Hokuetsu Paper Mills, Ltd. Hokuetsu Paper Mills, Ltd. 7 possibility that weak consumer spending will

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  • Published Sept. 2009 Printed in Japan

    Cover printed on Hokuetsu‘s Hi-Apis, inside pages on µ Mat, and financial section on Slight Natural

    Head Office: 3-2-2 Hongoku-cho, Nihonbashi, Chuo-ku, Tokyo 103-0021, Japan Tel: +81-3-3245-4500 Fax: +81-3-3245-4511

    A n n u a l R e p o r t

    Year Ended March 31, 2009

    Hokuetsu Paper Mills, Ltd.

    Hokuetsu Paper Mills, Ltd.

    ® ®

  • Note 3: For the net assets amounts for 2005 and 2006, minority interests are excluded.

    090805 06 07

    0

    50,000

    100,000

    150,000

    200,000

    0

    5

    10

    15

    20

    (%)

    Net sales

    EBITDA/net sales

    0

    3,000

    6,000

    9,000

    12,000

    15,000

    0

    2

    4

    6

    8

    10

    (%)

    Ordinary income / Ordinary income to net sales

    Ordinary income

    Ordinary income to net sales

    ROA

    (%)

    090805 06 07

    ■ Net sales / EBITDA/net sales

    (Millions of yen) (Millions of yen)

    Total assets and total net assets

    (Millions of yen)

    0

    70,000

    210,000

    140,000

    350,000

    280,000

    0

    4

    2

    6

    8

    10

    090805 06 07

    Total assets and total net assets (Note 3) / ROA

    1Hokuetsu Paper Mills, Ltd.

    Consolidated Financial Highlights

    Years ended March 31

    Millions of yen

    For the year:

    Net sales

    Operating income

    Ordinary income

    Net income

    Ordinary income to net sales

    EBITDA (Note 2)

    ROA

    ¥ 182,815

    8,125

    6,752

    1,913

    3.7%

    25,846

    2.2%

    $ 1,860,523

    82,689

    68,715

    19,469

    3.7%

    263,034

    2.2%

    5.9

    -2.5

    -14.4

    -53.0

    -0.9

    20.5

    -0.6

    ¥ 172,709

    8,330

    7,891

    4,074

    4.6%

    21,456

    2.8%

    %

    %

    %

    %

    point

    %

    point

    ( )Except pershare amounts

    Thousands of U.S. dollars (Note 1)

    ( )Except pershare amounts % change

    2009 2008 2009/2008 2009

    ¥ 9.01

    12.00

    $ 0.09

    0.12

    -53.0

    -14.3

    ¥ 19.19

    14.00

    %

    %

    ¥ 313,732

    136,713

    $ 3,192,876

    1,391,339

    7.2

    -2.5

    ¥ 292,726

    140,184

    %

    %

    Per share data:

    Net income

    Cash dividends

    At year-end:

    Total assets

    Total net assets

    Note 1: U.S. dollar amounts are converted from Japanese yen for convenience only, at the rate of ¥98.26 to US$1.00, the approximate exchange rate on March 31, 2009.

    Note 2: EBITDA = Ordinary income + Interest expenses + Depreciation and amortization

    On October 1, 2009, Hokuetsu Paper Mills, Ltd. will acquire complete

    control of Kishu Paper Co., Ltd. through a share exchange to consoli-

    date business, and change the company name to Hokuetsu Kishu

    Paper Co., Ltd.

    By combining Kishu Paper‘s superior products and technologies

    and the Hokuetsu Group‘s main businesses such as manufacturing of

    printing paper, white paperboard and specialty paper and paper

    processing, we will continue to make efforts to stably supply high-

    quality products, improve operational efficiency, and enhance

    profitability under the corporate cultures that the two companies

    have cultivated since their foundation.

    The newly-born Hokuetsu Kishu Paper Group will retain efficient

    management, environment-friendly management and sustainable

    growth as its original purposes, and aims to respond to the

    expectations of customers, shareholders, business partners, local

    communities and all other stakeholders while contributing to the

    sustainable development of the society as an attractive paper

    manufacturing company.

    P r o f i l e

    C o n t e n t s

    1

    2

    4

    10

    18

    20

    21

    41

    42

    43

    Consolidated Financial Highlights

    Hokuetsu Paper Mills at a Glance

    Message to Stakeholders

    Business Environment and Tasks

    How the Group Has Tackled Corporate Governance and Compliance

    Board of Directors and Corporate Auditors

    Financial Section

    Subsidiaries and Affiliates

    Corporate Data

    Hokuetsu Paper Mills Corporate Philosophy

  • 3Hokuetsu Paper Mills, Ltd.

