We would like to start the conference call for briefing of financial results of the fourth quarter of fiscal year ending December 2024. In starting this conference call, there are some requests. We would like to prevent acoustic feedback. If you have telecommunications equipment near you, such as cellular phones, please switch it off or put it somewhere further away from your phone. We have simultaneous interpretation in Japanese and English for this conference call. Wakatsuki-san, Tanaka-san, the floor is yours.
Thank you. Hello everyone. I'm Wakatsuki, Co-President of Nippon Paint Holdings. Thank you for coming out of your busy schedules today. I will give you a brief presentation on financial results for the fourth quarter of fiscal year 2024, full year results for fiscal year 2024, as well as guidance on fiscal year 2025.
As per our custom, we have participation of mass media for the fourth and second quarter financial results briefing. I would like to mention a bit about the foreign exchange. Second page. We apply the same rate for fiscal year 2025 guidance as the actual rate for full year 2024. The 21.14 at the revenue line, so that's what I would like to mention at the outset. Page three. This is the summary for the fourth quarter. Even in the face of a less robust period towards the year-end, each region did its best. On the reported Tanshin basis, the revenue was JPY 416 billion, up 16.6% year-on-year. Operating profit was JPY 45.9 billion, up 23.6% year-on-year. There was a significant increase in both revenue and profit. It was record high revenue and operating profit on a quarter basis.
The factors for increase in revenue were in paint volume, other paint business, forex, and new consolidation. Price and mix was flat overall. On the non-GAAP basis, excluding forex and new consolidation, the revenue had grown 5.4%, and operating profit grew 14.6%. Decorative business in NIPSEA, China's performance was a 2% increase in revenue for TUC and an 18% reduction in TUB. Operating profit for NIPSEA, China, overall had increased due to an increase in the revenue and improvement of the SG&A ratio. Because of the decrease in automotive production by Japanese OEMs, revenue decreased in the automotive business in Japan and the Americas. However, in China, we saw an increase in revenue from local OEMs. Because of this, revenue increased. Margin improved both on Tanshin and non-GAAP basis, 0.6 points and 0.9 points respectively.
Next, on page four, I will brief you on full year results for fiscal year 2024. Revenue and operating profit were record high. The company's performance was above the original guidance that we announced in February of last year, as well as the numbers we disclosed in the November financial results briefing. On the reported Tanshin basis, revenue was up 13.6%, and operating profit was up 11.2%. And on the Non-GAAP basis, we exclude forex and new consolidation, revenue was up 5.6%, and operating profit up 4.8%. Even under the difficult environment, each region did its best. On the operating profit for Tanshin and Non-GAAP basis, hyperinflationary accounting in Turkey continued to affect our performance. There was approximately JPY 3.2 billion worth of negative impact to operating profit on a full year basis, but even after the application of IAS 29, the company still achieved double-digit profit.
Next is full year guidance for 2025 on page five. With regards to acquisition of AOC, which we announced last October, as we have stated on page 11, the fulfillment of closing conditions is progressing steadily. It is possible that we would fulfill all requirements as early as by the end of February. However, it is difficult to foresee the approval timing by the authorities. Because of this, in this guidance, we have not factored in AOC's performance or acquisition-related expenses. Those information will be disclosed once the AOC deal closes, which would be followed by revision in the performance guidance after scrutinizing impacts of the acquisition. Based on that, and with the assumption that the forex would stay in line with that of 2024, we forecast that we will see proactive share expansion initiatives in the existing business, as well as enhancement of peripheral businesses.
In addition, two companies in India, which is a new consolidation which contributed to two months in the last fiscal year, would contribute full year. In total, we expect to grow approximately 6% to the record high revenue of JPY 1.74 trillion. As businesses outside of TUC and TUB in China, decorative business, we have raw material trading business. In the past, we had accounted for purchase and revenue on both sides of the ledger. However, starting from this year, we will book the net amount in the revenue due to change in the transaction format. There will be a reduction of approximately JPY 55 billion on the 2024 basis, and this will be gone. If we factor this in, it would be about 10% growth in revenue. Page six. We expect the revenue of China overall in 2025 will remain flat, as you can see here.
However, on an apple-to-apple basis, we expect 5%-10% growth. Operating profit is expected to be JPY 198 billion, growth by 5.5%. In 2024, we had some one-time P&L items such as subsidies, as well as AOC-related booking, and net amount of positive JPY 4.1 billion was included in the operating profit, and approximately JPY 3.4 billion will be gone in the forecast for 2025. If we account for this, we can say, in substance, we would see a 7.5% increase in profit. Margin is expected to be on par with the previous year, and EPS is assumed to be 57.05 JPY. As for the dividend, as I mentioned in October at the time of AOC acquisition announcement, we have officially adopted progressive dividend as our company policy. We expect the EPS would significantly improve as we acquire AOC.
