Nippon Paint Holdings Co., Ltd. ($4612)

Thank you very much for waiting. We will now begin Nippon Paint Holdings FY 2026 Q1 Financial Results Conference Call. Before we begin, a little housekeeping announcement. [Operator Instructions] Please note that this phone conference will be conducted with simultaneous interpretation in English and Japanese. Now Mr. Wakatsuki, Mr. Tanaka, please begin.

Thank you very much. Hello, everyone. I am Wakatsuki, Co-President of NPHD. Thank you very much for taking the time to join us today despite your busy schedules. I will provide an overview of our FY 2026 Q1 financial results. First, as always, historical performance is shown on Page 3. This Q1 was also strong with revenue CAGR of 16% and operating profit CAGR of 17.6% even in the long term. Furthermore, the profit contributions from organic and inorganic growth are 10% each, showing that both wheels of our Asset Assembler business are working well. Next, on Page 4. On a consolidated basis, revenue reached JPY 490.3 billion. Adjusted operating profit was JPY 76.4 billion. Adjusted OP margin was 15.6% and adjusted EPS was JPY 24.2, all of which were record highs for Q1. Revenue growth was over 20%, and adjusted operating profit rose sharply at approximately 38%. Organic and inorganic profit contribution was 21.6% and 16.3%, respectively. Adjusted OP margin was 15.6%, also up by 1.9 percentage points year-on-year. This market has been highly uncertain, particularly since March due to the escalating tensions surrounding Iran, but amidst this rapidly changing environment, all partner companies responded extremely quickly and autonomously, prioritizing their responsibility to supply to customers. I believe we were able to demonstrate our presence as reliable partners, especially during such uncertain times. Raw material cost increases linked to tensions surrounding Iran are affecting regions and businesses differently and is expected to gradually become apparent from Q2 through the second half of the year. Margin is expected to fluctuate slightly from quarter-to-quarter as well. However, the overall full year impact is expected to be largely offset by cost reduction measures and price pass-through implemented as countermeasures. The FX has also shifted to a weaker yen than forecasted in February. And even considering the uncertain demand environment, we believe that our full year guidance is well achievable. We hope to provide an updated outlook in Q2. As with our past crisis responses, we believe that challenging market conditions present an opportunity to leverage our group strength such as our group's procurement capabilities and the agile management decisions made by local management to further enhance our competitive advantage in each region. Next, Page 5. As you can see from the heat map, the market is generally flat or slightly weaker than FY 2025. Within this environment, we aim to maintain and improve our market share while steadily pursuing profitable growth. Please note that the market outlook for Q2 and beyond is based on current conditions and may change depending on future developments in the Middle East. Next, Page 6 provides a summary of operating results in major segments. While I will leave the details to the Q&A session, let me briefly comment on each region. In Japan, in the Decorative segment, sales increased for high durability architectural and structural products. And in the Industrial segment, price pass-through continued to progress. Furthermore, from March onward, there was a certain level of front-loaded demand aimed at securing supply. Overall, improved RMCC ratio and continued SG&A cost control drove higher revenue and profit with the adjusted operating profit margin rising to 12.3%. From the second quarter onward, we will continue to fulfill our responsibility to ensure stable supply to customers while securing appropriate profitability. NIPSEA China, revenue and profit continued to increase and the adjusted OP margin improved significantly to 17.6%, up 2 points from the same period last year. TUC, despite a weak market and consumer sentiment, sales volumes increased in both paint and non-paint businesses and non-paint business and textured paint offset the decline in conventional paint, resulting in a nearly flat revenue year-on-year on a local currency basis. For TUB, revenue declined 5% on a local currency basis due to ongoing impact of the property market, but the decline moderated compared to the prior year. In addition, automotive coatings grew significantly, particularly for Chinese manufacturers. We believe it is important that even in a challenging market, we are not pursuing volume at any cost, but are expanding our strong areas and improving profitability. We will continue to assume no early recovery in the Chinese market, but we believe that profitable growth can be maintained through expansion of share, mix improvement in non-paint businesses. NIPSEA, except China, despite the challenging environment, strong growth in both volume and price mix across each region, together with ongoing streamlining efforts led to a significant increase in both revenue and profit. DuluxGroup DGL Pacific, with market conditions remaining largely flat, continued mix benefit and contributions from small-scale acquisitions together with foreign exchange effects led to a significant increase in both revenue and profit, demonstrating steady and consistent growth. Meanwhile, Europe also achieved substantial growth. However, while market conditions in France recovered to around the price year level, profitability is still recovering and performance varied across regions with South and Central Europe remaining strong. In the Americas, revenue was higher despite the impact of market conditions for both decorative automotive business. Profit increased year-on-year. And finally, for AOC, contribution expanded from 1 month in the prior year period to a full quarter contribution this year and both revenue and profit increased. Margins remain high, delivering strong profit contribution and cash generation. As a reference, revenue declined 2% year-on-year, but the shift to volume growth is an encouraging sign. Page 7. As for major topics, in March, we celebrated the 145th anniversary of founding. I do not intend to boast, but I believe that there were a few listed Japanese companies with such a long history that are demonstrating this level of growth today. We have taken this opportunity to establish a new showroom in Shinagawa, and we would like to see you and visit at your convenience. In addition, we have received the Excellence Award at the Nikkei Integrated Report Awards this year. Although it did not reach last year's grand prize, we will continue together with our ongoing IR activities to engage proactively with investors, and we appreciate your continued support. This concludes my presentation. Thank you.

