Nippon Paint Holdings Co., Ltd. (4612) Earnings Call Transcript & Summary

We would like to start the conference call for briefing of financial results of the fourth quarter of fiscal year ending December 2024. [Operator Instructions] We have simultaneous interpretation in Japanese and English for this conference call. Wakatsuki-san, Tanaka-san, the floor is yours.

Thank you. Hello, everyone. I'm a Wakatsuki, Co-President of Nippon Paint Holdings. Thank you for coming out of your busy schedules today. I will give you a brief presentation on financial results for the fourth quarter of fiscal year '24 full year results for fiscal year '24 as well as guidance on fiscal year 2025. As per our custom, we have participation of mass media for the fourth and second quarter financial results briefing. I would like to mention a bit about the foreign exchange, second page. We applied the same rate for fiscal year '25 guidance as the actual rate for full year 2024. The 21.14 at the renminbi. So that's what I would like to mention at the onset. Page 3. This is the summary for the fourth quarter. Even in the face of less robust period towards the year-end, each region did its best. On a reported Tanshin basis, the revenue was JPY 416 billion, up 16.6% year-on-year. Operating profit was JPY 45.9 billion, up 23.6% year-on-year. There was a significant increase in both revenue and profit. It was record high revenue and operating profit on a quarter basis. The factors for increase in revenue was in paint volume, other Paint business, ForEx and new consolidation. Price and mix was flat overall. On the non-GAAP basis, excluding ForEx and new consolidation, the revenue had grown 5.4% and operating profit grew 14.6%. Decorative business in NIPSEA China's performed a 2% increase in revenue for TUC and 18% reduction in TUB. Operating profit for NIPSEA China overall had increased due to increase in the revenue and improvement of SG&A ratio. Because of decrease in automotive production by Japanese OEMs, revenue decrease in the automotive business in Japan and the Americas. However, in China, we saw an increase in revenue from local OEMs. Because of this revenue increased margin improved both on Tanshin and non-GAAP basis, 0.6 points and 0.9 points, respectively. Next, on Page 4, I will brief you on full year results for fiscal year '24. Revenue and operating profit were record high. The company's performance was above the original guidance that we announced in February of last year as well as the numbers we disclosed in the November financial results briefing. On the reported Tanshin basis, revenue was up 13.6%, and operating profit was up 11.2%. And on a non-GAAP basis, we exclude ForEx and new consolidation, revenue was up 5.6% and operating profit up 4.8%. Even under the difficult environment, each region did its best. On the operating profit for Tanshin and non-GAAP basis, hyperinflationary accounting in Turkey continued to affect our performance. There was approximately JPY 3.2 billion worth of negative impact to operating profit on a full year basis, but even after the application of IAS 29, the company still achieved double-digit profit. Next is full year guidance for 2025 on Page 5. With regards to acquisition of AOC, which we announced last October, as we have stated on Page 11, the fulfillment of closing conditions is progressing steadily. It is possible that we would fulfill all requirements as early as by the end of February. However, it is difficult to foresee the approval timing by the authorities. Because of this, in this guidance, we have not factored in AOCs performance or acquisition-related expenses. Those information will be disclosed once the AOC deal closes, which would be followed by revision in the performance guidance after scrutinizing impacts of the acquisition. Based on that and with the assumption that the ForEx would stay in line with that of 2024, we forecast that we will see share expansion initiatives in the existing business as well as enhancement of peripheral businesses. In addition, 2 companies in India, which is a new consolidation, which contributed to 2 months in the last fiscal year would contribute full year. In total, we expect to grow approximately 6% to the record high revenue of JPY 1.740 trillion. As businesses outside of TUC and TUB and China decorative business, we have raw material trading business. In the past, we had accounted for purchase and revenue on both sides of the merger. However, starting from this year, we will book the net amount in the revenue due to change in the transaction format. There will be a reduction of approximately JPY 55 billion on the 2024 basis, and this will be gone. If we factor this in, it would be about 10% growth in revenue. Page 6. We expect the revenue of China overall in 2025 will remain flat. As you can see here, however, on an apple-to-apple basis, we expect 5% to 10% growth. Operating profit is expected to be JPY 198 billion, growth by 5.5%. In 2024, we had some onetime P&L items such as subsidies as well as AOC related looking and net amount of positive JPY 4.1 billion was included in the operating profit and approximately JPY 3.4 billion will be gone in the forecast for 2025. If we account for this, we can say in substance, we would see 7.5% increase in profit. Margin is expected to be on par with the previous year and EPS is assumed to be JPY 57.05. As for the dividend, as I mentioned in October, at the