Ladies and gentlemen, thank you very much for waiting. We would like to start with the fiscal year 2023, second quarter financial results, presentation teleconference. At the outset of the conference, we have some housekeeping information request to each and every one of you. In order to prevent the so-called howling or the echoing effect, please turn off the mobile devices, including the cell phone, or keep them as far away from the fixed telephones. If the howling is detected, we may suspend the, the conference and, and may state our request again to the specific participant of the conference. We have the Japanese and English, into English, Japanese, simultaneous translation services available. Mr. Wakatsuki, Mr. Tanaka, the floor is yours.
Thank you. Good afternoon, everyone. I am Yuichiro Wakatsuki, Co-president of Nippon Paint Holdings. Thank you very much for taking the time to participate in our conference call regarding financial results for the second quarter of FY 2023. It gives me pleasure to announce that we have participants from the mass media to join the fourth and the second quarter financial results presentation. I would like to begin by summarizing the financial results for the second quarter of FY 2023 on page three. On a Tanshin basis, revenue increased by 7.6% year-on-year to JPY 362.7 billion, and operating profit increased by 141.6% to JPY 48.8 billion, which is a significant growth in both revenue and operating profit.
The breakdown of revenue growth is shown on the bottom of page three of the presentation. Volumes and price mix of the paint business, the adjacency business and new consolidations made positive contributions. There was a year-on-year adverse impact from FX, mainly with weaker Turkish lira. Operating profit is improving steadily due to pricing flow through, with the impact of raw material inflation continuing to ease and the gross profit margin steadily improved. The very strong results of the second quarter were boosted by a total of JPY 6.9 billion, due to the contributions from the one-off items to the profits, such as subsidy in China and insurance proceeds from the flood in Dulux Group in 2022.
Operating profit margin on a non-GAAP basis that excludes FX and new consolidations is 11.7%, yet the OP margin improved year-on-year and quarter-on-quarter, year-on-year and quarter-on-quarter. On a non-GAAP basis, revenue increased by 8.5% and operating profit improved by 42.4% in the existing business. In the Chinese decorative business, TUC revenue increased by 15% and TUB revenue decreased by 7%. China overall OP margin improved to 9.4%, up 1.7 point year-on-year, but was down 3.5 points quarter-on-quarter. Sales volume for decorative grew in particular, yet the profit margin lowered due to higher sales of economy products in terms of product price mix. Page four. Please note that we revised the FY 2023 guidance at this time.
Sales revenue guidance was revised upward by 3.6% from the February guidance to JPY 1,450 billion, which is a 10.8% revenue increase year-on-year. Operating profit was revised upward by 12.9% from the February guidance to JPY 158 billion, which is a 41.2% profit increase year-on-year. I will share the major factors for revisions. Please note that the figures are on rough estimates. Roughly JPY 70 billion, JPY 17 billion increase in revenue and JPY 9 billion increase in operating profit are driven by volume growth and margin improvement. Roughly JPY 28 billion increase in revenue and JPY 9 billion increase in operating profit are driven by the changes in FX rate from February, February.
Revenue contribution from the new consolidation of NPT is JPY 5 billion and will contribute in the second half as the deal was closed in July. Please assume that there will be almost no contribution to the operating profit due to offset by the one-off expenses. Operating profit is a plus, though. We continue to revise the current guidance as we assume different scenarios. The guidance may change in case there are changes in the consumption business trends in the second half, including the raw material price trends, FX, and the extent of the impact from the hyperinflationary accounting application in Turkey, which is factored in, but difficult to forecast. We will make updates if necessary for these matters in a timely manner.
Guidance for EPS will exceed the February guidance by JPY 5.11, and is expected to exceed JPY 15, which is the target for the final year of the medium-term plan by JPY 5.11. Annual dividend guidance is unchanged from February guidance and is JPY 13, dividend increase of JPY 2 year-on-year. The raw material market conditions are explained on page four. As there is a decrease in demand as a result of the global economic slowdown, we believe the impact of raw material price inflation is easing correspondingly. Page six. This is the heat map that we share with you regularly. Similar to the first quarter, there was a small decrease in our market share in the Chinese automotive coating business. This is because our sales to the Japanese OEM manufacturers are higher than the competitors.
