daio paper group integrated report 2017 · shaping an abundant and affable future for the world...
TRANSCRIPT
Shaping an Abundant and Affable Future for the World
Daio Paper GroupIntegrated Report 2017
Consideration for the Environment・Printed on FSC certified paper that comes from well-managed forest resources.・Printed using waterless printing that does not use “dampening solution”
which contains hazardous substances such as IPA (isopropyl alcohol), thus greatly reducing the volatile organic compounds (VOCs) emissions.・Uses vegetable-oil-based inks that release fewer VOCs into the atmosphere.
THE D
AIO
PAPER G
ROU
P INTEG
RATED
REPORT 2017
005_9032587913002.indd 1-3 2018/02/02 19:08:08
01 Integrated Report 2017
Management Philosophy
Shaping an Abundant and
Affable Future for the World
DedicatedDedication to manufacturing
AttentiveBonds with
local communities
IntegratedCorporate culture
providing safety and motivation to work
OrganicContribution to the global environment
Philosophy of the Daio Paper Group
To continue to be a proud corporate citizen that is trusted globally
The Daio Paper Group is promoting initiatives toward achieving the goals set out in
“Transforming our world: the 2030 Agenda for Sustainable Development Goals (SDGs),”
adopted at the United Nations Sustainable Development Summit in September 2015,
through its business activities.
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
See p. 23 for the details of SDGs.▶▶▶
Corporate Motto
Passion with Sincerity
PhilosophyPassion with sincerity leads to greatness. This founding principle of Daio represents the basis for all our decisions, leading us to enrich lives around the world by taking on new challenges daily with sincerity and passion.
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
1
2
4 12 13
11 10 15 21
13
1418
8
7
1719 2229 23 28
2520625242726
16
9
363133
32
34 35
30
1
2
4 12 13
11 10 15 21
13
1418
8
7
1719 2229 23 28
2520625242726
16
9
363133
32
34 35
30
■ Production Bases of Daio Paper Corporation
■ Business Bases of the Group Companies (Headquarters Location)
■ Overseas Business Bases
1 Daio Paper Corp. Mishima MillShikokuchuo City, Ehime Prefecture
Corrugated Container
1 Daio Package CorporationChiyoda Ward, Tokyo
2 Daiwa Shiko Co., Ltd.Chuo Ward, Tokyo
Printing
3 Daio Printing CorporationToshima Ward, Tokyo
4 Elleair Printing Co., Ltd.Shikokuchuo City, Ehime Prefecture
5 Daio Postal Chemical CorporationChuo Ward, Tokyo
6 Miura Printing CorporationSumida Ward, Tokyo
Paper Manufacturing
7 Iwaki Daio Paper CorporationIwaki City, Fukushima Prefecture
8 Dainichi Paper CorporationFuji City, Shizuoka Prefecture
9 Otsu Paper Board Co., Ltd.Otsu City, Shiga Prefecture
10 Harima Paper Tech. CorporationKakogawa City, Hyogo Prefecture
11 Taisei Paper CorporationTsuyama City, Okayama Prefecture
12 Marubishi Paper Tec. CorporationShikokuchuo City, Ehime Prefecture
Paper Processing
13 Daio Mill Support Co., Ltd.Shikokuchuo City, Ehime Prefecture
14 Elleair Texel CorporationKani City, Gifu Prefecture
H&PC Manufacturing
15 Ohmiya Paper CorporationFujinomiya City, Shizuoka Prefecture
16 Akabira Paper CorporationAkabira City, Hokkaido
17 Elleair Product Co., Ltd.Shikokuchuo City, Ehime Prefecture
18 Elleair Packaging Print CorporationKawabe Town, Kamo County, Gifu Prefecture
19 Elleair Paper Co., Ltd.Shikokuchuo City, Ehime Prefecture
20 Daio Paper Product CorporationChiyoda Ward, Tokyo
21 Tokai Seishi Kogyo Co., Ltd.Fuji City, Shizuoka Prefecture
Engineering
22 Daio Engineering Co., Ltd.Shikokuchuo City, Ehime Prefecture
Transportation
23 Daio Logistics Co., Ltd.Shikokuchuo City, Ehime Prefecture
Distribution
24 Tokyo Pulp & Paper CorporationChuo Ward, Tokyo
25 Tokyo Pulp & Paper International Co., Ltd.Chuo Ward, Tokyo
26 Daio Pulp & Paper Co., Ltd.Chuo Ward, Tokyo
27 Elleair Business Support Co., Ltd.Shinjuku Ward, Tokyo
Other Businesses
28 Elleair Paper Chemical CorporationShikokuchuo City, Ehime Prefecture
29 Elleair Resorts Golf Club Co., Ltd.Matsuyama City, Ehime Prefecture
30 Forestal Anchile LTDA. (Chile)31 Elleair International Korea Co., Ltd.32 Elleair International (Thailand) Co., Ltd.33 Elleair International China (Nantong) Co., Ltd.34 PT. Elleair International Trading Indonesia35 PT. Elleair International Manufacturing Indonesia36 Oregon Chip Terminal INC. (U.S.A.)
2 Daio Paper Corp. Kani MillKani City, Gifu Prefecture
Established May 5, 1943
Capital ¥39,707,327,353
Number of Shares Issued 149,348,785 shares
Number of Employees 2,609 (Unconsolidated), 11,022 (Consolidated)
Offices Tokyo Headquarters: 10-2, Fujimi 2-chome, Chiyoda Ward, Tokyo Tel: +81-3-6856-7500Shikoku Headquarters: 2-60, Mishimakamiya-cho, Shikokuchuo City, Ehime Prefecture Tel: +81-896-23-9001
Mills Mishima Mill (Ehime Prefecture)Kani Mill (Gifu Prefecture)
Branches Osaka Branch, Nagoya Branch, Kyushu Branch (Fukuoka City)
Website http://www.daio-paper.co.jpMain Products Newsprint, coated paper, woodfree paper, printing paper for publication, PPC paper, carbonless paper,
adhesive printing paper, wrapping paper, functional specialty paper, kraft linerboard (linerboard and corrugating medium), various types of pulp, household paper products (facial tissue, toilet tissue, paper towels, sanitary napkins, disposable diapers, etc.)
■ Corporate Information (As of September 30, 2017)
Corporate Data / Network
Integrated Report 2017 94
005_9032587913002.indd 4-94 2018/02/02 19:08:10
Business of the Daio Paper Group
Home and Personal Care Business
Strengths of the Daio Paper Group
“Desired Future Society” Envisioned by the Daio Paper Group
● Comfortable living● Equal society● Abundant life● Continuation of
sustainable innovation● Conservation of the global
environment for future generations
From newsprint to disposable diapers
Full-range Paper ManufacturerA thorough Customer First principle
Market-oriented Business StrategyRecovered paper utilization rate of 64%
Environmentally Conscious Company
1
2
3
The Second Medium-term Business Plan (FY2015 to FY2017)Principal Strategies:● Structural shift of the Paper Business
● Strengthening of the Containerboard and Corrugated Container Business ● Further growth and acceleration of the
Home and Personal Care Business ● Thorough cost reduction
● Pursuing efficiency and diversity in human resource utilization
● Further improvement of financial position
Paper and Paperboard Business
See p. 17 for details▶▶▶
See p. 15 for details▶▶▶
Integrated Report 2017 02
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 2 2018/02/02 19:35:46
DedicatedDedication to manufacturing
Our dedication to society and local communities drives us to innovate and deliver new value born from attention to regions, resources, and realizations.
The Daio Paper Group’s Dedication to Manufacturing● Manufacturing paper and paperboard products as a full-range paper
manufacturer ● High usage of recovered paper: Achieved industry’s first newsprint
made from 100% recovered paper● Approximately 90% of the 1,065 patent applications filed for baby
disposable diapers are in force, the highest ratio in Japan
To sell the products we have manufactured with our own efforts
D
I
A
O
Four Pillars of the Daio Paper Group Management Philosophy
Mishima Mill, Daio Paper Corporation
Production facility for coated paper (for pamphlets and magazines, etc.)
See p. 25 for details▶▶▶
03 Integrated Report 2017
010_9032587913002.indd 3 2018/02/02 19:35:47
AttentiveBonds with local communities
Our attention to individual cultures and regions drives us to contribute and work in harmony with local communities, demonstrating our standing as good corporate citizens.
The Daio Paper Group’s Initiatives to Contribute to Local Communities● Coexistence with local communities and zero forest destruction in
overseas plantations● Job creation and development of local communities through overseas
business expansion● Social contribution through sports events and provision of support to
disaster-stricken areas
Advancing sustainability and coexistence with local communities
D
I
A
O
Four Pillars of the Daio Paper Group Management Philosophy
Conducting mill tours for local elementary and junior high school students
Explanatory tour of mill for local residents
See p. 31 for details▶▶▶
Integrated Report 2017 04
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 4 2018/02/02 19:35:48
IntegratedCorporate culture providing safety and motivation to work
Corporate governanceDiversity management
Human resource development
D
I
A
O
We will strive to maintain a diverse and friendly corporate culture that offers new challenges and a sense of security and trust to employees.
The Daio Paper Group’s Initiatives for Corporate Governance and Diversity Management● Corporate governance framework● Risk management framework● Diversity management
See p. 35 for details▶▶▶
CO₂ emissions reduction (compared to 1990):
Four Pillars of the Daio Paper Group Management Philosophy
05 Integrated Report 2017
010_9032587913002.indd 5 2018/02/02 19:35:48
OrganicContribution to the global environment
We will actively work to grow organically, solving environmental problems and realizing a sustainable society for the world over.
The Daio Paper Group’s Initiatives for Environmental Protection● Switched approximately 50% of all energy used in the Group to
biomass energy which uses fuels derived from waste materials● Reduced CO2 emissions by 89,000t from the 1990 level by switching
from fossil fuels (coal, heavy oil, etc.) to biomass fuels (woodchips, wastepaper, refuse paper & plastic fuel (RPF), waste tires, etc.)
50%
89,000t
D
I
A
O
Toilet tissue made with high quality recovered paper
Industrial paper wipes made with unbleached pulp
Examples of environment-friendly products
Forestry business of Forestal Anchile Ltda. (Republic of Chile), Daio Paper Group
See p. 43 for details▶▶▶
Ratio of biomass energy use:
CO₂ emissions reduction (compared to 1990):
Four Pillars of the Daio Paper Group Management Philosophy Four Pillars of the Daio Paper Group Management Philosophy
Integrated Report 2017 06
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 6 2018/02/02 19:35:49
Contents
Philosophy of the Daio Paper Group About the Daio Paper Group
01 Corporate Motto, Management Philosophy
Four Pillars of the Daio Paper Group Management Philosophy:
03 Dedication to manufacturing
04 Bonds with local communities
05 Corporate culture providing safety and motivation to work
06 Contribution to the global environment
09 President’s Commitment
13 Daio Paper Group’s History of Value Creation
15 Daio Paper Group’s Strengths
17 Business Overview of the Daio Paper Group
21 11-Year Consolidated Financial Summary
This report was created to communicate the results of Daio Paper Group’s environmental initiatives during FY2016, and initiatives and plans for fulfilling its corporate social responsibilities. In preparing the report, we bore in mind to make it an information disclosure tool that clearly communicates the Daio Paper Group’s initiatives to our stakeholders.
● Reporting PeriodApril 1, 2016 – March 31, 2017 (Some information outside the reporting period is also included.)
● Scope of ReportThis report covers 37 companies in the Daio Paper Group. However, environment-related data cover production bases of Daio Paper Corporation and the following 19 consolidated subsidiaries. Daio Package Corporation, Elleair Printing Co., Ltd., Elleair Packaging Print Corporation, Daio Printing Corporation, Iwaki Daio Paper Corporation, Dainichi Paper
Corporation, Otsu Paper Board Co., Ltd., Harima Paper Tech. Corporation, Taisei Paper Corporation, Marubishi Paper Tec. Corporation, Daio Mill Support Co., Ltd., Elleair Texel Corporation, Ohmiya Paper Corporation, Akabira Paper Corporation, Elleair Product Co., Ltd., Forestal Anchile Ltda., Elleair International China (Nantong) Co., Ltd., PT. Elleair International Manufacturing Indonesia, Elleair International (Thailand) Co., Ltd.
● Guidelines Used as Reference“Environmental Reporting Guidelines: Fiscal Year 2012” of the Ministry of the EnvironmentISO26000
Editorial Policy
07 Integrated Report 2017
010_9032587913002.indd 7 2018/02/02 19:35:51
Value Creation Model of the Daio Paper Group Financial and Corporate Data
23 CSR at the Daio Paper Group
Four Pillars of the Daio Paper Group Management Philosophy:
25 Dedicated: Dedication to manufacturing ● SDGs6 Clean water and sanitation ● SDGs12 Responsible consumption and
production ● SDGs13 Climate action ● SDGs17 Partnerships for the goals
31 Attentive: Bonds with local communities ● SDGs3 Good health and well-being ● SDGs15 Life on land ● SDGs17 Partnerships for the goals
35 Integrated: Corporate culture providing safety and motivation to work
● SDGs3 Good health and well-being ● SDGs5 Gender equality ● SDGs8 Decent work and economic growth ● SDGs16 Peace, justice and strong institutions ● SDGs17 Partnerships for the goals
43 Organic: Contribution to the global environment
● SDGs7 Affordable and clean energy ● SDGs12 Responsible consumption and
production ● SDGs13 Climate action ● SDGs17 Partnerships for the goals
52 Board of Directors and Audit & Supervisory Board Members
● Publication PeriodNovember 2017 (this report)October 2018 (next issue)
● Inquiries:CSR DepartmentDaio Paper CorporationIidabashi Grand Bloom, 10-2, Fujimi 2-chome, Chiyoda Ward, Tokyo 102-0071TEL: +81-3-6856-7500FAX: +81-3-6856-7605
● Period Covered by Fiscal YearFY2016 and FY2017/3 in this Integrated Report refer to the consolidated fiscal period from April 1, 2016 to March 31, 2017, and the same applies to other fiscal years.
● Descriptions of Future OutlookForward-looking statements included in this report are based on various assumptions and do not assure or guarantee the achievement of future financial figures or the attainment of measures.
53 Business Environment and Issues to Be Addressed
56 Consolidated Balance Sheet
58 Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
59 Consolidated Statement of Changes in Net Assets
60 Consolidated Statement of Cash Flows
61 Notes to Consolidated Financial Statements
90 Annexed Consolidated Detailed Schedules
92 Independent Auditor’s Report
93 Investor Information
94 Corporate Data / Network
Integrated Report 2017 08
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 8 2018/02/02 19:35:51
President’s CommitmentInheriting its founding spirit, the Daio Paper
Group will work toward expanding our business sustainably to shape an abundant
and affable future.
Theme: Future Vision of the Daio Paper Group
President’s Commitment
■ For Further Expansion under the Third Medium-term Business Plan
In FY2015, the Daio Paper Group embarked on
initiatives aimed at achieving the Second Medium-
term Business Plan spanning three years under the
theme of “Step-up—Leap and Expand,” and FY2017
marks the final year of the plan.
Up until FY2016, we managed to achieve a steady
growth in sales and profit. However, the environment
surrounding the Paper and Paperboard Business has
become very tough due to the steep rise in the prices
of raw materials and fuels, such as recovered paper
and coal, since the beginning of this year.
Even under such tough business environment, the
Daio Paper Group will continue to strive toward
further development. We will continue to work
toward increasing profitability though the structural
reform of each business segment, advancement of
growth strategies, improvement of financial position,
and thorough cost reduction. In addition, we will
endeavor to generate synergistic effects with the
paper product business of Nisshinbo Holdings Inc.
and Miura Printing Corporation, which were
absorbed into the Group this year, and strengthen
our business structure for a greater leap forward
under the Third Medium-term Business Plan.
Initiatives under the Second Medium-term Business PlanThe Paper Business sees declining demand for
newsprint and printing paper used for leaflets and
catalogues year over year due to population decline
and advancement in IT technologies. Under such
situation, we worked to increase profitability by
changing our customer base composition through
collaborative efforts with our regional distributors via
DAIO Partner Ship Sakura Terrace and other initiatives,
as well as by increasing the production and sales ratio
of value-added products, such as wrapping paper,
communication paper, and uncoated paper. Going
forward, we will continue to implement flexible
manufacturing and sales frameworks to adapt to
changes in the market environment and pursue a
structural shift in the business through measures such
as a shift in product mix to high value-added products.
In the Containerboard and Corrugated Container
Business, backed by growth in e-commerce, we
● The Second Medium-term Business Plan
(Billions of Yen) FY2015 Results
FY2016 Results
FY2017 Goal
Net sales ¥474.1 ¥477.1 ¥500.0
Ordinary profit 21.3 21.3 25.0
Net interest-bearing debts 281.5 255.1 250.0
Equity ratio (%) 24.9 26.8 28.0
Net debt to equity ratio (times) 1.7 1.4 1.5
09 Integrated Report 2017
010_9032587913002.indd 9 2018/02/02 19:35:52
President’s CommitmentInheriting its founding spirit, the Daio Paper
Group will work toward expanding our business sustainably to shape an abundant
and affable future.
expect demand to remain firm. We strengthened our
supply structure to supply all types of containerboard
(exterior linerboard, white-top linerboard, and
corrugating medium) from each mill - the Mishima
Mill in East Japan, and Iwaki Daio Paper in West
Japan. In addition, we made strategic capital
expenditures in the Group’s subsidiary Daio Package
to enhance quality and increase sales ratio of high
value-added products. We will continue to promote
integrated operations of the Containerboard and
Corrugated Container Business to further strengthen
the business.
In the Home and Personal Care Business, the
growth engine of the Company, we are implementing
the following measures to develop it into the core
business of the Daio Paper Group in the future.
For the domestic business, in order to further shift
the product mix of household paper, such as facial
tissue and toilet tissue, to high value-added products,
we are constructing a household paper production
facility at the Kawanoe Mill, and operations are
scheduled to start in October 2018. By effectively
utilizing the superior infrastructure of the Mishima
Mill and its advantageous coastal location, and by
making the most of Kawanoe Mill’s highly efficient,
cutting-edge machines, we will further advance the
multi-category business expansion (product
diversification) of the absorbent product business in
Japan and overseas, including China.
Masayoshi SakoPresident and CEO
Integrated Report 2017 10
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 10 2018/02/02 19:35:53
The Daio Paper Group Management Philosophy
“Shaping an abundant and affable future for the
world” expresses our wish to deliver an “affable
future” to everyone in the world. We seek to go
beyond tangible affluence to pursue the greater well-
being and comfortable living for all that we engage.
Based on the following four pillars, the Daio Paper
Group will take action in concert to realize its
management philosophy. Through that, we hope to
make progress toward achieving the Sustainable
Development Goals (SDGs) set out by the United
Nations, which has 2030 as the target date.
Four Pillars of the Daio Paper Group Management Philosophy
I. Dedication to manufacturingDaio Paper is the only company in the paper industry
to have sales personnel stationed throughout Japan to
meet with its users directly. This allows us to respond
flexibly to changes in the business environment and
reflect the needs of users in product development, etc.
We will continue to have our sales and production
divisions work together to watch the business
environment from a market-oriented perspective, and
strengthen our unique sales approach where we “sell
the products we have manufactured with our own
efforts” to keep creating and delivering new value.
II. Bonds with local communitiesThe Daio Paper Group strives to coexist with local
communities through business activities and achieve
harmonious growth with local communities by
contributing to their development through the
following initiatives: sponsor sports events, such as
“Daio Paper Elleair Ladies Open,” an LPGA official
tournament; engage in child-rearing support initiatives
(distributing purchase coupons for baby disposable
diapers, etc.) in collaboration with local governments in
Ehime Prefecture and Shikokuchuo City; conduct mill
tours for local residents and students, etc.
For the overseas business, following the start-up
of our factories in Thailand (in 2011) and China (in
2012), the baby disposable diaper factory in
Indonesia commenced operation in December 2015,
and sales grew steadily in each region. In Thailand,
we successively installed production facilities for wet
wipes and feminine care products and are expanding
sales through product diversification. In addition, we
have expanded our sales reach of baby disposable
diapers to 29 countries. Going forward, we will
further advance multi-category sales expansion by
using the same sales channels of our baby disposable
diapers to sell adult disposable diapers, feminine care
products, household paper and others overseas.
In other businesses, we will reinforce our biomass
power generation plant (slated to operate in 2020),
which uses pulp waste liquor (black liquor) generated
during pulp production as fuel. With that, we plan to
expand the electric power selling business by utilizing
the Feed-in Tariff Scheme (FIT) for renewable energy,
and secure stable profit. Also, we are working toward
the commercialization of the new functional material
“cellulose nanofiber (CNF),” by cooperating with various
fields through an industry-government-academia
collaborative research and development project. We
plan to complete the construction of our CNF drying
facility pilot plant at the end of 2017, and we strive to
realize the commercialization of CNF speedily.
■ To Realize the Daio Paper Group Management Philosophy “Shaping an Abundant and Affable Future for the World”
President’s CommitmentPresident’s Commitment
11 Integrated Report 2017
010_9032587913002.indd 11 2018/02/02 19:35:53
The Daio Paper Group will continue to proactively
tackle environmental, social, and governance (ESG)
issues through constructive dialogue and appropriate
cooperative efforts with its stakeholders.
Finally, I would like to ask for your continued
support for Daio Paper and the Daio Paper Group
companies as the Group strives to increase its
corporate value by further strengthening its business
structure through an integrated operation.
■ Moving Forward with Our Stakeholders
Overseas, we strive to create jobs in local
communities and develop our business through locally
rooted initiatives by advancing our production and sales
policy of local production for local consumption.
III. Corporate culture that offers new challenges and a sense of security and trust
The Daio Paper Group’s corporate governance
framework allows us to continuously maintain and
strengthen governance by activating the Board of
Directors through effectiveness evaluation and making
decisions on risk management and countermeasures
via the Compliance Committee. We also issued the
Daio Paper Group Declaration of Health in 2014. As a
corporate group trusted by society through its business
activities, the Daio Paper Group endeavors to ensure
the health and well-being of all employees and their
families, in order to contribute to the development of
local communities and cultures.
IV. Contribution to the global environmentThe Paris Agreement, which set out global warming
mitigation measures that will take effect from 2020,
entered into force in November 2016. Japan has set
out the target of reducing greenhouse gas emissions
by 26% from 2013 levels by 2030.
The Daio Paper Group continuously work on
reducing environmental impact by promoting the high
usage of recovered paper, effective use of biomass
energy, energy saving, and CO2 absorption and
fixation through forestation at Forestal Anchile Ltda.
(Republic of Chile) in its plantations. We will continue
to contribute to the formation of a sustainable,
recycling-based society through business development
in harmony with the global environment.
President’s Commitment
Integrated Report 2017 12
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 12 2018/02/02 19:35:53
0
1000
2000
3000
4000
5000
19501930 1940 1960 1965 1970 1975 198019551928
1979Entry into the household paper business (facial tissue, toilet tissue) under the brand name “elleair”
1978Full-scale entry into the paper business (printing and publication paper, communication paper), growing into a full-range paper manufacturer
■ Paper and Paperboard Business
■ Home and Personal Care Business (H&PC)
■ (Overseas sales)
■ Others
1941 First paper machine of Shikoku Paper
Positive Cycle of Value Creation Culminated in Record-high Operating ResultsDaio Paper Corporation was established in Ehime Prefecture in 1943 as a manufacturer of newsprint and industrial paper (containerboard and wrapping paper). The Company subsequently expanded into the paper business, transforming into a full-range paper manufacturer. It then further branched out into the household paper market with consumer goods such as facial tissue and toilet tissue. Thereafter, by leveraging the sales channels developed by its household paper business, Daio Paper entered the absorbent products business. From 2011, the Company embarked on a full-scale expansion into overseas markets with its baby disposable diapers, leading to the formation of a unique business portfolio.
● Net Sales from FY1950 to FY2016
400,000
500,000
300,000
200,000
100,000
0
(Millions of Yen)
Daio Paper Group’s History of Value Creation
1940 - 1960 1960 - 1980 1980 - 2000
Established Business Foundation Entry into Tissue Products/Absorbent ProductsMaking a Leap Forward as a Full-range Paper Manufacturer
Starting from its main product, newsprint, Daio Paper implemented productivity improvements in a variety of products and streamlining measures to achieve stable supply, establishing a solid base as a full-range paper manufacturer.
Founded in 1928 in Shikokuchuo City (formerly, Iyo Mishima City), Ehime Prefecture as Shikoku Paper Corporation. In 1943, through a merger of 14 paper companies, Daio Paper was established.
Based on the managerial philosophy that “all changes occur at the side of end consumers,” Daio Paper entered the consumer goods market with household paper products. Through product development and sales strategies that flexibly respond to diversifying lifestyles and capture the latent needs of consumers, we achieved top market share in the household paper market.
1977● Trial operation of N4 machine (newsprint paper
making machine)
1985 ● Started operation of mill-wide system (Rolled out first-ever comprehensive production management system in the pulp and paper industry sequentially)
● Achieved No. 1 market share in facial tissue
1986 ● Achieved No. 1 market share in toilet tissue
1989 ● Established forestry company “Forestal Anchile Ltda.” in Chile, South America
1990 ● First in Japan to offer full range of Kraft paper products made from recovered paper
1993 ● Enacted Daio Global Environmental Charter
1998 ● Iwaki Daio Paper Corporation received the “Nikkei Superior Trend-setting Factories and Offices Award”
● First in the industry to begin production and sale of newsprint made from 100% recovered paper
1999 ● Received “Environment Agency Director-General Award” at the 8th Global Environment Awards
1947● Converted from the manufacturing
of washi (traditional Japanese paper) to yoshi (paper made in the Western way)
13 Integrated Report 2017
010_9032587913002.indd 13 2018/02/02 19:35:54
0
1000
2000
3000
4000
5000
1990 2000 2005 2010 2015 (FY)1985 1995
2016Recorded highest- ever sales
2011-Full-scale entry into overseas markets with the establishment of EIT in Thailand
2007Acquired the Attento adult disposable diaper business from P&G (U.S.)2002
Rebranded its baby disposable diaper business to GOO.N
1986Acquired No. 1 market share in facial tissue
Advertisement for household paperStrengths cultivated
over the years
Full-range Paper
Manufacturer
Market- oriented Business Strategy
Environmentally Conscious Company
2000 - 2017
Bringing Our Business Fields to the Global Stage
As the paper industry reached maturity in Japan, Daio Paper is accelerating the overseas expansion of its Home and Personal Care business in pursuit of new growth markets. In line with this strategy, Daio Paper has been implementing measures such as strengthening its production facilities in China and Thailand, building a local production plant in Indonesia, and tapping into new markets, e.g. the Middle East.
2001 ● Mishima Mill and Kawanoe Mill acquired ISO14001 certification● Iwaki Daio Paper received MITI Minister’s Prize in the Recycle
Promotion Merit Awards Program
2002 ● Acquired Forest Stewardship Council (FSC®) Certification (Chain of Custody Certification)
● Forestal Anchile Ltda. acquired FSC® Certification (Forest Management and Chain of Custody)
2004 ● Launched FSC-certified paper ● Completed and began operation of biomass boiler
2005 ● First in Japan to sell paper made from 100% recycled resources such as recycled papermaking sludge.
2007 ● Mishima-Kawanoe Port recognized as a recycling port● Acquired P&G’s “Attento” brand adult disposable diaper business● Installed and began operation of integrated coated paper
production facility (N10 machine) at Mishima Mill
2008 ● Began operation of recycled filler production facility ● Initiative adopted as a promotion project of the Green Logistics
Partnership Conference
2009 ● Launched PPC paper “Kininarukami” (“paper that becomes a tree”) made from a combination of recycled pulp and thinned wood pulp
2007 ● Installed and began operation of
integrated coated paper production facility (N10 machine) at Mishima Mill
2015 ● Established PT. Elleair International
Manufacturing Indonesia (EIMI) in Cikarang, Indonesia; began operation of baby disposable diaper production factory
2012 ● Established Elleair International China
(Nantong) Co., Ltd. (EICN) in Nantong City, China; began operation of baby disposable diaper production factory
2011 ● Established Elleair International Thailand
Co., Ltd. (EIT); began operation of baby disposable diaper production factory in Thailand, the first overseas Daio factory
Integrated Report 2017 14
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 14 2018/02/02 19:35:54
Daio Paper Group’s Strengths
Maximizing the Usefulness of Paper as a Material by Leveraging Our Strengths as a Full-range Paper ManufacturerDaio Paper seeks to develop its business by realizing the potential of paper as a material through leveraging its competitiveness in a wide range of fields from materials, such as newsprint, publication paper, and containerboards, to personal care products that support the daily lives of people, from babies to seniors.
Mishima Mill—Produces about 10% of the Annual Paper Production Volume in JapanThe Mishima Mill, our core mill, is one of the world’s largest coastal mills with a site area of 1.67 million m2.● Industry-leading cost
competitiveness in Japan
● Produces all kinds of pulps
● Annual production volume amounts to approximately 2.10 million tons
Strengths of a Full-range Paper ManufacturerThere are only three full-range paper manufacturers in Japan, including us (Daio Paper, Oji Holdings, and Nippon Paper Industries). Since a full-range paper manufacturer produces and sells a wide variety of paper, it has the advantage of always being able to respond flexibly to the changing needs of the market.
A Full-range Paper ManufacturerDaio Paper is the No. 3 full-range paper manufacturer in Japan and engages in the integrated manufacture of paper, such as newsprint, printing and publication paper, communication paper, wrapping paper, corrugated container products, household paper products and others, starting from the manufacture of pulp.
One of the World’s Largest
Strength3Recycling Hard-to-recycle Recovered Paper and Confidential PaperThe Daio Paper Group has developed a technology enabling automated removal of foreign material from hard-to-recycle recovered paper that used to be disposed of as industrial waste, and is working to expand its use of unused recovered paper, including confidential documents.
Recovered paper utilization rate
64%
Strength1Full-range Paper Manufacturer
Environmentally Conscious Company
Approx. 2 million tons per year
15 Integrated Report 2017
010_9032587913002.indd 15 2018/02/02 19:35:58
Strength2Market-oriented Business Strategy
Sustainable Forest Management in Chile in South AmericaDaio Paper manages 59,000 ha of forest areas in Chile. This corresponds in area to the 23 wards of Tokyo. We practice sustainable forest management, and approximately one-half of the area we own is left untouched as natural forest to maintain biodiversity.
≒Area of forest owned by
Daio PaperArea of Tokyo’s
23 wards
59,000ha
Chile, South America
Reducing CO2 EmissionsThe Daio Paper Group promotes the installation of biomass boilers fueled by woodchips, wastepaper, refuse paper & plastic fuel (RPF), and waste tires to reduce CO2 emissions.
“To Sell the Products We Have Manufactured with Our Own Efforts”With the basic principle of “to sell the products we have manufactured with our own efforts,” each and every sales personnel of Daio Paper positions themselves closest to our customers to grasp market trends through their daily sales activities. The deployment of our unique market-and-customer-oriented sales strategy facilitates our product development and sales proposal activities, enabling us to respond to our users’ needs speedily.
直接ニーズの把握と付加価値提案
顧客からの意見を商品開発に反映
販売
提案・販売
販売
同業他社(一般の製紙メーカー)
代理店
顧客当社
当社営業員
Sale
Proposal/Sale
Sale
Competitors (General Paper Manufacturers)
Distributors
CustomersDaioPaper
Daio SalesPersonnel
Grasp needs of customers directly and provide value-added proposals
Receive feedback from customers and reflect in product development
A Multi-dimensional Business ModelIn our overseas H&PC business, we are working to expand our business multi-dimensionally by increasing brand recognition, expanding our sales reach and advancing product diversification.
Achieve sustainable expansion in fast-growing Asian countries through product diversification
Baby disposable diapers
Adult disposable diapers
Feminine care products
Household paper
Wet tissue and wipes
FY2012
10 countries
4 countries
1 country
5 countries
8 countries
FY2016
29 countries
9 countries
8 countries
13 countries
18 countries
Brand Power
● Corporate brand power as a full-range paper manufacturer
● Strong brand assets and brand-building capabilities in various product categories
Cost Competitiveness
● Sharing of advanced technologies and know-how within the Group
● High efficiency in all aspects from procurement of materials to production and sales
● Intellectual property supported by large numbers of patent applications filed and patents in force
Human Resource Capabilities
● Human resources and management structure that support company growth
● Diversity management● Integrated operations from procurement of
materials to production and sales
Problem Solving Capabilities
● Initiatives aimed at achieving coexistence of society and businesses
● Value creation capabilities made possible by building favorable relationships with stakeholdersBiomass boiler at Taisei Paper
Integrated Report 2017 16
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 16 2018/02/02 19:35:59
Business Overview of the Daio Paper Group
In the Paper and Paperboard Business, to adapt flexibly to changes in market trends, Daio Paper leverages the strength of its Mishima Mill (Ehime Prefecture), one of the largest coastal paper mills in the world and capable of producing a wide range of pulps as well as paper and paperboard products, to promote a shift of production and sales mix. Through the integrated operations of the Group’s companies with Mishima Mill at the core, we share technologies and information on improving productivity and reducing energy costs and work to provide high value-added products and reduce environmental impact.