[Operator Instructions] First, from the Japanese channel. First question is from Goldman Sachs Securities. Ikeda-san, please.

Ikeda from Goldman Sachs Securities. Congratulations for great results. Q1 profit margin and top line and profit margin in all lines, you had an extraordinary profit and results. In March, due to the aggravating Iran results, the raw material cost increased, and there were some front-loading factor. From Q2 onward, the raw material cost impact by region and by application, if you could give us some color, I'd appreciate it. In your company, China business is large and your procurement capability is very high. So using the China site, will you do a group-wide procurement? AOC, the U.S. raw material cost is not rising much. So I think there are regional differences. So that is my question. And also the price increase, what is the sensitivity? And the solvent, I hear is slightly short in Japan and Asia. So what impact is expected? So sorry for a lot of questions. So after the Iran, my main question is the raw material impact.

Thank you very much, Ikeda-san for the question. So I understand that your question becomes long because, as you rightly said, the situation differ from region to region. So it's not that one single answer can cover all situations. So I will do my best to answer your questions. First, the impact on raw material. Japan and Asia have high dependence on Middle East. And therefore, the impact is bigger in these regions. On the other hand, Australia or Europe are impacted the next. And for now, the U.S. does not have the direct impact so far. But overall, the solvent is one issue, but the packaging, package and container, TiO2, there is impact on TiO2. So we need to watch closely on things trend and operate our business in each region accordingly. So that is one aspect. Under such circumstances, for March, we had the accumulation from the past. So our priority was to fulfill the supply responsibility. So we leveraged our supply -- strong supply capability and tried to meet customers' front-loaded demand so that we do not miss any opportunity. In Asia, in particular, the profitability was higher than we anticipated. In other words, from Q2 onwards, as I said earlier, Q2 and Q3 onward, second half, various impacts will emerge gradually, and we have to be prepared for that. So of course, the alternative procurement and packaging, we need to utilize available packaging and do our best to win the customers' understanding and increase the prices. So things are different among regions, but we will try to look into the future and take proactive measures. So we'll do our best in all the regions we operate. So in Q1, Q1 was strong, but we are not content with that. Rather, we are prepared for difficult times from here onward. As I said earlier, there may be a slight time lag, but we think we can achieve the profitability on a full year basis sufficiently. Our procurement capability is not just on China, but including China, the group-wide interchange can be leveraged. And the transportation cost, incurred surcharge. And in March, it was difficult. It may happen more in April and onward. First, we will prioritize on fulfilling our supply capability, supply responsibility to our customers. And on that basis, we want to demonstrate ourselves as a trusted partner, reliable partner. And to repeat myself, this crisis comes with risks, but is the opportunity in each site, customers are not fully satisfied. So we don't want to use the word opportunity too much, but this is the time when we can really show our presence. We think it is an opportunity. So that is the policy we have. In the end, we want to hit the right balance between the supply and the profitability. I hope this answers your question.

