Yuichiro Wakatsuki(Left) and Wee Siew Kim(Right), Representative Executive Officer & Co-Presidents
- Masaaki Tanaka, Advisor (Former title; Chairman of the Board, Representative Executive Officer, President and CEO)
- Hisashi Hara, Independent Director of the Board, the Chairperson of the Nominating Committee
- Yuichiro Wakatsuki, Representative Executive Officer & Co-President
- Wee Siew Kim Representative Executive Officer & Co-President
- Goh Hup Jin, Chairman
[Speech by Masaaki Tanaka, Advisor]
Good evening, ladies and gentlemen. Thank you for joining this press conference announcing my resignation as Chairman, President and CEO of Nippon Paint Holdings Co., Ltd. as of today. Please allow me to take some time to provide you with the background of this decision.
First of all, I’m truly sorry for the inconvenience and concerns my resignation at this time may cause to customers and employees, as well as distributors and persons concerned at industry groups. I’d like to express my apology also to shareholders for my resignation soon after the approval of my reappointment by almost 99% of them at our general meeting of shareholders last month.
Looking back, I assumed the office of Executive Chairman of the Board, Representative Director of the Board of Nippon Paint Holdings in March 2019, accepting an offer from Mr. Goh Hup Jin and the then Board of Directors of Nippon Paint Holdings. I have performed my duties as Chairman of the Board, Representative Executive Officer, President and CEO since the transition to a Company with Three Committees in March 2020.
Around the time when I accepted an offer to become Chairman of the Board of Nippon Paint Holdings, Mr. Goh and I had an extensive discussion about the future roadmap for the sustainable growth of the Nippon Paint Group’s shareholder value in the next 10 years. Our vision was to make the Group the leading paint manufacturing group in the world through organic growth and aggressive M&A, while focusing on the management philosophy of maximization of shareholder value.
Nippon Paint Holdings’ market capitalization was around 1.4 trillion yen at that time. We projected that we would be able to increase our market capitalization to a little shy of 3 trillion yen in FY2020. As you may know, Nippon Paint Holdings has grown into a company with a market capitalization of slightly below 4 trillion yen. As a result, we are currently ranked in the 30s among listed companies in Japan in terms of market capitalization. In addition, our credit rating was upgraded to reflect the significant enhancement of our financial soundness. The Nippon Paint Group achieved an increase in revenue and operating profit in FY2020 over the previous year, with operating profit reaching a record level, despite the impact of COVID-19. This was made possible through capitalizing on the Group’s comprehensive strength. On a financial front, I believe we have built a strong financial base that allows us to move on to the next business growth phase. I think the first stage of the roadmap for 10 years, including the completion of the acquisition of 100% ownership of Asian JVs and the Indonesia business, has been completed.
On the business front, we have significantly strengthened our R&D structure through the co-creation agreement with the University of Tokyo. Based on this agreement, we are jointly conducting research on new products that can be made commercially available and contribute to solving new social issues. Also, Nippon Paint Holdings has launched the PROTECTON brand of anti-viral paint products. These products have received many inquiries and earned a good reputation. We plan to launch a series of products from the PROTECTON brand. I’m confident that these products will gain popularity as paint products that can create a safe and secure living environment. As we pointed out in the Medium-Term Plan, the supply chain in Japan is facing the issues of aged facilities, declining working population and logistics crisis. To deal with these issues, we are implementing a plan for supply chain digital transformation with the goal of improving productivity.
Our next business growth phase is the Medium-Term Plan, which we announced as a three-year milestone plan last month. As I stated at its announcement, the plan was created with a significant involvement of the management teams of our partner companies around the world by taking steps including provision of briefing to the Board of Directors. The aim was to increase prospects for the plan’s success. During the process of plan formulation, I had an opportunity to examine business environment of various industries. The business environment is expected to change dramatically in every industry. For instance, the Japanese government has declared its commitment to reduce greenhouse gas emissions to net zero and realize a carbon-free society by 2050. The path to net zero is expected to require enormous changes on the part of the paint industry, which is one branch of the chemical industry, as well as the automotive and steel industries, which are our main customers. In addition, companies that operate across borders such as the Nippon Paint Group will face the challenge of managing geopolitical risk and securing the supply chain in order to stably procure raw materials.
