Thank you very much. Good afternoon, everyone.

I am Wakatsuki, Co-President of Nippon Paint Holdings. Thank you very much for joining us today despite your busy schedule.

I will now outline the key points of our financial results for the second quarter of fiscal 2026. Please note that members of the media are also joining us today.

I'll begin by addressing two points on slide number 2. First, regarding the revision of our full-year earnings forecast for fiscal 2026.

To properly reflect the current market conditions, we have adjusted our exchange rate assumptions, shifting towards a weaker yen compared to the initial forecast in February. Specifically, the assumed rate for the U.S.

dollar has been revised from previously 150 yen to 155 yen for the second quarter and 156.8 yen for the full year; Chinese yuan from previously 21.5 yen to 23.1 yen for the full year. Second, regarding the definition of adjusted profit, we have slightly changed the treatment of PPA-related expenses and have retroactively restated the figures from the prior years.

We believe this change will allow us to improve the comparability with our global peers and better reflect our underlying business performance. First, number 3—page number 3, please look at the long-term historical trend of second quarter performance.

As we have mentioned before, we take a dual approach of organic growth and M&A, and we have steadily expanded the revenue, adjusted operating profit, and adjusted EPS with this approach. In the second quarter, even amidst uncertain business environment such as the raw material prices caused by the Middle East situation, we have maintained and expanded our profitability through measures like price pass-throughs and cost control.

The second quarter results represent the continuation of this track record. Especially for the second quarter, although there was no incremental contribution from the new M&A activity from the previous fiscal year, we have been able to sustain a strong organic growth in the adjusted operating profit.

Next, page 4, let's review the financial results for the second quarter. Revenue was 453.4 billion yen, up 19.4% year on year.

This growth was driven by increased sales volume and improved product mix, as well as the favorable exchange rate. Adjusted operating profit stood at 94.9 billion yen, an increase of 30.4%, a significant increase year on year.

Adjusted operating profit margin was 17.8%, an improvement of 1.5 percentage point from the previous year. Adjusted EPS was 29.4 yen, up 31.7% year on year.

The key takeaway here is just not that we simply increased sales. Even amid the uncertain situation in the Middle East, we achieved margin improvement by combining revenue growth with better raw material cost ratio and effective cost control.

The impact of soaring raw material costs linked with the situation in Middle East varies by region and business. While we were able to absorb these costs in the second quarter through price pass-throughs and cost reduction initiatives, the impact may become more pronounced in the second half of the year.

We are not taking an optimistic view about this situation, and we will manage the operations in each region, closely monitoring the pricing, procurement, inventory, and SG&A expenses. Regarding the performance by segment, AOC, because the market shows signs of bottoming out, AOC achieved increases in both revenue and profit driven by price hikes and offset the raw material cost increase and increased sales volume.

Japan, NIPSEA other than China, and DuluxGroup Pacific also posted revenue and profit growth supported by higher sales volume and product price increases and other factors. As for NIPSEA China, the surge in raw material costs, exacerbated by the Middle East situations, further compounded the effects of the weak real estate market and subdued consumer sentiment.

Amid this challenging environment, rather than aggressively pushing for volume expansion, we prioritized sales discipline, cost efficiency, and the maintenance of the brand strength. This approach allows us to secure profit margin of about 15%.

We believe it is crucial to maintain a management approach that safeguards profitability without relying on the assumption of an early recovery in the Chinese market. Next, I will explain on page 5 the revisions to our full-year earnings forecast for fiscal 2026.

First, regarding revenue, we raised our forecast from the 1.92 trillion yen in February to 2 trillion yen, an improvement of 80 billion yen. This represents an expected year-on-year increase of 12.7%.

We have also presented figures for adjusted metrics. We anticipate the full-year adjusted operating profit of 316 billion yen, an adjusted operating profit margin of 15.8%, and adjusted EPS of 95.7 yen.

These figures represent a projected 13.6% increase in adjusted operating profit and 10% growth in adjusted EPS compared to the previous fiscal year. Driven by the strong performance in the first and second quarters, alongside the continued effectiveness of price pass-throughs and cost control measures, we expect to achieve record-high levels of revenue and profit for the full year.

