Nippon Paint Hldgs Co Ltd

Thank you very much. Good afternoon, everyone. I'm the of the Co-President of Nippon Paints. I would like to express my gratitude for you to spend some time despite of a busy schedule. Now, I would like to outline the FI 2022 Fast Forward financial results. Hopefully that you will enjoy this session on page three. And this shows the summary. on a time basis a considerable increase in revenue and might fall in operating profit. New consolidation of chromology contributed positively while higher raw material prices on the logistics cost negatively affected. On non-GAAP basis, which excludes the mandate on the vaccine, an increase of 13% is recognized, but progressively profits fell by about 15%. Revenue reduction was identified, even DIY in China business was robust, and selling price increased for projects. OPM is down year-on-year, when the price hike on raw material was not dreadful to this extent at the time of the first quarter of the previous year. However, on YouTube, it is back on the recovery track, and this trend per se is the same as what we shared back in February in terms of closely focused performance with trends, In real value terms, we are able to pass price rise into selling price, having said that, as you find here, it is unpredictable as to the world landscape. Therefore, we are taking various actions. Page 4. This has already been shared as the reclassification of the portable segment. From the traditional regional-based segment, it is changed to the management unit or the regional-based segmentation. There are four major changes defined here. Firstly, as for the marine coatings, we are applied to operate our business globally in an integrated manner. To that end, we changed the structure. We now include overseas business in Japan segment. That used to be under Asia. on a four-year basis, it pushes up the revenue by some 10 billion yen. Please acknowledge that the base for NIPC segment is less. Now the second point. In association with the NPT at Nippon Paint corporate solution establishment, allocation of expenses to Japan segment increases and adjustments are now with pure holding company is in principle just for the pure holding company. This transfer amounts to more or less 1.3 billion in the first quarter. Thirdly, that is the BTEC in Turkey as well as the Nippon Paints Turkey for the auto business. Both are now managed under the NIPC management. Therefore, it is included into NIPC segment. Now, BTEC in Indonesia will be disclosed on a separate basis, on a standalone basis, as much as possible. The fourth one, with respect to the Dulux segment, that is a new segment that we established. Traditionally, Dulux, that was composed, one of the composition elements of Oceania, now newly chromology was added. In addition to that, it is expected Europe will be added. So this is a new segment in Oceania and Europe mix. So hopefully that analyst will be able to understand this change. As for the landscape for the raw materials, as you find over here, there's not much big change. We expect that there is a reduction in terms of the raw materials price. That is not happening that we expect. Therefore, we are trying to reduce the cost as much as possible and tax on the price. Now, in association with the deaths in second quarter, we expect that there will be a moderate improvement, however, With respect to the Ukraine landscape, as well as the remaining high raw material price, we see cautious bias sentiments on the lockdown in China. There'll be a moderate pace as to the improvement. This shows the heat map. That's the page six. The decorative business in Europe, as well as the chromology area. Those are the targets not included. So there is the sagging trend as to the overseas markets, and we are trying to add some growth in markets of China, DIY, and we like to utilize brand distribution. As for the major segments, it is concisely put together here, and hopefully that you refer to the supplemental material with respect to the opposite profits, a substantial decline from 4.3 billion yen in the previous period to 300 million yen. Of those 4 billion yen, One third is due to the difference in allocation from the previous period. A remaining 2.7 billion is reduction in operating profit of this business. As for the business of the auto paint, there is a big impact as the reduction of the auto production. However, from overall perspective, we do not have the impact of the raw material in the previous first quarter. It is the under assumption that it is reduction, but we want to compare the previous fourth quarter. Without the CS expenses, it was 2.9%, but this first quarter, it will be 3.8%. Therefore, we see that there is a slight enhancement or improvement. In Japan, we are trying to gain understanding in Japan in order to to rise the selling price, and we are working on the product improvement, and we are not satisfied with this result as Japan team.

Now, regarding DGL, the raw material price inflation is impacting with a time lag. A profit decrease on a non-GAAP basis year on year was within our assumptions. However, as we accept sense of selling price increase in the second half and other actions will allow us to achieve increase in sales revenue and operating profit on a full year basis we presume. As for the Americas, demand in the decorative continues to be strong. Automotive is lower than the assumption due to lower automobile production, especially among the Japanese manufacturers because of production adjustment caused by parts supply disruption. Page eight, this topic as we release the topic separately, in an attached document, we want to make it clear that this is not a disclosure of the emerging facts or occurring facts. Our objective of this release is to give just a notice or heads up to the market regarding the possibility of what may or may not happen. The situation in China develops every day, and the impact of lockdown policy has become increasingly serious since April. Under such circumstances, We are now discussing the necessity of recording an additional allowance for potential credit loss on receivables from about 15 major Chinese real estate developers. And if so, it becomes necessary. If so, the amount of the allowance is also being assessed. Based on one estimate, a possibility of recording an additional allowance for potential credit loss on receivables of 10 to 15 billion yen emerged, came up. So this is why we are not notifying the investors tonight. The auditors have not yet agreed to this amount yet. As soon as we determine the amount, we will inform you. Regarding the impact on the full year earning forecast, there are positive factors and negative factors involved. And we do not have enough information to change the guidance we have announced earlier. In other words, regarding foreign exchange, weaker yen compared to the beginning of the fiscal year. This is a positive factor. Another positive factor is acquisition of Yube in Slovenia, as we now have the prospects of closing the deal in the end of May. So again, this could be another positive factor. On the other hand, a possible recording of the additional provision related to the Chinese business may not be a positive factor to say the least. The way lockdown in China and Ukraine crisis may impact our business is probably not positive. This That is our feeling. Hopefully, we intend to provide a clearer guidance in August when we announce the second quarter financial results. Page nine, this is an M&A update. Chromology acquisition was closed in January and has gone on to the next stage. You, JUB, the anti-monopoly authority approval was obtained, fully obtained, and now we expect the closing of the acquisition in the end of this month. Chinese automotive consolidated subsidiaries approval obtained for the authorities regarding the business David dissolution. We had 60% and the further purchase of 40%, the authority gave us the regulatory approval. So closing is absolutely possible for June. Page 10. This has been announced on April 4th. NPHC has been selected as a constituent stock of the FTSC Blossom Japan Sector Relative Index, we will continue to take actions for disclosure under the new sustainability structure in order to attract new investors to invest in us. Page 11, as we intend to strengthen DIY in China, Li Bang brand continues to win awards one after another. This kind of brand cannot be acquired, established overnight, and it is instrumental in differentiating our presence in the markets. Thank you for your attention.