Pack : Briefing Materials on Business Results for the Year Ended December 31, 2023

THE PACK CORPORATION

Briefing Materials on Business Results for the Year Ended December 31, 2023

February 29, 2024

Contents

	Topics	P. 2
1.	Business Results for the Year Ended
	December 31, 2023	P. 3
2.	Forecasts of Business Results
	for the Year Ending December 31,
	2024	P. 17
3.	Promotion of Sustainable
	Management	P. 21
4.	Progress on the Medium-Term
	Management Plan	P. 25
5.	Reference Materials	P. 34

Copyright© 2024 The Pack Corporation. All Rights Reserved.

1

Topics

• Demand for dining and accommodations grew as COVID-19 restrictions were relaxed. Despite an economic recovery driven by factors including recovering inbound tourism demand and rising wages, the lingering effects of high energy prices and exchange rate fluctuations appear to be spurring inflation, and the future outlook remains uncertain.
• The Pack Group recorded record highs In net sales, operating profit, ordinary profit, and profit attributable to owners of parent. Sales volumes grew, centered on packages for food products, thanks to proposals of environmentally conscious high value added products and solutions and sales expansion efforts. Additionally, prices were revised to reflect the rising cost of raw materials.
• Dividends grew by 25 yen YoY. The Company paid 90 yen in dividends vs. an initial forecast of 70 yen.
• In addition to upward revisions of FY2024 and FY2025 targets under the current Medium-Term Management Plan, the shareholder returns policy was revised to maintain a dividend payout ratio of 35% or higher, to purchase up to 1.0 billion yen in treasury stock per year, and to target a total payout ratio of 50%.
• We established a Sustainability Committee and are currently promoting various sustainability management efforts.

Copyright© 2024 The Pack Corporation. All Rights Reserved.

2

1. Business Results for the Year Ended December 31, 2023

3

Summary of Business Results

Record highs in net sales, operating profit, ordinary profit, and profit attributable to owners of parent

Net sales

Operating profit

Ordinary profit

Profit attributable to owners of parent

Basic earnings per share (yen)

Dividend per share (yen)

(Million yen)

Year ended December	Year ended December 31, 2023
31, 2022
Actual	Actual	YoY change
89,060	97,714	9.7%
5,972	7,743	29.7%
6,353	8,063	26.9%
4,058	5,652	39.3%
213.55	297.07	39.1%
65.00	90.00	38.5%

• Consumer spending recovered as demand related to souvenirs, domestic tourism, and inbound tourism grew following the relaxation of various restrictions.
• Offsetting growing costs, operating profits recorded significant growth thanks to higher average sale prices, which reflected the proposal of various high value added products and efforts to optimize prices. Paper bags and paper cartons in particular drove growth in both sales and profits.

Copyright© 2024 The Pack Corporation. All Rights Reserved.

4

Factors Underlying Changes in Operating Profit

Operating profit grew due to growing sales volumes and rising average sale prices.

(Million yen)

Year ended	Increased	Higher	Higher raw	Higher other	Higher labor	Higher	Higher other	Year ended
December 31,	sales	average sale	material	manufactur-	costs	logistics	selling, general December 31,
2022	volumes	prices	costs	ing expenses		costs	and	2023
Operating							administrative	Operating
						expenses
profit	+1,358	+3,747	-1,141	-383	-1,085	-312	-413	profit
5,972	7,743

• Sales volume grew due to recovering consumer spending, centered on paper cartons (up 5.5%).
• Average sale prices rose due to efforts to optimize prices and to proposal-based sales for high value added products (paper bags up 11.0%, paper cartons up 6.5%, corrugated boxes up 12.5%, plastic bags up 14.8%).
• Materials costs rose, due mainly to soring raw material costs.
• Labor costs rose due to expanded hiring and to wage hikes averaging 5.01%.
• Other SG&A expenses rose due to various factors, including costs associated with building a new headquarters building and expenses accompanying an upgrade of the backbone computer system.

Copyright© 2024 The Pack Corporation. All Rights Reserved.

5

Results by Segment

						(Million yen)
		Year ended December 31, 2022	Year ended December 31, 2023
		Actual	Share	Actual	Share	YoY change
	Net sales	89,060	100.0%	97,714	100.0%	9.7%
	Paper	62,932	70.7%	69,399	71.0%	10.3%
	Products
	Paper bags	26,252	29.5%	29,653	30.3%	13.0%
	Paper	22,283	25.0%	25,000	25.6%	12.2%
	cartons
	Corrugated	12,210	13.7%	12,419	12.7%	1.7%
	boxes
	Printing	2,186	2.5%	2,325	2.4%	6.4%
	Film	11,988	13.4%	13,798	14.1%	15.1%
	Packaging
	Others	14,138	15.9%	14,516	14.9%	2.7%
	Operating profit	5,972	100.0%	7,743	100.0%	29.7%
	Paper	5,333	89.3%	6,858	88.6%	28.6%
	Products
	Film	583	9.8%	856	11.1%	46.7%
	Packaging
	Others	1,059	17.7%	1,267	16.4%	19.7%
	Adjustments	-1,004	-16.8%	-1,239	-16.0%	-

• The Paper Products Business recorded sales and profits growth thanks to strong sales of packages for food products and recovering consumer spending and tourism demand.
• Positive sales performance continued in the Film Packaging Business for external packages for disposable diapers and for film packaging for food products.
• Other businesses saw strong sales of eco bags of cotton, nonwoven, and other materials and gift-wrapping materials.

