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KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.01
May 22, 2017
FY2016 Financial Results Briefing
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.02
1. Status of the Kansai Paint Group
2. Financial Results & Forecasts
3. Business Overview
4. Regional Overview
5. About the fiscal 2017 business forecast
6. The 15th Mid-Term Business Plan Progress
FY2016 Financial Results Briefing
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.03
Status of the Kansai Paint Group1
OverseasJapan
Consolidated
Kansai Paint Sales 973 (986)(Automotive, Industrial/Decorative, Sales)
Kansai Paint Marine 122 (141)(Marine , Sales)
Kanpe Shoji 73 (75)(Industrial, Sales)
Kanpe Hapio 63 (66)(Decorative, Manufacturing)
KNPL(India) 747 (658)(Decorative/Automotive, Manufacturing)
KPAL(South Africa) 282 (293)(Decorative/Automotive, Manufacturing)
TKP(Thailand) 127 (142)(Automotive/Industrial, Manufacturing)
KABS(Turkey) 163 (172)(Automotive/Industrial, Manufacturing)
Other 10 companies 25 in Asia, 22 in Africa, and 43 other companies
Equity method affiliates
Ogi Shokai 211 (203)(Decorative/Automotive, Sales)
Eru Mizuho 44 (45)(Industrial, Sales)
Hunan Xiangjiang Kansai (China) 446 (393)(Automotive, Manufacturing)
PKAF・US (United States) 144 (160)(Automotive, Manufacturing)
Cosco Kansai Paint (Shanghai, China) 65 (106)(Marine & Protective, Manufacturing)
12 other companies 12 in Asia, 4 in Africa, and 10 other companies
(Unit : 100M yen)
■ Main Group companies and their sales results Figures in parentheses are FY2015 results
Consolidated sales inFY2016: 330.2 billion yen
Founded : May 1918
Capital : 25.6 billion yen (as of March 31, 2017)
(Number of Shares Issued : 272 million)
Number of Employees : 14,828 (as of March 31, 2017)
● Automotive● Industrial● Decorative● Marine & Protective● Other Paints
By business(Consolidated)
38%
25%
26%
6%5%
● Japan● Asia● Africa● Europe● Others
By region(Consolidated)
41%
43%
5%2%
9%
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.04
Ordinary Profit (100M yen)
Financial Results (consolidated)Sales (100mn yen)
● Automotive ● Industrial ● Decorative ● Marine & Protective ● Other Paints ● Other Businesses Ordinary Profit EBITDA
■ Full Fiscal Year
Financial Results & Forecasts2
● Operating CF ● Investing CF ● Financing CFCash Flows (consolidated)
EBITDA
255
-161
-65
319
-195
-96
314
-147
-148
291
-970
602
395
-180
-76
104
-219
147
251
-134
-34
183
-142
-47
Operating CF
Investing CF
Financing CF
2013 2014 2015 2016 20172011 20122010
0500
10001500200025003000350040004500
0
100
200
300
400
500
600
700
Cash Flows (100M yen)
-300-200-100
0100200300400500600
3,204
354
502
3,493
377
502
3,281
397
596
3,302
400
531
4,050
490
683
2,565
214
346
2,940
283
422
2,369
235
305
Sales
Ordinary Profit
EBITDA
20162013 2014 2015 20172011 20122010
※EBITDA was calculated by adding and subtractingfrom profit before income taxes and minority interests
Sales
Ordinary Profit
EBITDA
2016
Year-on-year change (%)
2017 forecast
+0.6
+0.8
△10.8
+22.6
+22.4
+28.5
-1000-900
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.05
Sales (100M yen)
0
100
200
300
400
500
600
700
379
471
546 561 561
635
373
645
○ Auto production increased in India, China, and Turkey.○ ASEAN was flat growth, sluggish.▷ India to expand, ASEAN to recover▷ Accelerate efforts to break into or expand business with European and American automakers.
