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NIPPON PAPER GROUPThird Medium-Term Business Plan

FISCAL 2009 – 2011

“Accelerating restructuring for GV2015”

Analyst MeetingNovember 9, 2009

NIPPON PAPER GROUP, INC.

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１．Business environment and objectives of the 3rd MTBP

２．Outline of the 3rd MTBP

３．Financial targets

Contents

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Ｃhina's Domestic　Demannd

21.43 23.44 25.48 26.94 29.19 31.64 33.5

21.8924.62

28.9132.36

36.8141.26

45.85

0

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008－China Ｐａｐａｅｒ Association －

（million tons）

Ｐａｐｅｒboard

Paper

Japan's Domestic Demand

19.45 19.25 18.57 17.07

12.48 12.46 12.1811.19

0

5

10

15

20

25

30

35

2006 2007 2008 2009－Japan Paper Association－

（millon tons）

Paperboard

Paper

- Fast-growing Asian market- Increased threat of imports

- Shrinking domestic paper market- Drastic changes in demand structure after Lehman Shock

１．Business environment and objectives of the 3rd MTBP

Business Environment ①

42012 20132008 2009 2010 2011

Demand growth became

negative

Demand growth became

negative

2014 2015

Restructuring to meet demand shiftRestructuring to

meet demand shift

Lehman

ShockIncreased paper

ImportsIncreased paper

Imports

Assumed timingAssumed timingActual Actual

１．GV2015 anticipated increased paper imports and negative demand growth, but２．Lehman Shock brought such changes much earlier than anticipated.３．Expedited restructuring is critical.

Bus

ines

s E

nviro

nmen

tM

anag

emen

tPo

licy

１． Business environment and the objectives of the 3rd MTBP

Business Environment ②

5

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2007 2008 2009 2010 2011

（1,000 tons） Ｐａｐｅｒ

Ｐａｐｅｒboard

FY2011 Domestic SalesVolume Forecast(compared with FY2007)

Paper= ８０％

Paperboard= 100%

NPG Domestic Sales OutlookNPG Domestic Sales Outlook

１． Business environment and the objectives of the 3rd MTBP

Domestic demand outlook

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GroupVision2015

Secure solid domestic revenue base

FY2009～2011Third Medium-Term

Business Plan

Acceleratingrestructuring for

GV2015

FY2006～2008

Second MTBP

FY2012～2014

Fourth MTBP

Grow by expanding overseas business

１． Business environment and the objectives of the 3rd MTBP

The 3rd MTBP Objectives

■Domestic paper market to shrink to the 80% level of FY2007➣Revise management resource allocation

■Non-”pulp & paper” segments to support the bottom line

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Ⅰ．Downsize domestic paper business to 80% （Restructuring for surviving import competition）

Ⅱ．Promote overseas business（Utilizing overseas subsidiaries and alliances for expansion）

Ⅲ．Propel resource procurement strategy（Securing resources to support long-term business growth）

Ⅳ．Improve group mobility and management efficiency（Maximizing group synergy and rationalizing overhead）

Ⅴ．Develop new business（Nurturing new business outside paper domain）

２．Outline of the 3rd MTBP

Main Policy of the 3rd MTBP

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Downsizedomestic

paper businessto 80%

Optimizing production capability

Enhance competitive advantages against imports by:

Streamlining back office operation

NipponPaper

Industries

Company Main Policy Measures

Reducing further costs of logistics and sales

Emphasizing more on resource-saving andeco-friendly products

Pulp and Paper Business (1) Pulp and Paper Business (1)

２．Outline of the 3rd MTBP

Ⅰ．Downsize domestic paper business to 80% ①

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➣15 machines shut-down to secure sustainable operation rate <saving an ¥8 billion fixed cost>

（depr.1.9, energy 1.5, maintenance 1.1, labor 3.5）

➣Improve operation efficiency of existing machines

Continued restructuringContinued restructuring

NPG capacity and FY2011 domestic sales outlook

２．Outline of the 3rd MTBP

Ⅰ．Downsize domestic paper business to 80% ②

（,000 tons）

Before Shut-down※ After

Paper 5,766 ▲742 5,024 4,500Paperboard 1,963 ▲133 1,830 1,600

TOTAL 7,729 ▲875 6,854 6,100※Including temporary shut-downs during maintenance period.

Capacity SaleOutlook

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➣Further reduction in fixed costs

➣Additional cost cutting in logistics and sales

➣More emphasis on R&D for resource saving products and eco-friendly engineering

Strengthening competitive advantagesStrengthening competitive advantages

２．Outline of the 3rd MTBP

Ⅰ．Downsize domestic paper business to 80% ③

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Company Main Policy

Pulp & Paper Business (2)Pulp & Paper Business (2)

Establish cost-competitivenessas the container board supplier

Optimize production capability（reorganization）

Focus on thinner grades

Nippon Daishowa

Paperboard

Reduce dependency on mass-production grades Promote health(elder)care products

Expand to medical-related supply (Flu-prevent products)

Nippon PaperCrecia Restructure business model

to meet societal change

Measures

Nippon PaperPapylia

Promote cigarette related paper globally

Encourage R&D for new products

Strengthen sales force utilizing group network

２．Outline of the 3rd MTBP

Major group companies’ strategies ①

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Company Main Policy Measures