Copyright© 2024 The Pack Corporation. All Rights Reserved.

6

Trends by Segment

Record-high sales and operating profit for paper products

Net sales		Net sales		Net sales		Operating profit
(Paper Products Business)		(Film Packaging Business)		(other businesses)

(Million yen)

100,000

80,000

60,000

6,850

3,275

95,502

15,483

78,445

19,666 13,574

5,9727,743

4,144

		97,714
	89,060	14,516
79,690
14,138	13,798
13,008	11,988
11,184

8,000

6,000

4,000

2,000

0

40,000

20,000

0

60,353

13,484

51,386

55,498 62,932 69,399

Year ended December	Year ended December	Year ended December	Year ended December	Year ended December
31, 2019	31, 2020	31, 2021	31, 2022	31, 2023
	Copyright© 2024 The Pack Corporation. All Rights Reserved.	7

Sales Composition

Net sales by business

Year ended

December 31,

2022

Year ended

December 31,

2023

27.1

28.1

16.5

16.6

	1.0		2.8	0.4
5.0	6.1	4.9	2.13.3 3.4

5.0	5.6	4.9	2.03.0 3.8
	1.2		2.9	0.3

27.5

26.6

(%)

Food products Apparel Department stores Supermarkets and drug stores Convenience stores Pharmaceuticals and cosmetics e-commerce Sundries Home electronics and home installations Life care Automotive Other

		Year ended December 31,	Year ended December 31, 2023
			2022
	(Million yen)	Actual		Share	Actual	Share	YoY change
	Food products	24,149		27.1%	27,438	28.1%	13.6%
	Apparel	14,709		16.5%	16,187	16.6%	10.0%
	Department stores	4,449		5.0%	4,910	5.0%	10.3%
	Supermarkets and drug	5,390		6.1%	5,502	5.6%	2.1%
	stores
	Convenience stores	890		1.0%	1,184	1.2%	33.0%
	Pharmaceuticals and	4,331		4.9%	4,743	4.9%	9.5%
	cosmetics
	e-commerce *	2,520		2.8%	2,834	2.9%	12.5%
	Sundries	1,859		2.1%	1,939	2.0%	4.3%
	Home electronics and	2,982		3.3%	2,888	3.0%	-3.2%
	home installations
	Life care	2,985		3.4%	3,744	3.8%	25.4%
	Automotive	327		0.4%	330	0.3%	0.7%
	Other	24,461		27.5%	26,014	26.6%	6.3%

• In the food products segment, recovering consumer spending spurred sales growth to the souvenir market and for delivery and takeout foods.
• The relaxation of various restrictions helped drive a recovery in sales related to apparel packaging for brick-and-mortar stores.
• Department store sales remained firm as consumer spending and inbound demand recovered.
• Sales to the convenience store segment increased; our market share grew with expanded production capacity, while we received new orders related to proposals for paper package solutions leveraging our design capabilities.
• Sales to the pharmaceuticals and cosmetics segment grew with recovering consumer spending and inbound demand.
• The e-commerce sector showed positive sales performance due to new orders for corrugated boxes, paper delivery bags, and other delivery packaging.
• In the life care segment, sales grew sharply for external packages for disposable diapers.

* e-commerce refers to the e-commerce platform segment. e-commerce sales on vendor sites are counted as part of their individual business segments.
Copyright© 2024 The Pack Corporation. All Rights Reserved.	8

Paper Products Segment

Industry environment

• Department store sales were up for the 22nd consecutive month, including double-digit YoY growth for accessories, sundries, and cosmetics, centered on luxury brands. Demand

was strong for snacks as gifts.

(Source: Japan Department Store Association)

• Domestic travel consumption in Japan returned to near pre- COVID levels. The number of visitors from overseas is also recovering.
• • 2023 domestic travel consumption in Japan (preliminary figure) July-September: 6,289,900,000,000 yen (down 6.0% vs. 2019, up 15.7% YoY)
    (Source: Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism, "Travel and Tourism Consumption Trend Survey")

Initiatives

• Enhancing manufacturing capacity through investments in machinery and equipment and improved productivity
• Aggressive proposals of eco-friendly materials and processing methods

Trends in net sales and operating profits

		Net sales (left axis)		Operating profit (right axis)	(Million yen)
70,000					69,399	14,000
				62,932
60,000	51,386	55,498			12,000
50,000						10,000
40,000							8,000
					6,858
30,000					5,333		6,000
20,000			3,958		4,000
3,124
10,000							2,000
0							0
FY20/12	FY21/12	FY22/12	FY23/12

Trends in operating profit margins		Trends in sales volume by product

12.0%	Paper Products Business	Film Packaging Business	Paper Products
10.0%	Other businesses			Business,9.9%
		8.5%
8.0%		7.1%		Other
			7.5%	businesses,8.7%
6.0%	6.1%	6.8%	FilmPackaging
	5.5%		4.9%	Business,6.2%
4.0%	3.8%
3.6%
2.0%
FY20/12	FY21/12	FY22/12	FY23/12

2,000

1,500

1,000

500

0

		Paper bags			Paper cartons			Corrugated boxes (Million yen)
					1,464		1,618			1,646
1,349											1,311
	1,259
			1,243
1,153
90	96			91	82
			FY20/12			FY21/12		FY22/12		FY23/12

Copyright© 2024 The Pack Corporation. All Rights Reserved.

9