New Medium-Term Management Plan
(FY2017 – FY2019)

V-DRIVE
May 23, 2017

1. Review of the Previous Medium-Term Management Plan “C-next” (1)Comparison of consolidated management targets and actual results in the previous medium-term
management plan “C-next”
Net sales:(100 million yen)

Actual results in G-1st

Consolidated targets for FY2016

Actual results in C-next

Net sales
Operating income(right axis)

2,700

2,700

2,624

Operating income:(100 million yen)

240

2,468
2,284

2,239
2,083

2,100
1,800
1,500
1,200

108

12992900

61600

37

C-next Target for the fiscal year

2,306

C-next Final year

2,400210

Net sales
Operating income
Ratio of operating
income to net sales
EBITDA¥270.0 billion¥13.5 billion
5% or more
¥33.0 billion

180135150
120

Consolidated results for FY2016
9060

33303000

Net sales
Operating income
Ratio of operating
income to net sales
EBITDA¥262.4 billion¥12.9 billion
4.9%¥33.9 billion

0FY2011

FY2012FY2013

FY2014FY2015FY2016FY2016(target)1

2. Review of the Previous Medium-Term Management Plan “C-next” (2)Efforts and actual results in “C-next”
Achieved most of the targets of “C-next” as a result of seeking to create new fields that are responsive to change whilereforming the business structure for growth, based on strengthening the earnings base and deepening environmental
measures.

Strengthening of theearnings base

Deepening of environmental
measures

Creation of new fields
Reform of business structure

Raising prices in the domestic paper
business.
Subsequently announced a further pricerevision due to the worsened conditionsof exchange rates, etc.

Further improved CO2 emission
intensity.
Reduced it by 12% in 2015 comparedwith 2013.

There was hope for the restoration of
profitability in the white paperboard
business in China (Jiangmen Xinghui
Paper Mill Co., Ltd.).

Increased FSC-certified product items.

Acquired the pulp business (Alpac*2)
in Canada.
*2 Alberta-Pacific Forest Industries Inc.

Expanded operations and earnings in thespecialty paper business including theoverseas business (Dumas*1).
*1 Bernard Dumas S.A.S.

Acquired ISO14001 at Jiangmen
Xinghui Paper Mill Co., Ltd. in China.
Acquired the food safety management
system FSSC22000 at BF & PackageCo., Ltd.

Reduced the sales ratio of the paper
business to 45%.
Overseas sales ratio: 12%28%2

3. Recognition of Business Environment
The business environment in Japan became more severe, reflecting the shrinkage of total demand,
stagnant sales prices and rising prices of raw materials.

Paper and pulp market and industry
Shrinkage of total paper demand in Japan
Excess and aging of production facilities
Movements toward less dependence on paper and pulp andinclination to the energy businessSearch for new materials
Firm paper demand in emerging markets

Society and the economy
Globalization and localization, and world politics withuncertainties
Volatile exchange rates
Weak consumption under deflation (domestic market)
Increased necessity for an alternative to nuclear energy
Fluctuations in the market conditions of natural resources
and fossil resources

Global environment
Accelerated movement to reduce CO2
Magnified climate change
Contamination and shortage of water
resources
Review of the energy policy

34. Positioning of the New Medium-Term Management Plan

Vision 2020 (published in April 2011)
Be environmentally conscious in all corporate activities and promote environmentalmanagement.
Offer attractive products with excellent quality and competitiveness using
advanced technology.
Work with passion and seek steady growth and ever greater challenges.
Sales target: ¥300 billion or more (overseas sales ratio: 25%)

Name of thenew medium-term management plan

V-DRIVE
Value

第一次中計(2011～13年度)

V-DRIVE

Vision 2020

Victory

Variation
Variation / Value / Victory

DRIVE

C-nextChange / Challenge / Create

G-1stGreen / Global / GrowUp / Glowing[V-DRIVE]
Promote the creation of new fields and the reform ofbusiness structure (Variation), enhance thecorporate value (Value) and ride to victory byachieving Vision 2020 (Victory). Acceleratecorporate activities for these three “V”s (DRIVE).

