August 10, 2022

FY2022 2Q Financial Results Presentation material

JUB: Acropolis Museum in Greece

Dunn-Edwards: Color + Design 2023 Trends

□ FY2022 2Q Summary/Topics

・・・ P.3

□ Supplemental Material

・・・ P.13

1.

FY2022

2Q

Results: Highlights

・・・ P.14

Contents

2.

FY2022

2Q

Results: By Segment

・・・ P.17

3.

FY2022

Forecast

・・・ P.26

4. FY2022 1H Results

・・・ P.30

(Appendix) Reference Data

Disclosure policy for this document:

  • Both reported base ('Tanshin') and adjusted base ('Non-GAAP') financials are disclosed
  • Non-GAAPadjusts for effects of new consolidation through M&A and one-time gains/losses in order to clarify continuing operating trends year on year
  • Qualitative comments in this presentation primarily refers to Non-GAAP unless stated otherwise
  • Non-GAAPincorporates adjustments mainly for the following items: FX, subsidy, M&A related expenses, new acquisitions, etc.
  • Please see the Appendix Data for more information
  • Quarterly earnings trends of DuluxGroup, Betek Boya, PT Nipsea, Cromology and JUB are provided in Appendix Data

1. Summary: FY2022 2Q Operating Results

FY2022 2Q*1

(Tanshin)

(Billion yen)

Results

YoY(%)

Revenue

337.0

30.0%

OP

20.8

-14.2%

OP margin

6.2%

-3.2pt

(Non-GAAP)

(Billion yen)

Results

YoY(%)

Revenue

288.3

11.3%

OP

25.6

2.7%

OP margin

8.9%

-0.7pt

  • Tanshin basis
  • Revenue increased due to selling price increases mainly in decorative business, new consolidation of Cromology and F/X changes
  • Operating profit declined, despite progress with selling price increases, due to higher raw material prices and logistics costs, as well as a potential credit loss provision in China, and application of hyperinflation accounting for Turkish operations
  • Recorded a provision for potential credit loss of 13.0 bn yen for accounts receivable in China in the 2Q, following a review of the financial positions mainly of accounts receivable primarily from real estate developers
  • Following the rapid acceleration of inflation in Turkey, hyperinflation accounting was applied on the financial statements of Turkish subsidiaries in accordance with requirements of IAS 29
  • Non-GAAPbasis
  • Chinese decorative business was impacted by lockdowns in major cities. DIY revenue grew 15% due to stronger sales volumes driven by marketing activities with flow through of selling price increases. Project revenue decreased by 5% despite selling price increases due to generally softer real estate market conditions
  • Decorative revenue increased in all regions, driven by selling price increases
  • Prices of raw materials increased further due to the Ukraine crisis and other factors, impacting all regions. We will continue to increase selling prices where possible, purchase cheaper alternative raw materials, and streamline processes to control and lower SG&A expenses, and will continue this multi-pronged approach to mitigate the impact of inflation

Revenue

Paint and Coatings Business

Paint Related

New

F/X

Paint

Volumes

Price/Mix

Business

consolidation

YoY analysis

(others)*2

c.*3 -4%

c. +9%

c. +3%

c. +4%

c. +7%

c. +12%

*1

The earnings for 2Q 2021 have been adjusted retrospectively following Reclassification of the European automotive coatings business and the India business after they were transferred to the Wuthelam Group

(announced on August 10, 2021), Change in accounting policies involving cloud computing agreements beginning with 4Q 2021, Finalization of PPA for PT Nipsea (Indonesia), and Change in reportable

segments from 1Q 2022. The same adjustments are made throughout this presentation

3

*2

Products included in the Paint and Coatings Business with unit prices and volumes significantly different from paint products, such as semi-finished products and fine chemicals, are disclosed separately from

volumes and price/mix in the above graph to provide more reasonable data

*3 circa: approximately

2. Summary: FY2022 Forecast

FY2022

Consolidated

Earnings Forecast

(Tanshin)

