FY2016 second quarter Financial Results Briefing · Page.03 KANSAI PAINT CO.,LTD.-200-100 0 100 200...

KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.

Nov 21, 2016

FY2016 second quarterFinancial Results Briefing


FY2016 second quarterFinancial Results Briefing1. Status of the Kansai Paint Group

2. Financial Results & Forecasts

3. Business Overview

4. Regional Overview

5. FY 2016 business forecast

6. The 15th Mid-Term Business Plan Progress

KANSAI PAINT CO.,LTD.KANSAI PAINT CO.,LTD.Page.01

By region（Consolidated）

By business（Consolidated）

38％

25％

25％

7％5％

43％

41％

7％9％

Status of the Kansai Paint Group1

OverseasJapan

Consolidated

Kansai Paint Sales 986 （1,022）（Automotive, Industrial/Decorative, Sales）

NKM Coatings 141 （111）（Marine , Sales）

Kanpe Shoji 75 （79）（Industrial, Sales）

Kanpe Hapio 66 （64）（Decorative, Manufacturing）

KNPL（India） 658 （695）（Decorative/Automotive, Manufacturing）

KPAL（South Africa） 293 （395）（Decorative/Automotive, Manufacturing）

TKP（Thailand） 142 （163）（Automotive/Industrial, Manufacturing）

KABS（Turkey） 172 （185）（Automotive/Industrial, Manufacturing）

Other 10 companies 21 in Asia, 20 in Africa, and 3 other companies

Equity method affiliates

Ogi Shokai 203 （236）（Decorative/Automotive, Sales）

Eru Mizuho 45 （57）（Industrial, Sales）

Hunan Xiangjiang Kansai (China) 393 （391）（Automotive, Manufacturing）

PKAF・US (United States) 160 （164）（Automotive, Manufacturing）

Cosco Kansai Paint (Shanghai, China) 106 （119）（Marine & Protective, Manufacturing）

12 other companies 13 in Asia, 4 in Africa, and 9 other companies

（Unit : 100M yen）

■ Main Group companies and their sales results Figures in parentheses are FY2014 results

Consolidated sales inFY2015: 328.1 billion yen

Founded : May 1918

Capital : 25.6 billion yen (as of March 31, 2016)

(Number of Shares Issued : 272 million)

Number of Employees : 12,491 (as of March 31, 2016)

● Japan● Asia● Africa● Europe and　 the United States

● Automotive● Industrial● Decorative● Marine & Protective● Other Paints


The left graphs for each year are the second quarter figures


20142013 20152012201120102009 2016(full fiscal

year forecast)

20142013 20152012201120102009 2016(full fiscal

year forecast)

0500

1000150020002500300035004000

0

100

200

300

400

500

0500

1000150020002500300035004000

0

100

200

300

400

500

600

Ordinary Profit (100M yen)

Financial Results (consolidated)

EBITDA (consolidated)

Sales (100mn yen)■ Second quarter

■ Second quarter EBITDA (100M yen)Sales (100mn yen)

1,547

169

1,650

167

1,708

196

1,622

188

1,037

88

1,209

93

1,388

133

1,204

135

Sales

Ordinary Profit

20162013 2014 20152009 2011 20122010

1,547

258

1,650

224

1,708

254

1,622

253

1,037

123

1,209

147

1,388

193

1,204

171

Sales

EBITDA

2013 2014 2015 20162009 2011 20122010

Financial Results & Forecasts2

■ Full Fiscal Year　

3,204

354

3,493

377

3,281

397

3,400

420

2,224

226

2,565

214

2,940

283

2,369

235

Sales

Ordinary Profit

20162013 2014 20152009 2011 20122010

■ Full fiscal year

3,204

502

3,493

502

3,281

596

3,400

530

2,224

296

2,565

346

2,940

422

2,369

305

Sales

EBITDA

2013 2014 2015 20162009 2011 20122010

※EBITDA was calculated by adding and subtracting　from profit before income taxes and minority interests

● Automotive ● Industrial ● Decorative ● Marine & Protective ● Other Paints ● Other Businesses 　 Ordinary Profit　

● Automotive ● Industrial ● Decorative ● Marine & Protective ● Other Paints ● Other Businesses 　 EBITDA　


-200-100

0100200300

Cash Flows (consolidated)Cash Flows (100M yen)