time of AOC acquisition announcement, we have officially adopted progressive dividend as our company policy. We expect the EPS would significantly improve as we acquire AOC rather than using the payout ratio of 30%, which was our original policy, we would prioritize developing. Through this, we would prepare ourselves for the next acquisition, which can contribute to the improvement of EPS. With that in mind, we expect the dividend to go up by JPY 1 to JPY 16, and we will basically not change this amount even if there are changes in the guidance after AOC closing. Pages 6 and 7 are the assumptions for the main segment forecast. I will leave the details to Q&A, but let me briefly comment on each area. We will continue to strive to improve margins in the Japan segment, but we expect margins to remain flat in 2025 due to expenses for the ERP revamp and the completion of the new Shinagawa R&D building. There is no change in our mid- to long-term target of 15%. Regarding NIPSEA China, based on the assumption that the macroeconomic environment will remain challenging, we will continue our growth strategy centered on TUC. In addition, TUB, which struggled in 2024, will continue to diversify its revenue sources including infrastructure, public housing and government-related projects while aiming to grow and improve profitability. Again, the overall sales forecast for China is expected to grow by 5% to 10% on an apple-to-apple basis. Now I'm moving on to Page 7. In NIPSEA except China, particularly India, I would like to make some comments, in my 2 months contribution from November for the consolidated 2024 performance, the full year contribution will be made in 2025 compared to when we announced share buyback in 2022. New entrants have increased in the decorative sector, threatening our market share in 2 major provinces. While there has been considerable improvement in the industrial and automotive sectors. In total, we expect 5% to 10% growth on a full year basis with flat margins. In DuluxGroup, growth is about 5% in both the Pacific and Europe, which is what we are aiming for by raising prices and increasing market share, seeing market growth of almost 0, especially in France, Cromology, the market has been in decline for 2 years in a row, and we hope to see a recovery soon. Page 8, raw material trends are generally calm, but of course, there are various variable factors. Our general base scenario is either flat or a slight decline. Let me skip Pages 9 and 10, and please look at the key topics, starting on Page 11. As I mentioned at the beginning, we are making good progress in meeting AOC's closing conditions and expect to meet them as early as this month. We have been discussing monthly earnings reports and the series budget with the AOC's management. There is no change in our view of a positive EPS contribution of JPY 15 to JPY 17 on a full year basis, which was shared when the acquisition was announced in October last year. Although we need to scrutinize as there is seasonality in the PPA, the EPS contribution will be 10 months if we are able to consolidate for March and 9 months, if we are able to consolidate from April. Although the PPA itself will not be completed for some time based on our estimation from before the acquisition, we'd like to announce the revised earnings as soon as possible after the closing after making adjustments. We also have held our first IR Day on December 2 last year. In order to fill the valuation gap in the capital market, the CEO of DuluxGroup and the Head of the NIPSEA brand gave new presentations on the concept and strategy of the brand business in the decorative sector, which we've been discussing for a long time. This was very popular among the participants. And if you have not seen it, please check out the script and other information on our website. Page 12. This has already been announced, but I'd like to touch on 2 topics announced in January. First, we're pleased to report that we received very high evaluation from 3 major IR and sustainability website evaluation organization. And second, we have continued to be selected as a constituent of all 6 ESG indices used by the GPIF as we did last year. Again, our sole mission is to maximize shareholder value, which is residual value after fulfilling our legal, social and ethical obligations to our stakeholders. We believe that ESG and sustainability are also important responsibilities to our stakeholders. And we are very happy that they are being recognized by external organizations. Now looking back on 2024. We believe that we were able to reaffirm our strengths as a group of strong partner companies with very good financial results in a very challenging environment. While it is regrettable that we were not able to give our 2025 guidance inclusive of AOC, after the deal is closed, we believe that this is going to be the first year in which we can truly demonstrate our strength as an asset assembler by combining sustainable growth in existing businesses with M&A that will contribute to EPS compounding from year 1. And we believe that this will be the starting point. Please look forward to our continued growth. Last but not least, please join us on Thursday, April 3 from 4:00 p.m. to 5:30 p.m. for a briefing on the progress of the midterm management policy announced last April. 4:00 p.m. to 5:30 p.m. is Japan time. That concludes my presentation. And now I would like to take your questions.

