
Philosophy

800 billion to ¥1 trillion¥

net sales of ¥800 billion to ¥1 trillion, 50% or more of which will be generated by the Home and Personal
Care (H&PC) Business and 30% or more from the H&PC overseas business, and an operating margin of 10%.

H&PC net sales ratio

Aiming toward the next growth stage and a new future, the Group will strategically transform its business

50% or more 30% or more

portfolio to become a corporate group capable of continuous growth.

H&PC overseas net sales ratio

High-quality,
high-value-added
products and services

Operating margin

Employees andtheir families

Planning through10%

backcasting from thevision of an “Abundantand Affable Future”

2014 201520122017 20182020 2021

Safety-first workplaceenvironment

2026

1st MTBP

2nd MTBPThe Group’s Medium-Term Business Plans,
formulated by backcasting from the targets set
out in the long-term vision, is centered around
two business strategies: structural reforms toreinforce its business foundation and transform its
business portfolio; and expansion into overseas
growth markets to strengthen and expand the
H&PC Business.
With regard to structural reforms, the Grouphas carried out a strategic shift of product mix,
maintaining full pulp production and preventing
machine shutdowns—it has even increased its
kraft pulp production. By increasing the share ofhousehold paper and containerboard, which areexperiencing growing demand, in its product mix
and maintaining its machine utilization rate, theGroup has amplified its competitive advantages.
Regarding overseas business expansion, by
establishing production bases, which produce

Three Well-beings

3rd MTBP

Integrated Report 2022

4th MTBP

mainly baby diapers, in China, Thailand andIndonesia, the Group has developed an
infrastructure for local production andconsumption in Asia. Under the Third
Medium-Term Business Plan, the Group
conducted M&A in Brazil and Turkey,
establishing new entry points in South America
and MENA (Middle East and North Africa).
While implementing these businessstrategies, the Group is also taking actions tocombat the urgent global challenge of climatechange and other ESG (environmental, socialand governance) issues and to contribute to thecreation of a sustainable society, which is theobjective of the SDGs. Through these initiatives,
the Group aims to realize its management
philosophy of “Shaping an abundant andaffable future for the world.”

1. Hygiene Protect well-being of the bodyHygiene23

2023 2024

We will make hygiene products accessible, inspire
good habits, protect people’s health, and realize an
inclusive society in every community.

5th MTBP

Suppliers

2030

2050

Contribution to
the achievementof the SDGs

Japanesegovernment’s target
year for achievingcarbon neutrality

Daio Abundant andAffable Future 2030

Contribution to
the realizationof adecarbonizedsociety
P.57

P.45

Grow together

Local
communities

Lifestyle, industrial andcultural development

Shareholders
and investors

Stable dividend andimprovement ofshare prices

Shaping an abundant and aﬀable future for the world

long-term vision with specific targets to be achieved by the fiscal year ending March 31, 2027 (FY2026):

SECTION 04

2. Life Enhance well-being of lifestyles 3. Regeneration Restore well-being of the earthLife

We will provide services thatenhance lifestyles, improve thequality of life, and enable people
to lead happy and enriching lives.

Regeneration

We will actively conserve the environmentand regenerate the earth back into aplanet with abundant nature where
diverse organisms coexist and thrive.

Integrated Report 2022

24

SECTION 02

Review of the Medium-Term Business Plans
Over the nine years from the First (FY2012) to Third (FY2020) Medium-Term Business Plans, the Group
achieved significant improvements in business performance through the expansion of the H&PC Business,while maintaining stable sales in the Paper & Paperboard Business through structural reforms. The Group
recorded increases in net sales and operating profit for eight and three consecutive years respectively, andsuccessfully built the foundation for the next growth stage to a new future.
Net Sales and Operating Profit by Business

SECTION 01

SECTION 02

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

The Group will continue to implement radical cross-business structural reforms of the Paper andPaperboard Business and the H&PC Business under the Fourth Medium-Term Business Plan, which has
been underway since FY2021, and subsequent medium-term business plans. In its eﬀorts toward overseas
expansion, the Group plans to extend the coverage of its operations from its bases in Asia, Brazil andTurkey to surrounding areas, and also to promote multi-category business expansion by diversifying therange of its product categories in those markets with a view to multi-layering its businesses.
■ Newsprint and Paper Business■ Industrial Paper and Containerboard Business■ Other Businesses● Operating profit

Net sales (Billions of yen)
600

SECTION 04■ H&PC Domestic Business■ H&PC Overseas Business¥562.9 billion¥531.3 billion¥450.2 billion

11.1％

7.7％

4.9％

400

36.9

21.8

200

11.1
0

FY2012FY2013

FY2014FY2017FY2018

Restart—Solid Reform and Further Growth

Step-up—Leap and Expand

Basic Policies

Rebuilding of business foundation
Improvement of profitability of the paper business through cost
reduction and structural shift of product mix● Strengthening of the containerboard and corrugated container business● Expansion of Home and Personal Care (H&PC) Business●

Review

Promoted structural reforms
and improvement of financial
strength to rebuild thebusiness foundation(Billions of yen)

Targets

Results

Net sales
Ordinary profit

450.0
22.5

450.2
21.7

Interest-bearing debt

400.0

375.0

Equity ratio

17%

23.7%

3.8

2.4

Restart—Solid Reform and Further Growth
The First Medium-Term Business Plan
(FY2012–FY2014):

Review
Under the First Medium-Term Business
Plan, in response to a continuing decline indemand for paper and in order to maintainfull pulp production at the Mishima Mill,the Group embarked on a structuralreform. Aiming to improve the profitabilityof the paper business through thoroughcost reduction and a structural shift ofthe product mix, the Group worked toreduce pulp costs by increasing kraft pulp
production and improve the profitability of
paper products by shifting to higher valueadded products. At the same time, in orderto build an optimal production systemthat meets demand, the Group converted
paper machines at the Kani Mill into
containerboard machines to respond toincreasing demand for containerboard. It
also merged and integrated the operationsof its corrugated container subsidiaries
to strengthen the containerboard andcorrugated container business.
Meanwhile, to further expand the
H&PC Business as part of its growthstrategy, the Group established factories
in Thailand in 2011, in China (Nantong) in
2012, and in Indonesia in 2014 to produce
mainly baby diapers, thereby building an
infrastructure for local production andconsumption in Asia.
The Group also worked on revamping
its governance structure and improving
its financial strength in order to rebuild its
business foundation.

IssuesFurther structural shifting of thepaper business● Strengthening of production
facilities of H&PC Business●

Structural shift of the paper
business● Strengthening of thecontainerboard andcorrugated container business

Further growth and acceleration of H&PC
Business● Development of new businesses /Cellulose Nanofiber (CNF)●●

Promoted H&PC overseas
business expansion
Achieved significant expansion of
net sales through domestic M&A
Failed to achieve the profit target(Billions of yen)

Targets

Results

Net sales
Ordinary profit

500.0
25.0

531.3
12.8

Net interest-bearing debt

250.0

280.0

Equity ratio

28%

25.9%

1.5

1.6

Step-up—Leap and Expand
The Second Medium-Term Business
Plan (FY2015–FY2017):

Review
Under the Second Medium-TermBusiness Plan, the Group continued
to promote the structural shift ofthe paper business and shifted the
product mix to maximize profit. It
also worked to further strengthen
the containerboard and corrugatedcontainer business by starting
operation of the No. 3 paper
machine at Iwaki Daio Paper.
With regard to the H&PC
domestic business, the Groupacquired the paper products
business from Nisshinbo Holdings
Inc., achieving an increase in market
share of household paper products.

Net debt to equity ratio

The Group also worked to increase sales ofhigh value-added products by leveraging thestrength of the Elleair brand, and expanded thedomestic supply capacity for absorbent products
by commencing operation of Elleair Product’s
Fukushima Factory. As for overseas business, inaddition to expanding its production facilities
and broadening the product lineup to increase
sales in Thailand, China and Indonesia, the Group
increased exports from Japan to Korea, Russia,
Taiwan, etc.
Furthermore, with regard to the Cellulose
Nanofiber (CNF) business, a new business that
it hopes would drive future growth, the Group
worked to expand the CNF product lineup by
starting the operation of a pilot plant for the
production of dry powder-type CNF.

Issues
Radical structural reform from paper
business to growth business● Expansion into new overseas markets●

FY2019FY2020The Third Medium-Term Business Plan (FY2018–FY2020)(FY2015–FY2017)●

Integrated Report 2022

FY2016The Second Medium-Term Business Plan

Net debt to equity ratio

25

FY2015The First Medium-Term Business Plan (FY2012–FY2014)

Move on: Reform and Soar Above
Radical cross-business structural reform of Paper and Paperboard
Business and H&PC Business● Global expansion and strengthening of profitability of H&PC Business● Early commercialization of Cellulose Nanofiber (CNF)●

Conducted cross-businessstructural reforms andoverseas M&A
Achieved targets for all items
other than net sales* Operating profit is used as a profit indicator from the 3rd MTBP.