Description of Business● Production and sale of newsprint, printing and communication
paper, wrapping paper and functional materials, containerboard, corrugated container, pulp, etc.
Business OverviewFor the Paper Business of the fiscal year ended March 31, 2017, despite a 2% decline in domestic demand for paper products year over year, Daio Paper achieved a sales volume on the same level as the previous year due to improvements in sales mix and user composition. However, sales amount was lower year-on-year due to falling domestic market prices. As for newsprint, we were able to maintain the same levels of sales volume and amount as in the previous year despite decreasing newspaper circulation volume. For the Containerboard and Corrugated Container Business, despite a decrease in demand for fruit and vegetable due to bad weather, sales volume was higher year-on-year due to the growth in e-commerce and processed foods sectors. However, sales amount was lower year-on-year due to changes in user composition and sales mix. As regards segment profit, despite a decrease in raw materials and fuels costs due to the appreciation of the yen, production increase of Kraft pulp through remodeling of production facilities, and cost reductions for energy and chemicals, etc., segment profit was lower year-on-year due to falls in market prices.
Sales composition by product category
Net Sales
Operating Profit
Paper and Paperboard Business
Containerboard22%
Containerboard23%
Newsprint20%
Printing/Communication paper 46%
Newsprint18%
Printing/Communication paper 45%
Wrapping paper and functional material11%
Wrapping paper and functional material13%
Pulp1%
Pulp1%
FY2012
2,726,000tons
FY2016
3,011,000tons
300.0300.0
2017/32013/3 2015/3
278.0278.0
2016/3
283.5283.5 290.0290.0 292.0292.0
2014/3
(Billions of Yen)
(FY)0
200
100
300
400
10.510.510.910.9 11.411.410.110.1 10.010.0
0
6
3
9
12
15(%)
0
4
2
6
8
10
3.93.9 4.04.0 3.53.5 3.53.53.33.3
Operating profit Operating margin
(Billions of Yen)
2017/32013/3 2015/3 2016/32014/3 (FY)
17 Integrated Report 2017
010_9032587913002.indd 17 2018/02/02 19:36:00
Sales composition ratio of paper by category (domestic)
Sales composition ratio by industry (domestic)
The Daio Paper Group acquired the paper product business of Nisshinbo Holdings Inc. in April 2017. This adds fine paper and synthetic paper to our product lineup, and further promotes our business strategy of shifting product mix to high value-added products. We shall create more added value and further expand our sales operations by increasing sales to paperboard carton users through integrated operations with Daiwa Shiko Co., Ltd. (acquired from Nisshinbo Holdings), and integrating operations of Miura Printing Corporation, which we acquired in April 2017, with Daio Printing. While demand for newsprint and publication paper, etc. has been declining year over year with the spread of
web-based media, the sales ratio of high value-added products, such as communication paper and sheet products, is increasing. Accordingly, we strengthened our supply capability in FY2017 by installing an additional paper sheeting facility. Daio Paper made capital expenditures aimed at improving the quality of corrugated containers in FY2016. This has allowed us to supply to industries with strict quality requirements, including medical and cosmetics, and to make sales proposals that will live up to our end users’ need for reliability and their trust in Daio Paper.
Accelerating Structural Shift to High Value-added Products through Business Acquisitions, etc.
Risks and Opportunities
● Decrease in domestic demand for rotary printing paper (mainly for newspaper and insert flyers in newspaper) and coated paper for publications and catalogues
● Tight demand and supply and rise in prices of recovered paper due to increasing global demand
● Increase in demand for corrugated container with e-commerce growth
Measures to Mitigate Risks
● Increase the sales ratio of communication paper and sheet products, for which demand is solid
● Make greater use of recovered paper by utilizing hard-to-recycle recycled paper, etc.
Action
Up 38%
Sales volume growth of sheet products
FY2012: 157,000 tons
FY2017: 217,000 tons
Daio Paper Products/Fine paper Die-cut box
Paperboard carton
Daiwa Shiko Co., Ltd.
Strategyof the Daio Paper Group
80,000
60,000
40,000
20,000
0
2017/32013/3
(%)
(FY) (FY)
(tons/month)
100
80
60
40
20
0
2017/32013/3
5%
34%22.7%22.7%
32.3%32.3%
12%
41%
End users
Printing companies
Lightweight coated paper
A3 grade coated paper
Uncoated woodfree paper
Publishing companies
Regional distributors
A2 grade coated paper
Integrated Report 2017 18
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 18 2018/02/02 19:36:02
In the Home and Personal Care (H&PC) Business, we have been expanding our business activities in the domestic market by enhancing our product lines in all categories, and by developing and launching high value-added products to meet diversifying consumer needs and usage scenarios. In overseas markets, we have been expanding our business by exporting and selling baby disposable diapers from Japan to mainly Asian countries, where demand is growing rapidly, as well as through local production and sales activities in China, Thailand, and Indonesia. Going forward, we seek to expand our global sales reach and accelerate multi-category overseas business expansion through the addition of household paper and others to the lineup, and continue to support the hygiene and healthy living of people around the world from Japan.
Description of Business● Production and sale of household paper (e.g. facial tissue),
baby and adult disposable diapers, feminine care products, wet wipes, etc.
Business OverviewFor domestic H&PC Business in the fiscal year ended March 31, 2017, we steadily expanded sales and profit despite a decline in inbound demand for baby disposable diapers. We achieved this by promoting the shift of product mix to value-added products in household paper, launching Attento Sports Pants that is differentiated from competing products, and expanding the product line of feminine care products. For overseas H&PC Business, sales of the mainstay product baby disposable diapers grew steadily, and both its sales volume and amount increased significantly year-on-year. In the largest market, China, on the back of the success of our super premium zone tape type GOO.N Angel series diapers and remarkable growth in demand for pants type diapers, we extended the line-up of GOO.N Angel series to include pants type diapers and observed steady sales expansion. In Indonesia, where demand is growing rapidly, we started local production of baby disposable diapers in December 2015. Following Vietnam and the Philippines, we started exporting products to other ASEAN countries, such as Laos and Cambodia, from Thailand. In addition to baby disposable diapers, sales of feminine care products and adult disposable diapers in South Korea and Taiwan, as well as sales of wet tissue and wipes in Thailand commenced, thus further advancing product diversification.
Net Sales
Operating Profit
Home and Personal Care Business
Attento Sports Pants
GOO.N Yawaraka Pants
Elleair facial tissues, and high value-added products acquired from Nisshinbo Holdings
158.9158.9
120.7120.7134.9134.9
146.8146.8
168.8168.8
0
100
50
150
200(Billions of Yen)
2017/32013/3 2015/3 2016/32014/3 (FY)
10.410.4
5.15.1
9.7 9.7 9.29.2
10.110.1
0
6
3
9
12
0
3
6
9
12
4.24.2
7.27.2
6.36.3
6.56.5
6.06.0
(Billions of Yen)
2017/32013/3 2015/3 2016/32014/3 (FY)
(%)
Operating profit Operating margin
19 Integrated Report 2017
010_9032587913002.indd 19 2018/02/02 19:36:03
Action
Risks and Opportunities
Domestic market● Decrease in demand due to aging
population and declining birthrate● Change in the buying habits due to
globalizationOverseas market● Increase in demand due to rapid population
growth● Change in the living environment due to
rapid market expansion● Need for measures to cope with increasing
global environmental impact
Measures to Mitigate Risks
● Establish a global research and development structure to strengthen product appeal, speed up quality improvement, and enhance productivity in Japan and overseas
● Increase brand power through successive product initiatives● Create new product categories aimed at active seniors● Launch multi-language packaging and websites and connect with end users
(women, mothers, caregivers)● Proactive implementation of latest production technologies and thorough
improvement of the productivity of existing production facilities● Reinforce compliance framework to prepare for changes in global regulations
Sales Expansion Strategy for High Value-added Products and Acceleration of Global ExpansionThe Daio Paper Group is advancing its strategy to expand sales of high value-added products which improve the quality of lives of its customers. In April 2017, Daio Paper acquired the paper product business of Nisshinbo Holdings Inc. and added Nisshinbo Holdings’ products, such as “Cotton Feel” and “Double-absorbency Toilet Paper Made for Shower Toilet,” to its product line. We strive to further expand sales of high value-added products. In July 2017, Daio Paper established the Global Research and Development Headquarters as a division independent from H&PC’s domestic and overseas business headquarters. This enables the H&PC R&D team to grasp changes in the global market speedily, thus facilitating product improvement and production in Japan and overseas.
Net Sales of Overseas H&PC Business
Household paper production capacity after Kawanoe Mill begins operation in October 2018:
390,000
★●
●
■
■
●
●
●
■
Daio Paper
■ Production bases
● Sales bases
● Representative offices
Elleair International Korea (EIK)
Elleair International Thailand (EIT)
Elleair International Manufacturing Indonesia (EIMI)
Elleair International China Nantong (EICN)
Architectural rendering of Elleair Paper Corporation Kawanoe Mill
Strategyof the Daio Paper Group
tons per year
0
10
20
30
40
■ Russia, Taiwan, etc.■ Thailand, Indonesia, others (Southeast Asia)■ South Korea■ China
2017/32013/3 2015/3 2016/32014/3
31.731.7
25.125.1
22.222.2
13.113.110.710.7
(Billions of Yen)
(FY)
Integrated Report 2017 20
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 20 2018/02/02 19:36:04
Fiscal year 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3For the Year:
Net sales ¥ 414,164 ¥ 455,804 ¥ 465,804 ¥ 423,105 ¥ 410,159 ¥ 408,985 ¥ 407,362 ¥ 430,054 ¥ 450,239 ¥ 474,077 ¥ 477,140Cost of sales 313,823 357,716 371,168 330,108 327,375 334,240 325,338 334,113 344,237 359,933 358,005Gross profit 100,340 98,087 94,636 92,997 82,783 74,745 82,023 95,941 106,002 114,144 119,135Selling, general and administrative expenses 74,352 75,746 76,027 69,831 69,406 64,261 70,445 79,892 84,206 89,821 95,600Operating profit 25,987 22,341 18,608 23,165 13,377 10,483 11,577 16,049 21,796 24,323 23,535Ordinary profit 19,750 15,042 11,199 14,248 5,665 4,748 6,637 11,257 21,784 21,259 21,347Profit (loss) before income taxes 15,844 13,361 4,471 13,112 (5,297) (5,689) 20,682 6,608 17,373 21,997 18,118Profit (loss) attributable to owners of parents 11,300 5,460 356 2,381 (18,234) (5,321) 15,109 6,293 13,209 14,594 12,136Comprehensive income (loss) — — — — (16,506) (3,247) 22,075 11,826 27,943 9,599 14,905EBITDA 52,182 53,269 53,561 56,965 47,548 42,622 43,637 47,180 59,139 57,726 58,251Capital expenditures 19,931 74,746 37,738 18,678 22,057 18,200 21,726 24,948 31,587 37,310 32,453Depreciation and amortization 23,243 28,739 32,348 32,993 32,850 29,584 26,409 26,403 27,203 26,988 29,017Research and development cost 2,600 2,269 2,534 2,217 2,079 1,399 2,149 2,836 2,683 2,791 2,902Net cash provided by operating activities 34,525 61,286 49,482 73,995 41,153 23,775 50,805 58,091 44,740 47,011 62,932Net cash used in investing activities (36,556) (70,792) (37,899) (21,531) (25,496) (32,171) (41,455) (26,826) (28,581) (26,073) (31,394)Net cash provided by (used in) investing activities 3,093 8,099 8,058 (17,987) (20,747) (7,379) (13,441) (37,242) (29,429) (17,475) (22,037)Free cash flow (2,031) (9,506) 11,583 52,464 15,657 (8,395) 9,350 31,265 16,160 20,938 31,538
At Year-End:Total assets 683,261 698,788 705,602 703,549 672,386 596,425 659,112 646,112 652,745 656,310 657,747Net assets 136,696 133,227 126,161 132,689 115,191 97,313 107,969 119,252 164,495 174,820 191,079Current assets 293,048 270,549 280,678 293,910 290,159 269,483 246,258 243,871 252,490 257,154 257,048Interest-bearing debts 432,499 461,812 481,388 472,570 459,449 402,379 449,743 417,664 375,024 362,370 344,278Net interest-bearing debts 353,140 381,764 382,469 336,500 329,296 308,948 363,533 331,825 292,466 281,456 255,077Cash and cash equivalents 77,301 75,898 95,021 129,497 124,251 86,332 82,457 79,046 69,073 72,169 82,733Number of shares issued (shares) 128,990,790 129,018,785 129,018,785 129,018,785 129,018,785 129,018,785 129,018,785 129,018,785 149,348,785 149,348,785 149,348,785
Per Share Data (Yen):Basic earnings per share 95.67 44.97 2.85 19.22 (147.27) (43.13) 126.51 51.52 93.48 100.15 83.28Net assets per share 916.01 892.04 843.36 857.38 691.96 680.29 821.21 875.39 1,059.78 1,119.24 1,211.33Cash dividends per share 10.50 10.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 10.50 10.50
Financial Ratios:ROE (%) 10.6 5.0 0.3 2.3 (19.0) (6.3) 16.8 6.1 10.0 9.2 7.1ROA (%) 1.7 0.8 0.1 0.3 (2.7) (0.9) 2.3 1.0 2.0 2.2 1.8Equity ratio (%) 15.7 16.0 14.8 15.1 12.7 14.0 14.7 17.0 23.7 24.9 26.8 Debt to equity ratio (times) 4.0 4.1 4.6 4.4 5.4 4.8 4.6 3.8 2.4 2.2 2.0Net debt to equity ratio (times) 3.3 3.4 3.7 3.2 3.8 3.7 3.7 3.0 1.9 1.7 1.4
11-Year Consolidated Financial Summary
Daio Paper Corporation and its Consolidated SubsidiariesAs of and for the years ended March 31
Notes: 1. Amounts are rounded down to the nearest million yen through the fiscal year ended March 31, 2011, and rounded off to the nearest million yen from the fiscal year ended March 31, 2012.
2. EBITDA = Ordinary profit + interest expenses + depreciation and amortization + amortization of goodwill + equity in earnings of affiliates. 3. Effective from the fiscal year ended March 31, 2011, the “Accounting Standard for Presentation of Comprehensive Income” has been adopted.
Employees (Consolidated) (Persons) Foreign Employees (Persons) CO2 Emissions (Daio Paper Group) (1000 t)
51
1,2021,330
331
1,547
2013/3 2014/3 2015/3 2016/3 2017/3
7,3488,174 8,4978,497
7,759
9,5949,594
2013/3 2014/3 2015/3 2016/3 2017/3
3,6903,847 3,8093,755 3,760
2013/3 2014/3 2015/3 2016/3 2017/3
21 Integrated Report 2017
010_9032587913002.indd 21 2018/02/02 19:36:04
Fiscal year 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3For the Year:
Net sales ¥ 414,164 ¥ 455,804 ¥ 465,804 ¥ 423,105 ¥ 410,159 ¥ 408,985 ¥ 407,362 ¥ 430,054 ¥ 450,239 ¥ 474,077 ¥ 477,140Cost of sales 313,823 357,716 371,168 330,108 327,375 334,240 325,338 334,113 344,237 359,933 358,005Gross profit 100,340 98,087 94,636 92,997 82,783 74,745 82,023 95,941 106,002 114,144 119,135Selling, general and administrative expenses 74,352 75,746 76,027 69,831 69,406 64,261 70,445 79,892 84,206 89,821 95,600Operating profit 25,987 22,341 18,608 23,165 13,377 10,483 11,577 16,049 21,796 24,323 23,535Ordinary profit 19,750 15,042 11,199 14,248 5,665 4,748 6,637 11,257 21,784 21,259 21,347Profit (loss) before income taxes 15,844 13,361 4,471 13,112 (5,297) (5,689) 20,682 6,608 17,373 21,997 18,118Profit (loss) attributable to owners of parents 11,300 5,460 356 2,381 (18,234) (5,321) 15,109 6,293 13,209 14,594 12,136Comprehensive income (loss) — — — — (16,506) (3,247) 22,075 11,826 27,943 9,599 14,905EBITDA 52,182 53,269 53,561 56,965 47,548 42,622 43,637 47,180 59,139 57,726 58,251Capital expenditures 19,931 74,746 37,738 18,678 22,057 18,200 21,726 24,948 31,587 37,310 32,453Depreciation and amortization 23,243 28,739 32,348 32,993 32,850 29,584 26,409 26,403 27,203 26,988 29,017Research and development cost 2,600 2,269 2,534 2,217 2,079 1,399 2,149 2,836 2,683 2,791 2,902Net cash provided by operating activities 34,525 61,286 49,482 73,995 41,153 23,775 50,805 58,091 44,740 47,011 62,932Net cash used in investing activities (36,556) (70,792) (37,899) (21,531) (25,496) (32,171) (41,455) (26,826) (28,581) (26,073) (31,394)Net cash provided by (used in) investing activities 3,093 8,099 8,058 (17,987) (20,747) (7,379) (13,441) (37,242) (29,429) (17,475) (22,037)Free cash flow (2,031) (9,506) 11,583 52,464 15,657 (8,395) 9,350 31,265 16,160 20,938 31,538
At Year-End:Total assets 683,261 698,788 705,602 703,549 672,386 596,425 659,112 646,112 652,745 656,310 657,747Net assets 136,696 133,227 126,161 132,689 115,191 97,313 107,969 119,252 164,495 174,820 191,079Current assets 293,048 270,549 280,678 293,910 290,159 269,483 246,258 243,871 252,490 257,154 257,048Interest-bearing debts 432,499 461,812 481,388 472,570 459,449 402,379 449,743 417,664 375,024 362,370 344,278Net interest-bearing debts 353,140 381,764 382,469 336,500 329,296 308,948 363,533 331,825 292,466 281,456 255,077Cash and cash equivalents 77,301 75,898 95,021 129,497 124,251 86,332 82,457 79,046 69,073 72,169 82,733Number of shares issued (shares) 128,990,790 129,018,785 129,018,785 129,018,785 129,018,785 129,018,785 129,018,785 129,018,785 149,348,785 149,348,785 149,348,785
Per Share Data (Yen):Basic earnings per share 95.67 44.97 2.85 19.22 (147.27) (43.13) 126.51 51.52 93.48 100.15 83.28Net assets per share 916.01 892.04 843.36 857.38 691.96 680.29 821.21 875.39 1,059.78 1,119.24 1,211.33Cash dividends per share 10.50 10.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 10.50 10.50
Financial Ratios:ROE (%) 10.6 5.0 0.3 2.3 (19.0) (6.3) 16.8 6.1 10.0 9.2 7.1ROA (%) 1.7 0.8 0.1 0.3 (2.7) (0.9) 2.3 1.0 2.0 2.2 1.8Equity ratio (%) 15.7 16.0 14.8 15.1 12.7 14.0 14.7 17.0 23.7 24.9 26.8 Debt to equity ratio (times) 4.0 4.1 4.6 4.4 5.4 4.8 4.6 3.8 2.4 2.2 2.0Net debt to equity ratio (times) 3.3 3.4 3.7 3.2 3.8 3.7 3.7 3.0 1.9 1.7 1.4
(Millions of Yen)
CO2 Emissions per Unit (Daio Paper Group) (t/t product)
Hard-to-recycle Recovered Paper Usage (Daio Paper) (1000 t)
Final Disposal Amount of Industrial Waste (Daio Paper Group) (1000 t)
121.4 122.2130.8
121.1
134.3
2013/3 2014/3 2015/3 2016/3 2017/3
1.15
0.990.94
1.06
0.87
2013/3 2014/3 2015/3 2016/3 2017/3
9
5
9
6
4
2013/3 2014/3 2015/3 2016/3 2017/3
Integrated Report 2017 22
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 22 2018/02/02 19:36:04
CSR
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
To Continue to be a Proud Corporate Citizen Trusted by the Global Society“Transforming our world: the 2030 Agenda for Sustainable Development Goals (SDGs)” was adopted at the United Nations Sustainable Development Summit held at the UN Headquarters in September 2015 with more than 150 world leaders in attendance. SDGs, the successors to the Millennium Development Goals (MDGs), comprise 17 goals and 169 targets. All Member States of the United Nations are required to work toward the achievement of the various goals by 2030 to realize a sustainable society. The Daio Paper Group too will promote initiatives toward achieving the goals set out by SDGs through its business operations.
D
I
CSR at the Daio Paper GroupThe Daio Paper Group aims to build relationships of trust with all stakeholders, in order to provide high value-added products, grow with society, and conserve the global environment for future generations. Guided by the founding spirit of the Company, “Passion with Sincerity,” as its Corporate Motto, the Daio Paper Group works in unity on its everyday business activities to achieve the future vision of the Group set out in the Management Philosophy: “Shaping an abundant and affable future for the world.”
D
I
A
O
Dedica
ted
Dedica
tion t
o
manufa
cturin
g
Integrated
Corporate culture
providing safety and
motivation to work
Attentive
Bonds with
local
communities
Organ
ic
Contr
ibutio
n to
the gl
obal
envir
onmen
t
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
Regional Awareness
Integrity and Compliance
Safe Workplaces
Sustainable Growth
Diverse Management
Contribution to the Global Society
Environmental Awareness
Trusted Manufacturing Management
Philosophy
Shaping an Abundant and
Affable Future for the World
23 Integrated Report 2017
010_9032587913002.indd 23 2018/02/02 19:36:06
Trusted ManufacturingSupply high-quality and value-added products and services. As a manufacturer, we are most familiar with our customers’ needs around the world. So, what is made by Daio is sold only by Daio sales representatives, continuing in our founder’s spirit and giving us a direct connection to our customers to serve their needs and build trust.
Sustainable GrowthRespond to all our stakeholders’ needs, including customers, partners, shareholders, society and the global community. We will be agile and flexible to respond to sudden changes in the management environment, and we will work to grow our business in a way that is sustainable while strengthening our management foundations.
Regional AwarenessBe good corporate citizens and earn the trust of the world where we work. We will take part in activities that contribute to society, including volunteer work, sporting events, and cultural activities, to grow together with the countries and regions and contribute to growth and development.
Safe WorkplacesWork safely and energetically. We will continue to maintain safe and vibrant workplace environments that offer employees challenges and growth potential.
Integrity and ComplianceAct with integrity and comply with social norms and regulations along with laws and ordinances. We will strive to be a company trusted by society, and we consider ethical matters among our top priorities, always following our “Employee Code of Ethics.”
Diverse ManagementRespect diversity and personalities of employees and coworkers. We will strive to foster an environment that allows every employee to achieve their highest potential. We nurture employees who reflect our roots as a small company and understand the value of taking on responsibilities outside their sphere of work: The employees who act with consideration, good judgment, and proactivity.
Contribution to the Global SocietyRespect the laws of each country and region as well as international standards. We will conduct all corporate activities with consideration for cultures and customs while championing the advancement of lifestyles, industries, and cultures around the world.
Environmental AwarenessConserve biodiversity and contribute to the global environment. We will aim to reduce CO2 emissions and promote energy savings and recycling as per the DAIO Global Environment Charter.
Principal Collaborative Value Creation Initiatives of the Daio Paper Group
The Daio Paper Group’s Code of Conduct
Management Philosophy’s Four Pillars
Daio Paper’s Principal Collaborative Value Creation Initiatives Code of Conduct SDGs
DDedicated(Dedication to
manufacturing)
● Highly cost competitive Mishima Mill● Multiple-base production structure● Highly transparent procurement process● Reduction in the amount of incinerated sewage
sludge ash● Supporting environmental recycling● Quality assurance of products● Sources of competitiveness● Research and development
AAttentive
(Bonds with local communities)
● Coexistence with local communities overseas● Zero forest destruction● Overseas business development● Social contribution activities● Support for overseas disaster-stricken areas● Disaster-prevention activities
IIntegrated
(Corporate culture that offers new
challenges and a sense of security
and trust)
● Corporate governance● Compliance● Message from Outside Director● Responsibilities to shareholders and investors● Workplace that motivates employees● Supporting stress-free nursing care● Communication with customers
OOrganic
(Contribution to the global environment)
● The Daio Global Environment Charter● Environmental Action Plan● Initiatives in product transportation● Biomass fuels● Use of renewable energy● Reducing final disposal amount of industrial waste
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
Sustainable Growth
Contribution to the Global
Society
Integrity and Compliance
Environmental Awareness
Regional Awareness
Sustainable Growth
Contribution to the Global
Society
Environmental Awareness
Sustainable Growth
Integrity and Compliance
Environmental Awareness
Trusted Manufacturing
Regional Awareness
Contribution to the Global
Society
Integrity and Compliance
Trusted Manufacturing
Safe Workplaces
Diverse Management
Integrated Report 2017 24
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
010_9032587913002.indd 24 2018/02/02 19:36:08
Four Pillars of the Daio Paper Group Management Philosophy
N10 Paper Machine with On-machine Coater (Monthly production capacity: 24,000 tons; Production speed: 1,800m/min.)
Taisei Paper• Facial tissue• Toilet tissue• Kitchen paperElleair Paper
• Facial tissue• Toilet tissue• Kitchen paper
Akabira Paper• Facial tissue• Toilet tissue• Kitchen paper
Elleair Product Shizuoka Factory• Adult disposable diapers• Feminine hygiene products
Elleair Product Ehime Factory• Baby disposable diapers• Adult disposable diapers• Wet wipes
Elleair Product Tochigi Factory• Adult disposable diapers• Feminine care products• Baby disposable diapers
Daio Paper Kani Mill• Facial tissue• Toilet tissue• Kitchen paper
Elleair Product Fukushima Factory• Baby disposable diapers• Adult disposable diapers• Feminine care products
October 2018Elleair PaperKawanoe MillScheduled start-up of new household paper production facility
Daio Paper Products Shimada Factory• Facial tissue• Toilet tissue• Kitchen paper
Tokai Seishi Kogyo• Toilet tissue
Ohmiya Paper• Facial tissue• Toilet tissue• Kitchen paper
The Mishima Mill Boasts the Highest Level of Cost Competitiveness in JapanThe Mishima Mill, the Group’s most significant mill, undertakes the integrated production of paper and paperboard, starting from in-house production of pulp. Its total production volume is about 2.10 million tons annually, which accounts for about 10% of the total paper and paperboard production in Japan. Daio Paper has made capital investments in the Mishima Mill to improve profitability and achieved the following: (1) adapted to changes in market demand structure and raw materials supply and demand balance, (2) shifted product mix to high value-added products, and (3) converted energy sources from fossil fuels to biomass fuels. As a result, the coastal Mishima Mill boasts the highest level of cost competitiveness in Japan.
Establishing a Production Framework of Multiple Bases in JapanIn the H&PC Business, Daio Paper Products Corporation and Tokai Seishi Kogyo Co., Ltd. (both former Nisshinbo Group companies) became a part of the Daio Paper Group in April 2017. As a result, high-functionality facial tissue and toilet tissue products, such as “Cotton Feel” and “Double-absorbency Toilet Paper Made for Shower Toilet,” were added to the product line of the Daio Paper Group. The Daio Paper Group is increasing its sales composition of high value-added products by leveraging the strong market recognition of its Elleair brand. In addition, we will establish a framework that allows us to meet the increasingly diverse needs of the market and customers through the launch of the new household paper production facility in the Kawanoe Mill in October 2018.
Dedicated: Dedication to ManufacturingThe Daio Paper Group serves the needs of society in a wide range of fields through the manufacture and sale of paper and paperboard products while conveying the superiority of paper for communication and other purposes. The Company also conducts research and development activities for its paper and paperboard products with the goal of improving the quality of people’s lives.
D
I
A
O
25 Integrated Report 2017
011_9032587913002.indd 25 2018/02/02 18:45:36
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Transparent Procurement of Raw MaterialsWe promote sustainable forest management in harmony with the environment by ensuring the effective and efficient use of forest resources in the procurement of wood-based raw materials, the main raw materials for papermaking.
1
3
2
4
5
Wood Banned from PurchaseBasic Principles and Policy for Procurements of Wood-based Raw Materials❶ We only procure wood-based raw materials produced
from plantation timber, or reused or unused materials.❷ We only procure wood that are traceable from logging
to distribution, that do not fall in the following five categories of unacceptable material, and that are proved to have been harvested legally from sustainably managed forests.
Acquisition of Forest Certification and Trading with Suppliers (Use of Legal Wood)Forest certification is a certification by a third party that ensures that only wood from tree plantations and wood that are harvested legally while considering the environment are used. Use of forest certification is a means to ensure that we procure raw materials in accordance with the Basic Policy. Our Chilean subsidiary, Forestal Anchile Ltda., has acquired forest certification. We also encourage the woodchip suppliers of our business partners to acquire forest certification.
Using Domestic Wood (Promoting the Use of Thinned Wood)Thinning increases the amount of sunlight penetrating through the canopy of the forest. This leads to the growth of thicker tree trunks and roots, the growth of miscellaneous small trees on the forest floor, and the forest’s increased resistance to wind and flood damage. Thinned wood left behind in mountain forests would be swept away by heavy rain, causing damage and impeding vegetation growth on the forest floor. Therefore, Daio Paper is increasing the purchase volume of thinned wood to prevent thinned wood from being left untended.
Purchase Volume of Thinned Wood
Dai
o P
aper
Raw wood market
Timbermill
Wo
od
chip
fac
tory
Forestry union(General) material
producer
Harvesting starts upon approval of the tree harvesting notice.
• Notices are submitted to the agriculture and forestry department of the municipal government at least one month prior to harvesting to obtain mayor’s seal of approval.
• Notices must be submitted to obtain approval for both clear-cutting and forest thinning.
• Approval by the prefectural government is required for cutting trees in forest reserves.
Forestry union
Submission of tree harvesting
notice
Submission of tree harvesting
notice
(General) material producer
[Accompanying document]Certification that indicates the number of trees harvested and the timber volume by mountain, based on weight inspections and the tree harvesting notice
[Accompanying document]Thinned wood certification from woodchip factory based on the certification from forestry cooperative and material producer
Approval
Approval from the mayor of
each municipality
Flow of Delivery of Woodchips with Thinned Wood Certification
2017/32014/3 2015/3 2016/32013/3
(t)
(FY)0
4,000
6,000
2,000
8,0007,4227,422
2,6192,6193,5513,551 3,0723,072
5,6385,638
Under the Green Procurement Act in Japan (enforced in April 2009), suppliers for government procurement are required to submit certification for each production process to verify the following: 1 Illegally harvested wood is not used as a raw material
of virgin pulp.2 Wood is harvested from sustainable forests. In accordance with guidelines issued by the Forestry Agency, the Daio Paper Group checks that it purchases certified wood whose legality is audited by a third party. For wood that are not certified wood, it carries out traceability investigations on the source of the wood and the distribution channels of all suppliers, etc., in order to confirm that they are legally cut wood.
Wood harvested illegally (or without permission)Wood harvested in violation of traditional rights and civil rightsWood harvested in forests in which High Conservation Values are threatened by management activities (HCVs refer to areas particularly worthy of protection)Wood harvested in forests which are being converted to plantations or non-forest useWood harvested in forests where genetically modified trees are planted
Tree harvesting
notice
Integrated Report 2017 26
011_9032587913002.indd 26 2018/02/02 18:45:36
Supporting Environmental Recycling by Converting Industrial Waste into Recovered Fuel
Environment Recycling Business Supported by Daio Engineering Co., Ltd.
Waste plastics, waste home appliances, and discarded automobiles are disposed of as industrial waste. However, the Daio Paper Group is promoting the recycling of these materials through the following measures. First, Daio Engineering would propose plant-improvement plans to recycling businesses. Then, it would design and construct facilities to reduce the volume of waste and convert waste into recovered resources and fuels, improving the recycling
Recycled filler production facilities
Amount of incinerated sewage sludge ash reduced:
about 24,000 tons
rate and reducing the final disposal cost of recycling companies. Ultimately, Daio Engineering would accept the recovered fuels, such as refuse plastic fuels and heat-insulating materials (polyurethane) of refrigerators, for use at the biomass boilers of the six production bases of the Daio Paper Group. The Daio Paper Group strives to achieve a sustainable society through the effective utilization of wastes across the Group.
Support to improve profit of recycling companies
Daio Engineering’s proposals improve recovery rate and reduce final disposal costs through the introduction of a sorter developed by Daio Engineering, and the improvement and reform of existing recycling plants.
The Daio Paper Group is made up of 37 companies, comprising 30 domestic companies and 7 overseas ones. At these enterprises, 41 production plants of 17 domestic companies are engaged in producing newsprint, printing and publication paper, communication paper, corrugated containers, wrapping paper, functional materials, and household paper.
Support provided by the entire Daio Paper Group
Support through provision of materials
Production waste from the Daio Paper Group’s production plants is provided to various recycling companies as recyclable materials.