The market shares of the Chinese EV manufacturers increased relative to the Japanese OEM manufacturers. In the China decorative paint business, we believe our market share increased in the TUC market and remained flat in the TUB market.
Page seven contains the major segments. I will leave the details to the question and answer session, but I will briefly comment on the each of the segments. Please refer to the detailed information on page 15 and on. Number one, as for Japan, Japan segment, the operating income margin exceeded 10% for the first time in many years. The automotive and marine applications continue to improve, that while the decorative and industrial application made up for the drop in volume in their prices. That's number one. Number two, that I have already told you about the China, so I would like to cut this from this, my presentation. Number three, in Asia, outside of the China, both sales and profit continues to grow steadily. In Indonesia, sales continue to increase, the profit ratio exceeded 30%.
In Turkey, that we are able to recover very high margins after the application of the hyperinflationary accounting, thanks to the significant increase in sales, mainly due to the recovery from the effects of the earthquake in the first quarter, and an improvement in the raw material cost ratio. In DGL, although the market conditions were not favorable in the main Pacific segment and the volume growth was sluggish, the effect of the price hikes has penetrated into the market, resulting in a continuous stable growth. In Europe, Cromology sales were almost on a par with the previous year due to the price increases. JUB sales declined 8.7% in real term due to the volume decline.
Well, compared with the second quarter, and this is a comparison with the, this quarter and from the June from consolidated basis and on the, well, standalone basis, we are seeing that the increase and the good performance. Five, in Americas, the while sales for the automobile showed a significant recovery trend, the sales of the decorative products continued to be affected by the slowdown in the housing market due to the rising interest rate, resulting in a decline in sales. However, since there was no impact from the bad weather as in the previous quarter, the profit level has recovered considerably compared to the first quarter. Page eight and on, here are the major topics. The first, acquisition of the NPT in Italy, was successfully completed in July with the approval of the authorities.
We continue to receive the high praise for our integrated report and are currently in the final stage of operating the 2023 version edition. We consider that it one of the most important tools to dialogue with the investors, and we encourage you to read it again. Page nine, that we have already issued a release regarding the selection of the various stocks, but I would like to reiterate that we will continue to focus on this issue. We believe that the recognition of our various sustainability initiatives will help us further expand our investors base. Finally, page 24, I would like to make the supplementary comments on the earning forecast. Page 24, please. In response to requests from some analysts, that we have included the second half figures, which are calculated by subtracting the first half results from the new full year forecast.
For reference, this is strictly reference purposes only. In the first half of this year, the operating profit ratio was 12.1% on a Tanshin basis, but 11% on a real base, excluding one-time factors. The OP ratio for the second half of the year is 9.8% on a back calculation basis, but with the one-time negative impact of approximately JPY 1.5 billion related to the flooding of the DuluxGroup. In this amount, please consider that we are projecting the profit of the approximately 10% in the second half base of this guidance. Approximately 10% in the second half is our guesstimation.
In other words, compare with the first half, the sales will increase by 10% as well, but the margin will decrease by 1 percentage point, but will be almost the same as the second half of the previous year. This is a reflection of the fact that we have factored in the impact of the economic slowdown in China in particular, and the deterioration of the margins due to the super inflation accounting effect in Turkey to some extent, compared to the first half, and that in general, that we will not relax our efforts to expand the market share even during the economic slowdown. That, of course, that we are always looking for the margin expansion in or in addition to market share gains, so that we would like to do add that some company will naturally strive to exceed these figures.
This concludes my presentation. I will happy to take, entertain your questions. Thank you very much for your attention, ladies and gentlemen.
At this time, we would like to move on to the Q&A session. If you have any questions, please kindly push asterisk one, and if you would like to cancel your question, please push asterisk two. The operator will call upon you when your turn comes to ask questions. Those who have a question, please push asterisk one. In the interest of time, we would like to limit the number of the questions by the person to one question for each company. Now I would like to give the floor to the first person who would like to ask the question. We appreciate your patience for now. We would now like to entertain the question from the person in the Japanese channel, BofA Securities. Mr. Enomoto, the floor is yours.