45. Basic Policies and Strategies of the New Medium-Term Management Plan
“V-DRIVE”

Basicpolicies

Expand the overseas
business

Refortify thecompetitiveness of mills

Strategies

Aggressively develop
businesses horizontally byusing overseas
subsidiaries.

Strengthen costcompetitiveness in thepaper business.
Strengthen the global
consolidated managementsystem.

Promote overseas
strategies
in the white paperboard
business.
Promote overseas
strategies
in the specialty
paper business.

Strengthen the base of theconsolidated management
systemMake continuous efforts
for environmentalmanagement.

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6. Strengthening of Portfolio Management
Business portfolio
Focus on allocating management resources to next-generation business and growth business, including M&A.
Seek to expand the earnings of the domestic paper business and the overseas pulp business by increasing
their cost competitiveness and efficiency.

Growth business

Next-generation businessBusiness to enhance earnings• Domestic paper business (Niigata Mill/Kishu Mill)• Overseas pulp business (Alberta-Pacific
Forest Industries Co., Ltd.)

Growth potential• New materials business (CNF and CNC)
• Specialty paper business (development ofapplications of paper for industrial use)
• Environment-related business• Overseas specialty paper business (BernardDumas S.A.S.)• Paper processing business (BF & PackageCo., Ltd.)• Overseas white paperboard business(Jiangmen Xinghui Paper Mill Co., Ltd.)

Profitability/capital efficiency

Core business• Domestic specialty paper business(Nagaoka Mill/Osaka Mill)• Domestic white paperboard business (KantoMill)6

7. Consolidated Management Targets (FY2019)
Overview of the plan

Plan period

Financialindicators(FY2019)

April 1, 2017 – March 31, 2020 (3 years)
Net sales¥300.0 billion

Operating income¥15.0 billion

Operating income ratio

5.0%ROE

6.0%

EBITDA¥40.0 billion

Net D/E ratio

0.6 or less

[Assumptions]Exchange rate:
DUB crude oil:

¥115/US$
US$55.0/bbl
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8. Factors for Increase/Decrease in Consolidated Operating Income in FY2019

Factors for increase/decrease in consolidated operating income(FY2016 FY2019)¥1.1 billion¥3.0 billion-¥4.0 billion¥2.0 billion
FY2016
Operatingincome¥12.9 billion

Risk factors

Increase involume

Rationalization/
cost reduction(Costimprovement, etc.)

OthersOverseasbusiness
DomesticbusinessNew business

FY2019Operatingincome¥15.0 billion

89. Investment Plan
Total amount: ¥90.0 billion
Strategic investment: New investment including M&A and R&D investment
Capital expenditures: Capital expenditures for the purpose of strengthening competitiveness

Allocation ofinvestment

Strategic investment¥50.0 billion

Capital expenditures¥40.0 billion
Japan¥30.0 billion
Overseas ¥10.0 billion

910. Strategies in the Paper Business

Policies• Maintain sales of coated paper, wood-free paper and colored wood-free paper,and the paper export scale of 300,000 tons a year.
• Promote the development of specialty paper and increase sales of processing
base paper.
• Fully enforce optimum production and cost reduction at both Niigata Mill andKishu Mill.

Niigata Mill• Strengthen the price maintenance function by building a sales system coupledwith Hokuetsu Kishu Sales Co., Ltd.

Key strategies
Strengthen the logistics strategy utilizing the locational conditions of Niigata
Mill.
Maintain the market share and the development of applications for coatedpaper, wood-free paper and colored wood-free paper.
Increase sales of PPC paper and processing base paper.
Expand export sales areas.

Kishu Mill1011. Strategies in the White Paperboard BusinessPolicies• Develop new products and increase customer satisfaction by rapidly
responding to customer needs for quality.
• Capture growth in demand for primary containers.