Through the process of putting together the discussion to formulate the Medium-Term Plan since last year, I have come to believe that Nippon Paint Holdings will need a president who has much stronger leadership and energy and vision to respond to drastic changes in the business environment, as well as broad connections and presence in the global paint industry in order to increase the prospects of the plan’s success, including the decorative paint business in China and Asia, which is the primary growth driver of our Group. I also think that important elements of successful M&A execution include management who has long-standing connections and presence in the paint industry and a thorough knowledge of acquisition target companies.
By the time the Medium-Term Plan was completed early last month, the thought grew strong in me that I must maintain a higher level of physical and mental well-being as a CEO to lead the management of our Group during the three-year Medium-Term Plan in order to achieve the goal of solidifying the foundation for a sustainable growth path. It also dawned on me that I need to come face to face with the reality of my stamina and age to keep driving growth of the Nippon Paint Group. Actually, I will be 70 in 2023, the final year of the Medium-Term Plan. Another thing is that I was out of health a few times since the beginning of the year. This maybe as a result of devoting all my time and energy to drive growth of the Group for the past two years, running at full throttle, without watching my health carefully.
These thoughts and events have led me to believe that the best management decision I can and should make now is to resign as Chairman, President and CEO and create an opportunity to select as my successor a person who is full of stamina and energy required to lead Nippon Paint Group towards the future sustainable growth.
Then, I started sharing my thoughts to certain directors in early March. However, it was right before the annual general meeting of shareholders. In addition, I thought they needed a time to think over what I had said and to devise a succession plan. Considering these, I decided to focus on the general meeting of shareholders first. I was subsequently given an opportunity to unofficially communicate my thoughts to all the Directors of the Board. Then, the Board started deliberating on a succession regime. Following these discussions, the Board of Directors today approved my resignation as Chairman of the Board, Representative Executive Officer, President and CEO.
I will leave it to Mr. Hara, the Chairperson of the Nominating Committee, to explain the details of the succession framework later. Yet, I will briefly introduce my successors. Mr. Wee Siew Kim, who will be assuming Co-President, is 60 years old, eight years younger than me. He has supported me as Deputy President over the past year. He has an excellent track record, overseeing and driving growth of the Group’s overall Asian operations including the Chinese business for more than 10 years as CEO of the NIPSEA Group. Mr. Yuichiro Wakatsuki is 54 years old, 14 years younger than me. He has supported me in the capacity of Senior Managing Executive Officer and CFO over the past year. He was one of the key figures in the success of a major project involving the acquisition of the 100% ownership of Asian JVs, as well as other projects including formulation of the Purpose Statement and the Medium-Term Plan. I’m very pleased that this generational change which has been accomplished by these two highly skilled persons will lead the Nippon Paint Group as Co-Presidents on the path to the next business growth phase.
Needless to say, Mr. Goh is a legendary person in the global paint industry. I am very grateful to him for offering me the opportunity to run Nippon Paint Holdings. I have learned a lot from Mr. Goh over the past several years. I will pass the baton of CEO of Nippon Paint Holdings with a 140-year history to the new management. But I wish to remain friends with Mr. Goh for many years to come.
Once again, please accept my apology for resigning at this time. I hope you will understand the background to my decision to resign as Chairman of the Board, Representative Executive Officer, President and CEO of Nippon Paint Holdings as of today. It has been a pleasure working for this company. I wish you and your company all the best.
[Speech by Hisashi Hara, Independent Director of the Board, the Chairperson of the Nominating Committee]
Following Mr. Masaaki Tanaka’s notification of intention to resign, the Nominating Committee had discussions on a succession regime for about one month and submitted a proposal to the Board of Directors. At the extraordinary Board of Directors’ meeting held this afternoon, the new management regime was approved unanimously.
I will explain the details and reasoning behind the new management regime.
Before going into details, I will briefly talk about the major two premises we held on to upon selecting successors: global and Maximization of Shareholder Value (MSV).
The Nippon Paint Group earns 80% of revenue and 90% of operating profit outside Japan. The Group has 87% of its total number of employees working outside Japan. In that sense, the Group’s businesses have become truly globalized. Therefore, it is extremely important to highlight global as an important quality of new leaders.