● Operating CF ● Investing CF ● Financing CF

Financial Results & Forecasts2

■ Second quarter

■ Full fiscal year

255

-161

-65

319

-195

-96

314

-147

-148

335

-885

640

196

-77

-32

104

-219

147

251

-134

-34

183

-142

-47

Operating CF

Investing CF

Finacing CF

2013 2014 2015 20162009 2011 20122010

90

-95

-48

128

-51

-63

155

-90

-19

102

-626

788

79

-22

-21

13

-194

15

108

-88

-27

49

-100

-25

Operating CF

Investing CF

Finacing CF

2013 2014 2015 20162009 2011 20122010

-900-800-700-600

600700800

20142013 20152012201120102009 2016(full fiscal

year forecast)

　



0

100

200

300

400

500

600

700○ In India, year-on-year revenue rose due to increased auto production numbers of major clients.

○ In Indonesia, revenue fell year-on-year due to shrinking auto production.

○ In Thailand, revenue declined year-on-year despite signs of a recovery in auto production.

△ In the medium- to long-term, demand is expected to expand due to increases in auto production.

△ We will further accelerate efforts to break into or expand businesses with European and American automakers.

Automotive Coatings Overseas (excluding auto refinish)Sales (100M yen)

Business Overview - 1. Automotive (new vehicles)3

○ Due in part to the 2016 Kumamoto Earthquake, auto production numbers fell below previous-year levels, resulting in a year-on-year decline in revenue.

▷ In the second half of fiscal 2016, sales figures are forecast to suffer a slight year-on-year decline due to increased production aimed at recovering production declines caused by the Kumamoto Earthquake and from the effects of price adjustments despite increased auto output.

▷ Domestic auto production numbers for fiscal 2016 are forecast as 9.35 million vehicles.

Automotive Coatings in Japan (excluding auto refinish) Consolidated Sales (excluding auto refinish coatings)

0

100

200

300

400

500

600

700

0

2000

4000

6000

8000

10000

12000Auto Production Numbers (1,000)Sales (100M yen)



205 215170

219 218 227 227 218

421 413 422463 475 471 465465

530

3,8564,784

3,902

4,907 4,744 4,783 4,447 4,412

8,994 9,267 9,555 9,912 9,591 9,3509,1888,865

159192 183

208

268

379 373

471

546

288 303 287

635

561600

374

20 25 3015 20 2010 15 102014201520160102030

● India ● Thailand ● Indonesia ● Taiwan ● Malaysia ● China ●Turkey ● South Africa ● Others

● Sales 　Auto production numbers in Japan

20142013 20152012201120102009 2016(full fiscal

year forecast)

20142013 20152012201120102009 2016(full fiscal

year forecast)

Consolidated Sales (excluding auto refinish coatings)

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.


0

50

100

150

200

250

0

200

400

600

800

1000

■ Japan○ Amidst a slump in the market, we promoted sales expansion of products such as eco-friendly paint. As a result, revenue grew slightly year-on-year.

■ Overseas○ In Africa, revenue grew year-on-year on a local currency basis, despite low levels of economic growth.

▷ We will accelerate the breaking into and developing efforts in emerging countries.

■ Japan○ Revenue declined year-on-year due to the effects of a slowdown in demand especially for construction machinery.

△ We aim to expand market share by strengthening our competitiveness and exploring untapped markets.

■ Overseas○ In India, revenue increased year-on-year on a local currency basis due to increase in sales to Japanese manufacturers, among other things.

○ In Africa, revenue declined year-on-year due to fewer demand caused by a slowdown in the South African economy.

○ In every country, revenue decreased year-on-year due to the large impact of the currency conversion.

▷ We aim to attract demand of Japanese manufacturers shifting overseas as well as obtaining demand from new clients.

▷ In the second half of the fiscal year, sales from acquiring shares of U.S. Paint newly contributed to our financial results.

Auto Refinish

Industrial

Sales (100M yen)

● Japan ● Overseas

Consolidated Sales

Sales (100M yen)

Consolidated Sales● Japan ● Overseas

Business Overview - 2. Auto Refinish/Industrial3

7081

97104 102 101 100

64

141

172

200 206 211196

210

129

323 335 357409 417 434 412

207

645 671750

819873

818 845

444



20142013 20152012201120102009 2016(full fiscal

year forecast)

20142013 20152012201120102009 2016(full fiscal

year forecast)


0

200

400

600

800

1000

1200

0

50

100

150

200

250

193 188 191 190199

224210

198

98 95 95 92 95107 100101

■ Japan○ Despite the domestic construction market not making a full-scale recovery, business results remained at the same level as the previous year due to signs of a recovery in housing construction.

