Nippon Paint Group

Medium-Term Plan (FY2021-2023)

Update Report

April 7, 2023
Yuichiro Wakatsuki
Director, Representative Executive Officer & Co-President
Nippon Paint Holdings Co., Ltd.
TODAY’S AGENDA

1. Introduction …P3

2. Strategy Update by Asset …P8

3. Sustainability Strategy …P16

4. M&A Strategy …P26

5. Financial Strategy …P31

 1.
Introduction
1-1. Executive Summary
Resilient growth achieved despite challenging environment
• Solid demand and price pass-through capability in our market allows resilience against challenging business climate including pandemic,
conflict in Ukraine and raw material inflation
• Further market share gains achieved, underpinned by powerful brands and technological strengths

Excellent companies acquired with low financing cost delivering Year 1 EPS accretion
• No presumptuous synergies built in for justification and any synergies realized are upside
• Our model unleashes the full potential of acquired companies

Strengths of Asset Assembler model

• Our decoupled assets allow for risk diversification across our global operations
• Each asset is highly cash generative and generally requires no additional capital injection
• No HQ-driven synergies or standardized integration of acquired companies forced but pursuing benefits from autonomous management
at individual group partner companies; scale expansion possible even with small HQ

Rising interest rates create additional opportunities

• Past acquisitions financed with fixed interest rates and relationships with Japanese banks remain solid
• Our position to maintain yen-based financing to give us competitive advantage

Resilience of our Asset Assembler model to pursue

Maximization of Shareholder Value (MSV) through organic growth and M&A reassured
4
 1-2. Gap Analysis Between Original Plan and Current Guidance (1)
FY2023 Guidance Change factors contributing to FY2023 revenue guidance *3
FY2023 (Billion yen)
c. 35
MTP guidance c. 120
guidance c. 170
(Mar. 2021)
(Billion yen) (Feb. 2023) c. -45 c. 20 Türkiye
M&A*7 effect*8
Divestiture*5 Organic*6 FX*6
Revenue 1,100 1,400 1,400
1,100
772.6
Operating profit 140 140 CAGR c. +12%

FY2020 MTP guidance FY2023 guidance

Results*4 (Mar.2021) (Feb. 2023)
OP margin c.13.0% 10.0%
Change factors contributing to FY2023 OP guidance *3
(Billion yen) c. -25
Profit*1 105 98
c. 20 c. 6 c. -1
Divestiture*5 M&A*7 Türkiye
Organic*6 FX*6 effect*8
EPS ¥ 45 ¥ 41.73
140 140
87.6
Net Debt/EBITDA*2 1.6x 2.9x FY2020 MTP guidance FY2023 guidance
Results*4 (Mar.2021) (Feb. 2023)

Steady growth through organic growth and M&A expected despite

dramatic changes in external environment since MTP guidance
*1 Profit attributable to owners of parent *2 Assuming no additional M&A. Mar. 2021 assumptions include the impact of full integration of Asia JVs and acquisition of Indonesia business
*3 All figures are rough estimates and reflect changes in factors from MTP guidance as of March 2021
*4 Continuing operations basis and after retrospective adjustment to reflect a change in accounting policy regarding cloud computing agreement. Nippon Paint (India) was an equity-method affiliate back in 2020 5
*5 Including Nippon Paint (India) *6 Excluding Tϋrkiye *7 Only include Cromology and JUB *8 Changes in yen-based assumptions including organic growth, FX, and hyperinflationary accounting
 1-2. Gap Analysis Between Original Plan and Current Guidance (2)

Factors contributing to the gap between MTP guidance and FY2023 guidance
Summary of change factors*
Overview
MTP guidance (Mar. 2021) FY2023 guidance (Feb. 2023)
Decorative Decorative Resilient 〇 • Decorative demand remains solid despite pandemic
Market growth Constant • Supply chain bottlenecks continued to impact industrial business, centering on automotive, through to
Industrial Industrial Lower than expected △ end-market products

Market share/
Higher Higher 〇 • Steady market share gains due to successful sales promotion activities in each country and region
volumes
Prices Flat Higher 〇 • Multiple pricing actions in each country and region to respond to raw material inflation

Adjacencies CAGR+5~10% Expansion 〇 • Revenue (Tanshin) in adjacencies business grew 1.8 times from ¥76.7 bn in 2020 to ¥135.1 bn in 2022

• Japanese yen depreciated against major currencies, except Turkish lira. The FY2023 guidance assumes
FX USD/JPY=106 Weaker yen 〇 USD/JPY=125 (18% yen depreciation vs. MTP guidance)

+ Cromology, JUB, etc. 〇

• Acquired Vital Technical, Cromology, JUB, and NPT, and steadily built up minor acquisitions
M&A - - India business and • Transferred European automotive and India businesses to Wuthelam Group
-
European automotive
• Japan naphtha was initially assumed at ¥40,000 but price escalated to c. ¥86,000 in 2022.
Raw material prices Japan naphtha: ¥40,000 Higher × The FY2023 guidance assumes c. ¥72,000 (1.8 times vs. MTP guidance)

Hyperinflationary + Revenue • Applied hyperinflationary accounting on financial statements of Betek Boya (Türkiye) from 2022 in
- × response to rapid acceleration in inflation
accounting - OP
• Net debt increased from c. ¥400 bn at start of 2021 (incl. ¥100 bn to finance acquisition of Indonesia
Interest expenses - Higher due to M&A △ business in early 2021) to c. ¥570 bn at end of 2022 due to M&A and other factors. Higher interest
expenses vs. MTP guidance

Taxes - Higher effective tax rate △ • Higher effective tax rate vs. MTP guidance following application of hyperinflationary accounting

*A summary of general factors contributing to the gap although factors affecting our businesses differ across regions and businesses
6
 1-3. Analysis by Region
MTP guidance (Mar. 2021) February 2023 updates
FY2020 FY2021-2023 FY2021 FY2022 FY2023
Revenue Revenue
(Billion yen)
Results CAGR target
(Billion yen)
Results Results YoY Guidance Overview
(Tanshin) (In LCY) (Tanshin)*2 (Non-GAAP) (In LCY)

