Daio Paper looks to bounce back in fiscal 2017
Strong diaper sales abroad, acquisitions to make up for struggling domestic paper market
TOKYO -- Daio Paper is expected to earn a consolidated operating profit of around 25 billion yen ($229 million) for fiscal 2017, a 6% increase from its estimated profit for the previous fiscal year, on strong overseas demand for disposable diapers, improved printing paper margins in Japan and acquisitions.
Sales are forecast to rise 13% to 540 billion yen. Rising demand in China and Thailand for locally produced diapers is expected to provide a tailwind that will maintain firm sales. The Indonesian diaper business is also in full swing after Daio established a factory in the country through a joint investment with Mitsubishi Corp.
The Japanese paper company is augmenting capacity at its processing machines in its Indonesia factory this summer to more than 50 million diapers per month. Daio will also begin producing sanitary pads at its Thai factory in July and sell them as high value-added products along with diapers.
Meanwhile, demand at home for printing paper is expected to remain sluggish, but the company is aiming to negotiate a 10% price increase with customers to improve margins.
Daio also purchased Nisshinbo Holding's paper manufacturing business, which is focused on household paper items, and commercial printer Miura Printing. Sales and profits from both companies are expected to boost earnings for the current year.
Operating profit for the fiscal year ended March 31 is seen down 3% from the previous year to 23.5 billion yen and below projected profit of 25 billion. Demand for recycled paper used to make cardboard rose in China, which lifted the price in Japan by 30%, eating into profit. The cost of raw materials did decrease compared to the previous year due to the yen's strength against the dollar, but sales prices also fell, canceling out the lower costs.
Sales for fiscal 2016 probably increased slightly to 477 billion yen as sanitary products like tissue and toilet paper performed well. Paper sales volume was slightly better than the previous year's, but prices dropped.
Daio's fiscal 2016 results are due out May 11.