Based on these premises, we have appointed Mr. Wee Siew Kim, who was Deputy President and Executive Corporate Officer of Nippon Paint Holdings and CEO of the NIPSEA Group, and Mr. Yuichiro Wakatsuki, who was Senior Managing Executive Officer and CFO of Nippon Paint Holdings, as Representative Executive Officer & Co-President. We also nominated Mr.Goh Hup Jin as Chairman without the right of representation. Under the new management regime, Mr. Wee and Mr. Wakatsuki will lead the management of the Company, while Mr. Goh will support them in the overall management by drawing on his long-standing experience in the paint industry. Mr. Wee and Mr. Wakatsuki will be totally responsible for management execution. I will explain the division of responsibilities between them later.
Preceding this nomination, the Nominating Committee exchanged opinions with Mr. Wee, Mr. Wakatsuki and Mr. Goh about the future direction of management of the Nippon Paint Group. Their shared future management policies for the Group are to increase management transparency, enhance confidence among persons involved in management, speed up management decision-making and actions, and conduct management with minimum formality while placing a premium on increasing business performance. The three of them will assume separate responsibilities, taking advantage of their respective strengths. Our idea is that Mr. Wee and Mr. Wakatsuki will lead the management, while Mr. Goh will support them through providing advice on the overall management.
Before explaining the division of responsibilities between the Co-Presidents, I will describe the MSV, which is our paramount management mission. MSV is to pursue the maximization of shareholder value that remains after fulfilling duties to all stakeholders that include customers, employees and society. This clearly distinguishes us from shareholders primacy.
With that understanding, let me put it simply this way: share price is determined by multiplying earnings per share (EPS) by P/E ratio (PER). It is therefore important to maximize both EPS and PER to achieve MSV.
Regarding the division of responsibilities between the Co-Presidents, admitting that there is a correlation between EPS and PER, we expect Mr. Wee to contribute primarily to the maximization of EPS and Mr. Wakatsuki the maximization of PER.
Let me expand on the maximization of EPS. As I stated earlier, the Nippon Paint Group has already become a global paint manufacturer. Overseas businesses constitute a large proportion of the Group’s businesses. In particular, the NIPSEA Group is the core business of the Group, accounting for 50% of the total revenue and 70% of the total operating profit. Mr. Wee has been serving as Group CEO of the NIPSEA Group for 12 years since 2009. He has a distinguished track record of achieving growth at an annual rate of 11% during this period. The Nominating Committee has decided that Mr. Wee is suitable as the chief executive to manage the global operations and pursue maximization of EPS.
Regarding the maximization of PER, this ratio reflects the expectations of the capital market. Therefore, conducting high-profile IR activities, implementing optimal financial strategies, promoting ESG and SDGs and achieving further growth through M&A are important to maximize PER. In particular, a successful execution of an excellent M&A transaction entails comprehensive consideration of acquisition at an appropriate price, risk assessment, and the optimal equity and debt structure. Prior to joining Nippon Paint Holdings, Mr. Wakatsuki served as the Heads of M&A and Investment Banking Divisions at Merrill Lynch Japan Securities for many years. After assuming the role of CFO of the Company, he has played key roles in various initiatives. These include the significant improvement of communications with investors, acquisition of 100% ownership of the Asian JVs and formulation of the Medium-Term Plan. Considering these, the Nominating Committee has determined that he is the most suitable person to take charge of the Company’s efforts for maximizing PER.
Mr. Goh joined the NIPSEA Group nearly 40 years ago in 1979. Since then, he has contributed to the dramatic growth of the Asian JVs which his father started up as Nippon Paint’s sales distributor in 1958. He has successfully expanded the NIPSEA Group into the largest paint manufacturer in Asia. He has a broad and long-range perspective to get the current view and outlook of the paint industry. We are certain that Mr. Goh can provide high-level support to the activities of Mr. Wee and Mr. Wakatsuki.
Some minority shareholders may be concerned about Mr. Goh assuming Chairman of Nippon Paint Holdings given that he is the representative of its controlling shareholder. Let me briefly explain this point. Mr. Goh previously was the largest shareholder of Nippon Paint Holdings and a shareholder holding almost 50% of shares in Asian JVs. As a result, there was a possibility of a conflict of interest—whether to prioritize Nippon Paint Holdings’ interest or that of Asian JVs.
