The Next Growth Stage, to a New Future

Fourth Medium-term Business Plan
April 2021 – March 2024

2021年5月27日
May 27, 2021
DAIO PAPER CORPORATION

Contents
1. Review of the First to Third Medium-term Business Plans… P3••••

Our business model, utilizing the Group’s unique strengths
Trajectory of structural reforms
Trajectory of overseas business expansion
Strategic transformation of the business portfolio

2. Summary of the Fourth Medium-term Business Plan… P9
•
•
•
•
•
•

Basic policies of the Fourth Medium-term Business Plan
Numerical targets under the Fourth Medium-term Business Plan
Net sales and operating profit targets by business segment
Plan to expand consolidated net sales
Plan to expand consolidated operating profit
Overview of the investment plan

3. Strategies in Each Business Group… P16
•
•
•
•
•
•
•

Overview of business group strategies
Industrial Paper and Corrugated Container Business
Newsprint and Paper Business
Domestic Home & Personal Care Business
Overseas Home & Personal Care BusinessNew businesses
Global response by the Corporate Unit

4. Cash Flow and Shareholder Returns Policy… P35
5. Initiatives for a Sustainable Society… P37• Initiatives to address the SDGs
• Roadmap to achieving carbon-neutral status by 2050
• Global social contribution and coexistence with local communities
DAIO PAPER CORPORATION

2

1. Review of the First to Third
Medium-term Business Plans⚫ Our business model, utilizing the Group’s uniquestrengths… P4⚫ Trajectory of structural reforms… P5~6
⚫ Trajectory of overseas business expansion… P7⚫ Strategic transformation of the business portfolio… P8DAIO PAPER CORPORATION

3

Our business model, utilizing the Group’s unique strengths

Business strategy to achieve sustainable growth
Reinforce businessfoundations and transformthe business portfolio
through structural reform

Demand-driven shift

Business model

Paper and Paperboard (P&P)
Business
Pulp and paper
products
Maintain competitive
advantage

Processed
products
Shift to high valueadded product mix

Strengthen and expand the
H&PC Business throughexpansion into overseas
growth markets

Newsprint
and paper

Industrial
paper

Printing

Corrugatedcontainer

Home & Personal Care (H&PC)
BusinessNewbusinesses

Household paper

CNF
RFID
Absorbent products

Market-oriented sales style

Unique strengths
Competitive advantage ininfrastructure and costs at
Mishima mill

Sales style reflecting theneeds of end users

Swift decision-making andthe capacity to promote
integrated management

DAIO PAPER CORPORATIONDiverse human resources
and corporate governance4Trajectory of structural reforms (1)Structural reform to leverage our machines through continuous operation,
fully utilizing the Mishima mill’s competitive pulp
Vision of the future

Origin of our concept of structural reform・Continuing decline in demand for paper・Maintaining full pulp production at theMishima mill

～

2014

2015

～

2017

～

2018

The H&PC Business leads the Daio Paper
Group’s growth
5th MTBP

4th MTBP

3rd MTBP

2nd MTBP

1st MTBP
2012

Swift and continuing structural reform

2020

2021

～

2023

the foundations for the future● Increased production of kraft pulp Laid
shift to household paper

Increased production and expanded sales of high value-added paper

Plan to relocate paper machine from Kani mill to Iwaki Daio Paper, and shift to containerboard● ● Plan to install household paper machine at Kani mill

Pulp that becomes
available is utilized inhousehold paper

Relocated paper machine from Kani mill to Iwaki Daio Paper, and shifted to containerboard● Commenced operation of household paper machine at Kani mill
● Decision to restart Kawanoe mill* as a household paper factory● Acquired Nisshinbo HD’s paper products business● Installed the first household paper machine at Kawanoe millPlan to convert Mishima mill’s N7 paper machine into containerboard machine● Increase in kraft pulp production● Measures in the P&P Business● Measures in the H&PC Business2026

Net sales:
800～1,000 billion yen● products (A2 grade coated paper and sheet products)●

2024 ～●● Plan to install a second household paper machine at Kawanoe millOperating profit margin:
10%

50% or more of net sales
from H&PC Business
30% or more of net sales
from H&PC Overseas
Business

Pulp that becomes
available is utilized inhousehold paper● Further reform to increase production of kraft pulp
● Mishima mill’s N7 containerboard machine commences operation● Decision to install second household paper machine at Kawanoe mill Planned operation: Oct. 2021
operation:
Response to social● Decision to install a dedicated paper towel machine at Mishima mill Planned
Jul. 2021
change due to the
COVID-19 crisis● Decision to convert Mishima mill’s paper machine into fluff pulp machine Planned
operation:
Sep. 2022

DAIO PAPER CORPORATION

5Trajectory of structural reforms (2)Maintain machine utilization rate and achieve greater competitive advantages
through strategic shifts in product mix
Production volume by product type
(Daio Paper)

Production volume by product type
(papermaking industry)
2014⇒2020change(thousand t/month)

Total for all
products
2,000(thousand t/month)300-13.6％
Household
paper

＋3.9％

1,500

250

Misc.

-16.6％

1,000

Kraft pulp production volume

2014
Monthlyavg.

2017
Monthlyavg.

2020
Monthly
avg.

＋0.0％

＋3.3％

HouseholdpaperHouseholdpaper＋50.0％＋74.5％

Wrapping andfunctional paper

Wrapping andfunctional paper+7.9％

Containerboard

Containerboard＋22.8％＋38.5％

Newsprint andpaper

Newsprint and
paper

100

-31.7％

Kraft pulp production volume-20.2％-34.1％

50-24.9％
Kraft pulp

Kraft pulp

0

＋7.5％

＋14.2％

Kraft pulp

0

Total for all
products＋3.7％

Newsprint and
paper

500

Total for all
products

150

Containerboard＋2.6％

2014⇒4th MTBP
change200

Wrapping
paper-16.1％

2014⇒2020change2014Monthlyavg.

