Nippon Paint Hldgs Co Ltd

Thank you. Good afternoon, everyone. I'm Wakatsuki, co-president of NPHD Nippon Paint. Thank you for taking time out of your busy schedule to join us today. From now on, I will explain the outline of the financial results for the first quarter of fiscal year 2023. First of all, on page three, this shows today's summary. On a tension basis, revenue was 332.2 billion yen, an increase of 15.8% year-on-year, and operating profit amounts to ¥34.9 billion, an increase of 59.4% year-on-year, a substantial increase in revenue and profit. The positive factors for revenue are listed below, but pinned volume, price mix, adjacent fees, exchange rate, and new consolidation all served as positive factors. On the profit front, while the impact of raw material prices continued to be mitigated, price increases permeated and the gross profit margin improved steadily. PPA step-up costs associated with the acquisition of chromology were recorded in the third quarter of the previous year, but we retroactively revised the previous year's punching-based report and booked in the first quarter of the previous year when the acquisition was completed. For comparison purposes, please be mindful of this. On a non-GAAP basis, excluding new consolidation, foreign exchange and one-off cost, existing business posted a 9% increase in revenue and 32% increase in operating profits. Operating profit margin is 10.2% on improvements at 1.8% point year-on-year, which shows the continuous improvement trend. Regarding the Chinese decorative business, at the medium-term plan progress briefing in April, Preliminary figures were shared. The result shows that TUC increased revenue by 90% and 5% increase for TUB. China as a whole improved substantially by about 5 points when it scamped through operating profit margin. On page 4, raw material market conditions are as shown here, but we believe that the impact of inflation is gradually easing. partly due to the decline in demand associated with the global economic slowdown. Of course, a decline in raw material market conditions can affect prices, but we are aspired to continuously improve margins. Next, on page 5, this is the usual heat map. Now, let me indicate one point. While the automotive market in China was generally weak, The decrease in production volume of Japanese OEMs, where our company is strong, affected us, and local EV manufacturers increased their market share relatively. Our market share has fallen slightly. TUC4, Chinese decorative, is expected to increase its share, while TUB is expected to remain flat. The other point, decorative business. In America, they face extreme difficulty, however. These are businesses centered on the West Coast, and other companies are also similarly affected by unfavorable weather there, we suppose. In that regard, please be aware it means market share is maintained. Next on page six, here is an overview of our main segment. I'll leave the details when questions are raised. Having said this, I will briefly comment on each site, and please refer to the page 15 for details. I've expected that the Japan segment has improved significantly compared to the first quarter of the previous year, but the operating profit margin is 5.5%, so there is still room for improvement. While the market for automobiles and ships has improved significantly, the market for industrial use has not yet recovered, and the decorative market has suffered a little from the weather. From this year onwards, Nippon Pains Corporate Solutions costs have been included in both previous year and this year. Therefore, this shows an apple-to-apple comparison.

I will leave the details on China to the Q&A session as it has been touched upon during the summary discussion. We continue to see solid growth in Asia Other than China, profit margin is fully secured in the same area. Revenue increase and profit margin improvement were both achieved in Indonesia, among others. Revenue increased in Turkey, but the volume did not increase much, partly because of the effects from the earthquake. Higher revenue in Turkey was mainly driven by pricing action. Accounting results show decrease in profit, but this is because hyperinflation accounting was applied, which unfortunately brought negative impacts. Profit was affected by roughly 1.4 billion yen as a result of applying this accounting method. So if this method is not applied, the profit would not be too bad. However, as SD&A and other expenses were temporarily increased for brand investment, profit margin would be slightly squeezed even before hyperinflation accounting is applied. Ulex Group volume growth was weak due to adverse market conditions in the Pacific segment, which is its main segment. Yet, DGL achieved both higher revenue and higher profit driven by flow-through of pricing action and its effect. In Europe, higher revenue achieved by Chromology was driven by selling price increase, but profit declined due to challenging market conditions and rising costs. Chromology is included in the non-gap as of this first quarter. The only gap between non-gap and Tanshin at this point is JUB. Also, the tension-based figure of the previous year has been retroactively adjusted, and the PPA step-up expenses are recorded in the first quarter of the previous year when the acquisition was closed. Please note these matters at the time of comparison with the previous year. In the Americas, automotive is recovering, but YOY figures were weak in the decorative driven by the current downturn in the housing market due to higher interest rates and tumultuous weather in the West Coast. For example, there were 35 rainy days that brought a total of 22.6 inches of rainfall in LA area, Los Angeles area, and Southern California between January and March this year, while there were only six rainy days in the same month last year that brought a total of 1.7 inches of rain. Such figures explain how challenging this quarter was. So this concludes the explanation on the main segment. From this page on, main topics are discussed. Topics were thoroughly presented at the medium-term plan update meeting the other day, so not much is to be updated. Here we present the new structure. Directors who joined last year have new roles. Director Lim has become the chairperson of the Compensation Committee, and Director Kirby has become the member of the Audit Committee. This is a topic related to expansion of disclosure on page eight. As I've shared with you in the past, these topics are very useful in understanding the approach adopted by our company and the board of directors meetings. Please kindly take a look. This concludes my presentation, my brief presentation. We will now solicit questions from you. Thank you for your kind attention for now.