[Operator Instructions] From SMBC Nikko, Shintani-san.

This is Shintani from SMBC Nikko. I would like to ask outside of NIPSEA China. So 30% of the OP is coming from here. And the -- for the fourth quarter, the growth tended to be relatively high, and I think that this would be growing -- it would be driving the growth. So if you look at the situation region by region and if there are areas which is driving the growth, I believe that the growth will be about the same as this year, and Indonesia, Malaysia, Turkey, Kazakhstan, India. If you could elaborate a little bit more about the situation of those regions, I would appreciate it.

So it's a very broad question. So I would like to first broadly provide the answer. If you look at Page 7, so 5% to 10% growth for this segment. And for this region, 5% to 10% is expected in terms of growth. I think that it could go even further up internally. However, we should not have excessive expectations. So regardless of the internal target, we believe that we can go to this level, especially Indonesia, in the first and second quarters, the growth tended to be sluggish, almost flat, in the past track record. However, the higher single digit for the third and fourth quarters. We have seen effective use of the marketing initiatives during those quarters. So we don't know whether the growth will be as high as 2023, but we believe that this region, it can post 5% to 10% growth. If we look at the overall margin, there are 2 elements that we are focusing on. One is Betek, the Betek's margin in '24, it was at 13.2% after the application of IAS-29. For this term, we believe that there may be some difficulty in this area because of the change in the financial policy. Starting from the end of last year, there has been some tightening of the financial policy. So in that sense, economy-wise, it was struggling. But in the fourth quarter, they worked very well. So in terms of the margin, even though it's hard to foresee what kind of impact there would be from the application of IAS-29 we believe that we should look at the margin more conservatively. So another point is that this 17.2%, there was a contribution from 2 months of Indian business. And for your reference, the full year for India was 4.2%. And we believe that the -- this percentage would be about the same in the middle of the single digits. And it would depend on the mix. So that's why we are thinking that it is trending a bit downward. But as for Kazakhstan, we believe that it may be able to do better, but it is steadily generating cash. Malaysian Group, Thai Group and Singapore Group, they are doing steadily. 75% market share in Singapore, and there are some difficulties it's facing, but it's doing its best. And the same applies to Thailand. So overall, this region continues to be promising. So that would be all for the response from me.

So you have mentioned about India as well as Kazakhstan, which are the entities which you have acquired recently. Is the contribution from them as high as you have expected? What is the progress after M&A?

In terms of India -- so this is an asset that we have bought back. So we have been monitoring under NIPSEA umbrella. So it is not that the structure changed drastically after the acquisition. But as I have said earlier, compared to the time we have decided on the buyback. The -- in the area of [ Betco ], the new entrants are increasing. So in terms of marketing there are competitors, which are investing there even in the face of red ink. So we are now on the offensive because there are many new entrants, but we have been discussing with the Indian team that we will be making a recovery. And for the industry roles and including for automotive, we believe that the other entities will do good in this area. And as for Kazakhstan, the margin is lower than we had expected originally. However, I think their performance was pretty good as the first year of the acquisition.