Automotive Coatings Overseas (excluding auto refinish)● India ● Thailand ● Indonesia ● Taiwan ● Malaysia ● China ●Turkey ● South Africa ● Others
Consolidated Sales (excluding auto refinish coatings)
Business Overview - 1. Automotive (new vehicles)3
○ Auto production numbers: 9.36 million vehicles (+1.9% year-on-year)▷ Auto production numbers: 9.40 million vehicles forecast (+0.4% year-on-year)
Automotive Coatings in Japan (excluding auto refinish) Consolidated Sales (excluding auto refinish coatings)● Sales Auto production numbers in Japan
From FY2010, sales of two-wheeled vehiclesand auto parts have been counted in Industrial.
From FY2010, sales of two-wheeled vehiclesand auto parts have been counted in Industrial.
Auto Production Numbers (1,000)Sales (100M yen)
0
100
200
300
400
500
600
700
0
2000
4000
6000
8000
10000
12000
421 413 422463 471475 460473
8,9949,555 9,912
9,1889,5919,267 9,4009,360Sales
2016Year-on-year change (%)
2017 forecast
+0.4 ▲2.8
Sales
2016Year-on-year change (%)
2017 forecast
+0.0 +14.9
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.06
Auto Refinish
Industrial
● Japan ● Overseas Sales (100M yen)
Consolidated Sales
Consolidated Sales
Sales (100M yen)● Japan ● Overseas
Business Overview - 2. Auto Refinish/Industrial3
From FY2010, sales of two-wheeled vehiclesand auto parts have been counted in Industrial.
○ Sales expansion of eco-friendly paint was promoted in Japan.○ Sales expansion was promoted in Africa.▷ Accelerate breaking into and developing efforts in emerging countries.▷ Sales from Helios to newly contribute to our financial results (after 2Q 2017)
0
50
100
150
200
250
0
200
400
600
800
1000
1200
141
200 206 196 194211
172
240
645
750819 834873
819
671
1105
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
Sales
2016Year-on-year change (%)
2017 forecast
▲1.4 +23.9
Sales
2016Year-on-year change (%)
2017 forecast
+1.9 +32.4
○ Demand for automobile components recovered in Japan.○ Demand expanded mainly in emerging countries such as India.▷ Expand market share by strengthening our competitiveness and exploring untapped markets.▷ Attract demand of Japanese manufacturers abroad as well as from new clients.▷ Sales from Helios to newly contribute to our financial results (after 2Q 2017)
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.07
Decorative
Marine & Protective
● Japan ● Overseas Sales (100M yen)
Consolidated Sales
Consolidated Sales
Sales (100M yen)● Japan ● Overseas
Business Overview - 3. Decorative/Marine & Protective3
0
200
400
600
800
1000
1200
0
50
100
150
200
250
193 191
224208
199190188
215
460
771832 867
935
832
612
1135
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
Sales
2016Year-on-year change (%)
2017 forecast
+4.1 +31.0
Sales
2016Year-on-year change (%)
2017 forecast
▲7.3 +3.4
○ Continued demand expansion in India○ Demand stagnated due to economic slowdown in South Africa.▷ Increase demand in business deployment regions and further expand our business deployment regions.▷ Sales from Helios to newly contribute to our financial results (after 2Q 2017)▷ Performance of the Sadolin Group to newly contribute to our financial results (expected after 3Q 2017)
○ Weak domestic shipbuilding market○ Protective coating business expanded in the ASEAN region.▷ Obtain demand related to the Tokyo Olympics.▷ Break into, develop, and expand the protective coating market in emerging countries.
