Daio Paper Corporation and Hokuetsu Corporation Agree to Begin Concrete Discussions Toward Forming A Strategic Business Alliance

Daio Paper Corporation and Hokuetsu Corporation have agreed to begin concrete discussions toward forming a strategic business alliance to resolve management issues faced by both companies and to further enhance their corporate value amid the severe business environment surrounding the pulp and paper industry. Daio Paper and Hokuetsu are paper manufacturers that have worked to coexist with local communities through “monozukuri” (manufacturing) respectively, and will continue to aim to be trusted by all stakeholders ranging from customers to shareholders, business partners, local communities, and employees. The two companies share the recognition that sharpening competitiveness through structural reforms at core mills and reforming their business portfolios are critical management issues amid a severe business environment that requires solutions to social issues, such as the 2024 problem in domestic logistics and measures to reduce environmental impact, in addition to declining demand for domestic paper such as printing and communication paper, changing demand structures, and continuing high prices for raw materials and fuel, including wood chips, coal, and heavy oil.

They agreed on the idea that, rather than each company taking measures individually to address these issues, it would produce more rapid effects if both companies join hands in reforming the structure and bolstering the revenue base; they will begin to consider specific measures with an eye toward forming the Business Alliance. Through the Business Alliance, the two companies will maintain their independence and healthy competitive relationship while proactively considering initiatives that will contribute to the medium- to long-term enhancement of their respective corporate value, such as complementing each other by leveraging their respective strengths. The main target areas of the Business Alliance at present are as follows: While respecting the relationship with existing business partners, they will continue to study and verify the feasibility and effectiveness of each measure through subcommittees.

Production Technology: Technical cooperation to improve productivity and quality of pulp and paper, and to reduce costs. Establishment of cooperative production systems, including OEM (paper, base paper for corrugated containerboard, etc.), Sharing and mutual utilization of idle and spare articles, Reduction of maintenance costs through information exchange on machine repair and equipment, maintenance, Information sharing on factory operations (health and safety, mill DX, technology succession, etc.). Raw Material Purchasing: Increasing efficiency of procurement processes of various raw materials (response to BCP, CO2 reduction, etc.).

Establishment of a cooperative system for wood chip procurement, Mutually accommodating pulp manufactured in-house and various raw materials, Sharing know-how on overseas afforestation projects. Products Logistics: Improving cross distribution by utilizing the logistics networks of both company groups, Round transportation between production sites of both companies, Promoting modal shift through effective use of containers. Mutual utilization of distribution warehouses and joint delivery.

Further, in the mid- to long-term, they will also consider joint research on various themes, including new technologies, energy conversion, DX promotion, and forest resource utilization.

Source: Market Screener

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