Nippon Paint Holdings Co., Ltd. · TSE:4612
Nippon Paint — Q3 2020 Earnings Presentation
29 slides from Nippon Paint's earnings presentation, Nov 13, 2020
Slide 1: FY2020 3Q Financial Results Conference Call Presentation Summary
FY2020 3Q Financial Results Conference Call Presentation Summary November 13, 2020 Good evening everyone. I am Yuichiro Wakatsuki, chief financial officer of Nippon Paint Holdings. Thank you for taking the time today to participate in our conference call regarding financial results for 3Q of FY2020.
Slide 2: Summary of results of operations
I would like to begin by summarizing our results of operations on page 3. In 3Q of FY2020, both revenue and operating profit increased YoY on a ‘Tanshin’ basis (figures based on legal disclosure) and ‘Non-GAAP’ basis, which are figures principally without the effects of acquisitions. We made a somew
Slide 3: Tanshin results and DuluxGroup consolidation
September 2019. Therefore, please note that ‘Tanshin’ results include one month of earnings at DuluxGroup in 3Q of FY2019 and three months of earnings in 3Q of FY2020. 3
Slide 4: Revision to FY2020 earnings forecast
Please look at page 4. I will explain revision to our earnings forecast for FY2020. Nine months into FY2020 we now have rough estimates of COVID impact on our operations for this year. Nevertheless, this impact has continued to vary across regions around the globe. For instance, COVID impact is wors
Slide 5: FY2021 outlook and dividend forecast
FY2021 and afterward. Our full-year forecast, especially for earnings, reflects these factors. The dividend forecast is unchanged. 5
Slide 6: Market and business conditions in operating regions
This section provides a summary of market and business conditions in our operating regions. In the decorative paints business in Japan, revenue was slightly lower compared to 3Q of FY2019, when there was a last-minute surge in demand prior to the consumption tax hike in October. However, we expect 4
Slide 7: China momentum and Asia outlook
slower this year. Still, I believe the momentum will remain strong overall in our Chinese business. In Asia excepting NIPSEA China, COVID impact is subsiding overall compared to the severe impact in April-June quarter. We have maintained our conservative outlook for 4Q because of factors including l
Slide 8: Oceania, Americas and Europe decorative paints
At DuluxGroup in the Oceania segment, home improvement demand remained high across all businesses in 3Q, in areas both under stay-at-home restrictions and not. As a result, DuluxGroup maintained its strong momentum, achieving 9% YoY growth in revenue based on reference figures. Meanwhile, we expect
Slide 9: Betek Boya and automotive coatings
2019 and its earnings have been included in our ‘Non-GAAP’ results in 3Q. I will discuss this later, but we project that both revenue and operating profit at Betek Boya will be slightly higher than our full-year forecast announced in August, despite unfavorable effect of exchange rates. Lastly, in t
Slide 10: Significant events: acquisition of Asian JV stake
Now I will briefly discuss significant events following our financial results announcement for FY2020 2Q in August. On August 21, we announced the acquisition of Asian JV stake and Indonesia business and we are making progress towards the closing scheduled for January 1, 2021. Just as a reminder, we
Slide 11: Launch of PROTECTON anti-viral brand
We launched the PROTECTON brand for a line of anti-viral products. This new brand reflects the priority we place on solving social issues. We already sell PROTECTON products for the DIY and professional-use markets. We plan to add more brands for premium and high-performance products going forward.