Key strategies

Kanto Mill Ichikawa

Kanto Mill Katsuta

Develop demand mainly from major customers in greater depth.
Strengthen the competitiveness of the Group in collaboration withHokuetsu Kishu Sales Co., Ltd. and BF & Package Co., Ltd..
Diversify fuels of biomass boilers at Kanto Mill Katsuta.
Enhance technical synergies between Jiangmen Xinghui Paper Mill Co.,
Lｔｄ.and Kanto Mill.

Jiangmen Xinghui Paper Mill Co., Ltd.

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12. Strategies in the Specialty Paper BusinessPolicies• Further enhance domestic sales and actively promote business development ona global scale in cooperation with subsidiaries in Japan and overseas.

Nagaoka MillKey strategies
Develop new products and commence their commercial production.
Rebuild optimum production and sales systems on a global scale.
Ensure a system for boosting the production capacity of profitable products
and strengthen their sales capabilities.

Osaka MillBernard Dumas S.A.S.

Hokuetsu Toyo Fibre Co., Ltd.

Shanghai Toh Tech Co., Ltd.

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13. Strategies in the Paper Processing BusinessPolicies• Enhance business development in the paper processing field, which isexpected to grow, by demonstrating strength based on the integrated
production of the Group ranging from the development of processed
paper and materials for paper ware to processed products.

Key strategies
Expand the share of the market for paper ware for beverages.
Expand sales of paper ware for food and confectionery.
Strengthen competitiveness based on the integrated production ofprocessed paper.
Enhance the solutions capability of printing and data processingservices.

BF & Package Co., Ltd., Kanto Mill1314. Global Strategies
Policies and strategies• Maintain the paper export scale of 300,000 tons per year, mainly to Asia and North America.
• Further promote overseas development in the specialty paper and white paperboard business.
• Strengthen the competitiveness of Alberta-Pacific Forest Industries Co., Ltd. by promoting new businessincluding the manufacturing of CNC and by seeking M&A.
• Expand the afforestation business overseas.

Worldwide business development

FranceDumas

CanadaAlbertaPacific■■■

Bernard Dumas S.A.S.

China
Jiangmen Xinghui
Paper Mill■
Jiangmen Xinghui
Paper Mill Co., Ltd.

China
Shanghai Toh Tech

South Africa
Freewheel Trade and Invest 7ｐｔｙ■

Alberta-Pacific Forest
Industries Co., Ltd.

Shanghai Toh Tech Co.,
Ltd.

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15. Research and Development
Strengthened the system for research and development by establishing
the Novel Materials Development Office in April 2017.
• Development of novel materials, etc.
• Research on practical applications of CNF, etc.
• Use of novel materials for existing products• Development of new paper products and processed paper products

Central Research Laboratory(Nagaoka)

The Group’s efforts for novel materials and specialty materials
The Group has been actively and continuously working on the practical applications and commercialization ofnovel materials, etc. beyond the boundaries of paper and paperboards.
Vulcanized fiberSpecialty fiber boards
Ultra-high performance air filters
Chip carrier tapes
Battery separators
CNF (cellulose nano fiber)
CNC (cellulose nano crystal), etc.

Chip carrier tapes

Battery separators

CNF ultra-highperformance
air filters1516. Environmental Strategies
Environment-focused strategies in V-DRIVEChanges in CO2 Emission Intensity
Deepen and strengthen environmental strategies.
Maintain the industry-leading position in the Corporate
Environmental Management Ranking (Nikkei Inc.).
Expand the handling of FSC-certified products tailored touser needs.
Further reduce fossil energy-derived CO2 emission
intensity (Our target for 2016 is 381 kg-CO2/ ton of paper)… Chart on the right(Unit: Kg-CO2/ton of paper)
1000
The Company
820

812

789

800

793

777

Industry average
770

600
431

437

437

441

400

392

387

381

FY2014FY2015FY2016(plan)

2000
FY2010FY2011FY2012FY201316

Ｖ-ＤＲＩＶＥ[Note]
Descriptions of targets, etc. contained in this material are based on various assumptions at the time of formulating plans, andthe future target values and measures may differ from those presented in this material due to various factors.
Contact for inquiries about this material:
Hokuetsu Kishu Paper Co., Ltd., Corporate Planning Department+81-3-3245-4579

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