Next question is from Goldman Sachs, Ikeda-san.

This is Ikeda from Goldman Sachs. My question is regarding China from Q3 to Q4. What has been the trend, and I also would like to ask about this year's guidance. In your presentation on Q3, the situation was not good, and you were expecting recovery from Q4 onwards. When we look at numbers, TUC was plus 4.2%, TUC was minus 16% to minus 18%. So it has not improved significantly. Some local manufacturers commented that they had improvements, meaningful improvement. So what has been the impact of the deregulation and what has been the trend? And what kind of recovery do you foresee? And as you mentioned, I think the raw material supply situation is not easy in China. So I'm wondering what is the impact on the profit side for TUC, it is 10%. TUB it is 5%. So in terms of profitability, why are you expecting an improvement in profitability? What is the background?

Thank you for your question. In Q4, well, to be honest, I read through the Q3 script and it should have improved more. But as you are aware, Q4 is seasonally a low demand season. And regarding TUC toward December, they have declining demand, and they eventually start to recover or collect the receivables. So Q4 is not a strong season. We didn't expect it to be so. But margin-wise, it could have improved more, especially regarding TUC. The volume continues to be on a positive trend, but unfortunately, the product mix had a negative impact. So from Tier 0 to 2 and Tier 3 to 6 cities. In Tier 0 to 2 cities, they were flat or slight decline and Tier 3 to 6 were positive, big plus. And this difference between those 2 groups remain the same. 3 to 6 -- compared to Q3, Tier 3 to 6 cities growth improved. But in terms of mix or in terms of margin, it tends to be lower for Tier 3 to 6. So overall, it is 2%, but it is not satisfactory. But I think we still believe that we made good efforts. In the guidance, well, I'm talking about Page 6, or I think you are talking about Page 6 from 11.1%, we're expecting a slight improvement in the guidance. And as you pointed out, for one thing, trading businesses, business model is going to be what it has been revised to a distributor model. And the margin doesn't have to be too high. So there will be some improvement there. In other areas, we are going to pursue growth of TUC because it has the highest margin overall. We're expecting growth there. And IU, industrial coatings, it does not necessarily have high margin, especially sales to Chinese manufacturers is progressing, so we will be able to enjoy economies of scale. In total, the economic condition is not going to be rosy. So based on that assumption, we have to be conservative in our guidance. The other point within TUC, paints and coatings and adjacencies are also sold in the TUC channel. So paints and coatings and also adjacencies business. That is something we want to expand using our channels even further. CCM needs to be pursued and expanded. That will be something we will work on proactively in 2024. So the market share growth is something we believe that we will definitely be able to achieve. And in terms of the mix, we need to see how much improvement we can make there. And again, they are consumables. So it is difficult for us to have a perfect estimation. So as I've been saying, what we need to do is to utilize our brand strength to expand. So we believe that we'll be able to grow to a certain extent even under the current circumstances.

A follow-up question. So TUC is plus 10% for this year. So from Tier 0 to Tier 2 and Tier 3 to Tier 6 in those 2 groups, I believe there is 1 gap. So what is the impression and have TUB bottomed out? Or do you see signs of bottoming out? Real estate deregulation, is that going to happen? Can you please give us some color on the market condition?

