Nippon Paint Holdings Co., Ltd. · TSE:4612
Nippon Paint — Q2 2020 Earnings Presentation
23 slides from Nippon Paint's earnings presentation, Aug 14, 2020
Slide 1: FY2020 2Q Financial Results Conference Call Presentation Summary
FY2020 2Q Financial Results Conference Call Presentation Summary August 14, 2020 Good evening everyone. I am Yuichiro Wakatsuki, chief financial officer of Nippon Paint Holdings. Thank you for taking the time late in the evening during the Bon holiday to participate in our conference call regarding
Slide 2: Summary of results of operations
I would like to begin by summarizing our results of operations on page 3. In 2Q of FY2020, revenue increased and profit decreased YOY on a ‘Tanshin’ basis (figures based on legal disclosure), while both revenue and profit decreased YOY on a ‘non-GAAP’ basis, as with our 1Q results. The main factors
Slide 3: Results summary continued
growth on a YOY basis, while these are reference figures because they were not consolidated last year. A decline in raw material prices has also contributed to profits as with 1Q. 3
Slide 4: Revision to FY2020 earnings forecast
Please look at page 4. I would like to explain the revision to our earnings forecast for FY2020. As I mentioned at the time of the financial results announcement for 1Q, the impact of COVID-19 has remained uneven and varying across regions. Accordingly, it is still difficult to make reasonable estim
Slide 5: Dividend forecast rationale
because we place priority on maintaining stable dividends and we have enough cash to cover the dividend payments based on this forecast. 5
Slide 6: Economic impact of COVID-19 and response policies
This page shows the current status of economic impact of COVID-19 pandemic. The impact remains varying across regions, and we need to be properly on guard for the risk of the second wave hitting anywhere including Japan. In Australia, some states are currently under restrictions of business activiti
Slide 7: Market and business conditions by region
This section provides a summary of market and business conditions in each region. Let me explain about the decorative paints business in Japan first. Revenue for this business declined due to suspension of construction work and delays in ordering in early May, around the Golden Week holidays, due to
Slide 8: Decorative paints outlook and Asia conditions
of COVID infection, and concerns about possible economic slowdown, we expect that we can manage to bring the decorative paints business to deliver a full year positive growth YOY. In Asia excepting for NIPSEA China, the market conditions are challenging overall due to the COVID impact that worsened
Slide 9: DuluxGroup, Dunn-Edwards and Betek Boya
With regard to DuluxGroup in the Oceania segment, revenue increased 18% YOY based on reference figures, owing to demand driven by stay-at-home restrictions that continued from March. In the second half of the fiscal year, however, we need to assume the possibility that such special demand could slow
Slide 10: Betek Boya forecast and automotive coatings
cannot predict changes in the economic situation, such as exchange rate fluctuations for Turkish liras, our collaboration with NIPSEA in spider web management has been very successful, e.g. the procurement of raw materials. We have decided to publish the full- year earnings forecast for Betek Boya,
Slide 11: Consolidated 2Q financial results
Page 9 shows the Group’s consolidated 2Q financial results both on the ‘Tanshin’ and ‘non-GAAP’ base. As you can see here, we managed to return to a double-digit revenue growth and a double-digit operating profit margin, albeit on ‘Tanshin’ base, despite the challenging market environment. 11
Slide 12: Operating results by region
Page 10 provides operating results by region. In Asia, in particular, there is a large gap between the ‘Tanshin’ figures and the ‘non- GAAP’ figures. The major reason for this is the appreciation of the yen against the Chinese yuan to ¥15.3 this year, compared to ¥16.2 in 2Q of the previous fiscal y
Slide 13: Headquarters cost allocation policy
operations and reinforced business foundations such as we have now, this cost allocation policy is penalizing the Japan profitability more than necessary. We would like to review the allocation practice of such headquarters costs going forward. 13
Slide 14: 2Q heat map
This page shows the heat map for 2Q. Regarding the decorative paints business in China, as I mentioned earlier, the Project segment saw a rebound to offset the loss of busy season in March. Additionally, market was favorable compared to the same quarter a year ago. Under such circumstances, we took
Slide 15: Operating profit gap analysis
This page shows the operating profit gap analysis for 2Q. As you can see, the acquisition effects contributed significantly to our ‘Tanshin’ base operating profit. 15
Slide 16: Japan segment operating results analysis
Starting from page 14 is the operating results analysis of each region. As shown on this page, 2Q this year was a very challenging quarter for the Japan segment, notably in the automotive coatings business due to a significant COVID impact that hit the segment from April to June. However, I believe
Slide 17: University of Tokyo co-creation agreement and antivirus coatings
Under these circumstances, we have concluded an industry-academia co-creation agreement with the University of Tokyo, as described on page 15, and announced that we will work together to resolve social issues using coating technologies. We believe that we can apply our existing technologies includin
Slide 18: Full-year earnings forecast
Now, I would like to explain the full-year earnings forecast. As I mentioned at the beginning of this conference, there has been no major change in the forecast figures. As the COVID impact has continued to vary by region and industry, it is difficult to prepare rational estimates. However, as we ha
Slide 19: Market & Business Environment (3Q)
| 7 hn | 3-2. Market & Business Environment (3Q) ((@) NIPPON PAINT HOLDINGS CO,LTD. Asia (NIPSEA China) Oceania Americas Automotive coatings Decorative paints Trio V Automotive: In Japan, production slowdown due to COVID impact peaked in 2Q but remains weak in 3Q In China, recovery in 2Q to continue
Slide 20: Market condition forecast used for guidance
Pages 23 and 24 show our forecast for market conditions that was used to prepare the FY2020 earnings forecast. There is basically no change to our assumptions that the V-shaped recovery in the second half of the fiscal year is unlikely. We made relatively cautious estimates for the decorative paints
Slide 21: Various Assumptions for FY2020 Forecast (1)
= Ss W@) NPrON paNTHoLoNSS cOuTD | 3-4. Various Assumptions for FY2020 Forecast (1) | NIPSEA China YoY (Current | YoY (Previous Qualitative Information Revenue forecast) forecast) O%~-5% -5%~-10% No change -5%~-10% {With market expected weak in 2H, various promotional measures planned but not enough
Slide 22: Regional assumptions and reference materials
Pages 25 onwards show our assumptions for each region. Our assumptions for NIPSEA China was revised upward, while those for Asia excepting for NIPSEA China were revised downward as shown on page 25; our assumptions for the Japan segment were revised downward and those for the Oceania segment were un
Slide 23: Revisions to prior presentation materials
Before concluding this conference, I would like to mention two more point. First, as we published a press release on June 19, 2020, we made some revisions to the Financial Results Presentation Material for FY2019 4Q and FY2020 1Q published in February and May, respectively. There were no changes to
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