Rather than using a payout ratio of 30%, which was our original policy, we would prioritize developing through this. We would prepare ourselves for the next acquisition, which can contribute to the improvement of EPS. With that in mind, we expect the dividend to go up by JPY 1 to JPY 60, and we will basically not change this amount, even if there are changes in the guidance after AOC closing. Pages six and seven are the assumptions for the main segment forecast. I will leave the details to Q&A, but let me briefly comment on each area. We will continue to strive to improve margins in the Japan segment, but we expect margins to remain flat in 2025 due to expenses for the ERP revamp and the completion of the new Shinagawa R&D building. There is no change in our mid to long-term target of 15%.
Regarding NIPSEA, China, based on the assumption that the macroeconomic environment will remain challenging, we will continue our growth strategy centered on TUC. In addition, TUB, which struggled in 2024, will continue to diversify its revenue sources, including infrastructure, public housing, and government-related projects, while aiming to grow and improve profitability. Again, the overall sales forecast for China is expected to grow by 5%-10% on an Apple-to-Apple basis. Now I'm moving on to page seven. In NIPSEA, except China, particularly India, I would like to make some comments. It made a two-month contribution from November for the consolidated 2024 performance, but a full year contribution will be made in 2025. Compared to when we announced share buyback in 2022, new entrants have increased in the decorative sector, threatening our market share in two major provinces, while there has been considerable improvement in the industrial and automotive sectors.
In total, we expect 5%-10% growth on a full year basis with flat margins. In DuluxGroup, growth is about 5% in both the Pacific and Europe, which is what we are aiming for by raising prices and increasing market share, seeing market growth as almost zero. Especially in France, Cromology, the market has been in decline for two years in a row, and we hope to see a recovery soon. Page eight, raw material trends are generally calm, but of course, there are various variable factors. Our general base scenario is either flat or a slight decline. Let me skip pages nine and ten, and please look at the key topics starting on page 11. As I mentioned at the beginning, we are making good progress in meeting AOC's closing conditions and expect to meet them as early as this month.
We have been discussing monthly earnings reports and this year's budget with the AOC's management. There is no change in our view of a positive EPS contribution of JPY 15-JPY 17 on a full year basis, which was shared when the acquisition was announced in October last year. Although we need to scrutinize, as there is seasonality and the PPA, the EPS contribution will be 10 months if we are able to consolidate from March and 9 months if we are able to consolidate from April. Although the PPA itself will not be completed for some time, based on our estimation from before the acquisition, we'd like to announce the revised earnings as soon as possible after the closing after making adjustments. We also have held our first IR Day on December 2nd last year.
In order to fill the valuation gap in the capital market, the CEO of DuluxGroup and the head of the NIPSEA brand gave new presentations on the concept and strategy of the brand business in the decorative sector, which we've been discussing for a long time. This was very popular among the participants, and if you have not seen it, please check out the script and other information on our website. Page 12. This has already been announced, but I'd like to touch on two topics announced in January. First, we're pleased to report that we received very high evaluations from three major IR and sustainability website evaluation organizations. And second, we have continued to be selected as a constituent of all six ESG indices used by the GPIF, as we did last year.
Again, our sole mission is to maximize shareholder value, which is residual value after fulfilling our legal, social, and ethical obligations to our stakeholders. We believe that ESG and sustainability are also important responsibilities to our stakeholders, and we are very happy that they are being recognized by external organizations. Now, looking back on 2024, we believe that we were able to reaffirm our strength as a group of strong partner companies with very good financial results in a very challenging environment. While it is regrettable that we were not able to give our 2025 guidance inclusive of AOC after the deal is closed, we believe that this is going to be the first year in which we can truly demonstrate our strength as an asset assembler by combining sustainable growth in existing businesses with M&A that will contribute to EPS compounding from year one.
We believe that this will be the starting point. Please look forward to our continued growth. Last but not least, please join us on Thursday, April 3rd, from 4:00 P.M. to 5:30 P.M. for a briefing on the progress of the midterm management policy announced last April. 4:00 P.M. to 5:00 P.M. or 5:30 P.M. is Japan time. That concludes my presentation, and now I would like to take your questions.
