Nippon Paper Industries Co.,Ltd. Q3 FY2025 earnings call

Overall Financial Performance

• Consolidated net sales for the 3rd quarter of FY2024 (fiscal year ending March 2025) reached 886.3 billion yen, an increase of 11.8 billion yen YoY, driven by strong growth in household paper, healthcare, and chemical products that offset declining graphic paper demand.
• Consolidated operating profit reached 11.1 billion yen, an increase of 1.8 billion yen YoY. Strong performance in domestic lifestyle-related and energy businesses offset the impact of large-scale maintenance at NDP.
• Domestic business delivered stable profit across all quarters to date, and overseas business profit improved significantly in the third quarter.
• Net income for the period was 0.01 billion yen (1億円), and ordinary income was 12.8 billion yen (128億円). Special items included restructuring costs at Opal, impairment losses on idled assets at two factories, offset by gains from continued sales of policy-held cross-held shares.

Strategic Capital Investment for Sustainability

• The company was selected for a Japanese government GX economic transition bond support program for a fuel conversion project at its Ishinomaki Mill, with a total planned investment of 55.5 billion yen. One-third of the investment will be covered by government subsidies.
• The project will install a new high-efficiency black liquor recovery boiler and decommission the existing coal-fired boiler, cutting group-wide GHG emissions by 10% (approximately 500,000 tons of CO2 annually).
• This project is the centerpiece of the 52 billion yen environmental investment planned under the company's 2030 Vision, and will convert Ishinomaki Mill into a core biorefinery hub for low-GHG biomass products.

Long-Term Biorefinery Growth Strategy

• The company has a long-standing commitment to cascading wood use, supporting circular forest resource use and domestic forestry industry activation to enable stable sourcing of low lifecycle-GHG domestic timber.
• The company's biorefinery vision leverages existing pulp production: black liquor, a byproduct of pulping, is used as biomass energy, and the wood resource is processed into a wide range of biomass-based materials beyond traditional paper products, including cellulose nanofiber (CNF), bioethanol, and biocomposites.
• The company already operates legacy biorefinery-style businesses through its chemical division, including dissolving pulp, functional cellulose, and lignin products. It will leverage its long-held proprietary technology to supply biomass products to broad end markets including mobility (automotive), agriculture, civil engineering, food, and cosmetics.
• The company targets 65 billion yen in new business revenue by 2030 under its 2030 Vision, delivered through expanding the biorefinery initiative across domestic mills (led by Ishinomaki) and overseas sites.

1. Paper & Paperboard Segment: Decreased revenue year-over-year (YoY), with a 1.3 billion yen decrease in operating profit (13亿円 YoY decrease). Weak domestic demand for both graphic and packaging papers reduced sales volumes, and rising labor and logistics costs offset stable coal prices and in-place cost reduction efforts. Overseas subsidiary Jujo Thermal (JTOy) saw sales volume recovery and increased profit YoY despite continued weak European thermal paper demand.
2. Lifestyle-Related Business: Increased revenue YoY, with a 0.9 billion yen decrease in operating profit (9億円 YoY decrease). Domestic operations saw increased profit from higher sales volumes of tissue pulp, functional coating resins, and toilet paper, plus product price adjustments, partially offset by lower sales of facial tissue and liquid paper containers. Cumulative profit decreased due to the negative impact of large-scale maintenance at North American NDP in the first half, though Q3 profit returned to YoY growth after normal production resumed. Overseas Opal reported lower YoY profit due to foreign exchange impacts, but sequential quarterly improvement from fixed cost cutting efforts.
3. Energy Business: Decreased revenue YoY, with a 2.3 billion yen increase in operating profit (23億円 YoY increase). Revenue fell due to more maintenance downtime and lower power prices following coal price declines, but overall operations remained broadly stable, delivering higher profit YoY.
4. Wood, Building Materials & Civil Engineering Related Business: Increased revenue YoY, with a 0.6 billion yen decrease in operating profit (6億円 YoY decrease). Revenue grew from higher fuel chip handling volumes, offsetting the impact of lower new housing starts.

• The full-year FY2024 consolidated earnings guidance remains unchanged from the announcement made on May 15 of the previous year.
• A segment-level operating profit forecast revision was completed in November 2024, with no change to the overall consolidated guidance.

• Weak demand for graphic paper in domestic markets and thermal paper in European markets continues to pressure sales volumes and profitability for the paper and paperboard segment.
• Persistent cost increases from a weaker yen, higher prices for wood chips and recycled paper, and rising labor and logistics costs offset in-place cost reduction efforts across business segments.
• Weakness in the new residential construction market negatively impacts profitability for the wood, building materials, and civil engineering business segment.
• Large-scale planned maintenance and unplanned disruptions (such as the H1 cold wave impact at NDP) can create significant cumulative negative profit impacts for overseas operations.

The full Q&A content is hosted externally on Nippon Paper's official investor relations website, and no question/answer text is included in the provided transcript summary.