Recovered materials/Raw materials for fuels
Support through provision of production scheme for recycled fuelRecovered fuels can be used in various types of boilers. With a growing number of biomass boilers being constructed, recovered fuels have become increasingly appreciated.
Recycled fuels
Support through designing and construction of boiler plants
Thermal recycling
Material recycling
Final disposal
Recovery of various resources at recycling plant
Daio Engineering develops various sorters, essential for recycling plants. This enables it to customize facilities according to the needs of customers.
Support through designing and construction of various
recycling plants
Sorter series
Crushing machine
Polyurethane solidification and
fuelization facilities
Various RPF and RDF fuels
Single-stream sorting of plastic pellet, polystyrene
ingot and hard plasticRecovering copper wires
from mixed waste
Residues
Support by accepting recycled fuels
The Daio Paper Group accepts recycled fuels at its six production bases. In addition, the Group can provide technological support on the utilization of recycled fuels based on its expertise gained through the years.
Daio Engineering proposes the optimal boiler plant plan based on its long experience in operating and maintaining boilers at the Daio Paper Group.
● Construction Coordination
● Maintenance support (equipment management, repair plan)
● Operational support (operation management, operational support)
Industrial waste ensures stable quality
Support
1Support
2Support
3
Reduction in disposal amount
Increase in recycled amount
Increase in recycled amount
Reducing the Amount of Incinerated Sewage Sludge Ash by Recycling Deinking Sludge into FillerDeinking sludge, a byproduct from recovered paper pulp production, used to end up as sewage sludge after treatment. However, at Elleair Paper Chemical Corporation, we are reusing deinking sludge by recycling it into filler (chemicals mixed into paper to achieve higher opacity). In order to reduce the amount of sewage sludge generated, we are working to improve the quality of recycled filler and expand the variety of paper we use recycled filler in. (Reduction of about 24,000 tons in FY2016)
+
27 Integrated Report 2017
011_9032587913002.indd 27 2018/02/02 18:45:36
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Quality Policy
Measures to Assure Customers of the Quality of Our ProductsThe Daio Paper Group has established a quality management system (QMS) that covers activities from the purchase of raw materials to the delivery of products in accordance with ISO9001 standards, and uses the system to implement exhaustive quality management as a tool to achieve quality assurance.
■ Quality Assurance of ProductsDaio Paper Corporation and Iwaki Daio Paper Corporation have incorporated the content ratio of recovered paper pulp, etc. and use of regulated chemicals into their ISO9001-based quality assurance framework. Forest certification and the content ratio of recovered paper pulp are also indicated on the products. In the Home and Personal Care division, we have established a quality assurance structure in which inspections are performed on each sheet and all packages and inspections of processes and products are conducted by quality inspection staff.
Sale
s
Quality management of products
Design and development of new product, changes in
product quality
Process Evaluation
Council
Regulations for assurance of
recovered paper pulp
content ratio
Managing recovered pulp content ratio
Product safety assurance
Chemical safety• Chemical content
certificate• Safety data
sheet
Adoption of new chemicals after evaluation by the Chemical
Evaluation Council
ISO9001
Pro
du
ctio
n
Forest certification
management regulations
Delivery of certified wood and wood from well-managed
forests
Au
dit
by
ext
ern
al
revi
ew
org
an
iza
tio
n
Examples of Environmentally Friendly ProductsWe deliver environmentally friendly products in a wide range of fields.
Policy
1 32Trusted ManufacturingSupply high-quality and value-added products and services. As a manufacturer, we are most familiar with our customers’ needs around the world. So, what is made by Daio is sold only by Daio sales representatives, continuing in our founder’s spirit and giving us a direct connection to our customers to serve their needs and build trust.
Sustainable GrowthRespond to all our stakeholders’ needs, including customers, partners, shareholders, society and the global community. We will be agile and flexible to respond to sudden changes in the management environment, and we will work to grow our business in a way that is sustainable while strengthening our management foundations.
Integrity and ComplianceAct with integrity and comply with social norms and regulations along with laws and ordinances. We will strive to be a company trusted by society, and we consider ethical matters among our top priorities, always following our “Employee Code of Ethics.”
Kininarukami (Eco-friendly Paper Produced from Thinned Wood)
Office supplies
Elleair Unbleached Ultra Absorbent Kitchen Paper
Household products
Elleforet Toilet Tissue
Quality Assurance of ProductsThe Daio Paper Group has established a quality assurance framework that covers activities from the purchase of raw materials to the delivery of products in accordance with ISO9001 standards, and administers the framework based on the following quality policy.
A portion of the sales revenue from the product is returned to forest owners who contributed the thinned wood, which helps to promote good forest management practices such as forest thinning.* Kininarukami was produced jointly with the Committee for the Advancement of the campaign “Forest Management with People’s Support,” and is a product with carbon credits (for carbon offsetting).
Achieved both softness and environmental-friendliness with use of high-grade recovered paper pulp
Achieved reduced energy consumption and environmental impact from chemicals
Integrated Report 2017 28
011_9032587913002.indd 28 2018/02/02 18:45:37
Our Source of Competitiveness: The Mishima Mill
Supply Chain Management/Calculation of Scope 1, 2, and 3The Daio Paper Group aims to expand its scope of reductions in greenhouse gas emissions to include its supply chain, and determine and manage its greenhouse gas emissions at every stage of the entire lifecycle, from procurement of raw materials to the use and disposal of products. We believe this will lead to increased opportunities for reducing greenhouse gas emissions, and also greater potential for companies to identify cost reduction opportunities. Through our products and services, we will contribute to the reduction of greenhouse gas emissions of other companies. We shall declare the amount of emissions we wish to reduce, and work together with our stakeholders to achieve it, contributing to the realization of a sustainable society.
1.67 million m2 ● Total site area is 1,670,000 m2 (approx. 36 times the size of Tokyo Dome).
Integrated production
● Engaged in the integrated production of all kinds of pulps, paper, and paperboard products (newsprint, printing and publication paper, communication paper, wrapping paper, containerboards, and household paper, etc.)
2.1 million tons/year
● With a total production volume of paper and paperboard of about 2.1 million tons annually, the Mishima Mill is the world’s largest-class coastal mill and the key production plant of the Daio Paper Group. (The total production volume of the Daio Paper Group is about 3 million tons, which is approximately 10% of the total annual domestic paper and paperboard production volume.)
● Capable of receiving raw materials and fuels (woodchips, coals) directly from the dock facilities that allow four 100,000-ton class ships to berth simultaneously.
Pulp-making facilities and 17 papermaking machines are connected with pulp transportation pipes running across the plant, supplying the necessary type and amount of pulps to each papermaking machine according to the grade of paper and paperboard being produced. This allows us to switch production flexibly to meet changing market needs.
Scope 1+2 10.5%Scope1: Direct emissions
from emission sources within a company
Scope2: Indirect emissions from the use of purchased electricity, steam, and heat
Category 1 7.1%Purchased goods and services
Category 4 81.6%Transportation and delivery (upstream)
Scope 3 89.5%Indirect emissions from fuel and energy related activities in the supply chain, not included in Scope 1 and 2
Category 12 0.7%End-of-life treatment of sold products
Others 0.1%
Greenhouse Gas Emissions in the Supply Chain
The Daio Paper Group
(FY2016 Results)
Layout of the Mishima Mill
Step 1Raw materials and fuels are brought in directly to the yard located on the west dock.
Step 3Products are shipped directly to the areas of demand from the east dock.
Efficient and streamlined production framework1
Step 2Efficient arrangement of production line enables streamlined production.
Papermaking machines: 17 units Coaters: 4 units
■ Pulp production facilities■ Papermaking machines/
Coater machines■ Pulp transportation pipes
2
29 Integrated Report 2017
011_9032587913002.indd 29 2018/02/02 18:45:37
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Research and Development ActivitiesThe Daio Paper Group’s research and development activities focus on responding to the changing needs of its users through improving existing products and developing new products. We are working on the commercialization of new high value-added products, development of new fields such as integrated products, and research and development of chemicals and new materials. Total R&D costs for the Group for FY2016 amounted to ¥2,902 million.
Paper and Paperboard BusinessDaio Paper Group has been promoting a shift in sales mix to uncoated paper, communication paper, and wrapping paper in the face of a decrease in demand for newsprint, published materials, and catalogues, etc. Hence, the Production Division of the Paper and Paperboard Business is working to establish the optimal production-sales balance across the group, improve quality, and reduce manufacturing costs. In addition, the division is working to reinforce development of new products, expand the range of FSC® products, and strengthen basic technology research. In the functional materials business, using information gathered on market trends and needs, we are advancing the product development of high value-added products through the addition of functionalities such as oil-repelling, oil-absorbing, heat-sealing, and conduction, etc.
In April 2017, Daio Paper Products Corporation (former Nisshinbo Paper Products Inc.) joined the Daio Paper Group. Since then, joint development meetings and sectional meetings with relevant divisions have been held, and such efforts are beginning to yield synergistic effects in the development of synthetic paper and paper for inkjet printing, etc.
Home and Personal Care BusinessIn the Home and Personal Care Business, the top priority of our research and development activities is to deliver safe and reliable products to our customers. We manage our research and development activities based on the requirements of ISO9001 quality management, such as by always starting with the confirmation of the safety of the raw materials we use. Based on the concept of “providing people with the maximum softness and tenderness,” and a process that focuses on regions, resources, and realizations, we at the Daio Paper Group are constantly seeking to enhance our product development capabilities by grasping the needs of
customers and advancing the development of new technologies. For the overseas markets, building on our brand power and technological capabilities that we accumulated over the years, we further seek to localize our products to respond to the needs and actual usage of local customers.
Development of Cellulose Nanofiber (CNF)Daio Paper is advancing the development of cellulose nanofiber (CNF), a nano-material made from cellulose. In April 2016, the Company launched a CNF slurry manufacturing pilot plant, which is a NEDO research and development project. We will continue to conduct research and development activities to achieve a cost-competitive CNF production process. In August 2017, the Company started to supply
samples of a high-CNF-containing mold that loses little strength under high temperatures. We are also advancing the research and development of CNF powder that is suitable for compounding into resin and rubber. Daio Paper launched the Elleair Kirekira! toilet cleaning wipes with CNF content in April 2017. We will accelerate our research and development efforts as well as product development on CNF for various applications, including use in structural materials, thickening agent/dispersing agent, packaging materials, and separation materials.
Development of high-CNF-containing mold
Elleair Shoushuu+ (Deodorizing toilet tissue)
Water- and oil-repellent paper Heat-seal oil-repellent paper
Elleair Kirekira! toilet cleaning wipes
Elleair Zeitaku Hoshitsu (Lotion tissue)
Integrated Report 2017 30
011_9032587913002.indd 30 2018/02/02 18:45:40
Attentive: Bonds with Local Communities
Zero Forest DestructionSince 2008, we have been working with Austral University on the regeneration of native forests at Los Riscos (Purranque City, X Region, the Republic of Chile). There, we have been regenerating 41.5ha of native forest in the area adjacent to the district designated as an area with high conservation value to preserve natural vegetation and landscapes. Our initiatives and the results of the project have been highly rated by forest certification organizations. Since 2013, with the cooperation of Corral City (XIV Region, the Republic of Chile) and residents’ associations in the Futa area, three forestry companies have been engaged in native forest regeneration of deforested areas in Los Joaquines (Corral City) to preserve the landscape along Futa River. As part of that initiative, Forestal Anchile is regenerating 6ha of native forest along the same river. In recognition of these activities, we received a letter of appreciation from Corral City and the residents’ associations in the Futa area for protecting the natural environment.
Bridge and road constructed by the Company
Forestal Anchile Ltda. has one of the world’s largest growth volumes of planted trees, which is enabled by its capability to choose excellent tree species and its cutting-edge tree planting technologies.
Location of operations: Republic of Chile (IX Region, X Region, and XIV Region)
Date established: June 1989Area of operations: 59,000 ha (cf. the area of Tokyo’s 23 wards: 62,145 ha)Area of plantation: 28,700 ha (as of the end of FY2016)Forest certification: FSC Certification (in 2002)
PEFC Certification (in 2008)
Forestal Anchile Ltda. (Republic of Chile)
D
I
A
O
Los Riscos forested area in Purranque City, X Region in Chile (The red-bordered area indicates the area for native forest regeneration)
Coexistence with Local Communities OverseasIn response to requests from residents near the forestry property of Forestal Anchile (Alerce area), we constructed a bridge to allow large vehicles and emergency vehicles to pass over and improved the convenience of the lives of local residents. In another area near our forestry property, there were no roads for vehicles to travel on and residents faced serious problems with shopping for everyday goods and responding to emergencies such as fires and the transport of emergency patients. The Company constructed a public road and contributed to better and safer lives of residents living nearby. Forestal Anchile, in a government-private joint project with other forestry companies, Purranque City, and Osorno Province, is supporting the construction of facilities that supply water from the river running through the forestry area owned by Forestal Anchile to the local residents in Los Riscos area of Purranque City. By providing stable water supply for domestic use and irrigation to these areas which have been suffering from shortage of water during dry season, local residents could continue with their economic activities, such as agriculture and dairy farming, thus contributing to the building of a town which is resilient and sustainable.
The Daio Paper Group strives to coexist with the local communities through its business activities, and also proactively supports local initiatives, contributing to the development of local communities. We work to facilitate understanding of its businesses by holding plant tours for local residents and students and participating in local community events to achieve growth in harmony with the local communities.
Four Pillars of the Daio Paper Group Management Philosophy
31 Integrated Report 2017
011_9032587913002.indd 31 2018/02/02 18:45:40
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Employment Creation at Local Production PlantPT. Elleair International Manufacturing Indonesia (EIMI), our new and third overseas production base following those in Thailand and China, started production in December 2015. EIMI, established as a joint venture between Daio Paper and Mitsubishi Corporation, leverages the strengths of both companies. With globally competitive disposable diaper manufacturing technology and development capabilities, prior experience from its business expansion in Thailand and China, as well as two years’ experience of sales activities in Indonesia, the Daio Paper Group seeks to grow its presence in Indonesia as well.
CSR and Sales Support Activities at EIMI in Cikarang AreaWe are creating opportunities to meet local communities and consumers from various social classes in the area to facilitate deeper understanding of our business activities. This thereby creates more opportunities for the Company to expand its business further (sales increase from an increase in Elleair supporters, heightened name recognition, and an edge in securing human resources, etc.).
First Disposable Diapers to Receive Halal CertificationPT. Elleair International Manufacturing Indonesia (EIMI) is the first organization to obtain Halal Certification, given to products that are permissible in Islamic law, for disposable diapers. These Halal Certified baby disposable diapers provide assurance to Muslim mothers in Indonesia, a country where the majority of the population are Muslim.
Halal Logo can be used on Halal Certified products (which meet the requirements of Islamic law)
Halal Logo
Exterior view of factory of PT. Elleair International Manufacturing Indonesia
Field work● Reaching out directly to consumers
(mothers and children)● Reaching out to future mothers● Visiting local communities, such as schools● Taking part in local events● Conducting plant tours
Collection of information and data
● Information on products of other companies
● Information on market and everyday life
● Information on Warung● User feedback on disposable
diapers
Application of insights gained from data gathered● Establishment of development process that utilizes information on the needs of
consumers and their dissatisfaction levels, which are gathered from users’ feedback on both our competitors’ and our products, through securing sufficient number of quality verification personnel
● Understanding market trends, competitors’ moves, and lifestyle habits● Sales increase through re-examination of sales strategy● Sales increase by starting distribution to stores which do not carry our products● Efficient personnel recruitment ● Establishment of favorable relationships with local schools
What we envision beyond our activitiesThe achievement of Daio
Paper’s corporate philosophy
“to bring happiness to the babies and mothers
of Indonesia”
by manufacturing high-quality disposable diapers
and selling many such products.
Overseas Business DevelopmentBusiness practices overseas are different from those in Japan. There are regions where nearly 50% of daily necessities are purchased at minimarts and traditional small neighborhood shops. By having its sales representatives conduct sales activities at each local region, the Daio Paper Group is expanding sales channels to include these community-based stores. There are also countries where these community-based stores are mainly run by women. By expanding our business in these regions, we contribute to the popularization of disposable diapers and feminine hygiene products, raising hygiene levels and preventing the spread of infectious diseases, and also contribute to increased living standards for women.
Integrated Report 2017 32
011_9032587913002.indd 32 2018/02/02 18:45:41
Support activities for a national children’s hospital in Thailand
Daio Paper Elleair Ladies OpenDaio Paper Elleair Ladies Open has been hosted in Shikoku, the place where Daio Paper Corporation was founded. As the final event of the annual Japan LPGA tour, it draws a lot of attention because it is a critical game for players competing to top the money list or get into the list of seeded players on the next LPGA tour. Daio Paper also organizes amateur golf championships across Japan, creating opportunities for young golfers aspiring to become professional golf players and also to promote golf. Through its sponsorship of golf tournaments, Daio Paper hopes to revitalize the local community by utilizing local volunteer staff to run the tournament and also through charity donations from the gallery to local organizations, etc.
Sponsoring Child-rearing Support Projects of Ehime Prefecture and Shikokuchuo CitySince 2011, the Daio Paper Group has been a sponsor of the “Child-rearing Support Project in the City of Paper,” organized by Shikokuchuo City, in which vouchers for one year’s supply of baby disposable diapers are distributed to households with babies less than one year old. In 2015, we started to sponsor the “Smiling Child-rearing Support Project,” organized by Ehime Prefecture to mitigate the declining birthrate, in which vouchers for baby disposable diapers are distributed to families raising a second or subsequent child. We will continue to proactively contribute to initiatives addressing falling birthrate.
Charity donation to eight institutions in Ehime Prefecture (presented by professional golfer Ai Suzuki)
Ceremony for the Smiling Child-rearing Support Project (Commemorative photo with Ehime Prefecture’s mascot characters “Mikyan” and “Dark Mikyan,” and Ehime Prefecture Governor Nakamura)
Social Contribution ActivitiesThe Daio Paper Group seeks to create an environment for children around the world to play their favorite sports and support people who chase after their dreams, by sponsoring tournaments for women’s professional golf and girls’ baseball, etc. Also, to revitalize local communities, Daio Paper participates in various support projects organized by local governments and conducts charity activities. We aim to strengthen bonds with local communities and contribute to their prosperous development.
Support for Overseas Disaster-stricken AreasElleair International Thailand (EIT) has been engaged in activities such as visiting orphanages and children’s hospitals and delivering relief supplies to disaster-hit areas. When a flood disaster caused by heavy rain struck northern Thailand in July 2017, EIT delivered relief supplies of disposable diapers and sanitary products to the area. Out of a desire to provide support with their own hands, EIT employees personally visited the affected areas to deliver the supplies.
33 Integrated Report 2017
011_9032587913002.indd 33 2018/02/02 18:45:42
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Measures to Prepare for DisastersThe Daio Paper Group designates September 11 and March 11 every year as Disaster Preparedness Days, and conducts joint disaster drills at the Mishima Mill, the Kani Mill, and the Tokyo Headquarters twice a year. In the joint disaster drills, we mainly conduct reporting drills by using wide-area radio systems and teleconferences to gather information on the extent of damage at each production base and the safety of employees and report to the Tokyo Headquarters.
Disaster Simulation DrillsAt these drills, we mainly conduct initial firefighting training in accordance with the disaster-prevention manual, to prevent the occurrence of a secondary disaster in the wake of an earthquake. We also use this opportunity to practice how to use AED and give artificial respiration so that our employees can put the knowledge into practice anytime.
Disaster drills at the Mishima Mill AED training
Visit to the local community (Indonesia)
Plant tours for local elementary school students (China)
Basic Policy for Business Continuity Activities
The Daio Paper Group places the highest priority on human life. We will work to fulfill our corporate social responsibility to customers and local communities by recovering the livelihoods of employees and resume business operations at an early date, while preventing secondary disasters, providing support to and cooperating with local communities.
Action Guidelines for Business Continuity Activities
1
3
2
Overseas Social Contribution Activities Elleair International China (Nantong) Co., Ltd. (EICN) holds plant tours for local consumers (20 times a year; total of about 400 people). In the plant tours for local elementary school students, we show them, in easy-to-understand presentations and demonstrations, how disposable diapers are made and what kind of technologies are used to produce them to stimulate their interest in manufacturing.
Elleair International Manufacturing Indonesia (EIMI) helps alleviate new mothers’ worries on child rearing and provide childcare support through plant tours that serve as an occasion for mothers to come together to talk, as well as through visits to local communities.
Disaster-prevention ActivitiesIn the event of a large-scale disaster, such as a Nankai-Tonankai earthquake, the Daio Paper Group will place human life as the top priority and set up a disaster headquarters to confirm the safety of its employees and their family members and identify the extent of damage swiftly. We have designed our business continuity plan (BCP) clearly to ensure there is no discontinuation of important operations concerning stakeholders such as business partners, and to restore normal operations as early as possible even if an operational disruption occurs. We also conduct disaster drills twice a year to enable our employees to respond appropriately and readily.
Assign the highest priority to securing the safety of human life:
We place top priority on securing the safety of employees and their family members, guests, and visitors above all else.
Cooperate to secure safety in local communities:
We provide the utmost cooperation to secure safety in local communities and make efforts to minimize environmental impacts that may arise due to our production plants taking damage from the disaster.
Continue important operations:
We designate operations that minimize the impacts of disasters on our customers and local communities as important operations, and prioritize the necessary actions to continue the important operations.
Integrated Report 2017 34
011_9032587913002.indd 34 2018/02/02 18:45:42
Remuneration and Treatment Committee
The Board of Directors
CEO
Management Meeting
Compliance Committee
Executive Directors/Executive Officers
Operating departments/Group companies
General Meeting of Shareholders
Collaboration
Colla
bora
tion
Decisions on election, dismissal, and non-reappointment, judgment on the rationality of the accounting auditor
Audit
AuditCollaboration
Election/Dismissal
Oversight Appointment/DismissalReporting
Reporting
Reporting
Reporting
Reporting
Reporting
Repo
rting
Repo
rting
Election/Dismissal Election/Dismissal
Au
dit
& S
up
ervi
sory
Bo
ard
(M
emb
ers)
Assis
tanc
e
Audi
tor’s
Offi
ce
Internal Control & Audit
Department
Instructions and commands
Instructions and commands
Reporting
Acc
ou
nti
ng
Au
dit
or
Acco
untin
g au
dit
Corporate Governance Structure
With the aim of becoming a company that is trusted by all stakeholders, Daio Paper Corporation works to strengthen its corporate governance by following the Daio Paper Corporate Governance Guidelines. We encourage all officers and employees of the Group to follow the founding principle, “Passion with sincerity leads to greatness,” as unchanging values in all their judgment and actions, respect diversity and the individuality of employees and coworkers, and to act with consideration, good judgment, and proactively.
D
I
A
OKey measures implemented to strengthen corporate governance and pursue diversity management2012 Appointment of Outside Directors2014 Announcement of the Daio Paper Group Declaration of Health2015 Selected as “Nadeshiko Brand*” for FY2014
Established the Daio Paper Corporate Governance Guidelines2016 Started to evaluate the effectiveness of the Board of Directors
Revised the Daio Paper Group Management Philosophy and the Code of ConductObtained the highest rating in the DBJ Health Management Rating provided by the Development Bank of Japan (DBJ)Announced the Daio Paper Group Declaration of Work Style Reform
2017 Selected as the “Nadeshiko Brand” for FY2016 (second time)Obtained the highest rating in the DBJ Health Management Rating provided by DBJ (second consecutive year)
*Nadeshiko Brand: “Nadeshiko Brand” designation is granted to companies listed on the First Section of the Tokyo Stock Exchange (TSE) that are outstanding in encouraging women’s success in the workplace, selected jointly by the Ministry of Economy, Trade and Industry (METI) and the TSE.
Corporate GovernanceDaio Paper Corporation works toward strengthening its corporate governance based on the Corporate Governance Guidelines established in October 2015, with the aim of becoming a company that is trusted by our shareholders and other stakeholders.
Integrated: Corporate Culture That Offers New Challenges and a Sense of Security and Trust
Four Pillars of the Daio Paper Group Management Philosophy
Basic Policy on Corporate GovernanceDaio Paper strives to improve its corporate governance in order to contribute to the development of a lively lifestyle, culture, and industry for the society as a full-range papermaking company group that is trusted by all stakeholders including shareholders, business partners,
employees, and residents of local communities. We will ensure that the Group sustain steady growth, increase corporate value over the medium to long term, and conduct business activities in harmony with the global environment.
35 Integrated Report 2017
011_9032587913002.indd 35 2018/02/02 18:45:43
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Roles of the Board of DirectorsThe roles of the Board of Directors are to oversee the performance of duties by the management and the formulation of management strategy, etc. to ensure the fairness and transparency of management, and to make decisions on the execution of important business matters in accordance with laws and regulations of the Articles of Incorporation. In addition, the Board of Directors delegates authority to lower-level meetings, such as management meetings, and to Directors in charge of related business operations.
Accordingly, the Board of Directors also oversees the status of such meetings and the performance of duties by Directors, etc. Outside Directors, employing their various experiences and knowledge, oversee business execution by the Board of Directors and each Director, and monitor conflicts of interest between the Company and each Director from the viewpoint of stakeholders, in order to ensure the sustainable growth of the Group and increase its corporate value over the medium to long term.
Roles of the Audit & Supervisory Board (Members)The Audit & Supervisory Board comprises five members, including three Outside Audit & Supervisory Board Members. It investigates the condition of the internal control system through business audits and accounting
audits, in close cooperation with the internal audit division and Accounting Auditor, based on an audit plan determined by the Audit & Supervisory Board, in order to strengthen and enhance its management check function.
Audit Framework1. Audit by Audit & Supervisory Board MembersAudit & Supervisory Board Members attend Board of Directors meetings and other major meetings, and investigate the status of the Company’s operations and financial standing, in order to audit the legality and appropriateness of the performance of duties by Directors. Outside Audit & Supervisory Board Members are appointed from among certified public accountants and lawyers who have expertise in corporate accounting and corporate laws as well as high-level insights and experience of corporate management, and they audit decision-making by the Board of Directors and the performance of duties by Directors from an objective and fair position.
2. Internal AuditTo ensure that the corporate governance framework of the entire Group is in order, the Internal Control and Audit Department conducts on-site field audits and paper audits, etc. for each of the Company’s operating departments, as well as domestic and overseas Group companies. These are conducted from the viewpoint of operational execution process, compliance, and risk management, etc., based on the annual audit plan approved by the Board of Directors.
Evaluation of the Effectiveness of the Board of Directors
Since 2016, Daio Paper Corporation has been evaluating the effectiveness of the Board of Directors annually, using the results of a self-evaluation questionnaire collected and tallied up by an external organization. The questionnaire, targeted at all Directors and Audit & Supervisory Board Members, incorporates a third-party opinion on the composition and operation of the Board of Directors from an external organization. An overview of the results of the evaluation for this fiscal year is as follows.
1. Overview of the evaluation results
The Company has confirmed that its Board of Directors is largely functioning properly in terms of its composition and operation, strategy and execution, risk management, corporate ethics, and monitoring of business performance, etc., and its effectiveness is adequately ensured.
2. Efforts to address issues identified in the effectiveness evaluation of the Board of Directors for the previous year
The effectiveness evaluation of the Board of Directors for FY2016 identified that a review of agenda items for Board meetings should be conducted. In October 2016, the Company reviewed the type of matters to be included in the agenda for the Board meetings and management meetings. We found that this has led to an improvement in the scores of the self-evaluation questionnaire, and more focused and effective deliberation of agenda items at Board meetings.
3. Points evaluated as requiring further improvement
The Company considers that the Board of Directors needs to constantly obtain information, etc. to respond promptly to changes in laws and regulations, including the Companies Act, and the environment surrounding the Company, in order to fulfill the roles and responsibilities as officers and conduct adequate deliberations at the Board of Directors.
The Company will continuously work to enhance the effectiveness of the Board of Directors by examining and implementing improvement measures for issues identified in the effectiveness evaluation of the Board of Directors.
Integrated Report 2017 36
011_9032587913002.indd 36 2018/02/02 18:45:43
Note: Investigations on reported matters are led by Audit & Supervisory Board Members, and relevant departments are required to implement the necessary corrective measures.
Initiatives for ComplianceDaio Paper has established a compliance framework whereby the Compliance Committee implements unified management of risk control measures and deliberates and makes decisions on risk control measures that are appropriate for different levels of risk, with the objectives of strengthening and maintaining risk management and compliance. The Compliance Committee, which deliberates on the risk management framework of the Daio Paper Group, is chaired by the Director in charge of Compliance, Internal Control and the Audit Department, and comprises nine officers and employees of the Company, including all three Outside Directors. The Compliance Committee has eight subordinate organizations. These subcommittees discuss, make decisions on and promote the implementation of concrete risk control measures that are appropriate for different types of risk, thus establishing a highly effective risk management structure.
Implementation of a Whistle-blowing System (Corporate Ethics Hotline)The Daio Paper Group has established the Corporate Ethics Hotline, a point of contact for whistle-blowing. In addition, to promote the use of the whistle-blowing system, we established enforcement rules that obligate whistle-blowing when employees become aware of unlawful acts and situations, ensure the confidentiality of whistle-blowers, and protect whistle-blowers from disadvantageous treatment, and informed all employees across the Group of these rules. The point of contact for whistle-blowing is the Auditors’ Office (internal contact), whose staff assist Audit & Supervisory Board Members, and an outside lawyer (outside contact). This framework eases reluctance and makes it easier on the employee to report illegal and other misconduct concerning top-level executives and administrative departments.
H&PC Quality Subcommittee
Safety & Health Subcommittee
Environment Subcommittee
Overseas Risk Subcommittee
Co
mp
lian
ce C
om
mit
tee
Accounting and Finance Subcommittee
Labor and Human Rights Subcommittee
General Affairs and Public Relations Subcommittee
Paper and Paperboard Quality Subcommittee
Organization Chart of the Compliance Framework
Officers and Employees of the Daio Paper Group(including contract employees and
part-time employees, etc.)
Feed
ing
back
sur
vey
resu
lts
Repo
rtin
g
Repo
rtin
g
Outside contact
(Outside lawyer)
Internalcontact
(Auditors’ Office of the Company)
ComplianceCommittee
Repo
rtin
g an
d di
scus
sion
Repo
rtin
g
Repo
rtin
g
Dis
cuss
ion
Discussion
Audit & Supervisory Board Members
(all Audit & Supervisory Board Members including Outside Audit & Supervisory Board
Members)
Outsidespecialists
Schematic Diagram of Corporate Ethics Hotline
ComplianceThe Compliance Committee leads the initiatives for identifying risks and implementing concrete risk control measures that are appropriate for different types of risk, and ensuring operations comply with laws and regulations, etc. by conducting compliance training for all employees across the Group.
37 Integrated Report 2017
011_9032587913002.indd 37 2018/02/02 18:45:43
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
I believe corporate governance is a framework that
allows a company to reinforce its strengths and
complement its weaknesses, enabling it to straighten
itself out and earn the trust of society, leading to
enhanced total vitality of the company.
At the monthly meeting of the Compliance
Committee, we deliberate on various issues regarding
risk management and compliance of the entire
Group, and decide and implement countermeasures
to cultivate a sound corporate culture and to
ultimately achieve the future vision of the Company.
At the meeting of the Remuneration and
Treatment Committee, we consider and decide the
officers’ remuneration structure and actual amount
of remuneration of individual officers.
The Board of Directors is the core of the corporate
governance framework. To enable a thorough
examination of, as well as high-quality and lively
discussions on each matter proposed, the Outside
Directors and Outside Audit & Supervisory Board
Members hold a preliminary briefing and review
meeting prior to each Board of Directors meeting.
The purpose of the briefing and review meeting is to
identify the true nature and key idea behind each
matter proposed in order to give advice on it, raising
the level of discussion and improving the productivity
of the Board of Directors.
Daio Paper has continued to tackle challenges
through the course of implementing the First
Medium-term Business Plan “Restart—Solid Reform
and Further Growth” and the Second Medium-term
Business Plan “Step-up—Leap and Expand,”
enabling the Company to achieve robust growth
and evolve itself. I believe that this was the result of
the proper manifestation and embodiment of the
underlying Corporate Motto of the Company
“Passion with Sincerity,” made possible through the
improvement of corporate governance. I think that
in order to strengthen corporate governance, it is
essential to deploy various measures based on
attention to regions, resources, and realization.
Going forward, we will stay true to our Corporate
Motto, and continue to commit to work toward
enhancing and improving the Company’s corporate
governance further.
Message from Outside Director
Nobuhiko YoshidaOutside DirectorChairman of the Remuneration and Treatment Committee;Member of the Compliance Committee
Integrated Report 2017 38
011_9032587913002.indd 38 2018/02/02 18:45:43
Information Disclosure PolicyThe Company proactively utilizes various information disclosure tools, such as press releases and information posting on our corporate website, to ensure that financial information such as earnings, and non-financial information such as corporate strategy, risks and corporate governance, are disclosed timely and fairly to all stakeholders.