So if the Strait of Hormuz situation continues and the oil price stays at a high level of $100, you can raise prices. And on a full year basis, you can offset these shortages, shortfalls? You are raising price by 70% and also that some manufacturers are raising prices in China. So on the price raise, if you could share with us anything?

Yes. To repeat myself, the price raise is not welcomed by the customers. So we are doing the best we can, make the best effort in our company, but the raw material cost rise is high. So we have no other choice but to raise prices in that case. In reality, in the first half results, we are the last one to announce our results. And I looked at our peer -- global peers' situation, they're all taking similar measures. So in the end, I do not think we will see a big problem. But just one point. Of course, if we enter an inflationary environment, the demand environment will not turn for the better, most likely. So demand decline is possible. It depends on how long the situation surrounding Iran will linger. And no one can foresee that around the world. So we may be impacted to a certain extent, but through streamlining and through price raise, we will try to address the situation. So the same message. I think the situation is similar around the world with slight differences from region to region, depending on their economic status. Thank you.

Next, Nomura Securities, Okazaki-san, please.

This is Okazaki from Nomura Securities. So on a related note, I would like to ask a similar question. So what you said, so in terms of procurement, relatively speaking, U.S., China, relatively easier to procure. And on a global basis, you are supplying within the groups. That is one of the strengths. Am I right? I would like to confirm that point. And also about the price pass on, I think there will be some differences depending on the region. In the past, well, for example, there were easier regions to pass on price, for example, Indonesia, Australia and AOC. Relatively, I think it is easier to pass on price. That is my understanding. I would like to confirm whether my understanding is correct. And for the full year, profitability, JPY 283 billion is achievable that you mentioned. And Q1, 1/4 we completed and maybe there are some seasonalities. So the basic thinking is that Q2, Q3, there will be some cost increase and from -- starting from the end of Q3, Q4, you will be able to pass on prices. And for the full year, that will lead to the full year results. Of course, there are differences by regions, but is my assumption, my thinking correct? I would like to confirm that. That is my question.

Thank you for your question. So about our procurement capability to procure from the U.S. and whether it's applying that globally, that is not always the case. From the closer proximity nations procurement, that is the principle. And our group companies, we do have to start with a very strong coordination, cooperative relationship. So where we should procure from partners and Mr. Wee Siew Kim, we talk together so that there is not a loss of opportunities and also so that we can fulfill our responsibility to supply to our customers. So our sense, our feeling is that, to be quite frank, compared to a month ago -- from now compared to a month ago, the supply -- the shortage, the lacking of supply, I think that we've been able to somewhat with our procurement capability, been able to address that situation. But having said that, does it -- it means there are some cost of elements. For example, as I said, packaging containers, also the logistics transportation fees are going up. So in every element, there is a cost pressure that we are facing. So as you said, you said correctly, second quarter or towards the second half compared to the first quarter, it will be much tougher. And how rapidly we could respond and address that taking actions is the key, alternative supply also streamlining and rationalization, advancement of those efforts. That is going to be the key. And the question, I think that is will be the deciding factor, which we are determined to resolve, and we believe we have the agility to take the action in the region appropriately. We believe we can operate in that way. And 1/4 of the year, well, that mentioned -- as I've been saying, because there are seasonality, Q2, Q3 does account for a large portion. And taking into other elements, there are some differences between the quarters naturally, obviously. Also, additionally, the FX, there are some fluctuation caused by the foreign effect. So taking that into account, at the end, for the full year, we do believe that our outlook is -- needs to be achieved. And given the current situation, our view forecast that it is achievable. And if any update is required, when we announce the second quarter in August, it could go up or down. So at this point, we believe that as a minimum, this February guidance is achievable at this point. And there are some possibilities of upside, and that is what we believe in doing in our daily operation. And the third point, what was it again?