Slide 12: Corporate commercial
We created a corporate commercial to tell people about various functions of paint and tremendous potential of paint. The commercial can also be viewed on YouTube. I encourage everyone to visit our YouTube channel. 12
Slide 13: Integrated Report published
We have published our Integrated Report for this year. There are significant changes from last year’s report in terms of content, design, quality and volume, but it still has much room for improvement. I appreciate your taking a moment to review this report, which is an efficient tool for communicat
Slide 14: IR website improvements
In addition, our IR website is undergoing improvements and enhancements. We would also appreciate your feedback about the IR website and suggestions for improvements. 14
Slide 15: Global integration of automotive coatings business
This page explains the global integration of the automotive coatings business within our Group, which we announced in October. After the acquisition of 100% ownership of Asian JVs, our decorative paints business will continue to focus on local production for local consumption based on a regional axi
Slide 16: ESG Statement and materiality
My final topic is our ESG Statement and identification of materiality. We established ESG Promotion Department in January 2020 and we formulated ESG Statement with participation and input of our partner companies around the globe. The aim is to foster recognition among everyone at our group that pro
Slide 17: 3Q results highlights
This page shows highlights of 3Q results, which I have already explained. Please turn to page 16. 17
Slide 18: Regional analysis of revenue and operating profit
This page is a regional analysis of revenue and operating profit. As you can see, our Japan segment turned around from an operating loss in 2Q to a profit in 3Q. Our Asian segment delivered a strong performance. Operating profit at DuluxGroup decreased YoY on a ‘Non-GAAP’ basis. As I mentioned befor
Slide 19: Heat map of 3Q performance
This page shows heat map for our 3Q performance. In the decorative paints business in China, performance was strong in both the DIY and Project segments, as I mentioned earlier. Market conditions were also favorable. Therefore, based on our own estimates, our market share in China remained unchanged
Slide 20: Transition to full-year forecast
I will discuss information in the next page onwards more thoroughly during the Q&A session. Now, I would like to explain the full-year earnings forecast for FY2020 on page 27. 20
Slide 21: FY2020 guidance update
Due to our commitment to sound communications with our investors, we updated the FY2020 guidance again, but this time on a voluntary disclosure basis. The forecasts on right side of table give you a general picture of changes from the May forecast, assuming constant exchange rates. Exchange rates ha
Slide 22: 4Q forecast
With our performance in first three quarters now finalized, our 4Q forecast can be obtained by subtracting our 9-month results from the full-year forecast. We are providing our 4Q forecast on this page for your convenience. I would like to touch on two points here. Firstly, earnings of DuluxGroup an
Slide 23: Betek Boya and operating profit outlook
Betek Boya has achieved significant revenue growth in first three quarters, but expects a temporary revenue decline in 4Q after strong 3Q revenue. Even so, the overall momentum remains favorable for Betek Boya. Secondly, operating profit essentially is projected to decrease approx. 10 billion yen co
Slide 24: Market & Business Environment (4Q)
On ae | 4-3. Market & Business Environment (4Q) Japan Asia (NIPSEA China) Oceania | Americas Automotive Decorative nie oO 0 v Automotive: In Japan, car production recovery to continue from 3Q but remain below prior-year level In China, market growth likely to be slow compared to high market growth i
Slide 25: Various Assumptions for the FY2020 Forecast (1)
a, a eee | 4-4. Various Assumptions for the FY2020 Forecast (1) [_NIPSEA China §(@)" NIPPON PAINT HOLDINGS CO.LTD. YoY (Forecast| YoY (Forecast oe . as of Nov.™) | as of Aug.™) Qualitative Information NIPSEA China O%~+5% O%~-5% Decorative Improved Chinese consumer post COVID. Demand recovery for (DI
Slide 26: Full-year growth forecasts for operating regions
Page 30 to page 32 provide the full-year growth forecasts for our operating regions. Arrows indicate regions and segments where the August forecast was revised. At NIPSEA China, for instance, the overall growth forecast was revised upward to 0%～ 5% YoY growth from a 0%～5% YoY decrease in the August
Slide 27: 4Q growth rates and revenue estimates
Page 33, as with page 28, shows rough estimates for 4Q growth rates and revenue calculated by subtracting our 9-month results from the FY2020 forecast. We are disclosing this information to reflect our investors’ feedback. We appreciate continued advice and feedback from our investors, although we c
Slide 28: Partial Revision of Adjustments for Prior Periods
SL lls W@)wPPoN PANT HOLDINGS COATD. | 5- (4). Partial Revision of Adjustments for Prior Periods @ *’ Non-GAAP’ adjustment figures shown in Breakdown of Adjustment Items in FY2020 2Q Financial Results Presentation Material, dated August 14, 2020, were partially revised to conform to figures disclose
Slide 29: Revisions to prior period adjustments and closing
Lastly, page 48 and page 49 are partial revisions to the August presentation for 2Q financial results. Revisions are not for figures pertaining to FY2020 but for breakdown of adjustments for quarterly results in FY2018 and FY2019. This information is provided in response to our investors’ requests.
Nippon Paint Holdings — Q3 2020 Earnings Presentation on 6ix