Nippon Paper Industries (3863.T): On Reports of Abandoning the Restart of Paper and Pulp Production at the Yatsushiro Mill

On the evening of November 5, Nikkei's electronic edition reported that Nippon Paper Industries has decided not to restart paper and pulp production at its Yatsushiro mill, which was damaged by the late-July Kumamoto earthquake. According to the report, the company will explore a new business at the site utilizing forest resources in Kyushu while maintaining the base and employment. JPMorgan has not yet confirmed this with the company, but if true, the decision is not surprising: net debt-to-equity based on shareholders' equity was 1.74x at end-FY2025, and shrinking demand for graphic paper is pressuring operating cash flow. However, the investment cash flow and profitability of the new business need verification, and the household paper strategy based at Yatsushiro may be reconsidered. With the impact of the accident at its North American subsidiary, the company urgently needs to accelerate cash generation from existing businesses and assets. The mill's book value at end-March 2026 wa