At the same time, as we stated when we announced the first quarter results, we are adopting somewhat cautious assumptions for the second half of the year. China's real estate market is still in the process of recovery, and the consumer sentiment is still subdued.

Furthermore, we continue to face rising raw material costs driven by the situation in the Middle East, and the uncertainty in the United States still continues. Rather than counting on market recovery, we believe by continuing to pass on costs, improving product mix, reducing costs, and controlling SG&A, we can absorb these cost increases and maintain the profitability levels for the full year that are in line with our projections.

Regarding the reported figures, we maintain our operating profit forecast at 283 billion yen, unchanged. This reflects the fact that the upward revision resulting from foreign exchange rate fluctuations is being offset by the one-off expenses such as M&A-related costs and business transformation costs for the DuluxGroup in Europe.

We also project EPS at 81.5 yen, a figure that accounts for the impact of one-off expenses and effective tax rates. The forecast for annual dividend remains unchanged at 17 yen per share.

We intend to continue prioritizing EPS growth from the perspective of MSV while updating the outlook for the third quarter onwards as necessary. Page 6 and 7, next, I would like to outline the assumptions underlying our full-year forecast.

Reflecting the first half results, which were strong, and despite anticipating some adjustments in the second half of the year, we raised our adjusted operating profit forecast for Japan, DuluxGroup, and NIPSEA business other than China. On the other hand, regarding NIPSEA China, where the real estate market and consumer sentiment remain sluggish, we maintained our forecast for the automotive segment but revised our initial forecast for both TUC and TUB.

As for the Americas, due to the persistent economic uncertainty, we maintained the outlook for AOC as the market shows signs of bottoming out, but we still take a cautious approach for the Americas. Page 8, market conditions are expected to be flattish year on year in the second half and beyond.

Japan, in the second quarter, due to supply concern because of Middle East situation and brought-forward demand, there was a temporarily strong movement mainly for decorative. For third quarter and beyond, we don't expect such special factor.

China, automotive business is relatively strong, but TUC in the second quarter dropped markedly due to Middle East situation, but we expect market in the third quarter will recover to the first quarter level. The Americas, there's uncertainty in automotive production and housing demand for AOC, and market demand cannot be said to have strong recovery yet.

Meanwhile, the business is becoming solid through price flexibility, continued supply, and sales volume improvement. Given such market conditions, this full-year forecast this time is not an exploration of good first half results, but rather based on pursuit of profitable growth with uncertainty factored in.

Next, page 9, I'll explain the outline of results of major segments. The details will be left to Q&A session, just brief comment.

First, Japan, revenue 61.6 billion, up 17.9%. Adjusted operating profit is 8.9 billion, up 65%.

For decorative, sales increase and sales brought forward of high durability product for architectural and structural products contributed, and for industrial automotive, sales volume increase contributed. For profit side, increased revenue and improved material cost ratio, SG&A ratio significantly contributed.

NIPSEA China, revenue 129.1 billion, up 9.7%. Adjusted OP profit 18.7 billion, flattish year on year.

On the yen basis, revenue increased, but TUC saw 14% decrease in revenue in local currencies due to sluggish real estate market in China and weak consumer sentiment. TUB also decreased its revenue by 9% due to sluggish market in local currency.

That said, profit margin is maintained by keeping sales channel discipline, avoiding inventory build-up, and improved cost efficiency. NIPSEA except China, revenue 124.9 billion yen, up 26.4%.

Adjusted operating profit 27.4 billion, up 53.1%, very strong results. Growth was achieved in wide areas including Malaysia, Singapore, Thailand, Turkey, Indonesia, and India.

Increased revenue, improved raw material cost ratio, and effort for rationalization led to profit increase. DuluxGroup, first, Pacific, revenue 73.7 billion, up 29.2%.

Adjusted operating profit 10.7 billion yen, up 42.9%. Even under tough market environment, specialty coatings business share increase and small-sized acquisition and FX big factor contributed.