2017
Monthlyavg.

2020
Monthlyavg.

（Source: Japan Paper Association Statistics)

DAIO PAPER CORPORATION

Conclusion Vision forof the 4th
the 5thMTBP
MTBP

Note: the N7 machine was being upgradedfrom January to March 20206

Trajectory of overseas business expansion
Since the 1st MTBP, we have built systems for local production and consumptionin Asia, centered on baby diapers
Under the 3rd MTBP, we established new “entry points” in Brazil and Turkey
East Asia

Turkey andneighboring countries

EITR

EICN

Southeast
Asia

EIT

Brazil(billions of yen)Southeast
Asia

Net sales trend by overseas region

50.0

Santher

Other

EIMI

60.0

Central andSouth America

40.0
30.0

East Asia
20.0
10.0
0.0

2012

2013

2014

2015

DAIO PAPER CORPORATION

2016

2017

2018

2019

2020

Note: IFRS 15 applied from 2018 onward

7Strategic transformation of the business portfolio
We have firmly established a base for rapid growth from the 4th MTBP onward,
through structural reforms and the expansion of overseas business bases
5th MTBP (Vision)
Net sales
800～1,000 billion yen

Net sales and operating profit by business720.0 billion yen

Net sales(billions of yen)

Operating profit(billions of yen)

Otherbusinesses

19％
50％
600.0

562.9 billion yen

51.0

531.3 billion yen
450.2 billion yen

42.3％

37.1％

4.9％
400.0

H&PC
Business

11.1％

7.7％

36.9

50.0

H&PC
Overseas
Business

40.0

H&PC
Domestic
Business

Operatingprofit

30.0

32.6％

H&PC
Businesssales ratio

21.8

Industrial
paper
Corrugatedcontainer

200.0

20.0
P&P
Business
10.0

11.1

Newsprint
Paper

0.0

0.0
FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019

1st MTBP

2nd MTBP

3rd MTBP(FY2012～FY2014)(FY2015～FY2017)(FY2018～FY2020)

DAIO PAPER CORPORATION

FY2020

FY20232

4th MTBP(FY2021～FY2023)

8

2. Summary of the Fourth
Medium-term Business Plan
⚫ Basic policies of the Fourth Medium-term Business
Plan… P10
⚫ Numerical targets under the Fourth Medium-term
Business Plan… P11⚫ Net sales and operating profit targets by businesssegment… P12⚫ Plan to expand consolidated net sales… P13⚫ Plan to expand consolidated operating profit… P14⚫ Overview of the investment plan… P15

DAIO PAPER CORPORATION

9Basic policies of the Fourth Medium-term Business Plan
Slogan of the Fourth Medium-term Business Plan (4th MTBP)The Next Growth Stage, to a New Future

Basic Policies

1

2

Establish a strong andresilient businessportfolio

Improve financial strength

Achieve carbon-neutral
status by 2050

Build an even greater competitive

Strengthen cash generating capacity and improve cash

Promote the use of renewable energy, andadvantage in the P&P Business byflow to enable further growth under the 5th MTBP

aim to reduce coal usage to zero by 2050

In view of the uncertain economic outlook, rigorously

Continually engage in proper plantation

select capital expenditure projects for the 3 years of the

management and expansion of plantation

4th MTBP, and aim to obtain a credit rating of A during thisareas

capitalizing on the results of strategic
investment and continuing withstructural reforms
Lead the Company’s growth andexpansion through faster multi-categorybusiness expansion and further
acquisitions in the H&PC Business3
Respond to climate changetime

Promote a shift to environmentally-

Promote management with a consciousness of capitalfriendly materials through CNF andcost and return on capital

plastic-free product businesses

Introduce ROIC as an internal management indicator for

Create future growth opportunities

evaluating profitability for each business and investment

through new businesses such as CNF

decision standards

DAIO PAPER CORPORATION

10Numerical targets under the Fourth Medium-term Business Plan
Maintain growth momentum and aim for new records in net sales and operating profit
1st MTBP(FY2014)

2nd MTBP(FY2017)

3rd MTBP(FY2020)

4th MTBP(FY2023)

Vision for 5th MTBP(FY2026)

Net sales

450.2

531.3

562.9

720.0

800.0 - 1,000.0

Operating profit

21.8

11.1

36.9

51.0

80.0 – 100.0(Operating profit margin)(4.8 %)(2.1 %)(6.6 %)(7.1 %)(10%)

H&PC overseas net
sales ratio

4.9 %

7.7 %

11.1 %

18.8 %

30% or greater

ROE

10.0 %

2.2 %

10.1 %

10.0% greater

Net D/E ratio

1.9

1.6

1.3

1.0

(Unit: billions of yen)

(Reference)or

Ordinary profit(Ordinary profit margin)

21.8

12.8

34.5

(4.8 %)(2.4 %)(6.1 %)CAPEX (3-year cumulative)

78.3

109.3

174.9

125.0

Depreciation (3-year cumulative)

80.0

87.2

99.2

120.0

Net interest-bearing debt

292.5

280.0

299.8

270.0

Credit rating/outlook (R&I)

BBB-/stable

BBB+/stable

BBB+/positive

Aim for A

Exchange rate (JPY/USD)

109.8

110.9

106.1

110

Dubai crude oil (USD/barrel)

