Nippon Paint : Updated Latest Results and Forecast

Latest Results

＜Consolidated Financial Results for the Three Months Ended March 31, 2021 (January 1, 2021 to March 31, 2021)＞

During the three months ended March 31, 2021, consolidated revenue of Nippon Paint Holdings ('NPHD') and its group companies (collectively, the 'Group') increased by 42.1% from the corresponding period of the previous year (the 'previous year') to 231,426 million yen 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 in the decorative coatings business in China, which is a key business of the Group.
Consolidated operating profit increased by 72.4% from the previous year to 26,260 million yen on higher revenue.
Consolidated profit before tax increased by 84.1% from the previous year to 25,764 million yen, and profit attributable to owners of parent increased by 136.7% from the previous year to 17,685 million yen.

Japan

In this region, revenue for automotive coatings was on a par with the previous year despite a lower number of automobiles manufactured than the previous year due to factors such as the shortage of semiconductor chips.
Industrial coatings revenue was on a par with the previous year despite weak market conditions such as new housing starts, contrary to expectations of a market recovery from the COVID downturn. As for decorative paints, revenue was lower than the previous year due to factors such as delays in construction projects and sluggish new paint project orders due to new waves of COVID infections.
As a result, consolidated revenue decreased by 0.4% from the previous year to 39,907 million yen. Consolidated operating profit decreased by 13.7% to 4,383 million yen.
From the first quarter of the current fiscal year, headquarters expenses incurred by the Company, 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

In this region, the earnings of the Indonesia business have been included in the consolidated performance of the 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 automobile 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 and the continued recovery in demand for new housing construction and repainting interiors of existing homes in China.
As a result, consolidated revenue increased by 88.2% from the previous year to 117,394 million yen.
Consolidated operating profit increased by 175.2% to 19,248 million yen.

Oceania

In this region, 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, as well as robust demand for home renovations.
Revenue for the paint related business increased due to robust demand for home renovation.
As a result, consolidated revenue increased by 30.5% from the previous year to 41,518 million yen, and consolidated operating profit increased by 67.1% to 5,853 million yen.

Americas

In this region, revenue for automotive coatings increased from the previous year due to factors such as robust sales of automotive parts in the United States, a core region, despite automobile production adjustments due to the shortage of semiconductor chips.
Revenue for the decorative paints business increased due to factors such as stable housing demand and favorable weather.
As a result, consolidated revenue increased by 0.3% from the previous year to 17,703 million yen.
Consolidated operating profit increased by 12.6% to 925 million yen.

Other

In this region, revenue for automotive coatings increased from the previous year due to the continuing market recovery from the impact of COVID, although at different paces from country to country.
Revenue for decorative paints and paint related businesses increased due to successful marketing activities.
As a result, consolidated revenue increased by 35.5% from the previous year to 14,902 million yen, and consolidated operating profit increased by 72.1% to 1,387 million yen.

《Revenue》

(Million yen)

《Operating profit》

(Million yen)

Earnings Forecast

＜FY2021 Forecast＞ ※Released on February 10, 2021

During the fiscal year ending December 31, 2021, the economic outlook is expected to remain uncertain due to the resurgence of COVID-19 around the world. However, the global economy is projected to return to growth due to factors including vaccinations and more rigorous infection prevention measures.
The Group integrated its automotive coatings operations globally in order to provide products and services that more accurately meet the requirements of customers and expand the automotive coatings business in Japan and overseas. In addition, we completed the acquisition of 100% ownership of the Asian JVs and the Indonesia business on January 25, 2021 to accelerate the implementation of our strategic management initiatives. Furthermore, the Group companies in Japan and overseas are using seamless collaboration through spider web management and pursuing autonomous growth to gain market share in their respective business fields.
Our consolidated earnings forecast for the fiscal year ending December 31, 2021 takes into account this outlook. We forecast consolidated revenue of 890,000 million yen, consolidated operating profit of 87,000 million yen, profit before tax of 88,000 million yen and profit attributable to owners of the parent of 67,000 million yen.

(Billion yen)

Assumptions for the FY2021 Forecast

Japan (Revenue: c. +5% YoY)

• Automotive
  ±0% YoY; Revenue expected to be on prior-year levels due to uncertainty of COVID impact, despite continuing recovery of automotive market
• Decorative
  c. +10% YoY; Higher revenue expected due to overall recovery of the market, although DIY demand due to COVID-enhanced home improvement activity expected to normalize. Focus on marketing and sales promotion activities and development of new functional and high profitability products
• Industrial
  c.+15% YoY; Market recovery expected in coil sector from 2Q and agricultural and construction machinery sectors from 1Q. Higher revenue expected due to market share gains resulting from sales promotion activities in the powder coatings business

NIPSEA China (Revenue: c. +10% YoY)

• Decorative (DIY)
  c. +10% YoY; Full-year revenue expected to increase, assuming that market growth continues, with measures such as supplying value-added products, expanding sales channels, and making brands more powerful
• Decorative (PRJ)
  c. +20% YoY; Full-year revenue expected to grow steadily assuming that brisk construction demand continues amid favorable economic and market conditions, with measures such as continuing to focus on partnerships and increasing share in key and strategic customers and expanding product line
• Automotive
  +5%～10% YoY; Full-year revenue expected to increase due to recovery of automobile production

Asia Excepting NIPSEA China (Revenue: +5～10% YoY)

In automotive coatings, strengthen partnerships with customers by supplying high quality paints and strengthening technical support. A slow market recovery expected.
In decorative paints, higher revenue expected as the market recovers by expanding anti-viral and Selleys product lines and reinforcing the Project business

Asia (Indonesia) ((For reference) Revenue: +10～15% YoY)

Higher revenue and profit due to recovery from COVID, higher penetration of CCM(Computerized Colour Matching), and store network expansion
FY2020 (for reference): Revenue: 30.3 bn yen, Operating profit: 10.2 bn yen

Asia(India) ((For reference) Revenue: +15～20% YoY)

Significant revenue and profit growth expected due to market recovery and strengthened sales promotion activities
FY2020 (for reference): Revenue: 17.1 bn yen, Operating profit: 0.0 bn yen

Oceania (Revenue: +0～5% YoY)

Modest revenue growth expected following very strong FY2020

Americas (Revenue: c. +5% YoY)

• Automotive
  +5～10% YoY; Higher revenue expected as production expected to rebound sharply after significant cuts due to COVID in FY2020
• Decorative
  c. +5% YoY; Higher revenue expected due to the outlook for strong housing demand fueled by low interest rates as in FY2020, as well as promotion of DX and store network expansion

Other

• Automotive
  c. +30% YoY; Sharp revenue growth expected due to rebound from COVID-influenced weak production as with the Americas
• Betek Boya
  c. +10% YoY; Market growth expected to continue due to ongoing economic recovery, coupled with government's stimulus programs, and higher revenue expected due to expansion of brand and product lines

Cost of raw materials

Higher raw materials costs in all regions compared with prior-year levels. We will take actions to absorb the impact of recent rise in crude oil/naphtha prices, such as by increasing productivity and tightening and pugrading procurement policies

*Figures are in local currencies

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