Forest Products Division Strategies and Initiatives
Industry Environment and Fiscal 2010 Results
Enhancing Competitiveness in Each Business Domain
Amid stagnant growth in supply volume, market prices for pulp in fiscal 2010 were firm throughout the year, buoyed by growing demand in China, the world's largest consumer of paper and paperboard, and other emerging economies. In finished products, although demand for paperboard including corrugated board was firm in step with the global economic recovery, printing paper business was in a tough condition that demand languished and prices for raw materials and fuel rose. Similarly, low trading levels lingered in building materials since the new housing start was still at a low level of 810,000 though it showed slight recovery.
In this environment, we worked hard to enhance its competitiveness by extensively cutting costs and improving production efficiency in upstream sectors, including the pulp production business in which we have an advantage. As a result, PT. Tanjungenim Lestari Pulp and Paper (TEL) and Daishowa-Marubeni International Ltd. (DMI), aided by higher pulp prices, recorded significantly improved earnings. In midstream sectors, aiming to capture demand in the ASEAN region we took a stake in GS Paper & Packaging Sdn. Bhd. (GSPP), Malaysia’s largest containerboard manufacturing and sales company jointly with Oji Paper Co., Ltd., in order to secure a production base. In downstream sectors, we consolidated most of the commercial sales rights in paper and paperboard to Marubeni Pulp & Paper Co., Ltd., with the goal of strengthening domestic sales.
As a result, in fiscal 2010, the gross trading profit of the division totaled ¥39.8 billion, and the net income totaled ¥7.3 billion on a consolidated basis.
Initiatives in Fiscal 2011
Strengthening Marubeni's Value Chain Further
In fiscal 2011, we will keep working hard to build solid earning bases by bolstering its value chain ranging upstream from to downstream. To this end, DMI and TEL, overseas pulp suppliers, will conduct large-scale capital investments to boost competitiveness, aiming at enhancing earnings power. In wood chip sales, in addition to existing supply sources such as Australia and Chile, we will actively develop supply sources in Asia and expand sales to China, where demand is growing, and Japan. In the finished products sector, we will develop a packaging business in China, ASEAN and surrounding countries with GSPP and Long Chen Paper (China) Holdings Co., Ltd. in which we invested capital. Since the value of renewable forest-related commercial goods is considered to rise in the medium or long term, we will propel an environmentally-friendly business, through securing access to competitive afforestation resources and promoting sales of eco-building materials.
In terms of financial results, while we anticipate firm market prices for pulp, the business environment is likely to be challenging particularly for manufacturing companies in our operation due to higher costs of raw materials and fuel. In these circumstances, we will try to expand earnings through additional cost reductions and by steadily enhancing the sales force.