This is Enomoto from BofA Securities. Thank you for coming to this presentation. In China, regarding the paint business, decorative paint business, we quite don't understand, the first quarter, second quarter, the raw material inflation subsided, and it was quite low, and there was this seasonal demand. I, I understand that economy prices of products sold higher, but looks like the value is, is quite, quite low. On the other hand, the real estate market is rather deteriorated, and the TUC's sales revenue is, is, is at 20%-25%. That's quite a strong figure. When I just take a look at this, the price seems to be... Did you bring down the price to, to grow the sales volume?
Is my understanding correct to reorganize? The profit margin deteriorations, I don't quite understand. The full years, TUC's sales revenue, why did you change the guidance to higher value? Thank you for the question. In the first quarter, this was quite achieved, and in January to February is a very quiet month, and March is a stronger demand season, and this we have shared in the past. Against that backdrop, in the second half, since last year, because of the lockdown, there was logistic disruptions, challenges, and the demand was able to be picked up by ourselves, and it was a very efficient quarter, we admit.
Was there a general downward trend? Rather than that, that's not, that's not the case. The first quarter was, was, was rather, very good, was very strong. In the second quarter last year, China... If you exclude the provisions, it was a 7.6%-9.4%. Correspondingly, it, it is, it has become, it has increased on the year-on-year. Having said that, second quarter, to be honest, May and June, especially, until April, it was quite strong, but May and June, the, there was this, business, sentiment going, deteriorating. As a result, we thought that, this is when we have to go get the shares.
In some of the products, we did bring down the prices, decreased the selling prices in the economy zone, we went to get the shares by bringing down the prices. Against that backdrop, compared to last year, year-on-year, last year, second quarters, the Tier 0 cities was because of the lockdown, it was a regular growth. We did grow in the Tier 3 to Tier 6 cities. The economy products, economy zone, and also some products, selling price decrease, did impact the sales mix. That's one thing. Another thing, the value-wise, we do not disclose the value, but, generally speaking, the TUB, in the TUB... I did not say this earlier, because of the correction...
The receivables collection, collection of the receivables did, we had a challenge. We had a hard time collecting the receivables, and so we went, became rather aggressively than in the past, and we, depending on some cases, we took some legal actions. Would this continue? I, I don't think that's the case, but from our current provision level, when we take legal actions, 100% we will provide a provision, and that was, that would be the expenses before the profit margin. This is also impacting the growth. Generally speaking, we will continue to, we, we, we will continue to take the shares, and also volume growth is conspicuous.
Yet, some of the margins, OP margins are sacrificed. This is an opportunity that we don't want to miss out on, and that's why we're continuing the momentum. Compared to last year, still, the OP margin is still, still good. That's, that's what I put. Let me summarize. The TUC of the estimate of the full year, that the share increase is estimated. Yes, of course, of course, that's our assumption. Also China, well, JPY 5.6 billion of the plus of the temporary increase is because of the subsidies or the legal actions, minus of the provisions, these are mixed together for the 5 points? No, no. 5.6 is the cost of action. Well, this is not the temporary, that the cost is not included.
The subsidies and also the selling of the real estate, these are mixed together with the JPY 5.6 billion.
How much of the provision can you respond?
What do you mean?
For the provision, the legal actions.
No, no, we are not going to disclose.
We understand. Yes, it is a very good summary. Thank you very much.
The next question is from Mr. Yoshida from Mizuho Securities. The floor is yours, sir.
This is Yoshida from Mizuho.
Yoshida-san, thank you so much for joining.
My question is for the Japan segment. Please teach us the situation. The second quarter, the operating profit margin was higher than 10%, you said. From the first to second quarter, the profitability increased because of the sales price increase and also, and also, raw material price moderation, and also the mixed improvement in the automotive. This is a mixture of multiple factors, and the profitability of the second quarter went up. What is the main driver? Also, third quarter on, if you look at the third quarter on, for example, regarding the raw materials, I think... I don't think, the effects of the low raw material cost will be strong. Third quarter and beyond, the OPM, the JP OPM may, may decline.
