Nippon Paint Hldgs Co Ltd

I'm Wakatsuki, Co-President of Nippon Pain Holdings. Thank you for coming out of your busy schedules today. I will give you a brief presentation on financial results for the fourth quarter of fiscal year 24, full year results for fiscal year 24, as well as guidance on fiscal year 2025. As per our custom, we have participation of mass media for the fourth and second quarter financial results briefing. I would like to mention a bit about the foreign exchange. Second page. We applied the same rate for fiscal year 25 guidance as the actual rate for full year 2024. The 21.4 at the . So that's what I would like to mention at the onset. Page three. This is the summary for the fourth quarter. even in the face of less robust period towards the year end. Each region did its best. On the reported Tanshin basis, the revenue was 416 billion yen, up 16.6% year on year. Operating profit was 45.9 billion yen, up 23.6% year on year. There was a significant increase in both revenue and profit. It was record high revenue and operating profit on a quarter basis. The factors for increase in revenue was in paint volume, other paint business, forex, and new consolidation. Price and mix was flat overall. On the non-doubt basis, excluding forex and new consolidation, the revenue had grown 5.4% and operating profit grew 14.6%. Decorative business in NIPC China has performed a 2% increase in revenue for TUC and 18% reduction in TUV. Operating profit for NIPC China overall had increased due to increase in the revenue and improvement of SG&A ratio. Because of decrease in automotive production by Japanese OEMs, revenue decreased in the automotive business in Japan and America. However, in China, we saw an increase in revenue from local OEMs. Because of this revenue increase, Margin improved both on Tanshin and non-GAAP basis, 0.6 points and 0.9 points, respectively. Next, on page four, I will brief you on full year results for fiscal year 24. Revenue and operating profit were record high. The company's performance was above the original guidance that we announced in February of last year, as well as the numbers we disclosed in the November financial results briefing. On the reported Tanshin basis, revenue was up 13.6 percent and operating profit was up 11.22 a percent and on the non-gap basis we we exclude forex and new correlation revenue was up 5.6 percent and operating profit up 4.8 even under the difficult environment each region did its best on the operating profit for tanshin and non-gap basis hyperinflationary accounting in turkey continued to affect our performance There was approximately 3.2 billion worth of negative impact to operating profit on a full year basis, but even after the application of IAS 29, the company still achieved double digit profit. Next is full year guidance for 2025 on page 5. With regards to acquisition of AOC, which we announced last October, as we have stated on page 11, the fulfillment of closing conditions is progressing steadily. It is possible that we would fulfill all requirements as early as by the end of February. However, it is difficult to foresee the approval timing by the authorities. Because of this, in this guidance, we have not factored in AOC's performance or acquisition-related expenses. Those information will be disclosed once the AOC deal closes, which would be followed by revision in the performance guidance after scrutinizing impacts of the acquisition. Based on that, and with the assumption that the forex would stay in line with that of 2024, we forecast that we will see proactive share expansion initiatives in the existing business, as well as enhancement of peripheral businesses. In addition, two companies in India, which is a new consolidation which contributed to two months in the last fiscal year, would contribute full year. In total, we expect to grow approximately 6% to the record high revenue of 1 trillion 740 billion yen. as businesses outside of tuc and tub in china decorative business we have raw material trading business in the past we had accounted for purchase and revenue on both sides of the ledger however starting from this year we will book the net amount in the revenue due to change in the transaction format there will be a reduction of approximately 55 billion yen on the 2024 basis and this will be gone. If we factor this in, it would be about 10% growth in revenue. Page 6. We expect the revenue of China overall in 2025 will remain flat, as you can see here. However, on an apple-to-apple basis, we expect 5% to 10% growth. Operating profit is expected to be 198 billion yen, growth by 5.5%. In 2024, we had some one-time P&L items, such as subsidies, as well as AOC-related looking. And net amount of positive 4.1 billion yen was included in the operating profit. and approximately 3.4 billion will be gone in the forecast for 2025. If we account for this, we can say in substance we would see 7.5% increase in profit. Margin is expected to be on par with the previous year and EPS is assumed to be 57.05 yen. As for the dividend, as I mentioned in October at the time of AOC acquisition announcement, we have officially adopted progressive dividend as our company policy. We expect the EPS would significantly improve as we acquire AOC. Rather than using the payout ratio of 30%, which was our original policy, we would prioritize developing through this. We would prepare ourselves for the next acquisition, which can contribute to the improvement of EPS. With that in mind, we expect the dividend to go up by 1 yen to 60 yen, and we will basically not change this amount, even if there are changes in the guidance after AOC closing.