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.08
Kansai Nerolac Paints Ltd. (KNPL)
Kansai Plascon Africa Ltd. (KPAL)
●Automotive ●Industrial ●Decorative ●Other Paints Ordinary Profit EBITDA
●Automotive ●Industrial ●Decorative ●Other Paints Ordinary Profit(before amortization of goodwill) Ordinary Profit (after amortization of goodwill) EBITDA
Financial Results & Forecasts of KNPL in India
Financial Results & Forecasts of KPAL in South Africa
Regional Overview - 1. India and South Africa4
Ordinary Profit (100M yen)EBITDA
Ordinary Profit (100M yen)EBITDA
Sales (100M yen)
0100200300400500600700800900
1000
020406080100120140160180200
404501 550
658 747695
421
930
50 49 54
92
116
78
54
145
64 59 62
193
135
91
65
157
Sales (100M yen)
0
100
200
300
400
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
○ Auto output by major clients increased.○ Strong demand continued in the decorative field (limited impact from abolishing high denomination notes).▷ Demand expected to continue expanding in both the automotive and decorative fields.▷ Plan to establish production structures to meet continued growing demand.
○ Weak demand due to economic stagnation○ Increased materials costs due to the weak South African rand and transient costs.▷ Further vitalize the promotion of sales activities mainly in the decorative field.▷ Improve profitability by resolving transient costs and adjusting prices.▷ Performance of the Sadolin Group to newly contribute to our financial results (expected after 3Q 2017)▷ In the medium-to-long term, break into markets in untapped regions and countries, and expect an increase in financial results due to economic growth in Africa
Sales
Ordinary Profit
EBITDA
2016
Year-on-year change (%)
2017 forecast
+13.5
+26.4
△30.0
+24.5
+24.8
+16.0
Sales
Ordinary Profit
EBITDA
2016
Year-on-year change (%)
2017 forecast
▲4.2
ー
ー
+42.7
ー
ー
-40-30-20-100102030405060
05
-6
-37
0
1512
217
321293 280
400395348
10
19
4
-29
10
282429
37
23
-4
35
5245
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.09
Region Overview - 2. Asia, and Europe4
Financial Results & Forecasts of Consolidated Subsidiaries in Asia
Financial Results & Forecasts of Consolidated Subsidiaries in Europe
Ordinary Profit (100M yen)EBITDA
Ordinary Profit (100M yen)EBITDA
Ordinary profit in Asia
Breakdown ofordinary profit
Breakdown ofordinary profit
Ordinary profit in Europe
● Sales Ordinary Profit EBITDA
● Sales Ordinary Profit EBITDA
0100200300400500600700800
020406080100120140160180200
0100200300400500600700800
0102030405060708090100
Sales (100M yen)
Sales (100M yen)
46 4860
47
6772
30
56
402
501
589 566
662595
366
610
91142
191 178 168160105
540
20175.6billion
20164.7billion
● Turkey● Others 2017
3.2billion20167billion
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
○ Auto production recovered in China, demand for motorbikes increased in Indonesia.○ Impact of currency conversions was large in all countries.▷ Auto production to recover in the ASEAN region
○ Auto output increased in Turkey.▷ Sales from Helios Group to newly contribute to our financial results (after 2Q 2017)
Sales
Ordinary Profit
EBITDA
2016
Year-on-year change (%)
2017 forecast
▲3.9
▲20.1
▲17.7
+7.7
+18.9
+38.2
Sales
Ordinary Profit
EBITDA
2016
Year-on-year change (%)
2017 forecast
▲5.3
+36.3
+17.0
+221.4
+332.4
+461.9
● Thailand● Indonesia● Taiwan● Malaysia ● China● Other Asian countries
5868
9276
107100
38
105
5 7 996
32
5 79
101713
8
84
13 15
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.10
Regional Overview - 3. Other Consolidated and Equity method affiliates4
Ordinary profit in Other Consolidated
● Japan ●China ●Europe ●The United States ●Others
Profits from equity method affiliates (simple aggregation)
Ordinary Profit (100M yen)EBITDA
○ Auto production numbers increased in Japan.○ In China, sales increased, and sales to non-Japanese automakers enjoyed increased market share.▷ Profits from Polisan in Turkey to newly contribute to our financial results
Profits from equity method affiliates (100M yen)
● Sales Ordinary Profit EBITDA
0
10
20
30
40
50
60
02468101214161820
-10
0
10
20
30
40
50 42
1522
4142
35
5
45
Profits from equitymethod affiliates
2016Year-on-year change (%)
2017 forecast
+2.5 +7.5
Financial Results & Forecasts of Other Consolidated
Sales (100M yen)
5 7 9 10
26
84
50
○ U.S. Paint became a consolidated subsidiary (after 3Q 2016).▷ Market share expected to increase in the U.S. industrial field.