Move on:

Reform and Soar Above
The Third Medium-TermBusiness Plan (FY2018–FY2020):

Review
Under the Third Medium-Term Business
Plan, the Group launched a radical crossbusiness structural reform of the Paper& Paperboard Business and the H&PC
Business. The Group resumed operationof the Kawanoe Mill in October 2018
to produce household paper by using
pulp that was made available by shiftingfrom paper to containerboard, and also
strengthened the paper products businessacquired from Nisshinbo Holdings Inc.
Through these measures, the Group
increased its share of the household
paper products market and strengthened
the profitability of the H&PC Business.
As for growth strategies, the H&PC

(Billions of yen)

Targets

Results

Net sales
Operating profit*

615.0
32.0

562.9
36.9

H&PC overseas net sales ratio

15%

11.1%

ROE

8%

10.1%

Net debt to equity ratio

1.6

1.3

overseas business focused on expanding
sales of premium toilet tissue in China.
Furthermore, the Group gained operation
bases in new markets in South America
and MENA through M&As in Brazil(Santher S.A.) and Turkey (Özen A.S.). In
new businesses, the Group commenced
the biomass power generation businessusing the feed-in tariﬀ (FIT) scheme in
July 2020. Also, progress was seen in thecommercialization of CNF as material fortable tennis rackets, parts of electric racingcars, etc.

IssuesContinuation of ongoing structuralreforms and promotion of overseas
growth strategies (bringing
overseas business into the black)● Promotion of management that is
conscious of capital eﬃciency andstrengthening of financial strength●

Integrated Report 2022

26

SECTION 02

Overview and Progress of the Fourth Medium-Term Business Plan

SECTION 01

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Material issues
Strategic transformation of business portfolio

Since FY2021, the Daio Group has been actively committed to implementing the Fourth Medium-Term

P&P BusinessBusiness Plan under the slogan “GEAR UP: The Next Growth Stage, to a New Future.” Aiming to realize theThree Well-beings, the Group has been accelerating its initiatives to shape a new future in high gear.

●

Creation of new businesses

H&PC Domestic Business H&PC Overseas Business

Strengthen the business throughcompetitive advantages●

Acceleration of global expansion

Expand market share across all
categories

Newsprint and paper
Industrial paper andcorrugated containers●●

New Businesses

Overseas business will lead
growthHousehold paper
Baby diapers●●

Create a third business pillar

Feminine care products
Adult diapers●●

CNF business
RFID business (IC tags)

Basic Policies of the Fourth Medium-Term Business Plan
Environmental changes

Establish a strong and resilient

Respond to climate change

2 Improve financial strength

1 business portfolio

Build an even greater competitive advantage
in the Paper and Paperboard (P&P) Businessthrough continuous structural reforms● Lead the Group’s growth through fastermulti-category business expansion and further
acquisition in the Home and Personal Care
(H&PC) Business● Create future growth opportunities throughnew businesses such as Carbon Nanofiber (CNF)

3 (Carbon neutrality by 2050)

Strengthen cash generating capacity andimprove cash flow by capitalizing on the
results of structural reforms and strategic
investment● Promote management conscious of capitalcosts and return on capital by introducing
ROIC as a management indicator● Obtain and maintain a credit rating of A●

Promote the use of renewable energy,
aiming to achieve decarbonization by 2050
● Continually engage in proper plantation
management and expansion of plantation
areas● Promote a shift to environmentally friendly
materials through CNF and plastic-free
product businesses●●

Progress highlights
Started operating a paper towel machine at
the Mishima Mill
● Started operating the second machine forhousehold paper products at the Kawanoe Mill●●

Obtained an A rating in September 2021

Started conducting an environmental impact
assessment in preparation for the installation of
a waste-to-energy boiler at the Mishima Mill● Obtained about 6.0 km2 (nearly 1,500 acres)of land for plantation in Chile, South America

2nd MTBP(FY2017)450.2

Net sales
Operating profit (operating margin)

3rd MTBP(FY2020)

531.3

4th MTBP

Pursue further growth opportunities

Environmental changes

Structural growth of
e-commerce markets● Progress of the aging society

Increase in consciousness ofenvironmental conservation● Economic growth indeveloping countries● Change in social issues●●

Maximize growth opportunities

Maintain stable supply● Strengthen printing and corrugatedcontainers in the processing field● Shift to product types where
demand is anticipated● Capture e-commerce demand anddemand generated by a growing
trend toward plastic reduction

Solidify the household paper
business and strengthen theabsorbent products business● Increase brand loyalty● Strengthen e-commerce sales
channels● Continually oﬀer high-quality,
high value-added products●

Create future growth opportunities

Respond to the with/afterCOVID-19 society● Premium strategy● Accelerate expansion into growth
segments and areas● Accelerate growth through M&A● Promote multi-category businessexpansion●

Swift commercialization of the
CNF business● Entry into potential growthmarkets●●(FY2021)(FY2023)

562.9

612.3

720.0

¥800 billion to ¥1 trillion

21.8（4.8%） 11.1
（2.1%） 36.9
（6.6%）

37.6（6.1%）

51.0（7.1%）

80.0-100.0
（10%）

4.9%

7.7%

11.1%

12.1%

18.8%

30% or more

ROE

10.0%

2.2%

10.1%

9.5% 10% or more

12% or more

1.9

1.6

1.3

1.1

Net Sales and Operating Profit Results and Outlook by Segment
Paper and Paperboard Business

H&PC Domestic Business

H&PC Overseas Business■ Net sales (Billions of yen) ■ Operating profit (Billions of yen)

■ Net sales (Billions of yen) ■ Operating profit (Billions of yen)

■ Net sales (Billions of yen) ■ Operating profit (Billions of yen)

317.8

Vision for the 5th MTBP(FY2026)

H&PC overseas net sales ratio

Net debt to equity ratio

Rise in hygiene consciousness● Lifestyle changes● Fragmentation anddiversification of uses●●

(Billions of yen)

1st MTBP(FY2014)

Environmental changes

Accelerating decline ingraphic paper demand● More diverse packaging needs● Structural growth of
e-commerce markets
●

1.0

19.9

302.5

19.6

327.4

330.0

225.0 23.0

22.3
18.0

175.4

170.2

15.5

183.2

15.5

135.0

9.9
62.6

74.1

7.0

34.5

-1.9

1.0 or less

FY2019FY2020

FY2021

FY2023(target)

FY2019FY2020

FY2021

FY2023(target)

FY2019-0.8
FY2020-3.6
FY2021

FY2023(target)Progress of the Fourth Medium-Term Business Plan
Prioritized investments in the growth-driving H&PC businessNet sales(Billions of yen)(Billions of yen)

Operatingmargin

6.8%

330.0

18.0

5.5%

H&PC

257.3*

11.9

4.6%

360.0

30.0

8.3%

Domestic

183.2

15.5

8.5%

225.0

23.0

10.2%

Overseas

74.1

(3.6)

ー

135.0

7.0

5.2%

27.6

3.3

12.0%

30.0

3.0

10.0%

Total

612.3

37.6

6.1%

720.0

51.0

7.1%

* This net sales amount is a downward revision of about 6.1 billion yen from the previous
disclosure due to the application of accounting standards for revenue recognition.

Integrated Report 2022

The H&PC Business will exceed the Paper andPaperboard Business in terms of net sales.

Install additional waste boilers
Expand the total area of plantation land
● Shikokuchuo City Carbon Neutrality Council● Launch Elipla products● Start the operation of a pilot plant for CNF composite resin● Provide students with free period products●●

Daio Group

Establish the China Business as a multi-categorybusiness● Create synergy between the three companies in theBrazil Business●

Increase resilience to rising raw material
and fuel costs
Utilize hard-to-recycle recovered paper
Start in-house production of fluﬀ pulp
● Recycle used diapers● Establish a scheme for procuring paper material
chips stably● Build up the pellet fuel business
●

f
ed b
a
ain

Other businesses (including adjustments)

Accelerate initiatives to realize asustainable societyDelaybus in brinesverseas
the o
ing
black
ing to the
s in

22.3

mand
de apergin hic p
ap

Ne

327.4

Implement the structural reform of production in the
Chubu region● Enhance the containerboard and corrugatedcontainer business
●

s ust

Paper & Paperboard(Breakdown)

27

Operatingmargin

o
ili r
ty

eri
al

(Billions of yen)atOperating profitmra w l c
R is e i n
fue
an d

ts

Net sales(Billions of yen)

Accelerate eﬀorts to establish multi-categorybusinesses and create synergy in overseas markets

Further promote structural reforms

os

Business segment

Plan for FY2023
Operating profit

Defor clin
gr

FY2021

Four Issues Surrounding the Group and Urgent Countermeasures●

Integrated Report 2022

28

SECTION 02

Message from the Oﬃcer Responsible for Financial Aﬀairs

Continuing to maintain a suﬃcientlevel of liquidity to brace against
rapid changes in the management
environment

Toshihiro Adachi
Executive Vice President and Representative
Director, Executive Vice President

SECTION 01

SECTION 02

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—and to 1.1 as of the end of March 2022. Despite being in aharsh environment, we aim to further improve this ratio toachieve a target of lowering it to 1 or less by the end of the
final year of the 4th MTBP. The equity ratio exceeded 30% asof the end of March 2022 due to an increase in equity capital
as a result of our eﬀorts to increase net profit. Our aim for theforeseeable future is to raise the equity ratio to over 35%.
Although we succeeded in yielding good results inthese metrics, there is still room for further improvement.
We will continue to work to maintain a suﬃcient level ofliquidity to brace against rapid changes in the management
environment, and to create cash flows through asset
reduction measures, including reducing strategic cross-

SECTION 04

shareholdings. Furthermore, in consideration of futureacceleration of our overseas business and foreign exchangerisks, we are contemplating broadening the scope ofcontracts in which we use hedging transactions as wellas the range of currencies we use. The changes in foreignexchange rates and raw material and fuel prices have caused
cost increases far beyond what a single company can absorb.
We thank our customers who have consented to our selling
price revisions in the spring of 2022. Regrettably, given thatraw material and fuel prices remain high, it is necessary for
us to pass on the increased costs with further selling pricehikes and we will continue to seek the understanding of ourcustomers when doing so.