84

56

45

63

DAIO PAPER CORPORATION

12% or greater
1.0 or less

48.0
(6.7 %)

11

Net sales and operating profit targets by business segment
For the first time, the scale of H&PC sales will surpass P&P
3rd MTBP (FY2020)

Business segment

4th MTBP (FY2023) Targets

Net sales(billion yen)

Operatingprofit(billion yen)

Operatingprofit margin

Net sales(billion yen)

Operatingprofit(billion yen)

Operatingprofit margin

Paper & Paperboard

302.5

19.6

6.5%

330.0

18.0

5.5%

H&PC

238.0

14.7

6.2%

360.0

30.0

8.3%

Domestic

175.4

15.5

8.8%

225.0

23.0

10.2%

Overseas

62.6

-0.8

-

135.0

7.0

5.2%

22.5

2.6

11.4%

30.0

3.0

10.0%

562.9

36.9

6.6%

720.0

51.0

7.1%

(Breakdown)

Other businesses(Including adjustments)

Total

DAIO PAPER CORPORATION

12

Plan to expand consolidated net sales
Aim for consolidated net sales of 720.0 billion yen in FY2023 (+157.1 billion yen from FY2020)(billions of yen)

1. Key measures in the P&P Business⚫ Decline in sales due to shrinking demand for newsprint and paper… (6.5) billion yen
・Maintain sales in line with demand, while shifting to high value-added product mix⚫ Continued stable domestic supply of industrial paper and accelerationof overseas expansion…10.0 billion yen
・Boost exports and ensure stable domestic supply by increasing production using theMishima mill’s N7 machine⚫ Strengthening and expansion of downstream corrugated containerand printing businesses… 24.0 billion yen
・Expand sales by installing additional production machines at
corrugated container and printing companies
・Business expansion utilizing M&A

3. Key measures in the H&PC Overseas
Business
East Asia………………..….. 30.3 billion yen
Central and South America.. 14.4 billion yen
Southeast Asia…………….… 7.6 billion yen
MENA + Russia…………….. 6.1 billion yen
M&A………………………… 14.0 billion yen⚫ Acceleration of multi-category businessexpansion (business multi-layerization)

2. Key measures in the H&PC Domestic Business・Enter China’s feminine care market and increase salesof household paper and adult diapers⚫ Further growth in household paper through structural reform… 17.6 billion yen

・Enhance premium product line-up, primarily baby
diapers in Brazil

・Product development that captures new consumer needs
・Enhance supply capacity by installing additional production machines⚫ Enter into new markets (area expansion)⚫ Advance multi-category business expansion (enhanced market share in absorbent
products)… 32.0 billion yen
・Leverage Elleair’s brand strength to enhance the product line-up for absorbent products, etc. andexpand into surrounding categories
・Expand the ratio of sales from new products

DAIO PAPER CORPORATION

・Expand exports through bases in Thailand, Brazil,
Turkey, etc. to extend our reach to their neighboring
countries
・Full-scale entry into China’s third-tier cities
・Enter new markets through M&A

13

Plan to expand consolidated operating profit

Aim for consolidated operating profit of 51.0 billion yen in FY2023 (+14.1 billion yen from FY2020)（billions of yen）

1. Key measures in the P&P Business• Maintain machine uptime with a shift in product mix throughstructural reforms• Strengthen and expand downstream businesses (corrugatedcontainers, printing)• Reduce costs through the increased use of hard-to-recycle
recovered paper• Allow for raw materials cost increases

3. Key measures in the H&PC Overseas
Business• Accelerate multi-category business expansion in our
existing target markets, primarily China• Maximize synergies in Brazil and Turkish businesses• Reduce costs through reorganization of Brazil mill, etc.

2. Key measures in the H&PC Domestic Business• Implement additional household paper production machines and expand sales• Increase added value in absorbent products, and boost market share• Reduce costs through measures such as internal production of raw materials

DAIO PAPER CORPORATION

14Overview of the investment plan
Prioritize allocation of investment to H&PC, a growth business

CAPEX over 3 years:
125.0 billion yen

M&A investment:
30.0 billion yen[Breakdown of CAPEX] Growth: 76.5 billion yen; Maintenance: 48.5 billion yen
ClassBusiness

CAPEX

Main objectives

GrowthH&PC

55.5
billion yen[Domestic]
・Respond to demand from heightened hygiene consciousness(Strengthen supply systems for paper towels and wet tissues)
・Expand sales of high value-added household paper products and adult diapers[Overseas]
・Promote multi-category business expansion in China, with feminine care products,
household paper, etc.
・Further expand businesses in Brazil and Turkey, after full-scale entry in the 3rd MTBP

P&P

10.5
billion yen

・Strengthen downstream businesses by implementing additional production machines
at corrugated container and printing companies
・Add a recycling boiler at Iwaki Daio Paper and achieve 100% proprietary power
generation
・Promote recycling and cost reduction through expanded utilization of hard-to-recycle
recovered paper

Other

10.5
billion yen

・Accelerate commercialization through new CNF production equipment
・Invest in IT to support business expansion
・Improve profitability through stronger area logistics and warehouse expansions(CNF, IT, logistics)

Maintenance

Total

76.5
billion yen-

48.5 billion yen
DAIO PAPER CORPORATION

15

3. Strategies in Each Business Group⚫ Overview of business group strategies… P17⚫ Industrial Paper and Corrugated Container
Business… P18~19⚫ Newsprint and Paper Business… P20~21⚫ Domestic Home & Personal Care Business… P22~24⚫ Overseas Home & Personal Care Business… P25~31⚫ New businesses… P32~33⚫ Global response by the Corporate Unit… P34