    2007/3

    138,201

    2008/3

    151,160

    2009/3

    160,322

    2006/3

    133,951

    2005/3

    132,152

    ■ Sales (Millions of yen)

    5.5

    4.5 4.04.1

    8.2

    Operating margin (%)

    2007/3

    13,791

    2008/3

    15,402

    2009/3

    17,016

    2006/3

    13,474

    2005/3

    12,409

    ■ Sales (Millions of yen)

    2.2 3.2

    3.73.3

    6.7

    Operating margin (%)

    Hokuetsu Package Co., Ltd. engages in the paper processing business, which business includes manufacturing, processing and sales of paper packages (packages such as primary food containers), processed paper (function-oriented types of laminated specialty paper), liquid package cartons (paper containers for liquids such as milk, processed milk, juice and coffee), business forms (OCR slips, secret letter paper, system envelopes, forms and labels), functional materials (functional film products) and environmentally-friendly products. Sales and operating income in the paper processing business increased from the previous year. This was due to our price revisions for paper containers for beverages, increased sales volumes and cost reductions by improving efficiency, in addition to the foreign exchange profit due to the appreciation of yen.

    2007/3

    7,000

    2008/3

    6,147

    2009/3

    5,477

    2006/3

    6,267

    2005/3

    6,644

    ■ Sales (Millions of yen)

    13.3

    14.8

    19.8

    7.58.9

    Operating margin (%)

    The main areas of activity of this business include manufacturing, processing and sales of printing paper (wood-free paper, ground wood paper, bit light coated paper, coated paper), white paperboard (cast-coated paper, ivory board, cardboard, duplex board), specialty paper (specialty paper, vulcanized fibers and fiberboard), as well as electricity supply at the Kanto Mill. Sales in the pulp and paper manufacturing business increased from the previous year due to the implementation of price revisions for each product, although the sales volume of printing paper and paperboard decreased due to the drastic economic downturn. Operating income however declined from the previous year due to soaring prices for raw materials and fuel and an increase in depreciation and amortization expenses, despite positive effects from the product price revision.

    The Group‘s companies engage in various businesses as follows: Hokuetsu Forest Co., Ltd.–Forestry, manufacturing of wood products, collection, manufacturing and sales of fuel chips for biomass boilers; Hokuetsu Engineering Co., Ltd.–Manufacturing, delivery, maintenance and repairing of production-related facilities; Hokuetsu Logistics Co., Ltd.–Transporting and warehousing of the Company‘s products; Hokuetsu Trading Corporation–Real estate business and agent for non-life insurance, operation of a driving school and others. Sales in other businesses decreased from the previous year as orders from outside the Group declined across the board. But, operating income increased.

    2 Hokuetsu Paper Mills, Ltd.

    Hokuetsu Paper Mil ls at a Glance

    Pulp and paper manufacturing business Composition of sales ■ Products

    Specialty paper IT-related materials Industrial paper Communication paper Design paper Mixed materials for

    molding Hard fiberboard

    Paper processing business Composition of sales ■ Products

    Business forms and related materials Report paper, labels,

    stickers

    Functional materials Various types of

    functional coating products

    Environmentally- friendly products Various types of

    environmentally- friendly products

    Other businesses Composition of sales ■ Products

    Wood business

    Construction, machinery production, sales and maintenance

    Transportation and warehousing business

    Others

    Liquid package cartons Paper containers for

    various types of liquid

    Laminated paper Laminated paper

    Paper packages Food containers,

    cosmetic cases

    Printing paper Coated paper Lightweight coated paper Bit light coated paper Wood-free paper Ground wood (medium

    grade) paper

    White paperboard Cast-coated paper Art post Ivory board Cardboard Duplex board

  • 5Hokuetsu Paper Mills, Ltd.

    Summary of Financial Results for Fiscal 2008

    Fiscal 2008, ended March 31, 2009, was a landmark year for the

    Hokuetsu Paper Mills Group. The Group started operation of the No.

    9 papermaking machine at the Niigata Mill. With No. 9 papermaking

    machine having smoothly operated from September 2008, the

    Niigata Mill has further increased its global competitiveness. Demand

    for paper pr