(Responsible for Corporate Unit, Complianceand Sustainability; General Manager of Business
Administration Division, Corporate Unit)

Basic policies on financial strategy
Our current 4th Medium-Term Business Plan (MTBP)
defines three basic policies: 1) Establish a strong andresilient business portfolio, 2) Improve financial strength,and 3) Respond to climate change. During the three-year
period of the previous 3rd MTBP, against the backdrop ofa favorable funding environment and significant progressin improvement of our financial strength, we invested a
total of approximately 175.0 billion yen with high leveragein anticipation that those investments would produce
visible eﬀects during the 4th MTBP. Amid considerable
uncertainties in our business environment, including thelingering COVID-19 pandemic, we set a target of obtaining
a credit rating of “A” from the Japan Credit Rating Agency,
Ltd. (JCR) and Rating and Investment Information, Inc. (R&I)
within the period of the 4th MTBP, while carefully selecting
targets for capital investments that are necessary for our

growth. In FY2021, the first year of the plan, we succeededin obtaining an “A- / Stable” rating from both JCR andR&I. In FY2022, with drastic changes in foreign exchange
rates and a sharp rise in material and fuel prices, we areexperiencing an increase in the severity of the businessenvironment surrounding us. I believe that, in this situation,
the Corporate Unit must play its role in maintaining theGroup’s financial health (a credit rating of “A”) while
continuing to make necessary growth investments. We
have set a target of achieving net sales of 800.0 billion to 1
trillion yen by the end of the next 5th MTBP. To ensure that
the Group will be able to invest aggressively in M&A andother projects during the 5th MTBP, we have adopted amain policy of increasing the Group’s financial strength bystrengthening its cash generating capacity and improving
cash flows under the 4th MTBP.

Review of the FY2021 results
In FY2021, we began to perceive the eﬀects of capital
investments we had made under the 3rd MTBP. Aiming
for a target of achieving net sales of 720.0 billion yen in
the final year of the 4th MTBP, in FY2021 we establishedall-time records in net sales for the seventh consecutive year,in operating profit for the second consecutive year, and innet profit for the third consecutive year. As shown by theseresults, which brought us an “A-“ rating, we continued to
grow steadily. Since the situation became favorable enoughfor us to issue corporate bonds, we did so in October 2021,
for the first time in three years. As a result, the ratio of direct29

Integrated Report 2022

funding (from corporate bonds and commercial paper [CP])out of all interest-bearing debt increased from 13.9% as ofend of March 2021 to 15.5% as of the end of March 2022.
We aim to raise this ratio to 20% by the end of the final yearof the 4th MTBP and to 25% by the end of the 5th MTBP
period. We will continue our eﬀorts to diversify fund sources
and increase the amount of available funds for the 5th
MTBP with the aim of establishing a stable footing to makeinvestments for further growth and expansion.
The net debt to equity ratio improved from over 3 at atime during the 1st MTBP, to 1.3 as of the end of March 2021

Vision for asset allocation toward sustainable growth
Let me explain our vision of the composition of net sales of
1 trillion yen, which we aim to achieve in the 5th MTBP. We
envision that the Paper and Paperboard Business, which has
so far led Daio Paper’s growth, will continue to generateannual net sales of 300 billion yen as we direct eﬀorts tooﬀset the inevitable decline in graphic paper sales, brought
about by the shrinking paper market, by increasing sales ofindustrial paper, for which the market is expected to growdue to e-commerce demand and other factors. Meanwhile,the Home and Personal Care (H&PC) Business, our growthengine, will increase its annual domestic and overseas net
sales to 300 billion yen each. We plan to earn the remaining
100 billion yen by fostering new businesses in highly
promising growth fields, such as carbon nanofiber (CNF).
Based on this vision of the sales mix, in May 2021 weannounced a plan to make a total capital investment of
125.0 billion yen during the three-year period of the 4th
MTBP. Out of the total amount, 76.5 billion yen will beallocated to growth investment, which includes 55.5 billion
yen to the H&PC Business and 10.5 billion yen to the CNF

business and other growth fields. The remaining 48.5 billion
yen will be allocated to investment in the maintenance ofthe Mishima Mill and other facilities. In addition to this total
amount (125.0 billion yen), we set a quota of 30.0 billion
yen for M&A investment and used it to acquire Yoshikawa
Shigyo Co., Ltd. in Hyogo Prefecture, Japan and Yoshizawa
Industry Co., Ltd. in Niigata Prefecture, Japan, both of which
are corrugated container manufacturers. We will continue toinvest agilely in promising projects that can lead us to growfurther. Moreover, in March 2022, we signed a contract
with Pajero Manufacturing Co., Ltd. to purchase its landand building in a town neighboring the city where the Kani
Mill is located with the aim of using the property as a newfactory-cum-logistics warehouse. Although this investment
was not budgeted for in the initial plan, we went ahead
with this project as we saw it as an essential element forstrengthening and expanding our H&PC domestic business.
We will work to avoid exceeding the investment quota
through methods such as reallocating a budget planned forother capital investments.

Progress in our eﬀorts to increase return on invested capital (ROIC)
Up until recently, Daio Paper mainly used income-statementbased indicators as KPIs, and it made decisions on each
investment project based on factors such as the payback
period and the final return rate. Under the 4th MTBP,
we started implementing a management style with anincreased focus on business unit-specific capital eﬃciency. By
introducing ROIC as a KPI, we hope that it would drive us to
use capital invested eﬃciently, earning maximal operating
profit with minimal capital invested, and improve both cash
flows and our financial strength.
To raise awareness of ROIC throughout the Group, wehold workshops intended for all oﬃcers and executives ofeach business group, as well as financial and accounting
staﬀ of the subsidiaries. In the workshops, we explain indetail how to maximize ROIC by breaking down the ROIC

formula into each components, visualized by the reverse
ROIC tree. In addition, at meetings on the progress of the 4th
MTBP, the attendees regularly check on our progress toward
undisclosed ROIC targets for the 4th MTBP period, using ROIC
values of the entire Group and each business segment. At
those meetings, the ROIC values are also analyzed from thetwo perspectives of the income statement and the balance
sheet by breaking them down into such elements as thecost-to-sales ratio, the SG&A expense ratio, the fixed-asset
turnover, and the ratio of fixed assets to capital invested.
The key to success is understanding how our everyday
operations on-site aﬀect the individual elements that
constitute ROIC and how those eﬀects will lead to
improvements in ROIC, rather than simply inserting ROIC as
it is as a measure of our everyday operations. For example,

Integrated Report 2022

30

SECTION 02
Message from the Officer Responsible for Financial Affairs

against the backdrop of the continuing rise in raw material
and fuel prices, the Materials Procurement Division may
diversify its suppliers or secure alternative energy sources
to lower the cost-to-sales ratio and consequently improve
ROIC. Although necessary measures diﬀer depending on
the business segment or product, we will provide a moredetailed breakdown of ROIC to facilitate discussions byeach business group and help them create KPIs that aremeaningful to the people on the ground, rather than just

imposing it in a top-down manner, in order to accelerateGroup-wide eﬀorts to reduce inventories and improve the
cash conversion cycle (CCC) and pursue management that ismore conscious of capital eﬃciency.
I believe that ROIC is very beneficial for us as an indicatorthat each business group can use when discussing costeﬀectiveness and the eﬀects of investment to make various
decisions, including decisions on M&A and other growthinvestments.

The ROIC of the entire Group and each business segment is calculated regularly, and the latest forecasts of ROIC
are compared with internal ROIC targets for the 4th MTBP period to monitor our progress. The ROIC values are also
analyzed from the two perspectives of the income statement and the balance sheet by breaking them down intosuch elements as the cost-to-sales ratio and fixed-asset turnover (see the reverse tree diagram of ROIC below).
Moreover, decisions on capital investment and M&A are made through evaluation from the perspective of ROIC.
Under the 4th MTBP, we will perform business management with full consciousness of segment-specific capitaleﬃciency, and eﬃciently earn operating profit with a small amount of capital invested in order to improve both cash
flows and our financial strength.