Well, first, let me respond to the TUB portion, minus 18% in Q4, we have made much efforts here in order to expand the channels. In the past, we were focusing on developers and new builds and then shifting to a government-related project and real estate subsidies, if we have a favorable relationship with the government, we can enjoy subsidies. And that is why we've been able to have it every year, but that is something one-off even in government-related projects, we are a Japanese manufacturer, but we have a local brand, LiBang. So we are confident that we will be able to win projects. And we have been making efforts to expand channels already, but I'm hoping that it's going to bottom out and start to bear fruit. The baseline is declining. And we don't want to continue to see this. We will be implementing various measures for TUB. On the other hand, in TUC our biggest strength is in Tier 0 to 2 cities. In our sales, they account for about 80%. So the mix improvement here will be the key. And this is also related to the brand strategy. Consumption -- consumer sentiment needs to improve in order for the improvement here to be visible. But in Tier 3 to 6, we believe that is a white space where we have more room for growth. So compared to 0 to 2, we are expecting more growth in Tier 3 to 6 cities. But because of the volume we also have to work hard in Tier 0 to 2 cities. And the good news, maybe I shouldn't use this word, but good news is competitors in the premium segment is losing momentum. So in the premium sector we believe this is the timing where we can become the dominant player. So if that materializes, I think these numbers are achievable.

Next question is from Mizuho Securities, Yoshida-san.

This is Yoshida from Mizuho Securities. I would like to ask about Dulux. According to your guidance for this term, Pacific and Europe, there will be a growth of around 5% for Pacific. The market growth you said is 0, and you had factored in price increase. So could you give me the background for why you were able to grow exceeding the market? But on the other hand, operating profit ratio is 13.3%, which is flat. So I was wondering why that is? In Europe, revenue increase of around 5% is what you're expecting. Do you think this is achievable? I would like to confirm on that point.

Thank you for your question. First is the Pacific region. '24 versus '23 in terms of the revenue, 4% growth on a local currency basis. Even though the amount was small, there was a small M&A conducted locally and that contributed to this growth. So on a pure apple-to-apple comparison basis, it was almost flat. But starting from the latter half, we had conducted the reform in the brand, renewal in the brand. And if you look at the track record of Dulux, each year they had been increasing the price by 2% to 3% and the volume in the market is either flat or 1%, but Dulux has been able to increase about 2% or so. So in total, they have a track record of the growth of about 5% annual growth, putting aside the COVID years. So if you look at that track record, the growth that we have put in the guidance has probably high level of accuracy. So it's a dominant market. But if you look at the margins, if we reduce the marketing spend, it will go up, but we need to conduct certain amount of marketing investment versus the revenue. We do have competition, even though we have the majority of 50% share, there is remaining 50% of other players and we need to defend our positions, and we need to grow. So 13% is not a bad figure for us. So we want to continue our growth. That's the basic stance that we have. It applies to the other regions as well. So we would not be focusing only on the improvement in margin. We will be thinking about the balance of that with sustainable growth. We would not be spending wastefully but we would proactively spending for growth. And based on that, we believe we can grow 5%. In terms of Europe, as I have said earlier, France was struggling 2 years in a row, the market was a negative 5% growth. And this is something that rarely happens. So we believe that it would recover at some point in time. However, we would like the growth to get back to flat at least. We are conducting initiatives to improve the cost as well as the brand initiatives. And if these are successful, I believe that we can accomplish the growth target that we have set out. The market itself, if the conflict between Russia and Ukraine is ceased it would work positively. And because of that conflict, the economy in Europe is stagnating. In Cromology, France has 60% to 70%. The remaining is Portugal, Italy and Spain. The performance is robust and the market is not dipping. So the bottleneck is French market. If there is a consecutive negative growth of 5%, 3 years in a row, that would be problematic. But we don't see any factor -- negative factor that would lead to the 3 consecutive years of 5%. And if we are able to keep it flat, we would be able to grow as much in the -- as we have put in the guidance.

Okay. In terms of Europe, on a full year basis, the margin seems to go up about 1 point. Is this coming from the cost reduction?

