Expansion of the wood-based panel business through the establishment of EN Board

「Although improvements to individual production-related issues have gradually progressed at the company, it recorded losses for 4 consecutive fiscal years from the fiscal year ended March 2023 through the fiscal year ending March 2026.」

「In the wood-based panel business, we focused on increasing our share among existing customers and developing new customers to expand sales. Meanwhile, at consolidated subsidiary EN Board Co., Ltd., productivity has gradually improved as a result of thorough efforts to reduce production losses, including line stoppages and defective-product losses. However, many challenges remain in achieving stable production, and earnings improvement has been delayed.」

「We will ensure that EN Board Co., Ltd. achieves its business plan and establish a stable production system with monthly output of 15,000 tonnes.」

「At consolidated subsidiary EN Board Co., Ltd., production volume has gradually increased as a result of continued efforts to improve productivity, but earnings improvement has been delayed.」

「In the wood-based panel business, production was disrupted by the fire, and in order to fulfill our supply responsibilities to customers, we urgently sold raw PB procured externally. In addition, sales of decorative PB manufactured using that material as the substrate pushed up manufacturing costs, while expenses incurred during the production suspension were recorded as extraordinary losses due to the disaster.」

「Sales for the cumulative third quarter of the current consolidated fiscal year increased year on year to ¥6,180 million, up 18.3%, following the start of commercial production by ＥＮボード株式会社 in November 2022. However, sales were below plan due to the impact of the production shutdown following the fire and delays in improving productivity at ＥＮボード株式会社. The segment therefore recorded a loss of ¥873 million, compared with a loss of ¥614 million in the same period of the previous year.」

「EN Board Co., Ltd. resumed production on 26 June. However, after extensive consideration of the time and investment required to restore the buildings and equipment at the materials process of the Tsuruga PB Plant, the investment returns, including the required investment, and our group's supply structure for the market, we unfortunately decided not to proceed with restoration and resolved to close the materials process at the Tsuruga PB Plant. The decorative process, which applies a decorative finish to raw PB, was not affected by the fire. We will therefore continue production by efficiently procuring raw PB externally, including from group companies such as EN Board Co., Ltd.」

「EN Board Co., Ltd. suffered no personal injuries and resumed production on 26 June. However, one person died and 3 were injured in the materials process at the Tsuruga PB Plant, and production has remained suspended since the fire because the buildings and equipment were severely damaged.」

「There was a significant change in production results in the wood-based panel business during the current consolidated fiscal year. This was due to the start of production at EN Board Co., Ltd., a consolidated subsidiary.」

「To offset across the group the depreciation expenses arising at EN Board Co., Ltd., which began commercial production in November 2022, we worked to secure earnings through appropriate pricing, thorough cost reductions and expanded sales of high-value-added products.」

「Selling, general and administrative expenses at EN Board Co., Ltd., which is scheduled to transition to commercial production in November 2022, weighed on earnings, resulting in an operating loss of ¥712 million, compared with an operating loss of ¥293 million in the same quarter of the previous year.」

「In terms of earnings, amid continued increases in raw material prices due to factors including the wood shock, we worked to secure earnings through the profit contribution from higher sales, thorough cost reductions, expanded sales of high-value-added products and appropriate pricing. However, selling, general and administrative expenses at EN Board Co., Ltd., which is scheduled to transition to commercial production in November 2022, weighed on earnings, resulting in an operating loss of ¥224 million, compared with an operating loss of ¥176 million in the same quarter of the previous year, and an ordinary loss of ¥181 million, compared with an ordinary loss of ¥82 million.」

「Since the entry restrictions were eased in March 2022, the dedicated engineers have been able to enter Japan. We therefore began producing initial-run products in May 2022 toward obtaining JIS certification, and plan to begin commercial production in November 2022 after obtaining certification.」

「Installation of the production equipment itself has been completed, but because the latest continuous press was manufactured in Germany, a dedicated engineer was scheduled to come to Japan to supervise trial operations and operator training. However, the engineer has continued to be unable to enter Japan due to the renewed spread of COVID-19, causing delays to the plan to begin equipment operations in January 2022.」

「At a board meeting held on 27 September 2021, the company resolved to enter into lease agreements at the end of September with DFL Lease Co., Ltd. and others for production equipment worth approximately ¥3 billion for its consolidated subsidiary, EN Board Co., Ltd., and to provide guarantees for 65% of the obligations under those lease agreements. The leases are scheduled to commence in January 2022.」

「EN Board Co., Ltd., preparing for the start of equipment operations in January 2022」

「In light of these circumstances, the planned start of operations for EN Board Co., Ltd.'s equipment, originally scheduled for March 2021, has now been postponed to January 2022, and we will provide a further update once the detailed schedule has been determined. In addition, total investment, originally planned at approximately ¥18,000 million, is now expected to be approximately ¥25,000 million due to revisions to the equipment specifications and construction plan from the initial plan, as well as rising construction material and labor costs.」

「In the wood-based panel business, net sales for the cumulative second quarter of the current consolidated fiscal year were ¥2,183 million, down 26.3% year on year, due to the closure of the particleboard plant at the Yamaguchi-Hirao facility at the end of September 2019 following the establishment of EN Board Co., Ltd., as well as the impact of COVID-19.」

「EN Board Co., Ltd., established on 22 May 2019, is proceeding with the acquisition of plant land, construction of a new plant and arrangements for state-of-the-art production equipment, with operations scheduled to begin in March 2021.」

「(Land sale and purchase agreement) (1) Contracting company: EN Board Co., Ltd. (2) Contract: Acquisition of land for plant construction (3) Contract price: Approximately ¥2,993 million (4) Contract date: 27 November 2019 (5) Acquisition date: 26 December 2019 (Construction contract) (1) Contracting company: EN Board Co., Ltd. (2) Contract: Construction work for the new plant (3) Contract price: Approximately ¥3,718 million (4) Contract date: 26 December 2019」

「The contracts entered into were as follows. (Contract relating to significant capital investment) (1) Contracting company: EN Board Co., Ltd. (2) Contract: Purchase of particleboard production equipment (3) Contract price: ¥4,500 million (4) Contract date: 6 August 2019 (5) Scheduled delivery: December 2019」

「In addition, to expand the wood-based panel business, we established a joint venture, EN Board Co., Ltd., with 日本ノボパン工業株式会社 in May 2019 to manufacture particleboard. In addition to the decorative and woodworking particleboard in which our group has traditionally specialized, the joint venture will offer structural and flooring-underlayment particleboard, for which demand is expected to grow, with the aim of expanding sales and improving earnings.」