Daio Paper Corporation FY2018/3 Financial Overvie · SAP and others -0.9, chemicals and ......

DAIO PAPER CORPORATION 1

FY2018/3 Financial Overview

Daio Paper Corporation

May 31, 2018

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. (FY19/3 is the fiscal year from Apr 1, 2018 to Mar 31, 2019.) Disclaimers regarding translation: 1. This document is an English translation of the original Japanese document dated May 31, 2018 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.

http://www.elleair.jp/index.php


Consolidated Financial Results for the Fiscal Year Ended March 31, 2018



Consolidated financial results for FY2018/3

Summary of consolidated financial results

Business results FY17/3 FY18/3 VarianceNet sales % Net sales % %

Net sales 477.1 531.3 54.2 11.4

Operating income 23.5 4.9 11.1 2.1 -12.4 -53.0

Ordinary income 21.3 4.5 12.8 2.4 -8.5 -40.1

Profit attributable toowners of parent

Depreciation 29.0 31.2 2.2 7.4

Capital expenditure 32.5 39.5 7.0 21.8

Exchange rate

(average rate during term): 108.4 JPY/USD 110.9 JPY/USD 2.5 JPY/USD

Dubai crude oil

(average price during term): 47 USD/barrel 56 USD/barrel 9 USD/barrel

Financial data 17/3-end 18/3-end Variance

Net interest-bearing debt 255.1 280.0 24.9

Equity ratio 26.8 ％ 25.9 ％ -0.9

Net D/E ratio 1.4 1.6 0.2

NotesAs of the first quarter of FY18/3, due to the acquisition of stocks, Daio Paper Products Corporation and its three subsidiaries (Tokai Seishi Kogyo Co., Ltd.,

Daio Postal Chemical Corporation. and Daiwa Shiko Co., Ltd.), as well as Miura Printing Corporation are included in the scope of consolidation. Also,

as of Apr 1, 2017, due to increased significance, Elleair Paper Co., Ltd. (non-consolidated), which succeeded the Household Paper Products business of

Elleair Product Co., Ltd. (consolidated) following a company split, is included in the scope of consolidation. As a result, the number of consolidated

subsidiaries became 36 (up from 30, at the end of FY17/3).

12.1 2.5 4.0 0.7 -8.1 -67.3

(billions of yen)



235

111


Increase/decrease of consolidated operating income

0

5

10

15

20

25

30

FY17/3 FY18/3

23.5

11.1

Prices of raw

materials and fuels

-8.8

Sales and market

conditions +0.4

Others -0.6

Production increase,

cost reduction

-1.7

Sales and market

conditions -0.1

Prices of raw

materials and fuels

-1.4 Others +0.2


cost reduction

+0.5

Other(incl. adjustments)

-1.1

Fixed manufacturing

costs +1.4

Fixed manufacturing

costs -1.2

Paper & Paperboard (P&P), YoY: -9.3 Home & Personal Care (H&PC), YoY: -2.0

(billions of yen)

P&P H&PC Other Total P&P Major Factors H&PC Major Factors

Sales / market conditions 0.4 -0.1 - 0.3 Price +0.4 Sales volume +1.6, price -1.7

Prices of raw materials

and fuels-8.8 -1.4 - -10.2 Recovered paper -6.5, coal -2.0, heavy

oil -0.8, woodchip -0.7, chemicals and

others -0.3, moving average +1.6

SAP and others -0.9, chemicals and

others -0.3


cost reduction-1.7 0.5 - -1.2 Decreased production -1.0, energy

cost -0.4, yield and raw materials

composition -0.3

Increased production +0.8,

energy cost -0.4

Fixed manufacturing costs 1.4 -1.2 - 0.2 Labor cost +0.5, depreciation +0.3 Labor cost -0.5, depreciation -0.4

Others -0.6 0.2 -1.1 -1.5 Change in scope of consolidation +0.7,

logistics cost +0.5, decline in earnings of

corrugated container subsidiary -1.8, others

Change in scope of consolidation +0.5,

overseas business -0.3, logistics cost

(sales expansion) and others

OP income YoY, total -9.3 -2.0 -1.1 -12.4Increase, total 1.8 0.7 - 2.5

Decrease, total -11.1 -2.7 -1.1 -14.9

*

Operating Income, YoY: -12.4 bn yen (FY17/3: 23.5 bn yen → FY18/3: 11.1 bn yen)

* “Other” is the sum of “Other” category and “Adjustments”. The “Other” category consists of business segments such as wood, forestry, machinery, logistics, electric power selling, golf club, parking facilities, and real estate leasing businesses. “Adjustments” refer to adjustment for elimination of intersegment transactions.