Is, is that a concern that we should be braced for? Thank you for the question, sir. The second quarter, like you said, it's a multiple factors that is contributing. The automotive and marine and the volume is increasing, and the price has also, selling price was increased as well. The decorative and the general industrial business is a minus, is in a negative, and the selling price increase is contributing. At the same time, last year, we had this early voluntary retirement program and other process. We are trying to review all the processes. Mr. Kim is heavily committed to the Japan segment, and he tries to change his people's mindsets and also, try to refrain from outsourcing, try to do things in-house, logistics and distribution.
Maybe we can work hand in glove with the group to make this streamline the process. We tried to build up various things over the two years, and the fruit is gradually emerging. When we say 10%, this is just a passing point. This year, for, and on a full year, 10% would be rather aggressive. Rather, the second quarter, not that I mean to control it, I feel that, second quarter, we did quite well. Originally, we thought that, 10% we want to see in the fourth quarter. That was our original discussion. Then we were amazed at that we were achieved that much, in the second quarter.
Without compromising, we will continue. In the decorative, we are still increasing selling prices. Compare, considering the raw material price situation, I think that, that margin is still improvable and room for improvement. Internally, 15%, we have the golden number in the paint business, so I know it's not easy, but we should aspire for that level and try to be as close as possible. That's one thing, but still, we're, we're not saying that the 15% is, is, is truly coming. Please understand that. What I want to say here is, so the, it... I don't think that there will be a, a factor that will bring down, bring it down, but immensely. What do we do in the second two next quarters? Second, it could be bumpy.
Compared to the last year, we want to improve in the, in the general flow. Therefore, the outlook of this year, the OP margin may be, may be above, it could be on the page 25. Compared to the original, forecast, it may not be as good. We just, I just put, inserted the arrows there, arrows on this page. Please understand this from the impression.
I would like to confirm. Toward the second half, for example, in Japan, the spread, that is the cost and the raw materials, this is coming down.
Uh-
We don't have to, consider it in this way, that the margin, well, that the gap is narrowing.
No, no.
So long as that the trend means that raw material costs will not come down so dramatically, or and also that we are partly raising the price and also that, that there is the reflection of the logistics as well. The most demanding are automobile-... that the number, the volume last year, since last year, dropped significantly. This has the impact on the fixed cost, and also that the fixed cost includes the paint, and therefore that how much of the improvement, the ratio, that if we can, well, well, supplement with the decorative and industrial, we may be in a more comfortable position. For this, the second whole, second half, that are we be very optimistic in the second half? Probably not. Probably not yet.
Thank you very much. That's all from my side. Thank you very much.
The next question is from Mr. Okazaki at Nomura Securities. The floor is yours.
This is Okazaki from Nomura.
Thank you for joining us, Mr. Okazaki.
Regarding China, to make supplement the earlier questions, regarding TUC, in May and June, the demand was sluggish. Did you say so? Was it in the rural or urban area, were there difference, characteristic difference depending on the area? In the TUB, the government-related business is deployed and it's cash on delivery, you don't have to worry about the risk of the receivables, trade receivables. Can you explain the background? Thank you for your question, Okazaki-san. Maybe I should have said more. May and June was not good in the TUB. TUC, I don't think there was a conspicuous change for the month. But generally speaking, the economic condition is not very good.
Compared to April, May and June was becoming better. Rather TUB, May and June was challenging, was our impression. There wasn't any trends in the difference of the cities. Last year, 2nd quarter, in major cities, there were lockdowns and the impact was gone. Year-on-year, it grew, and premium, we did not decrease the selling price. The economy area, we... as a matter of fact, we did some selling price decrease and tried to get the shares in the Tier 3 to Tier 6 cities, and the volume is growing. Sales volume is growing. That's how things are. Another thing is the collection of the receivables.
