Daio Paper : （Delayed）Fourth Medium-term Business Plan

About this update from Daio Paper Corporation

ENGLISH TRANSLATION FOR REFERENCE PURPOSE ONLY This notice is an English translation of the original Japanese text of the timely disclosure statement dated May 27 issued by Daio Paper Corporation, and is for reference purposes only. In the event of any discrepancy between the original Japanese text and this English translation, the Japanese text shall prevail. May 27, 2021 To whom it may concern: Name of Company: Daio Paper Corporation Name of Representative: Yorifusa Wakabayashi President and Representative Director Chief Executive Officer Securities Code: 3880 (First Section, Tokyo Stock Exchange) Contact Person: Shuhei Shinagawa Senior Executive Officer General Manager of Corporate Planning Department Telephone No.: +81 3 6856 7509 Fourth Medium-term Business Plan Daio Paper Corporation (hereinafter "Daio") has formulated its Fourth Medium-term Business Plan (hereinafter "4 th MTBP") for the three years from the fiscal 2021 to fiscal 2023, and hereby announces a summary of the plan. 1. Overview of the 4 th MTBP Under the 4 th MTBP, Daio shifts up a gear to implement initiatives for a new future, under the motto "GEAR UP: The Next Growth Stage, to a New Future," aiming to realize the long-term vision of the Daio Group to achieve "net sales of 800-1,000 billion yen" by fiscal 2026. The numerical targets and basic policies of the 4 th MTBP are as follows. 1) Numerical targets 3 rd MTBP 4 th MTBP 5 th MTBP FY2020 Results FY2023 Targets FY2026 Vision Net sales 562.9 billion yen 720.0 billion yen 800.0-1,000.0 billion yen Operating profit 36.9 billion yen 51.0 billion yen 80.0-100.0 billion yen [Operating profit ratio] [6.6 %] [7.1 %] [10 %] H&PC Overseas sales ratio 11.1 % 18.8 % 30 % or more ROE 10.1 % 10 % or more 12 % or more Net D/E ratio 1.3 1.0 1.0 or less (Ref.) Interest-bearing debt 299.8 billion 270.0 billion - *Assumptions Exchange rate 106.1 JPY/USD 110 JPY/USD - Dubai crude oil 45 USD/barrel 63 USD/barrel - [Targets for each business] FY2020 Results FY2023 Targets Operating Operating Net sales profit Sales ratio Net sales profit Sales ratio (billion yen) (billion yen) (billion yen) (billion yen) Paper & Paperboard 302.5 19.6 6.5% 330.0 18.0 5.5% Business H&PC Business 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% Other Businesses 22.5 2.6 11.4% 30.0 3.0 10.0% (including adjustments) Total 562.9 36.9 6.6% 720.0 51.0 7.1% 2) Investment plan Daio will implement total capital expenditure of 125.0 billion yen over the three-year duration of the 4 th MTBP, comprising growth investment of 76.5 million yen and maintenance investment of 48.5 billion yen, with a priority allocation to the growing Home & Personal Care (H&PC) business. A further 30.0 billion yen in M&A investment is planned, to accelerate the pace of growth in combination with organic growth. [Breakdown of capital expenditure of 125.0 billion yen] Purpose Business/details Capital expenditure (billion yen) H&PC 55.5 Growth Paper & Paperboard 10.5 investment Other (CNF, IT, logistics) 10. 5 Total 76. 5 Maintenance - 48.5 investment Total 125. 0 Basic policies Establish a strong and resilient business portfolio Build an even greater competitive advantage in the P&P business by capitalizing on the results of strategic investment and continuing with structural reforms Lead the Company's growth and expansion through faster multi-category business expansion and further acquisitions in the H&PC business Create future growth opportunities through new businesses such as cellulose nanofibers (CNF) Improve financial strength Strengthen cash generating capacity and improve cash flow to enable further growth under the 5th MTBP, while rigorously selecting capital expenditure projects for the 3 years of the 4th MTBP, with the aim of obtaining a credit rating of A during the plan Introduce ROIC as an internal management indicator for evaluating profitability for each business and investment decision standards, to promote management with a consciousness of capital cost and return on capital Respond to climate change (achieve carbon neutrality by 2050) Promote the use of renewable energy, and aim to reduce coal usage to zero 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 2. Business Group Strategies Industrial Paper and Corrugated Container Business CSV (Creating Shared Value: economic activity that simultaneously addresses social issues) action policy: Provide environmentally-friendly packaging and wrapping paper, indispensable for the transport of goods Strategic policy under the 4 th MTBP: Pursue more stable domestic supply and accelerate overseas expansion Forecasting strong demand in Japan and overseas, Daio will increase containerboard production by the Mishima mill's N7 machine to 30,000 tons per month, to expand exports throughout Asia and strengthen the system of stable supply in Japan. Daio will also expand the downstream corrugated container businesses, partly through M&A, and implement integrated operations with the industrial paper business, with a view to enhancing total profitability. Newsprint and Paper Business CSV action policy: Ensure stable supply of graphic paper, an indispensable part of people's lives Strategic policy under the 4 th MTBP: Examine production