Yes. Starting from around last year, we have started a full-scale reform of supply chain as well as investment in the brands. [indiscernible], the main brand, what we have been operating in different stores will now be more integrated. We are working on those initiatives step by step. The market itself is stagnating and the stagnating market has been offsetting the positive impact of the initiatives that we have been taking, but this is the area where we are struggling with. But Cromology is generating cash. And we are not in a situation where we need to inject funds we want to look at the recovery in mid- to long term, and we want to get to the double-digit growth. We need to look at the business more in the longer term.

Next question is from Millennium Capital Fujita-san.

This is Fujita from Millennium Capital. So I have a question about AOC. I'm sure that you only can share limited information since it's before closing, but I hope you can try as much as possible. So this is the largest chunk. So I'm interested in knowing what will be the impact and that will really change the performance of this year. Well, since there is no track record, I am trying to understand what is the business' current situation. Is it in any up cycle or down cycle? So there were figures announced last year in terms of forecast, and do you say the business is still in line? And the EPS impact was mentioned earlier. In your previous material from last year, you showed JPY 15 to JPY 17 impact, just a simple sum. And the EPS contribution that you mentioned today was the same. So is that a result of a simple calculation or PPA one-off expenses, do you expect them to be small? So even when including those, do you think EPS will be about JPY 10 from year 1 and you will eventually get incremental positive impact?

Thank you for your question. I also hope that I can share more with you, but as you pointed out, we're before closing and the authorities' approval is awaited, we have 1 country left. We believe that it will be approved soon. But it is difficult for me to share anything concrete since this is before approval. So I hope you will understand that assumption. In last October, I mentioned JPY 15 to JPY 17 EPS growth, acquisition cost and inventory step-up, well, when we look at -- and also intangible amortization, we try to do as much diligence as possible, and we included everything to give out the number of JPY 15 to JPY 17 EPS. In the previous material, OP margin was 34% in 2024, that's an actual number. And this does not include intangibles amortization. But as EPS impact, we are including the intangibles amortization as well as the interest rate. In year 1, we are also including the one-off expenses. And the result of the calculation is the JPY 15 to JPY 17 EPS in year 1, and that remains unchanged. Since last October to the beginning of this year, we thought about what is going to be the outlook for 2025. And that is also taken into account in my commentary. So we are not expecting any major change in the business. And as I said previously, our customized product are not exposed to many competitions. And this is not a general purpose. So we can say that this is a sticky revenue flow. But to be honest, under the Trump administration, we are not sure what the U.S. economy will look like going forward. After closing, and let's say, we can consolidate from March, then we will have 10 months contribution. And if it's from April, we will have 9 months contribution. So this year's expected impact will be communicated post closing. But that is very unsure at the moment -- uncertain at the moment. So, in worst case, there is a risk that we cannot close the deal in March or April, it may take 6 months. So at this juncture, it's hard for me to share anything more. About JPY 15 to JPY 17 EPS assumption is, as I explained earlier. So we are not seeing any deterioration of the business this year, rather it has been trending at least flat. And one more thing I want to mention is the interest rate in the U.S. because the products are related to infrastructure, it is impacted by the interest rate. Well, I think the administration and the FRB are not necessarily aligned at the moment, so we need to pay careful attention. But we continue to have a very robust fundamental business. So a simple sum that we calculate is the number that I said earlier, and we are expecting a good accretion. And I understand that the market is unable to take that into account at the moment.

Well, just to be confirmed, acquisition and OP, if you calculate it in the context of EPS, there is not much gap JPY 20 or JPY 18 is the number I get. So acquisition cost, PPA, there shouldn't be a significantly huge amount, but they should be something manageable if we calculate backwards, is that a fair assumption?

Of course, they are manageable. I think that sounds pessimistic. So again, JPY 15 to JPY 17 includes our assumption for the amortization and the acquisition cost and a one-off inventory step-up are also taken into account for the year 1 estimation. So this is a business that is easy to have a visibility. It's just that the timing of the -- the closing of the deal is not sure at the moment.

