Nippon Paint Hldgs Co Ltd

Thank you. And hello, everyone. I am Wakatsuki, co-president of Nippon Paint Holdings. Thank you so much for your attendance today. Despite your busy schedules, I will now explain the highlights of our financial results for the second quarter of FY 2025. We're also joined by the media today. First, page three. This is a summary of the second quarter of 2025. As you can see, on Tanshin basis, revenue was 446.7 billion yen. After adjusting for the change in the trading business model in China, it grew by 5.7%. Operating profit was 69.7 billion yen, growing by 36.2%. and they are new record highs. For new consolidation, India and AOC contributed three months' worth of results, and margins also improved by 3.8 points, partly due to AOC's contribution. While the exchange rate impact on revenue was a significant negative of 9% year-on-year, as you can see on the bottom right, which is 38.8 billion yen impact in revenue and 5.2 billion yen impact on OP. The 14% contribution from India and AOC more than offset this. In OP it had 18.1 billion yen impact and revenue 60.43 billion yen impact where contribution were made. and these highlighted the positive aspects of our asset assembler model. Overall, as indicated in the summary on this page at the top, market conditions globally were not favorable, especially considering the period was from April to June. The environment was highly volatile, centered on the negative sentiment caused by the Trump tariffs. Our group strictly controlled prices, costs, and sales management expenses across all regions, referring from aggressive sales expansion, which led to moderate revenue, improved margins compared to our initial forecast, and satisfactory numbers in terms of profit, which is our top priority. On a non-GAAP basis, that is excluding the impact of foreign exchange, and one of factors, revenue growth was plus 0.6%, operating profit was plus 6.9%, margin improved by one point. China decorative TUC saw an 11% decline in revenue, making the first decline since the current classification was introduced. This was primarily due to the extremely challenging market conditions, as well as the impact of our efforts to strengthen credit management levels, including accounts receivable and market inventory levels. Including TUB, market continues to be in a difficult situation, but together with the strong automotive sector, we were able to significantly improve the margin and grow in terms of margin. We believe this reflects our prudent vigilance with our outlook to the market situation. Looking back on the first half, we believe that we were able to fully leverage our strength in local production for local consumption and stable products and achieve steady profit growth despite the extremely difficult environment. However, whether in decorative or industrial applications or in AOC's formulation business, we're not immune to the overall market conditions, and we expect the pressure on volumes to remain high. Looking ahead to the second half, we will continue to pursue profitable growth while carefully controlling costs. That said, we have now revised the performance guidance from the April announcement. As suggested in the regional overview on the next page, While sales are expected to be slightly more challenging compared to the April forecast, margins are generally showing an upward trend, and we aim to achieve profits and maintain sound operations. Page 4 and 5, they provide updated forecasts by region. They were updated from the initiative's perspective. In summary, revenue forecasts have been revised downward slightly for Japan, China, Dulux Group, Europe, the Americas, and AOC. In China, while the decorative market remains challenging, the automotive market has been revised upward due to an increase in market share. On the other hand, operating margin is largely in line or slightly above the April forecast as commented on the far right. The main factors include A GENERAL DECLINE IN RMCC RATIO AND TIGHT COST CONTROL. PAGE 6, THERE ARE REGIONAL VARIATIONS IN RAW MATERIAL TRENDS, BUT NO MAJOR FLUCTUATIONS ARE EXPECTED OVERALL. GROWTH PROFIT MARGIN IS UP 1.4 POINTS YEAR ON YEAR.

I WILL SKIP PAGE 7. gives the summary of operating results in major segments. I will elaborate further during the Q&A, but would like to briefly comment on each region. Japan's segment saw weak volume in both decorative and industrial segments, while automotive and marine sales were positive, resulting in higher revenue and profit. We assume the difficult market conditions to persist for decorative and industrial segments, as noted on page 4, full-year revenue forecast, was revised downward. Next, Nipsey China was as covered earlier, so I will skip. Nipsey, except China, saw higher growth in both revenue and profit on non-GAAP basis, excluding M&A, in comparison to the Tanshin basis, This is mainly due to foreign exchange. Overall, including Indonesia, market conditions were not necessarily favorable. Nevertheless, higher profit is achieved, including in Turkey. As for Turkey, through sales campaign and flow through of price increases, it is back to the growth trend for both revenue and profit, even on non-GAAP basis. Even after applying IAS 29 hyperinflation accounting, On non-GAAP basis, strong OP margin of 17.2% is achieved, but overall, it remains to be one of few highly volatile markets within our group. Dulux Pacific. Market was almost flat, but thanks to mixed improvement, revenue increased and OP margin improved, the profit grew by around 6%. on a non-gap basis, there may be some signs of improvement in market conditions, such as in Australia, including rate cuts. And if improvements materialize, we believe that we will be the first to benefit. As for Europe, France revenues were lower, driven by market conditions, but with other areas growing, overall profitability is improving. and revenue is almost flat. In Americas, while automotive production volume declined, revenue was almost flat. We raised prices in decorative business in Q1, but as interest rate was not lowered in the U.S., demand in general declined, and profit was lower for Americas, unfortunately. Finally, as for AOC, it is contributing fully for three months for the first time. But PPA is excluded since it is not yet finalized. Concerning market conditions, unfortunately, rate was not cut in the U.S., contrary to expectations. Demand is also weakening in Europe. On the other hand, extremely high margin is maintained, contributing significantly to profitability. PPA finalization is likely to be in Q4. at which time 10 months of amortization since March when consolidation started, amortization will be booked for 10 months and one of inventory step-up costs are expected. Please do bear that in mind. The amount assumed in October for PPA is included in the guidance, which remains unchanged. The amount at the moment is slightly above 9 billion yen in total, of which runtime cost is a little over 2 billion yen. But please note that this is subject to change after PPA finalization. Please move on to page 9. There are two main topics. The first is the publication of the integrated report at the end of June. We were able to publish one month earlier than last year. The report is even more focused on investor perspective than before. We would like to continue to enhance dialogue with investors. We would appreciate your comments and feedback. The second point is what we announced at the end of June, which is the full-scale operation of Tokyo Innovation Center. The other day, we held completion ceremony We are proud of the design of the center that centralizes functions as much as possible after they were dispersed following the company split by line of business in Japan so that the center can serve as the hub for knowledge creation and technology. With that, I thank you for your attention and look forward to your questions.