Our strategy for now is that, in the good old days, the major developers, large-scale developers, we will encroach in them. The top 30 or the top 100 developers, they were getting, growing the market share in the new housing, and our share was growing correspondingly. For the major companies, developers, we will be very selective and, in terms of customers. Cash on delivery, there are some customers that we are getting into trouble with, but we have to complete the project. The distributors in the project and those developers who are not large-scale companies, we try to expand our share.
It could be schools or if the, if that's the kind of customers, there's, there's not a problem, but still they, they get delinquent, their payment is delayed. The risk is not very high, on top of that, some of the money is collectible. Payment is collectible. But still, it's China, so in order to accelerate the payment, legal action is taken by us. As a result, if they, if they are collectible, it's good. This is a one-off. If we say it's one-off, then that's a misleading statement. That's why we do not disclose the value. Within the normal course of business, these things are getting bigger than what we had assumed originally.
That is why we are mentioning this, and that's a part of the reason why the margin is declining. It's not that we are taking an excessive amount of risk. This I must state.
I would like to confirm, TUB demanding. Within the TUC, for example, external economy zone or the local areas that you are suffering from the sluggish of the demand. Am I right in interpreting this? How shall I say? Precisely saying, for in order to stimulate the demand, we would like to reduce the price, we have to win out the competitors, and that is another strategy of lowering the price. We are not lowering the price anywhere, no. Well, some of the products are promoted aggressively, including the reduction of the price in order to win out the competition with the competitors. For the Tier 3 to 6, that is the very aggressive strategy. So that, we are increasing the volume or the market volume.
So while we are not seeing that the demand is so sluggish and, we cannot do anything to do, no, but the foundation of the demand is there. We would like to expand this, the foundation, and I would like to take this opportunity to expand more aggressively. While we are not selling at the red number, we are making profit. We are not suffering with the deficit. Rather that, well, sometimes that we give priority to the shares than margin. Yeah, this is not the commitment. I understand this. OPM of the China, 15% used to be your number, but basically that, I'm sure that you would like to get back to the 15%. What is the philosophy of the OPM? No, no, there are no philosophy change.
I've not changed, but I have probably that explained one on one. I don't remember. If we are 15% is a must, and then that we may lose the business opportunity. First, first, that we have to secure the share. We have to go for the share, market share, and we chase all the competitors out of the market, and we take time to get the margin next, and this is the order. While this may not be a very friendly well thing, however, this is something of that we have to emphasize the strategy. First, share increase. We cannot afford to lose the money for the sharing, losing with the share, and then share first. Ultimately, ultimately, with our power, that I would like to secure the OPM.
Well, that in the past, that we enjoyed 19%, as high as 19%. 10% and the share, we do not mean to stay with the 10% for the share, but we would like to get the share. We will get the share. That, if that the OPM, the general OPM, is there is a margin of the increase of the general OPM that we will do. We will aggressively take the measures to increase the, the general OPM first.
Understood. Thank you very much.
The next person is from CLSA Securities, Mr. Zhang. The floor is yours, Mr. Zhang.
This is Zhang from CLSA. Hello, Mr. Zhang. This is a general discussion. How do you look at the raw materials? What would be the premises for the second half and also the ongoing prices? I see that the selling price decrease is happening, and it could be region to region. The second half of the profit margin, how would it turn out? Please kindly give us the background, including the raw material, how you look at the price, raw material price trend. Thank you, Mr. Zhang.
Basically, regarding the raw materials, I think the prices are stable, so I don't think that it will go down, and down. I think that the current level is will be maintained. That is the assumption. In Japan, we are still conducting selling price increases in Japan. I mean, raw material, but it's not that the general trend is that upward. In some cases in China, in terms of price mix, there may be a deterioration, and then the margin compression towards the second half, may, may happen. The margin may be compressed towards the second half. On the other hand, in terms of sales volume, we would like to, to increase.
Generally, in the second half, maybe the margin may be a challenge. Maybe in China, in the first quarter, it, like I said earlier, because it was quite an achievement, compared to such period, the margin may go down. In other areas, I don't think this kind of assumption i- is applicable. Thank you.