Business results by segment (Paper & Paperboard)

% OP margin

10.0

15.0

20.0

25.0

30.0Old newspapers, export

Old corrugated containers, export

80.0

85.0

90.0

95.0

100.0

105.0

110.0Coated paper (A2 grade) Kraft linerboard

10

12

14

16

18

20

100

150

200

250USA N-chip(US$/BDU_left) AU L-chip(A$/BDT_left)

USA N-chip(yen/kg_right) AU L-chip(yen/kg_right)

Major factors

Sales and market conditions +0.4

Prices of raw materials/fuels -8.8

Production increase, cost reduction -1.7

Fixed manufacturing costs +1.4

Others -0.6

Total -9.3

C) Prices of major products (Apr 2012=100)

B) Prices of recovered paper A) Prices of imported woodchips ※From Apr 2015, AU L-chip is

imported at rate of US$/BDT instead of A$/BDT.

(yen/kg)

(Source: In-house investigation) (Source: Ministry of Finance Japan Statistics) (Source: The Nikkei)

290.0 300.0 292.0 313.6

10.1 10.5 10.0

0.7

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

0.0

200.0

FY15/3 FY16/3 FY17/3 FY18/3

Net sales OP income Variance

Net sales +21.6 +7.4%

OP income -9.3 -93.0%

Main types Year-on-year change

Vol. Value Major factors

Newsprint －－－Decline in newspaper circulation and pages

Paper －－

＋Increase in sales volume and value of wrapping/ functional materials as a result of strategy to shift from coated paper

－Decrease in domestic demand due to decline of print and shift to digital media

Containerboard & corrugated container

＋＋＋Increase in demand in fields of e-commerce and

processed food and beverage

3.5% 3.5% 3.4%

0.2%

(billions of yen)



40

60

80

100

120

140

160

180 JPY/CNY JPY/KRW JPY/THB

JPY/IDR JPY/RUB

146.8 158.9

168.8

197.0

9.2 10.4 10.1

8.1

0

10

20

0

20

40

60

80

100

120

140

160

180

200

220

FY15/3 FY16/3 FY17/3 FY18/3

Net sales OP income

6.5% 6.3%

6.0%

4.1%

% OP margin

95

100

105

110

115

120

125

Facial Tissue (Market) Toilet paper (Market)

Facial Tissue (Daio) Toilet paper (Daio)

Year-on-year change in sales value by category

Dom

estic

Household paper ＋＋Sales increase from acquisition of Nisshinbo HD’s Paper Products business

＋Sales shift to value-added products

Baby care －＋Price revision to match quality improvements from product update －Shrinking market due to low birth rate

Adult care ＋＋Sales increase of nighttime use incontinence pad (retail route) ＋Increase in acquisition of new clients (institutional route)

Feminine care → →Suppressed sales of products with low profitability

Overse

as

Baby care ＋

＋China: Added Guangyu series (higher grade than super premium Angel series) to lineup; increased distribution of pants diaper (higher unit price)

＋Thailand: Increased distribution of pants diapers; increased sales in each neighboring country

＋Indonesia: Strengthened in-store promotion; started E-commerce sales

Others ＋＋Advanced multi-category expansion (product diversification) in each country

Variance

Net sales +28.2 +16.7%

OP income -2.0 -20.0%

Major factors

Sales and market conditions -0.1

Prices of raw materials/fuels -1.4

Production increase, cost reduction +0.5

Fixed manufacturing costs -1.2

Others +0.2

Total -2.0

(billions of yen)

B) Monthly exchange rates (Monthly average TTM) (Apr 2012 = 100)

A) Prices of major products (Apr 2012 = 100)

(Source: SRI(retail tracking research) data)

(Source: MURC Exchange Quotations)


Business results by segment (Home & Personal Care)



Paper & Paperboard Home & Personal Care


Business results by segment (Quarterly trend)

(billions of yen)

72.8 72.1 75.3

73.5 71.8

75.5 77.7

74.8

82.0

75.9 73.2

80.7

2.1 2.2

-0.5

2.4

3.1

-1.1

2.6 2.8

0.6

3.4

2.0

1.7

-1.5

0.0

1.5

3.0

4.5

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

16/3 17/3 18/3 16/3 17/3 18/3 16/3 17/3 18/3 16/3 17/3 18/3

Net sales 0 2 OP income (loss)

1Q (Apr-Jun)