DuluxGroup Europe, revenue 50.1 billion yen, up 19.9%. Adjusted OP profit 5 billion, up 9.6%.

Though France was flattish year on year, South and Central Europe showed some strong growth. Europe as a whole is still on the path for recovery.

Next, Americas, revenue 34.9 billion yen, up 12.2%. Adjusted operating profit 3.2 billion yen, up 8.5%.

For automotive, share increased through acquisition of new business. For decorative, price hike and FX contributed, but the market conditions remain tough.

Lastly, AOC, revenue 59.1 billion, up 23%. Adjusted OP profit 21.5 billion yen, up 26%.

Even without plus 12% coming from FX, the performance was very robust. While macro environment remains severe, profit contribution level remains high through pass-through of material cost increase on prices, sales volume increase, and sales volume growth in Americas and Europe exceeding that in Asia Pacific, leading to better regional breakdown.

AOC, although some retrospective correction due to finalized PPA, profitability and cash creation capability on adjusted basis remains robust. Page 10, main topics.

First, let me explain about purchase back of European automotive coatings business from Wuthelam Group, which we announced today. In August 2021, we announced transfer of European automotive business to Wuthelam Group, and this time, we will purchase it back at about 47 million euro or about 8.5 billion yen.

The closing is expected within October 2026. With this deal and with Indian business purchased back in 2024, there will be no Nippon Paint Group business directly held by Wuthelam Group.

What is important about this deal is not the formality of buying it back, but we have made judgment that that repurchase at this time is the best from MSV point of view. Under Wuthelam umbrella, reorganization and other rehabilitation measures are progressed, and the performance recovered to some extent compared to the time at the transfer.

We judged it to be better to take integrated approach, including capital relationship, to accelerate automotive coatings business globally. For this deal, we set up a special committee comprising of three independent directors to discuss profit and protection of minority shareholders and from MSV perspective.

The acquisition price was decided based on equity value calculation by the third party, and the BOD Chairman Goh has not participated in deliberation and resolution of this deal. In the first year after this deal, its impact for October-December '26 period expected to be modest.

From 2027, more recovery is expected. The size of financial impact is limited, but we believe it is a significant step from strategic point of view.

Page 11, other topics. First, about integrated report 2026 issued in June.

This year's report was planned, structured, and edited based on representative questions from investors to convey more clearly the present position vis-a-vis MSV journey and the points of argument from now on. Each section explains about thinking about these questions and specific initiatives.

The report features many interesting content including dialogue among Co-President Wee, BOD Chair Nakamura, and myself. Please read it in your leisure time.

On July 23rd, we announced reorganization of Japan Group, where Nippon Paint Surf Chemicals is to be split and integrated into Nippon Paint Automotive Coatings and Nippon Paint Industrial Coatings effective January 1st, 2027. We have publicized information both internally and externally.

We will shift to a system to offer surface treatment product and coatings products, which have been provided from each subsidiary, in a more integrated manner. By doing so, we will further strengthen product development and technology service, improving competitiveness and customer satisfaction.

Lastly, let me report that we are awarded the Distinguished Service Encouragement Award at the 42nd Corporate Public Relations Awards. The advertising activities was to deepen trust relationship with stakeholders and foster understanding and pride among employees for our company.

In the second results, we achieved record-high revenue and adjusted operating profit owing to global partner companies' continuous effort in wide areas including material procurement, product supply, and customer service. That said, there remain some issues to note such as raw materials, FX, and geopolitical risks.

Our employees are operating with sense of alert towards the second half. We are committed to pursue to achieve MSV as Asset Assembler by watching closely those risks and accumulating adjusted profit, EPS, and cash.

We would like to continue to hold dear constructive engagement with investors. Thank you very much for listening.

This is Ikeda from Goldman Sachs Securities. Congratulations on your very good results.

Thank you, Mr. Ikeda.

Thank you very much for your comment.

Thank you very much for giving me the opportunity. The full-year adjusted OP, compared to the February forecast, you have decided to keep it unchanged.