DAIO PAPER CORPORATION

16

Overview of business group strategies
Implement strategies and measures based on our view of the environment in each business
P&P Business

H&PC Domestic Business

H&PC Overseas Business

Strengthen the business throughcomparative advantages

Expand market share across all
categories

Overseas business will lead
growthNew Businesses

Create a third business pillar●Newsprint and paper●Household paper●Feminine care products●CNF business●Industrial paper andcorrugated containers●Baby diapers●Adult diapers●RFID business (IC tags)

Environmental change●Accelerating decline in graphic
paper demand●Increasingly diverse packaging uses
●Structural growth of e-commercemarkets

Pursue further growth
opportunities● Maintain stable supply● Strengthen printing andcorrugated containers in theprocessing field● Shift to product types where
demand is anticipated● Capture e-commerce demandand non-plastic product demand

Environmental change and opportunity●Rise in hygiene consciousness●Structural growth of e-commerce markets●Lifestyle changes●Progress of the aging society●Fragmentation and diversification of uses

Maximize growth opportunities● Solidify the household paper businessand strengthen the absorbent products
business● Increase brand loyalty● Strengthen e-commerce sales channels● Continually offer high-quality, highvalue-added products● Respond to the with/after-COVID-19
society● Premium strategy● Accelerate expansion into growth
segments and areas● Accelerate growth through M&A● Promote multi-category businessexpansion

DAIO PAPER CORPORATION

Environmental change
and opportunity●Increase in consciousness ofenvironmental conservation●Economic growth in developing
countries●Change in social issues

Create future growth
opportunities● Swift commercialization of the
CNF business● Entry into potential growthmarkets

17

Industrial Paper and Corrugated Container Business: strategic policy

CSV
Resolve social
issues throughbusiness

Provide environmentally-friendly packaging and wrapping paper, indispensablefor the transport of goods● Increase the ratio of hard-to-recycle recovered paper pulp used in containerboard manufacturing byleveraging our recovered paper processing technologies, some of the best in Japan● Provide paper suited for recycling through the development and sale of plastic replacement materials

2nd and 3rd MTBP
2015～2020

Shift from “graphic paper” to“packaging paper”●Converted Mishima mill’s paper machine into
containerboard machine, and expanded
exports across Asia
●Achieved both high quality and low costthrough increased usage of hard-to-recycle
recovered paper in containerboard●Began to strengthen downstream corrugatedcontainer businesses(Enhanced corrugated sheet production equipment andengaged in M&A of box manufacturers)

4th MTBP
2021～2023

Maintain stable domestic supply andaccelerate overseas expansion

Industrial paper●Promote integrated operations through higher containerboard
sales within the Group●Strengthen profitability of containerboard export to Asia
Corrugated containers●Further strengthen downstream corrugated container businesses
to enhance the total profitability of the Containerboard andCorrugated Container Business●Consider overseas expansion in the Corrugated Container Business
DAIO PAPER CORPORATION

18

Industrial Paper and Corrugated Container Business: initiatives
Main initiatives under the 4th MTBP

Business environment● We forecast further growth indemand in Japan, particularly forprocessed foods, beverages, and ecommerce uses

● Overseas, we forecast an increasein exports from Japan to China andmarket stability due mainly to
Chinese restrictions on the importof recovered paper

Expand exports of containerboard and strengthen domestic supply systems
Production volume from Mishima mill N7 machine
Oct. 2020

25,000 tons

4th MTBP

30,000 tons/month

ExportDomestic
supplyStrengthen
profitability

Strengthen and expand downstream businesses (corrugated container net sales)
3rd MTBP

43.0 billion yen

4th MTBP

60.0 billion yen

5th MTBP (Vision)

85.0 billion yen

Integrated operation of industrial paper andcorrugated container businesses
Corrugated containers

Industrial paper
１

Expand sales by maintaining stable domestic supply andoffering one-stop delivery of all types of containerboard

１

２Strengthen profitability of containerboard exports througheffective utilization of hard-to-recycle recovered paper andthe rigorous selection of sales regions

２

３

Accelerate the development and sale of environmentallyfriendly paper products

３

Expand the business through stronger relationships withindependent corrugated container and box manufacturers,and M&A activities
Strengthen total package offerings (including peripheral
goods such as packaging and functional materials, paper
containers and specially processed products)
Commence consideration of the overseas expansion of the
Corrugated Container Business

Strengthen total profitability, from containerboard to corrugated containers
DAIO PAPER CORPORATION

19

Newsprint and Paper Business: strategic policy

CSV
Resolve social
issues throughbusiness

Ensure stable supply of graphic paper, an indispensable part of people’s lives● Always ensure stable supply of high-quality, high value-added product to users● Develop products to respond to the needs of end users● Develop and sell FSC certified paper and environmentally-friendly printed materials

2nd and 3rd MTBP
2015～2020

Made use of the Mishima mill’s features toshift the product mix from paper topaperboard and household paper● Converted Mishima mill’s paper machine tocontainerboard machine, and utilized pulp forhousehold paper●Pursue higher sales composition of high valueadded paper products through alliances with
Sakura Terrace distributors (A2 grade coatedpaper and sheet products)●Increase sales composition of high valueadded products through M&A of printing
companies(seals, labels, business forms, paper boxes)

4th MTBP
2021～2023

Consider production systems and sales
composition in anticipation of a further shift,and strengthen downstream printing paper businesses
Paper●Generate cash flow by pursuing a shift to high value-added products●Consider production systems and sales composition in anticipation offurther declines in demand
Printing●Build optimal production systems through the structural reform of
production, transcending the divisions between printing companies●Maximize total profitability from paper and printing by further
strengthening printing businesses
DAIO PAPER CORPORATION

