Oji Paper Co., which effectively has given up its attempt to take over Hokuetsu Paper Mills Ltd., plans to install cutting-edge equipment in Tokushima Prefecture in fiscal 2008, Oji executives said Thursday.
Oji will get rid of the equipment in its Tomioka mill in Tokushima, which has an annual output capacity of about 250,000 to 300,000 tons, and install new equipment for its main product, printing paper, in the second half of the fiscal year, the executives said.
Oji, Japan's largest pulp and paper company, is also expected to remove aging machinery in mills in Hokkaido, Hiroshima and Aichi prefectures, they said, adding that the plans will be included in its medium- and long-term business strategy, which will be released Sept. 22.
Earlier this week, Oji President Kazuhisa Shinoda told reporters the company's tender offer for a majority stake in Hokuetsu Paper, which runs until next Monday, is likely to fail.
To strengthen its competitiveness without Hokuetsu, Shinoda said Oji will spend 50 billion yen to 60 billion yen to install the new machinery.
An Oji executive said the disposal of its old equipment will have no major negative impact on employment or the local economies that host the factories, as the company expects the production cutback to be limited.
Oji plans to increase production efficiency to better compete with its domestic rivals, including Nippon Paper Group Inc., which surprised the industry by acquiring a significant stake in Hokuetsu in an attempt to block Oji's hostile buyout attempt.
Nippon Paper, Japan's second-largest pulp and paper firm, is expected to propose a business tieup next week to Hokuetsu that will center on mutual dependence in output.
There are concerns about a glut in the domestic paper industry, as many firms are planning to install more advanced machinery.