• New reportable segment (inclusion of overseas marine) from FY2022

Japan 159.6 c. +5% • Automotive: Roughly in line with MTP despite chip and parts shortage
Japan 174.0 184.2 +5.8% c. +5% • Industrial and decorative: Below MTP due to pandemic, etc., despite aggressive
product proposals to increase market share and pricing actions
Nipsea China 268.1 c. +10%
• TUC: Above MTP due to higher-than-expected market growth with market share gains
Nipsea China 379.1 395.1 +4.2% +5~10% • TUB: Below MTP due to soft market
Asia Except • Total revenue in China expected to exceed MTP
88.5 +5~10%
Nipsea China
NIPSEA • Above MTP due to pricing actions, growth in adjacencies business and market
103.8 119.5 +15.1% +0~5%
(NIPSEA Except China)*3 share gains that outpace market in every region (Malaysia, Singapore, Thailand)
New consolidation
47.4*1 c. +15% • Above MTP despite impact of hyperinflationary accounting, due to pricing actions
(Indonesia/India) Betek Boya
49.2 123.6 +151.3% c. +30% amid hyperinflation and successful branding strategies and growth in adjacencies
(Türkiye) business driving our market share

Oceania (Pacific) 148.3 c. +5% PT Nipsea • Above MTP due to pricing actions and market share gains through expansion of
39.5 45.8 +15.9% c. +15% distributors and more CCM*4 installed at paint shops
(Indonesia)
Americas 70.1 +5~10% DuluxGroup • Pacific*5: Above MTP due to ongoing bias to premium product mix, pricing actions
176.2 187.3 +6.3% +5~10% in response to raw material inflation and new adjacent business bolt-ons
(consolidated)
Other (Betek Boya) 36.2 +10~15%
Cromology (Europe) - -*6 - +5~10% -

JUB (Europe) - -*6 - +5~10% -

• Automotive: Roughly in line with MTP despite chip and parts shortage
Americas 76.4 83.1 +8.8% +0~5% • Decorative: Roughly in line with MTP due to firm market until 1H 2022, pricing actions, etc.

Achieving growth exceeding MTP guidance,

driven by growth outpacing market and pricing actions in most regions
*1 Unaudited pro forma figure *2 FY2021 results have been revised retrospectively following change in reportable segment from 1Q FY2022
*3 Figures excluding Betek Boya and PT Nipsea from the total of NIPSEA Except China *4 Computerized Color Matching 7
*5 Australia, New Zealand and Papua New Guinea *6 Cromology was newly consolidated from Jan. 2022 and JUB from Jun. 2022 and are not included in Non-GAAP FY2022 results
 2.
Strategy
Update
by Asset
 2-1. Growth Potential of Decorative Paints Market in China
Decorative paints market in China remains promising in medium and long term driven by
growing repainting market
Growth potential continues in medium and long term The property market has entered the “stock housing era” Market trends and outlook (TUC and TUB)

Med/long Term market growth rate* • Private houses that were built in large numbers in the late 1990s
are aging. As a result, repainting demand has been growing TUC (Trade Use Consumer)：B2C business
rapidly
GDP growth +α (CAGR) • China’s property market has crossed over into the Era of Stock
Business to consumers, DIY business, sales via
dealers/distributors and e-commerce to end consumers, etc.

• Paint consumption per capita is still around 1/3 of developed Housing; resale housing accounted for c. 26% of the total
• A rising proportion of existing/mature housing estates
countries. Expect longer term sustainable growth at GDP ∔α property transactions in 2022. The trend is particularly remarkable
across China boosts demand for repairs, renovation and
driven by an increase in disposable income due to growth of in Tier 0-2 cities. Beijing’s resale housing transactions are close
repainting
the middle class population to c. 70% of the total property transactions, while in Shanghai it
stands at 60% and in Shenzhen and Guangzhou at c. 50% • Renovation demand is growing
• Paint demand is growing with urbanization. The urbanization
rate has risen to c. 60%-70% from c. 50% in 2016, and is in Tier 0-2 major cities as well as
• For Tier 2-4 cities, resale housing transactions have made up
expected to continue increasing gradually Tier 3-6 regional cities
over 30% of total property transactions and are also steadily
• Subdued paint market growth in 2021 and 2022 is due to the increasing
overall weak market sentiment because of the pandemic and
efforts by the government to clamp down on excessive
borrowing by developers which had dampening effect on the Renovation demand(%)* TUB (Trade Use Business)：B2B business
property market. However, given that real estate has always
been a key pillar of the Chinese economy, the medium and 23 26 27 27 28 28 28 28 29 29 Business transactions direct to Project customers
31 32 34 37 and main contractors, etc.
long-term growth potential remains unchanged and continues 39 40 41 41 41 41 42
to be promising
25 22 20 19 17 16
43 40 37 35 33 30 28 15 14 13 13 12 12 11 10 • A rising proportion of existing/mature housing estates
Trends in market size* boosts demand for repairs, renovation and repainting
+1.7% 49 50 50 50 50 48 47 46 46 47 47 48 48
+6.6% 42 44 47 • Increasing number of new property
34 34 36 38 40
launches featuring fully pre-
decorated and move-in-ready units,
as opposed to bare units without
FY2020 FY2021 FY2022 FY2023 decoration and furniture
(Forecast) Stock housing New - unfurnised New - fine decoration

*NPHD’s estimate
9
 2-2. Nipsea China Decorative (TUC)
Positioning for growth and extending our leadership position
Market share (TUC)* Performance trends
Revenue (In LCY)
+10~15%
FY2020 FY2021 FY2022 +10%
DIY

19% 23% 24% DIY

+35%
+12%

FY2020 FY2021 FY2022 FY2023

(DIY) (Forecast)