*Quiet period: In order to prevent leakage of earnings information and ensure fairness, the Company, in principle, will observe a quiet period, beginning the day following the end of each quarterly accounting period and ending on the date of announcement of financial results for the said quarterly accounting period. During this period, we will not comment or answer questions regarding financial results and earnings outlook.
For details, please visit the “IR Information” page on the website of the Daio Paper Group.
http://www.daio-paper.co.jp/en/ir/index.html
IR Calendar
Principal IR Activities Conducted in FY2016 (from April 2016 to March 2017)
Activities Number of events Details
One-on-one meetings with institutional investors
94 timesIR interviews and teleconferences with domestic and overseas analysts and institutional investors
Earnings and management strategy briefing for analysts and institutional investors
TwiceBriefings with the President and Director-in-charge as the main speakers held after the second and fourth quarters
Overseas IR meetings OnceMeetings with overseas investors (Hong Kong, Singapore) by persons in charge of IR and Corporate Planning
Conferences organized by securities companies
TwiceSmall meetings and one-on-one meetings with domestic and overseas analysts and institutional investors at investment conferences
First quarter Second quarter Third quarter Fourth quarter
April May June July August September October November December January February March
Full-year earnings announcement/Analysts
briefingAnnual general
meeting of shareholders
First quarter earnings announcement
Second quarter earnings announcement/Analysts briefing
(Publication of the Daio Paper Group Corporate Report)
Third quarter earnings announcement
Quiet period* Quiet period* Quiet period* Quiet period*
Responsibilities to Shareholders and Investors
Policy and Framework of IR ActivitiesGuided by the Corporate Motto “Passion with Sincerity,” the Daio Paper Group is committed to make timely, appropriate and fair information disclosure, as well as promote sincere and proactive communication with shareholders and investors through its IR activities. The Company established the IR team in July 2016 to promote engagement (constructive dialogue) with shareholders and investors. Daio Paper will continue to make an effort to explain its management policy and business conditions clearly, and to reflect feedback from shareholders and investors in its corporate activities appropriately.
39 Integrated Report 2017
011_9032587913002.indd 39 2018/02/02 18:45:43
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Diversity ManagementDaio Paper is promoting diversity to encourage each employee, with their diverse abilities, to “take initiative to hone their unique abilities and sensibilities, and act with consideration, good judgment, and proactivity.” We aim to create a corporate culture in which employees embrace and make full use of their diverse values, points of view, and abilities and turn those into strengths that increase corporate value. Of various initiatives to promote diversity, we have been focusing particularly on promoting women’s active involvement in the workplace, with numerical targets, such as the ratio of female managerial employees, in place since 2014. The key initiatives are: (1) cultivating career awareness and promoting self-directed career development among female employees in career-track positions, (2) cultivating female employees into managerial positions, and (3) supporting good balance between work and childcare. For FY2016, Daio Paper was selected as the Nadeshiko Brand for the second time following FY2014. Daio Paper
Daio Paper Group’s Diversity
Develop and make full use of the abilities and strengths of each of our diverse employees to increase our
corporate competitiveness and value
Target ②: Fostering acceptance of and respect for diversity
Target ①: Establishing an ethos of promoting women’s active involvement in the workplace
Creating Innovations
Numerical Targets for Promoting Women’s Active Involvement in the Workplace (through FY2020)
Target ①
3.5%Current situation: 1.2% (as of October 2017)
Target ②
12.5%Current situation: 10.2% (as of October 2017)
Note: The Company has announced that its long-term target is to increase the ratio of women in managerial positions to 30% and the ratio of women in career-track positions to 40%.
Sustainable growth of the Group
Innovation
Growth spiral
OrganizationDiverse/
Global human resources
IndividualsWork motivation/
Eagerness to contribute/Capacity
development
Creation of a workplace that motivates employees
Health management Diversity management Human resource development
was recognized for our proactive efforts to promote women’s active involvement in the workplace, in particular the announcement of the Declaration of Work Style Reform and the President’s message. We also implemented “Reforms to Ways of Working,” “Career Training and Interview for Female Employees in Career-track Positions,” and “Mentor Program (one-on-one coaching by Officers).”
■ Supporting Good Balance between Work and ChildcareDaio Paper is aiming to create a corporate culture in which it is common practice for female employees who are raising children to play leading roles in the workplace. We provide female employees returning to work after childcare leave opportunities to consider their career path. We organize consultations with female employees before they return to work from childcare leave to facilitate a smooth return to work, as well as consultations after returning to work to facilitate their active participation in the workplace.
Creating a Workplace That Motivates EmployeesBased on the idea that motivated employees would contribute to the sustainable growth of the Company, the Daio Paper Group is promoting diversity management, health management, and human resource development.
Women in career-track positions:
Women in managerial positions:
Integrated Report 2017 40
011_9032587913002.indd 40 2018/02/02 18:45:43
We have also introduced the following measures to develop an environment that allows female employees to exercise their full potential with peace of mind, even during their child-rearing years. • Subsidy program for baby-sitting service • Extended short working hour system for child caring
purposes to until the child finishes third grade of elementary school
• Expanded the scope of valid reasons for using extended
Human Resource DevelopmentTo develop next-generation leaders who will shape the future of the Company, the Daio Paper Group conducts job rotations to let employees experience different operations. They will gain both a comprehensive ability to look at things with a broad perspective and the expertise to delve into the essence of problems and solve them.
Level Training by level Selective training On-the-job training (OJT)
Overseas personnel training
Personal development
Professional training
■ Training for newly appointed general managers
■ Training for newly appointed managers
■ Training for next-generation leaders
■ Open-application education grant program (MBA program, etc.)
■ Incentives to take the TOEIC test
■ Short-term language study abroad
■ Training before overseas assignment
■ Self-nominated job-posting system for overseas assignment
Others
■ Correspondence education programs
• Language• Management• Leadership• Finance/accounting• PC skills• ComplianceOthers
■ Support for acquisition of public qualification
• Bookkeeping• Certified mechanical
maintenance engineer
Others
■ Training for sales personnel
■ Technical knowledge education
■ Safety education
■ Lecture on laws and regulations
Others
■ Training for leaders of practical operations
■ Training for mentors
■ Follow-up training for third-year employees
■ Follow-up training for first-year employees
■ Training for new employees
■ Mentor program (one-on-one coaching)
Health and Productivity ManagementEnsuring that employees maintain good health and work with vitality is essential for a company to achieve healthy organizational operations and sustainable growth. The Daio Paper Group announced the “Daio Paper Group Declaration of Health” in 2014. Daio Paper endeavors to contribute to the development of people’s lives, culture, and industry and continue to be a Group trusted by society, underpinned by the well-being of its employees and their families. We are implementing the following initiatives to encourage employees to maintain and improve their health: (1) create a comfortable workplace environment, (2) promote healthier lifestyle habits, (3) promote mental healthcare, and (4) promote efforts to stop smoking.
■ Obtained the Highest Rank in the “DBJ Health Management Rating”
Daio Paper obtained the highest rank in the DBJ Health Management Rating for FY2016, provided by Development Bank of Japan Inc. The Company was highly rated for its initiatives that care for the health of its employees, for example, initiatives to reduce work hours and promote the use of paid leave, implementation of stress level tests, and initiatives to encourage employees to adopt healthier lifestyle habits.
Concrete Numerical Targets for Health and Productivity Management
Creating a comfortable workplace environmentReduce overtime work
Improvement of lifestyle habitsAchieve 100% take-up rate for medical checkups
2016 (result) 2018 (target)23 hours/month 20 hours/month or less
2016 (result) 2018 (target)99.6% 100%
Promoting mental healthcareImprove participation rate in stress level tests
2016 (result) 2018 (target)93.9% 95% or more
Promotion of efforts to stop smokingReduce smoking rate
2016 (result) 2018 (target)33.8% 30% or less
annual paid leave to include getting vaccinations for children and regular health check-ups, etc.
In October 2017, we established “GOO.N SukuSuku Leave,” which is paid leave for childcare designed to further support employees taking time off for childcare and promote male employees’ participation in childcare.
Sen
ior
man
ager
ial/
man
ager
ial
Plan
nin
g a
nd
ad
visi
ng
Gen
eral
Certification mark, dubbed Kurumin, awarded to companies that support raising next-generation children
41 Integrated Report 2017
011_9032587913002.indd 41 2018/02/02 18:45:43
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Communication with CustomersWe established “Elleair Customer Service Center” as the point of communication with customers. We listen to and handle customers’ inquiries with sincerity from their perspective, and strive to fulfill their needs. We reflect our customers’ feedbacks in product development, updating products to improve satisfaction, and modifying labels and advertisements to improve ease of understanding.
Exchange-of-opinion Meetings with Local ResidentsAt Daio Paper’s Mishima Mill, we create opportunities to exchange opinions with local residents once or twice a year. At this event, we explain our environmental protection activities (status of improving facilities, noise and vibration measurement data, etc.) and give a tour of the production facilities.
Tour of production facilities for local residents
Plenary meeting of Sakura Terrace
Dr. Minoru KamataGraduated from Tokyo Medical and Dental University, Faculty of Medicine;Currently, Director Emeritus of Suwa Central Hospital in Nagano Prefecture
Customers
Elleair Customer
Service Center
● Opinions, inquiries, suggestions
● Prompt and sincere response
● Product improvement, modification of labels and advertisements to improve ease of understanding
The Daio Paper Group is supporting the activities of “Panel for Study of Stress-free Nursing Care” with Dr. Minoru Kamata and member experts. Through the activities, we hope to make nursing care easier on the caregivers by making full use of various information and social services to lower caregiving stress.The activities are not only conducted in Japan, but overseas as well, extending the touch of tenderness provided by our Attento-brand products to people around the world.
Supporting Stress-free Nursing Care
Communication with Customers
Activities of “DAIO Partner Ship Sakura Terrace” Distributors’ PartnershipDAIO Partner Ship Sakura Terrace, our regional distributors’ partnership, was established in November 2015 to facilitate collaboration with our distributors in the face of declining demand. We seek to “grow together, thrive together, and open up a new era together.” Through Sakura Terrace, we have been implementing market-oriented initiatives in collaboration with member distributors, such as seminars by job position level, ranging from new employees to senior executives, and information-sharing through the Internet.
What is Stress-free Nursing Care?
Integrated Report 2017 42
011_9032587913002.indd 42 2018/02/02 18:45:44
The Daio Paper Group aims to reduce CO2 emissions, promote overseas afforestation and high usage of recovered paper, facilitate energy savings, conserve biodiversity, and work toward establishing a sustainable society.
Organic: Contribution to the Global Environment
D
I
A
O
Compliance Committee
Environment Subcommittee
Paper Manufacture
DivisionSeven companies,
eight mills
Corrugated Container Division
One company, 13 factories
Printing Division
Five companies, nine factories
Household Paper
DivisionSix companies,
12 factories
DAIO Global Environment Charter
Environmental Management Promotion FrameworkDaio Paper Corporation and its 19 Group companies, which are classified into four divisions by industry, conduct activities to develop and implement measures to prevent the recurrence of environmental accidents and complaints, to respond to revisions to environmental laws and regulations, and to improve the environment. The Environment Subcommittee mutually evaluates the activities of each division. Problems would be shared among the four divisions, and the direction of the activities would then be set or changed accordingly. The Environment Subcommittee reports its status of operations to the Compliance Committee, which then approves it.
Environment-related Compliance FrameworkUnder the Daio Paper Group’s environmental management framework, the Paper Manufacture Division (seven companies and eight mills), the Corrugated Container Division (one company and 13 factories), the Printing Division (five companies and nine factories), and the Household Paper Division (six companies and 12 factories) work together to share environmental risks and problems of each Division and address problems before they emerge.
Based on the environmental self-inspection list, which is common to all Group companies, employees of each company perform self-checks on the compliance status for each law and regulation once a year, and the Environment Subcommittee assures the accuracy of the results of environmental self-inspections conducted by each company. These activities allow the Daio Paper Group to ensure legal compliance as well as maintain compliance awareness.
We conduct business activities in harmony with the environment, setting CO2 emission reduction as our action goal to mitigate global warming, and carry out activities to advance effective use of
recovered paper, forest conservation, energy saving, and waste reduction.
Create an environmentally
conscious corporate culture
1
Adopt and develop environmental load
reduction technologies and products
2
Promote the effective use of
resources
3
Basic Policy
Four Pillars of the Daio Paper Group Management Philosophy
43 Integrated Report 2017
011_9032587913002.indd 43 2018/02/02 18:45:45
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Environmental Action Plan
Environmental Monitoring SystemDaio Paper Corporation and the 10 paper manufacturers in the Group constantly monitor environmental factors, such as air and water quality, with continuous measuring instruments. At the Mishima Mill and the Kani Mill, an environmental monitoring system runs constantly. (The 10 paper manufacturers are Iwaki Daio Paper Corporation, Dainichi Paper Corporation, Otsu Paper Board Co., Ltd., Harima Paper Tech. Corporation, Taisei Paper Corporation, Marubishi Paper Tec. Corporation, Omiya Paper Corporation, Akabira Paper Corporation, Daio Paper Products Corporation, and Tokai Seishi Kogyo Co., Ltd.)
Environmental monitoring server
(Safety Environment Office)
An alarm email is sent to the administrator if measured data exceed the voluntary control
value
Manufacturingsite A
Manufacturingsite
B
Manufacturingsite
C
Operation data at each manufacturing site are monitored in real-time using the intra-company network
Structural Diagram of Environmental Monitoring System (Daio Paper’s Mishima Mill and Kani Mill)
Environmental Self-inspection ChecklistWe update the Environmental Self-inspection Checklist annually, incorporating revisions to environmental laws and regulations (air, water quality, noise/vibration, odor, and waste) and measures to address similar internal and external environmental problems. Using the checklist, Daio Paper Corporation and 19 Group companies carry out self-inspections once a year according to an annual schedule. The status and progress of corrections of faults detected through environmental self-inspections are managed by the Environment Subcommittee of each company.
Promoting the Acquisition of ISO14001The Daio Paper Group encourages our group companies to acquire the ISO14001 Certification. 17 companies and 33 offices have obtained certification.
Education on Laws and Regulations for Each Position LevelThe environmental conservation department provides education to Directors and general managers once a year based on an annual schedule. The contents of the education are mainly on revisions to environmental laws and regulations and their impacts on company operations. All employees who are managers or below receive education on compliance, including environmental laws and regulations, based on the annual compliance education schedule of each section during the monthly compliance week, enabling them to consider the legal violation risks of their own departments and take measures in advance.
CO2 Emission Intensity Final Disposal Volume of Industrial Waste
Usage of Hard-to-recycle Recovered Paper
1.061.06
0.990.990.940.94
1.151.15
(t/t product)
2017/32013/3 2014/3 2015/3 2016/3 (FY)
0
1.00
0.80
1.20
1.40
0.870.87
9999
6655
44
(1000 t)
0
5
10
15
2017/32013/3 2014/3 2015/3 2016/3 (FY)
131131
121121 121121 122122
134134
(1000 t)
0
90
120
150
2017/32013/3 2014/3 2015/3 2016/3 (FY)
Reduce emission intensity
to 0.78 tons/tons product by the end of FY2030
(Reduce 26% compared to FY2013)
Increase use of hard-to-recycle recovered paper to
140,000 tons by the end of FY2030
Reduce final disposal volume of industrial waste to
5,000 tons
Integrated Report 2017 44
011_9032587913002.indd 44 2018/02/02 18:45:45
PRINCESS HARU (Launched in July 2017)
PRINCESS PACIFIC (Launched in August 2017)
PRINCESS SUIHA (Launched in October 2017)
Initiatives for a Modal Shift in Product TransportationModal shift refers to switching from road transport by truck, which emits large amounts of CO2, to less carbon intensive transport such as ship or rail. Daio Paper has been promoting a modal shift for the long-distance transport of products from the Mishima Mill (500 km or more). We achieved a modal shift rate of 86.1% in FY2016. By promoting a modal shift to JR Freight’s container transportation, which emits less CO2 than trucks, we are reducing the CO2 emissions of the Daio Paper Group as a whole.
Eco-shipsDaio Paper Corporation operates nine carriers for transporting woodchips, which are raw materials for papermaking. Of these, the Company will replace three woodchip carriers that have been in operation since the late 1980s under a charter contract with Daio Kaiun Co., Ltd. with eco-friendly ships with a higher fuel-economy performance (deadweight tonnage: about 50,000 tons) in FY2017. The first such initiative by a domestic papermaking company, the introduction of eco-ships, with their state-of-the-art engines and improved engine control technology, will achieve a 25% improvement in fuel efficiency compared with conventional woodchip carriers. It is estimated that switching to eco-ships will lead to a reduction in heavy oil consumption of 2,390 tons/year per
86.986.9
2017/32014/3 2015/3
90.490.4
2016/3
89.189.1
2013/3
15.015.0
75.475.4
14.714.7
74.474.4
15.515.5
71.471.4
86.286.2
16.116.1
70.170.1
86.186.1
15.715.7
70.470.4
(%)
(FY)
0
20
40
60
80
100■ By ship ■ By rail
Modal Shift Rate for Transportation over Distances of 500 Km or More
Increased propulsion efficiency by smoothing propeller wash
Reduced CO2 emissions through electronic control of engine system
Reduced wind and water resistance by modifying shape of ship
Introducing Fuel-efficient ships (Eco-ships)
ship and a fall in CO2 emissions of 7,531 tons/year per ship. The eco-ships will significantly heighten the competitiveness of the Company’s products, and become a means of transport that will increase our “contribution to the global environment (Organic),” as set out in the Daio Paper Group Management Philosophy.
Initiatives in Product TransportationThe Daio Paper Group has been implementing a modal shift, switching from road transport by truck to marine transportation and rail transportation, for long-distance transport of products to destinations more than 500 km from the production plants. We will work to reduce CO2 emissions further by expanding the modal shift’s target area. We also go beyond the boundaries of companies to work toward reducing total CO2 emissions, by collaborating with other companies in the industry to conduct reciprocal transportation and joint transportation, increasing transportation efficiency and reducing the number of trucks on the road.
45 Integrated Report 2017
011_9032587913002.indd 45 2018/02/02 18:45:46
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Conceptual drawing of the biomass boiler in the Mishima MillScope of data collection: Daio Paper Corporation and production bases of 19 Group companies (cf. p. 7)
2017/32014/3 2015/3 2016/32013/3
3737
6363
4747
5353
4848
5252
5151
4949
5151
4949
5050
5050
(%)
(FY)
0
20
40
60
80
100
■ Biomass energy ■ Fossil-derived energy
1991/3
Energy Composition Ratio of Fossil-derived Energy and Biomass Energy
Biomass energy ratio: 50%
57.557.5
2017/31991/3 2014/3 2015/3
72.372.3
2016/3
63.063.0
2013/3
(%)
(FY)0
20
40
60
80
1.6
57.557.560.460.4
Percentage of CO2 Emissions Absorbed and Fixed through Overseas Forestation
Biomass Fuels
Use of Renewable Energy
Initiatives for CO2 Fixation through Forestation
The Daio Paper Group has promoted the conversion from boilers fired by fossil fuels such as coal and heavy oil to boilers fired by non-fossil fuels (biomass fuels). As a result, the biomass energy ratio of the Daio Paper Group increased from 37% in FY1990 to 50% in FY2016. The Mishima Mill is constructing a biomass power generation plant that will utilize pulp waste liquor from the
kraft pulping process, with operations slated to launch in 2020. We plan to sell the electricity generated to electric utilities under the Feed-in Tariff (FIT; fixed-price purchase scheme for renewable energy) scheme. The biomass power generation plant will improve the energy efficiency by about 5% compared with before, which will lead to a CO2 emission reduction of 25,000 tons/year.
Otsu Paper Board Co., Ltd. has installed solar power generation facilities on the roof of its product warehouse as part of its environmental response measures. As a result, the company generates 298 MWh of electricity per year, reducing 148 tons of CO2 emissions annually. Iwaki Daio Paper Corporation has been introducing renewable energy with a low environmental load. The company started up solar power generation facilities at the end of November 2014 along with the reinforcement of its containerboard production facilities, which they relocated and remodeled in August 2014. The solar power generation facilities generate 252 MWh annually and reduce CO2 emissions by 141 tons per year. Fukushima Factory of Elleair Product Co., Ltd. received support from the Subsidy for Business Location for Reconstruction of Industry in Fukushima, and established solar power generation facilities on the roof of its product
warehouse, which started operations in January 2017. The solar power generation facilities generate 29.1 MWh of electricity per year, and are expected to reduce 16.3 tons of CO2 emissions annually.
The Daio Paper Group has been engaged in activities to plant trees, which absorb and fix CO2, overseas through Forestal Anchile Ltda. (Chile) since 1989. In FY2016, the forestation project achieved the absorption and fixation of 2,272,000 tons of CO2, which was 60.4% of the total amount of CO2 emitted through the business activities of the entire Group.
Solar power generation facilities at Fukushima Factory of Elleair Product Co., Ltd. started operation in January 2017
Integrated Report 2017 46
011_9032587913002.indd 46 2018/02/02 18:45:46
Initiatives for Recycling Waste MaterialsIndustrial waste such as incinerated sewage sludge ash, incinerated ash generated by biomass boilers, and sludge generated in the chemical manufacturing process have been recycled mainly into cement raw materials and base course materials. In addition, we have started to recycle industrial waste into concrete blocks, recycled soil, and sub-materials for steelmaking. As a result, excluding the final disposal (landfill disposal) amount of solid waste, we achieved an industrial waste recycling rate of 98.7%. Concrete blocks, which are formed by mixing incineration ash and cement and then shaped into cubes, are used as soil retainer blocks to prevent landslides and other disasters. Recycled soil is a certified recycled product, and is made by mixing quicklime and a fixation agent. It is used as an embankment material such as to raise the ground level of low-lying land or the surrounding ground level when constructing roads.
Concrete blocks used to retain soil
Recycled soil used as embankment material
Recycling rate of industrial waste:
98.7% (group-wide)
Amount of Industrial Waste Produced (Daio Paper Group)
Others 0.1% Landfilldisposal0.2%
Land reclamation5.1%
Cement raw materials43.4%
Recycled crushed stone51.2%
Breakdown of Recycled Waste (Mishima Mill)
Final Disposal Amount of Industrial Waste (Daio Paper Group)
Recyclingrate:
99.8%
333333
2017/3
350350
2014/3 2015/3 2016/3
304304314314345345
2013/3
(1000 t)
(FY)0
100
200
300
400
500
2017/32014/3 2015/3 2016/32013/3 (FY)
55
99
66
99
44
(1000 t)
0
5
10
15
Forestal Anchile designates natural forests and potential habitats of endangered species within its forestry property as reserves, and regularly monitors these designated areas to check if the ecology of such animals and plants is maintained.
Monitoring the Ecology of Animals and Plants
Forestal Anchile Ltda. (Chile)Showing consideration to biodiversity
Monitoring of wildlife
Cocoi heron(scientific name: Ardea cocoi )A bird that can be found in the Carlos Anwandter Nature Sanctuary, a Ramsar wetland, in XIV Region in Chile
Black-necked swan (scientific name: Cygnus melancoryphus)A symbolic bird of the Carlos Anwandter Nature Sanctuary, a Ramsar wetland, in XIV Region in Chile
Initiatives to Reduce Final Disposal Amount of Industrial WasteThe Daio Paper Group is promoting the reduction of final disposal amount of solid waste, by switching to intermediate waste treatment companies that recycle waste for the disposal of industrial waste produced in the Group. The total final disposal amount of industrial waste produced by the Group amounted to 4,000 tons (1.3% of the total industrial waste) in FY2016. The amount of industrial waste produced by the Mishima Mill accounted for 75% (258,000 tons) of the total of that produced by the Group, but through the promotion of recycling waste into recycled crushed stone and cement raw materials, we achieved a recycling rate of 99.8% at Mishima mill.
47 Integrated Report 2017
011_9032587913002.indd 47 2018/02/02 18:45:46
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Notes: 1. Scope of data collection: Daio Paper Corporation and the production bases of the 15 domestic Group companies (cf. P7) 2. Only chemical substances with 1 t or more of volume handled are listed. 3. Dioxins are excluded from output data aggregation due to differences in units of measure used.
The Daio Paper Group gives maximum consideration to product safety by appropriately managing the use of chemicals. We adopt new paper chemicals not just based on their effect on product quality, but also perform in-house evaluations to measure their possible impacts on people and the environment. We also check the safety of chemicals already adopted by requiring the submission of chemical content certificates every year.
The Mishima Mill and the Kani Mill of Daio Paper Corporation and Iwaki Daio Paper Corporation conducted the following study on the impacts of chemicals on soil and groundwater, and confirmed that there were no problems.(1) Study on land-use history
We verified the history of land use and confirmed, among others, that the sites were farmland before the production plants were constructed.
2017/32014/3 2014/5 2016/32013/3
(t)
(FY)
0
60
80
40
20
100
44444747
6666 6161
4444
Initiatives for Reducing the Amount of PRTR Substances
Soil and Groundwater Impact Study
Emission Volume of PRTR-listed Chemical Substances
Substance No. Name of Chemical Substance Unit Volume Handled Emission Volume Volume Transferred
1 Water-soluble zinc compounds t 1.2
2 Acrylamide t
20 2-aminoethanol t 1.0 1.0
48 EPN t 1.2
80 Xylene t 3.0 0.0 0.0
127 Chloroform t 2.9 2.9
134 Vinyl acetate t 1.1 0.2
243 Dioxins mg-TEQ 37.9 2.1
279 1,1,1-trichloroethane t 1.7
296 1,2,4-trimethylbenzen t 22.9
300 Toluene t 634.0 23.5 15.7
333 Hydrazine t 1.4
374 Hydrogen fluoride and its water-soluble salt t 1.4 5.1
395 Water-soluble salts of peroxodisulfuric acid t 4.4
405 Boron compounds t 5.2 3.2 0.3
412 Manganese and its compounds t 1.7
438 Methylnaphthalene t 89.0 2.8
Total t 766.3 44.3 16.2
(2) Water quality test of groundwater (spring water) at plant sites and surrounding areasWe conducted analyses of 26 items on the groundwater at each production plant in accordance with the Soil Contamination Countermeasures Act, and confirmed that there were no problems.
Environmental Accounting
Integrated Report 2017 48
011_9032587913002.indd 48 2018/02/02 18:45:46
Environmental Accounting
❶ Scope of calculations: In addition to the Mishima Mill and the Kani Mill of Daio Paper Corporation, and Iwaki Daio Paper Corporation, forestry-related operations of Forestal Anchile Ltda., our Group company in Chile, were included within the scope of calculations for Environmental Conservation Costs and Benefits.
❷ Target period: FY2016 (from April 1, 2016 to March 31, 2017)❸ Calculations were performed using “Environmental Accounting Guidelines 2005” released by the Ministry of the Environment.
[Environmental Accounting: Calculation Standards]
Category Details of major activities Investment Cost
(1) Business area cost ¥2,777 ¥30,759
① Pollution prevention cost Effluent treatment facilities, deodorizing/exhaust gas desulfurization facilities, ECF, etc. 1,349 5,409
② Global environmental conservation cost Overseas forestation, maintenance and management of company-owned forests, energy-saving 81 1,527
③ Resource circulation cost Waste disposal/recycling waste as materials, effective use of recovered paper and other resources 1,347 23,823
(2) Upstream/downstream cost Recycling cost, low-sulfur fuel purchase cost (difference), etc. 926
(3) Administration cost Management cost of ISO14001, cost of employee education, environmental impact measurement, etc. 112
(4) R&D cost Development of products, such as environmentally friendly brands, for environmental conservation, etc. 33
(5) Social activity cost Various volunteer activities, organization support, environmental report, etc. 62
(6) Environmental remediation cost Pollution load charges (SOx) 159
Total ¥2,777 ¥32,051
Details of benefits Amount
Cost reduction from energy saving ¥ 2
Cost reduction from decrease in fossil fuel usage –
Reduction of disposal cost due to effective use of waste 34
Cost reduction from dissolution treatment of and replacement of materials with hard-to-defiberize recovered paper 47
Total 83
Environmental Conservation Cost (Millions of Yen)
Economic Benefits of Environmental Conservation Measures (Millions of Yen)
Environmental Conservation Benefit
Categories of environmental conservation benefit Environmental load items Unit FY2015 FY2016 Change from the
previous year
(1) Benefit corresponding to business area cost
①Reduction of greenhouse gas (CO2) CO2 emission volume 1000 t 3,903 4,075 Increased by
172,000 t
②Reduction of air-pollution substances
Sulfur oxide emission volume t 1,235 1,109 Decreased by 126 t
Nitrogen oxide emission volume t 6,116 6,161 Increased by 45 t
Dust emission volume t 266 264 Decreased by 2 t
③Reduction of water-pollution substances
Volume of waste water 1000 m3 126,303 126,945 Increased by 642,000 m³
COD emission volume t 7,147 7,217 Increased by 70 t
SS emission volume t 1,904 1,997 Increased by 93 t
Nitrogen emission volume t 359 410 Increased by 651 t
Phosphorus emission volume t 45 48 Increased by 3 t
④Promotion of overseas forestation Overseas forested area ha 34,200 28,700 Decreased by
5,500 ha
⑤Reduction of industrial waste
Volume of industrial waste generation 1000 t 325 322 Decreased by 3,000 t
(2) Benefit corresponding to upstream/downstream cost
①Promotion of recovered paper usage
Volume of recovered paper usage 1000 t 1,808 1,784 Decreased by
24,000 t
Brea
kdow
n
49 Integrated Report 2017
011_9032587913002.indd 49 2018/02/02 18:45:46
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Material Flow
Absorption/fixation of CO2 through forestation:
2,272,000 t-CO2
Total volume of CO2 emissions of the Group:
3,760,000 t-CO2
Recycling of waste
OUTPUTGroup’s Production Bases
Group’s Non-production Bases
Volume of Recycled Waste
Item Aggregate total of FY2016
Atmosphere
CO2 (1000 t-CO2) 57
Waste
Volume of waste generated (t) 12
Final disposal volume of waste (t) 12
Item Aggregate total of FY2016
Fuels (Total input of energy)
①Cement raw material (t) 126,934
② Recovered crushed stone material (t) 165,308
③Land reclamation, etc. (t) 41,921
④Others (t) 6,027
Total (t) 340,190
Production
Volume of waste generated:
345,000tons
Item Aggregate total of FY2016
Production volume
Paper (1000 t) 2,239
Containerboard (1000 t) 1,342
Others (1000 t) 3,812
Total (1000 t) 7,392
Atmosphere
Sulfur oxide (SOx) (t) 1,170
Nitrogen oxide (NOx) (t) 6,438
Dust (t) 282
CO2 (1000 t-CO2) 3,760
Water quality
Emission volume (1000 m3) 154,521
COD (t) 7,960
SS (t) 2,415
Nitrogen (t) 430
Phosphorus (t) 52 Emission volume of PRTR substances (t) 44
Waste
Volume of waste generated (t) 344,570
Final disposal volume of waste (t) 4,432
CO2 emission volume:
Reduced by
60.4%
INPUTGroup’s Production Bases
Group’s Non-production Bases
Item Aggregate total of FY2016
Raw materials (total input of materials)
Woodchip (1000 t) 2,428
Recovered paper (1000 t) 2,231
Purchased pulp (1000 t) 182
Fuels (total input of energy)
Fossil energy (1000 GJ) 43,454
Renewable energy (1000 GJ) 35,672
Waste-derived energy (1000 GJ) 7,367
Water requirement (Input of water resources) (1000 m3) 168,308
Item Aggregate total of FY2016
Fuel (total inputs of energy)
Fossil energy (1000 GJ) 858
Water (inputs of water resources) (1000 m3) 24
Integrated Report 2017 50
011_9032587913002.indd 50 2018/02/02 18:45:47
While the volume of production increased, we increased the use of biomass energy and reduced the use of fossil fuels (heavy oil and crude oil). As a result, we reduced the volume of SOx emissions in FY2016 to 1,183 tons/year, which is a 14.8% decrease compared to FY2015.
Daio Paper Corporation’s Mishima Mill, located on the coast of Seto Inland Sea, and other Daio Paper Group companies such as Otsu Paper Board Co., Ltd., which is located near Lake Biwa, comply with regulations on total allowable emission volumes of COD, nitrogen, and phosphorus.
