Financial results presentation on fourth quarter of FY 2023. We have some housekeeping announcements. To avoid interference, if you have a mobile phone or communication device, please put it away from your telephone. If we hear strong interference during the meeting, we will suspend momentarily and ask the participants to fix. I hope you could understand. We have Japanese-English simultaneous interpretation. Wakatsuki [Foreign language], Tanaka [Foreign language], please start.
Thank you very much. Good afternoon, ladies and gentlemen. I am Wakatsuki, Co-President of NPHD. Thank you very much for taking time out of your busy schedule to join us today. I would now like to present an overview of FY 2023 Q4 and full-year financial results and FY 2024 full-year forecast. The media is also invited to attend the Q4 and Q2 financial results briefing. First, page 2, please.
The content remains unchanged, but we included supplementary information as we are frequently asked about it. There's no change in the difference between the Tanshin basis and non-GAAP basis, as stated here. Regarding FX rates, we apply the same assumption for FY 2024 full-year forecast as in FY 2023. Therefore, FY 2024 results will be higher if the yen depreciates against this rate and lower if the yen appreciates. The table next to this shows the FX sensitivity estimate based on FY 2023 results. We hope you will find this useful. Next, page 3, please. FY 2023 Q4 summary. On Tanshin basis, revenue was JPY 356.7 billion, up by 8.4%. Operating profit was JPY 37.1 billion, up by 23.5%, continuing a significant increase in revenue and profit. Positive factors in revenue were paint volumes, adjacencies business, favorable effects, and new consolidation.
The price in mix deteriorated slightly in China and Asia, including Indonesia and Malaysia, while the rest of the world generally improved, resulting in a slight decline overall. On non-GAAP basis, revenue increased by 6% and operating profit increased by 11.1%. In Nippon China for decorative business, TUC revenue increased by 8% and TUB decreased by 1%. Operating profit for Nippon China as a whole decreased due to high logistics and advertisement expenses despite higher revenue and improved RMCC ratio. Revenue for automotive business increased in Japan and the Americas thanks to ongoing recovery in auto production, but declined slightly in China due to a fall in the number of units by Japanese and European OEMs. Next is page 4. Overview of FY 2023 full-year results. Our results were almost in line with the guidance revised upwards in November last year and marked a record high revenue and operating profit.
On Tanshin basis, revenue increased by 10.2%. Operating profit and profit attributable to owners of parent increased by approximately 50%. On the non-GAAP basis, excluding FX and new consolidations, revenue increased by 8.4% and operating profit increased by approximately 30%. All regions generated great results in a difficult environment. In addition, the adjacencies business is also growing steadily as we push ahead with the provision of total solutions to our sales channels in each region. In operating profit, on both Tanshin and non-GAAP basis, we recorded a provision of just under JPY 6 billion in China for the full year of 2023. The impact of the hyperinflationary accounting in Turkey is approximately JPY 5 billion. While hyperinflationary accounting will continue in Turkey in 2024, we do not expect any major provisions in China at this time.
We believe that our real-term results are above these financial figures, given that inflation in Turkey will eventually subside at some point. Next, page 5, please. FY 2024 full-year forecast. As mentioned earlier, assuming constant FX rates compared to 2023, revenue is expected to grow organically by approximately 7%-7.5%, thanks to the aggressive measures to increase market share and enhance adjacencies business, while new consolidations are expected to contribute approximately 3.5%-4%, including one year's contribution from Alina in Kazakhstan where the acquisition was completed and six months from two Indian businesses, which are currently pending approval from the authority. The total growth is expected around 11%, with record high revenue of JPY 1.6 trillion. Our efforts to date as an asset assembler are steadily bearing fruit, and although not included in the forecast, we will continue to actively pursue M&A this year.
Operating profit is expected to reach JPY 184 billion, up by approximately 9%, with OP margin of 11.5%, which is flat year on year and almost flat on non-GAAP basis, excluding one-off factors. Assuming that trends in raw material remain constant, we will take aggressive measures to expand market share and will use the margin improvements resulting from operating leverage to reinvest in promotions and other activities. OP margin for new consolidation based on unaudited results for FY 2023 is expected to be around 20% for Alina and around 5% for India. The combined OP margin for both regions in 2024 will be roughly the same as the consolidated level. Pages 6 and 7 show the assumptions for the forecast of the main segments. I will go into detail in the Q&A session, but I will comment briefly on each area.