Cost pass on, cost transfer, price pass on, whether -- which areas are relatively easier to pass on price.

Well, to be frank, well, we don't want to -- I don't want to give a single answer and give a blended answer because the business environment also is related. In China, as I said earlier, it's not necessary that the market condition is strong. Market is not strong. So I can't just easily say that because of the cost is higher and even if we can procure and also the logistics cost, transportation cost increase, cost is increasing. But given that the market is weak, it is not in an environment that we can raise the price. Also, in Americas, although the overall impact is moderate, gas price, logistics price is going up. And against such backdrop, how can we have our customers understand their value. That is also one of part of the strength of AOC. So when it comes to this point. And I do ask the analysts to understand that never -- nothing is ever easy. At the front line, we are doing our best and also for the delivery, as always, it has been, and we are striving to do our best. And we hope to be helpful and useful. But at the end, it does differ. The results or -- it will differ and the color is different by region.

Yes, I understand that the company is striving to make an effort. But in the past, AOC, I think it was relatively because of its stronger competitiveness, I think you explained that it was easier to pass on price. So that kind of a trend in nature hasn't changed, I believe. But -- so that was what I wanted to confirm.

So right, as I said earlier, America, America is less hit directly. So the impact is moderate. And given that circumstances still, the cost is increasing. So how we understand that, how we respond to that will depend on how strong a position that we have. So that is -- AOC is also striving to do their best.

Next question is BofA Securities, Enomoto-san, please.

Rush order, how are you addressing rush order? And how were they incorporated into your January-March quarter results? In your Q&A, you said you addressed the front-loaded demand as much as possible. So how much -- how big an impact was that? And by region, what are the differences? According to your competitors, they said they have too much rush order and they could not deal with normal orders. So how did you handle this?

What order did you say?

Rush order.

Rush order, I see. So last-minute order, so because there's procurement worries, companies want to make orders to hoard or stock up, right? I've never used this word, rush order. We are trying to deliver to the areas that were really in need. We do not have abundant stock. So when we think of the distribution, we try to ascertain where we are needed the most. Thinner, this is in Japan, but -- it's like the toilet paper problem in the past. People tend to have sentiment of hoarding. So we raised the price beforehand in a proactive manner. So our policy is to distribute to where we are in need the most. And in the end, for our conventional customers, we think we have been able to deliver overall. I don't know if all customers are 100% happy, but I think we were able to manage. So I think that is happening to a certain extent in each region. But overall, using our past relationship, we were able to manage the unreasonable orders well. But that said, some clients may place orders, small-scale orders anticipating the future price raise. In our JPY 400 billion, JPY 500 billion revenue, maybe hundreds of millions of level. There were -- these events happened, I think, to the tune of JPY 100 million or so. But it was not so big that we needed to disclose as a material event.

In Q2, you do not anticipate this kind of situation?

As I said earlier, we can secure our material. Although we cannot be too optimistic, we are securing our material. Compared to a month ago, we have good visibility. So I don't know if all customers are 100% happy. I cannot guarantee you that. But for our customers, we are delivering to all of them. So rush order. If Middle East situation crisis aggravates, then we don't know what will happen. But in the current circumstances, we are managing the situation somehow. But to avoid misunderstanding, I want to clarify that cost is rising. That's for sure. We are fulfilling the supply responsibility, but cost is rising. So how can we absorb this cost increase and how we can ask the customer to also shoulder a portion of that. In April, May, June, this is the big mission for us regardless of any region. So in all regions, this is our challenge.

Next, SMBC Nikko, Shintani-san, please.

This is Shintani from SMBC Nikko Securities. I would like to ask a question about AOC. So you explained that the volume has turned to a positive. And I would like to know about the Q1 demand situation and also the future outlook. Competitors in Americas, there has been some increase from import to Asia. And also, in terms of volumes, also profitability has improved for competitors. I would like to confirm if it is the same for you as well. And also in the material presentation, there was a mention at the beginning of the pressure on the materials. So could you comment on that, please.