My second question is that the general question. For example, in China, TUC, TUC, China, a part of the inventory is increasing. Is my information correct? Increase of the inventory and TUC. I'm going back to your discussions earlier, on the local cities, that you have to be aggressive. Well, what, how about the major cities? What are the conditions? Well, on the, the, sales, is sluggish in the major cities and for the six tiers and the overall strategy that, well, you are going to attack the, the lower margin. What is, what is the segmentation of the market for you? That the inventory is the logistic inventory that you are talking about for the sales.
My guess is that logistic inventory or that the part of the inventory has been increasing the after the April and May. Am I right? I'm just confirming. As for this, that's my... That's not my recognition. Absolutely not. I denied categorically. Oh, the inventory into the future? The glut of inventory that I have not heard of. I don't have the means of confirming, and I'm not concerned. I'm not concerned, having said so. As I have mentioned earlier, the sales per se is that because of the sluggish economy, now frankly speaking, the sales is not as brisk as we expected, and I guess it's backdrop. That sometimes we have to do the discount in order to increase or to stimulate the demand.
Stimulate or that prevent the customers going to the, the customers. Well, whether it's the, the sixth Tier or the third Tier is the same for that measure, that the high premium products that we are the defending, that we are at the top share. We are not, well, hearing that the from three to Tier to the six Tiers, our share is just, well, favorable. So that, well, we would like to stimulate the demand of the other areas, whether generally, that whether that our premium market is sluggish or not, as I have mentioned, well, compared with the last year, or that in the lockdown areas, that we are improving, well, gradually. But originally, originally, well, switch over, switch over the, the demand to the, the premium or the superior.
Also, well, that, when the customers switch, that, we can increase the margin. Well, if that the economic condition is sluggish, well, we have to sometimes kick the can down the road and wait for that recovery. In that sense, is that we have to maintain and increase the market share. From the three to six tiers for the new housing demand is, well, is sturdy still. That the TUC is new construction houses, but still it is a robust demand, and then we can go get the market. Also, that, so far that we have not attacked so aggressively, and we are getting into the challenger that will like to fight against the competitors, and this is the color difference.
Well, then, well, whether there is that, the constitution, the demand of the, the 3 to 6 tiers and the other tiers, well, they start with the, the, foundation, but based upon this, other than this, there isn't too much of the difference. I would like to confirm one more point. In short, in short, for, or that advance into three to six tiers, it is going to, well, continue for the next three to five years. Am I right? Hmm, yeah. For that premium and the superior share increase is something that we are aspiring for. We are not loosen the rein somewhere and tighten the rein the rest. No, no, we are going to take that aggressive, positive strategy to the overall market.
Now, the next question is from, Toyo Keizai Shinpo, Mr. Yamada. Can you hear us? Can you hear me?
Yes, we hear you, Mr. Yamada.
Thank you for joining us. Thank you, sir. It's a pleasure. One question from myself. This is a rather a wide-ranging question. For this year, after the revision, there, there, the, I, I could understand the strengths and the weaknesses in the new guidance. What... How do you look at the next fiscal year? I know that, I'm jumping to the next year, but it could be region to region. I want to see, like, the strength or weaknesses, like, is shown, described on the page six. If you can tell me the whether you will be or page five or page six?
It doesn't have to be in details, rough estimate or the profitability, profit margin, and the, the profit margin, it may not change significantly, but with the profit margin go up by one phase or Chinese automotive. I get the feeling that it's negative there. Can you give us a general direction of as, as of what you expect in the next fiscal year?
Thank you for the question, sir. 2024 and beyond. I, I will refrain from giving you the general figure, but 2024 and beyond, in each of the group, the medium-term plan is now being planned internally. If you look at the plan, so depends, regardless of any region, so they want to aspire for the higher profitability, and that's the same. The DuluxGroup in Australia, the market share is already more than 50%, but still they feel that they can do more and grow more, and they want to aspire for higher growth. It's, it's half joke, half a joke, but they are always discussing: When would our share reach 60%?
