Nippon Paint Hldgs Co Ltd

Hello, everyone. I am Wakatsuki, co-president of NPHD. Thank you very much for taking time out of your busy schedule and at late hours for participants in Japan and Asia to join us today. I would now like to present an overview of FY 2024 Q1 financial results. First, page three, please, today's summary. On Tanshin basis, revenue was ¥384.3 billion, up by 16.4% year-on-year, and operating profit was ¥42.7 billion, up by 22.2% year-on-year, continuing a significant increase in revenue and profit. Positive factors in revenue were paint volumes, price nicks, adjacencies business, FX impact, and new consolidation, as shown in the bottom right. On non-GAAP basis, revenue increased by 10.6% and operating profit increased by 15.9%. In Nipsey China, for decorative business, TUC revenue increased by 15% and TUB decreased by 15%. Nipsey China as a whole continues to perform well with revenue up 12.2% on non-GAAP basis and operating profits up by 11.6%, partly due to strong growth in automotive business. These exceed the 7 to 7.5% revenue growth and 7.5 to 8% operating profit growth excluding M&A and FX in Kazakhstan and India shown in the guidance at the beginning of the year, or the 8% to 9% revenue growth and 10% to 12% EPS growth in the medium term, including Kazakhstan and India presented in the medium term strategy. FX is also more positive than our initial forecast, but we are not revising our guidance yet as we are only three months into the year. That said, we are basically on track plus alpha even discounting the delay in the closing schedule in India, the buyback of two India businesses, which I will explain later. Next, page four. We cannot be optimistic about raw material market trends, but as prices vary across regions and raw materials, we do not expect any significant change in the RMCC ratio as a whole. However, there is also the impact of the weak yen in Japan, for example, and we think the different regions and businesses are responding in different ways. Page five, please. Not much change in the heat map either, but the Japanese automotive market is dark blue with production down by 12% year-on-year in Q1, while Nipsey China's TUV market is also dark blue as the property market remains soft. Other markets are basically flat to slightly soft. And we will continue to strive to increase our market share. Page six, please. Page six shows the summary of the operating results in major segments. I will briefly comment on each area and go into detail in the Q&A session. In Japan's segment, the impact of the decline in auto production in automotive applications in particular and the continuing soft market conditions in both decorative and industrial segments were offset by price increases to compensate for the volume decline. Revenue for marine applications remained strong, resulting in a slight decline in total revenue, but operating profits increased by 40.7% year-on-year. Nipsey China is growing, as I mentioned earlier. TUC is strong, TUB is weak, and industrial application is doing reasonably well with no change in margins from the previous year. Basically, TUC maintained its margins. TUV margin declined due to lower revenue, and industrial applications margin increased. In TUC, we continue to see growth in all regions with higher growth in Tier 3 to 6 cities.

Nipsey, except China, continues to achieve high growth rate and margins. This includes Turkey, whose revenue grew by 100% on non-GAAP basis with constant currency. And when you exclude Turkey, the revenue growth rate of Nipsey, except China, is approximately 5%. Indonesia slowed down due to Ramadan being earlier than usual, but other markets are moderately strong in the first quarter. Also, Kazakhstan, ALINA, which was consolidated in January, also has a good start. In Dulux Group, both Pacific and Europe are, to be honest, in difficult market conditions. However, Pacific has contribution from a small acquisition in the adjacencies area, resulting in a 5.3 percent revenue growth, and there is no need to worry about the margin. Europe continues to face challenging market conditions, especially in France. resulting in revenue decline. But we estimate that our market share is slightly improving. Italy's NPT, which we acquired last year, has been making great contribution, and we believe that Europe as a whole will perform robustly in longer term. In America, while automotive has flattish market production volume, Japanese automakers were strong and revenue grew by 12.5% in total. Decorative has had a somewhat difficult market condition, but rainfall improved slightly. We're adding new stores following the bankruptcy of a competitor in Northern California, which required some upfront cost, but we anticipate contribution from this initiative. Once again, we shouldn't judge things based on quarterly results, including the seasonality. But overall, we have strong results, and in weaker regions, leaders are already implementing corrective measures. We are also willing to revisit the guidance at an appropriate timing and only if necessary. Measure topics, page seven. Today, we changed the closing schedule of the buyback of two Indian businesses from first half 2024 to by the end of 2024. There are no particular issues with closing, but progress is slow affected by the general election, which is held until June. Regulatory approval has not been provided as scheduled. In the February guidance, the total revenue of the two companies for 2023 was approximately 44 billion yen, NPI growing at 10 to 15%, and BNPA for automotive growing at 0 to 5%. The guidance included six months earnings with a flat margin of 4.5% for NPI and 6.4% for BNPA. We expect flat margin from 2023. Even if this contribution doesn't happen within this year, It only accounts for 2% of the consolidated revenue forecast of 1.6 trillion yen and a little less for margin, resulting in very limited impact on this year's consolidated performance. Also, we have been awarded the Grand Prize G at the Nikkei Integrated Report Award for our last year's integrated report. This is an announcement that we are making this time, and if you haven't taken a look at it, please kindly visit the website. Last but not least, I would like to thank you for your feedback following the midterm management policy briefing session held on April 4th. The first quarter results that I have shared with you today is on the same track as our past explanation. We will continue to achieve what we said we would achieve. which is proven by our organic growth that I just shared with you. Then what about the other pillar of the growth, which is M&A? We are continuing to study multiple opportunities in various size, and we still look for something that can contribute to MSV. This is all I can say for now. But I'm sometimes asked, are you suspending M&A? So let me clearly state that unfortunately that is not the case. This concludes my brief presentation. Thank you for your kind attention.