Nippon Paint Hldgs Co Ltd

I am Wakatsuki Co-President of MPHD. Thank you very much for taking time out of your busy schedule today to attend the conference call. I now would like to present the overview of FY2024 Q2 financial results. For your information, as this is the second quarter financial results briefing, we have participants from the media as well. First, page three, today's summary. On Tanshin basis, revenue increased to 432.8 billion yen, up 19.3% in a year. Opening profit increased to 51.8 billion yen, up 6.1% in a year, continuing significant growth both in revenue and income. Positive factors for revenue are as shown in the bottom right, paying volume, adjacent business effects, and new consolidation, while price mix is somewhat negative. On non-GAAP basis, revenue was up 5.4%. Operating profit increased by 7.5%. On non-GAAP basis, acquisition of NPT in Italy last year and Alina in Kazakhstan close this year are not included. Including these, revenue growth without FX would be about over 8%. Nipsey's China's decorative business increased 5% in revenue in TUC, despite challenging market environment, and TUV's revenue declined by 12%. But adjacent business grew, and as a result, Nipsey China as a whole increased revenue 5.6%. Open profit increased 30.2% on non-GAAP basis, with margin improved as well. In the Q1 earnings call, I stated that basically we were on track plus. And this remained the same in the second quarter. And furthermore, with the benefits of FX in the first half as a total, we can say our performance was extremely strong. Please turn to page four. As to revising the full year guidance or not, we kept considering to the very last minute. But starting the conclusion first, we maintained the initial forecast without revision this time as the recent exchange rate volatility has been too great. In the first half, we saw steady business growth and solid margin improvement. The yen appreciation was greater than we expected and we judged it is difficult to foresee effects in the second half. Also, the delay in closing the buyback in India announced as of the first quarter. We thought that it would be more than compensated for by the weaker yen. However, Now it has become a little more difficult to have visibility to the FX trend. We have taken all of these factors into consideration comprehensively, and our guidance is maintained at this point. I would also like to add that assumption for this is taking account of absence of revenue of about 30 billion yen and operating profit of about 1.6 billion yen expected in India at the beginning of the year. I believe you are already well aware that we are not a company in the export industry, but as an aggregation of local production for local consumption businesses. Basically, FX fluctuation gives certain impact to some growth material costs, but just changes in conversion rate. And I think it is better for us to look at trends in local currency terms for actual state of business. Thus, on page five and six, we updated the business growth rates and margin and trend expected in February guidance in local currency only if for full year basis. As this is the latest forecast, except for Turkey, it looks like there are more slight downward revisions in revenue. However, basically with the exception of some TUB businesses, basically there are slight revisions of revenue growth rates and there are no major changes. For China TUC, growth rate is revised to 10 to 15% from around 15% while we forecast moderate improvement in margin. As we kept saying from before, we will not pursue an unreasonable share increase only, but aim for both solid growth and revenue at the same time.

Page 7. The raw materials market is generally stable. And of course, in Japan, there's some FX impact. The positive for stronger yen and negative for weaker yen. But all in all, including demand and supply, the things are stable. On page eight, the heat map is shown on this page. In the Chinese automotive market, Japanese ODM manufacturers continue to struggle, and we think we have lost the market share slightly versus the market. Page 9. I would like to refer to the major segments here and leave the details to the QA session. First, in the Japan segment, automobile production continued to decline in the second quarter as well after the decline in the first quarter, and the market conditions remain difficult for both speculative and industrial segments, and we are making up for the decline in volume by raising prices. Marine segment continues to perform well, and in total, both sales and profits are almost flat. I have covered Nipsey China earlier. Loan gap basis margins have improved, even taking into account the additional provisions made last year. So once again, we have achieved a good balance between growth and profitability. Nipsey, except China, continues to achieve high growth, and margins are high. but the figures are slightly skewed by inflation in Tokyo and hyperinflationary accounting. The decline in margins is also largely due to Tokyo. Excluding Tokyo, sales closed up Nipsey, except China is around 6%. There is a bit of instability in the political situation and other factors in various regions, but things are generally as expected. That said, the economic conditions in Indonesia, which showed some recovery compared to the first quarter, do not warrant an optimistic view. We plan to implement various recovery measures in the second half of the year. Alina in Kazakhstan also contributes with an operating margin of around 20%, in the sense things are going very smoothly. Next, in Dulux Group, market conditions are difficult in both the Pacific and Europe. But in the Pacific, sales grew by 4% and margins almost flat, partly due to the contribution of small acquisitions in the adjacencies business. Especially in Australia, the market is bottoming out. And in the second half, the core brands in Dulux will be renewed first time in 10 years. So for both of them, the growth is possible. In Europe, the things are unfortunately down due to continued difficult market conditions in France. However, we estimate that market share is rising slightly. And according to the latest report, the market is bottoming out. Minus 5% growth per annum continues for several years. That is quite rare for matured markets. And we will see the recovery going forward, and we are seeing the sign of the recovery. Lastly, in the Americas, Sales of automotive products increased by 8.6%, doing part to strong sales to Japanese automakers, while the market production remained almost flat. And sales of decorative products grew. The interest rates are relatively high. And for the housing market included, markets are difficult, but showing positive growth. As I said in the first quarter, in North California, a total of 17 new store openings were completed in May on the site where a competitor had left after going bankrupt. And those stores are expected to make a gradual contribution in the future. It should be noted that these stores are neither business takeovers nor acquisitions, but rather the opening of new And then Edwards, Storrs. Page 10. As a topic, I'd like to touch upon the publication of the integrated report. So basically, it follows the medium-term management policy announced on the 4th of April. but it also includes more in-depth explanations about thinking on ROIC and other topics, as well as a dialogue between Chairman Goh and Lead Independent Director Nakamura. So, it is worth reading. And this year's report was published two months earlier than the one last year. We hope you will take the time to read it. The briefing session will be held on the 5th of September. Thank you for your support. So that concludes my brief presentation. In short, I would say that there are no particular surprises. So we have done sound the growth and the margin in various regions, and the measures are paying off. and economic conditions are not something that we can be very optimistic, but we are seeing some good signs in some regions, and original guidance will be achieved, and we'd like to beyond that, and in the third quarter, if necessary, we would like to make update. With that, I'd like to entertaining your questions. Thank you.