Nippon Paint Hldgs Co Ltd

Thank you very much. Good afternoon, everyone. I'm the co-president of our Nippon Paint Holdings, Wakatsuki. Thank you very much for participating in this session. Despite your busy schedule, I'm going to cover the FY2022 third quarter financial results. Thank you. To start with, I'm going to the page three. This shows the today's summary. On a Tanshin basis, Sales revenue is 357.9 billion. Year-on-year basis, 40% higher. Substantial increase is recognized followed by second quarter. As for the operating profit, 38.2 billion. Therefore, year-on-year basis, there is a substantial increase by 123%. For both sales and operating profit, we were able to hit the record high. As to the positive factors of this increase, as you find here, the volume price makes a pain to related business and foreign exchange new consolidation, all contributed to the positive factor. With respect to opposite profit, prevalence of selling price increase, and also there is a mitigation of the raw materials increase. In addition to that, we were able to have the good gross profit margin. Previous year, we had the provision for China business. We booked the subsidies from the Chinese government. With respect to the chronology, the PPA, I'm going to cover later more in detail. On the non-GAAP basis, New consolidation, Forex, and one of costs, if we were to exclude that, we had an increase by 19.6% as well as 44.4% increase in profit. Likewise, the previous quarter, I think we were able to show the improvement trend. for both decorative business as well as industrial business we see improve as to the diy growth in china we found that there is an increase by 10 percent in local currency i'm going to share later however we face some severe situation in the fourth quarter therefore we can't just um this is a cloud to the silver lining uh it's not the p l items however for the last nine months we sold across the holdings of eight names. That is the 25.4 billion that we are able to gain in cash. Next, let's move on to page four. As the raw materials market, The crude oil fell down, and we see that there's a calm-down situation in China and Asia for the raw materials price. However, we see that there is still a continuously challenging situation with the energy price increase as well as the logistics. And we passed on the prices, which is in progress. Therefore, for the gross margin, we were able to improve quarter-on-quarter basis as well as year-on-year basis. Now, page six, this shows the summary of major segments. and beyond, I hope that you are going to see the supplemental materials. With respect to Japan, let me add some comments. The operating profit of $1.8 billion is after the deduction of NPCS cost. If we were to compare on Apple to Apple basis, with the adding back 1.3 billion yen, it becomes to 3.1 billion yen. If compared against year-on-year basis, Apple to Apple basis, then more than 150% increase in profit and given 1.2 billion of the previous year. However, due to the typhoon impact in September, as well as the delay in production volume recovery, there is a slight decrease on a year basis. Therefore, still, we are in the process of recovery. Next, with respect to China, from the non-GAAP basis, increased by 3.3% from overall perspective. Decorative business accounts for 80% of the total, so it is 3.3%. Auto, 17.8%, substantially higher. On the industrial side, there is a reduction by 16.9%. For details, please go to page 19. Nipsey, besides China, Indonesia, Turkey included, we found some strong results. just Turkey, yen is appreciated. Therefore, with respect to only this segment, Tangshin is smaller than the non-GAAP basis. With respect to Indonesia, on non-GAAP basis, it was a strong result of 37.7% increase. because of the last minute demand before the selling price rise. Therefore, I do believe that still we have a difficult situation or the challenging situation in Q4 with the business confidence. Now, DGL, the Australia, New Zealand, on a continuous basis, we see a stability for the growth. Mostly, it is the impact of the selling price increase. On the other hand, for the chromology, The price increase covered volume decrease year-on-year basis flat and YUB impact from selling price increase was higher than the 10th volume year-on-year basis 5% increase. Both of them are not subject to consolidation. And just a reference point. Now, would you please go to page 23. With respect to the Tanshin base for chromology, operating profit shows a negative 400 million yen. I will explain over this point. After the completion of the acquisition, we did the PPA, purchase price allocation. However, not everything has been finalized, but we were able to finalize to some extent. Therefore, we have expensed for this period. First of all, as to the inventory step-up, That is one of the costs which amounts to 1.2 billion yen. And this is the one-time cost. Next, the expenses for amortization of intangible assets. This is expected that intangible asset amortization is going to happen during such a period. We are not able to allocate in the first quarter and second quarter. We have put together a nine-month period, that means three quarters. The total number for that is 1.1 billion yen. Now, one-third is ordinary expenses, and two-thirds is, in a sense, one-off. Two-thirds means that it is more or less 730 million yen. And I said 1.2 billion for the inventory step-up and 750 billion yen. That is total to 1.93 billion yen. This is before the one-off cost. Therefore, on a net basis with the minus 400 million yen, then our actual value is 1.53 billion yen. If we were before the amortization of the intangible assets, it would be the 1.9 billion yen under the local operating profit. Now, the second quarter, the previous quarter, we booked as operating profit of the 3.2 billion yen. Now, there will be some adjustments to be made up until the end of the fiscal year. But this is the current number. For your information, as for the chromology and yub, besides chromology and yub, in the segment of Dulux, this is before the acquisition that we did. That is in France. Maison Deco, which we acquired with some conditions, That is more or less 1.0 billion yen of the positive factor. Now it is the adjustment items.

