Nippon Paint Hldgs Co Ltd

I'm Wakatsuki, co-president of NPHD. Thank you very much for your attendance despite your very busy schedule. From now, I would like to provide the overview of FY 2021 first quarter financial results. Once again, this is going to be live streaming online, and this is going to be conference of simultaneous interpretation between Japanese and English. As I'm going to touch upon this later on, for the financial results announcement. Even after the organizational change, I will continue to be the presenter. Please move on to page three of the material. This is the summary of the first quarter. As you can see, in both Tung Hsin and non-GAAP basis, we achieved significant increase in both revenue and profit. There are three main points as for the gap between Tamsin and non-GAAP basis. The first one is no new consolidation impact of Indonesia and India. This is included in Tamsin, but not in non-GAAP basis. The second point is the foreign exchange impact. Overall, compared with the initial forecast, yen is depreciating, so this is plus. As for Turkey, is now depreciating, so this is a negative impact. As the third point, with Asia 100% completion of M&A, on Tanshin basis, this is negative, but this is the case for the M&A expenses. For the other regions, starting from China, in the peak months of March, with the biggest demand, there were serious impact from COVID-19 pandemic, so increase in revenue was somewhat expected, yet in both DIY and project, share increased and it was very favorable. Japan continues to have impact from COVID-19. Compared with year basis, it's still flat. In other regions other than Japan and China, they are relatively good. At any rate, this year, if you compare with the previous year, Last year was extraordinary year due to COVID-19. There is a need for having caution over that. For newly consolidated Indonesia, last year's result is for reference, but for Indonesia, increase in both revenue and profit was achieved, especially high profit margin. Generally, Raw material prices are on the rise. In terms of revenue and demand of paint, we just continue to have steady situation, but in terms of cost, after the second quarter, we cannot be too optimistic. Overall, price hike and through cost reduction, we should achieve initial target, but we are now being careful of how we can achieve the upside. As soon as we see more subtle situation for the raw material prices, we are hoping to provide update after second quarter. In order to clarify earnings in the Japanese segment, headquarter expenses have been reclassified as adjustments. This expense is an unallocated expense occurring in HLD, and this is the same kind of image as the headquarter expense announced at the midterm business plan Moving to page 4, as we informed you, on April 28th, we announced change of representative executive officer and co-presidency structure. The reason for resignation of former President and CEO Tanaka is as mentioned at the press conference. It is not necessarily appropriate for me to comment, but what I would like to clarify is that knowing that it was an extraordinary timing, he faced a physical capacity issue, and it was a judgment. Ultimately, considering sustainable development of the company, myself and Weishu Kim will not only steadily implement growth strategy in the mid-term business plan, but we are committed to overachieve the target. As the successor, we would like to overcome the pressure and to deliver results. We would like to ask for your support. As for co-presidency, We do recognize that it is uncommon for a listed company nomination committee made the judgment of best positioning for the development of the company in the future. For me personally, Nippon Paint Group itself is originally unique, yet powerful group. And this unique structure of a co-presidency is between us with Rishu Kim and myself, it can function well. I'm confident about that. Although there are pressures, I would like to prove and demonstrate by delivering the results. As I mentioned at the outset, there was an explanation by the chairman of the nominating committee at the press conference, but dialogue with capital market is my advantage where I can use my experience. So I would like to continue under the co-presidency structure. We will not established new CFO position, but I will continue with operation and together with Rishu Kim, I will have the joint responsibility for the overall management. Rishu Kim has the track record of leading NIPSI CEO over 12 years, well versed in the paint practice and responsible for operation and for management as a whole. He will have a joint executive responsibility with me. As for Chairman Goh, same from the past, he will continue to provide advice. But from the perspective of representative of the controller, chairman of the board will be served by Masayoshi Nakamura, lead independent director. That was the brief summary of the new structure, and we would like to ask for your cooperation. Please turn to page five. From here on, there would be explanation of market status of each region. China's DIY and projects have already been explained. It is doing very well. However, in Asia, outside of China, there has been significant recovery from last year's COVID impact. Page six, Oceania Deluxe Group. In the first quarter of last fiscal year, In the first