Following the acquisition of 100% ownership of Asian JVs by Nippon Paint Holdings last year, his position has been simplified to only being a shareholder of Nippon Paint Holdings. In addition, the transaction has allowed Nippon Paint Holdings to capture the entire profit from the Group’s businesses around the world, including those in Asia. As a result, Mr. Goh is now in the same position as minority shareholders.
I have explained that Mr. Goh will be assuming Chairman without the right of representation. Today the Board meeting has decided that the Board Chair will be served by the Lead Independent Director of the Board in order to allow the Board of Directors to fully perform its supervisory functions over the executive department.
As I explained earlier, Mr. Wee and Mr. Wakatsuki will take the initiative in the management of the Company, with Mr. Goh supporting them in the overall management. We have clarified the reporting line to avoid confusion that may occur due to the new management regime with Mr. Wee and Mr. Wakatsuki serving as Co-Presidents.
Based on the division of responsibilities, Mr. Wee will take charge of all the operations of the Group. These include operations of partner companies in Japan and other countries and activities associated directly with these operations such as research and development, manufacturing, supply chain, sales and marketing activities.
Mr. Wakatsuki will oversee back-office operations including promotion of M&A, financial policies, and fund procurement. These include departments related to corporate management of the Company, such as Finance & Accounting, Corporate Planning, Investor Relations, Public Relations, Legal, General Affairs, Human Resources, Audit, etc.
We are certain that Mr. Wee and Mr. Wakatsuki will make united efforts, bound by a solid relationship of trust, in order to drive further growth of the Group. We ask for your continued cooperation and support.
Before concluding my remarks, I would like to say a few more words.
I became Outside Director of Nippon Paint Holdings in 2018. The Company has grown significantly since joining of Mr. Tanaka, including through the acquisition of paint manufacturers in Turkey and Australia and the 100% ownership of the Asian business.
Mr. Tanaka said the reason for his resignation was he had to face the reality of his stamina and age to keep driving the growth of the Company. This made me realize how hard his job must have been although I had a vague idea that he was under intense pressure, doing extremely hard work over the past two years, in particular since he became CEO. I would like to express my deepest appreciation to Mr. Tanaka for his contributions during his time in office.
[Speech by Yuichiro Wakatsuki, Representative Executive Officer & Co-President]
Good afternoon everyone. My name is Yuichiro Wakatsuki, and I have been appointed
Representative Executive Officer & Co-President and nice to meet you all. As Group CFO, I have been in charge of Corporate Planning, Finance, PR, IR and M&A. I will continue to be in charge of the same, and in addition be in charge of overall Corporate matters. At the same time I will be jointly responsible for the overall management and execution with Mr. Wee Siew Kim and I am very thrilled about this opportunity.
It would not be true I told you I was not shocked with Mr. Tanaka’s decision. Also I have to confess I was honored, but at the same time had certain hesitation, when I was first offered of the position.
However, looking back to where I came from – I served as a financial advisor to NPG for its acquisition of Betek Boya in Turkey at my previous job. After joining NPG a year and a half ago, I was able to learn about the potential of technology for paint and coatings alongside many attractive features from great talent all over the world, and have been delivering our message successfully to the public market. I have also worked with Mr. Tanaka on the 100% acquisition of Asia JV which was our long term priority, and most recently the formulation of our medium-term plan. Finally I feel confident that I am one of the most suited person who fully understands what MSV is all about and who can deliver based on my experience in M&A and capital markets.
With that, under the new regime, Mr. Wee, whom I met for the first time in Istanbul in a project in Turkey, is one of the most respectable business person by all means, and I am very happy to be able to partner with him. And for Mr. Goh, who possesses long-term experience, knowledge and excellent management skills in the paint and coatings industry, if he is to back the two of us as Chairman, I came to believe that I should be able to fully contribute to our sustainable growth and prosperity. So here I am standing here with full confidence today.