systems and sales systems in anticipation of a further shift in product mix, and strengthen downstream printing paper businesses Amid an accelerating decline in demand for graphic paper, Daio will develop this into a stronger and leaner business, by adjusting its product mix to pursue higher added value and maintain machine operation rate. It will also strengthen sales of high value-added printed material such as adhesive labels, further strengthening the printing business, while enhancing earning power through integrated operation of the paper and printing businesses. H&PC Domestic Business CSV action policy: Support consumers to live their daily lives their own way Strategic policy under the 4 th MTBP: Further grow the household paper business and increase market share in the absorbent products business, through the continuation of structural reforms and capital expenditure from the 3rd MTBP Daio will further solidify its position as market leader in the household paper business, through product offerings that capture the needs of consumers, and additional equipment to enhance supply capabilities. For absorbent products, Daio will effectively invest in digital marketing and other means to extend the image of high-quality and trustworthy products established by the Elleair brand in the household paper business to absorbent and other products. At the same time, it will enhance the lineup of absorbent products and develop into peripheral categories, to expand the entire H&PC Domestic Business in tandem with household paper. H&PC Overseas Business CSV action policy: Contribute to development in our markets overseas, enhancing the standard of living Strategic policy under the 4 th MTBP: Expand overseas businesses, with multi-category business expansion in existing markets and entry into new markets as the pillars of our growth engine Daio will accelerate its pace of growth through business expansion in China and the rest of the Asia region, by realizing synergies in Brazil and Turkey, where it has completed a full-scale entry through M&A activities, and by considering new business acquisitions in overseas growth markets. In addition, while continuing to expand sales of its mainstay baby diaper products overseas, Daio will increase the sales contribution from products such as household paper, sanitary pads and adult diapers, and pursue the multi-category business expansion model it has established in Japan, to solidify its business platform overseas. New business development CNF CNF has already passed the R&D stage, with increasing instances of commercialization and the development of new uses during the past few years, including as part of Daio's own Kirekira! Toilet cleaning wipes, in the material used for table tennis bats, and its utilization in both outside and inside race car bodies. Under the 4 th MTBP, Daio will achieve productivity improvements and substantial cost reductions for composite resin containing CNF, which is expected to have broad applications in areas such as automotive parts and consumer electronics, accelerating the development of applications to expedite the commercialization process. Through the addition of CNF, Daio will contribute to reducing CO 2 emissions by achieving weight savings and reductions in the use of plastics. RFID (radio frequency identification: a general term for systems including IC tags and readers) Daio has utilized the expertise of its subsidiary DAIO Engineering in card inspection devices to enter the RFID business, primarily in the healthcare field. From 2019, Daio introduced manufacturing equipment for IC tags, for the purpose of conserving manpower, increasing efficiency and preventing human error. Under the 4 th MTBP, Daio will expand its targets beyond healthcare to fields such as logistics and apparel, providing RFID solutions in each industry, to achieve new value creation. Global response by the Corporate Unit The expansion of overseas businesses is indispensable for the development of the Daio Group. Together with investment in overseas growth markets, Daio considers appropriate risk management to be a vital factor in this expansion. To this end, the Corporate Unit, composed of human resources, legal affairs, accounting, finance and other functions, is engaged together with the business units in integrated operations to expand overseas businesses, with an emphasis on "stable procurement and optimal allocation of management resources necessary for business growth and expansion" and the "further reinforcement of the Group governance structure and enhancement of risk management." 3. Policy on Shareholder Returns Daio regards the return of profits to all shareholders as a key management issue. In addition to continuing to pay stable dividends in consideration of factors such as business status and the enhancement of internal reserves, it is Daio's policy to add DOE (dividends on equity) as an indicator, and return to shareholders the benefits from enhancement of net assets as result of growth. Daio will aim for a DOE level of approximately 2.0% in the medium to long term, in consideration of financial condition and investment in growth. This is an excerpt of the original content. To continue reading it, access the original document here .

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