quarter, there was bushfire and floods in January on February. And from March, there was a stay home, a demand in home centers and sales rose in home centers. There was a lot of fluctuation, so it is difficult to purely compare with last fiscal year. After second quarter on in the last fiscal year in Australia, there was a lingering impact of stay home. We don't necessarily believe that the same level of revenue year-on-year is possible. However, 0 to 5% increase in revenue year-on-year on a local currency basis is something that we would be able to sufficiently achieve. In terms of Australia, in terms of Europe, IBDK on a Local currency basis is doing well, but there has been forex impact, so there was not so much growth on Tanshin basis. As for automotive, there was an impact from a shortage of semiconductor chips. The sales demand, especially on a year-on-year basis, it is quite robust. But what would be important for us is the number of production The growth varies by region, depending on the production volume. Last but not least is adjustment. Out of the 5.5 billion yen in this term, out of that 2.6 billion are the provisional M&A expenses inclusive of stamp tax and others. So, on a non-GAAP basis, the total of consolidated adjustment is 3.3 billion yen. plus $1.3 billion in increase of expenses. On page seven, I would like to explain about raw material market. It is basically as written on this slide, but there is deterioration in supply and demand balance, but there has been original difference in the P&L impact. There has been impact from the cold wave in some of the regions, So there is a regional difference in the P&L impact. So in the first quarter, there were some carried over inventory from the previous year, and impact was felt in part of regions like China. But from second quarter on, the cost situation will be more severe. Countermeasures include price increase as well as cost reduction. we would like to capitalize on our global procurement capability, and we would be able to optimally allocate raw materials, and that would be a strength against our competitors. So in terms of the price increase, the situation varies region by region. Positioning, competitive environment, those will be comprehensively considered and conduct the best decisions. and make the best choices. From page eight on, you see some main topics. I will be skipping the details, but on page eight, you see that we receive high rating for our integrated report, which we worked very hard last year. Our team and our company overall feels very happy about it. We would like to continue to receive investors' feedback for further improvement and conduct proactive investor engagement measures. Page 9. Our diversity promotion initiatives have been recognized globally. The ratio of women as well as the senior managers, number of the women in the senior management and also utilizing women for executive officers. Those initiatives have been highly rated. Page 10, you see the activities that we have been conducting in China regarding green activities, as well as brand recognition. On page 11, you see our strength in Projects in China. The projects also have to consider brands. We need to be highly evaluated by customers, and that would lead to the expansion of our fruit business. Please turn to page 12. This is what we have announced in March. This is to report to you on the closing of Malaysia's vital technical acquisition. At the end of March, we have seen the completion of this acquisition, and vital technical is already contributing. This has been mentioned in midterm business plan, but we want to practically expand into paint-related businesses if synergy can be envisioned. So in this case, what we expect is enhanced sales channel in Asia and synergy with sellies of a Dulux group. So that's why we have conducted the acquisition of Vital Technical. On page 13, the Dulux brand is very strong. So we reconfirmed the strength of this brand in Australia through this award. That is all for the explanation of the overview of the performance. And from page 20 on, you see the regional analysis. And on the right, you see comparison of fourth quarter and the first quarter in a form of a graph. As you know, the paint business has strong seasonality, so quarter and quarter comparison It's not so meaningful, but there was a lot of requests to show quarter-and-quarter comparison, so that's why we have brought it to you on the slide. We explain about heat map every time, but this is very straightforward, so we would like to wait for the Q&A if there is any question we would like to answer. And on page 35, you see the balance sheet upon the completion of acquisition of Asia Joint Venture and Indonesia. As I have already explained several times, for Asia Joint Venture, that has already been consolidated. So even after the 100% acquisition, the balance sheet did not grow bigger. On the other hand, the capital increased because of the third-party allotment. Non-controlling interest decreased. So capital surplus and retained earnings had seen decrease. So the amount of the acquisition of Indonesia would work to increase the balance sheet. And so there has been an increase from 700 billion to 900 billion yen. And we were able to see the improvement in the rating So that would be a brief presentation from my side. Thank you very much for your kind attention.