Nippon Paper, Rengo, Sumitomo Expecting 1.8-B.-Yen Profit From Tie- Up

Tokyo, March 2 (Jiji Press)–Nippon Paper Group Inc. , Rengo Co. and Sumitomo Corp. said Friday their capital and business alliance is estimated to generate profits totaling 1.8 billion yen annually.

The three firms concluded the alliance the same day, based on an agreement reached in November last year, to strengthen their cardboard business.

The tie-up enables the three firms to streamline production facilities and jointly procure waste paper and other materials for cardboard production to boost their profit.

Specifically, the team expects to see one billion yen coming from plant consolidation, 400 million yen from cross product supply, 350 million yen from joint material purchases and 50 million yen from improving the efficiency of waste paper transportation.

As a result of the output facility streamlining, the combined annual production capacity at Nippon Paper and Rengo will decrease by 300,000 tons, company officials said.

Major trading house Sumitomo’s global network will be used for the two paper makers’ materials procurement, they added.

The package of tie-up measures will be carried out from April.

In November last year, Nippon Paper, Japan’s second-biggest paper manufacturer after industry leader Oji Paper Co. , Rengo, the top cardboard maker, and Sumitomo agreed that they would own stakes in each other by the end of March 2008.

Under the accord, Nippon Paper will take a 5 pct in Rengo, while Rengo will acquire a 3 pct interest in Nippon Paper. Sumitomo will transfer a 1.5 pct stake in Rengo, owned by Sumisho Paper Co., one of the trader’s units, to Nippon Paper in return for a 0.6 pct stake in Nippon Paper.END

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