Medium-term Management Plan
Released March 5, 2021
Nippon Paint Group New Medium-Term Plan (FY2021-2023)
Outline of Medium-term Management Plan
Setting a medium-term milestone towards our long-term goals
Policies for formulating
|Formulating the Medium-Term Plan through proactive involvement of our partner companies|
With a focus on maximization of our Group’s comprehensive power to ensure the feasibility of the plan, this Medium-Term Plan was formulated through involvement of our partner companies in the formulation process to create a business plan of the Nippon Paint Group.
|Setting a shared “Purpose” of our Group|
We set the “Purpose” that defines shared “Identity” of the Nippon Paint Group and respects the autonomy and accountability of our partner companies.
|Setting a Medium-Term milestone based on the long-term perspective|
We always look five to ten years into the future and update our management goals according to changes in actual business circumstances. This Medium-Term Plan is formulated to set a three-year milestone.
Regional and Business Strategy
Further solidify our strong growth platform and proactively address new challenges
Revenue growth projections by business
Revenue growth projections by region
Regional and business strategy (overview)
|High-growth markets such as Asia (including China) and Turkey: Grow profits through revenue expansion while maintaining margins||In the world’s largest market of China, we will leverage our strong brand power, distribution network, and alliances with real estate developers to increase our market share and achieve revenue CAGR of approx. 10%. While we expect marketing and other expenses to increase in the ever more competitive environment, we will maintain profit margins by growing revenue.|
In Turkey, where population and GDP growth is expected, we will use a multi-brand strategy to increase our market share. We will also strengthen the ETICS business and expand into adjacent markets outside Turkey to achieve revenue CAGR of 10-15%.
|Stable growth market of Oceania: Secure revenue and profit growth outperforming the market growth||In Oceania, we expect a market expansion mainly in the home renovation and repair markets based on the stable GDP growth and population growth and will speed up our growth in these markets. We will also work to enhance the customer engagement by using digital platforms for achieving revenue CAGR of approx. 5% and operating profit margin improvement.|
|Japan: Make investments in updating and streamlining production facilities with a medium to long term perspective. Secure competitive advantage and improve productivity while creating new demand||In Japan, we see growing opportunities for water-based paint in the decorative paints market due to an increase in environmental awareness. In addition, demand is increasing in new product categories such as anti-viral paints. As key strategies for this segment, we will expand the product lineup and strengthen sales and promotion activities for anti-viral products. Our focus will also be on promoting the automation of production using DX. By taking these actions, we will aim to achieve a revenue CAGR of approx. 5% and operating profit margin improvement in the Japan segment as a whole.|
|Automotive coatings: Assuming recovery of automobile production, aim to increase market share and acquire new customers by capturing customer needs on a global basis and reinforcing technological strengths and quality assurance system||According to the results of various surveys, automobile production will recover to the pre-COVID-19 level in FY2023. In the automotive coatings business, our Group will leverage the marketing capabilities of NIPSEA China and the technological strengths in Japan for rapidly increasing our market share in China. We will steadily strengthen our competitive edge also in Europe and the U.S. By taking these actions, we plan to achieve revenue CAGR of 5-10%.|
|Paint-related businesses: Expansion of business into China and the other Asia region by applying the experiences of DuluxGroup’s SAF*1, CC*2 and Betek Boya’s ETICS*3||The paint related business is expanding worldwide with the growing customer need, we see this market as promising. Our Group can use Powerful Partnerships to sell DuluxGroup’s Selleys brand adhesives, Betek Boya’s ETICS and other paint-related products using our Group’s distribution networks.|
Demand for paint-related products is growing also in the Project segment of NIPSEA China’s decorative paints business. Therefore, we will leverage our existing distribution networks and partnerships and make strategic investments to grow in this market category with the goal of achieving revenue CAGR of 5-10%.
Details of Regional and Business Strategy
Expanding business opportunities through ESG initiatives for sustainable growth
Further commitment to SDGs and ESG
Aggressively pursue new partners to join our Group taking advantage of the growth potential of the paint market and stability of cash flows
Overview of our M&A strategy
Using our strong cash generating capacity to strengthen our financial base and secure funds for growth with M&A and business investment
Boosting top-line growth to create a virtuous cycle of rising market share and profit margins
The FY2023 financial targets in the New Medium-Term Plan are based on ongoing expansion of our business portfolio to generate organic growth. The targets are challenging, but we believe our Group’s insatiable desire for growth will enable us to achieve them. The core strategies in the plan aim for both organic and inorganic growth through M&A (See “M&A Strategy” on page 79).
Establishing sustainable growth will require aggressive M&A along with capital expenditure and R&D investment for future growth. We will leverage our strong ability to generate cash flow to create the funds for these investments in growth.
Investments to increase marginal profit from revenue growth will be a specific focus. We will also seek to boost operating profit by increasing market share, which will allow us to increase prices at strategic points in time and reduce costs through bulk procurement of raw materials. Over half of revenue goes to raw material costs; as such reducing the raw materials contribution cost (RMCC) ratio significantly contributes to improving the operating profit margin. We will seek to thoroughly control costs by using our global raw materials procurement capability and our considerable revenue flow, which is roughly one trillion yen annually, to leverage the economies of scale.
Released in May 2018
Review of N-20
Establish an unparalleled market position in Asia and accelerate growth globally
Quantitative targets and results
Achievements and Challenges of N-20
|Achievements||Steady reinforcement of the organizational foundation|
for future sustainable growth
|Challenges||Improve sustainability and profitability|
over the medium- to long-term
Revenue Growth and Stock Price Trends
Dynamically evolved our business portfolio and operating regions through cross-border M&A and acquisition of 100% ownership of Asian JVs