Sales
Ordinary Profit
EBITDA
2016
Year-on-year change (%)
2017 forecast
+156.8
+49.4
+705.4
+92.3
+66.7
+118.0
0 0 000
10
1
5
000 000 000000000
101010
111
555
0 0 000
5
1
3
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
2013 2014 20162015 2017(full fiscal
year forecast)
201220112010
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.11
About the fiscal 2017 business forecast5
Sales
Materials and costs
Ordinaryprofit
(Domestic)
(Overseas)
Compared to fiscal 2016 business results
Although auto production numbers are expected to exceed the previous year’s level, promotion of local production will be a factor for a decrease in sales revenue. A gradual increase in sales revenue is expected in other fields.Sales are expected to remain unchanged compared to the previous yeardue to promotion of sales expansion and price adjustments.
We expect demand to stagnate temporarily in some regions due to a weakening economy and effects of political uncertainty. However, revenue is expected to continue growing due to growing demand mainly in emerging countries. We expect demand to grow especially in India, which will be the engine behind revenue growth. Sales from the Helios Group in Europe and Sadolin Group in East Africa are expected to newly contribute to financial results.
Materials costs are forecast to remain on a rising trend due to the rise in oil prices since the previous fiscal year. We aim to improve profitability by continuing to promote cost-reduction efforts. In Japan in particular, we will continue our efforts in cost reduction, including improvements in productivity.
Ordinary profit is expected to grow by 9.0 billion yen from the previous year.Parent-only ordinary profit is estimated to decrease by 2.6 billion yen, consolidated ordinaryprofit from domestic businesses is expected to decline by 300 million yen, while consolidated ordinary profit from overseas businesses is seen growing by 10.7 billion yen.Investment gain on equity method is forecast to grow by 300 million yen, but this is expected to be offset by dividend income and other factors, resulting in a 900 million yen increase.
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.12
ROE Adjusted ROE
Ordinary Profit (100M yen)EBITDA
The 15th Mid-Term Business Plan Progress - 1. Performance plan6
* Adjusted ROE = (Net income + goodwill amortization)/ shareholders’equity
More than10%8.4
9.5
9.010.1
*Figures for FY 2015 exclude extraordinary income resulting from the sales of land in India.
(%)
Sales (100M yen)
2018201720162015(Plan)(Forecast)(Actual)(Plan) (Actual)
Sales Ordinary profit EBITDA
3281 3400 3302 4050 4700
6
8
10
12
2018201720162015
◯ The plan for FY 2016 failed to be reached due to the large impact of the temporary slowdown in growth of emerging economies and exchange conversions.
◯ The sales plan for the final year of the 15th Mid-Term Plan has been revised upward from 420 billion yen to 470 billion yen by incorporating M&As carried out in FY 2016.
◯ We will aim to achieve ROE of more than10% with the increase of EBITDA.
◯ Adjusted ROE* that excludes the impact of goodwill amortization has been added to indicators.
0
1000
2000
3000
4000
5000
0
100
200
300
400
500
600
700
800
596531
683
3281 3400 3302 4050 4700
397 400
420
490
600
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.13
The 15th Mid-Term Business Plan Progress - 2. Priority measures and progress etc.6
Main contentPrioritymeasures Progress up until now etc.