The next question is from [ Nikkei Newspaper, Fujio-san ]

My name is Fujio from Neikkei Newspaper. I have one question. In terms of the automotive, the Japanese OEMs are struggling currently. And I think that you have the -- a lot of sales for paint to the Japanese automotive manufacturers. And I was wondering how you see the future?

Your voice was a bit breaking up, but as you have pointed out, that we are primarily selling to the Japanese OEMs. And the Japanese OEMs are struggling in China. Japanese OEMs are lagging behind in getting on the wave of the EVs. So we have been saying that in China, there has been a struggle. However, we are seeing increase in the delivery to the local players. And because of that, in the Chinese automotive our revenue is going up. Japanese OEMs remain to be our core customers. But we will be taking the strategy of expansion to other players, not only in China but elsewhere in the world. With that said, Japanese OEMs remains strong. In Europe, there has been some review in the EV strategy. We are not so strong in the European market. So that would not be impacting too much in our performance but we will continue to make progress and evolution in the provision of services to our main Japanese OEM customers. I don't think that we will be shifting towards the American OEMs. And in the U.S., our strength is providing to the Japanese OEMs. And I don't believe that the Chinese EVs will be exported in mass to the U.S. So our customer -- core customer remains to be Japanese OEMs, and we will try to expand from there.

Next question is from Citigroup Securities, Nishiyama-san.

This is Nishiyama from Citigroup Securities. I have a question about Japan. In Q4, the demand environment was difficult, but 11% margin on a non-GAAP basis was achieved. And likewise, competitors were also improved their margins. Can you please give us some more color on the situation? And in the new year, 9.6% was last year, and you're assuming flat margin. So that means a decline from the Q4 margin. And you're explaining that there will be more expenses. So do you think it's difficult to achieve double-digit margin? How much growth in expenses are you expecting?

Well, in Q4, yes, they did a good job. In Q4, for [ muddy ], we saw a contribution in improving margins and CR, cost reduction. We made a lot of efforts, we revisited raw materials and how we procure them as well as processes. We are doing this process on a regular basis, and that will continue through 2025. As I said earlier, 15% continues to be our long-term target. But for this fiscal year, ERP revamp expenses are going to be incurred. Well, that is a one-off, but the R&D building will be completed, and there will be a few hundreds of millions of depreciation expenses, that will be incremental. And the base wage increase, and as a result, labor cost could increase and also export -- excuse me, import cost, there is a pressure if yen continues to be weak. So how much we can absorb through price pass-through is a challenge. It is always a balance. We continue to have ambitious targets internally, but at least in guidance, we would like to say that, we at least want to keep flat margin.

When I look at Page 9, the decorative paint market, you are expecting a 10% revenue growth and DX is going to be utilized in order to grow market share in your commentary. So can you please elaborate on that part as well?

Yes. In decorative paints, we have a new CEO, they achieved -- well, Enomoto-san used to be a Vice President of a company selling Marine product, they achieved a great turnaround in profitability. So in this the decorative paint business, we will be looking at a new approach to improve profitability as well as the market share. I'm not going to mention the details, but we believe that we have opportunities to seize. I think we just need to achieve good performance to prove what I'm seeing is right. So that is the aspiration we have.

The next question is from CLSA Securities, [ Cho-san ].

From CLSA, this is Cho. I have a question relating on a detailed point. First, China. In terms of trading, India, I think it's included in the others in the TUC. It's not TUC. It's in TU, but it's other than TUC and TUB. The -- outside of that, the trading is located. So I was wondering what kind of trading business that you have been doing? Could you explain about the background? Also, I have a question related to Turkey. In the fourth quarter, the revenue and margin had increased. It is very hard to foresee what's going to happen there because of the hyperinflationary accounting. In Kazakhstan and India, in the fourth quarter, there were many fluctuations. In Kazakhstan, the margin was in the negative. And in terms of India, there was margin of around 30%. In India, there will be more competition, so I was wondering how sustainable the growth is?

