Management Policy

Our basic Management Policy, Management Strategy, Medium-Term Management Plan, and competitive strengths

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Development of Our Business Model and Evolution of Our Growth Strategy

2009-2014: Reform cost structure in Japan

Survival Challenge Program I & II (Released in May 2009)

Basic strategy	Reform the cost structure/expand sales and profit of existing businesses/create new markets Reinforce sustainable growth and the profitable business structure in Asia/reinforce the earnings base in North America
Outcomes	Significantly improved profitability and achieved targets through rigorous cost saving mainly in Japan
Challenges	Drastically reduced costs including spending on long-term investment as part of emergency measures to respond to the global financial crisis, which is the cause of the current aging facilities and workforce Growth in China and other Asian countries achieved through the Asian JVs, which were consolidated in FY2014
Corporate actions	April 2009: Kenji Sakai appointed President & CEO/Survival Challenge Program launched February 2014: Consolidation of the Asian JVs announced October 2014: Transition to a holding company structure

2014 (JGAAP) Quantitative targets/results

Plan

Results

Net sales

Plan

¥250.0 bn

Results

¥260.6 bn

Operating income

Plan

¥25.0 bn

Results

¥33.4 bn

Operating income margin

Plan

10.0%

Results

12.8%

2015-2017: Capture demand in the high-growth Asian markets

Survival Challenge Program III (Released in May 2015)

Basic strategy	Establish a foundation to achieve a “dominant” position in China, our most critical market Significantly transform our business structure to Asia-driven business expansion, thereby increasing the proportion of decorative paints characterized by high growth potential and profitability
Outcomes	Restructured the Japanese businesses and implemented company splits based on lines of business, and transitioned to a holding company structure Achieved significant earnings growth through consolidation of the Asian JVs
Challenges	Underachieved the plan due to the yenʼs appreciation, as well as a rise in raw materials caused by environmental regulations in China Profit capture through full integration of the Asian JVs
Corporate actions	April 2015: Domestic business restructuring, separation of operating companies by lines of business/Tetsushi Tado appointed President & CEO December 2016: Acquisition of U.S. Dunn-Edwards announced

2017 (JGAAP) Quantitative targets/results

Plan

Results

Net sales

Plan

¥700.0 bn

Results

¥605.3 bn

Operating income

Plan

¥105.0 bn

Results

¥75.0 bn

Operating income margin

Plan

15.0%

Results

12.4%

2018-2020: Establish a solid regional and business portfolio

N-20 (Released in May 2018)

Basic strategy	Strengthen the businesses in existing segments Accelerate expansion of our portfolio Improve earnings capacity Enhance the structure of “Global One Team”
Outcomes	Steadily reinforced the organizational base for sustained growth Expanded business in Oceania and Türkiye through M&A (DuluxGroup and Betek Boya) The full integration of the Asian JVs and the Indonesia business announced
Challenges	Improvement of sustainability and profitability over the medium to long term Operating profit margin reached 13.8% in FY2018, but fell below the target in FY2019 due to impairment losses and in FY2020 due to the pandemic and other factors Achieve sales growth and profitability improvement that outpace competitors in the growing paint market Create business opportunities through ESG initiatives and work on net zero GHG emissions Utilize DX (Digital Transformation) and recruit competent talent to respond to aging facilities and workforce in Japan
Corporate actions	January 2018: Increase of Outside Directors based on a shareholder proposal submitted by Wuthelam Group February 2019: Appointment of Masaaki Tanaka as Executive Chairman of the Board, Representative Director of the Board announced April 2019: Acquisition of Australian DuluxGroup and Turkish Betek Boya announced September 2019: Appointment of Masaaki Tanaka as President & CEO announced March 2020: Transition to a Company with Three Committees

Quantitative targets/results

2017 results^*

2020 plan

2020 results

Revenue

2017 results^*

¥610.2 bn

2020 plan

¥750.0 bn

2020 results

¥781.1 bn

Operating profit

2017 results^*

¥85.4 bn

2020 plan

¥105.0 bn

2020 results

¥86.9 bn

Operating profit margin

2017 results^*

14.0%

2020 plan

14.0%

2020 results

11.1%

*Figures recalculated in accordance with International Financial Reporting Standards (IFRS)

2021-2023: Relentlessly pursuing growth based on Asset Assembler model

Medium-Term Plan (FY2021-2023) (Released in March 2021)

Basic strategy	Strategy by Asset Further reinforcing our global growth foundation while proactively addressing new challenges Finance Strategy Leveraging our robust cash flow generation capability, we aim to reinforce our financial base and secure funds for growth initiatives, such as M&A and business investments M&A Strategy Leveraging the paint marketʼs growth potential and the stability of cash generation, actively considering the inclusion of new partner companies Sustainability Strategy Expanding business opportunities through ESG initiatives towards sustainable growth
Outcomes	Succeeded in sustainable EPS compounding as Asset Assembler Achieved both organic and inorganic growth through our Asset Assembler model Despite drastic changes in the business environment beyond our original assumptions, we maintained profitability through agile responses. With a business model and earnings capacity that are mostly unaffected by market conditions for each asset, we largely met our original guidance over the three-year period Acquiring high-quality assets with a low PER allows for EPS accretion from Year 1
Challenges	Enhancing expectations from capital markets while improving profitability of Japan Group In pursuit of maximizing PER, we strive to elevate capital market expectations regarding sustainable EPS accretion While the groundwork for improving the profitability of Japan Group is taking shape, a foundation for profitability improvement of Japan Group is being established, we are only halfway to reaching the levels achieved in 2017-2018
Corporate actions	January 2021: Asian JVs fully integrated and Indonesia business acquired April 2021: Transitioned to a Co-President structure led by Yuichiro Wakatsuki and Wee Siew Kim August 2021: European automotive and India businesses transferred to Wuthelam Group January 2022: International secondary offering 《Improving profitability of Japan Group》 January 2022: Nippon Paint Corporate Solutions (NPCS) established 《Accumulation of assets through M&As》Click here for M&A information March 2021: Vital Technical October 2021: Cromology October 2021: JUB November 2021: Chinese automotive JVs February 2023: NPT August 2023: Buyback of India businesses from Wuthelam Group November 2023: Alina 《Sustainability》 September 2021: Endorsement of the TCFD recommendations January 2022: Deepening of autonomous sustainability structure

Targets and results

		2023 guidance (Released in March 2021)	2020^*1	2021^*2	2022^*3	2023
Revenue	Original guidance	¥1,100.0 bn	¥720.0 bn	¥890.0 bn	¥1,200.0 bn	¥1,400.0 bn
	Year-end results		¥781.1 bn	¥998.3 bn	¥1,309.0 bn	¥1,442.6 bn
	Overachievement rate		+8%	+12%	+9%	+3%
Operating profit	Original guidance	¥140.0 bn	¥63.0 bn	¥87.0 bn	¥115.0 bn	¥140.0 bn
	Year-end results		¥86.9 bn	¥87.6 bn	¥111.9 bn	¥168.7 bn
	Overachievement rate		+38%	+1%	-3%	+21%
EPS	Original guidance	¥45.00	¥15.59	¥29.17	¥34.49	¥41.73
	Year-end results		¥27.83	¥29.41	¥33.82	¥50.45
	Overachievement rate		+79%	+1%	-2%	+21%

*1 Original guidance announced in May 2020; EPS was calculated using the number of shares after stock split
*2 Guidance revised downward at mid-term: (Factors) COVID, raw material inflation, chip shortage, etc.
*3 Guidance revised downward at mid-term: (Factors) Increase in provision in China, hyperinflationary accounting in Türkiye, etc.