Japan segment showed a dramatic recovery in 2023, but revenue for automotive is expected to decline slightly, reflecting a flat outlook for auto production, while market share expansion is expected for both decorative and industrial applications, thanks to a slight recovery in market conditions. Total revenue for marine applications will increase slightly, backed by continued strong demand. OP margin for Japan as a whole is expected to remain largely unchanged for the full year under these circumstances. For Nippon China, we've factored in the economic slowdown and will continue our growth strategy centered on TUC. In TUB, we will aggressively promote not only new builds but also exterior coating for housing and public buildings, aiming to diversify revenue sources and improve growth and profitability. In the automotive business, we expect to increase sales this year by expanding our business from the traditional focus on Japanese customers to local customers.
We expect Nippon Paint China as a whole to grow by 5%-10% and to achieve profit margin of last year's level. In Nippon Paint except China, we continue to expect sales growth of 10%-15%, except for Betek Boya, where we expect growth of 5%-10%. Margin will also continue to be affected by the hyperinflationary accounting in Turkey, but is expected to be at the previous year's level. In DuluxGroup, we expect growth of just under 10% in both the Pacific and Europe, with margin flat in the Pacific and improvement in Europe. In Europe, organic growth is expected to be around 5% with a full-year contribution from NPT. In the Pacific, organic growth is expected to be just over 5% with a small acquisition made last year contributing to growth of just under 10%.
In Americas, we expect 0%-5% growth in automotive and 5%-10% growth in decorative. Finally, on the new consolidations, please note that although Kazakhstan and India are expected to contribute for the full year and six months respectively, in the forecast, these prior year comparisons are based on the full year figures for India as well. PPA has not been completed, but both will contribute to EPS from the first year. Next, page 8. As for raw material trends, although there were some regional differences in the price mix in the fourth quarter of fiscal year 2023, the gross profit margin as a whole improved year-on-year and quarter-on-quarter. We expect a slight decrease in the RMCC ratio in our full year forecast for 2024.
Although the global economy is in a downtrend with declining demand, it is somewhat difficult to make generalizations because of the severe economic trends and the impact of foreign exchange rates in some regions. Moving on to page 10. This is an overview of the fourth quarter of fiscal year 2023. Details may be added in the Q&A, but in general, as per the guidance, sales in Japan exceeded expectations due to strong sales in the automotive and marine sectors. While in China, although sales were down year-on-year, TUC sales were slightly below plan, while TUB sales were above plan during the most quiet season of the year. We believe this is effectively in line with our expectations when considering fixed costs such as promotion of installation of CCMs and advertising expenses were increased.
In fact, looking at the second half of or third quarter and fourth quarter of fiscal year 2023, there was actual increase in profit taken into account subsidies and provisions for fiscal year 2023. As I mentioned earlier, we expect both sales and profit to grow in fiscal year 2024. Page 11, major topics. As already announced, the M&A deal in Kazakhstan has been successfully closed and will make a full contribution to this year's EPS. We've also held a briefing session on the integrated report and have received valuable feedback. Since it was held after some time from the publication, we hope to issue the report a little earlier this year and to hold these briefings as soon as possible following the publication. Finally, on page 25, we've provided a brief explanation of what is often asked, which is the seasonality factors for each region.
Since the growth occurs in each quarter, the order does not indicate actual numbers, but rather the highs and lows of demand under the same economic environment. I hope you will find this useful. We are trying to make improvements on the other pages as well, and we would appreciate it if you could let us know if you have any further comments or suggestions. Once again, we believe that the 2023 results and our projections for 2024 are a sign of strength demonstrated by each partner company, as well as the effectiveness of the Asset Assembler model. We will continue to exercise a healthy degree of caution and remain committed to building up EPS. Finally, on the 4th of April, we are going to be holding a briefing session on the medium-term management plan. This concludes my presentation, and now I'd like to take your questions.
Thank you for your kind attention.
We will now start the Q&A session. If you have questions, please press asterisk one on your telephone. To cancel your question, please press star two. The operator will appoint you. Please use push key star one on your phone if you have questions. We have time limitations, so we would like to ask you to ask one question per company. Please wait till we have the first questioner. First question from the Japanese channel. First question is from Nomura Securities' Okazaki [Foreign language]. Please go ahead.
This is Okazaki. Can you hear me?
Yes
Thank you very much for today. I have a question on China. On page 4 of your supplementary material, you have some data. Q3 and Q4 need to be watched at the same time. From Q3 to Q4, margin declined significantly. You mentioned the advertisement expenses.