So I don't have much time, so I will be brief. To your first question about trading, we have outsourcing -- we use outsourcing company for us, buying raw materials by us will be cheaper. So we will be buying the raw materials, and they will use it. But we have shifted more to the dealer model. And we have started booking it -- booking it in the net, and they will be booking of the fees. So the flow of the commerce would not be changing so much. It's a technical change. In terms of the fourth quarter margin, there is a lot of seasonality to it. If you look at just the fourth quarter, you would not understand anything. You should look at the trend in the course of several years. So this quarter, is more of a quiet period for commerce. And in December the market is not so active. But overall, our company was able to do better.

[Operator Instructions] Next question is UBS Securities, Omura-san.

This is Omura from UBS Securities. Q4 Dulux Pacific is where I'd like to ask about, the profit level was much higher than my expectation. Is this in line with your expectation? And if not, what was an unexpected factor? And the factors for this improvement, do you think they will be sustainable for 2025 as well?

In November, we announced the numbers. And I think in Dulux, it was one of the companies where we had an upside in the profitability. We try to reduce the SG&A, and this is the result. So it was better than we expected, but I recommend that you should look at the full year, we are expecting plus 5% growth, which is a flat figure. So 13.3%, like you see on Page 7, should be a normalized number. So I believe the full year growth is what we're guiding for.

The next question is from TOYO KEIZAI SHIMPO, Yamada-san.

This is Yamada from TOYO KEIZAI. I will be quick. In fiscal year '25 outside of AOC. What is the biggest risk? And what is the biggest opportunity? Where do you think will change the most? And my second question is, Indonesia has high margin, I was wondering if this margin is sustainable? These are my 2 questions.

Thank you for your questions. In terms of the risk, whether we would be able to overachieve the target, the paint business is linked closely to GDP. Whether the term Trump administration will be exercising its tariffs, then there will be a huge impact. And as I have been saying, the demand to paint -- it would not be taken over by a new player right away. And there would be cash generated and the investors always ask me whether there is anything that keeps me awake at night in terms of the risk. And I always answer stock price. Operationally, I don't see unmanageable risk operation-wise. So my biggest concern is the market not understanding our potential. And outside of that, there's not much concern to me. To your second question about Indonesia. For a long time, it has been maintaining the level of margin that you see. There are some market attributes in Indonesia. There is not much discount in the market. And there is no shopping around, when you provide a discounted product, they may have doubt that it may be a counterfeit product or something. The GDP and the population of Indonesia, if we think about those 2 things, I think that Indonesia is a country of opportunity, and we would like to improve the share there. And I believe under those circumstances, we have sustainability potential. So you -- so there are many risks regarding the Trump administration, ForEx tariffs, but I don't think that there is much fluctuation in terms of that. Well, this we have the local production, local consumption model. Of course, when there are raw materials that would be hitting the tariff conditions, but we don't have the materials and products crossing the border so much. So we have a decoupled model. So more impact would be on us in terms of what's happening to the GDP. So our business is lower risk compared to others.

Now we'd like to conclude the Q&A session. Wakatsuki-san, can we have your closing remarks.

We apologize for going over time. I apologize for giving long responses. But once again, our asset assembler model is what I tried to focus on and it's basis the organic growth, but we will also have AOC contribution. And in 2025, we would like to look forward to how much growth we can achieve. And in 2026, we will be pursuing organic growth again, and we're hoping to talk more about it after closing. And as a basis, we have the current portfolio. And as we discussed, we have been able to control risk and sustainable growth and profit growth are likely to be achieved. So I hope you will continue to check out our information. Thank you.

With this, we would like to conclude our earnings call for Nippon Paint Holdings for the fourth quarter of fiscal year ending December 2024. Thank you very much for joining us despite your busy schedules today. Please feel free to leave the conference room. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]