Reverse ROIC tree
Cost-to-sales ratio

Operating margin

SECTION 02

SECTION 03

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

In last year’s Integrated Report, I said that, in thejudgement of each investment projects, “we will evaluatevarious factors comprehensively—not only monetary
return, but also non-financial indicators such as CO2
emission reduction eﬀects.” From April 2022, each
investment plan must now include consideration ofinternal carbon pricing (ICP), building the perspectiveof sustainability into investment decision-making
processes. Although the target year of achieving carbon
neutrality is set as 2050, we will strive to achieve thetarget earlier by speeding up our eﬀorts to utilize forest
resources eﬀectively and decarbonize operations. At the
Shikokuchuo City Carbon Neutrality Council, which wasestablished in June 2021, local companies and financial
institutions and the municipality collaborate closelywith each other to decarbonize Shikokuchuo City, acenter of paper production in Japan. We will continue
to make aggressive investment that contributes todecarbonization.
With regard to human resource strategy, we must
further enhance the diversity of our staﬀ in terms ofgender, nationality, etc. For that purpose, we should
also accelerate the automation of the pulp and paperindustry itself. We will also invest in creating a working

SECTION 04

environment where everyone can work safely and securely
with pride in what they do. Our basic stance is “What is
made by Daio is sold only by Daio sales representatives.”
We will also enhance our intellectual property strategy
so that information and knowledge accumulated on the
ground about various matters will be shared among staﬀ
seamlessly and leveraged to develop intellectual property,
including patents.
In May 2021, we declared our support for the
TCFD recommendations, and we have since worked todisclose information in line with those recommendations.
Disclosure itself is very important, but I believe that theprocess of discussions in preparation for disclosure isalso significant as it serves as a starting point for drastic
reforms in the way we define business opportunities
and the resilience of our businesses. I recognize that
we are facing various challenges and risks concerning
decarbonization, water resources, resource procurementfrom abroad, and the 2024 problem in Japan regarding
logistics. However, I hope that we will transform suchrisks into opportunities by addressing them with apositive attitude. I estimate that, from the 5th MTBP, wewould have to allocate a quota of about 30 billion yen toenvironmental investment for each three-year period.

ROIC

SG&A expense ratio
Fixed-asset turnover

SECTION 01

Vision for shareholder return
Invested capital turnover

Ratio of fixed assets to capital invested
1 – Tax rate

In recognition of oﬀering return to shareholders as oneof our top priorities, we have adopted a basic policy ofcontinuing stable dividend payments while taking into
account our financial results, the need to increase internal
reserves, and other factors. Since FY2021, we have begun

to use the dividend on equity ratio (DOE), which shows theratio of the amount of dividends to equity, as an additional
indicator. The DOE for FY2021 was 1.5%. We will maintainstable dividend payments for the long term while aiming toraise the ratio to 2.0% in the medium to long term.

Message to stakeholders
Initiatives for sustainability management
Daio Paper began to make a clear commitment tosustainability in 2017, when it established the CSR
Department (currently the Sustainability Promotion
Department). I acknowledge that we had been left
far behind by other companies in terms of initiatives
for sustainability. However, since we created theSustainability Committee in 2020, we have devoted
a huge amount of energy to speeding up our eﬀorts
to enhance our sustainability management. I myself
recognize sustainability as the core of corporate
management and our top priority. I also recognize
environmental issues—such as response to climatechange, the realization of a circular society, forest
conservation, and the preservation of biodiversity—andsocial issues, including respect for human rights andhuman resource development, as material issues that Daio

31

Integrated Report 2022

Paper must tackle by priority.
Discussions at the Sustainability Committee
meetings have helped illuminate Group-wide
operational challenges, including response to the Task
Force on Climate-Related Financial Disclosures (TCFD)
recommendations, energy-related challenges, humanresource measures, and intellectual property strategy,
thereby inspiring Group-wide cooperation in solving
these challenges and even changing employees’ mindsets
drastically. Sustainability is a theme that should bepositioned at the center of corporate management, so
we are reconsidering the organizational position of the
Sustainability Committee with a view to promoting it to
be a more important organization. We will also increase
the number of staﬀ members of the Sustainability
Promotion Department.

Under the 1st to 3rd MTBPs, we continued to grow while
implementing various structural reforms. In FY2021, thefirst year of the 4th MTBP, we successfully kept to theplan. In FY2022, even in face of the massive impact ofa rise in raw material and fuel prices and other factors,
we will take them on as challenges to overcome andrelentlessly work to increase our corporate value toward
the 5th MTBP. We look forward to continued support
from our stakeholders.

Integrated Report 2022

32

SECTION 02

Toward Successful Implementation of the Fourth Medium-Term Business Plan

SECTION 01

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Major products
Ma

Paper & Paperboard Unit

Newsprint and Paper Business
Group

●

Tetsuya Kawabata
Executive Oﬃcer
General Manager of Newsprint
and Paper Business Group,
Paper & Paperboard Unit●

Message from the General Manager of the Business Group

Against the backdrop of digitalization and a shift to paperless workand lifestyles, demand for graphic paper, which the Newsprint andPaper Business Group handles, has been declining. It is predictedthat the market will continue to shrink by about 5% per year. Amidsuch situational changes, we have continued to shift the use ofadvantageous pulp transported in slurry form through the pipes
at the Mishima Mill to the types of products for which demand islikely to grow, with the aim of making Company-wide structuralshifts while maintaining a stable supply of newsprint and paper. We
will continue to boost sales of such products while concentrating
newsprint and paper production in one location to keep ourmachines in full operation in order to oﬀset the impact of declining
demand on our business and maintain profits. While domestic
demand for graphic paper continues to shrink and competition
intensifies, we will safeguard our interest and emerge as a survivor
in the industry by shifting to highly profitable product types while
maintaining stable product supply.

Our strengths and challenges
The strengths of our business group lie in its product lineup
based on pulp with competitive advantages from the Mishima
Mill and its ability to sell out products manufactured with paper
machines that are always in full operation, enabled by productmix shifts through cross-business-group machine conversions, andthereby increase profitability. As part of the structural reforms weembarked on during the 1st MTBP period, we relocated the N3
paper machine at the Kani Mill to Iwaki Daio Paper and converted
it into a containerboard machine. Under the 3rd MTBP, to utilize
our production facilities at the Mishima Mill more eﬀectively forthe production of product types for which demand is more likely togrow, we converted the N7 paper machine into a containerboard
machine, while stopping machine No. 16 and converting it into apaper towel machine. Under the current 4th MTBP, we are working
to convert machine No. 15 at the Mishima Mill into a fluﬀ pulp

33

Integrated Report 2022

Development of the product lineup[Socially conscious product]
New OA Paper Type H:
COVID-19 Tasukeai-no-wa+ (copy paper)

The Paper and Paperboard Business Group has launched bright white, high-opacity paper products for catalog and pamphlet uses, including Utrillo
L White and Utrillo L White Matte, and has also broadened its lineup of eco-friendly products. For example, some self-adhesive paper products arerecyclable because we have switched to using water-soluble adhesives. We also make use of waste such as old rice and tea leaves to produce mixedpulp paper. Moreover, amid the COVID-19 pandemic, Daio Paper launched not only antibacterial film but also New OA Paper Type H: COVID-19
Tasukeai-no-wa+, sales of which were partly donated to Japan Committee for UNICEF to help companies and households using copy paper to fulfill
their hopes of protecting children around the world. Furthermore, a part of the sales of KININARU-KAMI, a copy paper product containing pulp
derived from thinned wood, is contributed back to various Japanese prefectures, such as Kumamoto, Ehime and Osaka, as funds for thinning, which
is a necessary practice to conserve forests. Although the Newsprint and Paper Business Group is planning to make price revisions again in the fall of2022, after the spring of the same year, to pass on the increase in raw material and fuel prices, the business group aims to gain a superior positionin the market by launching a wide variety of high-value-added paper products that other companies cannot provide, such as the easy-to-use, highopacity Utrillo L Gloss Matte.

We will continue to work to shift to new
product types and ensure profits byproviding products that can help resolve
social issues while keeping each machine infull operation.

Future vision of the Newsprint and Paper Business Group[Eco-friendly
dly product]
WD-ECO Tack, recyclable selfadhesive paper

production facility. We have ensured our sales and profits in theface of a decline in paper demand by converting paper machines at
the Mishima Mill, which boasts high production eﬃciency and greatcompetitiveness, into machines for products that are likely to behighly profitable.
Unlike other paper manufacturers, Daio Paper is engaged in
manufacturing a wide range of products, from newsprint and paper
to packaging and wrapping paper, including containerboard andcorrugated containers, as well as household paper and absorbent
products, which the Home and Personal Care (H&PC) BusinessGroup is in charge of. Through cross-departmental collaboration,
we can leverage that strength to market to our customers sucha wide variety of products. Moreover, integrated operations that
include even our subsidiaries have enabled us to propose totalsolutions, from papermaking upstream to printing downstream,
to fulfill all of our end-users’ needs. This is one of our majordiﬀerentiating factors in terms of sales and marketing.
Meanwhile, I recognize that the key to overcoming the major
problem of a decline in domestic paper demand will be to allocate
limited management resources to growth fields in a timely mannerby such means as organizational restructuring. In addition, while
our Mishima Mill has one of the largest production capacities of any
paper mill in the world, decarbonization of the mill is an important
challenge we must tackle amid the growing urgency of climatechange. The Japanese government has pledged to achieve carbon
neutrality by 2050, and we have been implementing initiatives tobecome carbon neutral by 2050 according to schedule. However,there is public concern that the target year of 2050 is too late.
Therefore, I recognize the need to carry out our initiatives with aneye to phasing out our use of coal earlier than initially scheduled.

structural shifts through the development of new eco-friendly
products while focusing on providing alternatives to plastic
products and laminated paper. We are also working on various
initiatives with the aim of achieving carbon neutrality by 2050,
and we are ahead of other paper manufacturers in terms ofcommitment to achieving the carbon neutrality of the entire
region of where we operate in, as seen in our activities with the
Shikokuchuo City Carbon Neutrality Council. Stronger publicawareness of environmental issues is likely to provide us withgreater business opportunities.
Meanwhile, I recognize the so-called year 2024 logistics
problem, that is, the expected risk that logistics costs will risein Japan from 2024 onward due to overtime regulations to be
newly imposed on truck drivers as part of work-style reforms,
which will necessitate workarounds such as the construction ofrelay logistics bases. Under interrelated circumstances, such as therecent rise in raw material and fuel prices and our eﬀorts toward
carbon neutrality, we will adopt proactive measures to address thisproblem, including switching our transportation means from trucks
to ships and reconsidering our transportation scheme.

