Nippon Paint Hldgs Co Ltd

Good afternoon, ladies and gentlemen. I am Wakatsuki, co-president of NTHD. Thank you very much for taking time out of your busy schedule to join us today. I would now like to present an overview of FY2023 Q4 and full year financial results and FY2024 full year forecast. The media is also invited to attend the Q4 and Q2 financial results briefing. First, page 2, please. The content remains unchanged, but we included supplementary information as we are frequently asked about it. There is no change in the difference between the Tungsten basis and non-GAAP basis as stated here. Regarding FX rates, we apply the same assumption for FY24 full-year forecast as in FY2023. Therefore, FY24 results will be higher if the yen depreciates against this rate and lower if the yen appreciates. The table next to this shows the FX sensitivity estimate based on FY2023 results. We hope you will find this useful. Next, page three, please. FY2023 Q4 summary. On Tanshin basis, revenue was 356.7 billion yen up by 8.4%, and operating profit was 37.1 billion yen, up by 23.5%, continuing a significant increase in revenue and profit. Positive factors in revenue were paint volumes, adjacencies business, favorable effects, and new consolidation. The price and mix deteriorated slightly in China and Asia, including Indonesia and Malaysia, while the rest of the world generally improved, resulting in a slight decline overall. On non-GAAP basis, revenue increased by 6% and operating profit increased by 11.1%. In Nipsey China for decorative business, TUC revenue increased by 8% and TUV decreased by 1%. Operating profit for Nipsey China as a whole decreased due to high logistics and advertisement expenses despite higher revenue and improved RMCC ratio. Revenue for automotive business increased in Japan and the Americas thanks to ongoing recovery in auto production, but declined slightly in China due to a fall in the number of units by Japanese and European OEMs. Next is page four, overview of FY23 full-year results. Our results were almost in line with the guidance revised upwards in November last year and marked a record high revenue and operating profit. On Tanshin basis, revenue increased by 10.2%, Operating profit and profit attributable to owners of parent increased by approximately 50%. And on the non-GAAP basis, excluding FX and new consolidations, revenue increased by 8.4% and operating profit increased by approximately 30%. All regions generated great results in a difficult environment. In addition, the adjacencies business is also growing steadily as we push ahead with the provision of total solutions to our sales channels in each region. In operating profit, On both Tungsten and non-GAAP basis, we recorded a provision of just under 6 billion yen in China for the full year of 2023, and the impact of the hyperinflationary accounting in Turkey is approximately 5 billion yen. While hyperinflationary accounting will continue in Turkey in 2024, we do not expect any major provisions in China at this time. We believe that our real-term results are above these financial figures, given that inflation in Turkey will eventually subside at some point. Next, page five, please. FY 2024 full-year forecast. As mentioned earlier, assuming constant FX rates compared to 2023, revenue is expected to grow organically by approximately 7% to 7.5%, thanks to the aggressive measures to increase market share and enhance agencies' business, while new consolidations are expected to contribute approximately 3.5% to 4%, including one year's contribution from Alina in Kazakhstan where the acquisition was completed, and six months from two Indian business, which are currently pending approval from the authority. The total growth is expected around 11%, with record high revenue of 1.6 trillion yen. Our efforts to date as an asset assembler are steadily bearing fruit, and although not included in the forecast, we will continue to actively pursue M&A this year. Operating profit is expected to reach 184 billion yen by approximately 9% with OP margin of 11.5%, which is flat year-on-year and almost flat on non-GAAP basis, excluding one-off factors. Assuming that trends in raw material remain constant, we will take aggressive measures to expand market share and we'll use the margin improvements resulting from operating leverage to reinvest in promotions and other activities. OP margin for new consolidation based on unaudited results for FY2023 is expected to be around 20% for Alina and around 5% for India, and the combined OP margin for both regions in 2024 will be roughly the same at the consolidated level. Pages 6 and 7 show the assumptions for the forecast of the main segments. I will go into detail in the Q&A session. but I will comment briefly on each area. Japan's segment showed a dramatic recovery in 2023, but revenue for automotive is expected to decline slightly, reflecting a flat outlook for auto production, while market share expansion is expected for both decorative and industrial applications, thanks to a slight recovery in market conditions. and total revenue for marine applications will increase slightly, backed by continued strong demand. OP margin for Japan as a whole is expected to remain largely unchanged for the full year under these circumstances.