▷ We aim to expand sales by introducing and expanding sales of products that meet market needs.

■ Overseas○ In India, revenue grew year-on-year, thanks to economic growth.○ In Africa, revenue increased year-on-year on a local currency basis amidst economic slowdowns in South Africa and neighboring countries.

○ However, revenue plunged in various countries due to the currency conversion.

▷ We aim to increase demand in the business deployment regions, including India, Africa, Malaysia, and Indonesia, and to further expand our business deployment regions.

■ Japan○ In the marine field, revenue declined year-on-year. 　 This is because despite efforts to expand sales of fuel-efficient coating, the shipbuilding market was weak.

○ In the field of protective coating, revenue fell slightly year-on-year after the market did not achieve a full-scale recovery.

▷ We aim to obtain demand for investments into the Plan for National Resilience and the hosting of the 2020 Tokyo Olympics.

■ Overseas○ Consolidated sales remain unchanged overseas compared to the previous year despite business expansion in the ASEAN region.

▷ We aim to break into new markets for protective coating and develop the market amidst the establishment of infrastructure in emerging countries.

▷ Attempt to expand sales by using as a stepping stone the pipeline-internal-coating technology acquired from Mirodur.

Decorative

Marine & Protective

Sales (100M yen)

Sales (100M yen)

Business Overview - 3. Decorative/Marine & Protective3

237287

341384

445 453 427

220

460

612

771

935

832895

832

433

● Japan ● Overseas

Consolidated Sales

Consolidated Sales● Japan ● Overseas



20142013 20152012201120102009 2016(full fiscal

year forecast)

20142013 20152012201120102009 2016(full fiscal

year forecast)


0

200

400

600

800

1000

0

20

40

60

80

100

120○ In the automotive field, sales grew due to increased auto　 output by major clients.○ In the decorative field, sales grew due to the continuation of growing demand.

○ As sales grew, material prices remained steady, resulting in increased year-on-year profit.

○ Businesses expanded due to the factors above, but suffered impacts of currency conversion.

▷ Demand is expected to continue growing in both the automotive and decorative fields.

▷ We plan to establish production structures to meet continued growing demand.

▷ We will expand businesses in Sri Lanka, Nepal and nearby countries.

○ As the economy weakened in South Africa and neighboring countries, we continued to promote sales activities. As a result, revenue increased year-on-year on a local currency basis. But revenue declined on a yen basis due to the impact of currency conversion.

○ Profit declined largely affected by rising materials costs related to a weak South African rand and transient costs.

▷ In the second half of fiscal 2016, we expect to see strong demand in the decorative field and a recovery in sales due to promotion of sales activities.

▷ In the medium- to long-term, we plan to break into markets in West Africa and East Africa by first breaking into the Nigerian and Kenyan markets. We expect business expansion bolstered by economic growth in Africa.

Kansai Nerolac Paints Ltd. (KNPL)

Kansai Plascon Africa Ltd. (KPAL)

Sales (100M yen) Ordinary Profit (100M yen)

Financial Results & Forecasts of KNPL in India

Regional Overview - 1. India and South Africa4

162 201 200 208251

335364 37329 26

2327

39

5359

26

404 421501 550

695658

770

358

50 4955

78

92115

54

50



Financial Results & Forecasts of KPAL in South Africa

Sales (100M yen) Ordinary Profit (100M yen)

0

100

200

300

400

217

321348

395

293 300

0

10

20

30

40

10

19

2428

4

-11

-30 0

-6

-18

15

1215

-6

-20

1

6 86

1

-14-10

-20

169 176134

73

140 156

20142013 20152012201120102009 2016(full fiscal

year forecast)

20142013 20152012201120102009 2016(full fiscal

year forecast)

●Automotive ●Industrial ●Decorative ●Other Paints 　 Ordinary Profit

●Automotive ●Industrial ●Decorative ●Other Paints 　 Ordinary Profit


0100200300400500600700800

0102030405060708090100

○ In Thailand, profits increased year-on-year although auto production numbers did not achieve a full-scale recovery.

○ In Indonesia, profits rose year-on-year. In the automotive field, there was a reduction in the number of vehicles produced, and the decorative field was hurt by a weak Indonesian economy. However, sales in other fields rose.

○ In China, profit declined year-on-year. The automotive field saw the effects of a new tax incentive for compact cars, but demand for construction machinery weakened, and the company was hurt by exchange-rate losses.