Resolving social issues through our businessOur business group will continue to provide environmentally■ Net sales (Billions of yen)
189.2

181.6

182.6
160.5

169.0

Views on the current market environment(opportunities and risks)
Even amid a continuous decline in demand for newsprint andpaper, the public need for products that can contribute to theachievement of the SDGs is growing. We will accelerate our

FY2017FY2018FY2019FY2020

FY2021friendly products, such as paper made from recovered paper,
paper materials that can replace plastic materials or laminatedpaper, water-disintegrable self-adhesive paper, and Forest
Stewardship Council (FSC)-certified paper, while contributing
to the Daio-Group-wide eﬀorts to decarbonization mainly at
production bases, in order to contribute to the achievement of
the SDGs.
In addition, we will share our vision of the Three Wellbeings of Hygiene, Life and Regeneration with agencies anddistributors by holding study meetings and other events, in orderto gain their understanding of the Daio Group’s commitment toachieving the SDGs throughout the supply chain.

Business results for FY2021
For FY2021, the Newsprint and Paper Business Group achieved
a year-on-year increase in both sales volume and amount,
resulting in net sales of 169.0 billion yen. The main factor behind
the results was increased demand for paper for advertising use,
including leaflets, which reflected recovery from the previous
year’s stagnated economic activities due to the COVID-19
pandemic.
However, in FY2022, with growing instability of theinternational situation due to the Russian invasion of Ukraine,
the disruption of international logistics, and the continuing risein resource prices, we are facing major economic uncertainty, as
well as a high likelihood of a further shrinking of the entire paper
market. Adding to this diﬃcult situation, a rapid increase in raw
material, fuel, logistics and other costs due to the rise in prices ofcrude oil, coal, etc. is predicted to make our business environment
unprecedentedly harsh. Furthermore, we are currently witnessing
a very rapid depreciation of the yen. On the basis of the current
level of raw material and fuel prices, an increase of one yen
in the USD to JPY exchange rate has a negative impact worth
approximately 0.6 billion yen on Daio Paper. Therefore, we
forecast that the current trend in foreign exchange rates will havea massive adverse impact on our performance.

Integrated Report 2022

34

SECTION 02
Toward Successful Implementation of the Fourth Medium-Term Business Plan

SECTION 01

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Major products
ucts

Paper & Paperboard Unit

Industrial Paper andContainerboard Business Group●FS Elipla+
used for RAINGUARD+
from Nippon Notebook
Corporation

Atsushi Ishida
Director, Managing ExecutiveOﬃcer
General Manager of Industrial
Paper and Containerboard
Business Group,
Paper & Paperboard Unit

Message from the General Manager of the Business Group●

Aiming to boost sales of wrapping andpackaging paper as a growth engine
against the backdrop of a promising start
to containerboard exports and the current
trend toward plastic-free lifestyles

Future vision of the Industrial Paper and Containerboard
Business GroupThe Industrial Paper and Containerboard Business Group deals inwrapping and packaging paper, including containerboard, corrugatedcontainers, wrapping paper, and functional paper. Although weare unlikely to be able to avoid the future impact of the decline in
the Japanese population, we have thus far achieved relatively goodsales. Amid the ongoing shrinkage of the domestic paper market, we
focus on continuing to boost sales in our business group as a growthengine of Daio Paper. It is said that the act of wrapping things withpaper embodies the unique Japanese culture of handling things withgreat care—care that goes beyond consideration for the protection of
the contents—as a way of showing their appreciation to delight therecipient. The Daio Group’s management philosophy is “Shaping anabundant and aﬀable future for the world.” To help people express
their hope of an “abundant and aﬀable future” for others throughwrapping and packaging, we will propose high-value-added solutions
in both design and functional terms. I believe that it is especiallymeaningful in this digital age to develop and hand down the paper
wrapping and packaging culture, which connects the hearts of people
to each other, with the aim of contributing to people’s better lives.

Our strengths and challenges
One of Daio Paper’s strengths lies in its wide lineup of wrapping andpackaging paper—from lightweight paper with a weight of 5 g/m2
to heavyweight paper with a weight of 1,000 g/m2—apt for making
products from shopping bags and secondary packages for food, tocorrugated containers and cement sacks. In addition, the Company’s
ability to propose total packaging solutions to each customer throughintegrated operations across divisions also helps diﬀerentiate it from thecompetition. Corrugated boards are made of three layers: two layers oflinerboards and a layer of a corrugated medium in-between. Daio Paperis the only Japanese paper manufacturer that can oﬀer one-stop deliveryof containerboard of all these types from a single mill, being capable ofhigh-mix, low-volume manufacturing and delivery. The Company is also

35

Integrated Report 2022

[Eco-friendly products]
Elipla series, a new brand of
the entire range of productsthat contribute to plastic-freeand low-plastic lifestyles

Development of the product lineup

Elipla stir stickused by Doutor
Coﬀee Co., Ltd.

The Industrial Paper and Containerboard Business Group aims to boost sales of containerboard, its key product, by leveraging its capability to oﬀer one-stop
delivery of containerboard of all types from a single mill. It has also made significant progress in commercializing functional paper products intended toreplace plastic products. The business group will devote further eﬀorts mainly to proposing and boosting sales of the following products that can help reduce
the use of plastic: the Elipla Premium Series stir stick made of high-density heavyweight paper, which is aimed at contributing to a plastic-free lifestyle; the FS
Elipla Light secondary packaging material for food, where one of the layers of film has been replaced with a layer of paper; and the FS Elipla Heat-Seal.
In 2020, the N7 paper machine at the Mishima Mill was converted into a containerboard machine to manufacture containerboard for export toChina and Southeast Asian countries. Due to diﬀerence in the condition of paved roads and the expected transportation distance, the required qualityof corrugated containers varies between Japan on the one hand and China and Southeast Asian countries on the other. Pulp slurry piping and feeding
equipment at the Mishima Mill presents an advantage in manufacturing linerboards with high burst strength suitable for export.

the only Japanese paper manufacturer that has high-resolution printing
facilities suitable for decorative printing on linerboard. It has the fourthlargest manufacturing capacity for both containerboard and corrugatedcontainers and the second largest manufacturing capacity for wrapping
and packaging paper in the market. We are proud that our productrange, from lightweight paper to heavyweight paper and functional
paper, is among the broadest in the industry.
Meanwhile, despite progress in other major paper manufacturers’
eﬀorts to integrate paper production and conversion, Daio Paper has nobag-paper converting company among its direct subsidiaries, although
the Group includes corrugated-container converting companies. I
recognize that, since progress in the operational integration has caused
a decrease in the number of independent converting companies, wemust tackle the challenge of building a network, including a loose
alliance in view of M&A, with independent bag manufacturers.

Views on the current market environment(opportunities and risks)
I recognize marine plastic pollution as one of the issues we must tackle
urgently. I also recognize that heightened expectations for paper as anatural material against the backdrop of an accelerating global trend
toward plastic-free lifestyles have provided us with a valuable business
opportunity. Meanwhile, in parallel with a predicted increase in demandfor corrugated containers and other packaging materials due to thegrowth of e-commerce, there is a growing trend toward the simplificationof packages. We have identified the risk that the development of ondemand packaging systems designed to optimize packages will cause adecrease in the usage of packaging paper on a weight basis.

delivery initiatives, have been succeeding. Business activities with fullconsciousness of the sustainability of logistics and other processes
have resulted in an improvement in profit.
To achieve decarbonization, Daio Paper is striving to phase out
its reliance on coal. Provided that we develop eﬀective solutions to
the issue of CO2 emissions from production processes, it is highly likelythat the Industrial Paper and Containerboard Business Group willcontinue to be blessed with greater business opportunities against the
backdrop of the public trend toward plastic-free lifestyles.
While demand for both types of paper continues to decline, it
should be noted that the ratio of graphic paper to industrial paper for
packaging applications was formerly 6 to 4, but in 2020, demand forindustrial paper exceeded that for graphic paper. We are exploringnew demand for paper of novel kinds, including paper that can meetthe need for plastic-free products, in order to fill the gap left by paperof conventional kinds, which formerly accounted for an overwhelming
share of the market. I hope that Daio Paper will contribute to the growthof the entire pulp and paper industry by creating new businesses.

corrugated container business, which is expected to grow both in Japanand abroad. In FY2021, the corrugated board business established an
all-time sales record on both a volume and a monetary basis. Sales inthe export business also grew strongly due to our products’ quality
advantage and the establishment of eﬀective production and delivery
systems, as shown by the fact that the monthly production volume of theN7 machine at the Mishima Mill, which had been converted from a paper
machine to a containerboard machine, reached a record high, exceeding
32,000 metric tons, in March 2022. Our share of the containerboard
market increased significantly as a result of our capture of rapidly
growing overseas markets. We also increased our share of the wrapping
and packaging paper market by leveraging our ability to propose total
packaging solutions underpinned by our wide product lineup andintegrated operations, thereby taking steady steps toward capturing thehighest market share within the next several years. Since we are currently
under the massive impact of the rise in material and fuel prices, despiteachieving sales growth on both a volume and a monetary basis, we havedecided to revise our selling prices twice in a year, in the spring and fallof 2022. We are working to increase our sales volume and ensure profit
while obtaining customers’ consent to a price hike.