Right. For AOC, there are -- it is very dynamic in terms of the market. Also, the price is also fast moving and a very dynamic situation. So in that sense, on a daily basis, I would say that for procurement price and also the selling price, there is the contribution margin, how we manage that on a daily basis, we are controlling in our business system and monitoring the situation every day. And against such backdrop, as I will repeat in saying, last year, from the second half, about from the second half, we started to see the signs of bottoming out. And once again, I would like to say once again that we are seeing the bottoming out in Q1. And there is a pent-up demand is likely to happen. That is our view. And still, having said that, what -- how to say, we do not want to be too optimistic or to give a too optimistic outlook because there's still a lot of uncertainties. For example, recently, the inflation rate in the U.S. is going up and also the FRB chair also has changed. And also, there was a comment about the inflation -- fighting the inflation. So the rates also is not going to be cut continuously, given that the U.S. economy, the economic situation and also secondary housing, the movements, if we look, still the movements are slow and not robust. Given such a situation, we do need to take actions appropriately. On the other hand, the cost is even small, but it is rising. As I said at the outset, the U.S., Americas in terms of the impact level compared to Asia is moderate, small, but still cost is rising. And to our customers, as we fulfill our responsibility to supply, that is the most important because it is all related to infrastructure. So we need to deliver. That is the priority and also have our customers understand the situation. And if necessary, depending on the situation, raise the price. That is likely. And second quarter and beyond for the demand, if we look at the market, we are expecting a flat market. Our view is that against such market situation -- and in a fragile market, as we have the top market share, AOC is being the fast mover. And as a result, there are opportunities to increase the market share. And we do hope to see the positive impact -- positive effects from that. That is my response to your question.

Well, for example, by application, is there any differences in color for the demand, for example, in the past, infrastructure could be the first recovery, but construction, decorative, could it be weaker?

Right. There is no change to that. And [ leisure ], leisure-related, we are seeing some recovery that is marine boat. And -- but overall, as you said, your understanding is correct.

Next, Mizuho Securities, Otani-san, please.

Otani from Mizuho Securities. Can you hear me?

Hello, Otani-san.

I have a question on the Middle East situation. The impact from the Middle East, naphtha-derived raw material is now a hot topic. In your presentation, you said the titanium oxide is also impacted. So what about this TiO2? If you could elaborate on that point. So the sulfur does not come from Middle East and so the oxide titanium cannot be produced. I think the impact is large in China. So if you could give us some more color by region.

Thank you. The situation changes day by day, but as you rightly said, the titanium oxide in China, the supply is changing and is rising little by little. And eventually, in the U.S. decorative business, this will not be in the short term, and we have a price lock in. But further down the road, the volume and price, we need to look for alternative sources for supply and price will most likely rise. There is a possibility that price will rise. So the situation does not warrant optimism. So it boils down to our streamlining efforts and the price flow-through, price pass-through efforts. I hope this answers your question.

I understand well. So this is not talked much in -- but anything that you have concerns about, anything you're worried about?

Worrisome, risky ones, not really, but logistics cost or packaging cost. These are our variable costs. They are rising overall. But in the end, if I name them as risk factor, it's the matter of demand. In this economic situation, I always talk about the consumer goods that we -- our business has the consumer goods side. And when the interest rate rises or the economy slows down or in China, we see the signs of hitting bottom, but the economy is not so bright and secondary is not so good. So if this situation lingers, we think we can win in the share -- market share game, but the market demand will be impacted. So that is one big concern. But to repeat myself, in this situation with risk, I would not say a crisis, but a situation that has risk, difficult situation. We pride ourselves of overcoming these situations in the past and have built our corporate structure going through these adversities. So I don't want to just easily say use this challenge as an opportunity, but I think it is an opportunity. And our peers are also expressing it the same way. But this product of paint is a resilient product. So this is the sentiment that the industry -- management has, but the front line are working very hard every day to deal with our customers and to fulfill the supply responsibility. The front line is keeping themselves extremely busy to fulfill the responsibility. So I always mention that and it's something that you -- I would like you to understand.

