Message from the President

Introduction

At our 187th Shareholders’ Meeting on June 27, 2025, we were honored to receive the trust and confidence of our shareholders. I believe that shareholders reacted positively to the results of many of our measures, starting with our FY2024 financial results and our progress toward Mediumterm Management Plan 2026 from a medium- to long-term perspective, and including the emergence of results from our strategic business alliance with Daio Paper Corporation and our promotion of environmental strategies aimed at realizing Hokuetsu Group ZERO CO2 2050. Acting as president and CEO, I will continue forging ahead to enhance the Group’s value.

Looking back on FY2024 and our business environment

Reviewing the Group’s business results in FY2024, despite a decline in domestic paper demand and an increase in raw material, fuel, and other costs, increases in sales volume and prices along with recovery in overseas pulp market conditions contributed to increased revenue and profit. Looking at the business environment in FY2025, paper demand in Japan is expected to continue its downward trend amid population decline, the advance of digitalization, and the proliferation of remote work. We foresee a resulting sales revenue decline in the paper, white paperboard, and pulp businesses. At the same time, we expect that efforts to raise product sales prices and strengthen export sales, combined with lower crude oil prices than in the previous year, will contribute to profit. As an additional major topic, we foresee a decline in FY2025 revenue and profit at Alberta-Pacific Forest Industries Inc. (Al-Pac), our overseas subsidiary in the pulp business, due to the significant cost of large-scale maintenance carried out for the first time in 18 months. We foresee limited impact from tariffs imposed by the U.S., as sales of Al-Pac pulp in the U.S. remain exempt from tariffs under the United States–Mexico–Canada Agreement (USMCA). To address this business environment, in April 2025 we reorganized our sales divisions to focus on raising the added value of our products through means that include building a stronger sales structure tailored to demand characteristics, developing new products including those using cellulose nanofibers, and expanding applications for our existing products. The goal of the reorganization includes boosting sales competitiveness as well as accelerating our business portfolio shift by developing new businesses that will be central to our future. In our top-priority strategic business alliance with Daio Paper Corporation, we undertook cost-cutting initiatives that are yielding immediate effect, including round transport using trucks and containers and the shared use of wood chip transport vessels. Through this, we achieved ¥1.3 billion in partnership effects within our FY2024 business results. We expect that broadening our areas of partnerships, including the expansion of OEM products, will enable a profit increase of over twice that amount, ¥3.0 billion, in FY2026. I myself believe that we may surpass even that. The harsh business climate is likely to continue for some time, but we intend to accurately discern the needs of customers and expand our environmentally friendly product lineup through the low-CO2 products that we have been promoting. Through such means, we will engage in business activities that pursue both solutions to social issues and the enhancement of our corporate value.

Our growth story leading to the realization of our Long-term Corporate Vision: Vision 2030

Our Long-term Corporate Vision: Vision 2030 sets out three images that our corporate group seeks to attain: “A business group that contributes to sustainable social development based on environmental management,” “A business group that makes use of diverse human resources and the latest technology to challenge ourselves in new business fields in step with the times,” and “A business group made up of people working proactively with dreams, hopes and pride.” Under Medium-term Management Plan 2023 (FY2020- 2022), we took first steps aimed at turning these corporate group images into reality. While strengthening our global business, in Japan we entered the containerboard base paper business and advanced the development of plasticsubstitute materials, transforming our business portfolio into one capable of adapting to changes in the external environment. In parallel with these actions, we actively tackled the strengthening of our governance management and promotion of SDGs activities while making preparations for further leaps forward. The current Medium-term Management Plan 2026 marks a key path toward achieving Vision 2030. Its three-year period is one of strengthening our business foundation in line with the three pillars of our Basic policy of “Shifting the Business Portfolio”, “Strengthening Competitiveness” and “Promoting Sustainability (ESG) Activities,” without halting the momentum of the previous Medium-term Management Plan. To date, in the paper and pulp businesses we have engaged in initiatives including vertical integration of upstream to downstream fields, structural transformation through expansion of our overseas sales ratio, demonstration of cost competitiveness by leveraging the industry-leading productivity of our papermaking facilities and our mill locations adjacent to the giant Tokyo metropolitan consumer market, and strengthening of environmental competitiveness through our best-in-industry zero CO2 energy ratio. Under our current Medium-term Management Plan, these initiatives have earned us the regard of rating agencies and international non-profit organizations such as CDP. In FY2025, the last year of the current Mediumterm Management Plan and a midway point along the path toward Vision 2030, we want to make efforts in the areas of human capital management and environmental management by deepening our sustainability activities and progressing toward the next Medium-term Management Plan, which we position as an overall finishing period.

Realizing growth through the deepening of sustainability activities

In our view, solving medium- and long-term social issues through sustainability activities will be an engine for growth in our Group. However, although this, like GX, will connect to the realization of a carbon-neutral society, I believe that future predictability is the key to advancing initiatives in fields of high uncertainty that do not readily lead to quick profit. Since 1995, the Group has activelymade biomassenergy-related investments under the concept of minimizing negative impacts on the environment. In 2020, we launched Vision 2030, with its grounding in environmental management, and formulated a plan to achieve net-zero CO2 emissions by 2050. Our carbon dioxide capture and storage (CCS) project is a measure aimed at enhancing the foreseeability of this plan. The project connects to a reduction in greenhouse gases that impact global warming, the equivalent of reducing atmospheric emissions of CO2. With the aim of advanced CCS commercialization by FY2030, we have been commissioned with design and other work for facilities to separate and recover CO2 from biomass fuel at the Niigata Mill, under a research project by the independent administrative agency Japan Organization for Metals and Energy Security (JOGMEC). We will consider concrete development of our advanced CCS project not only in Japan but also at overseas locations, making it a nextgeneration investment that will enhance the corporate value of our group as well as the non-price value of our products. We are also studying plans to move up our timetable for the achievement of net-zero CO2 emissions to 2040 through research and development into GX technologies. The carbon pricing promoted by Japan’s government is also enhancing the foreseeability of added value born from paper, a bio-derived product, and from products using zero-CO2 energy. By creating new businesses and by engaging in new product development that fully leverages the strengths of the paper and pulp industry, the Group will contribute to the advance of a sustainable society.

To continuously live up to the trust of our stakeholders

Let me note in closing that while the environment surrounding our Group continues to undergo significant changes, our medium- and long-term management policy remains unchanged. We will connect our business activities in FY2025, the last fiscal year of our current Medium-term Management Plan, to solid achievements that will serve as footholds for dramatic growth under the next Medium-term Management Plan. Since our founding, the Group has contributed to the development of society through the heartfelt art of papermaking. We will continue to emphasize constructive dialogue so that we can remain a people-focused business group trusted by our stakeholders. At the same time, we will steadily achieve our Long-term Corporate Vision: Vision 2030 through sustainable growth.