Business results for FY2021

In FY2021, the first fiscal year of the 4th MTBP, we focused onenhancing our downstream business and conducting integrated
operations. In particular, I recognize that our initiatives to integrate
operations in the corrugated container business and the wrapping
and packaging business, including staﬀ exchanges, reorganization,and employee education, have made remarkable achievements. In
FY2022, we will devote eﬀorts to increasing profits from our businessgroup by further sophisticating our paper converting techniques,
launching more converted products and thereby enhancing theadded value of products. We will also work on the major operational
theme of “shifting from a B2B business to a B2C business” to capture
end-consumer needs behind our B2B business and consider the next
step we should take while building a network, possibly a loose alliance,with converting companies. We focus on reforming our operational
style and improving our strength under the 4th MTBP, with a view
to increasing our sales as an engine for further growth throughaggressive capital investment and M&A.

For FY2023, the final fiscal year of the 4th MTBP, the Industrial Paper
and Containerboard Business Group has set the target of achieving net
sales of 173.0 billion yen, including 60.0 billion yen coming from the■ Net sales (Billions of yen)

158.4
124.3

134.9

135.2

FY2018FY2019141.9Resolving social issues through our business
Since wrapping and packaging paper is a material related to logistics, I
do not believe that selling it marks the end of our responsibility. Rather,
I believe that our streamlined operation, including post-sales logistics
concerning the recovery of used paper, will contribute to sustainability.
An increasing number of initiatives to streamline logistics, such as joint

FY2017

FY2020

FY2021

Integrated Report 2022

36

SECTION 02
Toward Successful Implementation of the Fourth Medium-Term Business Plan

SECTION 01

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Major productsHome & Personal Care Unit

Domestic Business Group

Hiroyuki Shidara
Director, Managing ExecutiveOﬃcer
General Manager of Domestic
Business Group, Home &Personal Care Unit●●

Leading both solutions to social issues andDaio Paper’s growth by fully leveraging
the strong presence of the Elleair brand

As Daio Paper’s growth engine, under the next 5th MTBP, the H&PC
Business will be a core source of the Company’s consolidated sales
and lead its growth through business expansion. Our Elleair brand ofhousehold paper products (facial tissue and toilet tissue) in particular
has won great public recognition and trust as a high-quality brand,
and has maintained the largest share of the Japanese market.*
We will leverage the strong presence of the brand to enhance ourabsorbent products business (diapers and sanitary napkins) andthereby strengthen the entire business group. In addition, amid
drastic situational changes, including the rise in material and fuelprices, as a leader of the household paper product industry, we will
work to stabilize selling prices and continue to implement initiatives
to make a significant contribution to the entire industry. Meanwhile,
we are working on the challenge of maximizing profits while
addressing the cost increase by clearly diﬀerentiating our absorbent
products from those of our competitors, and creating new value forthe market.
* Source: Intage SRI+, tissue sanitary paper market (facial tissues, toilet tissues, and kitchen
towels), April 2021 – March 2022, cumulative total sales by manufacturer

Our strengths and challenges
One of Daio Paper’s strengths lies in widespread public awarenessof Elleair as a high-quality brand, which has been achieved throughthe Company’s exceptionally strong capacity to supply and sellhousehold paper products based on its production system thatcan meet various market needs. I believe that the strong brandpresence of Elleair helps to increase the eﬀectiveness of marketingand promotion activities while lowering the cost thereof, and it could
also be leveraged for other product categories, including absorbent
products.
Meanwhile, I recognize that we still have to address certain
challenges, including improving the imbalanced locational
distribution of factories of converted products, and minimizing
risks in material procurement and supply in the event of an

37

Integrated Report 2022

Development of the product lineup[Eco-friendly products]
Products using paper packages:• elis suhadanokimochi natural series• Kirekira! Toilet Cleaning Wipe Refill

The Domestic Business Group of the Home & Personal Care (H&PC) Unit deals in and strives to enhance not only the Elleair-brand toilet tissue and facial
tissue, which account for nearly 30% of the relevant Japanese market, but also sanitizing wipes, paper towels and masks, for which demand has grownamid the COVID-19 pandemic. It also devotes eﬀorts to developing products using Daio Paper’s proprietary R&D technology, such as the Kirekira! Toilet
Cleaning Wipe series, the world’s first such product series containing Cellulose Nanofiber (CNF), a plant-based natural material. The business group has
also recently launched various collaboration-based products designed to embody inspiring messages. In addition to disposable baby diapers featuring
a Disney design, in FY2021 it launched the elis COMPACT GUARD sanitary napkins with a colorful design created in collaboration with a brand under
the direction of the photographer and film director Mika Ninagawa, who agreed with Daio Paper’s hope of helping ease the suﬀerings and pain
women experience during their periods. Moreover, in June 2022, disposable adult diapers in an underwear-like color, developed jointly with Wacoal
Corporation, were launched with the aim of helping users overcome any emotional hurdles or embarrassment preventing them from wearing diapers.

Message from the General Manager of the Business Group

Future vision of the H&PC Domestic Business Group[Collaboration-based products]• elis × M / mika ninagawa, featuring adesign created in collaboration withthe photographer and film director• Attento-brand product developed
jointly with Wacoal Corporation

emergency. For the former, we will enhance our production
facilities in anticipation of an increase in our share of the market for
converted products. To reduce procurement risks, we will insource
the manufacture of meltblown nonwoven fabric and fluﬀ pulp, anddiversify our suppliers.

Views on the current market environment(opportunities and risks)
In widespread environmental conservation eﬀorts to replace plastic
with other materials, the value of paper as an alternative to plastic
has begun to be publicly recognized again. Daio Paper is one of thecompanies that is actively committed to recycling not only paper but
also diapers. I believe that our commitment to realizing a circular
economy will provide us with new business opportunities in the
future. Although the rapid depreciation of the yen we are currently
witnessing is a headwind for production, there is a growing demandfor domestic products due to a decreased supply of imported paper
products. I recognize this as a favorable opportunity for us to increase
our market share and demonstrate our competitive advantages.
Moreover, we predict that the habit of wiping down surfaces, which
has spread widely due to consumers’ heightened consciousness ofhygiene amid the COVID-19 pandemic, will continue and even takeroot. The increased use of paper towels and sanitizing wipes will also
oﬀer us greater business opportunities.
Meanwhile, amid the shrinkage of the paper market—especiallythe market for printing paper—due to the progress of digitalization,
several competitors that have dealt in printing paper as their main
business have announced that they will enter the household paper
market. Therefore, we predict that competition in the household
paper industry will become even fiercer in the coming two to three
years. In the household paper category, where Daio Paper is theindustry leader, we will work to stabilize our selling prices andmaintain our profitability in the face of risks entailed by situationalchanges, including the ongoing rise in material and fuel prices andlogistics costs.

Resolving social issues through our businessWe are currently experiencing drastic changes in the social
environment and consumer preferences, so we should change
our products and our ways of thinking. We are striving to provide
solutions to the many social issues that Japan is now facing, while
significantly changing our direction toward a stronger commitment
to achieving carbon neutrality and the SDGs. For example, against
the background of the rapid aging of the Japanese population, there
has been growing public concern about both elderly carers andyoung carers in the field of caregiving for elderly people. We hope tohelp reduce the burdens on such carers by providing our disposable
adult diapers and other products. In addition, with period poverty
becoming a focus of global concern, in 2022 Daio Paper launched
the “meet my elis” project, which includes a program whereby theCompany will provide 2,000 students who menstruate with elis-brandsanitary napkins free of charge for one year. Although we had to limit
the number of recipients of free sanitary napkins, we have oﬀerednapkin coupons to all student applicants through their schools, andthose applicants can use the coupons at stores near their schools. We
hope that our eﬀorts will help resolve the issue of period poverty.
From the perspective of reducing plastic in products, under the
Kirekira! brand, we have launched products whose containers use
a smaller amount of plastic than previous containers and Japan’s■ Net sales (Billions of yen)

155.9

FY2017160.6

FY2018170.2

FY2019175.4

FY2020183.2

FY2021first toilet cleaning wipes in a paper package. We are also preparing
to replace plastic packages for other products, including sanitarynapkins, with paper packages. Furthermore, we target to replace
60% of packaging materials with recycled plastics and biodegradable
plastics by the end of the 5th MTBP period.
Moreover, Daio Paper is working to recycle used disposable
diapers, which are now mostly disposed of and incinerated as theyare. We have thus far managed to use materials recovered from useddisposable diapers as fuel or building material, but we have also
launched a joint research project to develop a technology for recycling
used diapers into more valuable materials, with a view to constructing
a diaper recycling plant in the future. We are planning to insource
the manufacture of fluﬀ pulp, an absorbent material for disposable
diapers, from July 2023. We are looking to mix pulp recycled fromused disposable diapers into our in-house fluﬀ pulp, hoping that
it would accelerate our eﬀorts toward horizontal recycling, or therecycling of used products into the same kind of product.

