Lipan: Will Raise Sales Prices Anytime, Anywhere According To Agreements With Customers

On March 16, Nippon Paint Holdings Limited released a progress report on its medium-term plan (FY2021-2023) on its official website. Recently, Lippon shareholders asked questions to Lippon's executives in response to the report, and Huizheng Information has summarized some key questions, as follows.

Q: Rippon said it will maintain its operating profit target of JPY140 billion for FY2023. However, due to factors such as rising raw material prices and the deterioration of China's real estate market, the current business environment is very different from the one that existed when the mid-term plan was announced on March 5, 2021. What is the reason for Lipont to maintain its operating profit target of ¥140 billion under these circumstances.

Does Rippon have strong pricing power? Or, did Rippon achieve market share growth beyond expectations?

A: The revenue target in the medium-term plan announced last year was ¥890 billion in the first year (FY 2021) and ¥1,100 billion in the third year (FY 2023). Our first year revenue was ¥998.3 billion and our second year (FY2022) revenue forecast is ¥1,200 billion.

We expect to achieve our third year revenue target one year ahead of schedule. These results are better than we expected, thanks to the strength of our platform (business base), operational leverage and pricing power from increased market share.

However, we were severely impacted by higher raw material costs in FY 2021 and are already dealing with unforeseen events in FY 2022, such as the Ukraine crisis and the resurgence of the embargo in China due to the epidemic.

However, I believe we can turn the challenges into opportunities and beat our competitors in the medium to long term by steadily improving our selling prices and margins due to operational leverage to increase revenues and by being able to more fully leverage the strengths of our platform due to this challenging environment.

In fact, our strengths stand out in FY2021.

Assuming FY2022 operating profit guidance of JPY115 billion, we need to increase operating profit by JPY25 billion to achieve FY2023 guidance of JPY140 billion. Increasing our operating profit margin to 13% is not the only way to achieve the required operating profit growth.

For example, we could achieve operating profit growth of approximately JPY25 billion and achieve guidance through a combination of the 10% revenue growth achieved in previous years and a 1 percentage point increase in operating profit margin.

Despite the current challenging environment, with solid demand for base coatings, we will achieve steady growth and expect to deliver an operating profit of ¥140 billion, in line with our initial plan.

Our plan is to offset the impact of rising raw material prices, global instability and international logistics disruptions by leveraging the strengths of our platform.