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Driving Sustainable EPS Growth by Enhancing
Earnings Quality Through People and Systems
“Safe and sustainable EPS growth” — a core pillar of MSV
At the heart of Maximization of Shareholder Value (MSV) lies the pursuit of safe and sustainable EPS growth. While year-on-year earnings expansion is important, what matters more is the strength and durability of the underlying business foundation — how consistently earnings can be generated and how long they can continue to compound. This, in essence, defines what I consider the “quality of earnings.”
Over the years, we have enhanced shareholder value through our autonomous and decentralized management approach, harnessing the strengths of each region and business segment. This is a proven approach refined through years of disciplined execution. However, autonomy alone does not create value. For delegated authority to function effectively, it must be supported by capable talent and robust systems that enable early identification of risks and timely, appropriate responses.
Our enduring strength lies in the combination of trust in people and systems that inspire trust. By empowering high-quality management teams with autonomy and resources, while aligning them around MSV, we reinforce a resilient platform for safe and sustainable EPS growth.
AOC: Bringing the Asset Assembler strategy to life
AOC was the first clear and tangible demonstration of how our Asset Assembler strategy works in practice. The acquisition was not simply about securing a high-quality asset at an attractive valuation. Its true significance lay in bringing into the Group an exceptional management team and well-established business systems with a proven record of consistent performance.
Through due diligence, it became clear that AOC was not only an excellent company, but one underpinned by disciplined mechanisms executed consistently over time, closely aligned with our own philosophy. AOC already had a management team we could trust, and under our Group, it was well positioned to scale further. At the same time, it created learning opportunities for other partner companies.
More broadly, AOC represents what we consider a “system asset”: with capabilities, practices, and know-how that can be shared across the Group. While we respect partner autonomy, we also believe that superior methods and systems should be leveraged for collective benefit. In this sense, AOC embodies our Asset Assembler approach.
Expanding into adjacencies and new geographies
Our organic growth is not confined to paint and coatings alone. We view paint and coatings together with adjacent categories as an integrated growth domain. While core markets are expected to continue expanding steadily, relying on them alone may limit our ability to further elevate investor expectations. This is why we are cultivating adjacencies as our next growth engine.
The strengths underpinning this strategy are threefold: strong brands across multiple markets; extensive distribution networks that enable portfolio expansion; and technology capabilities rooted in chemistry.
A clear example is SAF (Sealants, Adhesives & Fillers). The addition of the Selleys brand through DuluxGroup in 2019 and the acquisition of Vital Technical in Malaysia in 2021 meaningfully advanced this strategy. Vital Technical expanded a business that had previously been more B2C oriented by opening new avenues of growth in B2B, project, new build, and industrial applications. This demonstrates how a bolt-on acquisition can enhance long-term growth potential rather than simply add revenue.
Importantly, Vital Technical was not a marketed asset. It was acquired through sustained relationship building and trust developed by local management over time, underscoring our distinctive, ground-up approach to growth.
Organic growth for us also encompasses exports, localization of operations, selective bolt-on acquisitions, and geographic expansion. Ultimately, growth potential is shaped not only by market conditions, but by the ambition and judgment of our people on the ground — their ability to identify opportunities and act decisively.
The true value of our China business: Earnings quality over cycles
I fully recognize investor concerns surrounding our China business, particularly given challenges in China’s property market. However, the business should not be assessed solely through short-term news flow. Rather, the focus should be on how it has operated within this environment and how the quality of its earnings has continued to evolve.
Since 2000, NIPSEA China has been a central growth driver for the Group. From 2011 to 2020, the business executed three consecutive three-year plans, doubling revenue every three years. This performance was achieved not simply through favorable market conditions, but through disciplined expansion into new segments, the introduction of higher value-added products, and sustained gains in market share. As a result, the business today is fundamentally different from what it was in 2010.
This adaptability is evident in initiatives such as the Building Materials Delivery (BMD) model and the Painters’ Club initiative. Even as the slowdown in the new build market persisted, NIPSEA China anticipated the structural shift towards repainting early on and steadily developed its systems and painter networks across major cities. While the pace of market expansion has been slower than initially expected, the underlying direction remains unchanged.
The resilience of NIPSEA China, despite the sharp contraction of the TUB segment — previously accounting for approximately 25% to 30% of the decorative paints business — demonstrates that earnings are diversified and not dependent on a single source. Other segments absorbed the impact over a relatively short period, underscoring the robustness of the underlying business foundation. This portfolio resilience is a clear expression of what I define as the quality of earnings.
Extending the horizon of growth beyond China
NIPSEA China’s growth potential is not confined to China alone. In addition to decorative paints, the business has a well-established industrial platform, particularly in automotive coatings. As Chinese automotive OEMs accelerate their global expansion, there are clear parallels with the overseas growth of Japanese OEMs from the 1970s onward. In a similar way, NIPSEA China is well positioned to grow alongside these customers, supported by established relationships in China, technology capabilities spanning Japan, Europe, and China, and access to the Group’s global operating footprint.
Beyond China, our growth opportunities continue to broaden. Following the acquisition of Betek Boya in Türkiye in 2019, the NIPSEA Group strengthened its platform by combining Betek Boya’s capabilities with the expertise of its Malaysia Group, extending its reach into North Africa and, from Kazakhstan, further into Central Asia. Betek Boya has since evolved into the Türkiye Group — an independent organization entrusted with responsibility for a wider region. This reflects our approach to people: identifying opportunities and empowering management teams we trust.
In India, alongside our core decorative paints and automotive refinish businesses, we are building additional pillars of growth through a series of bolt-on acquisitions in industrial coatings. While these initiatives may not deliver immediate results, they are deliberate investments to position the Group across multiple long-term growth vectors.
Autonomous management, collaboration, and the role of systems
A key source of the Group’s competitiveness lies in combining autonomous and decentralized management with a deeply embedded culture of collaboration. Knowledge is shared across the Group not only in times of challenge, but also in the normal course of business, across areas such as raw material procurement, pricing strategy, cost management, digitalization, and the expansion of SAF. In some cases, expertise developed in NIPSEA China is applied in other regions; in others, successful models from elsewhere provide valuable insights for China. This collaboration enhances resilience, particularly during periods of disruption.
Within the NIPSEA Group, we have embedded “VITALS” as six behavioral principles that bring our Lean for Growth culture to life. Among these, teamwork is especially important. What allows us to remain decentralized while operating as one cohesive organization is a shared North Star: MSV. Anchored by this common objective, each region and business can act autonomously while maintaining alignment in direction and values.
This philosophy also shapes how we approach AI. We do not view AI simply as a tool for improving efficiency, but as a broader management challenge that requires us to rethink how we engage with people and how work is organized. Initiatives such as the Job Crafting Center within the Japan Group reflect our commitment to supporting our people through change, ensuring that technological adoption translates into sustainable value creation.
AI has the potential to enhance capabilities across manufacturing, supply chains, sales, R&D, and productivity. However, meaningful value emerges only when the necessary foundations are in place: well-designed processes, accumulated data, integrated systems, and people equipped to use them effectively. Ultimately, it is not the technology itself that matters most, but how it strengthens our people and organization.
Closing perspective
Looking ahead, we will continue to build safe and sustainable EPS growth through both organic and inorganic initiatives, underpinned by strong people, robust systems, and a management system that balances decentralization with collaboration. I encourage investors to look beyond short-term fluctuations and focus instead on earnings quality and the replicability of growth over time. We remain committed to demonstrating both through consistent execution.