(Billion yen)

Revised

vs. Feb. 2022

forecast

forecast

Revenue

1,320.0

+10.0%

OP

105.0

-8.7%

Profit*1

72.0

-11.1%

FY2022

EPS Forecast

¥30.66

  • Revised the Feb. 2022 guidance upwards: Revenue forecast revision due to selling price increases, positive F/X contributions and new consolidation. Operating profit forecast was reduced due to a provision for potential credit loss in China, and application of hyperinflation accounting for Turkish subsidiaries, although continuous selling price increases are expected to offset the impact of higher-than-expected raw material prices, coupled with a boost from the weaker yen
  • Primary reasons for earnings revision:(all figures below are estimates)

↑A weaker yen vs. Feb. 2022 assumptions and other factors boosted revenue by c. 91.0 bn yen and operating profit by c. 9.0 bn yen

↑Continuous selling price increases centered on decorative business contributed to higher revenue (c. +13.0 bn yen on Non-GAAP basis)

↑New consolidation of JUB increased revenue by c. 11.0 bn yen and operating profit by c. 1.0 bn yen

→Continuous selling price increases, control of SG&A expenses and other actions offset higher-than-expected cost of raw materials on Non-GAAP basis as well

↓Expect the possibility of recording an additional provision for potential credit loss in China of c. 2.0 bn yen in 2H, in addition to the provision recorded in 2Q

↓Application of hyperinflation accounting for Turkish subsidiaries is expected to reduce full-year operating profit

by c. 5.0 bn yen

  • In addition to the provision for potential credit loss in China of 13.0 bn yen recorded in 2Q, we expect an additional provision for potential credit loss in China in 2H
  • This forecast may change depending on factors including changes in raw material prices, F/X movements, the pandemic in China, and automobile production
  • EPS forecast is ¥30.66 (+¥1.25 vs. FY2021/-¥3.83 vs. Feb. 2022 guidance)
  • Annual dividend forecast is unchanged from Feb. 2022 guidance at ¥11 (+¥2 vs. FY2021*2)

*1 Profit attributable to owners of parent from continuing operations

4

*2 Excluding dividend of ¥1 per share to commemorate the 140th anniversary of founding

3. Raw Material Market Conditions and Our Responses

Strategic pricing actions will continue for improving OP margin from 2H

2Q 2022

  • Crude oil prices have remained above USD100 due to bans on Russian oil imports because of the Ukraine crisis and production capacity restrictions at oil producers. The high price of oil, combined with the weaker yen, have driven naphtha prices up by 30% vs. the 1Q level. Raw material suppliers are raising selling prices frequently
  • Supply and demand is unlikely to ease with the peak summer demand period approaching
  • Logistics uncertainties are continuing due to factors such as labor- management negotiations in North America and container logistics disruptions worldwide
  • Increased selling prices of decorative paints mainly in China DIY, Asia except China, and Japan
  • Gross profit margin improved QoQ in 3Q and 4Q 2021 but declined QoQ in 2Q 2022 due to further increase in raw material prices

Gross profit margin

2Q 2021

3Q 2021

4Q 2021

1Q 2022

2Q 2022

YoY

QoQ

37.6%

36.4%

37.2%

38.5%

36.1%

-1.5pt

-2.4pt

3Q 2022 and beyond

  • FY2022 guidance announced in February assumed Japan naphtha price would remain above 60,000 yen during 1H 2022. The price has risen to the 80,000-yen range due to higher crude oil and naphtha prices resulting from US and UK bans on
    Russian oil imports and the yen's depreciation
  • Continuing to increase selling prices to keep up with raw material price increases
  • Expect raw material prices to decline in 2H from
    the 1H levels. Combined with selling price increases, we expect gross profit margin will improve in 3Q
  • Good medium to long-term prospects for margin recovery through selling price increases

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Nippon Paint Holdings Co. Ltd. published this content on 10 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 August 2022 06:55:03 UTC.