Q Amid a business environment that remains challeng-20222023Satoshi AokiExecutive Officer Executive General Manager,Fine & Specialty Paper Products Operations,Business Administration Div.202420252026(Forecast)Fine & Specialty Paper Products Operations15.316.112.515.314.915.4Business Strategy (Main Initiatives in Medium–Term Business Plan LSV 2030-Stage 2) Efforts to expand applications for oil-resistant paper Development and sales growth for high-performance papers as plastic alternatives Creation of high-value-added products Increase in profitabilityQ&A in Response to Frequently Asked Questions from Investorsing, what is your growth strategy going forward?A This business operation continues to face declining orders for its core envelope papers, as a result of digitalization and the shift away from paper, as well as ongoing rises in the cost of raw materials, such as pulp and chemicals, and of logistics. In light of these conditions, we recorded an impairment loss of approximately ¥7.7 billion in the fiscal year ended March 31, 2025. In addition to the resulting reduction in fixed costs, we will continue to proactively implement structural reforms, such as rebuilding and optimizing our production system. At the same time, we are pursuing every possible avenue to increase sales, including expanding sales of existing products, fully transitioning to fluorine-free oil-resistant papers, and developing high- performance paper products as alternatives to plastic, such as transparent papers and biodegradable heat-sealing papers.Featured TopicFluorine-Free Oil-Resistant Paper in the SpotlightIn recent years, moves to regulate the use of perfluoro-alkyl and polyfluoroalkyl substances (PFASs) have been gaining traction, particularly in the United States and Europe. In the field of food packaging, such as wrappers for items like french fries, demand is rising for oil-resistant papers that do not use fluoropolymer coatings. Leveraging its proprietary papermaking technology, this business operation has been proactively developing and marketing fluorine-free oil-resistant papers ahead of PFAS regulatory trends, in response to growing environmental awareness. Adoption of these products is increasing, particularly among convenience stores and fast-food chains.(Fiscal years ended / ending March 31) Review of the Fiscal Year Ended March 31, 2025In the fiscal year ended March 31, 2025, although we saw strong demand for dust-free papers used in semiconductor interleaving applications for generative AI data centers, sales of our core product, color papers for envelopes, were sluggish. This was due to the growing shift from paper to digital media, as well as the impact of postage rate hikes that took effect in October 2024. On the profit front, despite various efforts such as reducing inventories, rationalizing product specifications, and revising pulp procurement methods, negative factors including a decline in sales volume, persistently high raw material prices, and rising logistics costs resulted in a very challenging outcome. Strategic Direction for the Fiscal Year Ending March 31, 2026For the fiscal year ending March 31, 2026, initiatives in this segment will focus on the goals of improving profitability, boosting sales volume, and creating new products. To enhance profitability, we will work to rebuild and optimize our production system and ensure appropriate inventory levels. To increase sales volume, we aim to promote a full transition from fluorine-based oil-resistant papers to fluorine-free alternatives by lowering production costs and improving quality for these high-demand products. On the product development front, we will leverage the equipment of Converted Products Operations to create high- value-added products. We will also strengthen collaboration with the Research & Development Division and production sites to accelerate the formulation and execution of new development themes with greater speed.Net Sales¥ Billion25.0044Business StrategyPaper and Converted Products
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