Nippon Paint : Presentation Summary

I would like to begin with an executive summary.

Our performance in 2023 significantly outperformed the guidance set out in the previous Medium-Term Plan (MTP) released in March 2021. Specifically, the guidance for 2023 was to achieve revenue of 1,100 billion yen, operating profit of 140 billion yen, and EPS of 45 yen.

Reflecting on the business environment over the past three years, we faced substantial challenges due to external factors. The pandemic's effects lingered into early 2023, complicating our operations further. Additionally, the global chip shortage and supply chain disruptions significantly impacted many of our industrial products, including automotive coatings. Geopolitical conflicts in various parts of the world, such as in Ukraine, also posed challenges. Concurrently, inflation led to increased prices for raw materials, while a slowdown in the Chinese real estate market affected demand.

Despite these headwinds, we achieved strong growth, thanks to several key factors. These include the robust market demand typical of our businesses, the strength of our brand that supports our leading market share, and our ability to pass on price increases. Furthermore, our growth was bolstered by the strategic addition of excellent assets to our portfolio through M&A activities.

I believe our resilient growth reaffirms the strength of our Asset Assembler model, which, while not ostentatious, is designed to generate sustainable EPS growth through the assembly of stable companies. This model grants autonomy to the outstanding management teams of these companies, coupling it with accountability. We are confident that this approach can maximize the potential of these assets by fostering low-risk, sustainable growth.
As Co-Presidents, we recognize that we may not possess the specific knowledge or expertise required to directly sell paint in local markets such as Australia, China, or Türkiye. However, we firmly believe in our ability to evaluate whether local management teams in these regions are effectively adapting to changes in their business environments, are dedicated to achieving results, and are fulfilling their commitments. Both Co-President Wee and I also serve as Directors of NIPSEA Group and DuluxGroup. Co-President Wee leads the management meetings of each partner company in Japan Group, while I serve as the Board Chair of Dunn-Edwards. This governance structure enables us to unlock the potential of each of our assets. Honestly, I do not believe this model works well with every company. However, we consider it the most efficient and effective model for our Group, given that our businesses are characterized by a low-risk and stable earnings base.

MSV was already our sole mission in the previous MTP. However, starting in 2022, we began to position ourselves as Asset Assembler. The evolution of this model commenced in April 2021, following the appointment of Mr. Wee and myself as Co-Presidents. Throughout its evolution, we have taken various actions, including redefining the role of NPHD as a holding company by spinning off our Japan-focused functional company, beginning in 2022.

We will continue to develop and execute medium-term plans spanning three to four years for each asset, alongside ongoing M&A activities. However, we believe the value of presenting three-year target numbers, as we have previously done to facilitate a proper understanding of our potential, has diminished.

This Medium-Term Strategy briefing today aims to highlight the growth potential of our current portfolio and effectively communicate our approach as Asset Assembler.