37.1 38.5

44.6

39.3 39.3

47.9

42.9 44.3

52.6

39.6

46.8

51.9

2.1 1.9

0.9

2.1 2.3

2.4

3.4

2.3 2.5

2.8

3.6

2.3

0

1

2

3

4

5

6

0

10

20

30

40

50

60

16/3 17/3 18/3 16/3 17/3 18/3 16/3 17/3 18/3 16/3 17/3 18/3

Net sales 0 2 OP income

2Q (Jul-Sep)

3Q (Oct-Dec)

4Q (Jan-Mar)

1Q (Apr-Jun)

2Q (Jul-Sep)

3Q (Oct-Dec)

4Q (Jan-Mar)

FY FY



FY15/3 FY16/3 FY17/3 FY18/3 (billions of yen) Results Results Results Results Goal

Net interest-bearing debt

292.5 281.5 255.1 280.0 250.0

Equity ratio 23.7% 24.9% 26.8% 25.9% 28%

Net D/E ratio 1.9 1.7 1.4 1.6 1.5

Operating CF 44.7 47.0 62.9 30.5

Investment CF -28.6 -26.1 -31.4 -50.2

Free CF 16.1 20.9 31.5 -19.7

Credit rating Aug 2016 Sep 2017

R&I BBB-(Stable) BBB(Stable) BBB(Positive) BBB+(Stable)

JCR BBB (Stable) BBB(Positive) BBB+(Stable) BBB+(Stable)

331.8

292.5 281.5

255.1

280.0

6.9 5.8 4.7 3.7 3.2

1.6%

1.5%

1.3%

1.1%

0.9%

0.0%

1.0%

2.0%

0

50

100

150

200

250

300

350

FY14/3 FY15/3 FY16/3 FY17/3 FY18/3

Net interest-bearing debt

Interest expense

Interest rate


Progress of measures for improving financial strength

Improve financial strength, and suppress financing costs by diversifying financing methods.

*An increase in trade payables and others due to the acquisition of Nisshinbo HD’s Paper Products business and Miura Printing Corporation resulted in a one-time decrease in operating CF.

*

Progress of diversifying Jul 2015 Registered issuance limit of CP

financing methods Sep 2015 Issued CB (30 bn yen)

Sep 2016 Submitted straight bond shelf registration

Mar 2017 Issued straight bond (15 bn yen)

Dec 2017 Issued straight bond (25 bn yen)

<Trend of net interest-bearing debt, interest expenses, and interest rate＞



Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2019



Business results

(forecasts) FY18/3 FY19/3 VarianceNet sales % Net sales % %

Net sales 531.3 550.0 18.7 3.5

Operating income 11.1 2.1 18.0 3.3 6.9 62.7

Ordinary income 12.8 2.4 15.0 2.7 2.2 17.4

Profit attributable to

owners of parent4.0 0.7 10.0 1.8 6.0 151.9

Depreciation 31.2 34.0 2.8 9.1

Capital expenditure 39.5 74.8 35.3 89.4

Net D/E ratio 1.6 1.9 0.3

Exchange rate

(average rate during term): 110.9 JPY/USD 110.0 JPY/USD -0.9 JPY/USD

Dubai crude oil

(average price during term): 56 USD/barrel 67 USD/barrel 11 USD/barrel

NotesAs announced on May 15, 2018, the resolution to implement an absorption-type merger as regards the wholly-owned consolidated subsidiary,

Elleair Paper, was approved by the Board of Directors on Apr 26, 2018. For details, please see the press release (only in Japanese) on

Daio Paper's website.

Consolidated financial forecast for FY2019/3

Summary of consolidated financial forecast

(billions of yen)




Increase/decrease of consolidated operating income

Operating Income, YoY: +6.9 bn yen (FY18/3 : 11.1 bn yen → FY19/3 forecast: 18.0 bn yen)

0

5

10

15

20

25

30

11.1 18.0

Overseas business

+4.0

FY18/3 FY19/3 forecast

Prices of raw

materials

and fuels -4.8

Sales and market

conditions

+4.2 Others +1.9

Production

increase,

cost

reduction +1.1

Sales and market

conditions

+9.7

Prices of raw

materials and fuels

-2.7

Others -6.7


cost

reduction +1.8 Other(incl.

adjustments)

-0.8 Fixed manufacturing

costs

+1.4

Fixed manufacturing

costs

-2.2

Paper & Paperboard (P&P), YoY: +3.8 Home & Personal Care (H&PC), YoY: +3.9 (billions of yen)