▷ Despite the sluggish economic growth in each country, business expansion is expected from the increase in demand.

▷ Acquiring shares of Malaysia's Sancora Paint Industries newly contributed to the company's business performance.

○ In Turkey, profits increased year-on-year due to steady sales mainly in the automotive fields.

▷ Although there are concerns about the economy's future, demand is expected to continue to increase.

Ordinary profit in Asia

Ordinary profit in Europe andthe United States

Region Overview - 2. Asia, Europe, and the United States4



Sales ●Thailand ●Indonesia ●Taiwan ●Malaysia ●China ● Other Asian countries

Financial Results & Forecasts of Consolidated Subsidiaries in Asia

Ordinary Profit (100M yen)Sales (100M yen)

402

501

595

685

589565

366340

204 215

303 288 309283

192145

0

50

100

150

200

250

0

5

10

15

20

Sales ●Turkey ●Other countries in Europe ●the United States

Financial Results & Forecasts of Consolidated Subsidiaries in Europe and the United States

Ordinary Profit (100M yen)Sales (100M yen)

4 3 3

6

1

435

5

67

9 9

6

8

1196

149168

200188

215

10991

48

6783 91 96 94

6041

20

39 3033

2720

1629

46

30

48

7267

60

51

45

20142013 20152012201120102009 2016(full fiscal

year forecast)

20142013 20152012201120102009 2016(full fiscal

year forecast)


-505

101520253035404550

Regional Overview - 3. Equity method affiliates4

○ In Japan, profits dipped slightly on the year due to a decline in domestic auto production numbers.

○ In China, profit surged year-on-year as sales to non-Japanese automakers enjoyed increased market share due to sales growth among others.

○ In Europe and the U.S. auto production numbers remained steady in North America, but profit declined year-on-year due to intensifying competition.

▷ In China, despite a weakening in the container market, we forecast a profit increase year-on-year thanks to growth of automotive products for non-Japanese automakers.

▷ Profit from acquired shares of Tukey's Polisan newly contributed to financial results.

▷ In Saudi Arabia, profit from acquired shares of Saudi Industrial Paint newly contributed to financial results.

Profits from equity method affiliates Profits from equity method affiliates (simple aggregation)

Sales (100M yen)The left graphs for each year are the second quarter figures

15

22

35

42 41

48

58 11 9

21 19

25 21

50

20142013 20152012201120102009 2016(full fiscal

year forecast)

● Japan ●China ●Europe and the United States ●Others


About the fiscal 2016 business forecast5

Sales

Materials and costs

Ordinaryprofit

(Domestic)

(Overseas)

Compared to fiscal 2015 business results

In the automotive field, sales revenue is forecast to dip slightly in the full term. Although auto production numbers is expected to recover in the second half of the fiscal year and increase from the previous year, the price adjustments adversely affected results. In the marine and protective fields, revenue is forecast to slip due to a weak market trend. However, revenue is expected to rise in the industrial and decorative fields by promoting sales expansion. Overall, sales are expected to remain unchanged compared to fiscal 2015.

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.

Materials costs are forecast to remain stable despite a slight rise in the second half of the fiscal year. We aim to improve profitability by continuing to promote cost-reduction efforts.

--Ordinary profit is expected to grow by 2.3 billion yen from the previous year.--Parent-only ordinary profit is estimated to grow by 2.8 billion yen, consolidated ordinary profit from domestic businesses is expected to decline by 1.3 billion yen, while consolidated ordinary profit from overseas businesses is seen growing by 200 million yen.--Investment gain on equity method grew by 700 million yen, but this was offset by dividend income and other factors, resulting in a 100 million yen loss.


The 15th Mid-Term Business Plan Progress - 1. Performance plan6

Sales

Ordinary profit

3,281

397

Result

2015

Forecast

2016

3,400

420

Target

2018

4,200

600

■ Consolidated figures

0

1000

2000

3000

4000

5000

0

100

200

300

400

500

600

2018201720162015(Target)(Forecast)(Result)

sales ordinary profitSales (100mn yen) Ordinary profit (100mn yen)

(100mn yen)

The fiscal 2016 plan will remain at the initial estimate of 340.0 billion yen in consolidated sales and 42.0 billion yen in consolidated ordinary profit. In the last year of our 15th Mid-Term Business Plan, we aim to achieve 420.0 billion yen in consolidated sales and 60.0 billion yen in consolidated ordinary profit.


The 15th Mid-Term Business Plan - 2. Priority measures and progress etc.6

Main contentPrioritymeasures Progress up until now etc.