Atmosphere Quality Data
Water Quality Dat
SOx Emission Volume
COD Emission Volume
Phosphorus Emission Volume
NOx Emission Volume
SS Emission Volume
Volume of Drainage Water Produced
Dust Emission Volume
Nitrogen Emission Volume
Water Requirement
1,3551,355
2017/32014/3 2015/3
1,8121,812
2016/3
1,5011,501
2013/3
(t)
(FY)
0
500
1,000
1,500
2,000
2,500
SOx排出量
7575
936936
487487
314314
646646
595595
8686174174
420420
696696
121121118118
1,3881,388
470470
679679
1531538686
1,1701,170
489489
521521
74748686
■Mishima ■Kani ■ Iwaki ■Other
2017/32014/3 2015/3 2016/32013/3
(t)
(FY)
0
10
20
30
40
60
50
りん排出量
4242
2525
3636
20201313
2020
1313
66
77
99
44
2233
3344
4747
2626
1111
8822
5252
2828
1010
1010
44
■Mishima ■Kani ■ Iwaki ■Other
8,3598,359
2017/32014/3 2015/3
8,0358,035
2016/3
8,3488,348
2013/3
5,4965,4965,2705,270 5,5255,525
1,9401,9401,8131,813 1,8881,888277647647
246705705
279655655
0
2,000
4,000
6,000
8,000
10,000(t) ■Mishima ■Kani ■ Iwaki ■Other
7,7837,783
5,1355,135
1,7241,724288635635
7,9607,960
5,2185,218
1,7081,708290744744
(FY)
330330
2017/32014/3 2015/3
400400
2016/3
380380
2013/3
(t)
(FY)
0
100
200
300
400
500
ばいじん排出量
232232254254 238238
7373112112
11811810101515
2424
66232355
276276
137137
113113
15151010
282282
107107
147147
15151313
■Mishima ■Kani ■ Iwaki ■Other
2017/32014/3 2015/3 2016/32013/3
(Million m3)
(FY)
0
50
100
150
200
用水量
166166155155 158158
1021029595 9999
23232424 2424
30302525 2424
1111 11
166166
103103
2323
2929
11
168168
105105
2424
2727
12
■Mishima ■Kani ■ Iwaki ■Other
2017/32014/3 2015/3 2016/32013/3 (FY)
0
100
200
300
400
500(t)
438438
307307 322322
278278
158158 173173
104104
70708787
5656
23233434
232335352626
398398
265265
7676
18183939
430430
312312
747423232121
■Mishima ■Kani ■ Iwaki ■Other
6,4346,434
2017/32014/3 2015/3
6,1736,173
2016/3
6,3936,393
2013/3
(t)
(FY)
0
2,000
4,000
6,000
8,000
NOx排出量
4,6204,620
933933
371371
4,9664,966
895895
311311
5,0565,056
824824
317317238238221221
249249
6,4376,437
5,0775,077
805805
321321234234
■Mishima ■Kani ■ Iwaki ■Other
6,4386,438
5,1245,124
831831
249249234234
2017/32014/3 2015/3 2016/32013/3
(Million m3)
(FY)
0
50
100
150
200
排水量
156156152152 153153
96969595 9797
21212222 2121
28282525 2525
1110 10
154154
9595
2020
2727
11
154154
9595
1919
2929
11
■Mishima ■Kani ■ Iwaki ■Other
2,5802,580
2017/32014/3 2015/3
1,8381,838
2016/3
2,0542,054
2013/3 (FY)
0
500
1,000
1,500
2,500
3,000
2,000
3,500(t)
5454240240
4141262262 4646
282282
767767
767767
805805
922922
1,4311,431
856856
2,1412,141
5858236236
1,0981,098
749749
2,4152,415
4848
418418
1,2201,220
729729
■Mishima ■Kani ■ Iwaki ■Other
51 Integrated Report 2017
011_9032587913002.indd 51 2018/02/02 18:45:47
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Board of Directors and Audit & Supervisory Board Members
Director and Managing Executive Officer
Takashi OnoChief General Manager of Production Div.
Director and Executive Officer
Hiroshi YamasakiDeputy Chief General Manager of Production Div.; Chief General Manager of Mishima Mill
Director and Executive Officer
Yoshiyuki ShinoharaChief General Manager of Kani Mill
Director and Executive Officer
Toshiki YamagamiChief General Manager of Home and Personal Care Products International Business
Director and Executive Officer
Tetsuya WatanabeChief General Manager of General Affairs and Personnel Div.
Director and Executive Officer
Yukihiro TanakaChief General Manager of Corporate Planning Div.
Director and Executive Officer
Yorifusa WakabayashiChief General Manager of Home and Personal Care Products Domestic Business
Director (Outside)
Nobuhiko YoshidaDirector (Outside)
Yukimasa YonedaDirector (Outside)
Mizue Unno
Audit & Supervisory Board Member
Yasushi Nishikawa
Audit & Supervisory Board Member
Susumu Ishimaru
Audit & Supervisory Board Member (Outside)
Yoichiro Yamakawa
Audit & Supervisory Board Member (Outside)
Yoshinobu Shimizu
Audit & Supervisory Board Member (Outside)
Takemi Nagasaka
President, CEO and Representative Director
Masayoshi Sako
Representative Director and Senior Managing Executive Officer
Toshihiro AdachiChief General Manager of Business Administration Div.; Responsible for General Affairs and Personnel Div., Compliance, Internal Control & Audit Dept.
Representative Director and Senior Managing Executive Officer
Kunihiro OkazakiChief General Manager of Paper and Paperboard Business; Responsible for Home and Personal Care Business and Logistics Div.
Integrated Report 2017 52
011_9032587913002.indd 52 2018/02/02 18:45:50
Business Environment and Issues to Be Addressed
Operating Profit (Millions of Yen)��� Operating Margin (%)
Composition of Net Sales and Operating Profit (%)
Net Sales (Millions of Yen)
■Paper and Paperboard ■Home & Personal Care ■Other
2012/3 2013/3 2014/3 2015/3
10,48311,577
16,049
21,796
2.6 2.83.7
4.84.8
2016/3
2013/3 2014/3 2015/3 2016/3 2017/3
24,323
5.15.1
299,962
158,904
277,970 283,511 290,035
407,362430,054
450,239474,077
120,662
8,729
134,901
11,641
146,836
13,36815,211
291,953291,953
168,820168,820
477,14016,367
10,473
10,365
3,153
10,92611,372 10,068
11,577
16,049 21,796
24,323
5,100
882 9,687
1,089
9,206
5.1
2.83.7
4.8
2,071
2013/3 2014/3 2015/3 2016/3 2017/3
0
5000
10000
15000
20000
25000
0
15
2012/3 2013/3 2014/3 2015/3 2016/3
299,962299,962
158,904158,904
281,254277,970 283,511 290,035
120,935
6,795
120,662
8,729
134,901
11,641
146,836
13,36815,211
0
100000
200000
300000
400000
500000
10,02710,027
10,11010,110
3,1133,113
23,535
4.94.9
0
15
61.2%
35.4%
3.4%
43.1%
43.5%
13.4%
CompositionOutside: Net sales
Inside: Operating profit
Forward-looking statements included in the following are based on the judgment of the Company as of the submission date of the Annual Securities Report.
■ 1. OverviewTaking an overview of the global economy during the fiscal year under review (hereinafter referred to as the “Fiscal Year Ended March 31, 2017”), we see that the economy recovered moderately, underpinned by factors such as an improvement in employment conditions in the United States and robust personal consumption in China due to the effects of the government’s policy to encourage consumption. On the other hand, the economic outlook remained uncertain due to uncertainties about political and economic situations, including the policy management of the new United States administration and national elections scheduled in major countries in Europe. In Japan, the economy continued to recover at a modest pace, backed by robust corporate earnings and personal consumption, as well as solid employment conditions. In the pulp and paper industry, domestic demand for containerboard remained robust, but that for paper including newsprint and printing paper continued to decline. In addition, prices of recovered paper increased. As a result, companies in the industry continued to face a tough business environment. In the Paper Business, we promoted a shift in sales mix to uncoated paper, communication paper and wrapping paper in response to decreased demand for coated paper, such as published materials and catalogues. In addition, we expanded sales to distributors, mainly to member distributors of DAIO Partner Ship Sakura Terrace, our regional distributors’ partnership, which led to growth in sales of sheet products, etc. In the Containerboard and Corrugated Container Business, our production and sales volumes increased with the continued growth in demand in the e-commerce and processed foods sectors. We aim to further improve quality and reduce costs, and work toward strengthening production and sales frameworks in the Corrugated Container Business through strategic capital expenditures. Looking at our activities in the Domestic Business for Home and Personal Care, in household paper products, we installed an additional production facility for kitchen paper products at the Kani Mill in May 2016. As a result, we achieved a steady expansion in production and sales of kitchen paper products and higher sales of value-added products, such as “Shoushuu+ Deodorant Toilet Tissue” and “i:na Double Length Toilet Tissue". In absorbent products, sales were strong for adult disposable diaper and light incontinence care products, for which the markets are growing. In addition, sales of
“GOO.N Baby Wipes” grew following the construction of a new production facility at Elleair Product Co., Ltd. in April 2016, and sales of toilet cleaning wipes and antibacterial wet wipes also increased according to plan. Sales of sanitary napkins also rose in line with product update. In the Overseas Business, we constructed additional production lines for pants-type baby disposable diapers in China, which sees rapid growth in pants-type segment, and started production and sales. In addition, we steadily diversified our product range. We started selling feminine hygiene products in South Korea and wet wipe products in Thailand in the current fiscal year, in line with our strategy for multi-category expansion in the Overseas Business.
■ 2. Analysis of Operating ResultsThe Daio Paper Group embarked on initiatives aimed at achieving the Second Medium-term Business Plan under the theme of “Step-Up—Leap and Expand,” with three principal strategies: (1) structural shift of the Paper Business, (2) strengthening of the Containerboard and Corrugated Container Business, and (3) further growth and acceleration of the Home and Personal Care Business. For the fiscal year ended March 31, 2017, consolidated net sales totaled ¥477,140 million, up 0.6% year-on-year. Operating profit decreased 3.2%, to ¥23,535 million, ordinary profit increased 0.4%, to ¥21,347 million, and profit attributable to owners of parent declined 16.8%, to ¥12,136 million. Accordingly, basic earnings per share fell ¥16.87, to ¥83.28. For a discussion of sales by segment, see “Business of the Daio Paper Group” on pages 17 to 20.
■ 3. Analysis of Financial ConditionTotal assets at the fiscal year-end increased ¥1,437 million from the previous fiscal year-end, to ¥657,747 million. This primarily reflected increases of ¥8,286 million in cash and deposits, ¥3,047 million in investment securities, and ¥2,851 million in construction work in process, despite decreases of ¥4,984 million in merchandise and finished goods, ¥4,598 million in goodwill, and ¥2,985 million in trade receivables. Total liabilities fell ¥14,822 million, to ¥466,668 million. The major components of this decline were ¥14,706 million in long-term loans payable (including the current portion) and ¥7,200 million in short-term loans payable. These factors were partly offset by an increase of ¥4,980 million in bonds payable (including the current portion).
■Paper and Paperboard ■Home & Personal Care ■Other ■Paper and Paperboard ■Home & Personal Care ■Other
53 Integrated Report 2017
012_9032587913002.indd 53 2018/02/02 18:50:57
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Business Environment and Issues to Be Addressed
Total net assets climbed ¥16,259 million, to ¥191,079 million. The increase was mainly due to factors such as rises of ¥10,295 million in retained earnings, ¥4,565 million in the valuation difference on available-for-sale securities, and ¥2,842 million in non-controlling interests. Accordingly, the equity ratio at March 31, 2017 rose 1.9 percentage points year-on-year, to 26.8%.
■ 4. Analysis of Cash Flows Cash and cash equivalents at the end of the fiscal year under review amounted to ¥82,733 million, up ¥10,564 million from the previous fiscal year. Net cash provided by operating activities totaled ¥62,932 million, climbing ¥15,921 million year-on-year, due mainly to ¥18,118 million in profit before income taxes and ¥29,017 million in depreciation and amortization. Net cash used in investing activities amounted to ¥31,394 million, increasing ¥5,321 million year-on-year, due mainly to cash outflows of ¥34,694 million in payments for purchase of property, plant and equipment. Net cash used in financing activities totaled ¥22,037 million, rising ¥4,562 million year-on-year, due mainly to ¥80,006 million in repayments of long-term loans payable, a ¥7,200 million decrease in short-term loans payable, and ¥10,320 million in redemption of bonds payable. Cash outflows were partly offset by increases of ¥65,300 million in proceeds from long-term loans payable and ¥15,300 million in proceeds from issuance of bonds.
■ 5. Dividend PolicyThe Company places top priority on the returns of profit to shareholders and sets a basic policy to continue to pay stable dividends, while taking into consideration factors such as the status of business and the sufficiency of retained earnings. The Company’s basic policy is to pay dividends twice a year, an interim dividend and a year-end dividend. The decision-making bodies for distribution of retained earnings are the General Meeting of Shareholders for the year-end dividend and the Board of Directors for the interim dividend. For the fiscal year ended March 31, 2017, we paid an annual dividend of ¥10.50 per share, which includes an interim dividend of ¥5.00, in line with the policy described above. Retained earnings shall be used effectively for upfront investments in growth areas, capital expenditures to enhance future corporate competitiveness and improvement of our financial position, in order to further strengthen our corporate foundation.
The Company stipulates that “the Company may, by a resolution of the Board of Directors, pay interim dividends to the shareholders or registered share pledgees whose names appear or are recorded as such on the register of shareholders as at the closing thereof on the 30th day of September each year” in its articles of incorporation.
■ 6. Outlook for the Fiscal Year Ending March 31, 2018It is anticipated that the domestic pulp and paper industry will remain in a severe business condition, reflecting concerns over a decline in paper demand and uncertainties over trends in raw materials prices and foreign exchange. Against this background, based on the Second Medium-term Business Plan covering the three-year period from April 2015 to March 2018, we have continued to work to restructure our production and sales product mix, and review composition of customer base in the Paper and Paperboard Business. In the Home and Personal Care Business, we have worked to expand and grow our overseas business base as well as develop and expand sales of high value-added products. For the fiscal year ending March 31, 2018, which is the final year of the plan, we have been facilitating the structural shift of the Paper and Paperboard Business, and accelerating the growth of the Home and Personal Care Business. In addition, the paper products business acquired from Nisshinbo Holdings Co., Ltd. and Miura Printing Co., Ltd. joined the Group in April 2017. For the Paper business, the acquisitions will complement and expand our product lineup and strengthen our marketing capabilities in the printing division. In the Home and Personal Care Business, the acquisition will enhance our competitiveness by expanding our lineup of high value-added products. Through these initiatives to generate synergies with these two businesses at an early stage, we will work to increase sales, improve our profitability and financial position, and establish a more robust management base and corporate structure.
■ 7. Risks Associated with Business, Etc.Among matters relating to the status of business and the status of accounting, etc. described in the financial statements, etc., the following matters may have significant impacts on the decision-making of investors. Please note that forward-looking statements included in the following are based on the judgment of the Company as of the end of the Fiscal Year Ended March 31, 2016.
Total Assets (Millions of Yen)
Net Assets (Millions of Yen)
Capital Expenditures (Millions of Yen)
Depreciation and amortization (Millions of Yen)
Profit Attributable to Owners of Parent (Millions of Yen)
6,293
13,209
15,109 14,594
12,13612,136
2013/3 2014/3 2015/3 2016/3 2017/3 2013/3 2014/3 2015/3 2016/3 2017/3
164,495 174,820 191,079
107,969
659,112 646,112 652,745 656,310 657,747
119,252
2013/3 2014/3 2015/3 2016/3 2017/3
26,409 26,403 27,203 26,988
21,726 24,948 31,587
37,310
29,01732,453
Integrated Report 2017 54
012_9032587913002.indd 54 2018/02/02 18:50:57
Interest-bearing Debts (Millions of Yen)
Net Interest-bearing Debts (Millions of Yen)
Free Cash Flow (Millions of Yen) Debt to Equity Ratio (Times)
Net Debt to Equity Ratio (Times)
2013/3 2014/3 2015/3 2016/3
4.6
3.8
2.4
3.7
3.0
1.9
2017/3
2.2
1.7
2.0
1.4
2013/3 2014/3 2015/3 2016/3
449,743417,664
375,024363,533331,825
292,466
2017/3
362,370
281,456
344,278
255,077
2013/3 2014/3 2015/3 2016/3
9,350
31,265
16,160
2017/3
20,938
31,538
(1) Impacts of Changes in Demand and Market ConditionsThe Daio Paper Group is engaged in the Paper and Paperboard Business, Home & Personal Care Business, and other businesses. A significant decline in demand for our mainstay products (paper and containerboard products, and household paper products), or a downturn in market conditions for such products may affect the Group’s financial position and operating results.
(2) Impacts of Changes in Raw Material and Fuel Prices and Fluctuations in Foreign
Exchange RatesThe Daio Paper Group purchases raw materials and fuels, such as woodchips, recovered paper, chemicals, heavy oil, and coal, both domestically and from overseas. Therefore, changes in the prices of raw materials and fuels, as well as fluctuations in foreign exchange rates for procurements of raw materials and fuels paid for in foreign currencies may affect the Group’s financial position and operating results. Fluctuations in foreign exchange rates may also affect the Group’s overseas sales activities.
(3) Impacts of Overseas BusinessesThe Daio Paper Group is making efforts, led by the Home and Personal Care Division, to develop business mainly in China, South Korea, Russia, and Southeast Asia as one of its growth strategies. Overseas business expansion activities may be exposed to risks from fluctuations in foreign exchange rates, and changes in the economic environment due to regulations implemented by local governments or political instability, etc., which may affect the Group’s financial position and operating results.
(4) Impact of Interest Rate ChangesThe Daio Paper Group has been working on reducing interest-bearing debts. However, if there is a significant increase in interest rates, it may affect the Group’s financial position and operating results.
(5) Impacts of Price Changes of Investment SecuritiesAvailable-for-sale securities with market value are stated by the market value method based on the market price on the closing date, etc. Depending on the share prices of investment securities on the closing date, their price changes may affect the Group’s financial position and operating results.
(6) Impacts of DisasterIn the event of a disaster in areas where the Group’s production and logistics bases are located, the Group’s financial position and operating results may be affected due to damage to production facilities, disruption and delay of operations, incurrence of restoration costs, suspension of logistics functions, and loss of products and merchandise, etc.
(7) Impacts of LawsuitsThe Daio Paper Group is making efforts to strengthen its compliance framework by complying with various laws and regulations, environmental regulations, and social norms, etc. However, the Company is exposed to the risk of lawsuits, etc. regarding such laws and regulations in our domestic and overseas business activities. Depending on the results, such lawsuits, etc. may affect the Group’s financial position and operating results.
(8) Impacts of Loan Agreements with Financial CovenantsDaio Paper has signed syndicated term loan agreements, and those agreements contain financial covenants that set financial standards we are required to maintain, such as the amount of net assets reported in the consolidated balance sheet at the end of each fiscal year and ordinary income/loss reported in the consolidated statement of income of each fiscal year. If Daio Paper fails to comply with the financial covenants, the Company will be required to repay borrowings, which may affect the Company’s financial position and operating results.
(9) Impacts of Impairment Accounting on Non-current AssetsDaio Paper owns non-current assets such as property, plant and equipment and goodwill. We apply impairment accounting to those non-current assets and verify if the residual value of assets can be collected through future cash flows generated from the assets, and we apply the appropriate accounting treatment for assets that require the recognition of an impairment loss. If there is a decrease in estimated future cash flows due to changes in the future business environment, we will be required to recognize an additional impairment loss, which may affect the Group’s financial
position and operating results.
55 Integrated Report 2017
012_9032587913002.indd 55 2018/02/02 18:50:57
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Consolidated Balance SheetDaio Paper Corporation and its Consolidated Subsidiaries March 31, 2016 and 2017
Millions of YenThousands of U.S.
Dollars (Note 1)
2016 2017 2017
Assets:
Current assets:
Cash and deposits ¥ 80,915 ¥ 89,201 $ 795,091
Notes and accounts receivable—trade 95,683 92,698 826,260
Merchandise and finished goods 42,488 37,504 334,293
Work in process 4,893 4,594 40,947
Raw materials and supplies 21,788 21,489 191,546
Deferred tax assets 4,106 4,503 40,134
Other 7,283 7,060 62,927
Allowance for doubtful accounts (2) (1) (13)
Total current assets 257,154 257,048 2,291,185
Non-current assets:
Property, plant and equipment:
Buildings and structures 193,962 196,762 1,753,829
Accumulated depreciation (125,138) (127,769) (1,138,859)
Buildings and structures, net Note 5 (1) 68,824 68,993 614,970
Machinery, equipment and vehicles Note 5 (2) 805,170 815,254 7,266,725
Accumulated depreciation (671,120) (680,991) (6,069,980)
Machinery, equipment and vehicles, net Note 5 (1) 134,050 134,263 1,196,745
Land Notes 5 (1) (2) 74,645 74,042 659,968
Construction in progress 9,199 12,050 107,404
Other Note 5 (2) 19,031 19,472 173,559
Accumulated depreciation (9,376) (9,636) (85,889)
Other, net Note 5 (1) 9,655 9,836 87,670
Totalal property, plant and equipment 296,373 299,184 2,666,757
Intangible assets:
Goodwill 53,463 48,865 435,553
Other 3,651 4,213 37,556
Total intangible assets 57,114 53,078 473,109
Investments and other assets:
Investment securities Note 5 (3) 32,765 35,812 319,213
Long-term loans receivable 3,855 3,850 34,317
Deferred tax assets 921 531 4,732
Other Note 5 (3) 9,048 9,055 80,708
Allowance for doubtful accounts (1,091) (980) (8,732)
Total investments and other assets 45,498 48,268 430,238
Total non-current assets 398,985 400,530 3,570,104
Deferred assets 171 169 1,508
Total assets ¥ 656,310 ¥ 657,747 $ 5,862,797
Integrated Report 2017 56
012_9032587913002.indd 56 2018/02/02 18:50:57
Millions of YenThousands of U.S.
Dollars (Note 1)
2016 2017 2017
Liabilities:
Current liabilities
Accounts payable—trade ¥ 49,123 ¥ 48,446 $ 431,817
Short-term loans payable Note 5 (1) 33,560 26,360 234,959
Current portion of long-term loans payable Note 5 (1) 79,941 72,706 648,062
Current portion of bonds 10,320 — —
Accounts payable—other 23,970 25,265 225,199
Current portion of long-term accounts payable—facilities Note 5 (1) 2,526 2,621 23,363
Income taxes payable 5,190 5,210 46,440
Provision for bonuses 4,553 4,687 41,774
Provision for directors' bonuses 119 121 1,079
Other 9,959 10,872 96,910
Total current liabilities 219,261 196,288 1,749,603
Non-current liabilities:
Bonds payable — 15,300 136,376
Convertible bond-type bonds with subscription rights to shares 30,135 30,105 268,339
Long-term loans payable Note 5 (1) 199,992 192,521 1,716,023
Long-term accounts payable—facilities Note 5 (1) 4,022 2,385 21,258
Net defined benefit liability 18,874 20,127 179,405
Provision for directors' retirement benefits 279 287 2,557
Provision for environmental measures 4 2 17
Provision for loss on business of subsidiaries and associates 225 174 1,555
Other 8,698 9,479 84,488
Total non-current liabilities 262,229 270,380 2,410,018
Total liabilities 481,490 466,668 4,159,621
Net assets:
Shareholders’ equity
Capital stock 39,707 39,707 353,929
Capital surplus 39,922 39,817 354,907
Retained earnings 83,772 94,067 838,459
Treasury shares (2,907) (2,909) (25,927)
Total shareholders’ equity 160,494 170,682 1,521,368
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities 6,250 10,815 96,400
Foreign currency translation adjustment (2,822) (4,432) (39,501)
Remeasurements of defined benefit plans (814) (540) (4,813)
Total accumulated other comprehensive income 2,614 5,843 52,086
Non-controlling interests 11,712 14,554 129,722
Total net assets 174,820 191,079 1,703,176
Total liabilities and net assets ¥656,310 ¥657,747 $5,862,797
The accompanying notes are an integral part of these financial statements.
57 Integrated Report 2017
012_9032587913002.indd 57 2018/02/02 18:50:57
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Millions of YenThousands of U.S.
Dollars (Note 1)
2016 2017 2017
Liabilities:
Current liabilities
Accounts payable—trade ¥ 49,123 ¥ 48,446 $ 431,817
Short-term loans payable Note 5 (1) 33,560 26,360 234,959
Current portion of long-term loans payable Note 5 (1) 79,941 72,706 648,062
Current portion of bonds 10,320 — —
Accounts payable—other 23,970 25,265 225,199
Current portion of long-term accounts payable—facilities Note 5 (1) 2,526 2,621 23,363
Income taxes payable 5,190 5,210 46,440
Provision for bonuses 4,553 4,687 41,774
Provision for directors' bonuses 119 121 1,079
Other 9,959 10,872 96,910
Total current liabilities 219,261 196,288 1,749,603
Non-current liabilities:
Bonds payable — 15,300 136,376
Convertible bond-type bonds with subscription rights to shares 30,135 30,105 268,339
Long-term loans payable Note 5 (1) 199,992 192,521 1,716,023
Long-term accounts payable—facilities Note 5 (1) 4,022 2,385 21,258
Net defined benefit liability 18,874 20,127 179,405
Provision for directors' retirement benefits 279 287 2,557
Provision for environmental measures 4 2 17
Provision for loss on business of subsidiaries and associates 225 174 1,555
Other 8,698 9,479 84,488
Total non-current liabilities 262,229 270,380 2,410,018
Total liabilities 481,490 466,668 4,159,621
Net assets:
Shareholders’ equity
Capital stock 39,707 39,707 353,929
Capital surplus 39,922 39,817 354,907
Retained earnings 83,772 94,067 838,459
Treasury shares (2,907) (2,909) (25,927)
Total shareholders’ equity 160,494 170,682 1,521,368
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities 6,250 10,815 96,400
Foreign currency translation adjustment (2,822) (4,432) (39,501)
Remeasurements of defined benefit plans (814) (540) (4,813)
Total accumulated other comprehensive income 2,614 5,843 52,086
Non-controlling interests 11,712 14,554 129,722
Total net assets 174,820 191,079 1,703,176
Total liabilities and net assets ¥656,310 ¥657,747 $5,862,797
The accompanying notes are an integral part of these financial statements.
Millions of YenThousands of U.S.
Dollars (Note 1)
2016 2017 2017
Net sales ¥474,077 ¥477,140 $4,252,960Cost of sales Notes 6 (2) (6) 359,933 358,005 3,191,058Gross profit 114,144 119,135 1,061,902Selling, general and administrative expenses Notes 6 (1) (2) 89,821 95,600 852,128Operating profit 24,323 23,535 209,774Non-operating income: Interest income 140 145 1,297 Dividend income 989 693 6,177 Purchase discounts 345 304 2,709 Insurance income 391 614 5,475 Subsidy income 608 1,183 10,545 Other 1,905 1,300 11,577 Total non-operating income 4,378 4,239 37,780Non-operating expenses: Interest expenses 4,697 3,730 33,243 Foreign exchange losses 799 1,205 10,737 Other 1,946 1,492 13,302 Total non-operating expenses 7,442 6,427 57,282Ordinary profit 21,259 21,347 190,272Extraordinary income: Gain on sales of non-current assets Note 6 (3) 212 363 3,238 Gain on sales of investment securities 3,729 32 281 Insurance income 197 192 1,715 Other — 0 2 Total extraordinary income 4,138 587 5,236Extraordinary losses: Loss on sales and retirement of non-current assets Note 6 (4) 894 1,421 12,669 Loss on sales of investment securities 118 0 0 Loss on valuation of investment securities 2 163 1,453 Loss on disaster 150 229 2,042 Impairment loss Note 6 (5) 1,564 865 7,710 Retirement benefit expenses Note 6 (7) 289 972 8,659 Amortization of goodwill 346 — — Other 37 166 1,479 Total extraordinary losses 3,400 3,816 34,012Profit before income taxes 21,997 18,118 161,496Income taxes Income taxes—current 5,594 7,607 67,803 Income taxes—deferred 1,510 (1,405) (12,520) Total income taxes 7,104 6,202 55,283Profit 14,893 11,916 106,213Profit (loss) attributable to non-controlling interests 299 (220) (1,961)Profit attributable to owners of parent ¥ 14,594 ¥ 12,136 $ 108,174
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of IncomeDaio Paper Corporation and its Consolidated Subsidiaries Years ended March 31, 2016 and 2017
Consolidated Statement of Comprehensive IncomeDaio Paper Corporation and its Consolidated Subsidiaries Years ended March 31, 2016 and 2017
Millions of YenThousands of U.S.
Dollars (Note 1)
2016 2017 2017
Profit ¥14,893 ¥11,916 $106,213Other comprehensive income: Valuation difference on available-for-sale securities (4,451) 4,637 41,333 Foreign currency translation adjustment (1,122) (1,922) (17,137) Remeasurements of defined benefit plans, net of tax 279 274 2,443 Total other comprehensive income Note 7 (5,294) 2,989 26,639Comprehensive income ¥ 9,599 ¥14,905 $132,852Comprehensive income attributable to: Owners of parent ¥ 9,306 ¥15,366 $136,961 Non-controlling interests 293 (461) (4,109)
The accompanying notes are an integral part of these financial statements.
