Nippon Paint Hldgs Co Ltd

Good evening, ladies and gentlemen. This is speaking. Thank you so much for joining us out of your very busy schedules today. We would like to share with you financial results for the FY 2020 full year and the fourth quarter as well as the outlook for FY 2021. Once again, please be advised that the meeting sound is broadcast live on the web with simultaneous interpretation for Japanese and English. Page 3, please. First, the FY 2020 full-year summary is shown. On a transient basis, we achieved higher revenues and profits versus last year. In addition, both revenues and operating profit were the record high. In the past few years, China's significant recovery and robust performance of Dulux Group, Patek Boyer, we acquired 2019, and their full-year contribution are the major factors. Last November, we shared with you our full-year guidance, revenue 760 billion yen and operating profit 76 billion yen. The actual results are far better than the guidance, as you can see here. Automotive demand recovered, and China and Patek grew more than expected. While we spent some sales promotion shaded for the fourth quarter, and we made certain investment for 2021, the growth of profit exceeded those. Next page four, please. Here is a summary for the FY 2020 fourth quarter. In the fourth quarter 2020, Dulux and Patek are included both in Taishin, Tanshin, and long gap results. In terms of profits on Tanshin, there was impairment in Europe, and in India in the same period last year, compared with which profit increased significantly. Yet without such effects, it's a slightly negative growth in profit as expected, but it shrank significantly, minus 5.4%. On non-GAAP basis, you see an even higher revenues increase than its foreign exchange constant. So the difference from Tashin is basically FX related. In IBC, China's decorative business In project, the result was up 34%. In DIY, it was up 20%. The continued robust growth is indeed remarkable. Last November, when we shared with you our business results, I mentioned the possibility that our forecast might be conservative. It did turn out to be actually conservative. But the world markets are still very fluid, And uncertain, including COVID-19, our view is that there is still uncertainty. I hope you will understand. Page five, FY 2021 full year forecast. As I said, the situation is mixed. Depending on region, it's different. Generally speaking, though, even before the new consolidation of operations, we are forecasting about 7% growth, expecting robust recovery and growth. including newly consolidated Indonesia and India business. We expect 890 billion yen revenues, 87 billion yen operating profit, each making the record high results again. Regarding the operating profit with Asia operation integration, we expect a one-time expense of about 5 billion yen, including stamp tax inventory step-up with PPEA. If you reverse those, it's about 92 billion yen as guidance. Making Asian joint venture 100% owned and acquisition of Indonesian business were completed, as you know, on January 25th this year. After consulting with the auditing firm on the consolidated results, it is treated as deemed consolidation from January 1st. Please note that from this page onwards, the information is based on that premise. I'll come back to each region later. Overall, raw material cost is expected to increase into the current market situation. And as indicated in a presentation on February 21st last year, as Tanaka said, to have sustainable growth here in Japan, we commence active investment, which is likely to have a negative impact on the profit in the short term. Our company's stock split was resolved today with March 31st, 2021 as the record date, One share will be split into five shares. With the stock split, an investment unit amount will be lowered, making it easier for investors and their group employees to invest in our company. Our aim is to expand layers of investors and enhance the market liquidity. With this stock split, EPS after the split is assumed to be 29.17 Yen. And come March this year, we will be celebrating 140th anniversary since the foundation of the company. Our performance has been robust, and we decided to pay a commemorative dividend. Annual dividend post share split will be 10 yen per year, of which an ordinary dividend for first half is 4 yen, 1 yen for commemorative dividend, and 5 yen for the second half. According to the metrics, this is times 5, 50 yen, the 45, ordinary, 5 yen for commemorative dividend. Page 6, please. This shows an overview of Indonesia and India businesses which are newly consolidated. The guidance is shown separately because it's newly consolidation. I hope you will see all these numbers as reference figures. As you know, about India, we had 50% ownership of India business and equity method accounted. But with now 100% ownership, revenues and operating profits are in the scope of the newly consolidated results. Regarding Indonesia, as I mentioned last year, 2019 was affected by the presidential election. I talked about this. last august unfortunately in 2020 the covet impact is more significant than expected both in decorative and industrial businesses revenues declined yet a market share has been steadily expanding in our view we expect to ensure a double digit growth in revenues and that you can see high profitability and for india in 2020 Both revenues and profits decreased due to COVID, yet this year we expect to see increasing revenues and profits with market recovery and boosting of products. Please take note that 2020 actuals are reference figures. Page seven and page eight. I would like to skip them, though I can entertain your questions later. And let me explain recent topics in a chronological order. Page nine, please. First, our initiatives tackling the COVID, now an issue confronted by the society. Since last October at the University of Tokyo, we established research activities for society called Creating Innovative Coating Technology. We've been promoting joint research on the three themes, reducing risk of infectious diseases, smart society, lowering environment impact, reducing social cost. In parallel, last October, in the joint research with the Noguchi Memorial Institute for Medical Research at the University of Ghana, we confirmed that this water-based paint with visible light photocatalytic properties proved effective in suppressing COVID-19 virus on the coated surface. In November, University of Tokyo started verification for its efficacy against COVID under actual conditions. Verification is progressing steadily, including new variant strains.

