Nippon Paint : FY2021 3Q Financial Results Conference Call Presentation SummaryPDF1.3MB

FY2021 3Q Financial Results Conference Call Presentation Summary

November 12, 2021

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 3Q of FY2021.

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I would like to begin by summarizing the financial results for the 3Q of FY2021.

Revenue increased and operating profit declined in the 3Q both on a Tanshin and Non- GAAP basis. Our operating environment has not changed much from when we announced a revision of the consolidated earnings forecast in October. Our decorative revenue increased in China and other regions. On the other hand, our operating profit was impacted by the high cost of raw materials in all regions, and actions we have taken such as selling price increases have not fully offset this impact.

The Tanshin and Non-GAAP difference is mainly attributable to the new consolidation and exchange rate changes.

Please note that the Tanshin earnings include a provision of around 2.7 billion yen-an amount slightly smaller than assumed in October- that was recorded in the Chinese business, while the Non-GAAP earnings exclude this provision.

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Please see the next page for the accounting treatment for the transfer of the European and India businesses.

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Following the transfer of the European and Indian businesses we announced on August 10, 2021, we have categorized those businesses as discontinued operations in accordance with IFRS. As a result, the earnings of the discontinued operations from the 1Q of 2020 to the 2Q of 2021 have been adjusted retrospectively. The important point is that the bottom line has not changed but revenue and operating profit have been adjusted to exclude the discontinued operations.

The table on the bottom of page 4 shows the summary of 7 months of the earnings of the three businesses in 2021. These businesses collectively recorded an operating loss. As a result, excluding the earnings of these businesses reduced consolidated revenue but increased consolidated operating profit. One-off factors in operating profit include a gain on sale of shares. The businesses classified as discontinued operations collectively recorded an operating loss even after the one-off factors. Discontinued operations recorded a net profit of 1.0 bn yen that includes foreign exchange gains as non-operating income.

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The table in the middle of this page shows the retroactive adjustments to the 2020 earnings. Nippon Paint (India) Private Limited (NPI), our decorative paints business in India, was not included in consolidated revenue and operating profit in 2020 because it was a 50:50 joint venture at that time. The amounts retrospectively adjusted in 2020 are the total of the earnings from the automotive coatings businesses in Europe and India. Please note again that there is no change to net profit because both earnings from continuing and discontinued operations are included in the consolidated earnings.

The update of the consolidated earnings guidance was announced on the same day in August as the announcement of this transaction. In addition, we had not completed the check of figures when we announced the revision of the consolidated earnings forecast in October. As a result, our consolidated earnings included 7 months of earnings from the discontinued operations. We have decided that the impact of the classification of discontinued operations on our consolidated earnings is insignificant. Taking into account other factors as well, we did not update the guidance this time from the one released in October.

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