Next, Daiwa Securities, Umebayashi-san, please.

This is Umebayashi from Daiwa Securities. So about the AOC, maybe I misheard it. I thought you said that January, March quarter for the revenue compared to before the acquisition, the volume increased, but the revenue decreased by 2%. Volume increased. So is that the unit price just simply dropped. So for the reason for that, simply put, although it's sold, you were selling, but is it about the mix? And -- or is it about the raw material, transportation and logistics and also the FX, if it is shifting to a cost increase, maybe nominally that the revenue is declining. So if against the cost increase, AOC, I understand that there is a flexibility in terms of formulation. So maybe it could be addressed by how you operate at the front lines with using more less expensive materials. But if there's any way? Also I'm not sure if you can talk or disclose. If we look at the profit compared to the previous year, are you maintaining profitability? Or are you facing deterioration? Are there any comments that you can make?

Thank you for the question. The situation of AOC, January, February and also March, there is some differences. There's a dynamic change, raw materials and also pricing, the situation is very fluid and volume, price, if we look at that relationship, the cost when it is decreasing, we also lower the price. So it's not just about revenue only. It is between -- well, our thought is the volume and the contribution margin. We do need to look at -- we focus on the contribution margin. The selling price and the raw material, the price difference, whether we have the price difference multiplied by the volume, so it's not just the dollar amount of the revenue, whether it has increased or decreased because it could be misleading and although it will imply the trend. So that is my first point. And having said that, as you asked, there is somewhat related to the product mix. And also the competitive environment also is somewhat related. Although we have the top market share, still, we are subject to the competition. Some are good positive and some -- and depending on the term, the quarter, there are some differences. And it is not that the price is declining in a linear manner, but sometimes in a quarter, we may lose an account, a customer. And because of that, it could result in the fluctuations in the revenue, and the opposite is likely as well. So all of that, it is not that overall, as a trend, we are losing share or we do believe that we will be able to gain. I will not refrain from commenting on the profitability, but I would say that we are maintaining a high profitability and generating cash. So there is no difference from what we had expected before the acquisition. That is my response to your question.

So I understand that although you need to make an effort, it's not that you're facing a situation that the price is falling and you do not have such concerns.

You are correct. Your understanding is correct.

Next is CLSA Securities, Cho-san, please.

Cho from CLSA Securities. First, my question is, in the past, in 2021 and '22, Ukraine war and China electricity restriction. In 2022, the oil price was temporarily up to $120. So my question is, 2022 and -- compared to '22, '23, the raw material cost increase -- compared to last time, what is different from last time? And back then, raw material procurement or the pricing pass-through, how long did it take for pricing pass-through? In 2022, we had the Ukraine war. So if you could compare that with the Middle East situation, how do these 2 impacts compare?

Cho-san, I think it's an apple-to-orange comparison. So it's not really appropriate to compare these 2 events, but there is a regional difference again. So for example, in Japan, in 2021 and '22, the raw material cost surged and the price increase agility, the speed of price increase was due to the long-lasting deflation, it was difficult. Price increase was difficult. And that was the case in general. But for good or for bad, now price increase of various goods is something we have no other choice but to do with a stronger understanding. The understanding is spreading. So compared to back then, the environment has changed and the time required for pricing pass-through may be shorter. So that's one point I can make. But in overseas markets, the availability issue. Well, last time, price went up, but the Asia solvent type products were not delivered last time. And we have not experienced that. So we are using our procurement capability to deliver to our customers without fail. And maybe this is something our peers cannot do. So in that case, our reliability, our credibility is rising. It may rise more than we saw last time around. So this can be a differentiating factor. And as a result, it may be a difference when we try to raise prices this time. In China, for example, it's not so much the availability problem. It's a cost problem. And if it's a cost problem, local players are in the same situation. We will all raise prices, but the demand is not so strong. So how we navigate is different dynamics. So there is no one single answer to this. But in the end, we can sufficiently make ends meet, as I mentioned at the outset.