○ Acquired shares of the Helios Group in Europe○ Acquired shares of the Sadolin Group in East Africa○ Acquired shares of Polisan Turkey, and accepted share allocations from third parties
○ Acquired shares of U.S. Paint in the U.S.○ Acquired shares of Saudi Industrial Paint in Saudi Arabia○ Acquired shares of Sancora Paint Industries in Malaysia○ Planned to establish a joint venture in Nigeria and Kenya○ Acquired pipeline-internal-painting technology from Mirodur in Italy
○ Promote measures to develop businesses for non-Japanese clients and to boost shares
○ Promote the entry and development of the European and U.S. automakers
○ Expand sales of functional products such as plaster paint and insect repellent paint
○ Issue convertible bonds○ Establishment of headquarters’ functions to start in FY 2017
1. Sharing and promoting the resource utilization within the group
2. Establishing the headquarters’function and building the organization
3. Integrating current regions into seven global regions and establishing a supervisory control function
1. Increasing earning power by expanding market share
2. Reducing costs through efficiency and optimization
1. Expanding and strengthening our businesses in existing markets
2. Entering into new markets and regions
Strengthening the Group’s Management Foundations
Increasing Profitability
Accelerating Globalization
Each initiative was conducted based on the three themes set as priority measures.
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.14
(1) Overview of target company
(2) Overview of purchase, target and others
Acquiring shares of the Helios Group in Europe‒ Full-scale entry into the European coatings market ‒
○ Company name: Helios Group ○ Business size (2015) Sales of approx. 386 million euros (approx. 46.8 billion yen) Operating profit of approx. 34 million euros (approx. 4.1 billion yen)○ The Helios Group is a coatings maker whose strengths lie in industrial paints○ The Group operates in various countries in Central, Eastern and Western Europe as well as Russia.
○ Capital contribution ratio: Kansai Paint has 100% (consolidated subsidiary)○ Purchase price: 572 million euros (approx. 70 billion yen)○ Full-scale entry into the European coatings market○ A source for procurement of materials and ingredients in Europe○ Global utilization of highly competitive technology and product categories such as authentication products for railcar wheel makers and coatings for motors, for which demand is expected to grow in the future.
The 15th Mid-Term Business Plan Progress - 2. Priority measures and progress etc.6
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.15
New Production Plant in Uganda SADOLIN Merchandising in a Major Dealer in Uganda
(1) Overview of target company
(2) Overview of purchase, target and others
Acquiring shares of the Sadolin Group in East Africa‒ Strengthening our business foundation in the East African market ‒
○ Company name: Sadolin Group○ Business regions: Uganda, Tanzania, Kenya, etc.○ Business lines: Manufacture and sale of construction and industrial coatings○ Business size (2015) Sales of 85.5 million US dollars (approx. 9.6 billion yen), operating profit of 13.7 million US dollars (approx. 1.5 billion yen)○ An excellent corporate entity with the top share in the coatings market of the East African Community
○ Capital contribution ratio: Kansai Plascon Africa Ltd. (consolidated subsidiary of Kansai Paint) has 100%○ We are attempting to further solidify our business foundation in the East African market as well as expand and develop our business in Africa overall.
The 15th Mid-Term Business Plan Progress - 2. Priority measures and progress etc.6
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.16
Finally-
Kansai Paint contributes.● We will assist in the development of society and mankind through the coating business and continually endeavor to be a company indispensable to society.
● We will strive to contribute to solving problems facing society such as the need for environmental conservation, as well as creating a better world.
● We will address changes and aim to build and maintain the company’s credibility in society.
The global coating business is a growth industry.In this industry, we will aim to improve our cash generation ability and further disseminate coatings throughout the world.
Furthermore,
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.17
Forecasts of financial results stated in this document are forecasts based oncurrently available information that includes potential risks and uncertain elements.
Therefore, actual financial results may differ from the forecast figures.
KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.