I strongly believe Paint and Coatings is a growth industry on a global basis, while also a brilliant industry that can solve many social issues. NPG welcomed its 140th anniversary this year, and while we have the history and tradition, we are also a very strong and unique Group with strive for growth, venture minded, diverse and excellent talent around the globe. I am very proud of being selected as one of the leaders for such Group, and will continue to do my best for the realization of MSV. I would like to thank Tanaka san for all his contributions, lessons, thinking of all the projects we worked together. I appreciate everyone’s support as I will do my best in all sincerity for the best of our Group. Thank you.
[Speech by Wee Siew Kim Representative Executive Officer & Co-President]
Good afternoon. My name is Wee Siew Kim. I have been appointed Representative Executive Officer & Co-President. I look forward to working closely with my fellow Co-President, Yuichiro Wakatsuki as well as the Chairman and Members of the Board of NPG. As Co-President, I will be jointly responsible for overall management and execution together with Yuichiro, with specific focus on the operating businesses within the Group.
I have been Group CEO of the Nipsea Group, which is now a 100% subsidiary of Nippon Paint, for the past 12 years. Throughout this period, I have worked closely with my colleagues from the Japanese Partner Companies. In these interactions, I have always sensed the immense vitality and prowess of the Group.
I humbled by the trust that the Board has placed on me with this appointment. Even with the past 12 years of working within the Group, I am still overwhelmed by the enormity of the task. However, I am comforted by the alluring paint and coatings industry structure and within it, we have lots of headroom to grow and contribute. Over the years, even as innovations continually impact the industry, the belief in this quest of ours to rise to the forefront and dominate the industry continue to be stoked. I sincerely belief that Yuichiro and many of my colleagues have the same fire in the belly.
At this juncture, I would like to thank Tanaka san for his contributions in kicking off the transformation of the Group with the roll up of the Nipsea group and the Nippon Paint Indonesian businesses. He has articulated the concept of the Partner Companies and the overarching objective of MSV. Under his leadership, we have drawn up a mid term plan for 2021 to 2023. It is now left to us to breathe life into this plan; all of us working closely together to execute and if I dare say, deliver and more.
This past decade, I have primarily focused on Asia. I fully appreciate that the aspirations of Nippon Paint Group is now beyond Asia. Together with Mr. Goh, Yuichiro and the Board, we can aggressively but sure footedly embark on the global thrust intended in our mid term plan. I am confident I can lean on the talent base from Japan and the Partner Companies across the world. In this mission, I will be guided by our MSV conviction and our Lean for Growth culture.
With your support and luck on our side, my colleagues and I look forward to delivering on the promise.
[Speech by Goh Hup Jin, Chairman]
The reasons I asked Mr. Tanaka to steer the management of Nippon Paint Holdings in early 2019 were his capability to deliver messages successfully to the public market and his extensive connections. Needless to say, his strength in fund procurement capability and profound knowledge of corporate governance, which were cultivated through his experience as senior executives of leading Japanese banks, also set him apart from others.
I only offered him to assume the post of Chairman of the Board at first, but I entrusted him to serve concurrently as President and CEO to lead the executive department from 2020.
I regret that his taking on too many responsibilities has led to his decision to resign.
After the Board members were informed of Directors was notified of an intention to resign from Mr. Tanaka, the Nominating Committee had sufficient discussion on the possible impact of his resignation and considered various succeeding scenarios. Then the Board of Directors approved a new regime.
Mr. Tanaka’s thinking is that the Nippon Paint Group needs a leader who is younger and full of energy in order to further accelerate the Maximization of Shareholder Value, which is the paramount management mission of the Company.
Nippon Paint Holdings will adopt a new management regime in which Mr. Wakatsuki Yuichiro, who is currently Senior Managing Executive Officer and CFO of the Company, and Mr. Wee Siew Kim, who is currently Deputy President and Executive Corporate Officer of the Company and Group CEO of the NIPSEA Group, will be assuming the Co-President post. I will assist them while serving as Chairman of the Board. That is, the three of us will divide the responsibilities which Mr. Tanaka has assumed by himself.
We owe it to Mr. Tanaka to build up the operating structure of Nippon Paint Holdings over the past three years and showed the roadmap for the next business growth phase. I strongly support his decision to leave it to younger and more dynamic leaders to take the Company to the next level of growth. Finally, I would like to express my most sincere appreciation for his contributions to the Nippon Paint Group.