20Newsprint and Paper Business: initiatives
Main initiatives under the 4th MTBP

Business environment● Decline in demand for newsprint,
printing and communications
paper has accelerated due to the
COVID-19 crisis, and we do not
expect a substantial recovery in
the future● Despite declining demand forcommercial printing, demand for
stickers, labels an business forms
will continue to be firm

Develop newsprint and paper into a leaner business
Maintain net sales in linewith demand for newsprint
and paper

Leverage the advantages of the Mishima mill to pursue highvalue-added products and maintain strong operating rates while
restructuring the product mix

Further strengthen and expand printing businesses (printing net sales)
3rd MTBP

33.0 billion yen

4th MTBP

40.0 billion yen

5th MTBP (Vision)

45.0 billion yen

Integrated operation of paper
and printing businesses
Printing

Newsprint & paper
１

Maintain and continue stable supply

１

２

Improve cash flow by reducing inventories

２

３

Further product mix shift to fields where demand isanticipated３

Strengthen one-stop sales across all product types
Build an optimal production system that transcends thedivisions between printing companies (transfer andconsolidation of equipment)
Strengthen sales of high value-added printed materials(stickers, labels and business forms)

Strengthen total profitability from paper to printing
DAIO PAPER CORPORATION

21

Domestic Home & Personal Care Business: strategic policy

CSV
Resolve social
issues throughbusiness

Supporting consumers live their unique and individual daily lives●Pursue daily convenience for consumers through Elleair products●Support secure and healthy lifestyles in response to increasing hygiene consciousness

2nd and 3rd MTBP
2015～2020

Established an overwhelming top market
share for household paper in Japan● Strengthened household paper production
systems through radical structural reform● Acquired Nisshinbo HD’s paper products
business● Strengthened absorbent products production
systems in anticipation of expanded market
share

4th MTBP
2021～2023

Further grow the household paper business and increase market
share in the absorbent products business, by carrying forward
structural reforms and capital expenditure from the 3rd MTBP
●Further strengthen the household paper business, which leads themarket share in all categories●Actively introduce derivative products in existing categories, andincrease the sales composition of new products● Enhanced equipment for producing masks,
sanitizing wet tissues, etc.
DAIO PAPER CORPORATION

22

Domestic Home & Personal Care Business: initiatives (1)Business environment
Changes in lifestyles due to the COVID-19 crisis, such as the increase in hygiene consciousness, have brought about a change in the
structure of demand in the domestic household products market, and we forecast further fragmentation of consumer needs in eachcategory a and a shift to high value-added products

Main initiatives under the 4th MTBP
Solidify our position as No.1 across all household paper categories
Product development that captures
consumer needs● Respond to “new needs” resulting fromconsumers’ increased hygiene consciousness● Achieve greater market share by continuing to
expand product offerings to revitalize markets
Image of household paper product expansion
Introduce products tocapture “new needs”
Highvalueadded
products

Generalpurposeproducts

Revitalize markets throughfurther high value-added
product offerings

Fragmentation of needs
propelling the shift of some
general purpose products tohigher-value added versions

New
needs
High
valueadded
products

Further enhance supply capacity
Optimize consolidation of product types
Achieve optimal production and stable supply ateach mill/factory
October 2018
No.1 household paper machine began
operation (Kawanoe mill, Ehime)

July 2021
Planned operation of paper towel machine(Mishima mill, Ehime)
October 2021
Planned operation of No.2 household paper machine(Kawanoe mill, Ehime)
Planned operation of household paper processing machine(Kani mill, Gifu)(thousand tons)

160

Household paper market (production volume)147

The Company’s production volume: 42,000 tons/month120

Share of net sales(Total share across household paper categories*)
80

40

0

32%

27%

29%

16%

18%

24%

28%

Jan.-Dec.
2014

Jan.-Dec.
2017

Jan.-Dec.
2020

Conclusion of
the 4th MTBP

22%

2020

Conclusion of the 4th MTBP

29％

32％

36,000 tons/month

42,000 tons/month

Total share acrosshousehold paper categories*
The Company’s
production volume

Generalpurposeproducts

153

151

149

(In-house
investigation)* Total sales amount data for tissue paper, toilet paper and kitchen towels
INTAGE SRI data (Jan.-Dec. 2014, nationwide aggregate across all business categories)
INTAGE SRI+ data (Jan.-Dec. 2017 and Jan.-Dec. 2020, nationwide aggregate across all
business categories)

DAIO PAPER CORPORATION

23

Domestic Home & Personal Care Business: initiatives (2)Strengthen and expand category brands
Drive multi-category business expansion through the tandem promotion of household paper and absorbent products
Expand our market share for absorbent products and other personal care products, to strengthen tandem promotion with household paper
Shift to in-house manufacturing of fluff pulp to introduce products with new value, and enhance profitability

Household paper

Absorbent products and other personal careproducts
Leverage the strength of the “Elleair” brand,
expand our product lineup and expand into
peripheral categories

Brand strength of Elleair

Increase the sales ratio of new products, andexpand net sales and profit

Masks

Baby diapers

Sanitizing wet
tissues

Sanitary
napkins

Elleair’s brandstrength
Paper towels

Tissues

Kitchenpaper

Additive-free wet
tissuesMarketing policy / Brand policy /Toilet paper

Adult diapers

Distribution policy / Logistic policy
Toilet cleaner

Absorbent care

H&PC Domestic Business: Operating profit

H&PC Domestic Business: Net sales by product type

175.4 billion yen

40%

3rd MTBP

60％

4th MTBP

54%

46%

Household paper

Absorbent products and otherpersonal care products

225.0 billion yen

3rd MTBP

15.5 billion yen(Profit ratio 8.8%)