So what is your view? And in the new year, TUC, Q4, I think the revenue increase is strong, and you are increasing share in Tier 3-6 cities. So what is your view and your projection? Thank you very much.
Thank you, Okazaki [Foreign language], for your question. As I said earlier, first, Q4 in China is a slow season. And so revenue-wise, it is generally low, but the fixed cost is incurred. And so margin is rather difficult, and we have a conservative view on margin. On the other hand, it's not just Q3, Q4, but on a full year basis, we worked hard. And so towards next fiscal year, we did some investments. In Q3, we suppressed the fixed cost a bit, the SG&A. And in Q4, we did investment for next year, the installation of CCM and the advertisement. We did quite a big amount.
As a result, China results were strong. So FY 2024, mainly in TUC, we will continue our growth Tier 3-6 cities, we have good traction in the progress. Of course, Tier 1-2 cities will continue. The economic situation is not that good, but we focus on increasing market share. The good news is that our competitors, as we saw mentioned last year, the smaller ones, smaller players are now withdrawing from the market. In the U.S., there are some players who withdrew from the market in January. They're all small players, but sometimes they just withdraw, exit the market, or join hands with us, not in the form of the capital participation, but have the production done under our brand, our brand. So our strategy is moving forward efficiently.
In TUB, as I said earlier, the new build, we're less dependent on new build residential market. From Q4, schools and public sectors refinish or repainting. We're seeing a progress there, and margin is improving there. So overall, operating leverage will improve. And on that basis, subsidy, we had a little over JPY 8 billion subsidies. But even without subsidies, we can have the same level of margin as last year for automotive and for industrial included. In Q1, there's not much we can say at this point, but in March, March is the biggest month of the year. So the trend in March will probably be the touchstone for us going forward. At this point, we have sufficient validity of our strategy. And so that is the background to this guidance. Thank you.
One point, so TUC growth in the fiscal year, quarterly revenue declined quarter after quarter, Tier 3-6 cities, you think you can accelerate? So you think you have good traction in your sales?
Well, revenue, it's revenue. So there is the mix of the volume. We have good volume, big volume, Tier 3-6 cities and Tier 1-2 cities, unfortunately, there is some trade down. So in total, we think we can achieve the level shown in the guidance. China is a dynamic market. So we have confidence there. On the other hand, if the situation changes, we will let you know. And there may be some upside and downside. Thank you very much.
Thank you.
Next question is from CLSA Securities, Cho [Foreign language]. Please go ahead.
Hello, this is Cho speaking from CLSA. Hello.
My question is, so regarding the profit driver for this fiscal year, if possible, how much is my organic growth and how much is my M&A contribution, especially your subsidiary in India and in Central Asia?
When we do a rough calculation, I think there's JPY 5 billion impact from M&A. In this fiscal year, regarding profit increase, can you please give me some color on that projected increase of profits? On page 5, so 11%, around 11% growth is expected for profit contribution. And this is excluding one of factors. On Tanshin basis, it's 9%. It was JPY 8.5 billion last year. This was the decline. But there was provision for China, which amounted to about JPY 6 billion. And when taking these into account, 3.5%-4% is going to be the profit increase coming from consolidation. So I believe there aren't much differences in the numbers.
So 60%-70% or 80% is existing business. And new consolidations is, can I assume it will account for about 30%? Well, 7.5%-8% out of 11 is organic growth, and new business is 3.5%-4%. So it depends on how you do the calculation. So I think the ratio will be 70-30, roughly speaking. Organic growth is expected to be quite strong.
I see. And my second question is regarding China. Well, regarding peers, AkzoNobel is projecting flat performance, but you are projecting 15% growth. Can you please elaborate on the market share? Have you been able to take market share because your peers are projecting flat growth for this fiscal year? So what is driving this projected growth? That's all. Thank you.
Are you talking about TUC?
Yes, TUC, decorative.
Your assumption is 15% growth for TUC. When I look at the peers in the first half of the year, they're expecting flat growth. There is much gap. If possible, can you please elaborate on this point? In TUC, as we've been saying, we have the number one well, there is a gap with the number one position. Market share is 25% or 26%. The number two and number three companies have single-digit market share. The top three companies only account for less than 40% share. There's the remainder that is 60%. The Tier 3-6 cities, which is underdeveloped from our point of view. Inclusive of investment efficiency, we have been able to improve performance there.