Nippon PaperChemical

Add higher value to main products

Focus on products withhigh potential

Encourage investment on added value DP business

Strengthen functional film business

Paper Related BusinessPaper Related Business

NipponPaper-Pak

Improve margin by cost-cuts Promote in-house supply of milk-carton board

Shift from export to local production

Exploit new/replacing demand by developing new products

Enter into Asian market

２．Outline of the 3rd MTBP

Major group companies’ strategies ②

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Company Main Policy Measures

Improve profit marginunder NPG’s 100% ownership

Capital investment to increase competitiveness

（in-house production／streamlining）

Close collaboration with group companies

ShikokuCoca-Cola

Bottling

Other businessOther business

２．Outline of the 3rd MTBP

Major group companies’ strategies ③

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Company／Partner Main Policy Measures

Maximize NPG brand presence in Oceania and its neighboring

areasImprove operation control

Increase market share by utilizing mutual sales network

Bringing in NPG’s management resources and know-how

AustralianPaper

Yuen Foon Yu（Taiwan）

SCG Paper（Thailand）

Expand paperboard business in fast-growing

China marketInvesting in YFY’s paperboard business

Exploit business opportunity in

Southeastern AsiaMutual OEM sales in each market

２． Outline of the 3rd MTBPⅡ．Promote overseas business

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Secure forestry resources to support

mid- to long-term growth

Streamlining woodchip carriers

Main Policy Measures

Restructuring woodchip sourcesDownsize

procurement system

２． Outline of the 3rd MTBPⅢ．Promote resource procurement strategy

Expanding own forestry resources(Tree Farm Initiative – 200,000 ｈａ overseas)

Utilize domestic forestry resources(sawmill waste and logs from thinning, etc.）

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Improve operation efficiency

Utilizing shared-service and out-sourcing

Streamlining administrative sections

Objectives Measures

Relocating major group companies atnew headquarters building (Takebashi)

Reduce overhead cost by cutting head-count

２．Outline of the 3rd MTBPⅣ．Improve group mobility & management efficiency

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Other

Allocating management resource to promising area

Allocating management resource to promising area

●Developing health related products by utilizing active ingredients contained in wood resource●Converting wood resource into feed●Joint study/venture in agricultural area

■Food &Healthcare

●Development from nano-fibered cellulose

■New Materials

●Selective plant breeding to expand biomass resource●Developing cellulose-based material to replace plastics

■Reducing CO2 emission

Housing & construction

materials

２．Outline of the 3rd MTBP

Ⅴ．Develop new business

Pulp & Paper

Paper-related

Biobusiness

Wood-relatedchemicals

Agribusiness

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FY2010-2011 Outlook（vs. FY2009）FY2010-2011 Outlook（vs. FY2009）

３．Financial Targets

Premises

Paper Paperboard Recoverd Paper Woodchips

Paper Paperboard Oil (Dubai) Coal

ＵＳ＄ Ａ＄

\95.00 \75.00Exc

han

geR

ate

Sal

es

Price

Dom

est

icD

em

and

Raw

Mat

erial

sFuel

19

65.2

44.7

32.8

20.0

48.436.0

55.0

0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008 2009E 2011t

（\bn）

(FY)

Historical Trend

FY2011 Operating Income Target: ¥５５ billionFY2011 Operating Income Target: ¥５５ billion

３．Financial Targets

Consolidated operating income target

20

20

（¥ bn）

Sales Price▲１００

FY2009E vs. FY2011FY2009E vs. FY2011

30Sales Volume

＋２００

40

50 Depreciation etc.

＋７０

10

３．Financial Targets

Factor analysis – Impact on operating income

0

Input Cost▲１２０

Cost Cut

＋１４０

¥55 bn

FY２０１１P

Increase by ¥19 bn（¥36bn ⇒ ¥55 bn）

¥36 bn

FY２００９E

21

4%

70%

11%

15%

0%

8%

12%

80%

Pulp & Paper Paper related Housing & Construction Materials

Other

-FY2009-¥36 billion

-FY2011-¥55 billion

More contribution from non-“pulp and paper” segments excepted and required

３．Financial targetsSegment information: Operating income contribution

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GroupVision2015

Strengthening domestic business foundation

FY2009～2011Third Medium-Term

Business Plan

Acceleratingrestructuring for

GV2015

FY2006～2008

Second MTBP

FY2012～2014

Fourth MTBP

Growth by expanding overseas business

１． Business environment and the objectives of the 3rd MTBP

The 3rd MTBP Objectives

■Domestic paper market to shrink to the 70% level of FY2007➣Revise management resource allocation

■Non-“pulp and paper” segments to support the bottom line

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３． Financial targetsDepreciation, Capex and Debt

■Depreciation（FY2010－FY2011 total）

¥150 billion

■Capex（FY2010－FY2011 total ）

¥65 billion

■Interest-bearing Debt (←cut by ¥80billion) 31 Mar.2012(E) 31 Mar.2010(E)

¥690 Billion ¥770 billion

■D/E Ratio31 Mar. 2012(E) 31 Mar.2010(E)

×1.5 ×1.8

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予測に関する注意事項等Disclaimer

These materials include company-related forecasts, plans, and management targets. Forward-looking statements are based on assumptions about the future and trends at the time of producing these materials and contain uncertainties. Actual results could differ significantly from what is presented here.

These materials do not represent an offer or solicitation of an offer to purchase securities, and the contents do not constitute an agreement or promises of any kind.