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Daio Paper's home products seen nurturing 10% profit surge

Daio Paper's sales of children's diapers surged overseas, including in China.

TOKYO -- Daio Paper's group operating profit apparently climbed 10% on the year for the April-September half, with strong sales of household products helping avert an anticipated 10% dip.

The Japanese paper maker likely logged around 11 billion yen ($105 million) in profit, compared with the forecast of 9 billion yen. Sales are seen dipping 1% to 228 billion yen, falling 7 billion yen short of the projected figure.

The home and personal care products division making goods such as tissues and diapers provided much of the boost. Overseas sales of children's diapers surged. Making the products in China helped keep the goods price-competitive compared with imports from Japan. Higher-end diapers sold better in major cities as incomes rose.

Mass-market diapers led sales growth in Southeast Asia. Daio began making the products at an Indonesian plant in March, supplementing a Thai facility. This eased the supply bottleneck that had hindered business in the region. The company is gradually expanding its share in the market, having gotten a later start in Southeast Asia than rivals such as Kao and Unicharm.

Adult diapers were strong sellers in Japan. Sales of tissues and toilet paper rose as well. Expansions to a Gifu Prefecture paper mill in autumn 2015 began to pay off for the household products segment overall.

Demand for products such as printer paper sagged at home due to a trend toward digitization, creating stagnant sales for office-use paper and paperboard operations. Prices on those products dropped as well.

But lower costs of fuel and raw materials amid strengthening in the yen helped counter those headwinds. Daio imports materials such as wood chips, leading to a roughly 400 million yen boost to annual operating profit for each 1 yen to the dollar the Japanese currency appreciates. In the April-September half, the yen was over 15 to the dollar stronger than a year earlier.

When Daio releases first-half earnings Nov. 11, the company is expected to retain forecasts for the year ending in March of operating profit rising 2.8% to 25 billion yen and sales growing 3.4% to 490 billion yen.

(Nikkei)

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