Integrated Report 2017 58
012_9032587913002.indd 58 2018/02/02 18:50:57
Millions of Yen
Shareholders’ equity Accumulated other comprehensive income
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Valuation difference
on available-for-sale
securities
Foreign currency
translation adjustment
Remeasure-ments of
defined benefit plans
Total accumu-lated other
comprehensive income
Non-controllinginterests
Total net assets
Balance, April 1, 2015 ¥39,707 ¥39,586 ¥70,412 ¥(2,896) ¥146,809 ¥10,603 ¥(1,867) ¥(1,093) ¥7,643 ¥10,043 ¥164,495
Changes of items during period:
Dividends — — (1,234) — (1,234) — — — — — (1,234)
Profit attributable to owners of parent — — 14,594 — 14,594 — — — — — 14,594
Purchase of treasury shares — — — (11) (11) — — — — — (11)
Change in scope of consolidation — — — — — — — — — — —
Capital increase of consolidated subsidiaries — 117 — — 117 — — — — — 117
Sales of shares of consolidated subsidiaries — 219 — — 219 — — — — — 219
Net changes of items other than shareholders’ equity
— — — — — (4,353) (955) 279 (5,029) 1,669 (3,360)
Total changes of items during period — 336 13,360 (11) 13,685 (4,353) (955) 279 (5,029) 1,669 10,325
Balance, April 1, 2016 ¥39,707 ¥39,922 ¥83,772 ¥(2,907) ¥160,494 ¥ 6,250 ¥(2,822) ¥ (814) ¥ 2,614 ¥11,712 ¥174,820
Changes of items during period:
Dividends — — (1,669) — (1,669) — — — — — —
Profit attributable to owners of parent — — 12,136 — 12,136 — — — — — (1,669)
Purchase of treasury shares — — — (2) (2) — — — — — 12,136
Change in scope of consolidation — (105) (172) — (277) — — — — — (2)
Capital increase of consolidated subsidiaries — — — — — — — — — — (277)
Sales of shares of consolidated subsidiaries — — — — — — — — — — —
Net changes of items other than shareholders’ equity
— — — — — 4,565 (1,610) 274 3,229 2,842 6,071
Total changes of items during period — (105) 10,295 (2) 10,188 4,565 (1,610) 274 3,229 2,842 16,259
Balance, March 31, 2017 ¥39,707 ¥39,817 ¥94,067 ¥(2,909) ¥170,682 ¥10,815 ¥(4,432) ¥ (540) ¥5,843 ¥14,554 ¥191,079
Thousands of U.S. Dollars (Note 1)
Shareholders’ equity Accumulated other comprehensive income
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Valuation difference
on available-for-sale
securities
Foreign currency
translation adjustment
Remeasure-ments of
defined benefit plans
Total accumu-lated other
comprehensive income
Non-controllinginterests
Total net assets
Balance, April 1, 2016 $353,929 $355,845 $746,698 $(25,919) $1,430,553 $55,707 $(25,152) $(7,256) $23,299 $104,395 $1,558,247
Changes of items during period:
Dividends — — — — — — — — — — —
Profit attributable to owners of parent — — (14,879) — (14,879) — — — — — (14,879)
Purchase of treasury shares — — 108,174 — 108,174 — — — — — 108,174
Change in scope of consolidation — — — (8) (8) — — — — — (8)
Capital increase of consolidated subsidiaries — (938) (1,534) — (2,472) — — — — — (2,472)
Sales of shares of consolidated subsidiaries — — — — — — — — — — —
Net changes of items other than shareholders’ equity
— — — — — 40,693 (14,349) 2,443 28,787 25,327 54,114
Total changes of items during period — (938) 91,761 (8) 90,815 40,693 (14,349) 2,443 28,787 25,327 144,929
Balance, March 31, 2017 $353,929 $354,907 $838,459 $(25,927) $1,521,368 $96,400 $(39,501) $(4,813) $52,086 $129,722 $1,703,176
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in Net AssetsDaio Paper Corporation and its Consolidated Subsidiaries Years ended March 31, 2016 and 2017
59 Integrated Report 2017
012_9032587913002.indd 59 2018/02/02 18:50:57
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Millions of Yen
Shareholders’ equity Accumulated other comprehensive income
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Valuation difference
on available-for-sale
securities
Foreign currency
translation adjustment
Remeasure-ments of
defined benefit plans
Total accumu-lated other
comprehensive income
Non-controllinginterests
Total net assets
Balance, April 1, 2015 ¥39,707 ¥39,586 ¥70,412 ¥(2,896) ¥146,809 ¥10,603 ¥(1,867) ¥(1,093) ¥7,643 ¥10,043 ¥164,495
Changes of items during period:
Dividends — — (1,234) — (1,234) — — — — — (1,234)
Profit attributable to owners of parent — — 14,594 — 14,594 — — — — — 14,594
Purchase of treasury shares — — — (11) (11) — — — — — (11)
Change in scope of consolidation — — — — — — — — — — —
Capital increase of consolidated subsidiaries — 117 — — 117 — — — — — 117
Sales of shares of consolidated subsidiaries — 219 — — 219 — — — — — 219
Net changes of items other than shareholders’ equity
— — — — — (4,353) (955) 279 (5,029) 1,669 (3,360)
Total changes of items during period — 336 13,360 (11) 13,685 (4,353) (955) 279 (5,029) 1,669 10,325
Balance, April 1, 2016 ¥39,707 ¥39,922 ¥83,772 ¥(2,907) ¥160,494 ¥ 6,250 ¥(2,822) ¥ (814) ¥ 2,614 ¥11,712 ¥174,820
Changes of items during period:
Dividends — — (1,669) — (1,669) — — — — — —
Profit attributable to owners of parent — — 12,136 — 12,136 — — — — — (1,669)
Purchase of treasury shares — — — (2) (2) — — — — — 12,136
Change in scope of consolidation — (105) (172) — (277) — — — — — (2)
Capital increase of consolidated subsidiaries — — — — — — — — — — (277)
Sales of shares of consolidated subsidiaries — — — — — — — — — — —
Net changes of items other than shareholders’ equity
— — — — — 4,565 (1,610) 274 3,229 2,842 6,071
Total changes of items during period — (105) 10,295 (2) 10,188 4,565 (1,610) 274 3,229 2,842 16,259
Balance, March 31, 2017 ¥39,707 ¥39,817 ¥94,067 ¥(2,909) ¥170,682 ¥10,815 ¥(4,432) ¥ (540) ¥5,843 ¥14,554 ¥191,079
Thousands of U.S. Dollars (Note 1)
Shareholders’ equity Accumulated other comprehensive income
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’
equity
Valuation difference
on available-for-sale
securities
Foreign currency
translation adjustment
Remeasure-ments of
defined benefit plans
Total accumu-lated other
comprehensive income
Non-controllinginterests
Total net assets
Balance, April 1, 2016 $353,929 $355,845 $746,698 $(25,919) $1,430,553 $55,707 $(25,152) $(7,256) $23,299 $104,395 $1,558,247
Changes of items during period:
Dividends — — — — — — — — — — —
Profit attributable to owners of parent — — (14,879) — (14,879) — — — — — (14,879)
Purchase of treasury shares — — 108,174 — 108,174 — — — — — 108,174
Change in scope of consolidation — — — (8) (8) — — — — — (8)
Capital increase of consolidated subsidiaries — (938) (1,534) — (2,472) — — — — — (2,472)
Sales of shares of consolidated subsidiaries — — — — — — — — — — —
Net changes of items other than shareholders’ equity
— — — — — 40,693 (14,349) 2,443 28,787 25,327 54,114
Total changes of items during period — (938) 91,761 (8) 90,815 40,693 (14,349) 2,443 28,787 25,327 144,929
Balance, March 31, 2017 $353,929 $354,907 $838,459 $(25,927) $1,521,368 $96,400 $(39,501) $(4,813) $52,086 $129,722 $1,703,176
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash FlowsDaio Paper Corporation and its Consolidated Subsidiaries Years ended March 31, 2016 and 2017
Millions of YenThousands of U.S.
Dollars (Note 1)2016 2017 2017
Cash flows from operating activities: Profit before income taxes ¥ 21,997 ¥ 18,118 $ 161,496 Depreciation and amortization 26,988 29,017 258,641 Impairment loss 1,564 865 7,710 Amortization of goodwill 4,782 4,158 37,059 Increase (decrease) in allowance for doubtful accounts (137) (112) (997) Increase (decrease) in provision for loss on business of subsidiaries and associates (18) (51) (451) (Gain) loss on sales of investment securities (3,611) (32) (281) (Gain) loss on valuation of investment securities 2 163 1,453 Increase (decrease) in net defined benefit liability 1,095 1,557 13,875 Interest and dividend income (1,129) (838) (7,474) Interest expenses 4,697 3,730 33,243 Foreign exchange (gains) losses 799 1,205 10,737 Subsidy income (608) (1,183) (10,545) Insurance income (197) (807) (7,190) (Gain) loss on sales of property, plant and equipment (44) (222) (1,982) Loss on retirement of property, plant and equipment 725 1,280 11,412 (Increase) decrease in notes and accounts receivable—trade (4,795) 2,882 25,692 (Increase) decrease in inventories (3,376) 5,393 48,073 Increase (decrease) in accounts payable—trade 1,237 (555) (4,950) Increase/decrease in other assets/liabilities (969) 3,149 28,069 Increase (decrease) in accrued consumption taxes (2,238) 1,422 12,676 Other, net (617) 106 944
Subtotal 46,147 69,245 617,210 Income taxes paid (2,006) (7,912) (70,524) Income taxes refund 1,807 12 108 Proceeds from subsidy income 525 646 5,760 Proceeds from insurance income 538 941 8,385 Net cash provided by (used in) operating activities 47,011 62,932 560,939
Cash flows from investing activities: (Increase) decrease in time deposits 4,616 2,024 18,045 Payments for purchase of property, plant and equipment (33,958) (34,694) (309,241) Proceeds from sales of property, plant and equipment 385 1,269 11,313 Payments for purchase of investment securities (76) (172) (1,533) Proceeds from sales of investment securities 5,155 60 533 Payments for purchase of shares of subsidiaries and associates (2,565) — — Proceeds from sales of shares of subsidiaries and associates 853 — — Collection of investments in capital of subsidiaries and associates — 849 7,566 Payments of loans receivable (6) (7) (59) Collection of loans receivable 7 7 67 Interest and dividend income received 1,475 1,137 10,138 Other, net (1,959) (1,867) (16,654) Net cash provided by (used in) investing activities ¥ (26,073) ¥ (31,394) $ (279,825)
Cash flows from financing activities: Net increase (decrease) in short-term loans payable ¥ (3,800) ¥ (7,200) $ (64,177) Proceeds from long-term loans payable 73,137 65,300 582,048 Repayments of long-term loans payable (97,118) (80,006) (713,133) Proceeds from issuance of convertible bond-type bonds with subscription rights to shares 30,150 — — Redemption of bonds (15,020) (10,320) (91,987) Proceeds from issuance of bonds — 15,300 136,376 Proceeds from issuance of common shares assigned to non-controlling interests 809 1,320 11,769 Proceeds from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation
1,328 — —
Interest expenses paid (5,200) (4,189) (37,341) Cash dividends paid (1,234) (1,669) (14,879) Other, net (527) (573) (5,105) Net cash provided by (used in) financing activities (17,475) (22,037) (196,429)Effect of exchange rate change on cash and cash equivalents (367) (468) (4,179)Net increase (decrease) in cash and cash equivalents 3,096 9,033 80,506Cash and cash equivalents at beginning of period 69,073 72,169 643,279Increase in cash and cash equivalents from newly consolidated subsidiary — 1,531 13,651Cash and cash equivalents at end of period Note 9 ¥ 72,169 ¥ 82,733 $ 737,436
The accompanying notes are an integral part of these financial statements.
Integrated Report 2017 60
012_9032587913002.indd 60 2018/02/02 18:50:58
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Daio Paper Corporation (hereinafter referred to as “the Company”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japan and its related accounting regu-lations and in conformity with accounting principles generally accepted in Japan (hereinafter referred to as “Japanese GAAP”), which are different in certain aspects as to application and disclosure requirements from International Financial Reporting Standards. In preparing the consolidated financial statements, certain reclassifi-cation and rearrangements have been made to the financial statements issued in Japan in order to present these statements in a form which is more familiar to readers of these statements outside Japan.
In preparing the accompanying consolidated financial statements, Japanese yen figures including the subtotal and total amounts less than one million yen have been rounded up or down to the nearest million yen. The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using the prevailing exchange rate as of March 31, 2017, which was ¥112.19 to $1.00. U.S. dollar figures including the subtotal and total amounts less than one thousand dollars have been rounded up or down to the nearest thousand dollars. The convenience translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.
(1) Scope of consolidation(a) Number of consolidated subsidiaries
As of March 31, 2016: 29; as of March 31, 2017: 30Names of the main consolidated subsidiaries:Iwaki Daio Paper Corporation, Tokyo Pulp & Paper Corporation, Elleair Product Co., Ltd., Forestal Anchile Limitada, Elleair International China (Nantong) Co., Ltd., PT. Elleair International Trading Indonesia, PT. Elleair International Manufacturing Indonesia
(Changes in the scope of consolidation or the scope of applica-tion of the equity method)The Company’s scope of consolidation has been changed due to an increase in materiality of PT. Elleair International Manufacturing Indonesia, and the number of consolidated subsidiaries is 30 as of March 31, 2017.
(b) Names of the main unconsolidated subsidiariesMain unconsolidated subsidiaries: Nagoya Paper Tec Corporation(Reasons for excluding from the scope of consolidation)Subsidiaries, which are small in terms of their total assets, net sales, profit or loss (amount corresponding to equity), retained earnings (amount corresponding to equity) and other indicators, and do not have a significant effect on the consolidated financial statements, are excluded from the scope of consolidation.
(2) Application of the equity method(a) Number of associates accounted for using the equity method There is no associate accounted for using the equity method as
of March 31, 2017.(b) Unconsolidated subsidiaries and associates (such as Nagoya Paper
Tec Corporation), which are small in terms of their profit or loss (amount corresponding to equity), retained earnings (amount corresponding to equity) and other indicators, and do not have a significant effect on the consolidated financial statements and are immaterial as a whole, are excluded from the scope of application of the equity method.
(3) Fiscal years of consolidated subsidiariesConsolidated subsidiaries whose closing date differs from the consolidated closing date are as follows:
Company name Closing date
Forestal Anchile LimitadaElleair International (Thailand) Co., Ltd.Elleair International China (Nantong) Co., Ltd.PT. Elleair International Trading IndonesiaPT. Elleair International Manufacturing Indonesia
December 31December 31December 31December 31December 31
For the purpose of preparing the consolidated financial statements, the Company used the financial statements of the subsidiaries above whose closing date differs from that of the Company. Adjustments to account for material transactions occurring between the actual closing dates and the consolidated closing date are recorded as necessary.
(4) Accounting standards of foreign subsidiariesThe Company made adjustments for certain items as necessary in the consolidation of its foreign subsidiaries based on “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ Practical Issues Task Force, No. 18 issued on March 26, 2015)
(5) Accounting policies(a) Valuation standard and methods for significant assets
(i) Securities Available-for-sale securities 1) Available-for-sale securities with quoted market price
Investments in available-for-sale securities are stated at fair value based on the quoted market price as of the end of the fiscal year. The valuation differences are accounted for as a separate component of net assets and the cost of securities sold is calculated by using the moving-average method.
2) Available-for-sale securities without quoted market priceInvestments in securities without quoted market price are stated at cost using the moving-average method.
(ii) DerivativesDerivative financial instruments are stated at fair value.
(iii) InventoriesInventories are stated at cost, determined primarily by the moving-average method after recording any write-downs appropriate as a result of the decline in profitability.
(b) Depreciation and amortization methods for significant depre-ciable assets(i) Property, plant and equipment (excluding leased assets) All the items of property, plant and equipment are depreciated
using the straight-line method.(ii) Intangible assets (excluding leased assets) Intangible assets are amortized using the straight-line method.(iii) Leased assets Leased assets arising from finance lease transactions in which
ownership of the leased assets is not transferred to the lessee are depreciated or amortized using the straight-line method over the lease term with no residual value.
Of those finance lease transactions in which ownership of the leased assets is not transferred to the lessee, lease
2. Summary of Significant Accounting and Reporting Policies
Notes to Consolidated Financial StatementsDaio Paper Corporation and its Consolidated SubsidiariesMarch 31, 2016 and 2017
61 Integrated Report 2017
012_9032587913002.indd 61 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
transactions that commenced on or before March 31, 2008 are accounted for using the method applicable to ordinary rental transactions.
(c) Accounting standard for significant provisions(i) Allowance for doubtful accounts For receivables from insolvent debtors who are undergoing
bankruptcy or other collection proceedings or who are in the similar financial condition, an allowance for doubtful accounts is provided based on an evaluation of collectability of each debtor. For other receivables, an allowance is provided based on the Company’s historical rate of uncollectible receivable amount.
(ii) Provision for bonuses To provide for payment of bonuses to employees, a provision
for bonuses is recorded in the amounts that are estimated to be paid as at the end of each fiscal year.
(iii) Provision for directors’ bonuses To provide for payment of bonuses to directors and audit &
supervisory board members, a provision for directors’ bonuses is recorded in the amounts that are estimated to be paid as at the end of each fiscal year.
(iv) Provision for directors’ retirement benefits To provide for payment of retirement benefits to directors and
audit & supervisory board members, a provision for directors’ retirement benefits is recorded in the amounts that are required by the internal rule to be paid at the end of each fiscal year.
(v) Provision for environmental measures To provide for payments related to treatment of the polychlori-
nated biphenyl (PCB) waste, a provision for environmental measures is recorded in the amounts that are estimated to be incurred for the treatment in the future.
(vi) Provision for loss on business of subsidiaries and associates To provide for operating losses expected to be suffered by
subsidiaries and associates in the future, a provision for loss on business of subsidiaries and associates is recorded in the amounts that the Company is expected to incur in view of the financial position and other conditions of the subsidiaries and associates.
(d) Accounting methods for retirement benefits(i) Method of allocating projected retirement benefit obligation In calculating retirement benefit obligation, the benefit
formula basis is applied to attribute the projected retirement benefits to the periods until the end of the current fiscal year.
(ii) Method for amortizing actuarial gain or loss and prior service cost Actuarial gain or loss is amortized from the following fiscal
year of the fiscal year in which it is incurred using the straight-line method over a period (five years) which is within the employees’ average remaining years of service at the time of incurrence.
Prior service cost is amortized using the straight-line method over a period (five years) which is within the employees’ average remaining years of service at the time of incurrence.
(e) Standard of translating significant assets or liabilities in foreign currencies into Japanese yenReceivables and payables denominated in foreign currencies are translated into yen at the spot exchange rates in effect at the balance sheet date, and differences arising from the translation are recognized in profit or loss. Assets, liabilities, revenues and expenses of the consolidated foreign subsidiaries are translated into yen at the spot exchange rates in effect at the balance sheet date. Differences arising from the translation are included in
foreign currency translation adjustment and non-controlling interests in the net assets section.
(f) Significant hedge accounting method(i) Hedge accounting method When hedges against foreign exchange rate fluctuation risk
meet certain conditions to qualify for the deferral hedge accounting treatment (“furiate shori”), the Company adopts such treatment, by which foreign currency transactions hedged by forward exchange contracts are reported at the forward rate and the resulting differences between the spot rate and the forward rate are amortized over the life of each contract.
When an interest rate swap contract and an interest rate cap contract meet certain conditions to qualify for the excep-tional hedge accounting treatment (“tokurei shori”), the Company adopts such treatment, by which the net amount to be paid or received under the contract is added to or deducted from the interest on the hedged items.
(ii) Hedging instruments and hedged items 1) Hedging instruments: Forward exchange contracts
Hedged items: Foreign currency receivables resulting from export of finished goods and foreign currency payables resulting from import of raw materials
2) Hedging instruments: Interest rate swap and interest rate cap contracts
Hedged items: Loans payable(iii) Hedging policy
Based primarily on the Derivatives Transaction Control Regulations, which is the Group’s internal rule, the Group is party to the derivative transactions in order to hedge against foreign exchange rate fluctuation risk and interest rate fluctuation risk.
(iv) Method for evaluation of hedge effectivenessThe evaluation of hedge effectiveness is not performed for the interest rate swap and interest rate cap transactions subject to the exceptional hedge accounting treatment (“tokurei shori”) and for the hedging transactions subject to the deferral hedge accounting treatment (“furiate shori”).
(g) Amortization method and period for goodwillGoodwill is amortized using the straight-line method over a period not exceeding 20 years, which is determined on a deal-by-deal basis.
(h) Scope of cash and cash equivalents in consolidated statements of cash flowsFor the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments with a maturity of three months or less from the date of acquisition that are readily convertible into cash and are exposed to immaterial risk of changes in value.
(i) Other(i) Accounting for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(ii) Adoption of consolidated tax returnThe Company and its certain consolidated subsidiaries have adopted the consolidated tax return system, with the Company being a parent for the purpose of the system.
Integrated Report 2017 62
012_9032587913002.indd 62 2018/02/02 18:50:58
3. Changes in the Method of Presentation
Consolidated Statement of Income“Insurance income,” which was included in “Other” under “Non-operating income,” and “Loss on valuation of investment securities” and “Retirement benefit expenses,” which were included in “Other” under “Extraordinary losses,” for the fiscal year ended March 31, 2016 have been presented separately from the fiscal year ended March 31, 2017 due to an increase in monetary materiality. To reflect these changes in presentation, the reclassification of accounts has been made to the consolidated financial statements for the fiscal year ended March 31, 2016. As a result, the ¥2,296 million presented as “Other” under “Non-operating income” in the Consolidated Statement of Income for the fiscal year ended March 31, 2016 has been reclassified as ¥391 million of “Insurance income” and ¥1,905 million of “Other,” and the ¥328 million presented as “Other” under “Extraordinary losses” has been reclassified as ¥2 million of “Loss on valuation of valuation of investment securities,” ¥289 million of “Retirement benefit expenses” and ¥37 million of “Other.”
Consolidated Statements of Cash Flows“Proceeds from short-term loans payable” and “Repayments of short-term loans payable,” which were presented in gross amounts under cash flows from financing activities for the fiscal year ended March 31, 2016, have been presented in the net amounts as “Net increase (decrease) in short-term loans payable” from the fiscal year ended March 31, 2017, in light of their short periods and turnover. To reflect these changes in presentation, the reclassification of accounts has been made to the consolidated financial statements for the fiscal year ended March 31, 2016. As a result, the ¥12,200 million presented as “Proceeds from short-term loans payable” and the ¥(16,000) million presented as “Repayments of short-term loans payable” under cash flows from financing activities in the Consolidated Statement of Cash Flows for the fiscal year ended March 31, 2016 have been reclassified as ¥(3,800) million of “Net increase (decrease) in short-term loans payable.”
Application of Revised Implementation Guidance on Recoverability of Deferred Tax AssetsEffective from the fiscal year ended March 31, 2017, the Group has
applied the “Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016).
4. Additional Information
5. Notes to Consolidated Balance Sheets
(1) Assets pledged as collateral are as follows:
Millions of Yen Thousands of U.S. Dollars
2016 2017 2017Buildings and structures ¥ 32,934 [¥ 30,978] ¥ 30,062 [¥ 28,274] $ 267,955 [$ 252,022]Machinery, equipment and vehicles 44,706 [40,339] 57,996 [54,163] 516,942 [482,783]Land 46,787 [39,546] 43,443 [36,306] 387,229 [323,609]Other items of property, plant and equipment 88 [88] 73 [73] 651 [650]Total ¥124,515 [¥110,951] ¥131,574 [¥118,816] $1,172,777 [$1,059,064]
Associated secured debt obligations are as follows:
Millions of Yen Thousands of U.S. Dollars
2016 2017 2017Short-term loans payable ¥ 100 [¥ 100] ¥ 100 [¥ 100] ¥ 891 [$ 891]Long-term loans payable (including current portion) 49,744 [48,727] 27,374 [27,051] 243,994 [241,114]Long-term accounts payable—facilities (including current portion) 2,742 [—] 1,473 [—] 13,128 [—]Total ¥52,586 [¥48,827] ¥28,947 [¥27,151] ¥258,013 [$242,005]
The figures in parentheses above indicate the amounts of factory foundation mortgage and the debt secured by the factory foundation mortgage.
63 Integrated Report 2017
012_9032587913002.indd 63 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
(2) The following are the amounts of the reduction entry associated with acquisition of property, plant and equipment using government subsidies.
Millions of Yen Thousands of U.S. Dollars
2016 2017 2017Machinery, equipment and vehicles ¥— [¥4,702] ¥— [¥4,681] $— [$41,725]Land — [463] — [463] — [4,127]Other items of property, plant and equipment — [119] — [119] — [1,065]
Notes: 1. The figures in parentheses above indicate the accumulated amounts of the reduction entry associated with acquisition of property,plant and equipment using the government subsidies.
2. The amounts of land indicate those of the government subsidies deducted from the cost, which was received in compensation for expropriation.
(3) Investments in unconsolidated subsidiaries and associates are as follows:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Investment securities (equity securities) ¥4,878 ¥1,644 $14,653
Investments and other assets (investments in capital) 1,353 504 4,493
(4) Guarantee liabilitiesThe Company has committed to provide the following debt guarantees for loans taken out by companies other than the consolidated subsidiaries and associates from financial institutions.
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Otsu Kami Unyu Co., Ltd. ¥31 ¥15 $131
Other 54 — —
Total ¥85 ¥15 $131
(5) Notes receivable transferred by endorsement
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Notes receivable transferred by endorsement ¥706 ¥485 $4,326
Integrated Report 2017 64
012_9032587913002.indd 64 2018/02/02 18:50:58
6. Notes to Consolidated Statements of Income
(1) Selling, general and administrative expenses mainly consist of the following:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Logistics and warehousing expenses ¥42,501 ¥43,663 $389,189
Salaries, allowances and bonuses 13,021 13,506 120,381
Provision for bonuses 1,668 1,768 15,758
Retirement benefit expenses 1,085 860 7,667
(2) Research and development costs included in selling, general and administrative expenses and manufacturing costs are as follows:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Research and development costs ¥2,791 ¥2,902 $25,863
(3) The details of gain on sales of non-current assets are as follows:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Buildings and structures ¥ 0 ¥170 $1,519
Machinery, equipment and vehicles 154 28 246
Land — 164 1,464
Other 58 1 9
Total ¥212 ¥363 $3,238
(4) The details of loss on sales and retirement of non-current assets are as follows:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Buildings and structures ¥108 ¥ 120 $ 1,069
Machinery, equipment and vehicles 656 210 1,876
Land 71 42 378
Other 59 1,049 9,346
Total ¥894 ¥1,421 $12,669
(5) Impairment lossThe Company recognized impairment losses for the following asset groups.
For the fiscal year ended March 31, 2016
Use Type Location Millions of Yen
Company housing Buildings and landSaitama City, Saitama Prefecture and other
¥596
Idle assetsMachinery and equipment, structures, land and other
Shikoku-Chuo City, Ehime Prefecture and other
71
OtherGoodwill, machinery and equipment and other
— 897
65 Integrated Report 2017
012_9032587913002.indd 65 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
The Group recognizes impairment loss by grouping assets by business unit whose cash inflows and outflows are captured consistently for managerial accounting purposes. Assets that are not directly in use for business operations (consisting of idle assets, assets for rent and other assets) are grouped on an indi-vidual basis. During the fiscal year ended March 31, 2016, the Company made a decision to sell its own company housings and as a result of this decision the book values of buildings and land of the company housings were written down to their recoverable amounts.
The book values of idle assets that were not in use for business operations (including machinery and equipment, structures, land and other) were written down to their recoverable amounts. In addition, the Company reviewed the business plan for a certain consolidated subsidiary, which the Company formulated at the time of the acquisition. As a result, the entire book value of goodwill was written off and those of machinery, equipment, etc. were written down to their recoverable amounts. The recoverable amount is measured at net selling price by valuing the assets at their estimated selling price.
For the fiscal year ended March 31, 2017
Use Type Location Millions of YenThousands of U.S. Dollars
Idle assetsBuildings, structures, machinery and equipment, land and other
Shikoku-Chuo City, Ehime Prefecture and other
¥398 $3,551
OtherGoodwill, machinery and equipment and other
— 467 4,159
The Group recognizes impairment loss by grouping assets by business unit whose cash inflows and outflows are captured consistently for managerial accounting purposes. Assets that are not directly in use for business operations (consisting of idle assets, assets for rent and other assets) are grouped on an indi-vidual basis. The book values of idle assets that were not in use for busi-ness operations (including buildings, structures, machinery and equipment, land and other) were written down to their recover-able amounts.
In addition, the Company reviewed the business plan for a certain consolidated subsidiary, which the Company formulated at the time of the acquisition. As a result, the entire book value of goodwill was written off and those of machinery, equipment, etc. were written down to their recoverable amounts.The recoverable amount is measured at net selling price by valuing the assets at their estimated selling price.
(6) The amounts of inventories at the end of the fiscal years are calculated by writing down the value based on any decreased profitability. Losses on valuation of inventories included in cost of sales are shown as follows:
Millions of yenThousands ofU.S. dollars
2016 2017 2017
Losses on valuation of inventories included in cost of sales ¥526 ¥629 $5,608
(7) Retirement benefit expenses This is due to a change in the method of calculating retirement benefit obligations from the simplified method to the standard method at certain domestic consolidated subsidiaries.
Integrated Report 2017 66
012_9032587913002.indd 66 2018/02/02 18:50:58
7. Notes to Consolidated Statements of Comprehensive Income
The reclassification and tax effects allocated to each component of other comprehensive income are as follows:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Valuation difference on available-for-sale securities:
Amount arising during the year ¥(3,157) ¥ 6,331 $ 56,434
Reclassification adjustments (3,728) (31) (277)
Before tax effect adjustment (6,885) 6,300 56,157
Tax effect 2,434 (1,663) (14,824)
Valuation difference on available-for-sale securities (4,451) 4,637 41,333
Foreign currency translation adjustment:
Amount arising during the year (1,122) (1,922) (17,137)
Reclassification adjustments — — —
Before tax effect adjustment (1,122) (1,922) (17,137)
Tax effect — — —
Foreign currency translation adjustment (1,122) (1,922) (17,137)
Remeasurements of defined benefit plans, net of tax:
Amount arising during the year (282) (53) (474)
Reclassification adjustments 628 358 3,193
Before tax effect adjustment 346 305 2,719
Tax effect (67) (31) (276)
Remeasurements of defined benefit plans, net of tax: 279 274 2,443
Total other comprehensive income ¥(5,294) ¥ 2,989 $ 26,639
8. Notes to Consolidated Statements of Changes in Net Assets
(1) Type and number of shares issued and type and number of treasury shares are summarized as follows:
For the fiscal year ended March 31, 2016Number of shares
April 1, 2015 (in thousands)Increase
(in thousands)Decrease
(in thousands)Number of shares
March 31, 2016 (in thousands)Shares issued:
Common stock 149,349 — — 149,349 Total 149,349 — — 149,349Treasury shares:
Common stock (Note) 3,609 10 — 3,619 Total 3,609 10 — 3,619
Note: The increase in common stock as treasury shares of 10 thousand shares is due to purchase of shares in less than standard units.
For the fiscal year ended March 31, 2017
Number of sharesApril 1, 2016 (in thousands)
Increase(in thousands)
Decrease(in thousands)
Number of sharesMarch 31, 2017 (in thousands)
Shares issued:
Common stock 149,349 — — 149,349
Total 149,349 — — 149,349
Treasury shares:
Common stock (Note) 3,619 0 — 3,619
Total 3,619 0 — 3,619
Note: The increase in common stock as treasury shares of 0 thousand shares is due to purchase of shares in less than standard units.
67 Integrated Report 2017
012_9032587913002.indd 67 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
(2) Stock acquisition rights and treasury stock acquisition rightsFor the fiscal year ended March 31, 2016
Companyname Details
Type of stock subject
to stock acquisition
rights
Number of shares subject to stock acquisition rights(in thousands) (Note 2)
March 31, 2016(in million yen/
thousand U.S. dollar) April 1, 2015 Increase Decrease
March 31, 2016
Filing company
Zero Coupon Convertible Bonds due 2020 (issued on September 17, 2015)
Commonstock
— 20,790 — 20,790(Note 1)(Note 3)
Notes: 1. Convertible bonds are accounted for using the lump-sum method, by which a bond portion and a stock acquisition right portion are treated as non-separable.
2. The number of shares subject to stock acquisition rights shown above is the number of shares based on the assumption that the stock acquisition rights were fully exercised.
3. An increase in the number of shares subject to stock acquisition rights is due to the issuance of convertible bonds.
For the fiscal year ended March 31, 2017
Companyname Details
Type of stock subject
to stock acquisition
rights
Number of shares subject to stock acquisition rights(in thousands) (Note 2)
March 31, 2017(in million yen/
thousand U.S. dollar) April 1, 2016 Increase Decrease
March 31, 2017
Filing company
Zero Coupon Convertible Bonds due 2020 (issued on September 17, 2015)
Commonstock
20,790 26 — 20,816(Note 1)(Note 3)
Notes: 1. Convertible bonds are accounted for using the lump-sum method, by which a bond portion and a stock acquisition right portion are treated as non-separable.
2. The number of shares subject to stock acquisition rights shown above is the number of shares based on the assumption that the stock acquisition rights were fully exercised.
3. An increase in the number of shares subject to stock acquisition rights is due to the adjustment of the conversion price.
(3) Dividends(a) Amount of cash dividends distributed
For the fiscal year ended March 31, 2016
Resolution Type of shares
Total amount of dividends Dividends per share
Record date Effective dateMillions of Yen Yen
General Shareholders’ Meeting held on June 26, 2015
Common stock ¥659 ¥4.50 March 31,
2015June 29,
2015
Board of Directors’ Meetingheld on November 11, 2015
Common stock
¥586 ¥4.00September 30,
2015December 4,
2015
For the fiscal year ended March 31, 2017
Resolution Type of shares
Total amount of dividends Dividends per share
Record date Effective dateMillions of
YenThousands of U.S. Dollars Yen
U.S. Dollars
General Shareholders’ Meeting held on June 29, 2016
Common stock ¥952 $8,484 ¥6.50 $0.06 March 31,
2016June 30,
2016
Board of Directors’ Meeting held on November 11, 2016
Common stock
¥732 $6,526 ¥5.00 $0.04September 30,
2016December 5,
2016
Integrated Report 2017 68
012_9032587913002.indd 68 2018/02/02 18:50:58
(b) Dividends with record date in the current fiscal year, and effective date in the following fiscal year
For the fiscal year ended March 31, 2016
Resolution Type of shares
Total amount of dividends Source of dividends
Dividend per share
Record date Effective dateMillions of Yen Yen
General Shareholders’ Meeting held on June 29, 2016
Common stock ¥952 Retained
earnings ¥6.50 March31, 2016
June 30,2016
For the fiscal year ended March 31, 2017
Resolution Type of shares
Total amount of dividendsSource of dividends
Dividend per share
Record date Effective dateMillions of
YenThousands of U.S. Dollars Yen
U.S. Dollars
General Shareholders’ Meeting held on June 29, 2017
Common stock ¥805 $7,179 Retained
earnings ¥5.50 $0.05 March31, 2017
June 30, 2017
9. Notes to Consolidated Statements of Cash Flows
Cash and cash equivalents in the consolidated statements of cash flows for the fiscal years ended March 31, 2016 and 2017 are reconciled to the accounts reported in the consolidated balance sheets as of March 31, 2016 and 2017 as follows:
Millions of YenThousands ofU.S. Dollars
2016 2017 2017
Cash and deposits ¥80,915 ¥89,201 $795,091
Time deposits with maturities of more than three months (8,746) (6,468) (57,655)
Cash and cash equivalents ¥72,169 ¥82,733 $737,436
69 Integrated Report 2017
012_9032587913002.indd 69 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
10. Lease Transactions
(1) Finance lease transactionsLeased assets arising from finance lease transactions in which ownership of the leased assets is not transferred to the lessee are property, plant and equipment, which consists mainly of production facilities such as machinery, equipment and vehicles for the fiscal years ended March 31, 2016 and 2017. As described in “(b) Depreciation and amortization methods for significant depreciable assets, (5) Accounting policies of Section 2. Summary of Significant Accounting and Reporting Policies,” leased
assets are depreciated or amortized using the straight-line method over the lease term with no residual value. Of those finance lease transactions in which ownership of the leased assets is not transferred to the lessee, lease transactions that commenced on or before March 31, 2008 are accounted for using the method applicable to ordinary rental transactions. The following are the details of such transactions on an “as if capitalized” basis for the fiscal years ended March 31, 2015 and 2016.