Turning to page 10. This September, we launched new brand specializing on antiviral and antibacterial products called Protection. Two products for DIY and household use and two products for business use were launched and were received. This fiscal year, under Protection brand, We plan to launch numerous antiviral and antibacterial products. Turning to page 11, here we illustrate the smooth progress of automotive business reorganization announced in October, including investment for domestic market. Automotive coating business is strengthened, and we are enhancing global quality assurance structure, as well as strengthening and product service delivery. From ESG perspective, we accelerate environment-friendly product development. At Nippon Paint Marine, faster hydrolysis anti-fouling paint was launched in January. Industry-first nanotechnology significantly reduces solution of anti-folding agent, resulting in mitigation of environmental burden through COD reduction by saving fuel consumption. We can contribute to HG management of customers. As we informed you already, we completed acquisition on January 25th. On page 14, as of February 4th, R&D rating was upgraded from A minus to A flat. Without sacrificing the financial soundness, we have implemented the acquisition of Asian JV stake in Indonesian business while enhancing the financial soundness and steady performance despite COVID-19 impact. Page 15 is related to stock split, as I mentioned earlier. As we informed you in the previous quarter, we are providing numerous topics over a short period of time. Without sacrificing speed of management, we hope to enhance dialogues with you. After this, for individual page, we would like to use the Q&A session, but please turn to page 21 now. Up to now, when we spoke about our share of China business, in order to measure market size, we were looking at new housing market. However, major renovation demand expanded rapidly for existing houses. So if aggregated, our project market expands dramatically. As our company, we adapt flexibly to the market change, and we will be proactive in share expansion, including existing house market, including DIY market. We should be able to broadly grasp market. As a result, our previously announced figures, such as 36% of DIY market, Those do not necessarily match with our target market, so we would like to withdraw these market share figures for the time being. In a sense, we have more room for share expansion in the future supported by our capabilities. We would like to commit to share increase strategically, so we would like to seek for your understanding. Lastly, After page 30, I would like to talk about the full-year forecast. On page 30, the figures are, as I mentioned earlier at the beginning, and the expenses, raw materials, they are expected to increase compared to previous year. So on the mid- to long-term basis, in order to look for sustainable growth, especially we are promoting investment domestically more proactively. So domestically, reorganization of plans or automation or seeking efficiency of the logistics, those should be done immediately. Since last year, we have been mentioning this. So starting from this year, we will be shifting to implementation stage. So in terms of the timeframe, It won't be just three years. We will have long-term perspective. Of course, what is visible will be within the timeframe of seven years. So within this timeframe, we will like to do the capital expenditure. We are not going to fix seven years, but every three years or so, we will like to have a review and to make sure to have robustness. And even though this is not included, global capex amount is roughly 44 billion. And this is written on page 53, 38.9 billion. Compared to that figure, we are increasing the amount. But this capital expenditure, we will not be able to depreciate immediately to expenses. We will be spending time to depreciate. And even during that time, we are going to increase our revenue. So that part does not mean that this would only take up all the spaces for the expenses. After page 31, you see the forecast of the market. Although there are still uncertainties, at least if you compare with fiscal year 2020, It's at least a flat, and we are expecting to have positive figure, and we are planning to gain more share exceeding that. And after page 32, you find the figures. For example, on page 32, in China project, it will be around 20%. And in decorative, no, it's DIY. It's going to be roughly 10% increase in terms of revenue. On page 33... Oceania, this is a Dulux. Here, year 2020 had stay home special demand. And looking from 2019, we will be leveling their growth over two years. So this year's growth will slightly slow down. But on the other hand, from the latter half of last year, various investment is made. and we are expecting to see the increase of margin. Lastly, on page 34, for BTEC Boyer, due to Turkish lira impact, this year we will have the rise of import of commodity price. But at least on the local currency basis, we're expecting to have the increase of revenue by 10%. Overall, for automotive, fiscal year 2020, we had hold of the plant and the production itself stopped. So compared to that, we're expecting to see recovery, especially in North America. And we are also expecting to see the recovery domestically as well. So far, I talked over the presentation materials. But lastly, As for the midterm business plan beginning from this year for a three-year period on March 5th, from 3.30 p.m., President and CEO of the company, Mr. Masaaki Tanaka, will explain to you. We are planning to have the virtual meeting, but we hope that you will participate in this meeting as well. That concludes my presentation. Thank you very much for your attention.