And if I could ask you a second question about China. As mentioned earlier, in Q1, sales has not recovered much, but profitability is rising now. And is it because the real estate market is recovering or because our peers, the SMEs are now shaken out and the industry discipline is improving? Or this demand recovery in China, real estate market is recovering or maybe the industry consolidation is progressing, if you could give us some update.

As I said, China market is not recovering yet. And we are not operating on the -- based on the assumption that it is recovering, we are still cautious. Now you mentioned discipline. As I've mentioned many times over, we are the price leader. So we are profitability oriented. And therefore, we are enjoying the optimal margin and our competitors are probably a beneficiary of this. But that is not to say that the competition is easy. It is severe. We see severe competition in various forms locally. Our high value-added products are our focus. We're trying to sell high value-added products. One is textured paint. There were bigger gaps with local peers, but now in the Q1, this gap is narrowing. But the product makeup or composition is different. So it's not an easy comparison. So to repeat myself, we were able to secure the optimal level of margin. But from Q2 onward, the raw material and logistics cost increase will emerge more. And so we cannot take this Q1 result for granted, and we need to be careful. I hope this answers your question.

Next, UBS Securities, Omura-san, please.

This is Omura, UBS Securities. My question is related to the Japan business. Naphtha price increase, I believe that you're also facing an impact from this. And to be specific, April in Q2, as we start the Q2, your receiving price for the raw material, how much raw material price increase are you facing? I think usually, there's about a 3-month delay gap in the price increase. Now the upstream company, when I had a conversation, they say that almost immediately, the price hike is happening. So the receiving price for your raw material prices, naphtha for the domestic 120,000, is that the price, if it's possible for you to respond? Please comment.

Omura-san, well, I will refrain from giving the details. But what I can say is, as you mentioned, the current situation compared to the normal times differs from ordinary price negotiation. There are different dynamics. At the same time, we do need to fulfill our responsibility to supply to our customers. And there is not much of a time gap, and we are raising prices and price hike is happening. At the same time, for price hike also from early stage being prepared, and also the price hike has been put in place. So at the end, I think that everything, the ends will meet. That is the background and the comment that I can provide.

Next, JPMorgan Securities, Nakada-san, please.

Nakada from JPMorgan Securities. So continuing on from Omura-san's question, so making it meet. So what is beyond that? Nuance. And if that's the case, then the price will decline again if raw material cost declines, that is one structure. But in your case, your paint, there must be differences among regions. But to -- if you are raising price to secure supply, it does not mean price will decline when cost declines. So what is the reason for the price increase? And what steps will you take when cost declines?

Well, I hope that will be the case. But I don't know that far into the future. But if I may say something, B2C and B2B are different. In B2C, we do not need to lower prices right away. But on the other hand, the competitive landscape needs to be taken into account. Peers are in the same environment. So we have to think of our strategy. So we're not asking this as a surcharge. We are sincerely asking customers to understand the situation. And if the situation settles, customers' understanding may decline. But B2B is more about the negotiation. And for the request for price increase, it is not easy compared to B2C, but the level of understanding need to be considered on a more bilateral basis. So if the situation changes, we may need to lower more quickly. So we have more B2C business. So it's not like ending a surcharge. That will not be the case. But of course, in the long-term trend, it will end at one point. So when cost increases, prices increase and when cost decreases, price will decrease with some time lag.

As of this time, now we would like to close the Q&A session. Wakatsuki-san, please.

Thank you very much once again, amid your busy schedule attending and participating. And there's a lot of uncertainties. And as uncertainties remain, our position is that we will do our best at the front line to service our customers and fulfill our responsibility to supply while balancing our profitability. I think this is a common issue and globally and the stronger organization will become stronger. That is likely to happen if we look at the history in the past, we know from history. And once again, I would like to highlight -- stress that point. And we would like to ask for your cooperation, and we will provide you with updates as anything changes in the second quarter. Thank you.

So with this, we would like to conclude 2026 Q1 the results presentation conference for Nippon Paint Holdings. Thank you very much for participating amid your busy schedule. Now we would like to end the conference.