At least based on our experience so far in various regions where we are strong, we already have a foundation to become even stronger. In smaller markets, we may be able to acquire more market share because the peers are withdrawing. I believe we are looking at a world from a different level perspective, even though I don't want to sound arrogant. But I think we have a very strong brand capability that allows us to look at the world in this way, which is different from our peers. We believe we'll be able to achieve this strong growth. Probably regarding projections regarding economic environment, I think we all share the same understanding that it's going to be a tough year. So we will have sound caution so that we'll be able to hit the margin target.
I see. Thank you.
Regarding M&A in India, I think there was a media report saying that the price decrease is happening among the local companies, but you are expecting flat profit. If possible, can you please talk about the overall situation of the business in India?
Okay. Regarding India, well, we haven't closed. So I have to reserve my comments on the details. But as we explained in last August, Karnataka and Tamil Nadu, in these two provinces in India, we have been doing aggressive promotions to acquire market share and profitability. And we've been able to take good market share and profitability. And that view has remained unchanged at this point in time. But in the second half of last year, the Indian market situation was not necessarily ideal. That is why we're expecting reasonable growth and maintenance of flat margin.
But we'd like to outperform the market as a minimum requirement because that's what we achieved last year, and we are confident we can do that this year as well. So I think we've been implementing a focused strategy, and it's starting to bear fruit. And our view has remained unchanged since last August.
Thank you. That's all.
Thank you.
Next question is Mizuho Securities, Yoshida [Foreign language]. Please.
This is Yoshida from Mizuho Securities. Thank you very much for the briefing.
Hello, Yoshida [Foreign language].
I have a question on Japan, Q4. From Q3 to Q4, your profit margin improved quite significantly. So what's the background in auto paint, the price structure? Is there a bulk or some one-off, some non-recurring factors included here? And the profit margin is 9.5%. It's flat. This Q4 level will continue into next year, or is that unlikely?
First, I would be happy if this Q4 level continues into next year, but it was rather high, a bit higher than what we are so it's not that there is a big tailwind. We think we can at least achieve the previously recorded level. Now, in terms of one-off factors, there's some, the transfer price-related factors, which led to an upside. But that is not a big factor. Auto volume is growing, and operating leverage is effective. And in marine, compared to two years ago, price increase is possible with the strong demand. So in total, a little less than 10% is sufficiently achievable. We have good foundation to achieve such level. But unfortunately, we cannot say that 12.5% is the normalized level, not just yet.
But internally, we are always aspiring for higher and set this as a minimum level and try to achieve a higher level. Understood. This year, OPM, you said you will maintain this level. In this year, the decorative plus 5%-10%; could you elaborate on that point? So that's Japan decorative? Yes, plus 5%-10%. Last year, volume declined. We offset that with price increase. And as the price raised ran its course through various sales measures, the market will recover, we think. So the volume, we think this is achievable. 5%-10% is not that aggressive as a target. So we think we can achieve that level. The market itself is not weak. On a year-on-year basis, it's expected to be positive. And so the market will be positive. And we will increase the market share on top of that.
Thank you. Understood.
That's all from me.
Thank you.
If you have any questions, please push asterisk one. Millennium Capital, Fujita [Foreign language], please go ahead.
This is Fujita of Millennium Capital. Can you hear me all right?
Yes, Fujita [Foreign language]. Hello.
Hello. I think everyone is attending SUMCO's conference call. So I have a question about the cash flow. Well, I am not fully aware of the seasonality. There was something I noticed this time. Up to the third quarter, I think trade receivables had negative impact in the cash flow. So the cash flow was not really in a good position compared to the performance. But recently, we've seen some positive impact. Is it because of the collection making progress, or are there any uncollected receivables that are recently collected? Are there any assumptions that I should be aware of?
Well, in Q4, in China, well, as I've been explaining every time, in TUC, we collect everything. This is a norm. So in terms of seasonality, cash collection tends to happen more in Q4. On the other hand, in TUB, from the second half of last year, we've been doing cash on delivery in many cases. So recently, we don't have many collection issues. In some areas, well, this is also related to provision. But there are some things that are returning. Overall, in terms of the environment, I think it has been improving. But I think this is largely due to the seasonal reason. So is it fair to say that there's no deterioration, and there is less risk of having bad debt? Well, basically, our transaction is in cash in TUC. And in TUB, when we trade with developers, we have long-term receivables.