P&P H&PC Other Total P&P Major Factors H&PC Major Factors

Sales / market conditions 4.2 9.7 - 13.9 Product mix +0.6, price +3.6 Volume +6.4, price +3.3

Prices of raw materials

and fuels-4.8 -2.7 - -7.5 Coal -3.0, woodchip -1.5,

recovered paper +0.4, others -0.7

Pulp -1.5, SAP and others -0.6,

chemicals and others -0.5


cost reduction1.1 1.8 - 2.9 Yield and raw materials composition

+1.0, energy-saving +0.1

Production increase +2.0

Fixed manufacturing costs 1.4 -2.2 - -0.8 Maintenance +1.5, depreciation -0.1 Labor cost -0.8, depreciation -0.8

Overseas business - 4.0 - 4.0 - Overseas subsidiaries' sales expansion +4.0

Others 1.9 -6.7 -0.8 -5.6 Improvement in earnings of corrugated

container subsidiary +1.4,

logistics cost +0.5

Logistics cost (sales expansion) -4.8,

moving average -1.0, personnel increase

(sales expansion) -0.7

OP income YoY, total 3.8 3.9 -0.8 6.9Increase, total 8.6 15.5 - 24.1

Decrease, total -4.8 -11.6 -0.8 -17.2

*

* “Other” is the sum of “Other” category and “Adjustments”. The “Other” category consists of business segments such as wood, forestry, machinery, logistics, electric power selling, golf club, parking facilities, and real estate leasing businesses. “Adjustments” refer to adjustment for elimination of intersegment transactions.



Paper & Paperboard H&PC


Business results forecasts by segment

158.9 168.8

197.0

220.0

10.4 10.1

8.1

12.0

0

10

20

0

50

100

150

200

250

FY16/3 FY17/3 FY18/3 FY19/3 forecast

Net sales OP income

6.5% 6.0%

4.1%

% OP margin

(billions of yen)

5.5% 300.0 292.0

313.6 310.0

10.5 10.0

0.7

4.5

0

3

6

9

12

15

18

21

0

50

100

150

200

250

300

350

FY16/3 FY17/3 FY18/3 FY19/3 forecast

Net sales OP income

3.5% 3.4% 0.2%

% OP margin

1.5%

Net sales OP income OP margin Net sales OP income OP margin Net sales OP income OP margin(loss)

150.0 3.0 2.0% 160.0 1.5 0.9% 310.0 4.5 1.5%

(Results of prev. corresponding period) 150.9 -1.6 - 162.7 2.3 1.4% 313.6 0.7 0.2%

100.0 3.5 3.5% 120.0 8.5 7.1% 220.0 12.0 5.5%

(Results of prev. corresponding period) 92.4 3.3 3.6% 104.6 4.8 4.6% 197.0 8.1 4.1%

10.0 0.0 0.0% 10.0 1.5 15.0% 20.0 1.5 7.5%


260.0 6.5 2.5% 290.0 11.5 4.0% 550.0 18.0 3.3%


Full year forecastセグメント

Paper & Paperboard

Total

H&PC

Other (incl. adjustments)

H1 forecast H2 forecast



26.4 26.4 27.2 27.0 29.0

31.2 34.0 34.9

36.9

21.7 24.9

31.6

37.3 32.5

39.5

74.8

51.1

32.1

10

20

30

40

50

60

70

80

FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3 FY19/3 Plan

FY20/3 Plan

FY21/3 Plan

Depreciation CAPEX

FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3FY19/3

Plan

FY20/3

Plan

FY21/3

Plan

Depreciation 26.4 26.4 27.2 27.0 29.0 31.2 34.0 34.9 36.93-year cumulative

CAPEX 21.7 24.9 31.6 37.3 32.5 39.5 74.8 51.1 32.13-year cumulative 78.3 109.3

80.0 87.2 105.8

158.0

1st Medium-term Business Plan 2nd Medium-term Business Plan 3rd Medium-term BusinessPlan


Capital expenditure, depreciation

(billions of yen)



407.4 430.1

450.2 474.1 477.1

531.3 550.0

635.0

2.6% 3.0%

4.9% 5.3%

6.7% 7.7%

9.5%

15.0%

2.8% 3.7%

4.8% 5.1% 4.9%

2.1% 3.3%

5.0%

0

5

10

15

20

25

0

100

200

300

400

500

600

700

FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3 FY19/3 FY21/3

Net sales H&PC overseas net sales ratio OP margin

FY19/3 FY21/3

Plan Target

Net sales 407.4 430.1 450.2 474.1 477.1 531.3 550.0 635.0

(H&PC overseas sales) 10.7 13.1 22.2 25.1 31.8 41.1 52.0 100.0

H&PC overseasnet sales ratio

2.6% 3.0% 4.9% 5.3% 6.7% 7.7% 9.5% 15.0%

OP income 11.6 16.0 21.8 24.3 23.5 11.1 18.0 32.0

OP margin 2.8% 3.7% 4.8% 5.1% 4.9% 2.1% 3.3% 5.0%

FY18/3FY13/3 FY14/3 FY15/3 FY16/3 FY17/3

1st Medium-term Business Plan 2nd Medium-term Business Plan 3rd Medium-term Business Plan

