Reform the Cost Structure of the Paper Business & Focus on Packaging
Hokuetsu can also improve in its current core business, paper pulp.
We believe Hokuetsu is paying extra costs to import materials required to produce paper pulp due to the location of the factory.
Hokuetsu could enhance the operations by moving its factory closer to the harbor, as most procurement is done via shipping.
Hokuetsu procures chips from countries including Chile and South Africa, far away from Japan. Hokuetsu could reduce its costs by procuring chips from Southeast Asia.
Hokuetsu’s paper business could stand to benefit as a solution to resolving the problem of plastic waste. Companies such as Nestle have decided to transition plastic wrappers to paper packaging:
We believe this is a big opportunity for Hokuetsu. As population in Southeast Asia increases, we believe there are business opportunities in Southeast Asia for the paper packaging business.
Hokuetsu already owns a subsidiary which is focused on paper processing, Hokuetsu Package Co., Ltd., which could be leveraged to expand the business in Southeast Asia. Investing in paper processing factories tend to cost several billion yen, which we believe is a good investment.