Innovation & SustainableGrowth

-The Japanese Coatings Industry & Nippon Paint Holdings Group-

Tetsushi Tado

Chairman, Japan Paint Manufacturers Association (JPMA)

President & CEO, Nippon Paint Holdings Co Ltd

Paris, France

February 1, 2019

World without Color & Colorful World

2

Today’s topics

Recovery & Innovation: The Japanese Coatings Industry

1. Paint Industry in Japan

2018 update from JPMA*

2. NPHD** Group Innovations

* Japan Paint Manufacturers Association

** Nippon Paint Holdings

3

Today’s topics

Recovery & Innovation: The Japanese Coatings Industry

1. Paint Industry in Japan

2018 update from JPMA*

2. NPHD** Group Innovations

* Japan Paint Manufacturers Association

** Nippon Paint Holdings

4

5

About JPMA

Our Mission

1. Research on the industry-environmental management and safety measures.

2. Set up domestic/international standard of product quality.

3. Collaborate with IPPIC & APIC on global issues.

4. Publish JPMA Standard Paint Colors.

5. Enhance cooperation among paint manufactures, distributors ＆ application sectors.

•Regular Members: 99 (95 manufacturers & 4 associations)

•Supporting Members: 175 (Raw materials & equipment suppliers)

Standard Color Chart

6

2018 Topics of JPMA

1. Established JIS on waterborne anti-corrosion.

2. Achieved totally lead free.

3. Launched JIS Standard for solar reflectance paints to Vietnam & Indonesia.

4. Started for heat insulation roof-top paints.

5. Collaborations with IPPIC & APIC on global basis.

6. Newly introduced JPMA Standard Paint Colors 2019 edition K includes matt colors.

7. The first “High Functional Paint Exhibitions” succeeded in Osaka & Tokyo.

Paint Shipment Trend 2000 – 2017 in Japan

7

0

1000

2000

3000

4000

5000

6000

7000

8000

0

50

100

150

200

250 800

700

600

500

400

300

200

100

Shipment Volume (million tonnes) Shipment Value (Billion JPY)

Source: JPMA

25% decrease in Volume, but Price

Recovered

2 mil. tonnes

level

1.5 mil. tonnes level

8

Industry in Japan by value

20,6%

9,1%

9,0%

5,7%

Others,

13,8%

Manufacturing

Transportatio

n

Machinery

Chemical

Foo

dStee

l

29,2%

12,8%

7,4%6,8%

5,9%

5,4%

5,4%

3,4% 7,2%

Chemical Industry

Plastic

s

Others Medicine

6.0%

Paint

Source: Japan Chemical Industry Association (JCIA)

9.1% of Manufacturing total

—a presence of paint industry

Japan & Global segment mix by value

9

25

2516

8

16

Japan Global

Decorative

Industrial

Others

45

30

12

3

12

Decorative

Industrial

Others

Market size: 146 billion USD

Source: 2016 JPMA statistics Source: 2017 Orr & Boss (%)

Market size: 6.3 billion USD

(%)

B to B

50%B to B

45%

Automotive

Ship

Automotive

Ship

Paint Shipment by types

10

Big Shift to Water-borne Paints

57%36%

7%

Solvent Water Borne Non-solvent

Solven

tWater

borne

Non-solvent

47%42%

11%Non-solvent

SolventWater borne

Year 2000 Year 2017

Water borne: +6pt

Solvent: -10pt

Overseas Production of Japanese Paint Companies

11

Source: JPMA

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

US EU China India SE Asia Other Asia Others

CAGR 19.5%20 times volume

Oversea Production: Twice of Domestic

3.2

(million tons)

76%

India

&

Chin

a

Refurbished JPMA office!!Joint project with paint contractors & distributors

Promotion of Interior Coatings

12

Before AfterBefore After

Refurbished JPMA office!!Joint project with paint contractors & distributors

The Japanese Paint Industry facing issues

13

Shrinking

MarketLabor

Shortage

How can JPMA lead to improve this

situation?

✓Development of:➢ Value-added Products

➢ High Performance Paints

➢ Interior-Paint market

✓ Improvement of:➢ Productivity

➢ Efficiency

➢ Work Environment

Paint Market Outlook

14

Concerns:

⚫ Increase of “Raw material prices”

⚫ Increase of “Geopolitical risks”

Expectations:

⚫ Boost paint demand for:

✓ 2020 Tokyo Olympic/Paralympic

✓ Osaka Expo 2025

⚫ Last-minute demand before tax increase

Today’s topics

Recovery and Innovation: The Japanese Coatings Industry

1. Paint Industry in Japan

2018 update from JPMA

2. NPHD Group Innovations

15

16

Company overview

Nippon Paint Holdings

Headquarters in Osaka

P aid-in C apital JP Y 78,800 m illion

F iscal year-end E nd of D ecem ber

S ales (C onsolidated) JP Y 605.3 billion

E m ployees 20,257

O verseas business

operations

27

countries & areas

As of the end of December 2017

The first paint manufacturer in Japan

Current position: No.1 in Asia, No.4 in the world

17

18

Recent Change #1

FY2017

Sales by region: Strong business structure based in growing market, Asia

< Shift of sales mix by region >

Japan

29%

China

38%

Other Asia

19%

US &

Europe

14%

Japan

72%China 12%

Other Asia 5%

US & Europe

11%

FY2014

1. Enforced existing businesses

2. Implemented M&A to capture growing demand in Asia

and to achieve growth in the Americas & Europe

19

Recent Change #2

FY2014 FY2017

Sales by business: Focus on decorative paint, which is highly growing & profitable

segment

<Sales mix by business segment>

Automotive

coatings

38%

Decorative

paint 19%

Industrial

coatings

19%

Other

24%

Automotive

coatings

25%

Decorative

paint

51%

Industrial

coatings

12%

Other

12%

Decorative paint ＋50％

1. Growth strategies in existing business

2. M&A to achieve further growth of largest market―the decorative paints business

20

NPHD Group Medium/Long-term Corporate Plan

【FY2018-20 Medium-term Management Plan】

Moving

towards our

goal

Future Pull

- Net sales target 750 billion yen in 2020

- Maximization of value for all stakeholders

⇒ Maximization of shareholders’ value

Win to be the top leader

in all business domains & regions

The leading company committed to

continuously create new value

【Our envisioned goal in 2030】

19

411

2921

38

714

35

25

53

1218

41

29

0

10

20

30

40

50

60

China India Other regions in

Asia

Americas Europe

47

9

3221

58

11

46

26

73

13

60

32

0

20

40

60

80

100

Decorative Automotive coatings

(OEM)

Industrial Coatings Others (Auto refinish,

marine, etc) 21

Global paint & coatings demand

◼ Graph

Left 2010 actual

Center 2015 actual

Right 2020 forecast

*Source: IPPIC

<Business Segments>

(Billion USD)

Main drivers are demand in China & decorative

<Regions>

(Billion USD)

22

2016

11.9%

2016

17.1%

2020

24.3%2020

15.5%

Automotive Project

2016

30.2%2020

40.0%

House interior

Acquire dominant position in China & Asia:Further expansion of market share in China

NPHD Group’s value creation: Maximization of shareholders’ value

23

Shareholders

ESG management = Implement “Co-existence & Co-prosperity”

Rewarding career

（meaningful work）

ServicesDiverse

workstyle

sColor

sSafety/security

Growth

opportunitie

s

Revitalize regions

VOC/CO2

reduction

Environment

al

preservationInvestment

returns

QCD

Busines

s growth

Comfort

Governanc

e

Hazardou

s

substance

reduction

Employees

Localcommunities

Customers

Business

partners

ESG: Vision & Goals

24

Theme Envisioned Goal

Governance

Strong governance

system for

competing with

the world

EnvironmentValue creation by

environmental

initiatives

leads to expand

businesses &

earnings

Diversity Gathering

Diversified

Knowledge

by wide range HR

＜Current Issues＞

1. Invention & prevalence of eco-friendly products

2. Proper management of chemicalsubstances

＜Goals in 2020＞

Globally

1. Development & prevalence ofeco-friendly products

2. Proper management & reduction of

chemical substances emission

25

0

50

100

150

200

250

300

溶剤 水性

VOC(g/㎡)

0

5

10

15

20

25

30

35

溶剤 水性

PRTR(g/㎡)

Own research

Eco-friendly products: Water-borne paints

Water-borne anticorrosive paints:

Enables to minimize adverse impacts to the environment

Air pollution

(Reduction of T-VOC)Toxic substances

(Specified substances under PRTR

Law)

PRTR substances:

NONE

Reducedapproximately

90%

Solvent Water borne Solvent Water borne

26

0

20

40

60

80

100

120

CO2 VOC

排出削減量

Solvent type

Water-borne

Eco-friendly products: Water-borne paints

Water-based 3 Wet: Reduces CO2/VOC emissions by shortening manufacturing

processes

Emission by different type of coatings

Toyota：JPN TAXI

Honda: VEZEL

Own research VOCCO2

2018年10月22日技術情報協会講演

The World First！！

“Block”Refractive transparent

heat shilled paints

Window

Coating Film

Visible Light

Sunlight

Infrared Light

近畿化学会 審査委員会 22th Mar 2017

0

40

80

120

160

200

0%

10%

20%

30%

40%

50%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CO

2 e

mis

sio

n (

kg)

Energ

y s

erv

ing E

ffect

Survey at Laboratory

Energy saving

effect 30%

CO2 Emission

Reduced by

1,000kg

Tremendous Energy Saving Effect

“Relax”Japanese paper taste

paints “Washi”

30

What is “Washi” ?

◆Unique texture ◆Strong feature ◆Japanese traditions

–traditional Japanese paper taste-

31

Thank you for your attention