(a) Equivalents of acquisition cost, accumulated depreciation and ending balance of leased assetsFor the fiscal year ended March 31, 2016
Millions of Yen
Acquisition cost
Accumulated depreciation
Ending balance
Machinery, equipment and vehicles ¥197 ¥174 ¥23
Total ¥197 ¥174 ¥23
For the fiscal year ended March 31, 2017Millions of Yen Thousands of U.S. Dollars
Acquisition cost
Accumulated depreciation
Ending balance
Acquisition cost
Accumulated depreciation
Ending balance
Machinery, equipment and vehicles ¥33 ¥28 ¥5 $292 $246 $46Total ¥33 ¥28 ¥5 $292 $246 $46
Note: The acquisition cost equivalents above are calculated using the imputed interest method since the amount of future minimum lease payments at the end of the fiscal year are not material compared with the book values of property, plant and equipment at the end of the fiscal year.
(b) Future minimum lease payments equivalent at the end of the fiscal year
Millions of YenThousands ofU.S. Dollars
2016 2017 2017Future minimum lease payments equivalent Due within one year ¥18 ¥3 $26 Due after one year 5 2 20 Total ¥23 ¥5 $46
Note: The future minimum lease payments equivalent above are calculated using the imputed interest method since the amount of future minimum lease payments at the end of the fiscal year are not material compared with the book values of property, plant and equip-ment at the end of the fiscal year.
(c) Lease expenses and depreciation expense equivalent
Millions of YenThousands ofU.S. Dollars
2016 2017 2017Lease expenses ¥60 ¥18 $157Depreciation expense equivalent 60 18 157
(2) Operating lease transactions
(Lessee)
Future minimum lease payments relating to non-cancellable operating leases
Millions of YenThousands ofU.S. Dollars
2016 2017 2017Due within one year ¥— ¥160 $1,423Due after one year — 800 7,137Total ¥— ¥960 $8,560
Integrated Report 2017 70
012_9032587913002.indd 70 2018/02/02 18:50:58
11. Financial Instruments
(1) Overview(a) Group policy for financial instruments
The Group raises funds required to implement the capital invest-
ment plan through bank borrowings and bond issues. Also, the
Group raises short-term working capital through bank borrowings.
Derivative financial instruments are utilized to reduce risks and the
Group does not hold or issue derivative financial instruments for
speculative trading purposes.
(b) Details of financial instruments and risks
Trade receivables, presented as notes and accounts receivable –
trade, are exposed to credit risk of customers. Investment securi-
ties are mostly stocks that are held by the Group in conjunction
with the business or capital alliance with our business partners and
are exposed to the risk of market price fluctuation. The Company
is also a lender who delivers long-term loans to its subsidiaries and
business partners.
Trade payables, presented as accounts payable – trade, are
mostly due within one year. Loans and bonds payable are taken
out primarily for the purpose of financing the Group’s capital
expenditures. While the floating-rate loans payable are exposed to
interest rate fluctuation risk, part of the risks are hedged by using
derivative financial instruments, i.e. interest rate swap and interest
rate cap transactions.
As for derivative transactions, interest rate swap and interest
rate cap transactions are utilized to reduce the risk of interest rate
fluctuations on interest expenses from borrowings, and forward
exchange contracts are utilized to reduce the risk of exchange rate
fluctuations on foreign currency trade receivables and payables.
Regarding hedging instruments and hedged items, the hedging
policy and method for evaluation of hedge effectiveness of hedg-
ing activities, please refer to “(f) Significant hedge accounting
method, (5) Accounting policies of Section 2. Summary of Signifi-
cant Accounting and Reporting Policies.”
(c) Risk management for financial instruments
(i) Management of credit risk (the risk of non-performance by
business counterparts)
The Company protects and manages trade receivables by
first establishing a credit limit of each customer based on the
financial situation and creditworthiness, and then monitoring
the due dates and the outstanding balance on a customer-by-
customer basis primarily in accordance with the Credit Control
Regulations, which is the Company’s internal rule. Creditwor-
thiness of each customer is measured by using credit informa-
tion that is obtained through the credit-reporting agencies and
is collected by the Company on its own behalf. Furthermore,
long-term loans receivable are controlled by regularly updat-
ing the borrowers’ financial situation on top of monitoring
the due dates and the outstanding balances so as to quickly
detect and reduce concerns about collection. The consolidated
subsidiaries also follow the same procedures in accordance
with the Company’s Credit Control Regulations.
(ii) Management of market risk (the risk of foreign exchange and
interest rate fluctuations)
The Company and certain consolidated subsidiaries use inter-
est rate swap and interest rate cap transactions to reduce the
risk of interest rate fluctuations on interest expense payable
on borrowings.
Investment securities are subject to review on a regular
basis to allow for appropriate portfolio decisions by monitoring
their fair values and the financial situation of business partners
whose shares are owned by the Company, and evaluating the
relationship with them.
Regarding derivative transactions, the basic policy is deter-
mined by the Board of Directors and transactions are entered
into by the Treasury Department in accordance with the Deriva-
tives Transaction Control Regulations, which is the Company’s
internal rule.
(iii) Management of liquidity risk related to financing activities
(the risk of non-performance on a due date)
The Company manages liquidity risk, or the risk of non-perfor-
mance by the Company on due dates, associated with trade
payables and loans payable primarily through monthly prepara-
tion of a cash budget by the Treasury Department based on the
reported forecasts received from each department. The consoli-
dated subsidiaries also manage liquidity risk by preparing a cash
budget in the same manner on a monthly basis.
(d) Supplementary explanation regarding fair value of financial
instruments
Fair value of financial instruments is measured based on quoted
market prices, if available, or reasonably assessed value if a quoted
market price is not available. Fair value of financial instruments for
which a quoted market price is not available is calculated based on
certain assumptions, and the fair value might differ if different as-
sumptions are used.
71 Integrated Report 2017
012_9032587913002.indd 71 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
(2) Matters related to fair values of financial instrumentsBook value, fair value and their difference are summarized as follows. Financial instruments whose fair values are extremely difficult to
determine are excluded from the following table (See Note 2 for details.)
For the fiscal year ended March 31, 2016
Millions of Yen
2016
Book value Fair value Difference
(1) Cash and deposits ¥ 80,915 ¥ 80,915 ¥ —
(2) Notes and accounts receivable—trade 95,683 95,683 —
(3) Investment securities 25,533 25,533 —
(4) Long-term loans receivable 3,855
Allowance for doubtful accounts* (852)
Net amount 3,003 3,204 201
Total of assets ¥ 205,134 ¥ 205,335 ¥ 201
(1) Accounts payable—trade ¥ 49,123 ¥ 49,123 ¥ —
(2) Short-term loans payable 33,560 33,560 —
(3) Accounts payable—other 23,970 23,970 —
(4) Income taxes payable 5,190 5,190 —
(5) Bonds payable 10,320 10,320 0
(6) Convertible bond-type bonds with subscription rights to shares 30,135 29,211 (924)
(7) Long-term loans payable 279,933 279,194 (739)
(8) Long-term accounts payable—facilities 6,548 6,485 (63)
Total of liabilities ¥438,779 ¥437,053 ¥(1,726)* Allowance for doubtful accounts separately accounted for on long-term loans receivable is deducted.
For the fiscal year ended March 31, 2017Millions of Yen Thousands of U.S. Dollars
2017 2017
Book value Fair value Difference Book value Fair value Difference
(1) Cash and deposits ¥ 89,201 ¥ 89,201 ¥ — $ 795,091 $ 795,091 $ —
(2) Notes and accounts receivable—trade 92,698 92,698 — 826,260 826,260 —
(3) Investment securities 31,982 31,982 — 285,070 285,070 —
(4) Long-term loans receivable 3,851 — — 34,324
Allowance for doubtful accounts* (849) — — (7,570)
Net amount 3,002 3,156 154 26,754 28,134 1,380
Total of assets ¥216,883 ¥217,037 ¥ 154 $ 1,933,175 $1,934,555 $ 1,380(1) Accounts payable—trade ¥48,446 ¥48,446 ¥ — $ 431,817 $ 431,817 $ —
(2) Short-term loans payable 26,360 26,360 — 234,959 234,959 —
(3) Accounts payable—other 25,265 25,265 — 225,199 225,199 —
(4) Income taxes payable 5,210 5,210 — 46,440 46,440 —
(5) Bonds payable 15,300 15,295 (5) 136,376 136,335 (41)
(6) Convertible bond-type bonds with subscription rights to shares 30,105 32,175 2,070 268,339 286,790 18,451
(7) Long-term loans payable 265,227 262,841 (2,386) 2,364,085 2,342,819 (21,266)
(8) Long-term accounts payable—facilities 5,006 4,968 (38) 44,621 44,284 (337)
Total liabilities ¥420,919 ¥420,560 ¥ (359) $3,751,836 $3,748,643 $ (3,193)* Allowance for doubtful accounts separately accounted for on long-term loans receivable is deducted.
Note 1. The method for measuring fair values of financial instruments and matters relating to securities
Assets:(1) Cash and deposits, (2) Notes and accounts receivable—trade
As these instruments are settled within a short term and their fair values approximate book values, their fair values are equal to their book values.
(3) Investment securitiesFair value of investment securities equals the price quoted in the stock exchange. Please refer to Section 6. Securities regarding matters concerning the securities classified by holding purpose.
(4) Long-term loans receivableFair value of long-term loans receivable (including the current portion) is determined by discounting the total of principal and
Integrated Report 2017 72
012_9032587913002.indd 72 2018/02/02 18:50:58
interest at the rate that consists of an appropriate rate such as the government bond yield plus an adjustment factor reflecting the credit risk.
Liabilities:(1) Accounts payable—trade, (2) Short-term loans payable, (3)
Accounts payable—other, (4) Income taxes payableAs these instruments are settled within a short term and their fair values approximate book values, their fair values are equal to their book values.
(5) Bonds payable, (6) Convertible bond-type bonds with subscription rights to sharesFair values of corporate bonds (including the current portion) and convertible bond-type bonds with subscription rights to shares
are determined based on a quoted market price if any. In cases where quoted market prices are not available, it is determined by discounting the total of principal and interest at the rate that reflects the remaining life of the bond and its credit risk.
(7) Long-term loans payable, (8) Long-term accounts payable— facilities
Fair values of long-term loans payable (including the current portion) and long-term accounts payable—facilities (including the current portion) are determined by discounting the total amount of principal and interest with an interest rate to be applied if similar new loans were entered into or similar new equipment were purchased.
Note 2. Financial instruments whose fair values are deemed to be extremely difficult to determine
Millions of YenThousands ofU.S. Dollars
Category 2015 2016 2016
Non-marketable equity securities ¥2,354 ¥2,186 $19,489
Shares of subsidiaries and associates 4,878 1,644 14,653
As these financial instruments do not have quoted market prices and their fair values are deemed to be extremely difficult to determine, they are not included in “(3) Investment securities.”
Note 3. Redemption schedule for financial receivables and securities with maturity dates after the consolidated balance sheet date
Millions of Yen
As of March 31, 2016Due withinone year
Due after one year through five years
Due after five years through
ten yearsDue after ten years
Deposits ¥ 80,811 ¥— ¥ — ¥ —Notes and accounts receivable—trade 95,683 — — —Investment securities
Available-for-sale securities with maturity dates (1) Bonds (corporate bonds) — — — — (2) Other — — — —Long-term loans receivable 1 2 3,000 852Total ¥176,495 ¥ 2 ¥3,000 ¥852
Millions of Yen
As of March 31, 2017Due withinone year
Due after one year through five years
Due after five years through
ten yearsDue after ten years
Deposits ¥ 89,095 ¥ — ¥— ¥ —Notes and accounts receivable—trade 92,698 — — —Investment securities
Available-for-sale securities with maturity dates (1) Bonds (corporate bonds) — — — — (2) Other — — — —Long-term loans receivable 1 3,001 — 849Total ¥181,794 ¥3,001 ¥— ¥849
73 Integrated Report 2017
012_9032587913002.indd 73 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Thousands of U.S. Dollars
As of March 31, 2017Due withinone year
Due after one year through five years
Due after five years through
ten yearsDue after ten years
Deposits $ 794,142 $ — $— $ —Notes and accounts receivable—trade 826,260 — — —Investment securities
Available-for-sale securities with maturity dates (1) Bonds (corporate bonds) — — — — (2) Other — — — —Long-term loans receivable 6 26,748 — 7,570Total $1,620,408 $26,748 $— $7,570
Note 4. Repayment schedule for bonds payable, long-term loans payable, lease obligations and other interest-bearing debt after the consolidated balance sheet date
Millions of Yen
As of March 31, 2016Due withinone year
Between one to two
years
Between two to three
years
Between three to four
years
Between four to five
yearsOver five
yearsShort-term loans payable ¥ 33,560 ¥ — ¥ — ¥ — ¥ — ¥ —
Bonds payable 10,320 — — — — —
Convertible bond-type bonds with subscription rights to shares — — — — 30,000 —
Long-term loans payable 79,941 72,512 47,818 32,731 26,042 20,889
Long-term accounts payable—facilities 2,526 2,408 1,020 429 157 8
Lease obligations 477 426 341 234 139 257
Total ¥126,824 ¥75,346 ¥49,179 ¥33,394 ¥56,338 ¥21,154
Millions of Yen
As of March 31, 2017Due withinone year
Between one to two
years
Between two to three
years
Between three to four
years
Between four to five
yearsOver five
yearsShort-term loans payable ¥ 26,360 ¥ — ¥ — ¥ — ¥ — ¥ —
Bonds payable — — — — 15,300 —
Convertible bond-type bonds with subscription rights to shares — — — 30,000 — —
Long-term loans payable 72,706 50,112 44,809 33,796 29,360 34,444
Long-term accounts payable—facilities 2,621 1,218 629 353 185 —
Lease obligations 593 511 393 290 168 325
Total ¥102,280 ¥51,841 ¥45,831 ¥64,439 ¥45,013 ¥34,769
Thousands of U.S. Dollars
As of March 31, 2017Due withinone year
Between one to two
years
Between two to three
years
Between three to four
years
Between four to five
yearsOver five
years
Short-term loans payable $234,959 $ — $ — $ — $ — $ —
Bonds payable — — — — 136,376 —Convertible bond-type bonds with subscription rights to shares — — — 267,404 — —
Long-term loans payable 648,062 446,667 399,401 301,237 261,702 307,016
Long-term accounts payable—facilities 23,363 10,857 5,605 3,142 1,654 —
Lease obligations 5,286 4,553 3,507 2,584 1,494 2,900
Total $911,670 $462,077 $408,513 $574,367 $401,226 $309,916
Integrated Report 2017 74
012_9032587913002.indd 74 2018/02/02 18:50:58
12. Securities
(1) Available-for-sale securitiesAs of March 31, 2016
Millions of Yen
Classification Type of securities Book value Cost Difference
Securities for which book value exceeds cost Equity securities ¥23,798 ¥14,714 ¥9,084
Securities for which book value does not exceed cost Equity securities 1,735 1,888 (153)
Total ¥25,533 ¥16,602 ¥8,931
Note: Non-marketable equity securities (with book value of ¥2,354 million) are not included in “available-for-sale securities” in the above table because they have no quoted market price and thus it is extremely difficult to determine their fair value.
As of March 31, 2017Millions of Yen
Classification Type of securities Book value Cost Difference
Securities for which book value exceeds cost Equity securities ¥31,637 ¥16,284 ¥15,353
Securities for which book value does not exceed cost Equity securities 345 465 (120)
Total ¥31,982 ¥16,749 ¥15,233
Thousands of U.S. Dollars
Classification Type of securities Book value Cost Difference
Securities for which book value exceeds cost Equity securities ¥281,996 ¥145,148 ¥136,848
Securities for which book value does not exceed cost Equity securities 3,074 4,147 (1,073)
Total ¥285,070 ¥149,295 ¥135,775
Note: Non-marketable equity securities (with book value of ¥2,186 million ($19,489 thousand)) are not included in “available-for-sale securities” in the above table because they have no quoted market price and thus it is extremely difficult to determine their fair value.
(2) Available-for-sale securities sold
For the fiscal year ended March 31, 2016Millions of Yen
Type of securities Proceeds from sale Gain on sale Loss on sale
Equity securities ¥5,155 ¥3,729 ¥ 0
For the fiscal year ended March 31, 2017Millions of Yen
Type of securities Proceeds from sale Gain on sale Loss on sale
Equity securities ¥60 ¥32 ¥ 0
Thousands of U.S. Dollars
Type of securities Proceeds from sale Gain on sale Loss on sale
Equity securities $533 $281 $ 0
(3) Impairment of investment in securities
For the fiscal year ended March 31, 2016, the Company recorded impairment losses of ¥2 million on securities (all of which was on available-for-sale securities). For securities whose fair values at the end of the fiscal year have declined by 50% or more compared with their cost, loss on impairment is recorded without exception. For securities whose fair value at the end of the fiscal year have declined by 30% or more but less than 50% compared with cost, loss on impairment is recorded if it is deemed necessary in consideration of the possibility of the fair values being restored.
For the fiscal year ended March 31, 2017, the Company recorded impairment losses of ¥163 million ($1,453 thousand) on securities (all of which was on available-for-sale securities). For securities whose fair values at the end of the fiscal year have declined by 50% or more compared with their cost, loss on impairment is recorded without exception. For securities whose fair value at the end of the fiscal year have declined by 30% or more but less than 50% compared with cost, loss on impairment is recorded if it is deemed necessary in consideration of the possibility of the fair values being restored.
75 Integrated Report 2017
012_9032587913002.indd 75 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
13. Derivative Transactions
(1) Derivative contracts outstanding to which the hedge accounting was not appliedThere were no relevant transactions.
(2) Derivative contracts outstanding to which the hedge accounting was applied(a) Currency-related derivatives
As of March 31, 2016 Millions of Yen
Hedge accounting method
Type of derivativetransactions Major hedged item
Contract amount
Total
of whichdue afterone year Fair value
Deferral hedge accounting treatment (furiate shori) applicable to forward exchange contracts
Forward exchange contractSell USD Accounts receivable—trade ¥ — ¥—Buy
USD Accounts payable—trade 232 — (Note 2)
EUR Accounts payable—trade 0 — (Note 2)
Total ¥232 ¥— ¥—
Notes: 1. Fair values are determined based on the prices quoted by counterparty financial institutions. 2. The fair values of forward exchange contracts are included in those of accounts receivable and payable—trade because when forward
exchange contracts qualify for deferral hedge accounting treatment (furiate shori), they are accounted for together with foreign currency denominated financial receivables and payables (the hedged items) as one set of transactions.
As of March 31, 2017 Millions of Yen
Hedge accounting method
Type of derivativetransactions Major hedged item
Contract amount
Total
of whichdue afterone year Fair value
Deferral hedge accounting treatment (furiate shori) applicable to forward exchange contracts
Forward exchange contractSell USD Accounts receivable—trade ¥ 5 ¥— (Note 2)Buy
USD Accounts payable—trade 361 — (Note 2)
EUR Accounts payable—trade 6 — (Note 2)
GBP Accounts payable—trade 0 — (Note 2)
Total ¥372 ¥— ¥—
Thousands of U.S. Dollars
Hedge accounting method
Type of derivativetransactions Major hedged item
Contract amount
Total
of whichdue afterone year Fair value
Deferral hedge accounting treatment (furiate shori) applicable to forward exchange contracts
Forward exchange contractSell USD Accounts receivable—trade $ 40 $— (Note 2)Buy
USD Accounts payable—trade 3,221 — (Note 2)
EUR Accounts payable—trade 52 — (Note 2)
GBP Accounts payable—trade 0 — (Note 2)
Total $3,313 $— $—
Notes: 1. Fair values are determined based on the prices quoted by counterparty financial institutions. 2. The fair values of forward exchange contracts are included in those of accounts receivable and payable—trade because when forward
exchange contracts qualify for deferral hedge accounting treatment (furiate shori), they are accounted for together with foreign currency denominated financial receivables and payables (the hedged items) as one set of transactions.
Integrated Report 2017 76
012_9032587913002.indd 76 2018/02/02 18:50:58
(b) Interest rate-related derivatives
As of March 31, 2016 Millions of Yen
Hedge accounting method
Type of derivativetransactions Major hedged item
Contract amount
Total
of whichdue afterone year Fair value
Exceptional hedge accounting treatment (tokurei shori) applicable to interest rate swap contracts
Interest rate swap contractFloating rate receipt/fixed rate payment
Long-term loans payable ¥78,394 ¥76,454 (Note 2)
Exceptional hedge accounting treatment (tokurei shori) applicable to interest rate cap contracts
Interest rate cap contractBuy
Long-term loans payable 105 60 (Note 2)
Total ¥78,499 ¥76,514 ¥—
Notes: 1. Fair values are determined based on the prices quoted by counterparty financial institutions. 2. The fair values of interest rate swap and interest rate cap contracts are included in those of long-term loans payable because when
interest rate swap and interest rate cap contracts qualify for exceptional hedge accounting treatment (tokurei shori), they are accounted for together with long-term loans payable (the hedged items) as one set of transactions.
As of March 31, 2017 Millions of Yen
Hedge accounting method
Type of derivativetransactions Major hedged item
Contract amount
Total
of whichdue afterone year Fair value
Exceptional hedge accounting treatment (tokurei shori) applicable to interest rate swap contracts
Interest rate swap contractFloating rate receipt/fixed rate payment
Long-term loans payable ¥56,831 ¥41,779 (Note 2)
Exceptional hedge accounting treatment (tokurei shori) applicable to interest rate cap contracts
Interest rate cap contractBuy
Long-term loans payable 20 — (Note 2)
Total ¥56,851 ¥41,779 ¥—
Thousands of U.S. Dollars
Hedge accounting method
Type of derivativetransactions Major hedged item
Contract amount
Total
of whichdue afterone year Fair value
Exceptional hedge accounting treatment (tokurei shori) applicable to interest rate swap contracts
Interest rate swap contractFloating rate receipt/fixed rate payment
Long-term loans payable $506,558 $372,391 (Note 2)
Exceptional hedge accounting treatment (tokurei shori) applicable to interest rate cap contracts
Interest rate cap contractBuy
Long-term loans payable 178 — (Note 2)
Total $506,736 $372,391 $—
Notes: 1. Fair values are determined based on the prices quoted by counterparty financial institutions. 2. The fair values of interest rate swap and interest rate cap contracts are included in those of long-term loans payable because when
interest rate swap and interest rate cap contracts qualify for exceptional hedge accounting treatment (tokurei shori), they are accounted for together with long-term loans payable (the hedged items) as one set of transactions.
77 Integrated Report 2017
012_9032587913002.indd 77 2018/02/02 18:50:58
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
14. Retirement Benefits
(1) Overview of retirement benefit plansThe Company and its consolidated subsidiaries provide the following defined benefit plans: a contract-type corporate pension plan and a lump-sum retirement benefit plan. Some of the consolidated subsidiaries participate in the Small and Medium Enterprises’ Retirement Allowance Mutual Aid System. The simplified method is applied by some of the consolidated subsidiaries to calculate the net defined benefit liability and retire-ment benefit expenses.
(2) Defined benefit plans(a) Reconciliation of beginning and ending balances of retirement
benefit obligations
Millions of YenThousands of U.S. Dollars
2015 2017 2017 Beginning balance of retirement benefit obligation ¥20,266 ¥21,477 $191,435 Service cost 1,088 1,109 9,886 Interest cost 195 197 1,760 Actuarial (gain) loss 151 101 897 Benefits paid (1,206) (929) (8,277) Past service cost 49 — —
Increase due to a change from the simplified method to the standard method 934 2,311 20,596Other — 2 15
Ending balance of retirement benefit obligation ¥21,477 ¥24,268 $216,312
Note: Retirement benefit obligations under the plans for which the simplified method is applied are not included in the table above.
(b) Reconciliation of beginning and ending balances of plan assets
Millions of YenThousands of U.S. Dollars
2016 2017 2017 Beginning balance of plan assets ¥5,421 ¥5,470 $48,759 Expected return on plan assets 54 55 488 Actuarial gain (loss) (84) 47 422 Employer contributions 325 332 2,953
Benefits paid (246) (182) (1,618)Ending balance of plan assets ¥5,470 ¥5,722 $51,004
Note: Plan assets of ¥733 million ($6,529 thousand) for the fiscal year ended March 31, 2017 (¥639 million for the fiscal year ended March 31, 2016) under the plans for which the simplified method is applied are not included in the table above.
(c) Reconciliation of beginning and ending balances of net defined benefit liability for plans for which the simplified method is applied
Millions of YenThousands of U.S. Dollars
2016 2017 2017Beginning balance of net defined benefit liability ¥3,933 ¥ 3,507 $ 31,255Retirement benefit expenses 412 419 3,731Benefits paid (193) (273) (2,423)Decrease due to a change from the simplified method to the standard method (645) (1,339) (11,937)Ending balance of net defined benefit liability ¥3,507 ¥ 2,314 $ 20,626
(d) Reconciliation of ending balances of retirement benefit obligations and plan assets, net defined benefit liability and net defined benefit asset reported on the consolidated balance sheets
Millions of YenThousands of U.S. Dollars
2016 2017 2017Funded retirement benefit obligation ¥ 6,960 ¥ 7,059 $ 62,921Plan assets (6,109) (6,455) (57,533)Subtotal 851 604 5,388Unfunded retirement benefit obligation 18,023 19,523 174,017Net asset or liability reported on the consolidated balance sheet 18,874 20,127 179,405Net defined benefit liability 18,874 20,127 179,405Net asset or liability reported on the consolidated balance sheet ¥18,874 ¥20,127 $179,405
Note: Retirement benefit obligation and plan assets under the plans for which the simplified method is applied are included in the reconciliation above.
(e) Components of retirement benefit expenses
Millions of YenThousands of U.S. Dollars
2016 2017 2017
Service cost ¥1,088 ¥1,109 $ 9,886
Interest cost 195 197 1,760
Expected return on plan assets (54) (55) (488)
Amortization of actuarial (gain) loss 619 353 3,148
Amortization of past service cost 9 5 46Retirement benefit expenses cal- culated by the simplified method 412 419 3,731Expenses incurred due to a change from the simplified method to the standard method 289 972 8,659Other — 0 1Retirement benefit expenses related to defined benefit plans ¥2,558 ¥3,000 $26,743
Integrated Report 2017 78
012_9032587913002.indd 78 2018/02/02 18:50:59
(f) Remeasurements of defined benefit plans in other comprehensive income (before tax effect)
Millions of YenThousands of U.S. Dollars
2016 2017 2017 Actuarial (gain) loss ¥386 ¥300 $2,672Past service cost (40) 5 46Other — (0) (0)Total ¥346 ¥305 $2,718
(g) Remeasurements of defined benefit plans in accumulated other comprehensive income (before tax effect)
Millions of YenThousands of U.S. Dollars
2016 2017 2017 Unrecognized actuarial (gain) loss ¥1,066 ¥767 $6,830Unrecognized past service cost 23 17 156Total ¥1,089 ¥784 $6,986
(h) Plan assets (i) Allocation of plan assets
2016 2017General account 57% 39%Debt securities 19 34Equity securities 19 23Other 5 4Total 100% 100%
Note: Plan assets under the plans for which the simplified method is applied are not included in the table above.
(ii) Determination procedure of long-term expected rate of return on plan assets
In determining the long-term expected rate of return on plan assets, the Company considers the current and projected asset allocations as well as current and future expected long-term rate of returns from various assets that constitute the plan assets.
(i) Assumptions used in actuarial calculationsMajor assumptions used in actuarial calculations
2016 2017Discount rate 0.53% – 1.06% 0.47% – 1.06%Long-term expected rate of return on plan assets 1.00% 1.00%
(3) Defined contribution planThe amounts required to contribute to defined contribution plans of the consolidated subsidiaries are as follows:
Millions of YenThousands of U.S. Dollars
2016 2017 2017 Amount required to contribute to defined contribution plan ¥25 ¥29 $176
79 Integrated Report 2017
012_9032587913002.indd 79 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
15. Income Taxes
(1) Significant components of deferred tax assets and deferred tax liabilities
Millions of YenThousands of U.S. Dollars
2016 2017 2017Deferred tax assets:
Provision for bonuses ¥ 1,459 ¥ 1,499 $ 13,358Accrued enterprise tax 483 449 4,001Net operating loss carryforwards 2,246 2,202 19,623Loss on valuation of inventories 808 782 6,970Net defined benefit liability 5,559 6,045 53,882Unrealized gains and losses on non-current assets and investment securities 270 283 2,524Adjustments on non-current assets 515 529 4,719Loss on valuation of investment securities 1,263 1,245 11,096Impairment loss 1,102 786 7,010Adjustment of book value of investments — 2,337 20,827Other 2,130 2,297 20,477
Subtotal 15,835 18,454 164,487Less valuation allowance (4,416) (5,807) (51,756)
Total deferred tax assets 11,419 12,647 112,731
Deferred tax liabilities:
Valuation difference on available-for-sale securities (2,482) (4,135) (36,858) Retained earnings of subsidiaries and associates (3,181) (2,978) (26,540)
Valuation difference on non-current assets for consolidated tax return (862) (829) (7,386)Other (1,353) (1,417) (12,635)
Total deferred tax liabilities (7,878) (9,359) (83,419)Net deferred tax assets ¥ 3,541 ¥ 3,288 $ 29,312
Note: Net deferred tax assets as of March 31, 2016 and 2017 are included in the following accounts in the consolidated balance sheets.
Millions of Yen Thousands of U.S. Dollars
2016 2017 2017
Current assets—deferred tax assets ¥ 4,106 ¥ 4,503 $ 40,134
Non-current assets—deferred tax assets 921 531 4,732
Current liabilities—other (deferred tax liabilities) (35) (33) (296)
Non-current liabilities—other (deferred tax liabilities) (1,451) (1,713) (15,258)
(Changes in the Method of Presentation)“Valuation difference on non-current assets for consolidated tax return,” which was presented separately under deferred tax assets for the fiscal year ended March 31, 2016, has been included in “Other” from the fiscal year ended March 31, 2017 due to a decrease in monetary materiality. As a result, the ¥38 million presented as “Valuation difference on non-current assets for consolidated tax return” and ¥2,092 million presented as “Other” under deferred tax assets for the fiscal year ended March 31, 2016 have been reclassified as ¥2,130 million of “Other.”
(2) Difference between the effective statutory tax rate and the Company’s effective income tax rate
The note disclosure for the fiscal years ended March 31, 2016 and 2017 is omitted because the difference between the effective statutory tax rate and the effective income tax rate after applying the tax effect accounting is not more than 5% of the effective statutory tax rate.
Integrated Report 2017 80
012_9032587913002.indd 80 2018/02/02 18:50:59
(1) Overview of reportable segmentsThe Company is organized into business units or sales divisions by product line. Each business unit or sales division is responsible for the formulation of a comprehensive strategy for the products it carries and the relevant business activities. The Company consists of two reportable segments, namely the Paper and Paperboard business segment and the Home and Personal Care business segment, each of which comprises businesses of product lines that are similar in terms of the manufacture and distri-bution system and types of market or customers. Each reportable segment of the Company is a unit for which operating results are evaluated regularly at the budget meeting, where decisions regarding the Company’s financial performance are made, and for which separate financial information is available. The products manufactured and distributed by the Paper and Paperboard business segment include newsprints, printing papers, packaging papers, paperboards, corrugated containers and pulps, and the customers include newspaper companies, printing companies, processing companies and corrugated container companies.
The products manufactured and distributed by the Home and Personal Care business segment include sanitary goods, disposable diapers, napkins and wet wipes, which are ultimately sold to consumers.
(2) Calculation method of net sales, income, assets and other items by reportable segment
The accounting method for the reportable segments is the same as those described in Section 2. Summary of Significant Accounting and Reporting Policies. Segment income is based on operating income. Intersegment sales or transfers are based on the price determined upon consultation between the parties involved.
16. Segment Information
(3) Net sales, income, assets and other items by reportable segmentFor the fiscal year ended March 31, 2016
Millions of Yen
Reportable segment
Other(Note 1) Total
Adjustments(Note 2)
Consolidated(Note 3)
Paper and Paperboard
Home and Personal
Care TotalNet Sales Sales to external customers ¥299,962 ¥158,904 ¥458,866 ¥15,211 ¥474,077 ¥ — ¥474,077 Intersegment sales and transfers 18,450 2,207 20,657 56,288 76,945 (76,945) —Total sales ¥318,412 ¥161,111 ¥479,523 ¥71,499 ¥551,022 ¥(76,945) ¥474,077Segment income ¥ 10,473 ¥ 10,365 ¥ 20,838 ¥ 3,153 ¥ 23,991 ¥ 332 ¥ 24,323Segment assets 409,237 182,774 592,011 48,255 640,266 16,044 656,310Other items: Depreciation and amortization 20,787 5,701 26,488 500 26,988 — 26,988 Increase in property, plant and equipment and intangible assets 16,711 19,649 36,360 950 37,310 — 37,310
Notes: 1. The “Other” category consists of the business segments that are not included in the reportable segments, and includes woodchip, forestry, machinery, logistics, electric power selling and golf club businesses.