Market features and outlook (TUC) Key actions in FY2023 and onwards
▶ Enriching with new product line-up
• The Chinese central government has set its 2023 GDP y-o-y growth target • Striving and innovating products and services as a leading brand,
at around 5%, which is an improvement over the 3% in 2022 bringing greater value to our customers
• Magic Paint to spearhead and champion best in class decorative effect
• General market conditions improving with the opening up of the country and
gradual easing of property measures ▶ Continuous brand building
• Investing in branding, sparing no efforts to enhance Libang market recognition and
• The government is introducing measures to support people in buying their maintain our high brand evaluation
first homes and to help resolve the problems of new urban residents and • Numerous awards year after year is a testament of the trust and confidence that
young people our customers have in us

▶ Optimising & expanding customers and channels

• See demand growth in the renovation market (as apartments get older and
• Channel expansion via opening of new multi-brand stores, images stores and
require a new lease of life) and stronger growth in lower-tier and rural cities stores with CCM tinting machines
• Efforts to accelerate and aggressively grow share in Tier 3-6 and rural cities
*NPHD’s estimates. Our China decorative business has been re-organized into TUC and TUB based on customer segmentation. The TUC market share has been redefined to be consistent with the re-organization
10
 2-3. Nipsea China Decorative (TUB)
Poised for recovery and towards sustainable moderate growth
Market share (TUB)* Performance trends
Revenue (In LCY)
-14% + 0~ 5%
FY2020 FY2021 FY2022
Project
Project
8% 9% 8% +29%
-10%

FY2020 FY2021 FY2022 FY2023

(Project) (Forecast)

Market features and outlook (TUB) Key actions in FY2023 and onwards
• Signs of recovery with the opening up of the country following the lifting of the
COVID travel restrictions late last year and the gradually easing of property measures ▶ Diversification of customer base
• Further property easing measures is expected and will continue to support and • Further diversifying our customer base by continuing to increase penetration
stimulate property sales going into 2023 in non-residential segments

• Re-opening of both onshore and offshore capital market to local developers will • Strengthening business relationship with strategic construction, project service
support developers’ refinancing efforts, lowering default risk and promote stability vendors, high quality, financially stable real estate enterprises
and project resumption

Market share controlled by top 100 real estate developers ▶ Value add offering
• Developing and promoting scenario based solutions, catering to the varied needs
35.1%
57% of our B2B customers across sectors
60.9%

2015 2021 2022

*NPHD’s estimates. Our China decorative business has been re-organized into TUC and TUB based on customer segmentation. The TUB market share has been redefined to be consistent with the re-organization
11
 2-4. Betek Boya (Türkiye)
Making inroads, further entrenching our dominant position
Market share (Decorative)*1 Performance trends*2
Revenue 1 4,0 00

(TRY million) c. +30% 2 0.0 %

FY2020 FY2021 FY2022 13.6% 9,952

1 8.0 %

1 2,0 00

13.4% 1 6.0 %

OP margin 1 0,0 00
1 4.0 %

1 2.0 %
8 ,00 0

7.6%

30% 34% 34%

1 0.0 %

6 ,00 0

3,936 8 .0%

4 ,00 0
2,382 6 .0%

4 .0%

2 ,00 0

2 .0%

0 0 .0%

FY2020 FY2021 FY2022 FY2023

(Forecast)

Market features and outlook

*3 Key actions in FY2023 and onwards
(Decorative and ETICS )

FY2022-2024 market • Promoting sale of paint and coatings solutions and complete systems as opposed to
growth rate (Decorative)*1 ~+25% (CAGR) solely selling products

• Widening our already extensive product portfolio range covering interior to exterior,
• Market value growth continue to be driven by inflation albeit at a decreasing rate. waterproofing paints and coatings to non-paints products including sealants, adhesive,
Volume growth remains challenging and expected to be limited, if any.
Inflation is now expected to increase by 5~10% vs previous forecast of 40%, due to the fillers, construction chemicals, tools and accessories which will allow us greater ease
loss of productivity from the earthquake to expand and attract new shops, expanding our market reach

• Stable market growth in ETICS is still expected due to strong demand and consumer • Continued advertising investment to preserve premium positioning and
consciousness from high energy prices brand thought leadership
• GDP impact of earthquake is estimated at -1%. Demand for new build homes is
estimated at 650,000 units and renovation/rebuilt of residential builds at 4 million units • Creating premium consumer and shopping experience via integrated platforms and
next generation dealership programmes that we have rolled out in 81 cities
• Consumer sentiment is now poor and is expected to improve with the upcoming May
elections across the country

*1 NPHD’s estimates *2 Local currency basis (after elimination of intersegment transactions and after PPA) *3 External Thermal Insulation Composite System
12
 2-5. PT Nipsea (Indonesia)
Elevating our brand & driving channel and adjacencies expansion
Market share (Decorative)*1 Performance trends*2
Revenue 8 ,00 0.0

(IDR billion)
c.+15%
FY2020 FY2021 FY2022 594.71
1 20 .0%

7 ,00 0.0

OP margin 6 ,00 0.0 512.99 1 00 .0%

5 ,00 0.0
409.46 8 0.0 %

17% 17% 18%

4 ,00 0.0

33.8% 29.7% 31.2%

6 0.0 %

3 ,00 0.0

4 0.0 %

2 ,00 0.0

2 0.0 %
1 ,00 0.0

0 .0 0 .0%

FY2020 FY2021*3 FY2022*3 FY2023

(For reference) (Forecast)

Market features and outlook Key actions in FY2023 and onwards

(Decorative)

FY2022-2024 market • Elevating the Nippon Paint brand in the premium segment with added focus of
growth rate*1 +5% (CAGR) driving our Ultra Premium and Premium products

• Continue strategy of opening more depots /stockpoints to further widen

• Indonesia GDP grew 5.3% in 2022 and is expected to experience a slight our geographical coverage, adding more sales staff to allow wider and better
deceleration in 2023 to 4.8% amid concerns of slowing global growth coverage of more dealer channels