By region, I think there may be different colors. In Japan and NIPSEA other than China, they achieved upside, but NIPSEA China, I think, has been revised downwards.

MFC AOC remains unchanged, according to my understanding. To the extent possible, with the raw material prices going up, can you give us some color regarding the pricing trends and also the volume?

Have they changed compared to initial forecast? Also, for China, raw material, I think, is easy to procure, I think, and there might be room for you to reduce prices, but the prices and also the volume are coming down, in China.

The consumption mindset, given the situation in Middle East, such as what is the situation regarding the coating or painting business in these markets? If you can comment on that.

Thank you very much, Ikeda-san, for the question. Regarding your first question, to avoid any misunderstanding, adjusted operating profit, as of February, we did not give the detail number, the concrete number, because adjusted AOP was revised upwards effectively.

On a reported basis, the operating profit remains unchanged because in the adjustment items there are one-off expenses. In the new forecast, these things offset the favorable impact of the foreign exchange, therefore 283 billion yen remains unchanged.

Roughly, my gut feelings says that the February AOP was about 300 billion yen or so, I think that was the ballpark figure that we had anticipated. In that regard, there was basically an upward trend, this is the strength of our underlying performance.

Now, the AOP margin as of the first half was 15.8%, and then in the second half, because there are some uncertainties, to what extent do we factor in such uncertainty was the question. As of this point, the numbers that we present is the must-achieve number.

Roughly speaking, the second quarter, in many regards, the price pass-throughs, we were able to achieve this quite swiftly. Because the traits of our company, we have agility, we were able to agilely pass on the prices.

The raw materials prices are coming up, and there's a timing difference of about 6 to 3 months. The inventory benefits are still manifesting themselves.

Towards the second half of the year, downward pressure on the margin we have to anticipate that. As it turns out, on a full-year basis, 15.8%, I think, is something that we are well positioned to achieve.

As far as revenue is concerned, the demand recovery is not something that we anticipate, that's what I explained in the heat map. We would like to fulfill our responsibility to supply, and also improve the market share, and thereby secure a margin by working on cost control.

That's the basic approach that we would like to take. Second, regarding the China market, to be honest with you, in the second quarter, on a local currencies basis, TUC was quite difficult, quite tough.

First and foremost, as Ikeda-san mentioned, the real estate market in China, we are seeing signs of bottoming out already in China. However, the bread and butter TUC business, this relates to consumer goods, slow-moving consumer goods.

Those repainting demand, this is quite affected by the consumer sentiment, quite significantly. Overall, when we look at many different statistics, rather than spending, people are now focused on savings.

People are quite cautious right now, and they are not spending money as much as before. Eventually, I think people will start repainting their homes or whatever, but at this point of time, the situation remains very tough.

If I may add one more comment, in light of this situation, including relationship with the distributors, we are not going to push ourselves towards them. We would like to make sure to keep a closely monitored market inventory so that we'll make sure that we can sell well.

For that purpose, we are conducting many different promotions in the third quarter. Third quarter is a very important quarter, some investments are anticipated in the third quarter, the margin will come down slightly in the third quarter according to our current anticipation.

As I mentioned during the first quarter results presentation, that basically price pass-on will be done on many different fronts, and we have been able to do this to some extent. Although the sentiment is not really favorable, if we raise the prices recklessly, that could have negative impact.

Therefore, we would like to keep a margin discipline, and the mid-teen level, 15% or so level of margin is something that we would like to achieve. This is something that we aim for for the full year.

That is the current situation. That's all for now.

Some peers are lowering their prices, but is there any movement on the side of price discipline? In large cities, for example, investment in Tier 1, are there any different colors in different regions?

In short, it's not that the market has a very rigorous price discipline. We are always in the red ocean.

Our positioning is not to be involved in price competition. We continue to sell at reasonable prices, especially during the past several years, that's the discipline that we have been using.

Actually, in the second quarter, from 0 to 2 are the main markets, and Tier 3 to 6, it is not a big difference. All in all, the situation is tough.

For us, high single-digit minus for volume, mid to high single-digit. As to price, it's not the lowering prices, but it is a mix of activities.