But in these two years or so, we have been able to provide for those long-term receivables. And as I mentioned earlier, developers include very important clients. But we have been making very strict judgment on the risk. And we've been focusing on diversifying the revenue source in exterior coating, for example. Therefore, in this fiscal year, large provision is not expected. And exposure is quite limited at this point in time.
I see. If that is the case, well, unless these receivables increase, I think there is JPY 180 billion cash. And if the CapEx is JPY 50 billion, cash flow will be JPY 130 billion or JPY 150 billion, which is quite large. So in terms of free cash flow, are you trying to downsize the liabilities on the balance sheet, or are you satisfied with the current debt-to-equity ratio? What are you planning to use the cash for?
I'd like to confirm if the calculated amount of free cash is correct.
Well, regarding the soundness of balance sheet, we are confident. So in terms of cash, I'm not going to comment on the exact number. But we have accumulated cash. And basically, it will be used for M&A and building up EPS. I believe that is going to contribute to the growth overall. And we don't want to look at M&A as the purpose. We like to identify low-risk, fair valuation M&A deals. And we are constantly considering and exploring such opportunities even now. I believe that is going to be one of the options of using cash. So it's not only about repaying debts. That is not the purpose. But we need to increase a dry powder. That is the management that we're doing around cash management.
So in the midterm plan, I'm looking forward to an update regarding the cash flow.
Thank you.
Thank you.
Next question is Coating Media, Kondo [Foreign language]. Please go ahead.
Coating Media, I'm Kondo. Thank you very much, Wakatsuki [Foreign language].
Hello, Kondo [Foreign language].
So Japan business is my question. Auto and decorative and industrial in three segments. What is your understanding of market share and the key strategies, please?
The latest numbers will be discussed again in April. But for automobile, we are number two in Japan. There are two players accounting for a significant portion. And there are other players, too. But we are slightly behind the first player. In decorative, we have the top share. But there are two other players who are fairly close to us. So we have around 30% each. And for industrial, industrial is broad. So in foil coating, we have a high share.
In the agricultural and construction materials and the powder, these are rather fragmented and diverse. But we are the top manufacturer, for sure, in industrial as well. So these positions have not shown much change. There are some who are raising market share. And the automobile share may be rising a bit.
Thank you. In industrial, there are different players with different focus, or?
Yes, we are focusing on all. We are aggressive, and we're greedy. And so we are trying to focus and increase our market share where we can raise profit. So in various businesses, we are active. And of course, the focus, priority is to deliver to our customers good products, high-quality products to our customers. We have good technical expertise. We're confident of our technical prowess. So we want to enhance our position.
One more question, -5% in automotive w hat is the factor behind this estimate?
As I said earlier, fiscal 2023, automotive production recovered quite significantly. In FY 2024, we think it will be roughly flat. In some areas, we were behind our peers. So there may be some revenue decline. The line is decided well in advance. And so we cannot recover overnight. But there are some non-OEM segments like Parts, Line, and Film business, which we are focusing on now. We hope we can recover in those other areas, too. But at this point, our estimate is a slight decline in revenue.
Thank you very much.
Thank you.
Next question is from BofA Securities, Enomoto [Foreign language]. Please go ahead.
This is Enomoto of BofA Securities.
Hello, Enomoto [Foreign language].
So on page well, I think there was a page about the market environment in the deck. I think it's page 9. And on earlier pages, there is your projection.
I like to talk about how they compare. In 2024, market environment is expected to be flat in all the regions. You have the same color for all the regions. Well, this is pretty straightforward. But well, be it China or elsewhere, you're expecting growth in all the regions. Is it because of the market share increase, or is there any expected market environment improvement that is not described with the color? Can you please give me some more details?
Well, regarding the color used for market environment, it doesn't mean zero. But maybe 1%-2%, 2%-3%, such growth will be shown in green. So overall, we are expecting flat growth. In Asia, it's 5%-10%. +5% is expected in various other places. And these are largely coming from market share growth.
In our business, well, earlier, there was a question about China. But we are ready to become even stronger in our strong markets. For example, in Australia, in China, our brand business is successful in these markets. And we're looking at the opportunity to grow even further. On the other hand, in Japan, market situation is slightly upward, as Yoshida [Foreign language] asked. And share increase is something we would like to pursue. So overall, we will be acquiring market share. That's what we have to achieve. That is our mindset.
So raw materials cost is expected to increase, if I remember correctly.
