Daio Paper Poised to Acquire Nisshinbo’s Tissue Business

Japan's leading producer of toilet paper is poised to make a domestic acquisition that will increase its capacity to supply a still-growing household paper (tissues) market forecast to reach a record volume this year.

According to a report this week by the Nikkei Asian Review (NAR), Daio Paper, Japan, reportedly will pay some 20 billion yen ($178 million) for Japan-based Nisshinbo Holdings' paper business, including three mills in Japan. A final decision could come as early as this week, with the deal possibly closing by the end of March, NAR added. 

Sales in the business, which produces mainly household paper (tissues), rose 4% to 32.5 billion yen in the year ended March 2016. Nisshinbo ranks a distant fourth in domestic market share, at 8%, compared with 23% for market leader Daio. The latter will move further ahead of second-ranked Nippon Paper Industries of Japan, now at 12%, NAR reported. 

Daio is investing 24 billion yen in new household (tissue)paper mills in Ehime and Saitama prefectures, set to begin operations by 2018, according to NAR. The Ehime facilities are expected to boost exports to Asia. Taking on Nisshinbo production facilities in Shizuoka Prefecture, near the greater Tokyo area, would supplement domestic supply.

The acquisition would see Nisshinbo fold up its paper operations, started in the 1960s as an offshoot from the textiles business at the company's foundation. Nisshinbo could then focus resources on such current core businesses as automobile brake materials and communications equipment.

The Japanese market for household tissue papers is robust, according to NAR. Shipments to hotels and commercial facilities are on the rise, supported by a boom in tourists from abroad. More residents are also stocking up for disasters. While demand for such products as printing paper is seen declining in 2017, tissue paper demand is forecast to increase 0.7% from the 2016 level to a record 2.02 million tons.

Sales by Daio's home and personal care segment, which includes diapers, climbed 8% to 158.9 billion yen in the year ended March 2016. Operating profit rose 13% to 10.3 billion yen. The company aims for these products to account for 40% of group sales, or 200 billion yen, by fiscal 2017.

Daio's disposable diapers are sold in 29 markets worldwide and produced in China, Thailand, and Indonesia. Its toilet paper and tissues have been exported to just a handful of markets, including South Korea.