Nippon Paint Hldgs Co Ltd

Good afternoon, ladies and gentlemen. I'm Wakatsuki, co-president of Nippon Paint Holdings. Thank you very much for taking the time to join us today despite your busy schedules. I would now like to explain the outline of our FY 2025 Q3 financial results.

First, please turn to page two.

Let me briefly explain the changes we've made to our disclosures starting this quarter. Regarding the background, as you know, I have held numerous meetings with investors and received various feedback directly and indirectly. And many investors, especially overseas institutional investors comparing us to peers said that while many overseas issuers publish adjusted figures excluding various adjustment items for comparison, Nippon Pen's detailed disclosures are good but often difficult to grasp at a glance. Some feedback also noted that the sheer volume of figures made it difficult to convey even very strong earnings results at first glance. In response to these comments, and with the primary goal of ensuring a correct understanding of our capabilities and proper peer comparison with our overseas competitors, we have now decided to proactively disclose adjusted profits. This is outlined in the upper section of the summary on page two. We also decided to change the terminology for growth rates and similar figures to align with industry standards like LSD, MSD, and HSD, low, mid, and high single digits. and separate them into price mix and volume components in our disclosure. We will continue to disclose information under this policy for the time being and will continue to listen to your constructive feedback to make further upgrades as necessary. Thank you for your continued support. Next, pages three and four are new additions. To help you understand our track record correctly through the long-term trends in RP&L, page 3 shows the historical trend of Q3 revenue, adjusted operating profit, and adjusted EDS since the adoption of IFRS in 2018, and the change to a board composition with MSV as its mission. Page 4 shows the trend in profit contributions from organic and inorganic growth. We believe this clearly demonstrates our strong growth track record and growth both organically and inorganically at a glance. We also plan to continue disclosing this information going forward. Particularly on page 4, While organic profit declined temporarily in 2021 due to COVID-19 and rising raw material costs, it recovered significantly in 2022, minus 34.7 to 83.9%. This clearly demonstrates the robust resilience of our earnings power. Next, page 5, please, Q3 overview. Both revenue and operating profit continued to set new records, with revenue increasing by 19% non-GAAP basis. China trading accounting change is included, and adjusted operating profit and EPS both growing by over 40%. Regarding FX rates, the yen has strengthened overall compared to last year. For example, yen strengthened to 147.8 yen against the U.S. dollar this year from 151.6 yen in Q3 FY 2024, 20.5 yen against Chinese yuan this year versus 21.1 yen last year, and 94.5 yen against the Australian dollar this year versus 100.5 yen last year. Despite these factors, we achieved substantial growth in both revenue and profit. Operating profit saw solid contribution from organic growth plus 8.7% and inorganic growth 33.8%, with margins improving by approximately 3 percentage points. Regionally, AOC continues to contribute strongly to earnings. The U.S. market is showing signs of bottoming out with declining interest rates, which is a positive development. In China, we achieved profit growth by avoiding aggressive sales expansion and firmly securing margins despite the persisting challenging business environment. In Nipsey, except China, both volume and price mix improved overall. Next, page six, please. The outlook for FY 2025 remains unchanged, with revenue expected to reach a new record high. Regarding Q4... While demand is slowing in many regions, organic growth is still positive, but our currency FX outlook anticipates a stronger yen year-on-year. If the current weak yen persists, there could be some upside potential, but for the full year, it falls slightly short of our guidance of 1.82 trillion yen. Operating profit, on the other hand, is expected to largely achieve the guidance on the pre-adjusted basis of 244 billion yen. Page 7. No specific comments on the heat map. Overall market conditions were flat in Q3, except for slightly favorable conditions in China's automotive sector, where we gained market share. The AOC segment shows some signs of bottoming out, so we anticipate nearly flat market conditions for Q4.

Next, turning to page 8, here we align the situation of our major segments. Although I will leave the details to Q&A, let me briefly comment on each region. First, for the Japan segment, basically, market conditions and volume remain challenging, but we're offsetting this with a favorable price mix, and we're achieving profit growth. Regarding Ipsy China, TUC's Revenue is up by 1% despite challenging market conditions and we secured sufficient profits. In TOC specifically, it experienced a situation of volume down by LSD and price and mix up by LSD. Automotive sales grew by 7.9% driven by increased production volumes and strong sales to Chinese manufacturers. The adjusted operating margin rose by 2.3 percentage points year-on-year, compensating for the revenue decline with margin expansion securing profit growth. Nipsey, except China, had growth in revenue and profit. Indonesia saw volume growth by mid-single digit, though currency had a negative impact. Turkey achieved double-digit growth in both volume and price. This adjustment attempts to incorporate the impact of applying IAS 29, the superinflationary accounting, hyperinflationary accounting. In DGO Pacific, revenue increased despite largely flat market conditions driven by continued volume and mixed improvements. The solid growth persisted even when accounting for the impact of yen appreciation. Meanwhile, in Europe, while the French market remained challenging, Revenue grew thanks to contributions from Southern Europe and Europe's business expansion.

The stronger Euro also provided a positive currency effect. Profit also grew dramatically.

In the Americas, automotive sales revenue increased due to rising overall production volumes in the region. However, for decorative

housing demand declined overall as long-term interest rates remained low, leading to a decrease in profits for the Americas region.

Lastly, ALC, it continues to maintain exceptionally high margins and contributes significantly to profits, while sales are down 9% year-on-year, just for reference. This business experiences relatively rapid unit price fluctuations, making sales figures themselves less indicative. Volume is down by mid-single digit, so performance isn't exactly strong, but we are securing market share in this sluggish market, as well as the margin. Furthermore, as mentioned at the outset, we sense that the market conditions are finally showing signs of bottoming out. While the overall decorative market itself is not performing well in the U.S. or China, we can say we have maintained a position that will allow us to be among the first to benefit when recovery begins. Turning to page 9, we have three major topics. The first is the Treasury stock acquisition announced on October 9. As of the end of October, we've purchased shares worth 7.4 billion yen. Although the stock price remains depressed, the silver lining is that we have been able to make truly undervalued investments, which we believe will contribute to future EPS growth. However, as disclosed, there is no change to our fundamental strategy as an asset assembler, so the primary allocation of surplus cash remains focused on exploring M&A opportunities. This treasury stock acquisition was implemented after listening to market feedback and having thorough deliberation at the September board meeting in its strategic session. Inclusive of the change in the disclosure method, we intend to continue constructive dialogue with all market participants going forward and we appreciate your continued support. Secondly, Following the completion of the Tokyo Innovation Center in Shinagawa, we conducted a tour for investors. This included presentations from the CTO of Japan and NIPC, along with a Q&A session. And we were pleased to welcome participation from many investors and analysts. We'd like to express our sincere gratitude once again to all who attended. Thirdly, turning to page 10, This is the third major topic. We plan to hold an IR Day on November 26th. This time, the event will feature a presentation from ALC, so it has been scheduled for the morning in Japan. Both co-presidents will also be speaking, so we're looking forward to seeing you there. This concludes my brief presentation, and now I take questions from the audience. Thank you for your kind attention.