• Driving distribution of CCM machines and increasing product penetration in

• Growth in the Indonesia economy will likely be supported by household
all product segments in the CCM stores
consumption while inflation should be under control
• Expanding and focusing on SAFL (Sealants, Adhesives, Fillers and Lubricants) and
Tools and Accessories range to complete our total solution offering to customers,
tapping on existing and new retail network, to increase sales contribution from this
segment

*1 NPHD’s estimates *2 Local currency basis (after elimination of intersegment transactions) *3 After PPA
13
 2-6. DuluxGroup (Pacific・Europe)
Continue growth in our market leading Dulux business in the Pacific and drive growth in Europe
Market share (Australia)*1 Performance trends*2
Revenue +5~10%
4 ,00 0

(AUD million) 3,459 5 0.0 %

FY2020 FY2021 FY2022

4 5.0 %
3 ,50 0

4 0.0 %

OP margin 3 ,00 0

2 ,50 0
2,012 2,131 3 5.0 %

3 0.0 %

50% 50% 50%

2 ,00 0 2 5.0 %

1 ,50 0
10.4% 10.8% 9.4%
2 0.0 %

1 5.0 %

1 ,00 0

1 0.0 %

5 00
5 .0%

0 0 .0%

FY2020 FY2021 FY2022*3 FY2023*3

(Forecast)

Market features and outlook Key actions in FY2023 and onwards

(Decorative in Australia and Europe)

Australia Europe • Continue strong track record of organic growth in DuluxGroup Pacific by maintaining
FY2022-2024
market
growth rate*4
-2 to 0% -2 to 0% a focus on core fundamentals, being consumer engagement, premium brands,
innovation and customer service
(CAGR) (CAGR)
• Drive meaningful organic growth in DuluxGroup Europe by leveraging our recent
• In Australia the renovation and repair segment of the Decorative paint market is highly resilient, acquisitions of Cromology and JUB in the European decorative paints and specialty
however it is still normalizing from its “COVID enhanced" abnormal 2020 peak coatings & SAF*5 markets

• In general, decorative paint market volumes are primarily correlated with GDP, interest rates • Target bolt-on acquisitions to the existing DuluxGroup Paints & Coatings portfolio
and to a lesser extent new housing starts. Indicators of demand remain uncertain ie. GDP that enable key strategic growth opportunities
remains positive, interest rates rising from record lows, unemployment is historically low, falling
house prices from record highs

• In Europe, Decorative paint market demand is being impacted by ongoing macroeconomic

uncertainty ie. weakening consumer confidence, rising inflation and interest rates

*1 Estimated Australian Decorative Paints market by volume *2 Local currency basis (after elimination of intersegment transactions). Includes all of DuluxGroup, including non-paints businesses
*3 All of DuluxGroup, including earnings of Cromology and JUB and non-paints businesses *4 Estimated market volume growth rate *5 *Sealants, Adhesives & Fillers
14
 2-7. Japan Group
Aim for early restoration of double-digit OP margin through pricing flow through and
per capita productivity improvement
Key actions for margin improvement Roadmap for further margin improvement
and achievements (~2022) (2023~)
1. Pricing actions to respond to raw material inflation 1. Market share gains through top-line growth
• Price negotiation while maintaining customer relationships • 【Automotive】 Recovery of automobile production and pricing flow through.
⇒ Pricing actions in 2022: Decorative in May and industrial Pricing actions in January
in April and October • 【Decorative】 New customer acquisition and sales promotion using digital transformation;
development and sales promotion of high-performance and differentiated products.
Pricing actions scheduled for May
2. Transforming into an efficient and resilient organization • 【Industrial】 Aggressively pursue market share gains and pricing actions
• Company split
⇒ Into NPHD (holding company) and NPCS*1 (Japan-focused 2. Thorough control of SG&A expenses
functional company) • Review expenses while continuing necessary investments including human resource investment
• “Next Career Plan” voluntary early retirement program • Increase productivity and added value by reviewing inefficient tasks based on J-LFG
⇒ 2022: Special retirement payment, etc. of c. ¥2.2 bn Revenue (bn yen)

2023 onwards: Personnel expense reduction of c. ¥2.0 bn OP margin c.+5%

2 ,00 0
175.9 182.8 182.6 164.6 174.0 186.1
1 ,80 0 159.6
3. Reform of business structure and mindset 1 ,60 0

1 ,40 0
17.4% 16.2%
• Structural reform of Marine and Automotive businesses 12.8%
1 ,20 0

1 ,00 0

6.3%
⇒ Turned around Marine from c. ¥1.9 bn operating loss in 2021 5.5%
8 00

6 00

4.5% 4.0%*4
into profit in 2022
4 00

2 00

2.8%
• Eight task forces 0

FY2017*2 FY2018 FY2019 FY2020 FY2021 FY2021 FY2022 FY2023

⇒ Taking reform measures based on production, quality and other themes (Previous (Previous (Previous (Previous (Previous (Forecast)
segment*3) segment) segment) segment) segment)
• Introduced J-LFG action guidelines NPHD*5-related
Allocated NPCS-related
⇒ Reforming corporate culture and mindset NPHD-related expenses were allocated to Japan segment expenses were included
in Adjustments expenses to Japan

*1 Nippon Paint Corporate Solutions *2 J-GAAP based figures for FY2017 (IFRS-based figures starting with FY2018)
*3 Japan Group included marine business in Japan only under previous segment but also includes overseas marine business under new segment. 15
*4 Excluding special retirement payment of c. 2.2 bn yen *5 Including the current NPCS
 3.
Sustainability
Strategy
3-1. Reinforcing Autonomous Sustainability Structure (1)
Established Basic Policy on Sustainability aimed to achieve MSV based on
Asset Assembler model
Basic Policy on Sustainability
Nippon Paint Group recognizes an opportunity for sustainable growth from taking actions such as
protecting natural capital including the environment, enhancing human resources by embracing diversity, and creating innovation with social benefits.
Our group partner companies autonomously develop sustainability strategies and conduct business activities. Furthermore, we identify risks and
opportunities related to Materiality based on sound group governance with the sole mission of Maximization of Shareholder Value (MSV)
after adequately fulfilling our legal, social and ethical obligations to customers, suppliers, employees, society and other stakeholders.

