Nippon Paint : "Medium-Term Plan Progress Report Briefing" Presentation Summary 5.4MB

Nippon Paint Group Medium-Term Plan (FY2021-2023)

Progress Report Presentation Summary

March 16, 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 this progress report briefing on our Medium-Term Plan for FY2021-2023.

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I would like to begin with an executive summary.

To recap our progress, we are well positioned to achieve our Medium-Term Plan target. Year 1 of the plan provided the foundation for our Asset Assembler model to deliver solid growth. I would like to take this opportunity to explain our robust model for pursuing Maximization of Shareholder Value (MSV).

Wee Siew Kim and I were appointed as the Co-Presidents on April 28, 2021. We were involved with the formulation of the Medium-Term Plan. This has allowed us to smoothly and speedily implement business strategies based on the plan with the goal of driving autonomous growth in every operating region while aggressively pursuing M&A.

After we became the Co-Presidents, we had thorough discussions at meetings of the Board of Directors regarding our management policy. Our conclusion was to adopt a business model in which we, with a smaller headquarters at the holding company (NPHD), assemble assets focused on attractive markets in the paint and adjacency arena through M&A, while driving autonomous growth of the existing Group partner companies, resulting in strong growth with limited risk. We decided to call this policy the Asset Assembler model. The launch of Nippon

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Paint Corporate Solutions at the beginning of this year was based on this concept. The Asset Assembler model is not necessarily a change of management policy from the Medium-Term Plan. Rather, we believe Asset Assembler will more clearly define our visionary growth model with MSV as our sole mission.

Looking back on Year 1 of the Medium-Term Plan, we achieved strong revenue growth despite the pandemic, which reaffirms the strengths of our platform. We are well positioned to capture firm demand, in particular in decorative paints, and the current challenging environment allows us to utilize our strengths in regions where we have a high market share to increase our market share. As we announced in February 2022, we expect to achieve our Year 3 revenue target by the end of this year, which is one year early.

On the other hand, we were unable to achieve a satisfactory operating profit due to higher than expected raw material price increases and supply chain disruptions that are affecting our businesses and customers alike. However, we effectively achieved operating profit growth after excluding one-off expenses, backed by solid earnings growth in Australia, Turkey, and Asia except China and the contribution from the newly consolidated Indonesia business. There were also significant savings of head office expenses compared with the initial plan due to the smaller headquarters at the holding company. I believe this highlights our success as an Asset Assembler for assembling excellent assets through M&A.

Based on our results and achievements in Year 1, we maintained our operating profit target for FY2023. Despite various uncertainties, such as the Ukraine crisis and subsequent raw material price movements, we see good prospects for achieving our operating profit target due to revenue growth. This growth is underpinned by solid decorative paint demand and market share gains, coupled with margin improvement due to progress with selling price increases. We will continue to fuel our insatiable appetite for medium- and long-term growth based on the Asset Assembler model after the Medium-Term Plan.

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This page lists corporate actions we have announced since January 2021.

There were some concerns, such as a possible slowdown of decision-making, in the early days after the launch of the Co-President setup, which is a rare management structure among listed companies. However, the two of us were able to implement numerous corporate actions speedily through very close communications, with MSV as our shared decision-making guideline.

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My next subject is our FY2021 performance. This page provides the revenue analysis.

We have provided the volumes and price/mix breakdowns of revenue growth in the paint and coatings business on a trial basis. I hope this information will be useful.

The Medium-Term Plan CAGR targets in the table on the right side of this page are the FY2021- 2023 targets announced in March 2021. The FY2022 revenue growth forecast is slightly lower compared to the FY2021 growth rate but is higher than the Medium-Term Plan CAGR targets in almost every region.

Please note that we have increased the FY2022 revenue growth forecast for the Indonesia business and Asia excepting NIPSEA China from the guidance announced in February this year.

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