Business results for FY2021
For FY2021, the Domestic Business Group of the H&PC Unit achieved
net sales of 183.2 billion yen, an operating profit of 15.5 billion yen,
and an operating margin of 8.5%, setting all-time records in both
net sales and operating profit. For FY2023, the final fiscal year of the
4th MTBP, the business group has set the target of achieving net
sales of 225.0 billion yen, an operating profit of 23.0 billion yen, andan operating margin of 10.2%. However, we predict that, in FY2022,
we will face serious diﬃculty increasing operating profit due to therise in raw material and fuel prices, while net sales will continue togrow. If we have to pass on the cost increase to consumers by hiking
selling prices, I believe that we should also increase the added valueof the products themselves when doing so. Since the start of the
4th MTBP period, we have launched many products to achieve thetarget of having new products account for 30% or more of net sales,
and we will continue to do so. We are also planning to launch a new
business in a field derived from the existing household paper andabsorbent products businesses.

Integrated Report 2022

38

SECTION 02
Toward Successful Implementation of the Fourth Medium-Term Business Plan

SECTION 01

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Major productsHome & Personal Care Unit

Overseas Business Group●

Message from the General Manager of the Business Group

Aiming to increase the H&PC Overseas
Business’s share of the entire Group’s net
sales to 30% by accelerating multi-categorybusiness expansion and exploring newmarkets

Future vision of the H&PC Overseas Business Group
Against the backdrop of the continuing decline in the Japanese
population, the H&PC Overseas Business is positioned as an engine
for the Group’s future growth. We are working to expand the
H&PC Overseas Business to achieve the target of ensuring that it willconsistently turn a profit and account for about 30% of the Group’s
net sales under the next 5th MTBP. While we have so far expanded
into overseas markets mainly with disposable baby diapers, we are
currently accelerating our eﬀorts to leverage a high level of brandrecognition of our baby diapers for multi-category business expansion
with sanitary napkins, household paper, and other products.
Moreover, the Turkish-based hygiene products manufacturer that
Daio Paper acquired in 2020 (currently Elleair International Turkey
Kisisel Bakim Urunleri Uretim A.S.) provides hand soaps, body washes,
hair shampoos, and baby oils, so we will oﬀer products in this new
category to markets outside Turkey. We aim to expand our businessfrom the countries where we already have production bases—
Thailand, China, Indonesia, Turkey and Brazil—to their surrounding
countries, to help improve the local hygiene environments throughpeople’s use of Daio Group products and enable those people to leadbetter lives.

Our strengths and challenges
Among Daio Paper’s strengths are its abilities to develop premium
products and to conduct marketing activities that match local needs.
No product can satisfy people if it does not conform with local
customs, no matter how highly value-added it may be. The Company’s
ability to create products that meet local needs through trial anderror has helped increase its brand power. For example, in China,
when economy products were prevalent, high-quality made-in-Japanproducts had great appeal to local consumers. However, as local
manufacturers gained technological skills, the label of made-in-Japanalone no longer gives an overwhelming advantage to any products.
Based on the principle of local production and consumption, DaioPaper has focused on producing high value-added products locally by

39

Integrated Report 2022

Makoto Saito
Senior Executive Oﬃcer
General Manager ofOverseas Business Group,
Home & Personal Care Unit;
General Manager ofOverseas Business Promotion
Division, Overseas BusinessGroup, Home & Personal
Care Unit[Newlyy launched p
products]
Thailand Scented, cool-feeling sanitarynapkins
Scented baby diapers●[Newly launched product]
Brazil Three-ply toilet rolls

Development of the product lineup for each country

In Thailand, where scented products are popular, the Overseas Business Group of the Home & Personal Care Unit launched the country’s first scented
disposable baby diapers in the fall of 2021. As feminine care products, whose sales are growing in Thailand, the business group has launched
42-cm-long night sanitary napkins, disposable period panties, and cool-feeling slim sanitary napkins successively since the start of FY2022. In China,
the business group began to insource the local manufacture of sanitary napkins and launched premium and ultra-premium products in response to
local needs. In Brazil, into which Daio Paper expanded in 2020, the business group launched high-value-added products, including sanitary napkins,disposable baby diapers and toilet tissue, by integrating the Company’s excellent technologies, in addition to existing standard products. In the fall of2022, disposable baby diaper pants will be launched to stimulate the Brazilian market. In Turkey, the only country where the Group’s liquid-category
products are manufactured, the business group will export liquid products to Daio Group companies worldwide for sale in their local market.

leveraging its great technological capabilities developed in Japan andcooperating with local staﬀ in marketing activities that match local
consumer trends, thereby resulting in the brand’s success in taking
root in the Chinese market and providing premium products.
Daio Paper’s wide lineup of products includes not only facial
tissue and toilet tissue but also sanitizing wipes, all of which boast alarge share of the Japanese markets and a proven track record. This isa meaningful strength in our eﬀorts toward multi-category businessexpansion.
Meanwhile, for the past two years, we have faced the problem offailing to align our business bases around the world with each other interms of the speed of scaling out multi-category business operations
partly due to COVID-19 lockdowns. In the markets we have recently
entered in particular, travel restrictions have stagnated our businessactivities themselves. We will speed up our eﬀorts to explore newmarkets as various COVID-19 restrictions are relaxed from now on.

Views on the current market environment(opportunities and risks)
The key to an eﬀective sales strategy used to be getting as many
products as possible onto the limited number of shelves in physicalstores. As we are newcomers in every country we expand into, it isextremely diﬃcult to secure shelf space in physical stores. However,
e-commerce allows us to sell our products free of such physicallimitations. The COVID-19 pandemic has raised the e-commerce
penetration rate in most countries, so we will enhance our
e-commerce sales by utilizing the know-how we have acquiredin China, a leading country in e-commerce. On the other hand, I
recognize that in addition to unforeseeable risks such as the COVID-19
pandemic, overseas businesses have inherent risks. That includes
geopolitical risks and the risk of being aﬀected by various factors
such as changes in foreign exchange rates and rises in material andfuel prices. For example, with heightened geopolitical risks in Turkey,
we are reconsidering our initial expectations of the destinations ofexports from the country.

Resolving social issues through our businessI clearly recognize the very important role that the Overseas BusinessGroup must play in realizing the Daio Group’s management
philosophy “Shaping an abundant and aﬀable future for the world.”
Given that the Group’s overseas expansion has only a short history
and is still small in scale, I believe that the business group’s current
mission is to return profits to local communities stably in such forms
as creating local employment by achieving business growth in the
countries where we operate. Since these countries include many
developing ones, we hope to contribute to better lives of local people
by improving their living environments in terms of hygiene andconvenience through the products we produce and sell.
Our ongoing specific initiatives include holding period education
seminars targeting new students at universities in Thailand as anawareness-raising activity, and distributing samples of disposable baby
diapers in cooperation with local healthcare centers in Indonesia to teachlocal people how to use disposable diapers, when to change diapers, etc.,
and thereby to promote the adoption of disposable baby diapers.
In China, Daio Paper has locally developed toilet tissue thatdisintegrates more easily in water, so that it can be flushed downeven in local flush toilets characterized by low-pressure water flow.
This has changed the local custom of putting used toilet tissue in trashcans and thus contributed to improving hygienic environments and■ Net sales (Billions of yen)
74.1
62.6

41.1

FY201734.5

34.5

FY2018FY2019FY2020

FY2021

reducing waste.
At the bases of the H&PC Overseas Business, the rate of women’s
participation and advancement in the workplace is generally higher
than in Japan. We will adopt various systems for actively supporting
female staﬀ and introduce those systems to Japan too. We hopeto lead by example to inspire Group-wide eﬀorts to increase
opportunities for women to reach their full potential.

Business results for FY2021
For the final fiscal year of the 5th MTBP (FY2026), the Overseas
Business Group of the Home & Personal Care Unit has set the targetof achieving net sales of 300.0 billion yen and an operating margin of
10% or more, as well as increasing the ratio of overseas sales to theGroup’s consolidated sales to over 30%. As a milestone on the roadmap toward the achievement of this target, we aim to record net salesof 135.0 billion yen and an operating margin of 5.2% or more in the
final year of the 4th MTBP (FY2023).
For FY2021, we achieved a net sales increase of 18% year on
year, but failed to reach the operating profit target set in the current
plan mainly due to the massive impact of strict COVID-19 lockdowns
in ASEAN countries. Our business activities in ASEAN countries weredrastically limited due to travel restrictions amid the pandemic,
resulting in the suspension of our eﬀorts to explore new markets,
just when we were working to open up new sales channels toward
provincial cities, given that no significant progress had been madein product distribution in those countries. Meanwhile, our plan todevelop new products was implemented according to schedule.
Therefore, since the fall of 2021, we have launched high-value-added
products that are clearly diﬀerentiated from competitors’ products into
all the overseas markets where we operate. I expect that a combinationof the relaxation of COVID-19 restrictions and our launch of new
products will provide a springboard for us to boost our sales going
forward. I also view an increasing percentage of products bought via
e-commerce services amid COVID-19 lockdowns as a favorable tailwind
for Daio Paper. In FY2022, in the ASEAN region in particular, we aim
to become able to remain stably in the black through a sharp recovery
and raise our ratio of overseas sales to around 15%.
Integrated Report 2022

40

Overseas Strategies and Initiatives under
the Fourth Medium-Term Business Plan

FeatureTrend of H&PC Overseas Business net sales

4.9%

7.7%

12.1%

¥41.1 billion¥62.6 billion¥74.1 billion

1st MTBP(FY2014)

2nd MTBP(FY2017)

3rd MTBP(FY2020)

FY2021

The Daio Group aims to further expand the Home & Personal Care
(H&PC) overseas business as its core growth engine through multicategory business expansion in existing markets, including the
Chinese market, and entry into new markets. Daio Paper will strive
to accelerate its eﬀorts to expand its overseas business throughsynergy with Group companies toward its expansion from Brazil andTurkey, where it has started full-scale operations through M&A, tosurrounding countries.
At the peak of the COVID-19 pandemic, just as in Japan,
consumers’ shopping styles drastically changed outside Japan,

18.8%

13.6%

¥135.0 billion¥90.0 billion

64%

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

FY2022
forecast

One-ply
Two-ply
Three-ply

4th MTBP(FY2023) forecast

100%

resulting in growth in e-commerce sales in various countries. The
Daio Group leverages its strengths in e-commerce in Japan and
China to enhance its e-commerce sales in other countries. It isalso working to broaden the range of its products and productcategories by adding new products and categories to existing ones.
These initiatives are expected to enable the Daio Group toachieve net overseas sales of 90.0 billion yen, an increase of 21%
year on year, in FY2022, the second year of the Fourth Medium-TermBusiness Plan (MTBP).