Key points of update

バ ESG Statement 〉 Basic Policy on Sustainability
Stated that the delivery of sustainability improvement
Position of Clearly state that MSV is the goal of
MSV
plans will lead to the creation of new business 〉 our sustainability initiatives
opportunities and MSV
Premised on Nippon Paint being a paint and coatings
Business Basic Policy on Sustainability based on
model
manufacturer. Mainly focused on actions to achieve 〉 Asset Assembler model
sustainable development

Mainly discussed at the then ESG Committee meeting and Discussed and resolved at the Board meeting
Procedures
reported to the Board meeting in August 2020 〉 in March 2023

17
 3-1. Reinforcing Autonomous Sustainability Structure (2)
Evolved into a business-driven, autonomous sustainability structure with MSV as the goal

ESG management system (~2021) Sustainability structure (2022~)

〉
Top-down approach Bottom-up approach
Board of Directors Board of Directors
Report
Report (quarterly) Entrustment Entrustment
(whenever necessary)

Dialogue Director, Representative Dialogue Stakeholders

Representative Executive Officer
Stakeholders Executive Officer & Co-president External experts
& Co-President

ESG Committee External experts Nomination/Entrustment Sustainability Department

Committee Chair: Representative
Structure Executive Officer & Co-president
ESG Promotion
〉 Proposals

Nomination/ Department Five Global Teams

Entrustment Proposals
Innovation
Environment People Sustainable
& Product Governance
Working teams & Safety & Community Procurement
Stewardship
Dialogue

Domestic and overseas partner companies, Domestic and overseas partner companies
functional divisions and functional divisions

Supervision by Team Leaders directly report to Co-Presidents,

the Board of ESG Committee reports to the Board of Directors 〉 who then report progress and proposals to the Board of Directors
Directors whenever necessary
⚫ Strategy, policy, and action plans are developed by the ESG
Strategy Committee
⚫ Autonomous sustainability structure with MSV as the goal
development~ ⚫ The working team, which is directly below the ESG Committee,
Breakdown shares advanced case examples, establishes group-level 〉 ⚫ Global Teams are formed based on three Materiality-based
pillars*1 and two pillars*2 cutting through Materiality
into actions targets, and develop measures in line with the situations in
each region
*1 Environment & Safety, People & Community, Innovation & Product Stewardship *2 Governance, Sustainable Procurement 18
 3-2. Sustainability Strategy Updates
Share success cases of each partner company, identify priority issues and develop
roadmaps for addressing identified issues
Team Materiality Main actions/achievements in FY2022 Targets/actions in FY2023 and onwards
⚫ Climate Change ⚫ Identify further improvement focus areas for ⚫ Implement and disclose:
⚫ Resources and • Climate change • Scope 3
Environment &
Environment • Resource usage • Water usage
Safety
⚫ Safe People and • Significant safety risk • High potential safety incidents
Operations ⚫ Agreed standardized metrics and implementation plan ⚫ TCFD risk and opportunity assessment and actions

⚫ Shared actions to increase the ratio of women in all employees ⚫ Increase the ratio of women in managerial positions in
⚫ Diversity & Inclusion
People & ⚫ Decide the group’s target to celebrate the diversity accordance with targets in each region
⚫ Growth with
Community ⚫ Established a global CSR framework as a guiding structure for ⚫ Develop a long-term community engagement strategy with
Communities
all partner companies our global framework and targets

⚫ Stated ESG innovation strategy and roadmap

Innovation & ⚫ Use Sustainability Scoreboard in broader partner companies
⚫ Innovation for ⚫ Redefined sustainable products*
Product ⚫ Identify and compile Chemicals of Concern and develop
a Sustainable Future ⚫ Developed Green Design Review
Stewardship a phase out plan
⚫ Established packaging recycled content

⚫ Increase diversity in Board of Directors ⚫ Enhance growth strategy discussions and implement succession plans
⚫ Enhance growth strategy discussions by Directors ⚫ Continuously improve group management effectiveness
All Materiality
Governance ⚫ Established the Nippon Paint Group Global Code of Conduct ⚫ Establish Whistleblowing Hotline and verify its effectiveness
categories
⚫ Modified the Group Risk Management Basic Policy and established ⚫ Reform governance framework responding to changes in social
Global Basic Policy of Whistleblowing Hotline demand (including in compliance and risk management)

⚫ Established global team

⚫ Conduct supplier survey
Sustainable All Materiality ⚫ Developed Supplier Code of Conduct and supplier questionnaire
⚫ Define supplier ESG assessment methodology
Procurement categories ⚫ Organize regional teams
⚫ Scope 3 disclosure (raw materials related)
⚫ Conducted trial supplier survey

*Products with sustainable advantage from the perspective of product life cycle and based on the framework of Sustainable Development Goals (SDGs) adopted by the United Nations
19
 3-3. Team 1 (Environment & Safety)
Identify and mitigate risks related to CO2 emissions, recognizing new business opportunities
created from responding to climate change
Nippon Paint Group’s CO2 emissions reduction target (Scope 1 and 2)*1 *2
CO2 emission reduction 2030
2020 Expected expenses and investments required
target (Scope 1 and 2) *1 (estimate)
NIPSEA 100 65 TBD
DuluxGroup 100 50 <A$0.5m p.a. expense, investment manageable within
normal minor capex expenditure levels
Dunn-Edwards 100 67 TBD
Japan Group 100 65 ¥30 mm in expenses for renewable energy and certificate,
etc. (in FY2023 only) *3
Total *4 100 63 -