DAIO PAPER CORPORATION

4th MTBP

23.0 billion yen(10.2%)

5th MTBP (Vision)

36.0 billion yen
(15%)

24

Overseas Home & Personal Care Business: strategic policy (1)CSV
Resolve social
issues throughbusiness

Contribute to development in our markets overseas, enhancing the standard of living● Prevent infection and raise the standard of living through the spread of high-quality
household paper● Create and maintain employment at our overseas bases, and source raw materials locally● Enhance the technical and R&D capabilities of our overseas bases

2nd and 3rd MTBP
2015～2020

Promoted expansion of production overseas(local production for local consumption) andmulti-category business expansion●ChinaPremium brand strategy for baby diapers,
and expanded sales of premium toilet paper●ThailandEnter the markets for baby diapers, wet
tissues and wipes, and feminine care products●Indonesia
Expand baby diaper machines●Brazil and Turkey
Market entry through M&A

4th MTBP
2021～2023

Expand through multi-category business expansion
in existing markets and entry into new markets
as the pillars of our growth engine●Achieve operating profit across all overseas subsidiaries●Realize synergies and expand export businesses in countries we areentering through M&A (Brazil and Turkey)●Expand the area and scale of overseas businesses through M&A,
pursue multi-category business expansion, and consider merger
with/acquisition of household paper manufacturers in developing
countries●Enhance CSV and contribute to local communities in the countries
where we operate
DAIO PAPER CORPORATION

25

Overseas Home & Personal Care Business: strategic policy (2)● Develop our Japanese multi-category business expansion model overseas● Accelerate growth through M&A

East Asia

FY2023

FY2023
FY2020

MENA+Russia
1.9(Middle East, North Africa) billion yen*Central andSouth America
FY2020

8.0
billion yen

62.0 billion yen

FY202031.7 billion yen
FY2023

FY202314.0

FY202037.0 billion yen

Southeast Asia

22.6

billion yen

6.4
billion yen

Overseas net sales by region

billion yen*(billions of yen)

*FY2020 includes net sales from M&A activities
in Brazil and Turkey for 9 months only

Overseas sales ratio by category
Adult, other

5%

Baby
95%

New M&A

120

MENA
Southeast Asia

100

45% Adult, other

36%
2018
34.5 billion yen

135.0 billion yen

140

62.6 billion yen

80

Household
paper

2020
62.6 billion yen

Feminine

Baby64%Household2023
Paper 135.0 billion yen

Central andSouth America

60

Baby
55%

40

East Asia
20

Feminine

0
2018

DAIO PAPER CORPORATION

2019

2020

2023

26

Overseas Home & Personal Care: initiatives in the China business (1)Further sales expansion in the super-premium zone
Business expansion in third-tier cities, which account for 80% of the whole market, and where demand is growing
Product fragmentation by zone and sales channel

Consistently introduce premium zone products(billions of yen)

1,000

Expand sales of top-of-the-line “Light Plume Pure Gold Guangyu Liujin” series

China market scale (by zone)

19%

800

26%

9%

600

Super-premium
Premium

400

1%Standard

200
0

EconomyJan.-Dec.
2014

Jan.-Dec.
2017

Jan.-Dec.
2019

Jan.-Dec.
2020

Strengthen storefront promotion of Guangyu Liujin series(Source: Company estimate based on data from Nielsen
and China Statistical Yearbook (16.80 JPY/CNY))

Established consumer recognition of the high quality of GOO.N brand products
under the 3rd MTBP

Full-scale entry into third-tier cities(billions of yen)

400

Guangyu Liujin(Highest-grade product)➡ Under the 4th MTBP we will expand sales channels in third-tier cities with growing demand, tofurther increase sales

Chinese baby shop market by city tierFirst and second-tier cities

300➡ Launch new products targeting third-tier cities

200

84%
100

Third-tier cities

81%

0
2017

2018

2019

2020

The “Hare no hi no ubugi” sales caravan visits third-tier cities“Hare no hi no ubugi” diapers(for third-tier cities)(Source: Nielsen (16.80 JPY/CNY))DAIO PAPER CORPORATION

27

Overseas Home & Personal Care: initiatives in the China business (2)Enhance production equipment to achieve full-scale multi-category business expansion
Promote multi-category business expansion(billions of yen)

70

Enhance production systems through the operation of a second factory
September 2020 Second factory is completed; tissue processing machine

Composition of sales in the China business

60
50

commences operation

Household paper
Feminine care
Adult diapers

35%

40

March 2021

Wet wipes processing machine commences operation

2022

Planned operation of the feminine care processing machine
Considering future entry into corrugated container business

Factory No.1

8%

30

0.5%
20

Baby diapers

Factory No.2

10

0
2014

2017

2020

Conclusion of
the 4th MTBP

■Full-scale entry into the feminine caremarket in China: market scale approx. 700
billion yen (9 times the size of the Japanesemarket)Commence test sales of imported products from May
this year

Panorama of factories No. 1 and 2

New feminine care productelis Tenshi no Shaori

Plan to commence local production from Jan. 2022

■Rising demand for “hygienic,
safe, high function” products
Strengthen development andproduction equipment