○ 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

○ Open the “Paint Gallery”

○ Issue convertible bonds○ start considering the construction of headquarters’ functions

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


Issuance of convertible bonds issued in Euro and yen with warrants attached

(Overview)

(Target)

(Goal)

The15th Mid-Term Business Plan - 3. Priority measures, progress etc.6

*Obtained a total of roughly 20.0 billion yen in shareholders' equity

Total value of company bonds

Conversion value

Interest rate

Maturity date

40.0 billion yen

2,663 yen

0.00%

17-Jun-19

Convertible bonds with warrant attached maturing in 2019

Convertible bonds with warrant attached maturing in 2022

60.0 billion yen

3,217 yen

0.00%

17-Jun-22

In addition to procuring growing funds at low cost to invest in the Group’s expanding businesses, we will maintain a strong and highly flexible financial foundation in order to engage in active strategic investments in the future.

1) Issue zero coupon

2) Set a conversion value surpassing the market value

3) Adding a soft call clause

4) Issue convertible bonds with new warrants with different time limits (maturing either in 2019 or 2022)

5) Pre-fix a conversion value for the convertible bonds maturing in 2019, then calculate and decide offer prices based on market trends such as investor demands

enables the minimization of interest costs.

expect effects to reduce the dilution of current net earnings per share after issuance.promote conversion to stocks, and enable the strengthening of shareholders' equity.

disperse the timing of dilution.

maximize the paid-in amount to our company, and enable the booking of profit or loss from issuance.


Acquiring shares of Polisan in Turkey -- Breaking into Turkey’s construction paint market --


Polisan

1） Overview of target company

2） Overview of purchase, target and others

○ Company name: Polisan Boya Sanayi ve Ticaret A.S

○ Location: Gebze City, Kocaeli Province, Turkey

○ Business size (2015):Sales of approximately 16.0 billion yen, operating profit of approximately 1.8 billion yen

○ Polisan is one of Turkey’s major paint manufacturers that has a strong presence in the field of decorative paint. It has an especially strong presence in interior paint.

○ The firm has a sales network all over Turkey.

○ Its business model focuses on consumers’ brand value under the concept of “Home Cosmetics.”

○ Capital contribution ratio: Kansai Paint has 50% (affiliated company accounted for by the equity-method)

○ Acquired shares and accepted allocation of new shares to a third party

○ Purchase price: approximately 11.5 billion yen (estimate)

○ Breaking into the Turkish decorative paint market

○ In addition to paint for automobiles and industrial paint, in which we already do business, we aim to further expand business by breaking into the market for paint for decorative purposes.

○ We are attempting to expand business by effectively using Polisan’s brand and sales networks.



The U.S. : Acquiring shares of U.S. Paint-- Strengthening the business structure in industrial and auto parts paint in North America --

U.S.Paint

1） Overview of target company

2） Overview of purchase, target and others

○ Location: St. Louis, Missouri, the U.S.

○ Business size (2015): Sales of approximately 3.7 billion yen, operating profit of approximately 900 million yen

○ U.S. Paint is a local paint manufacturer that mainly deals with paint for autoparts

○ Receives technology and know-how from Musashi Paint Holdings Co., Ltd. about paint for automobile interiors, then supplies paint to Japanese users.

○ Kansai Paint and its wholly owned subsidiary acquired shares

○ Capital contribution ratio: The Kansai Paint Group owns 51% (we turned U.S. Paint into a consolidated subsidiary)

○ Purchase price: 51million US dollars (approximately 5.3 billion yen)

○ Expand business for local users and Japanese firms by using Kansai Paint’s brand name recognition and credit worthiness.

○ Secure a manufacturing base in North America for industrial paint as well as autoparts paint



Opening the “Paint Gallery” -- More paint in our daily lives --

Under the brand concept of “More paint in our daily lives,” the “Paint Gallery“ will open within our company’s Tokyo office in June 2016 as a base where consumers (customers) can experience the information they need such as the special functions of paint, the texture, and the free expressions unique to paint. ｠This facility is used as a space to showcase the significance of paint and coating, their functionality and design to consumers through design companies, architectural firms, construction firms, paint companies and other firms.

FY2016 second quarter Financial Results Briefing · Page.03 KANSAI PAINT CO.,LTD.-200-100 0 100 200...

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Transcript of FY2016 second quarter Financial Results Briefing · Page.03 KANSAI PAINT CO.,LTD.-200-100 0 100 200...