Roadmap 2022 2023 ~2030 2050~2060

• Aim to reduce emissions intensity (Scope
NIPSEA • Measure Scope 3 1and 2) by 15%, with a yearly reduction
target of 4% from 2021 levels
• Commenced development and • Commence Cromology and • 50% renewable energy consumption
DuluxGroup implementation of detailed action plans JUB Scope 1&2 measurement • 50% CO2 emissions reduction by 2030
to achieve the 2030 targets and inclusion from 2021 level • Net zero carbon (Scope 1&2)

• Started using renewable energy

Dunn-Edwards • Measure Scope 3 in 2024
supplied in each state
• Around 7% renewable energy • 37% CO2 emissions reduction (Scope 1
Japan Group
consumption and 2) from 2019 levels

*1 Emission intensity (index 2020=100) *2 Data coverage: NIPSEA and DuluxGroup excluding Cromology and JUB, Dunn-Edwards, and Japan Group
*3 Expenses for renewable energy procurement and certificate were calculated using results (unit price) and emissions as of 2022 20
*4 Total was calculated based on production volumes of 4 Partner Companies in 2022
 3-3. Team 2 (People & Community)
Enhance human resources by embracing diversity brought by Asset Assembler model
NIPSEA DuluxGroup Dunn-Edwards Japan Group

Ratio of female employees (2022) 25.0% 32.7% 30.0% 22.5%

Ratio of women in
25.2% 31.5% 34.5% 5.4%
managerial positions (2022)
80% 89%
Employee satisfaction level (2022) 75% -
(2021) (2021)

Roadmap 2022 2023 ~2025

• Kicked off D&I Week to • Launching D&I Policy • Implementation of roadmap towards the goal of
raise employee awareness • Encourage countries to own the roadmap towards achieving 35% female achieving 35% female representation in both
NIPSEA
• Implemented Global representation in both management & emerging leader category management & emerging leader category
CSR Framework • Weave D&I into Employee Engagement campaigns • Monitor progress towards the goal

• Revised draft D&I framework and

• Promote our EVP to all employees, but particularly to women in SC and Sales
strategy, encompassing • Meaningful actions to sustain and increase our
• Quarterly reporting to the CEO on SBU diversity statistics against ambition
DuluxGroup dimensions beyond gender percentage of women in managerial positions to 35%
• Reviewing our attraction strategies and recruitment processes for accessibility
(indigenous reconciliation; • Meaningful internal programs to foster inclusion
by people with a disability
disability; cultural diversity)
• Launched phase 2 of DEI curriculum for all employees
• Share DEI curriculum with NPHD People and Community DEI Committee
• Continuously review and adapt company polices to
Dunn-Edwards • Launched DEI Training • DEI committee building company-wide interactive activity for April’s
ensure that all charter objectives are met
celebration of diversity, highlighting the diversity that exists within Dunn-
Edwards
• Developed action plans towards 2025
• Increase the ratio of women in managerial
Japan Group • Kicked off D&I Committee • Act on Promotion of Women’s Participation & Career Advancement in the
positions to 10%
Workplace

21
 3-3. Team 3 (Innovation & Product Stewardship)
Create new markets by rolling out sustainable products with low carbon emissions and
reduced chemical substances
Group-level R&D framework (2022)
19.5%
Engineers 3,895 persons
2022 New Product Sales Index (NPSI)
of Japan Group and NIPSEA R&D expenditures 28.1 bn yen

No. of new patents registered 158 cases

Roadmap 2022 2023 ~2027

• NIPSEA: Redefined sustainable products
• NIPSEA, Japan Group: Developed Sustainability • Manage the performance of Sustainability Scoreboard of
• Life Cycle Assessment (LCA) of selected products
Sustainable Scoreboard each partner company every quarter
can be calculated at each Partner Company
Products • DuluxGroup: Established sustainable products targets • Promote creation of more innovative sustainable products
• DuluxGroup: Develop Scope 3 reduction roadmap
and developed roadmaps for ANZ*1 businesses • DuluxGroup: Implement sustainable products and Scope 3 roadmaps

• Each Partner Company responded to US • Consider the phase out plan of Chemicals of
Environmental Protection Agency (EPA) and REACH Concern in each partner company
Chemicals of • DuluxGroup developed position statements for 50% of • NIPSEA: Focus on 4 hazardous heavy metals*2
• Create sustainable products based on phase out plan
Concern high concern CoC • DuluxGroup: Complete position statements for
• Dunn-Edwards: Incoming Chemical Management / 75% of CoC and develop a structured program of
Selection per Chemicals of Concern CoC in Europe
• R&D activities for sustainable products from
R&D
• Developed Green Design Review Partner Companies beyond Japan and NIPSEA, • Drive innovation towards UN SDGs and carbon neutrality
e.g. DuluxGroup, Dunn-Edwards, etc.
• Identify inquiry items
• Implement inquiry management database
• Stakeholder questionnaire
Product • DuluxGroup established packaging recycled content • Inquiry response training
• NIPSEA: Reinforce PS&RA*3 team
Stewardship targets and developed roadmaps for ANZ businesses • Training for customers and business partners
• DuluxGroup: Implement Product Vision to help with
• DuluxGroup: Implement packaging roadmaps
formulation management & regulatory tracking
*1 Australia and New Zealand *2 Lead, Chromate (Cr6+), Cadmium, and Mercury *3Product Stewardship & Regulatory Affairs 22
 3-3. Team 4 (Governance)
Reinforced global risk management system underlying our Asset Assembler model
Risk heatmap ◼ Identify high-risk items and monitor changes
High risk items identified in FY2022 Change from FY2021 Risk details • Compile results of risk self-assessment*1 and identify high risk
Slightly items
Human resources Leadership succession planning • Assigned a score to risk sensitivity of related items and ranked
higher
them in the order of degree of change from FY2021
Business Continuity Plan (BCP) Slightly Global raw material inflation, FX and BCP responses
responses higher incl. pandemic, natural disaster and IT security
◼ Overview of high-risk matters
Social risks including information leakage and
Compliance Higher • No major change from FY2021 in high-risk item list
employee misconduct
• However, there were signs of change in the following
Much ✓Risk sensitivity regarding international taxation decreased
Supply chain Inventory, logistics, and credit management
higher ✓Risk sensitivity in both BCP and supply chain increased