In some cases, the product sales taking enough margin with the current price level. In our view, from region to region, there's not much difference.

All the regions are in difficulties.

Thank you for your explanation. Thank you.

Enomoto-san, hello.

Separately from the other results, the acquisition offer for the decorative side, AkzoNobel, there was a merger proposal. I understand that deal is gone, am I right?

Also about the background, AkzoNobel, I think that you made the proposal for acquisition many times. What is so attractive about European coatings business?

I think you have been involved in the various M&A activities, what is the background for those activities? Also M&A cost, I think, is included, and this particular deal is also included?

Enomoto-san, as to M&A, I do not make any comment on M&A, whether it is done or not included. There's no comment to make here other than that we have already publicized.

As to M&A cost, although we are very serious associated with Akzo, the cost is included, reflected.

Sorry, thank you.

If I push myself to say the comment, the M&A will not be our goal. It should be at right value, right asset, low-risk asset.

If there's any opportunity there to buy such an asset, we will pursue such opportunity. That's it.

Of course, there's a counterparty. Sometimes the deal will go through, sometimes it won't.

That stance remains unchanged. Sometimes the deal is publicized before the deal is done, so that is associated with the difficulties, but within our expectation.

Thank you.

Thank you for that explanation.

Hello, this is Shintani from Nikko Securities, SMBC. Thank you.

Hello, Mr. Shintani.

Now, regarding AOC, the sales, I'm looking at page 25, 12% plus 12% on the FIC basis. That's a 2% double-digit increase.

Can you talk about the demand situation? Three months ago, by and large, you said there are not many differences, but there was a slight recovery, and also infrastructure was taking a lead.

Can you talk about the second quarter performance and towards the second half, what's your projection? Maybe there might not be so many changes, but if you can give some color on that point.

Thank you. Regarding AOC, the overall picture is that I think if excluding currency basis, double-digit growth and revenues, 800 or so was already achieved.

That is the resilience of AOC. That made a strong contribution to this resilience of AOC.

That's another thing that I would like to comment here once again. Regarding the second quarter, not only the Middle East, but depending on the market, the one-time demand is also there.

It's good that they have been able to capture those demand, but this double-digit revenue growth, whether that is going to be sustained or not, it's too early for us to determine that at this point of time. The full-year outlook remains to be very subdued or conservative, please be advised of that.

Regarding the segment, the construction market overall remains weak. That remains unchanged.

The infrastructure is so-so good. That's the difference of the color, and that remains really unchanged from the first quarter.

The AOC strength is that they have a broad range of customer base, and they've been able to offer a value-add service to these different customers. In that regard, they have a very sustainable revenue stream, and depending on the pent-up demand manifesting very gradually, at least, as we have mentioned before, we are seeing signs of bottoming out, and that will continue to be the case going forward.

For the second quarter, I think the local people said that it's too well, that my peers said so, maybe too good is also the manifestation of their underlying performance, but I think the situation is like that. Please be advised.

Thank you very much. If that is the case, then in terms of level, the level is so-so okay.

As for the second half of the year, what is the margin you are expecting? The cost increase is going to kick in from other regions, but what about AOC?

Can we have the same outlook for AOC as well? Also for Europe, the business system's penetration is something that you've been working on, can you talk about the progress of that effort?

In association with the Middle East situation, the impact from Middle East is the least pronounced in the United States. The logistics expenses, including these, and also it's on the inflationary trend in terms of costs, we cannot be too optimistic.

However, towards the second half of the year, we are not expecting a significant impact from that element. Demand, I think, is a bigger impact towards the second half of the year.

As for Europe, to some extent, the Middle East impact may become stronger in Europe compared to the Americas, but I think the bulk is much higher with the Americas in terms of the business composition, the business system as well, we are making steadfast progress. In that regard, on a net-net basis, in totality, margin remains to be robust, I believe.

However, at the risk of repeating myself, AOC, in the case of AOC, the price changes is done dynamically, it's not a simple margin. We are rather focused on the contribution margin and volume.