In Europe, the business confidence is not as strong in Europe, but Cromology is a, is, is a platform. Cromology would like to go to one stage higher, and, and they are seriously discussing this within the DuluxGroup. Ritsuo Kim and I, myself, joined there as a board member and, and listen to their discussion. On the other hand, in Asia, NIPSEA, different companies in NIPSEA, because they have high share, they, they do have some concerns. Malaysia is, is more than 40%, and Singapore has a sizable share as well. When you think of the profit margin, to be honest with you, nobody is, believes that the current margin is optimum.
We need a price revision consecutively, the raw material price is, there may be highs and lows. It is also included in our KPI, the share up and the margin improvement, to achieve both, both ways, because Asia is a growing market. How do we beat the business confidence and achieve both? Japan, in Japan, in the past several years, we were underperforming, to be honest with you. As we regret that, across Japan, automotive or industrial or the decorative, we have been doing this separately, but we are trying to look for some common grounds that we can pursue.
It could be margin improvement or sales revenue increase by share gains. Some people believe that Japan may not grow further, but we would like to deny that. That's not the case. There are still things that we can do. That is our belief. In total, sales revenue will continue to be, to be strong, and the OP margin will be the margin, profit contribution is bigger, and still we can do margin expansion and also selling price increase and control of something. This is the major difference. Another thing is, we have woven in our D&A, the M&A, and we have this Assembler Model, and we will continue to make use of our low funding costs.
I think we can benefit from that. Compared to the interest rates overseas, it is much lower in Japan to finance in yen. Our current physical strength and our accountability will be combined, and we want the companies to grow progressively. There are many companies who resonate with our ideas, who sympathize with our ideas. Our M&A model is something that we can benefit from, and we look forward to that. I don't know if this answer here answers your question, but we continue, we would like to continue both the organic growth and the inorganic growth, and this pursuit will not change beyond 2024. There's no limit to our growth, we believe.
I hope that you will look forward to our growth as well.
Risk is diversifying and increasing. That is a modern society. Against this backdrop that you have been trying to pursue the growth. What is the biggest risk out of this for the growth? Is it China, Chinese economic conditions? If you cannot raise probably one only end risk, but what is the biggest risk which may throw the shadows on your growth strategy and plan? What is your concern? Well, there is no only one risk. Well, we have to be cautiously optimistic in order for the M&A that we have do the due diligence. On the other hand, for example, China. Take the example of China. Well, many people are interested in China, and China is sluggish. It's easy to say, but our Chinese business is at the localized, locally procured, locally produced.
What you may imagine that if China stops and all the accounting stops, no, I don't think so. Of course, that we are not independent, well, in independent from China. However, within the China, well, the cash flow should be sufficient, regenerated on top of this, and the dividend should be paid, and the investment, the capital investment should be done in China. All our companies are basically are that.
... they are not in need of external funding, so that each and every one of them is capable of growing on their own. If that, if there is, the machinery goes wrong, what is this for the management? That there may be that, well, we gather that the very capable person, if they leave the company, that is that, the problem that they face. Our confidence is that we would like to motivate, that the capable local management, motivate them, promote them, and encourage them to do their best to be on their accountability. They are confident, and not 100% all of them are not within our, the scope of influence. No.
Relatively speaking, our independency-prone culture, and also that, the holding companies, that the parent company should support that the subordinates, the subsidiaries, whether that there are subsidiaries can be put on the global platform in a very performance-oriented way. This has been working. We do have the talent pool, talent base, but we are not comfortably sitting on this. Basically, we would like to, well, go for the lower risk to build up our base. When you ask what is the risk? Of course, that we have risk, that there are some worries and concerns, but we would like to create a model which is risk-avert as much as possible.
Also, one, one is that, that, lowest risk as possible, and our nature is to reduce the risk to the minimum level and raise the profit. That is our basic plan. This is summarized by Arthur. Thank you very much. The next question comes from Mr. Uchida at Goldman Sachs. Ikeda from Goldman Sachs. Nice to see you, Mr. Ikeda. On page four, the revision of the guidance, please, to the extent possible, the volume growth and the raw material price decline, there is the increase in the operating profit. Looks like Turkey is exceeding and Asia is robust, and China seems to be weak. What is the strength and weaknesses by the region?