Pages 6 and 7 are the assumptions for the main segment forecast. I will leave the details to Q&A, but let me briefly comment on each area. We will continue to strive to improve margins in the Japan segment, but we expect margins to remain flat in 2025 due to expenses for the ERP revamp and the completion of the new Shinagawa R&D building. There is no change in our mid- to long-term target of 15%. Regarding Nipsey China, based on the assumption that the macroeconomic environment will remain challenging, we will continue our growth strategy centered on TUC. In addition, TUB, which struggled in 2024, will continue to diversify its revenue sources, including infrastructure, public housing, and government-related projects, while aiming to grow and improve profitability. Again, the overall sales forecast for China is expected to grow by 5% to 10% on an apple-to-apple basis. Now I'm moving on to page 7. In NIPC, except China, particularly India, I would like to make some comments. In May, two-month contribution from November for the consolidated 2024 performance, the full year contribution will be made in 2025. Compared to when we announced share buyback in 2022, new entrants have increased in the decorative sector, threatening our market share in two major provinces. while there has been considerable improvement in the industrial and automotive sectors. In total, we expect 5% to 10% growth on a full year basis with flat margins. In Deluxe Group, growth is about 5% in both the Pacific and Europe, which is what we are aiming for by raising prices and increasing market share, seeing market growth as almost zero, especially in France, chronology, The market has been in decline for two years in a row, and we hope to see a recovery soon. Page 8. Raw material trends are generally calm, but of course, there are various variable factors. Our general base scenario is either flat or a slight decline. Let me skip pages 9 and 10, and please look at the key topics starting on page 11. As I mentioned at the beginning, we are making good progress in meeting AOC's closing conditions and expect to meet them as early as this month. We have been discussing monthly earnings reports and this year's budget with the AOC's management. There is no change in our view of a positive EPS contribution of 15 to 17 yen on a full year basis, which was shared when the acquisition was announced in October last year. Although we need to scrutinize as there is seasonality in the PPA, the EPS contribution will be 10 months if we are able to consolidate from March and 9 months if we are able to consolidate from April. Although the PPA itself will not be completed for some time, based on our estimation from before the acquisition, we like to announce the revised earnings as soon as possible after the closing after making adjustments. We also have held our first IR day on December 2nd last year. In order to fill the valuation gap in the capital market, the CEO of Deluxe Group and the head of the Nipsey brand gave new presentations on the concept and strategy of the brand business in the decorative sector, which we've been discussing for a long time. This was very popular among the participants, and if you have not seen it, please check out the script and other information on our website. Page 12. This has already been announced, but I'd like to touch on two topics announced in January. First, we're pleased to report that we received very high evaluations from three major IR and sustainability website evaluation organizations. And second, we have continued to be selected as a constituent of all six ESG indices used by the GPIS as we did last year. Again, our sole mission is to maximize shareholder value, which is residual value after fulfilling our legal, social, and ethical obligations to our stakeholders. We believe that ESG and sustainability are also important responsibilities to our stakeholders. And we are very happy that they are being recognized by external organizations. Now, looking back on 2024, we believe that we were able to reaffirm our strengths as a group of strong partner companies with very good financial results in a very challenging environment. While it is regrettable that we were not able to give our 2025 guidance inclusive of AOC, after the deal is closed, we believe that this is going to be the first year in which we can truly demonstrate our strength as an asset assembler by combining sustainable growth in existing businesses with M&A that will contribute to EPS compounding from year one. And we believe that this will be the starting point. Please look forward to our continued growth. Last but not least, Please join us on Thursday, April 3, from 4 to 5.30 p.m. for a briefing on the progress of the midterm management policy announced last April. 4 to 5 or 5.30 p.m. is Japan time. That concludes my presentation, and now I would like to take your questions. Thank you for your kind attention.