The contribution margin per unit, this is something that we keep an eye on, and if you multiply that with the volume, what comes in as a total profit. These are the things It will not that result in a big erroneous number, but if you just look at that, I think you may misunderstand the underlying performance and capability of AOC.

Thank you.

Thank you very much for detailed explanation. Thank you.

Hello, here is Takahashi of Nikkei. Can you hear me?

Takahashi-san, hello. Yes, I can.

Thank you. I have one question.

Page 5, the revision of the forecast. If it is already explained, maybe I would like to have some clarification.

Revenue, adjusted operating profit, it's all revised up. As to net profit, it is because of the cost it is revised down, it is one-off expense, what is it?

As you can find here, M&A-related cost or the Dulux Europe, the business transformation cost, especially the latter accounts for big part. Net total basis, 12 to 13 billion yen or so, that is for the business transformation cost.

The DuluxGroup Europe, it's mainly France, the business transformation there, three things roughly: headquarters cost containment, and the closing of one factory, and distribution stores are being reviewed. In France, for many years, the market recovery has been expected, but it seems that the market is not recovering.

With that assumption, we need to be more profitable, and for that, we are making some transformation, and the cost is associated with that transformation. Thank you.

Just for information, for this one-off expenses, at the AOP level, this is not included in the adjusted operating profit. At the operating level, the profitability does not factor in such one-off expenses, please be advised of that, just for the sake of confirmation, I mention this.

This is Omura from UBS Securities. Thank you very much.

Thank you. Hello, Mr.

Omura.

I have a question relating to the overall picture. This earnings results, you achieved a good profit level, and I think the business environment is significantly changing.

In 2022, when the Ukraine war erupted, I think the situation deteriorated quite significantly. Compared to that timeframe, I think the naphtha prices changed this time around quite significantly.

When the environment changes significantly, you've been able to achieve this good results. What are the factors that allowed you to deliver these very favorable results?

Maybe there are some unique elements to you, and maybe there might be some changes in the environment. Can you give us the big factors that allowed you to deliver good results?

What industry did you say?

The automotive industry, for example, if they changed their pace of price increases, is there anything that was noteworthy?

Are you talking about B2B business?

I'm talking about the industry that you are facing or interfacing.

Interfacing industries. You're talking about our customers.

Yes, that's correct, yes.

All right, thank you very much for the question. To be honest with you, if this is going to be an apple-to-orange comparison, back in 2022, well, the business portfolio, the corporate portfolio was different.

It was immediately after the COVID-19 outbreak started to finish, and also the situation in Japan was better, but the raw material costs started to increase back then already, and our price hikes efforts were belated. Therefore, as far as the elements related to our company in each region, the volatility of raw materials was not existent before, but that started to permeate into the entire organization, nowadays we are able to take preemptive actions.

With inflation becoming the norm in the current situation, if you are the price leader especially, you have to work on price hikes in a steadfast fashion, and against these cost increases, we have to be sensitive. We're not really insensitive in the past, but after going through those ups and downs in the past, now as a corporate trait as Nippon Paint, this sensitivity has become more broadly and deeply penetrated across the organization.

Now when we look at the access from the various industry vectors or the industry segments, depending on the customer, the sensitivity is different from customer to customer. We cannot generalize everything.

If it's decorative paint, we cannot say that they are strong against the price hikes, because if it's China, that will have a very negative impact, we cannot be frequent in price hikes. There are some other regions where it's easier for us to raise the prices.

This relates to our brand strength, our market position, we have to make a comprehensive judgment whenever we do the price hikes. When it comes to the B2B customer, we have a stronger accountability, and also we have to fulfill our responsibility to supply products, because that relates to our relationship of trust.

Based on the relationship of trust, it's all about whether we can gain the understanding of customer. In Japan, for example, back in 2022, inflation was not real at all, but compared to 2022, I think the acceptability of cost increases has become more generous, I think, compared to before.

To be honest with you, the acceptance is different, the sensitivity is different. We can never say that price increases is easily done in this market.

Did I answer your question?

