May 10, 2006

Paper Production Facilities Scrap-and-Build Plan

Nippon Paper Group, Inc.

Nippon Paper Group, Inc. (President: Masatomo Nakamura) is pleased to announce that it has decided to build thin coated paper production facilities with an annual production capacity of 350,000 metric tons on the premises of Ishinomaki Mill of Nippon Paper Industries, investing a total of 63 billion yen. The equipment is expected to start production in November 2007.
At the same time the Group will scrap a large scale of paper production facilities and smoothly consolidate its production to core mills. In doing so, it will take care to avoid impacting the market.
The Group aims to become one of the top five pulp and paper manufacturers in the world in FY2015. It started its Second Medium-Term Business Plan (from FY 2006 to FY 2008) in April 1 this year as a first step towards that goal.
In the facility investment, which is an important initiative in the medium term business plan, the Group will combine its manufacturing technology, product development capability, and environment-responsive measures. The Ishinomaki Mill, one of the largest production plants of the Group, will take a first step towards become the strongest printing paper mill in Asia.
The Group has been leading the domestic market in lightweight coated paper for many years and will continue to position the product as a top-priority strategic item. With the installation of the new facilities, the Group will bolster its production capability and international competitiveness in this area.
Nippon Paper Group will continue to improve its products and services, incorporating sophisticated functions and quality that satisfy customers while responding to social requests such as resource saving and the creation of a recycling-oriented society. It will succeed in Asian markets with the scrap-and-build plan as a driving force and endeavor to enhance its corporate value.
1. Profile of the new facilities
(1) Place: Ishinomaki Mill of Nippon Paper Industries (Nanko-cho, Ishinomaki, Miyagi Prefecture)
(2) Name: N6 paper machine
(3) Operation start: November 2007
(4) Capital investment: 63 billion
(5) Product type: Lightweight coated paper
(6) Annual capacity: 350,000 metric tons (1,005 metric tons daily)
(7) Machine type: High-speed on-machine coater
(8) Wire width: 9,450 mm
(9) Operating speed: 1,500 m/min. (World's fastest for blade coating on-machine coaters with multistep calendar)
(10) No. of operators: eight persons / shift (plan)
(11) Equipment manufacturer: METSO SHI Co., Ltd., Voith IHI Paper Technology Co., Ltd., Yodogawa Steel Works, Ltd.
(12) Other equipment: De-inked pulp equipment added (400 metric tons per day), in-house filler equipment added, etc.
2. Paper production equipment to cease operation
Name Annual Capacity
(10 thou. metric ton)
1. Nippon Paper Ishinomaki Mill Paper Machine No. 3
2. Nippon Paper Ishinomaki Mill Paper Machine No. 5
3. Fuji Coated Paper Yoshinaga Plant Coating Machine No. 30
4. Fuji Coated Paper Fuji Plant Coating Machine No. 31
5. Fuji Coated Paper Fuji Plant Coating Machine No. 32
Total 34.0
The Group will scrap the paper machines and coating machines described above alongside the introduction of the new machine (some have already been scrapped). The production capacity of the machines to be scrapped is almost identical to that of the new equipment.
The Group has ceased the operation of 13 paper machines (with an annual production capacity of about 600,000 metric tons) apart from the five mentioned above following the business merger of Nippon Paper Industries and Daishowa Paper Manufacturing in March 2001. It has not installed any machines during the same period.
The Fuji Coated Paper machines mentioned above will be stopped at the request of Fuji Coated Paper. Nippon Paper will enter into a contract with Fuji Coated Paper to produce the volume of products currently now produced using the Fuji Coated Paper equipment.