For NIPC China, we've factored in the economic slowdown and will continue our growth strategy centered on TUC. In TUB, we will aggressively promote not only new bills, but also exterior coding for housing and public buildings, aiming to diversify revenue sources and improve growth and profitability. In the automotive business, we expect to increase sales this year by expanding our business from the traditional focus on Japanese customers to local customers, and we expect NIPC China as a whole to grow by 5% to 10% and to achieve profit margin of last year's level. In NIPC except China, we continue to expect sales growth of 10% to 15%, except for where we expect growth of 5% to 10%. Margin will also continue to be affected by the hyperinflationary accounting in Turkey, but is expected to be at the previous year's level. In Deluxe Group, we expect growth of just under 10% in both the Pacific and Europe, with margin flat in the Pacific and improvement in Europe. In Europe, organic growth is expected to be around 5%, with a full year contribution from NPT. And in the Pacific, organic growth is expected to be just over 5%, with a small acquisition made last year contributing to growth of just under 10%. In Americas, we expect 0 to 5% growth in automotive and 5 to 10% growth in decorative. Finally, on the new consolidations, Please note that although Kazakhstan and India are expected to contribute for the full year and six months respectively, in the forecast, these prior year comparisons are based on the full year figures for India as well. PPA has not been completed, but those will contribute to EPF from the first year. Next, page eight. As for raw material trends, although there were some regional differences in the price mix in the fourth quarter of fiscal year 23, The gross profit margin as a whole improved year-on-year and quarter-on-quarter, and we expect a slight decrease in the RMCC ratio in our full-year forecast for 2024. Although the global economy is in a downtrend with declining demand, it is somewhat difficult to make generalizations because of the severe economic trends and the impact of foreign exchange rates in some regions. Moving on to page 10. This is an overview of the fourth quarter of fiscal year 23. Details may be added in the Q&A, but in general, as per the guidance, sales in Japan exceeded expectations due to strong sales in the automotive and marine sectors, while in China, although sales were down year on year, TUC sales were slightly below plan, while TUB sales were above plan during the most quiet season of the year. We believe this is effectively in line with our expectations when considering fixed costs such as promotion of installation of CCMs and advertising expenses were increased. In fact, looking at the second half of or third quarter and fourth quarter of fiscal year 2023, there was actual increase in profit taken into account subsidies and provisions for fiscal year 23. And as I mentioned earlier, we expect both sales and profit to grow in fiscal year 24. Page 11, major topics. As already announced, the M&A deal in Kazakhstan has been successfully closed and will make a full contribution to this year's EPS. We've also held a briefing session on the integrated report and have received valuable feedback. Since it was held after some time from the publication, we hope to issue the report a little earlier this year and to hold these briefings as soon as possible following the publication. Finally, on page 25, we've provided a brief explanation of what is often asked, which is the seasonality factors for each region. Since the growth occurs in each quarter, the order does not indicate actual numbers, but rather the highs and lows of demand under the same economic environment. I hope you will find this useful. We are trying to make improvements on the other pages as well, and we would appreciate it if you could let us know if you have any further comments or suggestions. Once again, we believe that the 2023 results and our projections for 2024 are a sign of strength demonstrated by each partner company as well as the effectiveness of the asset assembler model. We will continue to exercise a healthy degree of caution and remain committed to building up EPS. Finally, on the 4th of April, we are going to be holding a briefing session on the medium-term management plan. This concludes my presentation, and now I'd like to take your questions. Thank you for your kind attention.