Yes. Specifically, as far as Japan is concerned, automotive industry, can we say that the price increase is to be done based on a formula?

Have you been able to implement the price increases earlier than expected, if you can comment on anything?

Automotive, if I talk about automotive industry, you'll be able to pinpoint the customer, I won't comment on that.

Understood. Thank you.

On a related note, the inventory assets for this year has this term increased by 26 percentage point compared to the last fiscal year. Have you done anything to secure raw materials?

A significant increase, also the revenue is also increasing, inventory increase is not something that strange or awkward in that regard because revenues is also increasing. As I said, we have to fulfill our responsibility of supply, we have leveraged our capability and build up our raw material inventory, we have a higher level of inventory for the raw materials, and that's reflected in the number.

Thank you.

For example, in China, for example, generally speaking, the TUC, at the year-end, we build up the inventory generally, and then, in terms of working capital, this tends to go up, but we do not think that this is a level that is problematic for us yet. Thank you.

Thank you.

Okazaki-san, hello.

More than 5 years have passed since you became Co-President. What are you struggling with, What kind of issues are you working on, Wakatsuki-san?

I read the integrated report very interestingly, and how to raise the equity valuation, of course, we need to make more efforts on our side, but what are the business issues or challenges that you are thinking about? Could you please talk about it?

For example, M&A is not going very well, or China, or it depends on business environments, the mid to long-term picture, any progress or anything else?

Maybe next time, you can hear me complaining about things over drink. Okazaki-san,

yes, often, "what keeps you awake at night?" the frequently asked questions by investors.

On operational side, the Wee-san is supervising it very firmly, actually, there's no concern for me personally. The cash is being created, and we have this strength as a group of such businesses.

The capital allocation, especially for M&A, what is the target, what should be the valuation, that is one of the big jobs for me. As a result, share price.

What keeps you awake at night?

In my surprise, what way can we operate in a very firm, but aggressive way, and how can it be visible for external audience, and that is another big challenge for me. Other than that, for each quarter, what do we think very good might not be so satisfactory from an analyst point of view, I wonder why sometimes.

For the first quarter, second quarter, we have very good results, but some people might find it unsatisfactory when it comes to full-year result. 162 yen is now coming down to 157 yen on FX side, it's a big fluctuation.

Towards the second half, we do not expect demand to contract, we think we will be okay, but we do not expect all the regions to go as we have expected. As a whole, Nippon Paint's strength, especially what we have described on page 2, my biggest issue is how this picture can be well understood by external people.

Thank you for sharing your issues and concerns with me again. Thank you.

Hello, can you hear me?

Yamada-san, hello.

It's been a long time since we last met. We have heard several comments already and also in the past meetings, but based on your current plan, it looks as though that the second half will be profitability will be declining compared to the first half.

Is it because you are having a conservative assumption? Given the situation of the world today, maybe this cannot be helped, I think.

On your real feeling, what is the performance on a neutral basis, if you can comment on that? Or maybe you may have to readjust the numbers if that is the case, but then if that is the case, then what's your projections for the next fiscal year based on your cautious projection?

We may have to anticipate a slowdown in the next fiscal year, is there anything that you can comment on at this point of time? That will be appreciated.

There are not so many things that I can comment on at this point of time, because this is the only official statement that we can share with you at this point of time. Based on the track record of the past, basically, under-promise and over-deliver is the basic posture of the company.

Whatever we announced as a number is a must-achieve number for us. Of course, the business environment remains very tough, but how to overachieve the numbers we stated is the mandate that we have to work on.

If we are able to overachieve this in the current guidance as a Japanese company, not many companies are delivering this magnitude of number, I think this is worthy of praise to some extent. Also, for the second half of the year, the second half of last year, that was a timing when the raw material costs has come down significantly.

As a general trend, because this industry has a high raw material cost ratio, of course with price pass-throughs and cost control, we are trying to absorb these cost increases, but as a major trend, the 2026 second half versus the 2025 second half are looking at different directions. How do we overcome this is the question that we have to address.

It's not going to be an easy journey, it's not going to be an easy comparison, please be advised of that.