Much International taxation due to greater Group-wide collaboration

International taxation, etc.
lower in brands and technology

Roadmap 2022 2023 ~2026

• Increased diversity in Board of Directors
• Enhanced growth strategy discussions • Further sophistication of growth strategy
Board of • Further streamline the Board of Directors operations
• Streamlined the Board of Directors’ operations discussions by Directors
Directors • Further increase contributions by Independent Directors
• Increased contribution by Independent Directors
governance • Enhance succession plans • Enhance and implement succession plans
• Strengthened the Board of Directors secretariat
functions
• Verify effectiveness and refine
• Increase effectiveness of risk management through risk
• Established the Group Global Code of Conduct self-assessment based on Global Risk -risk management system through risk self
Execution • Modified Global Risk Management Basic Policy and Management Basic Policy assessment
governance established Global Basic Policy of -whistleblowing hotline
• Establish and increase efficiency of whistleblowing
Whistleblowing Hotline system at each Partner Company Group • Reform governance framework*2 to respond to
changes in social demand
*1 Carried out annually by each Partner Company Group and results will be reported to Co-Presidents *2 Including compliance and risk management 23
3-3. Team 5 (Sustainable Procurement)
Create new opportunities by building closer communication and stronger trust with suppliers
Key items of the Supplier Code of Conduct
Compliance Environment Social Governance
Legal Compliance Minimize impact Freedom of association Anti-corruption
Subcontractor compliance Waste management Child labor Gifts and entertainment
Environment, health and safety compliance Forced labor Conflict of interest
Discrimination Confidentiality
Working conditions Record keeping
Conflict minerals Fair competition
Product safety and compliance International trade
Safety training

Roadmap 2022 2023 ~2025

• Conduct supplier survey • Conduct supplier survey
• Launched the global team • Define supplier ESG assessment methodology • Conduct supplier ESG assessment
Team activities
• Organize regional teams • Define Scope 3 disclosure • Refine Scope 3 disclosure
(raw materials related) (raw materials related)
• Developed Supplier Code of Conduct
Evaluations/ • Developed supplier questionnaire • Conduct supplier questionnaire • Conduct supplier questionnaire
questionnaires, etc. (target 40% by value) (target 90% by value)

24
 3-4. Sustainability Strategy Updates: ESG Index/Rating Evaluations
Due to our progress in our sustainability initiatives and disclosure enhancement, we have been
included in ESG indexes adopted by GPIF and showed improvement in ESG rating scores
ESG index
S&P/JPX Carbon Efficient Index Sep. 2018~

MSCI Japan Stock Index (WIN) June~

MSCI Japan ESG Select Leaders Index June~

FTSE Blossom Japan Index June~

FTSE Blossom Japan Sector Relative Index March~

ESG rating 2019 2020 2021 2022

Climate Change D C B B

Water Security D B- A- A-

MSCI ESG Rating BBB A A A

FTSE ESG Score 2.1 2.3 2.5 3.5

25
 4.
M&A
Strategy
4-1. M&A Strategy
Continue to pursue aggressive M&A strategy by leveraging our autonomous and
decentralized business model
1. Fundamentals of paint and adjacencies markets, e.g. population
1. Business segments: growth and urbanization create enormous growth opportunities
Paint (decorative/industrial) and adjacencies
2. No restrictions in terms of target locations as long as acquisition
Targets 2. Geography: Not limited contributes to MSV. Distant location to be carefully examined
3. Potential targets:
Strong corporate/product brand, and excellent management team 3. Continue to assemble assets leveraging strengths of our autonomous
and decentralized business model

1. Financial soundness 1. Stable cash generating ability and strong financial position

Our 2. Ability to finance in Japan, with stable currency and stable market
2. Low interest rate borrowings, safety and liquidity of the stock market
3. Full access to the Nippon Paint Group’s platform
Strengths 3. Sharing expertise, products, and technologies within the Group
4. Excellent management teams enabling autonomous and
decentralized business model 4. Minimize the PMI risk

1. Contribution to EPS 1. Aim to achieve EPS accretion in Year 1 after acquisition

Financial 2. ROIC*1＞WACC*2 2. Take capital efficiency into consideration

3. Sufficient leverage capacity
Discipline 3. Secure financial soundness to prepare for future M&As
4. Debt financing prioritized: equity-based capital raising remains
an option 4. EPS accretion also a must in rare case of equity financing

*1 Return on invested capital (after on-off expenses) *2 Weighted average cost of capital 27
 4-2. M&A Success Case: DuluxGroup (1)
Nippon Paint acquired DuluxGroup for two reasons: Dependable + Talent
2010 2019
Demerged from Orica Limited & listed on Australian Stock Exchange Joined Nippon Paint Group

Market cap Stock value valuation

c. AUD 0.8bn c. AUD 3.76bn
Steady growth continuing through Key considerations of acquisition
market share gains in mature market
⚫ High credibility in ability to deliver stable
・・・After-tax profit*
・・・Dividend 30 growth through steady share gains even in
175
25
mature market
150

125 20 ⚫ Excellent management team delivering

100 15
stable growth
75
10
50
5
25

0 0 Patrick Houlihan Patrick Jones Richard Stuckes Martin Ward Simon Black
2011 2012 2013 2014 2015 2016 2017 2018 Chairman and Chief Operating Officer Chief Operating Officer Chief Operating Officer Executive General Manager
Chief Executive Officer Dulux Pacific DGL Europe DGL SAF Strategy/M&A

*Before deduction of non-recurring items

28
4-2. M&A Success Case: DuluxGroup (2)
Delivered further growth after acquisition by complementing organic growth with
strategic M&A deals based on three key strategic pillars