So up until now, we have been talking about page 6, the outline of segment regarding Dulux, PPA discussion, and France, Maison Deco, the acquiring of this company and the debts of the was about 1 billion yen positive. So the Americas, so there was this increase from the rebound from the previous year's slump. And Dan Edwards' increase in selling sales volume, unfortunately, did not grow. It was from the selling price increase that this revenue increase happened. So page seven, this page is prepared as a reference as we received requests to provide this kind of information. These are figures that simply subtracted the third quarter cumulative from the guidance under the circumstances of not revising the guidance. We did not revise the guidance, but as a preliminary figure of October and on, the figures of China and indonesia especially specifically have become unfavorable compared to the assumptions we announced in august there is a possibility that there will be a downward revision of the guidance for the sales revenue specifically impacted by logistic disruption caused by lockdown in china there are wide areas where products cannot be delivered due to the disruption there were there was were also impacts from china national people's congress held in october I thought I would give you this information. We can identify some general signs of easing of the zero COVID policy in China. But based on what we hear and what we feel locally, we assume it takes some more time for this easing to take effect. And on top of it all, seasonally, December has always been a month when the demand is weak. So as we expect the fourth quarter this year is a rather challenging period, we plan to control the cost rigorously. This is our plan. And as a result, regarding the profit, hopefully we would like to achieve the guidance, the figures expressed in the guidance. Page 8 shows in detail the assumptions at this point. All the figures to your right are based on local currency. This is the outlook for 2022. So this is different from the Tanshin figures, and it excludes foreign exchange impact. Among the figures, if you look at the full-year figures of China, original assumption was 15% to 20% increase in overall China, but this will be revised down to zero growth on a full-term basis, especially the DIY and project. There is a downward revision of figures in both DIY and project, respectively. This is a reverse calculation, summarized figure, Reverse calculated summarized figure. Fourth quarter of China is minus 20% on a local currency basis, and project is minus 40% or more. So these figures are changing every day. So again, please understand this is a rough indication. These figures are meant to express the challenges we face in the fourth quarter. I hope this will help you to understand the situation. Page nine. Let me share with you some main topics. First is our integrated report. We have a well-accomplished, evolved version this year, including the nice design. If you have not yet had the chance to browse through, please take a look. Our last year version received several awards, but this year's version was shortlisted for the best annual report large-cap category in the best practice awards of the UK Investor Relations Society. We were among the six companies shortlisted as the first Asian company to be shortlisted. Page 10. Again, October 11, we have already announced that next career plan. This is a voluntary early retirement program in Japan. 2.2 billion yen of special retirement benefit is expected as an expense. Cost saving contribution from the next year on will be roughly 2 billion. And this is a discussion within the Japanese segment. Page 11. Sustainability structure update. We have already announced that we switched to a structure led by the business instead of by the head office and have appointed leaders to four pillars respectively. Ethical procurement that includes human rights issue in the procurement has become a matter closely watched by the customers or sustainable procurement is closely watched. And this is closely watched within our relationship with the customers. So we identify some overlaps with the four pillars, yet there are some parts that other pillars do not cover in the realms of ethical procurement. This is why we have procurement as the fifth pillar, and we assign the NIPSI group procurement department person in charge, Tohoku Shea, as the team leader to reinforce our action as a group. This is our decision. So this concludes my presentation. I'd like to start soliciting questions from all of you. Thank you for your kind attention.