But it is expected to be flat for margin.
So you are not going to acquire market share by decreasing the price?
Well, I'd like you to focus on the total profit because RMCC ratio for fiscal year 2023 has come down significantly.
In fiscal year 2024, it is not necessarily expected to go down further. The RMCC ratio may decline in some regions. But our focus is not on those areas. But this is a chance to use the money for promotion. And that will be indicated in the SG&A. And price decrease may happen in some areas. China is a dynamic market. In the premium markets, we'd like to maintain. And in the economy markets, we may decrease the price. And the mix may change with more shifting to the economy market. And we are expecting a decline in RMCC ratio in China. But that will be allocated to promotion so that we can achieve better margin. So it is risky to do generalization because there are different colors between regions. But I think everyone is striving so that we can achieve the margin targets.
Well, I think I asked my question in the wrong way. Well, I understand that there is intense competition in China. But I don't see any intensive competition in other markets. In areas where you have strong clients, have you been selling well, or do you need to decrease price?
For example, in Australia, we have 50% market share. So this is where we would consider a price hike. And volume is in a tough situation. So we need to pursue growth with price hike. So the share is expected to grow here. And this is possible because we have the premium brand. On the other hand, in Malaysia, Indonesia in Indonesia, this is an economy type of market. Economy products sell well. So this is something we have to capture as opportunities. So we would not focus only on premium products.
But when we look at the market share, there is a very strong competitor. And we've been in an intensive competition. So we have to focus on both premium and economy zone. That would be our strategy. So it really depends on the region. Well, we are going to aim to be profitable overall. But how we do that will really depend on the region.
Thank you for your very detailed explanation. That was clear. Thank you.
Next, we will take questions from the English channel. If you have any questions, please use star one on your telephone. And to cancel your question, please press star two. We do not see questions from the English channel. So we will take questions from the Japanese channel again. If you have questions, please use star one. CLSA Securities, Cho [Foreign language], please.
Cho from CLSA Securities. Thank you for appointing me again.
Earlier, I asked you on M&A. For the past few years, your construction paint has made progress. The M&A going forward, in terms of scale, will the M&A be midsize? And will be mainly construction, the industrial paint, or marine? There are many good players, high-quality players, so construction, industrial, and automotive paint. What is your view on the M&A in this landscape? Thank you.
M&A. I cannot talk much about M&A to begin with. On that basis, it turns out that starting from Dulux in 2019, Betek Boya and Indonesia, 80% is construction and 20% industrial and Cromology and JUB and NPT. This is the peripheral adjacencies. Including adjacencies, it's not that we are selective on the areas. It's evaluation and the contribution to EPS. We consider those two factors. Generally, maybe construction area has higher EPS or higher profit.
But on the industrial side, if we can buy good profitability with a good valuation, then that is a possibility. So we think comprehensively. M&A, there's no one single answer. As we have said, we want to contribute to MSV. Risk-return balance needs to be good, a good company for reasonable price, and increase EPS as a result of that. So including the size, we have no limitation. We are open-minded in pursuing our M&A going forward. So maybe this is not a direct answer to your question. But that is our stance. So that I can say for sure.
Thank you. And your funding, barely no risk of new share issuance. So bank borrowing, financing from banks is going to be the mainstream, main portion.
Of course, the priority is debt. But I do not rule out the possibility of equity at all.
If equity, if it contributes to EPS and, as a result, it leads to a healthier balance sheet, then equity is, of course, a possibility. And that remains unchanged for a long time. But we do not have to issue shares if we don't have to. So debt has higher priority. In corporate finance, of course, debt is a priority. And the funding environment, debt funding environment, is favorable now. So we are open-minded. And equity is a possibility in some circumstances. But right now, of course, we won't do equity financing right now if there is no M&A going on. And that remains unchanged.
Thank you. And one last question. Of all the companies you have acquired, good cash flow and good financial results. And so very little impairment risks, right? Am I correct?
Impairment risk is always existent.
At this current point, we do not think there is anything we need to impair because there's goodwill. Of course, we conduct impairment tests regularly. When interest rate rises, WACC goes up. Present value will be negative as the interest rate rises. If the business plan improves, then it will offset each other. The worst case is stagflation. Interest rate goes up. The financial results do not go up. Then the impairment risk rises. This is textbook information. In the year ending December 2023, there were no companies we had to impair. We're not fully done with our audit. This is where we are.
