Nippon Paper Industries Co., Ltd.

The turnaround of the Australian consolidated subsidiary Opal is positioned as the most critical management priority, with efforts underway to concentrate management resources on the corrugated cardboard business and reduce fixed costs at the Maryvale mill, among other measures. If these initiatives do not progress as planned, they could have a material impact on consolidated business results and financial position. The company aims to achieve an early return to operating profit through sales expansion, organizational restructuring, and procurement efficiency improvements.

Due to the progress of digitalization and changes in work styles and lifestyles triggered by COVID-19, the mainstay graphic paper market continues to see a structural contraction. The company is working to maintain utilization rates and improve profit margins through optimization of its production system, as well as developing and expanding environmentally conscious products. However, if these responses do not proceed as planned, they could affect business results and financial position.

In response to the decline in graphic paper demand, the company is shifting management resources toward the forestry and timber-related business, the Household & Daily Products Business (Liquid Paper Containers, household paper, healthcare, and chemicals), and new biomass materials businesses. If growth in these areas does not proceed as planned, it could affect business results and financial position. Building sufficient technological and sales capabilities, as well as industry-government-academia-finance networks, is considered essential.

As the company's mainstay pulp and paper business is energy-intensive, there is potential for regulatory risks such as strengthened carbon pricing, increased costs from responding to the emissions trading scheme set for full implementation in FY2026, and physical risks such as production facility shutdowns and raw material procurement difficulties due to the intensification of extreme weather. The company has set a target to reduce GHG emissions (Scope 1+2) by 54% by FY2030 compared to FY2013 levels, and is pursuing measures such as installing a new high-efficiency black liquor recovery boiler at the Ishinomaki mill.

The prices of raw materials and fuels such as wood chips, wastepaper, heavy oil, and coal are heavily influenced by domestic and international market conditions, and there are concerns about procurement instability due to suppliers scaling back or withdrawing from business amid the momentum toward decarbonization and declining graphic paper production volumes. Delays and rising costs in global transportation networks due to labor shortages in logistics and geopolitical tensions are also expected to continue. The company is taking measures such as advance purchase contracts, multi-source procurement, and promotion of logistics DX, and plans to pass on unabsorbable cost increases through price adjustments.

Against the backdrop of a declining working-age population due to the falling birthrate and aging society, if the company is unable to secure the necessary talent as planned, this could hinder the execution of structural reforms and profitability improvements under the Medium-Term Management Plan 2030. The company is working to create an environment where diverse talent can fully utilize their abilities, including introducing reskilling support programs, retention training for career-track hires, and selective education programs, as well as establishing new wellness leave and life support leave systems, while also considering automation and labor-saving measures at operational sites.

If large-scale natural disasters such as earthquakes, typhoons, floods, wildfires, droughts, or extreme heat directly strike production or sales sites, this could result in operational shutdowns, increased facility restoration costs, and damage to products or raw materials, potentially having a material impact on business results and financial position. The company has established a crisis management headquarters that can be rapidly activated based on crisis management regulations, is strengthening BCM, considering building supply systems across multiple plants, and conducting regular evacuation and safety confirmation drills. However, the insurance coverage in place may be insufficient to fully cover liability for damages.

Since the company utilizes a variety of systems from raw material procurement through order receipt, production, and shipping, if cyberattacks, unauthorized access, or information leaks occur from external sources, this could result in loss of social trust, suspension of business activities, increased facility restoration costs, and other effects on business results and financial position. The company is strengthening its management system through the introduction of defense systems tailored to the times, regular information security training, and vulnerability assessments conducted by external specialists.

The company holds large-scale fixed assets such as production facilities and land, and if future cash flows generated from these assets significantly decline due to changes in the business environment, impairment losses could occur, affecting business results and financial position. Amid the continuing structural contraction of the graphic paper business, there are concerns that impairment risk may increase depending on the progress of production system optimization.

Across a wide range of business fields including Paper & Paperboard, Household & Daily Products, Energy, and Timber & Building Materials, compliance violation risks are becoming more complex amid growing interest in digitalization, globalization, environmental protection, and respect for human rights. Compliance with the Antimonopoly Act and the Act on Promoting Fair Trade with Subcontractors, as well as ensuring fair trading practices with business partners, is required, and if violations occur, this could become a significant management risk, including litigation risk and loss of social trust. The company is promoting initiatives based on the establishment of a Group Helpline and its Declaration of Partnership Building.