2010 2019 2022

Extending our market leading
positions in the Pacific

Leveraging capability for

+ 9 acquisitions

growth into the mature

European paints market
+ 23 Pacific Europe

acquisitions
Leveraging capability for
growth into global SAF Dulux ANZ & PNG
Paint Spot RTP Sydney
Selleys ANZ
Admil Sealants
Paints & Coatings
Maison Deco
Dryden woodcare Qld Roofing Services Sealants Australasia
Cromology
Quikcote Specialized Const. Products Lincoln Sentry
JUB
Ezycoat Inspirations franchise FHS South Australia
Pure & Paint
Trade Stores (x4) Nippon Paint PNG Yates
SAF
BIC Canberra Seasol
NPT Italy

29
 4-3. M&A Success Case: Adjacencies Business
Accelerating growth by building up assets also in adjacencies (Paint++) arena with
material market opportunities
SAF CC
(Sealants, Adhesives & Fillers) (Construction Chemicals)

Market size USD 71.5 bn*3

Market size
(global) USD 60 bn*1 (global)

Growth
centering 2022
2019 on Asia ・NIPSEA acquired CMI (Malaysia)
・Acquired DuluxGroup along with Selleys brand

2020
・NIPSEA integrated Selleys business in Asia, ETICS
expanding its adjacencies business (External Thermal Insulation Composite System)
Faster ・DuluxGroup acquired Admil Adhesives (Pacific)
growth 2019
centering 2021 ・Acquired Betek Boya along with its ETICS business
Asia, ・NIPSEA acquired Vital Technical (Malaysia) Faster ・NIPSEA expanded into ETICS business
Pacific ・DuluxGroup acquired Sealants Australasia (Pacific) growth by capitalizing on Betek Boya’s know-how
and centering
Europe on Europe
2023 2022
・DuluxGroup acquired NPT*2 (Europe) and Asia ・DuluxGroup acquired Cromology*4
and JUB*4 (Europe)

*1 Source: Fortune Business Insights. Primary focus is on ‘Build & Construct’ segments *2 Completion expected H1 2023
*3 Source: ReportLinker *4. Cromology and JUB are primarily focused on decorative paints but with a material ETICs business 30
 5.
Financial
Strategy
5-1. Financial Strategy

Prioritizing growth investment and M&A while maintaining financial discipline

with the focus of increasing TSR through EPS accretion

Financial discipline
Financial • Pursue optimal capital structure with balanced leverage
Discipline • Allow for temporarily higher leverage for
strategically important M&As

Capex/M&A
• Proactively implement capex and M&A for
future sustainable growth

Shareholder Capex
Shareholder returns
Returns M&A • Maintain a dividend payout ratio of 30%
• Increase TSR through growth investment and M&A
32
 5-2. Financial Position
Net Debt/EBITDA Capital Allocation
(Billion yen) (Billion yen)
FY2023 Guidance FY2023 Guidance

(after one-off (after one-off Feb. 2023 MTP guidance Feb. 2023 MPT guidance
expenses) expenses) updates (Mar. 2021) Updates (Mar. 2021)
3.4x 3.4x
2.9x FY2021-2022 FY2023 FY2021-2023 FY2021-2023
Results Forecast Forecast guidance
2.6x
574.4 560.0
1.6x +) Operating CF*2 182.6 120.0 c. 300.0 ~330.0
429.3
-) CAPEX*3 76.0 55.0 c. 130.0 ~125.0
309.2 (after one-off 280.0
(after one-off expenses)
expenses) 190.0 175.0 -) Dividend*4 49.3 30.0 c. 80.0 ~85.0
170.3
116.7 127.3
Total 57.3 35.0 c. 90.0 ~120.0
↓
FY2020 end FY2021 end FY2022 end FY2023 end FY2023 end -) M&A 293.4 - c. 290.0 Debt repayment
(assuming no (assuming no (net cash of
M&A
Net Debt/EBITDA additional M&A) additional M&A*1)
Net Debt EBITDA acquired companies)

• Operating CF below MTP guidance due to raw material inflation, but

• Net Debt/EBITDA in 2022 stayed at 3.4x due to higher EBITDA and
Capex maintained for continuous revenue and profit growth
interest-bearing debt from Cromology and JUB acquisitions
(c. 5% of consolidated revenue)
• Expect Net Debt/EBITDA to decrease to around 2.9x in 2023 assuming no
• Dividend increase for 2 consecutive years planned, maintaining
additional M&A occurs
dividend payout ratio of 30%
*1 Includes the impact of full integration of Asia JVs and acquisition of Indonesia business *2 Continuing operations basis
*3 Excluding CAPEX on leased assets. FY2021-2022 results are Tanshin basis (continuing operations) 33
*4 The amount of annual dividends for each fiscal year, which includes dividend distribution that will be carried forward to the next fiscal year or thereafter
Conclusion

MTP final year revenue expected to far exceed target and operating profit
1 to be in line with target; resilience of Nippon Paint Group
in challenging business climate over last few years reassured

Continuing to pursue growth through organic growth and M&A

2 with MSV as sole mission

Next MTP already in the works; while medium and long-term plans for
3 individual assets are constantly updated; how we present our MTP
based on Asset Assembler model is under discussion

34
 For Reference: Nipsea China 1Q FY2023 Preliminary Results

Net sales 1Q FY2022 1Q FY2023

YoY
(RMB million) Results Preliminary results

Decorative 4,297 4,862 c. +13%

Automotive 593 482 c. -19%

Industrial 368 338 c. -8%

Total 5,258 5,682 c. +8%

*1Q FY2023 preliminary results are rough estimates prepared by local management and are available for reference purposes only.
Figures for both 1Q FY2022 and 1Q FY2023 are unaudited and pro forma before consolidation adjustments,
such as intersegment eliminations

• TUC：YoY c.+19%
• TUB：YoY c.+4%
• OP margin is improving by more than 2 pts both YoY and QoQ

35