The raw material cost, it seems to have peaked out in China, and ASEAN is strong. Japan and Australia, they are now about to benefit from the cost. Can you tell us the weak- weakness and strong- strength? I think page 25 and 26 tells you the strengths and the weaknesses. To your far right, it says above or in line. China, the TEC is exceeding guidance and TEB is lower, and the automotive is rather challenging. In total, this may not be so much different from the original FY 2023 guidance. Japan, the sales revenue is maintained.
We were expecting automobile production to recover, but the operating profit margin seems to be going up more than expected, so that's why it's above. The NIPSEA China, other except China, is improving. Malaysia, Singapore, Thai, the OP margin is benefiting from the raw material cost decline, and the sales revenue is also improving. PT NIPSEA in Indonesia, the originally in the beginning of the year or the since second half of last year, we had concerns, but compared to that, more than better than, than we had expected. Betek Turkey, in the second quarter was very strong, but on a full- year basis, we don't see any factors that would exceed the guidance.
The hyperinflationary accounting is applied, so the forecast is very difficult. Hopefully, our forecast will not be too off the line to, to be too much deviated. Also page 26, DuluxGroup is almost in line. Americas, the first quarter, like I said earlier, the decorative was weak, but the automotive is improving more than expected. Altogether, this would be square and will, will be offsetting. Is there any change of the estimate of the overall performance? The JPY 9 billion and also that the JPY 9 billion and JPY 18 billion and one-off.
... 6.9 China and Oceania, the one- off. Oceania in the second half, the minus. Well, is there a lingering impact? Also that, well, there is a significant impact in the first half, but do you think the second half, this will be erased? I would like to confirm because the estimate is quite conservative. Conservative, conservative, do you think so? Well, I think that this is higher than your estimate, and that's my impression. My impression of the TQ is that the conservative, as I have mentioned in China, that the one- off China will remain to the left. Well, $5.6 billion may increase significantly that we can afford to do so, but plus or minus, of course, that it comes with a story.
BT, as I have mentioned here, is that the second half only, this is a half year only. That the plus contribution, however, that M&A costs may eat this away, therefore, that the 0 performance, that the contribution, I'm sorry, 0 contribution. In this end, dual that. That the flooding plus and the minus, this is plus or minus and zero. The second half and the second half. The second half is that we factored this in JPY 1.5 billion is woven into, that the one, one- off a certain amount be affecting us, including this, the second half, that the plan 10% instead of 9.7%.
As an OPM, this is little lower than the guide, guidance, this may be as a result, is conservative. Of course, I would love to increase this one, first of, as I have mentioned, that our priority that shares. Assuming that we are going to maintain the share, yeah, that, the plus of the China is that, how about the risk of the Cromology or that, do you consider that, the, the buffer of, for the Cromology? No, no, no, that's not, that's, my interpretation of the plus figure of the China. 5.6, the plus B, it is included in JPY 18 billion. Is it included, that the JPY 9 billion, the segmentation of 9? Yes, it's including the Forex, it is included. Included. Thank you.
The yen is depreciating, so that this is a double effect. I understand this, the upper JPY 9 billion or the growth, it is included into that, the growth concept. I'm sorry that my question was very detailed. Welcome.
I would like to get the questions from the English channel. If you have any questions, please push asterisk one. If you want to cancel your question, please press asterisk two. There doesn't seem to be any questions from the English channel, we would like to conclude the Q&A ses sion.
Thank you for coming despite your busy schedule. I understand that people look at their questions differently, I believe this is a very strong financial result, and we were able to show the strength of our franchise, and I keenly feel that.
I hope we would like to continue this trend, and hopefully, we will be able to share with you the best figures. Please kindly continue to support us. Thank you again for joining us despite your busy schedule.
Thank you for attending the financial results announcement presentation of the second quarter of the FY 2023. Thank you for coming to this earnings call, telephone call. Please kindly hang up the telephone.