Nippon Paint : Updated Latest Results and Forecast

August 19, 2021 at 04:44 am EDT

Latest Results

＜Consolidated Financial Results for the Six Months Ended June 30, 2021 (January 1, 2021 to June 30, 2021)＞

During the six months ended June 30, 2021, consolidated revenue of Nippon Paint Holdings ('NPHD') and its group companies increased by 44.1 % from the corresponding period of the previous year (the 'previous year') to ¥497,662 million due to the acquisition of 100% ownership of the Asia JVs and the Indonesia business owned by the Wuthelam Group (Wuthelam and Mr. Goh Hup Jin collectively, 'Wuthelam and Mr. Goh'; Wuthelam and Mr. Goh, Wuthelam's subsidiaries, and companies substantively controlled by Wuthelam and Mr. Goh collectively, the 'Wuthelam Group'), coupled with the strong performance of the decorative coatings business in China, which is a key business of the Nippon Paint Group. Consolidated operating profit increased by 40.3 % from the previous year to ¥48,655 million on higher revenue despite raw material price increases across regions . Consolidated profit before tax increased by 41.8 % from the previous year to ¥48,195 million, and profit attributable to owners of parent increased by 99.7 % to ¥33,731 million.

Japan

Revenue for automotive coatings increased from the previous year due to a higher number of automobiles manufactured despite the impact of semiconductor shortage. Industrial coatings revenue increased due to solid market conditions such as new housing starts and the recovery from the COVID downturn in the construction machinery market. Decorative paints revenue was on a par with the previous year due to factors such as delays in construction projects and sluggish new paint project orders due to the resurgence of COVID infections.
As a result, consolidated revenue increased by 5.9% from the previous year to ¥80,214 million. Consolidated operating profit increased by 6.9% to ¥7,347 million. From the first quarter of the current fiscal year, headquarters expenses incurred by NPHD, which were previously allocated to the Japan segment, are classified as 'Adjustments' that do not belong to any reportable segment in order to more accurately reflect the performance of each reportable segment.

Asia

The earnings of the Indonesia business have been included in the consolidated performance of the Nippon Paint Group from January 2021. Revenue for automotive coatings increased from the previous year due to the continuing market recovery as shown in the increase in the number of automobiles manufactured in China and Thailand. Revenue of decorative paints, a mainstay business in Asia, was higher than in the previous year as a result of contributions from the earnings of the Indonesia business, the continuing recovery in demand for new housing construction and repainting interiors of existing homes in China, and market share gains due to aggressive marketing activities in the major markets including China, Malaysia, Singapore, and Indonesia.
As a result, consolidated revenue increased by 74.9% from the previous year to ¥263,142 million, and consolidated operating profit increased by 58.2% to ¥33,688 million.

Oceania

Revenue for decorative paints increased from the previous year due to the absence of the adverse effects incurred by bushfires and floods in the previous year, coupled with the robust demand for home renovations. Revenue for the paint related business increased due to the robust demand for home renovations.
As a result, consolidated revenue increased by 25.9% from the previous year to ¥84,169 million, and consolidated operating profit increased by 35.4% to ¥11,243 million.

Americas

Revenue for automotive coatings increased from the previous year due to a higher number of automobile manufactured in the　United States, a core region, despite automobile production adjustments due to the semiconductor shortage, as well as robust sales of auto parts. Decorative paints revenue increased due to factors such as stable housing demand and favorable weather.
As a result, consolidated revenue increased by 17.4% from the previous year to ¥38,400 million. Consolidated operating profit increased by 131.0% to ¥2,738 million.

Other

In Other region, automotive coatings revenue increased from the previous year due to the continuing market recovery from the impact of COVID, although at different paces from country to country as a result of the semiconductor shortage and other factors. Revenue for decorative paints and paint related businesses increased due to the continuing brisk market conditions and successful marketing activities.
As a result, consolidated revenue increased by 61.6% from the previous year to ¥31,734 million, and consolidated operating profit increased by 156.3% to ¥2,362 million.

《Revenue》

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《Operating profit》

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《Profit attributable to owners of parent》

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Earnings Forecast

＜FY2021 Forecast＞ ※Released on August 10, 2021

《Reasons for Revisions》

Our decorative paints business in China, a mainstay business of our Group, and our decorative paints business in Turkey delivered a solid performance due to continuing strong market conditions and price increases. In addition, our Group's earnings were robust in Asia, Oceania, and the Americas. In Japan, our performance was below our forecast due to a resurgence of the COVID-19 pandemic.
Our profits were significantly affected by shortages of raw materials and higher raw material prices worldwide. While the higher revenue driven by strong market conditions raised our profits, we also implemented actions to boost profitability, such as reviewing selling, general and administrative expenses and reducing headquarters expenses. After taking into account factors including the yen's appreciation against major currencies compared to our assumed exchange rates, as well as the transfer of shares accompanied by changes to subsidiaries and the dissolution and liquidation of a consolidated subsidiary announced today, we have decided to increase our forecast for revenue, operating profit, profit before tax, and profit attributable to owners of parent for the fiscal year ending December 31, 2021.

(Billion yen)

Assumptions for the FY2021 Forecast

Japan