2. Adjustments are as follows: i) The amount of adjustments for segment income is the adjustment for elimination of intersegment transactions. ii) The amount of adjustments for segment assets is the adjustment for elimination of intersegment transactions of ¥(14,854) million
and corporate assets, consisting primarily of investment securities, not attributable to any reportable segment of ¥30,898 million. 3. Segment income is calculated by adjusting operating income presented in the consolidated statement of income.
81 Integrated Report 2017
012_9032587913002.indd 81 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
For the fiscal year ended March 31, 2017
Millions of Yen
Reportable segment
Other(Note 1) Total
Adjustments(Note 2)
Consolidated(Note 3)
Paper and Paperboard
Home and Personal
Care TotalNet Sales Sales to external customers ¥291,953 ¥168,820 ¥460,773 ¥16,367 ¥477,140 ¥ — ¥477,140 Intersegment sales and transfers 17,471 2,489 19,960 56,470 76,430 (76,430) —Total sales ¥309,424 ¥171,309 ¥480,733 ¥72,837 ¥553,570 ¥(76,430) ¥477,140Segment income ¥ 10,027 ¥ 10,110 ¥ 20,137 ¥ 3,113 ¥ 23,250 ¥ 285 ¥ 23,535Segment assets 395,867 190,813 586,680 48,831 635,511 22,236 657,747Other items: Depreciation and amortization 21,320 7,113 28,433 584 29,017 — 29,017 Increase in property, plant and equipment and intangible assets 15,696 12,230 27,926 4,527 32,453 — 32,453
Thousands of U.S. Dollars
Reportable segment
Other(Note 1) Total
Adjustments(Note 2)
Consolidated(Note 3)
Paper and Paperboard
Home and Personal
Care TotalNet Sales Sales to external customers $2,602,311 $1,504,768 $4,107,079 $145,881 $4,252,960 $ — $4,252,960 Intersegment sales and transfers 155,727 22,189 177,916 503,343 681,259 (681,259) —Total sales $2,758,038 $1,526,957 $4,284,995 $649,224 $4,934,219 $(681,259) $4,252,960Segment income $ 89,379 $ 90,113 $ 179,492 $ 27,742 $ 207,234 $ 2,540 $ 209,774Segment assets 3,528,542 1,700,801 5,229,343 435,255 5,664,598 198,199 5,862,797Other items: Depreciation and amortization 190,039 63,401 253,440 5,201 258,641 — 258,641 Increase in property, plant and equipment and intangible assets 139,908 109,009 248,917 40,352 289,269 — 289,269
Notes: 1. The “Other” category consists of the business segments that are not included in the reportable segments, and includes woodchip, forestry, machinery, logistics, electric power selling and golf club businesses.
2. Adjustments are as follows: i) The amount of adjustments for segment income is the adjustment for elimination of intersegment transactions. ii) The amount of adjustments for segment assets is the adjustment for elimination of intersegment transactions of ¥(13,676) million
($(121,903) thousand) and corporate assets, consisting primarily of investment securities, not attributable to any reportable segment of ¥35,912 million ($320,102 thousand).
3. Segment income is calculated by adjusting operating income presented in the consolidated statement of income.
(4) Related information(a) Information by product and service
For the fiscal years ended March 31, 2016 and 2017This information is omitted because a similar description has been disclosed in segment information.
(b) Information by geographical area (i) Net sales For the fiscal years ended March 31, 2016 and 2017 This information is omitted because the Group’s domestic sales exceed 90% of net sales presented in the consolidated statements of income.
(ii) Property, plant and equipmentFor the fiscal years ended March 31, 2016
Millions of Yen
Japan Asia South America Other Total
Property, plant and equipment ¥269,114 ¥13,485 ¥13,631 ¥143 ¥296,373
Integrated Report 2017 82
012_9032587913002.indd 82 2018/02/02 18:50:59
For the fiscal years ended March 31, 2017 Millions of Yen
Japan Asia South America Other Total
Property, plant and equipment ¥268,665 ¥16,631 ¥13,746 ¥142 ¥299,184
Millions of Yen
Japan Asia South America Other Total
Property, plant and equipment $2,394,730 $148,242 $122,526 $1,259 $2,666,757
Note: From the fiscal year ended March 31, 2017, as the amounts of the items of property, plant and equipment that are located outside of Japan exceeded 10% of the amount of property, plant and equipment presented in the consolidated balance sheet, the above items are presented. While the amounts of the items of property, plant and equipment that were located in Japan exceeded 90% of the amount of property, plant and equipment presented in the consolidated balance sheet in the fiscal year ended March 31, 2016, and thus were not presented, starting from the fiscal year ended March 31, 2017 the items have been presented through aggrega-tion using the same regional categories as the current fiscal year.
(c) Information by major customerThis information is omitted because none of the external customers singularly account for 10% or more of net sales presented in the consolidated statements of income.
(5) Impairment loss of non-current assets by reportable segmentFor the fiscal year ended March 31, 2016
Millions of Yen
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Impairment loss ¥1,294 ¥234 ¥36 ¥— ¥1,564
Note: The amount of “Other” is impairment loss associated with the machinery businesses.
For the fiscal year ended March 31, 2017Millions of Yen
Paper and Paperboard
Home and Personal Care Other
Corporate & elimination Total
Impairment loss ¥737 ¥128 ¥— ¥— ¥865
Thousands of U.S. Dollars
Paper and Paperboard
Home and Personal Care Other
Corporate & elimination Total
Impairment loss $6,571 $1,139 $— $— $7,710
(6) Amortization and unamortized balance of goodwill by reportable segmentFor the fiscal year ended March 31, 2016
Millions of Yen
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Amortization of goodwill ¥ 2,273 ¥ 2,041 ¥ 541 ¥— ¥ 4,855Unamortized balance 22,018 23,449 8,793 — 54,260
Note: The amount of “Other” includes amortization and unamortized balance associated with the woodchip, forestry, machinery and logistics businesses.
The following are amortization and unamortized balances of negative goodwill that arose in the business combinations that occurred before April 1, 2010.
Millions of Yen
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Amortization of negative goodwill ¥ 11 ¥0 ¥ 62 ¥— ¥ 73Unamortized balance 111 1 685 — 797
Note: The amount of “Other” includes amortization and unamortized balance associated with the woodchip and forestry businesses.
83 Integrated Report 2017
012_9032587913002.indd 83 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
For the fiscal year ended March 31, 2017Millions of Yen
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Amortization of goodwill ¥ 2,011 ¥ 1,679 ¥ 541 ¥— ¥ 4,231Unamortized balance 19,566 21,770 8,252 — 49,588
Thousands of U.S. Dollars
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Amortization of goodwill $ 17,921 $ 14,970 $ 4,821 $— $ 37,712Unamortized balance 174,407 194,042 73,555 — 442,004
Note: The amount of “Other” includes amortization and unamortized balance associated with the woodchip, forestry, machinery and logistics businesses.
The following are amortization and unamortized balances of negative goodwill that arose in the business combinations that occurred before April 1, 2010.
Millions of Yen
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Amortization of negative goodwill ¥ 11 ¥0 ¥ 62 ¥— ¥ 73Unamortized balance 100 1 623 — 724
Thousands of U.S. Dollars
Paper and Paperboard
Home and Personal Care
Other(Note)
Corporate & elimination Total
Amortization of negative goodwill $ 97 $1 $ 555 $— $ 653Unamortized balance 894 5 5,552 — 6,451
Note: The amount of “Other” includes amortization and unamortized balance associated with the woodchip and forestry businesses.
(7) Negative Goodwill (Gain on Bargain Purchase) by Reportable SegmentFor the fiscal year ended March 31, 2016The Company did not recognize any gain on bargain purchase.
For the fiscal year ended March 31, 2017The Company did not recognize any gain on bargain purchase.
Integrated Report 2017 84
012_9032587913002.indd 84 2018/02/02 18:50:59
17. Related Party Transactions
(1) Transactions between the company filing consolidated financial statements and related parties(a) Transactions with parent company and major corporate shareholders, etc.For the fiscal year ended March 31, 2016None
For the fiscal year ended March 31, 2017None
(b) Transactions with associates, etc.For the fiscal year ended March 31, 2016None
For the fiscal year ended March 31, 2017None
(c) Transactions with directors, etc. of the company filing consolidated financial statementsFor the fiscal year ended March 31, 2016
Category
Name of company or individual Location
Capital stock or
investments in capital
Millions of Yen
Business details or
occupation
Voting rights owned by the
Company(Voting
rights of the Company
owned by related
party)
Relation with
relatedparty
Transactiondetails
Transac-tion
amount
Millions of Yen
Account title
Year-end balance
Millions of Yen
Companies(including their subsidiaries) the majority of whose voting shares are owned by those equivalent to directors and close members of their family
Shikoku Paper Sales Corporation
Shikoku-Chuo City, Ehime Prefecture
¥50
Purchase and sale of papers, paperboards and raw materials for papermaking
Direct5.05%
Direct(1.07%)
—
Sale of products and merchandise (Note 1)
¥14,902Accounts receivable—trade
¥4,426
Purchase of raw materials(Note 2)
92Accounts payable—trade
9
Sale of raw materials(Note 2)
108Accounts receivable—other
19
Payment of warehousing charge (Note 3)
10Accounts payable—other
1
Payment of subcontractor processing fee (Note 4)
17Accounts payable—other
2
Notes: 1. The selling prices of the products and merchandise are determined upon consultation between the parties involved.2. The purchase and selling prices of raw materials are determined upon consultation between the parties involved.3. The warehousing charge is determined upon consultation between the parties involved.4. The product processing fee is determined upon consultation between both parties based on the total costs incurred by Shikoku Paper Sales Corporation.5. The transaction amounts do not include consumption taxes.
For the fiscal year ended March 31, 2017None
85 Integrated Report 2017
012_9032587913002.indd 85 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
(2) Transactions between the consolidated subsidiaries of the company filing consolidated financial statements and related parties
(a) Transactions with parent company and major corporate shareholders, etc.For the fiscal year ended March 31, 2016None For the fiscal year ended March 31, 2017None
(b) Transactions with directors and major individual shareholders, etc.For the fiscal year ended March 31, 2016
Category
Name of company
or individual Location
Capital stock or investments
in capital
Millions of Yen(Thousands ofU.S. Dollars)
Business details or
occupation
Voting rights owned by the
Company(Voting
rights of the Company owned by
related party)
Relation with
relatedparty
Transactiondetails
Transac-tion
amount
Millions of Yen
(Thousands ofU.S. Dollars)
Account title
Year-end balance
Millions of Yen
(Thousands ofU.S. Dollars)
Companies(including their subsidiaries) the majority of whose voting shares are owned by those equivalent to directors and close members of their family
Shikoku Paper Sales Corporation
Shikoku-Chuo City, Ehime Prefecture
¥50
Purchase and sale of papers, paperboards and raw materials for papermaking
Direct5.05%
Direct(1.07%)
—
Sale of products and merchandise (Note 1)
¥335Accounts receivable—trade
¥ 1
Purchase of raw materials (Note 2)
197Accounts payable—trade
14
Payment of subcontractor processing fee (Note 3)
25Accounts payable—other
3
Notes: 1. The selling prices of the products and merchandise are determined upon consultation between the parties involved.2. The purchase prices of raw materials are determined upon consultation between the parties involved.3. The product processing costs are determined upon consultation between both parties based on the total costs incurred by Shikoku
Paper Sales Corporation.4. The transaction amounts do not include consumption taxes.
For the fiscal year ended March 31, 2017None
Integrated Report 2017 86
012_9032587913002.indd 86 2018/02/02 18:50:59
18. Per Share Information
Amounts per share as of March 31, 2016 and 2017 and for the fiscal years then ended are summarized as follows:
Yen U.S. Dollars
2016 2017 2017Net assets per share ¥1,119.24 ¥1,211.33 $10.80Basic earnings per share 100.15 83.28 0.74Diluted earnings per share 92.94 72.74 0.65
Note: Basic and diluted earnings per share are calculated based on the following:
Yen U.S. Dollars
2016 2017 2017Basic earnings per share
Profit attributable to owners of parent (millions of yen/thousands of U.S. Dollars) ¥ 14,594 ¥ 12,136 $108,174 Amount not attributable to common shareholders of parent (millions of yen/thousands of U.S. Dollars) — — — Profit attributable to common shareholders of parent (millions of yen/thousands of U.S. Dollars) 14,594 12,136 108,174 Average number of common shares outstanding during the period (thousands of shares) 145,732 145,730 145,730
Diluted earnings per share
Adjustment to profit attributable to owners of parent (millions of yen/thousands of U.S. Dollars) ¥ (10) ¥ (21) $ (185) [Amortization of bond premium (after deducting the amount equivalent to taxes)(millions of yen/thousands of U.S. Dollars)] [(10)] [(21)] [(185)]
Increase in the number of common shares (thousands of shares) 11,190 20,816 20,816 [Convertible bond-type bonds with subscription rights to shares (thousands of shares)] [11,190] [20,816] [20,816]Summary of potentially dilutive shares that were not included in the calculation of diluted earnings per share since there was no dilutive effect — — —
87 Integrated Report 2017
012_9032587913002.indd 87 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Business Combination through Acquisition The Company, in accordance with the share transfer agreement concluded with Nisshinbo Holdings Inc. (hereinafter, “Nisshinbo HD”) effective February 10, 2017, has acquired all outstanding shares of Nisshinbo Paper Products Inc. (hereinafter, “Nisshinbo PP”) from Nisshinbo HD effective April 3, 2017.
(1) Overview of the business combination(a) Company name and business details of the acquired company
Company name Nisshinbo Paper Products Inc.
Location2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo
Business detailsManufacture and sale of household paper, specialty paper, processed paper products, etc.
(b) Main reasons for the business combinationThe Company, collectively as a group, has a presence in every field of the Paper Products Business (hereinafter, the “Business”), namely household paper, specialty paper, processed paper products and label-related products, which it acquired from Nisshinbo HD. Therefore, the Company will be able to make full use of all of the management resources (human talents, facilities and equipment, and brands) of the Business, and will be able to raise the value of all products, including household paper, specialty paper, processed paper products and label-related products, and further develop each business.
(c) Date of the business combinationApril 3, 2017
(d) Legal form of the business combination Acquisition of shares through a share transfer (i) Details of the transferred business
The shares of Nisshinbo HD’s domestic subsidiaries (Nisshinbo PP, which holds Daiwa Shiko Co., Ltd. and Tokai Seishi Kogyo Co., Ltd. as its subsidiaries) and Nisshinbo Postal Chemical Co., Ltd. (hereinafter, “Nisshinbo PC”), and Nisshinbo HD’s equity in its Chinese subsidiary, Shanghai Sun-Rich Arts & Crafts Co., Ltd. (hereinafter, “Shanghai Sun-Rich Arts & Craft”), all of which are involved in the Business, as well as the real estate, facilities, intellectual property rights and other assets pertaining to the Business that Nisshinbo HD holds.
(ii) Method of the transferNisshinbo HD, by absorption-type company split, had Nisshinbo PP succeed its shares in Nisshinbo PC, its equity in Shanghai Sun-Rich Arts & Craft, and its real estate, facilities, intellectual property rights and other assets pertaining to the Business, after which the Company acquired all shares in Nisshinbo PP from Nisshinbo HD.
(e) Company name after the business combinationEffective the same date as the acquisition of all shares (April 3, 2017), the trade names of Nisshinbo PP and Nisshinbo PC were changed to “Daio Paper Products Corporation” and “Daio Postal Chemical Corporation,” respectively.
(f) 3.881Ratio of voting rights acquired100%
(g) Major reasons for the decision on acquiring the company Due to the Company acquiring the shares in exchange for cash
(2) Acquisition cost and breakdown by type of consideration
Millions of YenThousands of U.S. Dollars
Consideration for acquisition Cash ¥24,600 $219,271
Acquisition cost 24,600 219,271
Note: The above amount represents the estimated amount at the time of acquisition, and the actual amount may change due to price adjustments and other factors going forward.
(3) Major components and amounts of acquisition related costs
Millions of YenThousands of U.S. Dollars
Advisory fees, etc. ¥24,600 $2,139
The above is a provisional amount, as certain amounts are yet to be determined.
(4) Amount of goodwill, reason for the goodwill and method and period of amortization
Not determined at the present time.
(5) Amounts of assets received and liabilities assumed on the date of the business combination and their breakdown
Not determined at the present time.
Business Combination through AcquisitionAt the Board of Directors meeting held on February 27, 2017, the Company resolved to acquire all share certificates of common stock (excluding the treasury shares held by Miura Printing Corporation) of Miura Printing Corporation (hereinafter, “Miura Printing”) and all stock acquisition rights of Miura Printing issued pursuant to a resolution passed at Miura Printing’s Board of Directors meeting held on September 30, 2015, and to conduct a tender offer for shares, etc. of Miura Printing (hereinafter, the “Tender Offer”) as part of a transaction with the aim of making Miura Printing a wholly-owned subsidiary of the Company (hereinafter, the “Transaction”). As a result of the Tender Offer, Miura Printing became a subsidiary of the Company effective April 18, 2017.The Company made a demand for all shareholders of Miura Printing (excluding the Company and Miura Printing) to sell all shares they hold with the aim of acquiring all shares of Miura Printing as of April 20, 2017, and completed the acquisition of all shares as of June 1, 2017.
(1) Overview of the business combination(a) Company name and business details of the acquired company
Company name Miura Printing Corporation
Location 2-3-9, Chitose, Sumida-ku, Tokyo
Business detailsPrinting business, parking lot business and real estate leasing business
19. Subsequent Events
Integrated Report 2017 88
012_9032587913002.indd 88 2018/02/02 18:50:59
(b) Main reasons for the business combinationThe Company, by welcoming Miura Printing to the Group through the Transaction, intends to make maximum use of Miura Printing’s strong branding capabilities, sales capabilities based on its numerous transactions with blue-chip customers and various know-how including its technical capabilities with the aim of expanding the Company’s printing business as well as strengthening the specialty paper business, the Company’s core business, both from the paper manufacturing and printing segments, which are inseparable in the Group’s specialty paper business, with a view to further expanding the scale of the printing business in the future.
(c) Date of the business combinationAcquisition through tender offer: April 18, 2017Acquisition through demand for sales of shares: June 1, 2017
(d) Legal form of the business combinationAcquisition of shares in exchange for cash
(e) Company name after the business combinationThere will be no change to the trade name.
(f) Ratio of voting rights acquired100%
(g) Major reasons for the decision on acquiring the companyDue to the Company acquiring the shares in exchange for cash
(2) Acquisition cost and breakdown by type of consideration
Millions of YenThousands of U.S. Dollars
Consideration for acquisition Cash ¥8,062 $71,860
Accounts payable – other 296 2,642
Acquisition cost 8,358 74,502
(3) Major components and amounts of acquisition related costs
Millions of YenThousands of U.S. Dollars
Advisory fees, etc. ¥183 $1,633
The above is a provisional amount, as certain amounts are yet to be determined.
(4) Amount of goodwill, reason for the goodwill and method and period of amortization
Not determined at the present time.
(5) Amounts of assets received and liabilities assumed on the date of the business combination and their breakdown
Not determined at the present time.
89 Integrated Report 2017
012_9032587913002.indd 89 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Annexed Consolidated Detailed SchedulesDaio Paper Corporation and its Consolidated SubsidiariesMarch 31, 2016 and 2017
1. Detailed Schedule of Bonds
Company Name Date of issueBeginning balance Ending balance Interest
rate (%)
Collateral MaturityMillions of yen Thousands of
U.S. Dollars Millions of yen Thousands of U.S. Dollars
Daio Paper Corporation
Unsecured Straight Bond
No. 17
September 20, 2011
¥ 10,000[20,000]
¥ 89,135[89,135]
¥ — $ — 1.00% NoneSeptember 20, 2016
Daio Paper Corporation
Zero Coupon Convertible Bonds due
2020 (Note 2)
September 17, 2015
30,135 268,607 30,105 268,339 — NoneSeptember 17, 2020
Daio Paper Corporation
Unsecured Straight Bond
No. 18
March 22, 2017
— — 15,000 133,702 0.42 NoneMarch 22,
2022
Consolidated subsidiaries
Subsidiary Straight Bonds
From March 30, 2007 to March 27,
2017
320 [320]
2,852 [2,852] 300 2,674 0.49 None
From March 27, 2017 to March 27,
2022
Total — —¥ 40,455[10,320]
¥360,594[91,987]
¥45,405 $404,715 — — —
Notes: 1. The amounts in parentheses above indicate redemption amounts due within one year.
2. Details of the convertible bonds are presented as follows:
Name of bonds: Zero Coupon Convertible Bonds due 2020
Stock to be issued: Common stock
Issue price of stock acquisition rights: Free of charge (gratis issue)
Issue price of stock: ¥1,441.2 ($12.85)
Total issue amount: ¥30,150 million ($268,741 thousand)Total issue amount of stock issued upon exercise of stock acquisition rights: ¥— million ($— thousand)
Percentage of stock acquisition rights granted: 100.0%
Exercise period of stock acquisition rights:From October 1, 2015 to September 3, 2020(Local time of the place for accepting the exercise request)
Note: Upon the exercise of stock acquisition rights, the bonds associated with the stock acquisition rights shall be subject to capital
contribution, with the price for the bonds being the same as their face value.
3. The redemption schedule of bonds payable for five years subsequent to March 31, 2017 is as follows:
Millions of yen Thousands of U.S. dollars
Due withinone year
Between one to
two years
Between two to
three years
Between three to
four years
Between four to
five years
Due withinone year
Between one to
two years
Between two to
three years
Between three to
four years
Between four to
five years
¥— ¥— ¥— ¥30,000 ¥15,300 $— $— $— $267,404 $136,376
Integrated Report 2017 90
012_9032587913002.indd 90 2018/02/02 18:50:59
2. Detailed Schedule of Loans
Category
Beginning balance Ending balance Averageinterest rate
(%)
MaturityMillions of yen Thousands of
U.S. Dollars Millions of yen Thousands of U.S. Dollars
Short-term loans payable ¥ 33,560 $ 299,135 ¥ 26,360 $ 234,959 0.56% —
Current portion of long-term loans payable 79,941 712,553 72,706 648,062
1.46—
Current portion of lease obligations 477 4,250 593 5,286 — —
Long-term loans payable (excluding current portion) 199,992 1,782,616 192,521 1,716,023 1.06 Due 2018 through 2025
Lease obligations (excluding current portion) 1,397 12,451 1,687 15,038 — Due 2018 through 2026
Other interest-bearing debt: Current portion of long-term accounts payable—facilities
2,526 22,518 2,621 23,363 0.66 —
Long-term accounts payable—facilities (excluding current portion)
4,022 35,853 2,385 21,258 0.53 Due 2018 through 2022
Total ¥321,915 $2,869,376 ¥298,873 $2,663,989 — —
Notes: 1. The average interest rate above represents the weighted-average interest rate for the ending balance of loans payable.
2. The average interest rate of the lease obligations is not presented because the lease obligations are stated in the consolidated
balance sheet at the amount before deducting the amount equivalent to interest expenses that are included in the total
lease payments.
3. The redemption schedule of long-term loans payable, lease obligations and other interest-bearing debt (excluding current portions)
for five years subsequent to March 31, 2017 is as follows:Millions of yen
Between one totwo years
Between two tothree years
Between three to four years
Between four to five years
Long-term loans payable ¥50,112 ¥44,809 ¥33,796 ¥29,360Lease obligations 511 393 290 168Other interest-bearing debt 1,218 629 353 185
Thousands of U.S. dollars
Between one totwo years
Between two to three years
Between three to four years
Between four to five years
Long-term loans payable $446,667 $399,401 $301,237 $261,702Lease obligations 4,553 3,507 2,584 1,494Other interest-bearing debt 10,857 5,605 3,142 1,654
3. Schedule of Asset Retirement ObligationsThe Schedule of Asset Retirement Obligations is not presented, pursuant to Article 92-2 of the Ordinance on Consolidated Financial Statements, as the beginning and ending balances of asset retirement obligations for the fiscal year ended March 31, 2017 were one percent or less of the total beginning and ending balances of liabilities and net assets of the fiscal year.
91 Integrated Report 2017
012_9032587913002.indd 91 2018/02/02 18:50:59
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
Independent Auditor’s Report
Integrated Report 2017 92
012_9032587913002.indd 92 2018/02/02 18:51:00
Number of shares held Shareholding Name (Thousands of shares) ratio (%)
Hokuetsu Kishu Paper Co., Ltd. 31,707 21.2
The Iyo Bank, Ltd. 7,072 4.7
The Ehime Bank, Ltd. 6,920 4.6
Daio Kaiun Co., Ltd. 5,442 3.6
Ehime Paper Manufacturing Co. Ltd. 5,331 3.6
Takao Ikawa 5,000 3.3
Kami Shoji Co. Ltd. 4,700 3.1
The Norinchukin Bank 4,110 2.8
Tokushu Tokai Paper Co., Ltd. 3,871 2.6
Hyogo Paper Manufacturing Co., Ltd. 3,479 2.3
■ Status of Shares (As of September 30, 2017)
Authorized Shares 300,000,000 shares
Number of Shares Issued 149,348,785 shares
Number of Shareholders 6,042
■ Stock Price Movement
■ Major Shareholders
Notes: 1. Treasury stock of 2,915,400 shares are included in “Individuals, others.”
2. “Other domestic companies” includes shares registered under the name of Japan Securities Depository Center, Inc.
■ Shareholder Distribution
6,042 149,348 thousand shares
85.1%
10.8%
2.7%
0.9%
0.5%
By Number of Shareholders per Type
Individuals, others
Other domestic companies
Foreign institutions and individuals
Financial institutions
Financial instruments and exchange dealers
By Number of Shares per Type
53.9%
28.0%
11.6%
6.0%
0.5%
Other domestic companies
Financial institutions
Individuals, others
Foreign institutions and individualsFinancial instruments and exchange dealers
0
9,000
0
1,600
1,200
800
400
2015April
2016April
2017March
18,000
Stock Price Trading Volume (Thousand of shares) (Yen)
Trading volume (left scale)Stock price (closing) (right scale)
Investor Information
93 Integrated Report 2017
012_9032587913002.indd 93 2018/02/02 18:51:00
01 Integrated Report 2017
Management Philosophy
Shaping an Abundant and
Affable Future for the World
DedicatedDedication to manufacturing
AttentiveBonds with
local communities
IntegratedCorporate culture
providing safety and motivation to work
OrganicContribution to the global environment
Philosophy of the Daio Paper Group
To continue to be a proud corporate citizen that is trusted globally
The Daio Paper Group is promoting initiatives toward achieving the goals set out in
“Transforming our world: the 2030 Agenda for Sustainable Development Goals (SDGs),”
adopted at the United Nations Sustainable Development Summit in September 2015,
through its business activities.
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”
17 GOALS TO TRANSFORM OUR WORLD
See p. 23 for the details of SDGs.▶▶▶
Corporate Motto
Passion with Sincerity
PhilosophyPassion with sincerity leads to greatness. This founding principle of Daio represents the basis for all our decisions, leading us to enrich lives around the world by taking on new challenges daily with sincerity and passion.
PHIL
OSO
PHY
OF
THE
DA
IO P
APE
R G
RO
UP
AB
OU
T TH
E D
AIO
PA
PER
GR
OU
PV
ALU
E C
REA
TIO
N M
OD
EL O
F TH
E D
AIO
PA
PER
GR
OU
PFI
NA
NC
IAL
AN
D
CO
RPO
RA
TE D
ATA
1
2
4 12 13
11 10 15 21
13
1418
8
7
1719 2229 23 28
2520625242726
16
9
363133
32
34 35
30
1
2
4 12 13
11 10 15 21
13
1418
8
7
1719 2229 23 28
2520625242726
16
9
363133
32
34 35
30
■ Production Bases of Daio Paper Corporation
■ Business Bases of the Group Companies (Headquarters Location)
■ Overseas Business Bases
1 Daio Paper Corp. Mishima MillShikokuchuo City, Ehime Prefecture
Corrugated Container
1 Daio Package CorporationChiyoda Ward, Tokyo
2 Daiwa Shiko Co., Ltd.Chuo Ward, Tokyo
Printing
3 Daio Printing CorporationToshima Ward, Tokyo
4 Elleair Printing Co., Ltd.Shikokuchuo City, Ehime Prefecture
5 Daio Postal Chemical CorporationChuo Ward, Tokyo
6 Miura Printing CorporationSumida Ward, Tokyo
Paper Manufacturing
7 Iwaki Daio Paper CorporationIwaki City, Fukushima Prefecture
8 Dainichi Paper CorporationFuji City, Shizuoka Prefecture
9 Otsu Paper Board Co., Ltd.Otsu City, Shiga Prefecture
10 Harima Paper Tech. CorporationKakogawa City, Hyogo Prefecture
11 Taisei Paper CorporationTsuyama City, Okayama Prefecture
12 Marubishi Paper Tec. CorporationShikokuchuo City, Ehime Prefecture
Paper Processing
13 Daio Mill Support Co., Ltd.Shikokuchuo City, Ehime Prefecture
14 Elleair Texel CorporationKani City, Gifu Prefecture
H&PC Manufacturing
15 Ohmiya Paper CorporationFujinomiya City, Shizuoka Prefecture
16 Akabira Paper CorporationAkabira City, Hokkaido
17 Elleair Product Co., Ltd.Shikokuchuo City, Ehime Prefecture
18 Elleair Packaging Print CorporationKawabe Town, Kamo County, Gifu Prefecture
19 Elleair Paper Co., Ltd.Shikokuchuo City, Ehime Prefecture
20 Daio Paper Product CorporationChiyoda Ward, Tokyo
21 Tokai Seishi Kogyo Co., Ltd.Fuji City, Shizuoka Prefecture
Engineering
22 Daio Engineering Co., Ltd.Shikokuchuo City, Ehime Prefecture
Transportation
23 Daio Logistics Co., Ltd.Shikokuchuo City, Ehime Prefecture
Distribution
24 Tokyo Pulp & Paper CorporationChuo Ward, Tokyo
25 Tokyo Pulp & Paper International Co., Ltd.Chuo Ward, Tokyo
26 Daio Pulp & Paper Co., Ltd.Chuo Ward, Tokyo
27 Elleair Business Support Co., Ltd.Shinjuku Ward, Tokyo
Other Businesses
28 Elleair Paper Chemical CorporationShikokuchuo City, Ehime Prefecture
29 Elleair Resorts Golf Club Co., Ltd.Matsuyama City, Ehime Prefecture
30 Forestal Anchile LTDA. (Chile)31 Elleair International Korea Co., Ltd.32 Elleair International (Thailand) Co., Ltd.33 Elleair International China (Nantong) Co., Ltd.34 PT. Elleair International Trading Indonesia35 PT. Elleair International Manufacturing Indonesia36 Oregon Chip Terminal INC. (U.S.A.)
2 Daio Paper Corp. Kani MillKani City, Gifu Prefecture
Established May 5, 1943
Capital ¥39,707,327,353
Number of Shares Issued 149,348,785 shares
Number of Employees 2,609 (Unconsolidated), 11,022 (Consolidated)
Offices Tokyo Headquarters: 10-2, Fujimi 2-chome, Chiyoda Ward, Tokyo Tel: +81-3-6856-7500Shikoku Headquarters: 2-60, Mishimakamiya-cho, Shikokuchuo City, Ehime Prefecture Tel: +81-896-23-9001
Mills Mishima Mill (Ehime Prefecture)Kani Mill (Gifu Prefecture)
Branches Osaka Branch, Nagoya Branch, Kyushu Branch (Fukuoka City)
Website http://www.daio-paper.co.jpMain Products Newsprint, coated paper, woodfree paper, printing paper for publication, PPC paper, carbonless paper,
adhesive printing paper, wrapping paper, functional specialty paper, kraft linerboard (linerboard and corrugating medium), various types of pulp, household paper products (facial tissue, toilet tissue, paper towels, sanitary napkins, disposable diapers, etc.)
■ Corporate Information (As of September 30, 2017)
Corporate Data / Network
Integrated Report 2017 94
005_9032587913002.indd 4-94 2018/02/02 19:08:10
Shaping an Abundant and Affable Future for the World
Daio Paper GroupIntegrated Report 2017
Consideration for the Environment・Printed on FSC certified paper that comes from well-managed forest resources.・Printed using waterless printing that does not use “dampening solution”
which contains hazardous substances such as IPA (isopropyl alcohol), thus greatly reducing the volatile organic compounds (VOCs) emissions.・Uses vegetable-oil-based inks that release fewer VOCs into the atmosphere.
THE D
AIO
PAPER G
ROU
P INTEG
RATED
REPORT 2017
005_9032587913002.indd 1-3 2018/02/02 19:08:08