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Management Policy/Management Strategy

Purpose: Our Shared Identity

The Nippon Paint Group has set the “Purpose” on the occasion of its 140th anniversary of founding.
We set the Purpose that defines shared identity of the Nippon Paint Group, while respecting the autonomy of our partner companies based on their own Mission, Vision, and Value. Based on the shared values, diverse people at our partner companies around the world will collaborate based on strong bonds toward realizing Maximization of Shareholder Value (MSV).

Purpose
Prosper Together We prosper with absolute integrity and fairness by fulfilling our obligations and maximizing our commitments to all stakeholders (consumers, customers, communities, employees, suppliers, governments).
Powerful Partnerships Our unique approach between our partner companies is based on respect, trust, empowerment and accountability. These partnerships form a powerful catalyst for innovation and growth.
Science + Imagination The unlimited power of Science + Imagination, leading to ground-breaking technology and useful innovation that preserve, enhance and enrich the world.



Our Ultimate Objective: Maximization of Shareholder Value (MSV)

Our ultimate objective is to create wealth through Maximization of Shareholder Value (MSV)

Maximization of Shareholder Value (MSV)

MSV is the ultimate objective of Nippon Paint Group management. The MSV concept is different from a “shareholder primacy” approach in that we seek to create wealth with the aim of maximizing the residual shareholder value that remains after fulfilling our duties to customers, employees, business partners, and society.

The illustration above shows stakeholder relationships to profit and loss items—customers and revenue, suppliers and SG&A, employees and labor costs, financial institutions and interest expenses, and government and taxes. MSV is predicated on first fulfilling our duties to each stakeholder group. These duties encompass legal contracts and social and ethical responsibilities as well as the concept of sustainability.

MSV seeks to maximize the value that remains after fulfilling these duties, and reward shareholders who accepted the risks and invested in our company. The MSV approach recognizes that our stakeholder duties are finite and that the value we produce beyond that amount belongs to shareholders. MSV focuses on the maximization of medium- and long-term shareholder value, rather than pursuing short-term shareholder value.

Maximize EPS (Earnings Per Share) and PER (Price-to-Earnings Ratio) to achieve Maximization of Shareholder Value (MSV)
EPS (Earnings Per Share)
Wee Siew Kim
Representative Executive Officer & Co-President
Wee Siew Kim, Representative Executive Officer & Co-President
  • Primarily responsible for EPS maximization
  • Oversees global business operations
  • Extensive management experience/ Proven track record as NIPSEA CEO
× PER (Price-to-Earnings Ratio)
Yuichiro Wakatsuki
Representative Executive Officer & Co-President
Yuichiro Wakatsuki, Representative Executive Officer & Co-President
  • Primarily responsible for PER*1 maximization
  • Oversees corporate management and M&A
  • Extensive capital markets/ M&A experience

*1 PER=Price/Earnings Ratio: Market capitalization/ Profit attributable to owners of parent

Important indicators of our MSV performance are earnings per share (EPS) and the price-to-earnings ratio (PER). As the CEO of the NIPSEA Group, Wee Siew Kim guided the group through annual profit growth of over 10% for 12 years from FY2009. Wee's focus at the Nippon Paint Group will be on overseeing the worldwide operations and to maximize EPS by growing both revenue and profitability. Yuichiro Wakatsuki will apply his wealth of experience and knowledge in the capital markets and M&A to maximize PER by raising expectations in the capital markets. Wakatsuki will be in charge of overall corporate matters and seek to leverage M&A to spur further growth for the Group. As just described, we have a division of responsibilities. However, we will make all executive decisions together and will be jointly responsible for the overall management of the Group.



Our Business Model: Asset Assembler

Nippon Paint is a unique Japan-based "Asset Assembler" with MSV as its sole mission

We have adopted a business model in which we, with a smaller headquarters at the holding company (NPHD), assemble assets focused on attractive markets in the paint and adjacency arena through M&A, while driving autonomous growth of the existing Group partner companies*, resulting in strong growth with limited risk. We call it the Asset Assembler model.