(%)


Net sales, overseas net sales ratio, operating income (margin) (billions of yen)



15.1

6.3

13.2

14.6

12.1

4.0

10.0

16.8%

6.1%

10.0% 9.2%

7.1%

2.2%

5.5%

8.0%

3.7 3.0

1.9 1.7 1.4 1.6 1.9 1.6 0

5

10

15

20

25

0

5

10

15

20

FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3 FY19/3 FY21/3

Profit ROE Net D/E ratio

FY19/3 FY21/3

Plan Target

Profit attributable toowners of parent

Equity 97.1 109.8 154.5 163.1 176.5 178.0 - -

Net interest-

bearing debt363.5 331.8 292.5 281.5 255.1 280.0 350.0 350.0

Net D/E ratio 3.7 3.0 1.9 1.7 1.4 1.6 1.9 1.6

ROE

FY18/3FY13/3 FY14/3 FY15/3 FY16/3 FY17/3

15.1 6.3 13.2 14.6 12.1

16.8% 6.1% 10.0% 9.2% 7.1% 8.0%

-4.0 10.0

2.2% 5.5%

1st Medium-term Business Plan 2nd Medium-term Business Plan 3rd Medium-term Business Plan


Profit, equity, ROE, net interest-bearing debt, net D/E ratio (%) (billions of yen)



Reference



A) Exchange rate at quarter-end

C) Price of coal

Reference material 1

Changes in external environment

B) Price of crude oil

50.0

75.0

100.0

125.0

JPY/USD(TTM)

0.0

50.0

100.0

150.0

(Source: The Nikkei)

40.0

60.0

80.0

100.0

120.0

(Source: NEX Index)

USD/barrel

FOB USD/t




Domestic demand for paper and paperboard

70

80

90

100

110

120

130

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

FY13/3 H1 FY13/3 H2 FY14/3 H1 FY14/3 H2 FY15/3 H1 FY15/3 H2 FY16/3 H1 FY16/3 H2 FY17/3 H1 FY17/3 H2 FY18/3 H1 FY18/3 H2

Domestic shipment, total Imports, total Paper Paperboard

Domestic Shipment + Imports = Domestic Demand Thousand t %

(Source: Japan Paper Association Statistics, Ministry of Finance Japan Trade Statistics)

(Take FY13/3 H1 as 100 _ right axis)




Consolidated ordinary income

11.2 14.2

5.7 4.7 6.6 11.3

21.3 21.3

12.8

2.4

3.4

1.4 1.2 1.6

2.6

4.8 4.5 4.5

2.4

0.5

1.5

2.5

3.5

4.5

5.5

0

5

10

15

20

25

30

FY09/3 FY10/3 FY11/3 FY12/3 FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3

Ordinary income Sales ratio

21.8

(19.1)※

(2.7)※

※Subsidy income from Fukushima Pref. of approx. 2.7 billion yen is included in ordinary income (21.8 billion yen) of FY15/3.

FY09/3 FY10/3 FY11/3 FY12/3 FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3

Consolidated

ordinary income11.2 14.2 5.7 4.7 6.6 11.3 21.8 21.3 21.3 12.8

Sales ratio 2.4 3.4 1.4 1.2 1.6 2.6 4.8 4.5 4.5 2.4

3-year cumulative 24.7 bn yen (2.0%) 39.7 bn yen (3.2%) 55.3 bn yen (3.7%)

第1次中期事業計画 2nd Medium-term Business Plan1st Medium-term Business Plan

billions of yen %



Cautions regarding forward-looking statements

Forward-looking statements such as projections and forecasts on business results included in this document are derived by Daio Paper Corporation (the “Company”) based on beliefs as well as assumptions made using information currently available to it at the time of the release (May 31, 2018), and are subject to contingencies, risks and uncertainties.

As such, actual future performance and results could differ materially from the statements included herein as a result of latent risks, factors not yet known to the Company or not currently considered material to the Company and its subsidiaries by the Company.


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