Thank you very much.
Next question is from Goldman Sachs Securities. Ikeda [Foreign language], please go ahead.
Thank you. This is Ikeda from Goldman Sachs.
Ikeda [Foreign language], hello.
Hello? So I joined the call later in the hour.
But in the Q4, the OP margin in China is 8% excluding one-time factors. And I think it was 9.1% last year in the Q4. And the profit margin seems low considering the fact that there were some negative factors last year. And other companies are saying they're decreasing price. So was there any impact? And in TUC and TUB in China, can you give us some idea of how they will grow this year? And in terms of profit margin, low 10% level, is that going to be a fair level to assume for this first half?
So I think Okazaki [Foreign language] asked the same question. But on page 6, well, let me address your second question first. TUC 15%, TUB 0%-5%. So it's a 12.5% growth rate overall. It is largely flat.
In the fourth quarter, as you said, compared to our expectations in TUC, we had weaker growth than we had expected. But still, we have positive 8% growth. On the other hand, TUB, we expected more negative trend. But residential developer opportunities in the public buildings, these contributed positively with increased volume. So it's minus 1%. But it was steady. The mix is expected to deteriorate, however. And this will lead to deterioration in margin. But in Q3 and Q4, I hope you can aggregate those two. So even before provision, we had good numbers for Q3. And we had control of advertising and promotion expenses. But in Q3 and Q4, overall, profit is increasing on a year-on-year basis. We will be promoting CCM installation and promotion and advertisement. These measures were taken in the fourth quarter looking at 2024.
Mainly in TUC, growth strategy will continue to be in place with good traction. We are looking at a good delivery. In Q4, overall, we were able to surpass the guidance. We were a little short of the revenue target. We were able to hit the profit target. Our eyes are already focusing on 2024. There is no significant change in the trend in this Q1.
Regarding the price, well, standard items, I think you are decreasing the price. Can I assume that you are changing the pricing from a strategic point of view in TUC?
Yes, we are maintaining the price for premium products. It is a fact that trading down is happening. In the economy zone, we are trying to take market share with decreased price. We are expecting 8% growth.
But in terms of price mix, it's lower than that. In terms of volume, it will be higher than that. Of course, we are decreasing price for some Tier 3-6 is expected to increase. That would lead to deterioration of the mix. I can't generalize this. It doesn't mean that we are decreasing the price to go into the red ocean. We are still being profitable in the TUC business. We will continue our current strategy to pursue growth.
I see. The 15% TUC growth is expected for this year, which is quite high. Has there been any improvement of consumers' consumption mind?
Well, I haven't heard any of such a situation.
Is your view better for this year compared to last year? Tier 3-6, you have been able to acquire market share.
But is there any difference from the Tier 0 city in terms of the economic environment? I would appreciate any updates.
Well, to be honest, the economic situation is not necessarily good. I don't have any good news. But at the same time, Wee Siew Kim, mention this in the small meeting last year. But in terms of competition, especially with small-sized peers, they have been choosing to withdraw from these markets. In this Q1, foreign affiliated companies decided to withdraw from the markets. And local players, if they are struggling, we decided to include them in our ecosystem as OEM. So we have been able to take market share from our competitors. At the same time, CCM installation has been promoted strongly in China. The installation base of CCM is quite strong in China as of today. That is something only we can accomplish.
As a market, we are in a tough situation. But we've been able to take sufficient market share. That is our impression. But at the end of the day, China is a dynamic market. So you need to look at the results. We would always aspire to be better. And there may be fluctuations in the Q4, 15%-20% growth. If that is to be achieved, we need to grow by 30% in the Q4. But we're projecting 8%. But it's 13% on a full-year basis. So there may be such variances. But they will be acceptable. So we have good visibility to growth with margin growth.
That was very clear. I'm looking forward to the results. Thank you.
It is time. So we will close the Q&A session. Thank you, Wakatsuki [Foreign language], to do the closing remarks.
Thank you. Time has come.
Thank you very much for your attendance. As we always say, assembler model is our goal. We're seeing strong growth in each region. We want to deliver strong growth in all regions. So I hope you can have high expectations to us. The economic situation is not optimistic. It does not warrant optimism. But we have the scale and brand. And we think this will show in numbers this year. We want to share good results with you later. Thank you very much.
With that, we will close Nippon Paint Holdings FY 2023 Q4 financial results telephone conference. Thank you very much for taking time out of your busy schedule to attend today.