*Name of consolidated subsidiary companies of Nippon Paint Holdings

feature1 1. Focused on paint and adjacencies with significant market opportunities
  • Paint and adjacencies have significant growth opportunities, driven by population growth, per-capita GDP growth, and urbanization. We have considerable expertise and knowledge in these areas.
  • SAF*1(USD60.0 bn*2) and CC*3(USD71.5 bn*4) also have attractive market size.
feature2 2. Attractive risk-return profile of paint and adjacency arena
  • Strong brand and high market share raise entry barriers, leading to solidification of leading market position.
  • Paint and adjacencies markets are characterized by local production for local consumption, allowing for our autonomous and decentralized model to minimize PMI risk.
feature3 3. Japan domicile enhanced competitive strengths
  • Ability to finance at low interest rates in Japan, which has a stable currency and stable market, based on long-term relationships with banks.
  • Attractive Japanese capital markets, which have stable legal system and high liquidity in TSE.
feature4 4. An assembly of talented management and strong brands
  • Management of partner companies have deep understanding of market features in every region and are well versed into MSV, and can fully utilize their capabilities based on our autonomous and decentralized business model.
feature5 5. Advanced governance
  • Independent Directors comprise majority of the Board of Directors (8 out of 11 board members).
  • Ensuring protection of minority shareholders interests with MSV as a shared mission with our major shareholder.

*1 SAF: Sealants, Adhesives, Fillers
*2 Source: Fortune Business Insights
*3 CC: Construction Chemicals
*4 Source: ReportLinker

On top of strong organic growth, we assemble assets with strong brand and excellent management through M&A, effectuating accelerated growth with limited risk.

Sustainable Growth Model as Asset Assembler

The key element of this model is that excellent management teams pursue autonomous growth in the Nippon Paint Group and exploit the technological strengths, distribution networks, purchasing capabilities, and financing capabilities of the Nippon Paint Group platform, rather than relying on initiatives of the headquarters. This will allow us to accumulate expertise in various areas and generate synergies as well as to attract new partners to the Nippon Paint Group.
By focusing on the paint and adjacencies markets, which are growth markets with the ability to generate sustainable earnings and cash, the Asset Assembler model allows us to accelerate growth with limited PMI (Post Merger Integration) risk involving M&A.

Asset Assembler Schematic Diagram

Our Management Structure: Autonomous and Decentralized Management

Creating synergies through trust-based collaborations with partner companies

The autonomous and decentralized management is our unique approach to foster organic collaboration and cooperation among partner companies in Japan and overseas and to promote autonomous business growth based on a decentralized model, guided by the Group’s common Purpose.

Autonomous and decentralized management

Our mainstay decorative (architectural) paints business features local production for local consumption. For this reason, NPHD exerting blanket control over the Group’s wide palette of businesses would not be effective. Conversely, providing a platform for our Group companies to share and learn from each other is the most effective way to generate Group synergies.

We adopted an autonomous and decentralized management approach to foster organic collaboration and cooperation among partner companies in Japan and overseas and to promote autonomous business growth guided by the Group’s common Purpose. NPHD plays a governance role for the Group, including appointing and dismissing Group partner company CEOs and overseeing financial strategy, but the individual companies are responsible for executing their own autonomous initiatives to create synergies among the Group’s partner companies.

Our aim is to encourage and facilitate our partner companies to create synergies with other Group companies and new additions to the Group to pursue new growth opportunities, reduce costs through joint procurement, acquire human resource talent, and share best practices to improve their businesses.



Value Creation Model: Our Basis for Achieving Maximization of Shareholder Value (MSV)

Pursuing Maximization of Shareholder Value (MSV) based on autonomous and decentralized management with Group partner companies around the world

The Nippon Paint Group Value Creation Model




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