Diaper monitoring room

Factory tour

Elleair hygienic toilet paper

DAIO PAPER CORPORATION

28

Overseas Home & Personal Care:initiatives in the Thailand and Indonesia businesses
Consider further strengthening production systems to promote multi-category business expansion
Promote optimization of distribution and sales networks to strengthen profitability
Promote multi-category business expansion
ThailandIndonesia● Further strengthen the well-performing feminine care business● Promote multi-category business expansion pivoting on baby diapers and household paper● Expand sales of wet tissues● Capture fluid consumer demand through drastic renewal of baby diaper quality and design,and the use of Disney characters● Achieve stronger sales and stable profits in surrounding countries
such as Vietnam and Malaysia

Feminine care products, wet tissues and baby diapers

Baby diapers (premium and economy products)

Baby diapers(design featuring Disney characters)

Optimize distribution and sales networks
ThailandIndonesia●Expand distribution from cities to regional areas●Achieve a profit in the baby
diaper business throughexpanded sales channels to
traditional stores (warung)●Rigorous store selection and focused sales
promotion●Utilize e-commerce to expand sales of high-profit
products
Sales at a small-scale store in Thailand●Raise the e-commerce sales ratio
and improve sales efficiency

DAIO PAPER CORPORATION

Individually-packaged baby diapers(design featuring Disney characters)

29

Overseas Home & Personal Care: initiatives in the Brazil business
Grow Brazil into the second overseas “sales and profit core” after China
Maximize synergies between Daio Paper, Santher and Marubeni

DAIO PAPER CORPORATION
Technical, product andmarketing strength

High brand recognition within Brazil

Baby diapers, feminine care products, household paper

Enhance product lineup

Reform production and development
systems●Progressively introduce Daio quality and Daio brandproducts●Structural reforms through the reorganization of existing
factories and the introduction of new machines●Achieve a shift to high value-added products andincreased profitability●Strengthen development systems

DAIO PAPER CORPORATIONBusiness network in Brazil

The Bragança Paulista factory, Santher’s main production base

Further business expansion throughsynergies●Consider expanding exports from both H&PC andspecialty paper businesses

30Overseas Home & Personal Care: initiatives in the Turkey business
Expand the business by utilizing Turkey’s strategic location to expand exports
Strengthen the GOO.N brand and develop the Group’s first liquid soap business

Utilize the Daio Paper Group’s
knowhow

Promote export sales to surrounding
countries●Local production of GOO.N brand products andexpanded production equipment●Establish export and sales systems to Russia, MENA andEastern Europe●Strengthen baby diaper quality and establish thebrand●Minimize exchange rate risk by increasing the proportion ofexports

Effectively utilize new productcategories●Consider lateral expansion of the liquid soap
business within the Group

RussiaUkraineEasternEuropeNorth Africa

Kazakhstan

MiddleEast

Liquid soap

Baby diapers

Elleair International Turkey head office factory

DAIO PAPER CORPORATION

31

New business expansion (1): cellulose nanofibers
In the 4th MTBP, lay the foundations for full-scale business expansion in the 5th MTBP
Understanding of the business environment

Our strength incellulose
nanofibers (CNF)● CNF has already passed the R&D stage, with increasing instancesof its utilization in commercial products

Utilizing the Mishima mill’s diverse range ofpulp will enable us to provide samples ofmultiple materials and fiber sizes to matchthe needs of CNF users● CNF products are expected to become common within the next few
years in response to the need to reduce CO2 emissions, withincreasingly diverse applications for weight reduction and plastic
usage reduction through the addition of, or replacement with, CNF

Main initiatives under the 4th MTBP
Achieve cost reductions through higher productivity
for cellulose-fiber-containing composite resin

Accelerate the development of new applications for CNF to expedite thecommercialization process● We provided a greatly increased number of CNF samples under the 3rd● One example of the development of expanded applications is our supply of proprietary ELLEX-M CNF

MTBP. Under the 4th MTBP, we will further enhance our CNF supply
capabilities by launching a pilot plant in 2021
We will achieve a rapid improvement in productivity andsubstantial cost reductions by building an integrated
manufacturing process**Selected as a New Energy and Industrial Technology Development

molds for electric race car components since 2018. In 2020, we added ELLEX-R cellulose-fiber-containing
composite resin, and we have pursued the potential of expanded applications in automobileparts● We will utilize the features of CNF, including strength and high elasticity, to contribute to cutting CO2

emissions through the reduced use of plastics and lighter vehicles, to realize a sustainable
society

Organization (NEDO) “CNF-related Technology Development Project toContribute to a Carbon Recycling Society”

Our CNF is used in race car components● We will accelerate the development of applications
under the 4th MTBP, and aim to introduce

equipment forcommercial
production

Cellulose-fiber-containing
composite resin©SAMURAI SPEEDDAIO PAPER CORPORATION

32

New business expansion (2): RFID
Expand RFID businesses utilizing the Group’s technologies
Understanding of the business environment
Fusing the technologies we have developedin papermaking and engineering, we are able
to respond to customer demands with an
integrated range of RFID tags, hardware andsoftwareOur strength inradio-frequency
identification (RFID)

Demand for RFID technology is anticipated to rise, and it is expected to
become common in industries such as healthcare and logistics, where a
response to labor shortages (labor reductions), better work
environments, the prevention of human error, the digitalization ofbusiness operations (DX), and more efficient operations are needed

Main initiatives under the 4th MTBP (expanded solution offerings)

Achievements in the provision of RFID solutions●Main solutions provided

Paper

Healthcare: relieved labor shortages, prevented human error, and enhanced

Carbon(antenna)

RFID tags

Inlays, RFID tags, and RFID labels

the efficiency of operations

Adhesive
Releasepaper

IC tags
Electronic tags

Cosmetics: enhanced distribution traceability
Logistics: relieved labor shortages, facilitated the digitalization of operations●Main RFID tags and labels provided