Understood. Thank you very much for that.

What's your outlook for the next year?

We'll comment on that in February next year.

Thank you. Because

macro environment is very uncertain, and to give guidance farther down the road might not be so appropriate. That said, on the mid-term basis, what we have told about mid-term targets, that we would like to stay committed both to the top line and bottom line, we'd like to achieve those targets.

Thank you. For

this fiscal year, the market conditions are very tough, and to achieve those numbers because the possibility is that the macro environment gets worse. Anyway, we will do our best.

Thank you.

Here's Nakada of JPMorgan.

Hello, Nakata-san. Hello.

One-off expense for the European transformation of business, I would like to ask questions. 12 to 13 billion yen is expected, and it would not be included in the adjustment, but the next year on that it will have some impact for cost improvement side.

How much the contribution to profit next year? Why did you make the decision at this time?

Because we have been waiting for the market to recover, but as Enomoto-san asked, is it because of the pipeline issues, that's why you have to start to transform European business?

12 to 13 billion yen, it is combined with other one-off expenses, at this moment, it's a very rough estimate, I cannot talk about the breakdown of that number. I will not make any comment on that.

In the first half alone, 6.6 billion was booked, and the rest will be booked in the second half. As to timing, it has nothing to do with M&A.

A lot of restructuring measures, of course, are about the people, we need to be prudent. As I have said repeatedly, just to wait for the market to recover will not be good enough.

The DuluxGroup's board, myself and Wee-san are sitting, decision was made at that board meeting. It has nothing to do with M&A.

Thank you. 7.3 billion yen is booked.

The impact for the improvement, the expense will be decreased or the fixed cost decrease that can be seen next year and onwards?

Yes, of course. On a total basis, that we are still reviewing it, but at least and we expect to have some the benefits, that's why we are using those expenses.

Hello, thank you very much. This is Umebayashi from Daiwa Securities.

Hello to you.

Hello. Thank you very much.

NIPSEA other than China, Indonesia, Turkey, and so forth, and Malaysia, Singapore, and Thailand included, this time around, the performance was quite favorable, it seems. The top line is showing a very strong growth.

Of course, depending on the region, there might be different reasons for this. Compared against China, of course, the market conditions generally are better in these markets, but as a result of this, the initiatives that you can implement, how are they different from the China market?

Is it easy for you to implement price increases in these markets, maybe? Compared against China, what's the reason that these performance of non-China market of NIPSEA performing well?

Thank you.

Thank you very much for that. The participants, it's 5:00 already.

Since there are some other questions, I would like to continue with this meeting if there are any unanswered questions. I would like to first address Mr.

Umebayashi's question. As he rightly pointed out, the markets other than China perform very well.

Indonesia, for example, as we mentioned during the last earnings call, the first quarter and the first quarter, they performed very well. Compared against the peers, the performance was not so good because the timing of the price hike was different.

In May, we implemented price increases, therefore that's the reason why the April was good. The acceptability of our price increases, to be honest with you, compared to other regions, these markets are better accepting price increases, I believe.

There are because of two reasons: one is that the market itself, the acceptance of premium products, I think, for example in India, Indonesia, is getting better. That's one thing.

On the other hand, when it comes to Turkey, volume is not increasing at all. In that environment, the market is going through inflation, we are making up for the volume decrease or non-increases with the cost increases or the price increases.

It's not really reasonable to compare versus China. I think the characteristics of each market are different, quite different compared to China.

Within ourselves, the non-China NIPSEA markets, I want you to understand we are to understand these markets very well. What is the best way to disclose these markets is something that we are giving thoughts to.

Thank you.

Thank you, understood. Thank you very much for your comment.

Thank you.

Thank you very much, everyone. Again, that we had a very strong second quarter, and as was asked in the question, that with agility, we are successfully dealing with the current situation.

Our products and coatings and their prices and the pass-through on prices, I would not say easy to do that, but that we did make a successful execution. The market continues to be uncertain, and we would like to achieve or go more than the goals and targets.

Thank you very much.