Initiatives for Priority Markets

Global Markets
In addition to the sales of MDF produced in Malaysia and New Zealand, the industrial materials business in the global markets expands
the sales by the North American wood materials with a focus on the veneers and LVL produced in Canada and the USA. The building
materials business has been deploying interior doors in China, which has a huge market size, and Indonesia, where housing demand
expansion is expected.

Global markets: Trends in net sales

1000(¥100 million)
800

Industrial materials business

Building materials business+5+4960Engineering business

Other+26 721 (64)
(5)

0(4)

665

646 (137)

600+90+30 550

400200+3+71+15 192

01020
2016
Results

2019
Results

BenchmarkGP25 1st Stage

2022
Results

2024 2026 (Fiscal year)
Forecast Goals

2023
Results

GP25 2nd Stage

GP25 3rd Stage

Overseas bases/Sales breakdown by overseas region[Salesbreakdown byregion][Salesbreakdown
byoverseas
overseasregion]

7%

VeneerOther

CIPA Lumber Co., Ltd. (CIPA)

Other
13%%

Oceania
Oceania %713(Canada/from 2019)

Fiscal 2023

SoutheastAsia
Southeast%

20

Asia%2064.6NorthFiscal 2023 America
60North%America

64.6

billion yen

60%billion yen

DAIKEN (Shanghai) Corporation(China)Doors, flooring, and construction materials

LVL

DAIKEN Industries (Ningbo) Corporation

Pacific Woodtech Corporation (PWT)(China/from 2002)(The U.S.A./from 2019)*The company, which used to be a consolidated subsidiary,
became an equity method affiliate in August 2022.

MDF

DAIKEN SARAWAK SDN. BHD. (DSK)(Malaysia/from 1994)
Singapore
BranchMDF

Indonesia
officeDAIKEN MIRI SDN. BHD. (DMR)(Malaysia/from 2005)

Door

Sales office

PT. DAIKEN DHARMA INDONESIA(Indonesia/from 2015)41

DAIKEN GROUP REPORT 2023

Production base
MDF

MDF

DAIKEN SOUTHLAND LIMITED (DSL)DAIKEN NEW ZEALAND LIMITED (DNZ)(New Zealand/from 2018)(New Zealand/from 2009)

Industrial materials
business
Building materials
businessDevelopment by MDF
Product characteristics
With the system of four plants in the two countries of Malaysia and New Zealand, we are engaged in the production of MDF for which wood
offcuts from timber are effectively used. By taking advantage of tree species and the characteristics of the production lines and cooperation,
we will promote the distribution of products having new value and the further expansion of the sales channels in global markets.
New ZealandTree species: Hardwood

Tree species: Softwood

Brown-colored MDF that effectively uses wood offcuts from the plywood/lumber
plants in Malaysia. It is used for the flooring substrates that require excellent
water resistance and dimensional stability.

White-colored MDF that uses plantation Pinus radiata timber in New Zealand. It is
used for the base materials for furniture and building materials that require
lightness and smooth surface.

CharacteristicsCharacteristics

DSK is a mother plant for MDF, which produces high valueadded special MDF, etc. They are in the two-plant system withDMR after M&A in 2005. They developed MDF that uses 100%plantation acacia timber and proceed with the distribution of newapplications.

MDF that is globally recognized with the CUSTOMWOOD brand. In
addition to the product development that corresponds to thecustomer needs, such as ultra-lightweight MDF, DNZ and DSL
take advantage of their respective characteristics of theproduction lines and optimize their production items.

Daiken Group’s Value CreationMalaysia

Production base
DAIKEN SARAWAK SDN. BHD. (DSK)DAIKEN NEW ZEALAND LIMITED (DNZ)

Global41%

23%
MDF sales
breakdownby region
Domestic

DAIKEN MIRI SDN. BHD. (DMR)

59%

Oceania(Fiscal 2023)

1976 → Purchased the company inFebruary 2009
Production capacity: 107,000 m3/year
Acquired certificate: JIS A 5905, FSC CoCCARB, and EPA TSCA Title VI
Foundation:

10%

DAIKEN SOUTHLAND LIMITED (DSL)The U.S.A.

*Including the portion
consumed by our company

8%

September 1996 → Purchased thecompany in February 2005
Production capacity: 110,000 m3/year
Acquired certificate: JIS A 5905, PEFC CoCCARB, and EPA TSCA Title VI

November 1993 → Purchased thecompany in April 2018
Production capacity: 195,000 m3/year
Acquired certificate: JIS A 5905, FSC CoCCARB, and EPA TSCA Title VI

Foundation:

Tree planting activity in Malaysia

Strategy for Value Creation

Asia

Foundation:
May 1994
Production capacity: 120,000 m3/year
Acquired certificate: JIS A 5905, PEFC CoCCARB, and EPA TSCA Title VI

Foundation:(ha)[Cumulative afforestation area in Sarawak, Malaysia]

20062011

First afforestation
area

Second afforestation
area2016Third afforestation
area

2021

2023
(Fiscal year)

Future development❶ Profitability improvement by optimizing
the production system❷ Enhancement of the new use
application development/proposals❸ Further pursuit of the sustainability ofraw materials

By optimizing production items that take advantage of the characteristics of the respective bases,
improve profitability.
Enhance the new use application development and proposals that correspond to the demand as thealternative materials to plywood and plastics.
In addition to the expansion of their afforestation sites and improvement of the certified material ratio, pursue
sustainability of raw materials by developing new technologies.