Paper RFID labels
Inventory system

SoftwareHardwareMiddlewaresystems

Readers
Attachingmachines

Healthcare:

RFID labels

Apparel:RFID tags and labels

Production control: RFID labels
Independent
collaborative robots

Business development under the 4th MTBP
We aim to fully utilize the cutting-edge production equipment installed at
Daio Engineering to expand the use of RFID in a range of industries,
including logistics and apparel, by packaging the solutions we have

RFID event space sales systems

Automatic RFID tag
attaching machinedeveloped through our achievements in this field
DAIO PAPER CORPORATION

33

Global response by the Corporate Unit
Establish global support systems to respond to the expansion of overseas businesses
Further strengthen the Group’s governance structure from a global perspective
Stable procurement and optimal allocationof management resources necessary forbusiness growth and expansion

Further strengthen the Group’s governancestructure and enhance risk management•

Optimal allocation of human resources,
recruitment and training of overseas humanresources, recruitment of foreign employees in
Japan

•

Build systems to respond to overseas laws andregulations and manage legal risk, by developing
human resources with expertise in overseas legal
affairs•

Establish optimal logistics systems within eachcountry and for import and export••

Integrate and strengthen purchasing policy andpurchasing function for the stable procurement of
resources and materials overseas

Strengthen the application and acquisition of design
and trademark rights overseas, by strengthening anddeveloping staff responsible for overseas regions at
the Intellectual Property Department•

Standardize rules and strengthen internal control by
establishing a Group-wide, global infrastructure
control platform•

Strengthen key IT personnel and systems to promote
overseas M&A strategy••

Review key investment domains and establish a
global funds management system
Promote overseas M&A strategy

DAIO PAPER CORPORATION

34

4. Cash Flow and Shareholder
Returns Policy⚫ Cash flow and shareholder returns policy… P36

DAIO PAPER CORPORATION

35

Cash flow and shareholder returns policy
We will promote management with a consciousness of capital cost and return on capital,
and aim for sustainable growth by improving financial soundness
Cash flow under the 4th MTBP

１

Operating CF: 210.0 billion yen
Depreciation: 120.0 billion yen

Profit before tax, etc.

Investment CF: 155.0 billion yen
M&A investment:
30.0 billion yen

Capital expenditure: 125.0 billion yen

Reduce interest-bearing debt

Stable dividends
Enhance net assets

Dividends and DOE (dividends on equity) trend

２
20
15

8.5

8.5

10

1.1

1.0

8.5

10.5

0.9

1.0

5
0

2.5
(%)

DOE

(yen per 25
share)

2012

2013

2014

2015

10.5

10.5

10.5

0.9

0.9

0.9

2016

2017

2018

Maintain stable dividends with consideration for businessresults, more substantial internal reserves, etc.

13.5
1.1

2019

17.0
1.2

2020

20.0

2.0

2.0
1.5

1.3

Year-end
dividend

1.0

Interimdividend

0.5
0.0

2021

Add DOE* as an indicator, and return to shareholders thebenefits of growth-induced rise in net assets*DOE: dividends on equity

DAIO PAPER CORPORATION

36

5. Initiatives for a Sustainable
Society⚫ Initiatives to address the SDGs… P38⚫ Roadmap to achieving carbon-neutral status by
2050… P39
⚫ Global social contribution and coexistence with local
communities… P40

DAIO PAPER CORPORATION

37

Initiatives to address the SDGs

DAIO PAPER CORPORATION

38
38

Roadmap to achieving carbon-neutral status by 2050
Through our expertise in utilizing diverse fuel sources and the introduction of new technologies,
we will actively engage in reducing the use of fossil fuels

DAIO PAPER CORPORATION

3939

Global social contribution and coexistence with local communities

Donated diapers to a children’s hospital that supports children with cleft
lips

Donated sanitary pads to a project supportingchildren of ethic groups in mountainous regions

China

Japan

Supported outings for parents
with small children, through theplacement of diaper vending
machinesJapan

ThailandDonated to a project run by The Okinawa Timesto eliminate child poverty

BrazilZambiaContinued to engage in the Heart Support Project, one of our SDGs initiatives,supporting women’s independence

Indonesia

Donated baby diapers to a nearby nursery

DAIO PAPER CORPORATION

Donated Santher non-woven masks to a
local medical facility

Chile

Implemented skills training on fruit tree cultivation and handicrafts
to promote the local economy in Chile, where we are engaged in
the plantation business40

Cautions regarding forward-looking statements
The strategies, plan, targets and other forward-looking statements included inthis document have been prepared based on assumptions made by Daio Paper
Corporation (“the Company”) using information currently available to it, and are
subject to contingencies, risks and uncertainties.
As such, actual future performance and results could differ materially from thestatements included herein as a result of factors such as changes in theeconomic and business environment surrounding the Company.

Notes regarding figures and expressions
1. Amounts are rounded off to the nearest 0.1 billion yen; totals may not sum due
to rounding.
2. Fiscal year (FY) represents the 1-year period from Apr 1 to Mar 31. (FY2021 is
the fiscal year from Apr 1, 2021 to Mar 31, 2022.)
3. MTBP = “Medium-term Business Plan”.

Disclaimers regarding translation
1.

This document is an English translation of the original Japanese document
dated May 27, 2021 and is only for reference purposes. In the event of any
discrepancy between the original Japanese document and this translated
document, the Japanese document shall prevail.

2.

Translations of brand names and product names not yet launched in
English-speaking regions are not official and are subject to change without
notice.
DAIO PAPER CORPORATION