Nippon Paint : Conference Call Presentation SummaryPDF1.9MB

FY2021 4Q Financial Results Conference Call Presentation Summary

February 14, 2022

Good afternoon, everyone. I'm Yuichiro Wakatsuki, Co-President of Nippon Paint Holdings.

Thank you very much for taking the time today to participate in our conference call regarding financial results for the 4Q and FY2021 and forecast for FY2022.

1

I would like to begin by summarizing the financial results for the 4Q of FY2021.

Revenue increased and operating profit declined in the 4Q both on a Tanshin and Non- GAAP basis. Revenue continued to increase in China and other regions.

The operating profit margin improved to 8.2% from 6.8% in the 3Q despite the ongoing significant impact of raw material price inflation. Even after reversing the provision recorded in our Chinese business in the 3Q and 4Q, the operating profit margin improved.

2

Looking at the full-year results for FY2021, revenue was 998.3 bn, which is roughly in line with the guidance announced in October 2021, and operating profit was 87.6 bn, which is nearly 10% higher than the guidance.

We achieved significant revenue growth of 29.2% from a year earlier on a Tanshin basis and 16.6% on a Non-GAAP basis that excludes the effects of new consolidations and exchange rate changes. Revenue increased by around 22% on a Tanshin basis excluding the impact of exchange rate changes of 54.5 bn. As you can see from these results, we are steadily delivering inorganic revenue growth through M&A, on top of building upon our strong base for organic growth.

On the other hand, the operating profit margin was flat from the previous year. However, our operating profit margin was impacted by around 5 bn in one-off expenses including a stamp tax related to the full consolidation of Asian JVs and one-off expenses including a provision of 3.2 bn at our Chinese business. The operating profit margin was not bad at

3

all considering the adverse impact of raw material price inflation. Nevertheless, I believe our margins have much room for improvement.

Net profit was ¥67.6 bn, more than 50% higher than in the previous year when 49% of Asian JV earnings were not included in our consolidated earnings. Net profit in FY2021 also includes contributions to earnings from discontinued operations. EPS increased by 7.4% from the previous year as a result of the issuance of new shares.

4

For FY2022, we forecast revenue of 1,200 bn and operating profit of 115 bn, which are increases of around 20% and 30%, respectively, from FY2021. We expect higher growth in operating profit than in revenue due to higher revenue, the absence of one-off factors, and a margin improvement. The annual dividend for FY2022 is forecast to be 11 per share, an increase of 2 from FY2021, based on our target dividend payout ratio of 30%.

I have four additional comments regarding the FY2022 forecast.

（1）Firstly, we assume that raw material prices will continue to increase through the 1H of FY2022. Based on this assumption, our operating profit margin in the 1Q of FY2022 will be close to the level in the 4Q of FY2021 but will start recovering in the 2Q as a result of the acceptance of selling price increases. We expect higher revenue and a lower operating profit in the 1Q of FY2022 compared to the 1Q of FY2021 when our operating profit benefited from a low Raw Material Cost Contribution (RMCC) ratio at that time due to inventories of raw materials we carried over from the preceding periods. We expect our performance will be back to higher revenue and operating profit in the 2Q of FY2022.

5