Nippon Paint: Fiscal 2021 Q4 Financial Results Conference Call Summary 1.9 MB

Fiscal Year 2021 4Q Financial Results Conference Call Summary

February 14, 2022

Good afternoon, everyone. I am Yuichiro Wakatsuki, co-chairman of Nippon Paint Holdings.

Thank you very much for taking the time today to participate in our conference call regarding 4th quarter and fiscal 2021 financial results and guidance for fiscal 2022.

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I would like to begin by summarizing the financial results for the 4th quarter of fiscal 2021.

Revenues increased and operating profit decreased in the 4th quarter on both a Tanshin and non-GAAP basis. Revenue continued to grow in China and other regions.

The operating profit margin improved to 8.2% from 6.8% in the 3rd quarter despite the significant and continuous impact of raw material price inflation. Even after the reversal of the provision recorded in our Chinese activities in the 3rd and 4th quarters, the operating margin improved.

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Looking at the full year results for FY2021, revenue was $998.3 billion, roughly in line with forecasts announced in October 2021, and operating profit was $87.6. billion, almost 10% more than forecast.

We achieved significant revenue growth of 29.2% over the prior year on a Tanshin basis and 16.6% on a non-GAAP basis which excludes the effects of new consolidations and changes in interest rates. exchange. Revenue increased by around 22% on a Tanshin basis excluding the impact of exchange rate variations of 54.5 billion. As you can see from these results, we consistently generate inorganic revenue growth through mergers and acquisitions, in addition to building on our strong organic growth base.

On the other hand, the operating profit margin remained stable compared to the previous year. However, our operating margin was impacted by approximately 5 billion non-recurring expenses, including a stamp duty related to the full consolidation of the Asian JVs, and non-recurring expenses, including a provision of 3.2 billion on our Chinese activity. The operating margin was not bad at

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all this taking into account the negative impact of inflation in commodity prices. Nevertheless, I think our margins still have a lot to do.

Net profit was 67.6 billion yen, more than 50% higher than the previous year, when 49% of Asian joint venture revenue was not included in our consolidated revenue. Net profit for fiscal 2021 also includes profit contributions from discontinued operations. EPS increased by 7.4% compared to the previous year due to the issuance of new shares.

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For fiscal year 2022, we expect revenue of $1.2 trillion and operating profit of $115 billion, increases of approximately 20% and 30%, respectively, from fiscal year 2021. We expect growth operating profit than revenue due to higher revenue, absence of one-time factors and improved margin. The annual dividend for fiscal 2022 is expected to be 11 per share, an increase of 2 over fiscal 2021, based on our target payout ratio of 30%.

I have four additional comments regarding the guidance for fiscal year 2022.

（1）First, we assume that commodity prices will continue to increase during the first half of fiscal 2022. Based on this assumption, our operating profit margin in the 1st quarter of fiscal 2022 will be close to the level of the 4th quarter of fiscal 2021, but will begin to recover in the 2nd quarter following the acceptance of sales price increases. We expect higher revenue and lower operating profit in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021, when our operating profit benefited from a low cost contribution ratio. raw materials (RMCC) at that time due to raw material inventories that we carried over from previous periods. We expect our performance to return to higher revenue and operating profit in the 2nd quarter of fiscal 2022.

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