DAIKEN GROUP REPORT 2023

42Data10,000
Toward the realization of stableprocurement of wood materials, we
8,000
started acacia tree planting in
6,000
Sarawak, Malaysia, in 2002, and thecumulative afforestation area is 9,800
4,000
ha or more. DSK aims to increase the2,000
plantation timber ratio in the woodmaterials used for MDF to 100% by02003
fiscal 2026, strives to enhance the plantation timber growth
management, and proceeds with the expansion ofafforestation sites.

Initiatives for Priority Markets Global Markets
Expansion with wood materials in North America
With the acquisition of CIPA, which is a veneer plant in Canada, and PWT, which is an LVL plant in the United States, in June 2019, we
officially started to expand into the American market, which is the world’s largest wooden housing market. In August 2022, PWT
acquired the housing structural material manufacturing business with a focus on the business of manufacturing and selling LVL fromLouisiana Pacific, and the size of the business expanded significantly. With the capital increase aimed at acquiring the business, PWT,
which used to be a consolidated subsidiary, became an equity method affiliate but they will continue enhancing the cooperation withCIPA and further expand the North American wood industrial materials business by taking advantage of the Daiken Group’s
technological capabilities cultivated in Japan and proceeding with the deployment of more value-added products on the basis of LVL
manufacturing/sales networks expanded throughout the United States.
Veneer

CIPA Lumber Co., Ltd. (CIPA)

Foundation:
April 1968 → Purchased the company in June 2019
Location:
Canada (Delta, British Columbia)
Business lineup: Veneer manufacturing and sales

LVL

Pacific Woodtech Corporation (PWT)

January 1998 → Purchased the company in June 2019
→ Became an equity method affiliate in August 2022
Location:
The U.S.A. (Burlington, Washington)
Business lineup: Structural LVL and I-Joist manufacturing and sales
Foundation:

Significance of group structure
While shrinking of the new housing market in Japan is expected, expand into the global market, which is positioned
as the prioritized market in the long-term vision.

❶ Expansion in the global market

Expand into the North American market, which is the world’s largest wooden housing market supplying about
twice as many houses as Japan and the growing market where population is expected to increase by 2 million ormore annually.
❸ Pursuit of synergy that takes advantage Further expand by deploying the business model expanded by infusing technology in industrial materials andof the capabilities to develop industrial increasing added value in the North American market. In addition, aim for the new use application development by
capturing the market with a focus on industrial materials.
materials❷ Expansion into the world’s largest
wooden housing market

The world’s largest wooden housing market
The number of housing starts in the most recent
fiscal 2023 in the United States, which is theworld’s largest wooden housing market, was about
1.55 million, and the number decreased from theprevious fiscal year from the impact of housing
prices remaining high and the policy interest rate
DAIKENNEW ZEALAND
LIMITEDincrease,but the market
size is still about 1.8 times
largerthan that of Japan. Regarding the future
生産能力：210,000㎡/年
marketon
theCoC
background of the lack of取得認定：JIS Atrends,5905、FSC
housing stock after the bankruptcy of Lehman
CARB, EPA TSCA Title 5Ⅵ
Brothers and an increase in the home ownershiprate among millennials, in addition to the mediumto long-term population increase due to theimmigration policy, steady housing demand isexpected.

Trends in housing starts in the United States and Japan
Fiscal year (April to March) total

220
200
180
160
140
120
100
80
60
40

The U.S./10,000 houses

Japan/10,000 houses

155

86.1
(Fiscal year)
91

96

1901

1920

1106

21

16

20

20

20

20

23

20Expansion in the global market with a focus on the North American wood industrial materials business(¥100 million)

1,000

Net sales in the global market

Net sales in the North American woodindustrial materials business

The global market’s sales composition ratio

The North American wood industrial materials
business’ sales composition ratio
3230

28

800

25

2320600

20

1816
15400

116200102071102016

Benchmark

43(%)

35

DAIKEN GROUP REPORT 2023

2017

87123
2018

GP25 1st Stage

365192
2019

170
2020

13463

721

646
440

260
2021

GP25 2nd Stage

2022

10365

502023 (Fiscal year)

GP25 3rd Stage

Business flow
CIPA: Veneer manufacturing flow

Daiken Group’s Value Creation

Stock of timber

PWT: LVL manufacturing flow

Cutting

Peeling the bark
DryingPacking
VeneerStorage

Shipment

Heat treatment

Shipment

Laminating/thermalcompression
Strategy for Value Creation

Major applications

I-Joistrafters

I-Joist

Structural LVL for homes

LVL header

Antiseptic LVL installed in the wood deck

LVL beams

I-joist installed as the joist
in a home

New use application development/development of high value-added products

Future development❶ Enhancement of the cooperation
between CIPA and PWT

Make an investment in CIPA toward the expansion and reinforcement of the veneer production capacity andincrease the supply quantity to PWT, which expanded the LVL production scale.

❷ CIPA’s profitability improvement

By proceeding with stable procurement of raw wood and improving production efficiency, further improve
profitability.

❸ Expansion into new products

Utilize the sales channels and local networks for veneer and LVL and proceed with the consideration ofexpansion into new products where synergy can be expected.

DAIKEN GROUP REPORT 2023

44

DataIn addition to regular LVL to be used for posts of houses, etc. and I-Joist, which is a composite material of OSB and LVL, we introduced LVL as newproducts to address new needs by increasing added value, such as billet beams, which is high-strength LVL made by further laminating LVL to enhancestrength, and treated, which is antiseptic LVL processed to make it hard to decay, and proceed with sales expansion.