Ratio ofdisposable baby
diaper sales in
FY202254%
Ratio ofdisposable baby
diaper sales in
FY2021

Ratio ofdisposable baby
diaper sales in
FY202360%

49%

We strive to accurately detect changes
in consumer preferences and trends insales at stores, quickly predict market
trends, and leverage our capabilities
to make prompt decisions andimplement them in order to diversify
our product lineup and increase thesales ratio of product categories otherthan disposable baby diapers while
expanding net sales of baby diapers.
We aim to raise the ratio of total salesof household paper, feminine careproducts, adult diapers, etc. to 51% toboost our net sales and profit.

109%

2020

111%

2021

85%
2022

Source: Nielsen data on a quantity basis

Growth rate of the Brazilian markets for one-ply,
two-ply and three-ply toilet tissues (with the2020 level as 100)

High value-added feminine careproducts and baby diapers

E-commerce, that is, buying or selling products and services on theInternet, has grown in popularity mainly among young consumers.
The COVID-19 pandemic and the consequent restrictions on
travel and other human activities have caused drastic changes in
consumers’ shopping styles, resulting in further expansion of the
e-commerce market.
In China in particular, Singles’ Day—November 11 every year—
has become not just a big event in the e-commerce industry alone
but also the world’s largest shopping event. We have estimatedbased on Nielsen data that, over 45% of purchases of disposable

Integrated Report 2022

baby diapers and products in other categories that we havepresence in is made over e-commerce in China. E-commerce sales of
those products have also been rapidly growing in Southeast Asian
countries, such as Thailand and Indonesia, against the backdrop of
the COVID-19 pandemic.
We aim to boost e-commerce sales in each country bypromoting our new products and high value-added productswith the leverage of the presence of our brand, which we havestrengthened with our disposable baby diaper business, while also
distributing those products to physical stores.

Three-ply toilet tissue

Business expansion initiatives through the utilization of Marubeni Corporation’s global network
Survey in preparation forentry into African markets
A sales pilot of feminine careproducts in Kenya has been
prepared with a view to
product launch within 2022.

●

Survey in preparation for extending
sales coverage in South America
A survey and examination are under
way on the feasibility of the export andsale of personal care products to SouthAmerican countries.

●

New businesses in Brazil• A feasibility study is under way on the introduction of
IoT-based feminine care product dispensers targeting
offices in São Paulo.
• A feasibility study is under way on a disposable diaper
subscription service targeting nursery schools in São
Paulo.

Turkey Business
Expanding domestic sales and sales of exports by developing a lineup of
products using the Daio Group’s know-how
Boosting domestic sales by oﬀering a multi-category lineup of products,
including GOO.N-brand products

Growth in e-commerce sales in Asia

41

SECTION 04

In Brazil, where consumer demand for highvalue-added products is growing, we havelaunched a premium range of feminine careproducts and disposable baby diapers, aswell as three-ply toilet tissue, by leveraging
our technological prowess. We are currently
working to boost sales of those products.
We have also launched initiatives toenhance our Brazil Business and extend thecoverage of our operations to surrounding
countries in the future
by taking advantage ofthe global network of
Marubeni Corporation.

106%

89%

●

Householdpaper, feminine
care products,
wipes, disposable adultdiapers, etc.

Fulfilling Our Purpose—Value Creation Story of the Daio Group—

Promoting further business expansion by boosting sales of high valueadded products and taking advantage of synergetic eﬀects
Developing and selling high value-added products by utilizing bothSanther’s brand power and the Daio Group’s
technological prowess

Overseas business: Promotion of multi-category business expansion

Ratio ofdisposable baby
diaper sales in
FY2020SECTION 03

Brazil Business¥22.2 billion

Disposablebaby diapers

SECTION 02

Initiatives to create synergy■ Ratio and amount of overseas net sales

11.1%

SECTION 01

The KOMILI Natural Tea Tree Oil series using a technology developed
through the creation of olive-oil-based products has been launched under
the concept of “hand-friendly antibacterial products.”

In Turkey, we are striving to enhancedomestic sales by providing high-value-added
GOO.N-brand products, including baby
care products and disposable baby diapers,
leveraging both the high level of publicrecognition of the KOMILI brand, which
originated in 1878, and the Daio Group’s
technological prowess.
Although the Russian invasion of Ukraine
has forced us to focus on domestic sales in
Turkey, we aim to make a structural shift toincrease the ratio of export sales to 50% ormore during the 5th MTBP period.

Enhancement of
the Turkey Businessthrough the expansionof export sales tosurrounding countries

Integrated Report 2022

42

Feature

SECTION 01

SECTION 02

SECTION 03

SECTION 04

Fulfilling Our Purpose

Achieving Sustainable Growth

Responding to Social Issues

Data and Information—Value Creation Story of the Daio Group——Strategy for Continuing to Provide Value——Foundation for Sustainable Growth——Financial and Corporate Data—

Overseas Strategies and Initiatives under the Fourth Medium-Term Business Plan

Responding to social issues and local needs

China Business

Promotion of multi-category business expansion
Leading the growth of the overseas business through multi-categorybusiness expansion based on disposable baby diapers(Billions of yen)
60.0

36%

Ratio of non-baby
products

50.0
40.0

8%

30.0

10%

20.0

25%

Household paper
Feminine care products
Disposable adult diapers
Wipes

Disposable baby diapers

10.00

1st MTBP(FY2014)

2nd MTBP(FY2017)

3rd MTBP(FY2020)

FY2021

FY2022
4th MTBP
forecast (FY2023) forecast

elis School Roadshow

Donating household paper and otherproducts during Nantong City’s lockdown

Sanitizing wipes

Multi-category business expansion with feminine care products,
household paper, etc.

In Thailand, whose climate is categorized as a tropicalmonsoon climate, there has been growing interest in
not only the comfortable feel of products but also theirfragrance. We have launched various new productsthat can meet such local needs, including cool-feelingsanitary napkins, which help ease uncomfortablefeeling even on sweltering days, and baby-powderp , with the aim ofscented disposable babyy diapers,
boosting sales.

Scented, cool-feelingsanitary napkins

B
Baby-powdersscented disposablebaby diapersbIntegrated Report 2022

China

43

2-piece2
piece pac
packagesckages ofmasks

We have so far provided
disposable baby diapers
in single-piece packages
to provide better accessto this kind of product attraditional stores called“warung,” which many
consumers in Indonesia
regularly use in their
daily lives. Our lineup ofmasks imported fromJapan amid the COVID-19
pandemic also includes
a set of two masks in
one package, which isintended to match local
needs.

To reduce greenhouse gas (GHG) emissions from our factory, in 2021 we installed
solar panels on its rooftop, thereby replacing part of the sources of the electricity thefactory uses with a clean energy source. We have also installed green curtains madeof climbing plants around the oﬃce building to save energy.

Strengthening the foundation for the baby diaper businessIn the disposable baby diaper business in China,
we aim to not only boost sales by broadening
the lineup of disposable baby diaper pants,
for which demand is increasing, and explore
new markets in third-tier or lower-ranking
cities, which account for 80% of demand at
physical stores in the country, but also enhance
e-commerce sales in particular. We will further
increase the strength of the GOO.N brand,which is widely recognized as a high-quality
brand, in order to boost sales in other categories
and ensure that the China Business will be able
to lead the entire overseas business.

Indonesia

Feminine care products

ThailandToilet tissue

We hold this event at schools toshare accurate information on
how to use sanitary napkins andother related subjects with local
lower-secondary school students,
who do not yet have suﬃcientknowledge about menstruation.
We also provide them with samplesof sanitary napkins in the hope thatthey can lead better student lives.

ThailandComposition of China Business sales

In China, we are striving to boost sales
by providing products in a wide range ofcategories, including household paper, whose
lineup has recently been broadened, andfeminine care products, which have started
to be manufactured locally, by leveraging thepresence of our brand and our sales channel,
both of which have been strengthened throughour disposable baby diaper business operations.
In addition, we tackle social issues by donating
disposable adult diapers to local nursing homes
for the elderly and donating household paper
products amid COVID-19 lockdowns, thereby
earning greater public recognition.

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44