Thank you for your kind attention. We will now go into the Q&A session. If you have any questions, please put asterisk one on your phone. If you would like to cancel, please press asterisk two, and the operator will be designating you. If you have any questions, please press on asterisk one on your phone. We would like to limit the questions to one per company because of the restraint in time. Please wait until we designate the first questioner.
From SMBC Nikko, Shintani -san. Please ask your question.
Thank you. This is Shintani from SMBC Nikko.
Hello, Shintani -san.
Thank you for being here. I would like to ask outside of NIPSEA, China. So 30% of the OP is coming from here, and for the fourth quarter, the growth expected to be relatively high, and I think that this would be driving the growth. So if you look at the situation region by region, and if there are areas which are driving the growth, I believe that the growth will be about the same as this year. Indonesia, Malaysia, Turkey, Kazakhstan, India. If you could elaborate a little bit more about the situation of those regions, I would appreciate it.
So it's a very broad question, so I would like to first broadly provide the answer.
If you look at page seven, so 5%-10% growth for this segment and for this region, 5%-10% is expected in terms of growth. I think that it could go even further up internally. However, we should not have excessive expectations. So regardless of the internal target, we believe that we can go to this level, especially Indonesia. In the first and second quarters, the growth tended to be sluggish, almost flat in the past track record. However, the higher single digit for the third and fourth quarters. We have seen effective use of the marketing initiatives during those quarters. So we don't know whether the growth will be as high as 2023, but we believe that this region can post 5%-10% growth. If we look at the overall margin, there are two elements that we are focusing on. One is the Betek.
The Betek's margin in 2024, it was 13.2% after the application of IAS 29. For this term, we believe that there may be some difficulty in this area because of the change in the financial policy. Starting from the end of last year, there has been some tightening of the financial policy. So in that sense, economy-wise, it was struggling, but in the fourth quarter, they worked very well. So in terms of the margin, even though it's hard to foresee what kind of impact there would be from the application of IAS 29, we believe that we should look at the margin more conservatively. So another point is that this 17.2%, there was a contribution from two months of Indian business.
For your reference, the full year for India was 4.2%, and we believe that this percentage would be about the same in the middle of the single digit, and it would depend on the mix. So that's why we're thinking that it is trending a bit downward. But as for Kazakhstan, we believe that it may be able to do better, but it is steadily generating cash. Malaysia Group, Thai Group, and Singapore Group, they are doing steadily. 75% market share in Singapore, and there are some difficulties it's facing, but it's doing its best. And the same applies to Thailand. So overall, this region continues to be promising. So that would be all for the response for me. So you have mentioned about India as well as Kazakhstan, which are the entities which you have acquired recently. Is the contribution from them as high as you have expected?
What is the progress after M&A? In terms of India, so this is asset that we have bought back. So we have been monitoring under NIPSEA umbrella. So it is not that the structure changed drastically after the acquisition. But as I have said earlier, compared to the time we have decided on the buyback in the area of Betek, the new entrants are increasing. So in terms of marketing, there are competitors which are investing there even in the face of red ink. So we are now on the offensive because there are many new entrants, but we have been discussing with the Indian team that we will be making a recovery for the industry roles and encoding and for automotive. We believe that the other entities will do good in this area, and as for Kazakhstan, the margin is lower than we had expected originally.
However, I think their performance was pretty good as the first year of the acquisition.
That's all. Understood.
Thank you very much. Next question is from Goldman Sachs Securities, Ikeda-san. Please go ahead.
This is Ikeda from Goldman Sachs. Thank you for this opportunity.
Thank you. Hello, Ikeda-san.
Hello. My question is regarding China. From Q3 to Q4, what has been the trend? And I also would like to ask about this year's guidance. In your opening session on Q3, the situation was not good, and you were expecting recovery from Q4 onwards. When we look at numbers, TUC was +4.2. TUC was -16 to -18. So it has not improved significantly. Some local manufacturers commented that they had meaningful improvements. So what has been the impact of the deregulations? And what has been the trend? And what kind of recovery do you foresee?
As you mentioned, I think the raw material supply situation is not easy in China. I'm wondering what is the impact on the profit side? For TUC, it is 10%. TUB, it is 5%. In terms of profitability, why are you expecting an improvement in profitability? What is the background?
Thank you for your question. In Q4, well, to be honest, I read through the Q3 script, and it should have improved more. As you are aware, Q4 is seasonally a low demand season. Regarding TUC, toward December, they have declining demand, and they eventually start to recover or collect the receivables. Q4 is not a strong season. We didn't expect it to be so, but margin-wise, it could have improved more, especially regarding TUC. The volume continues to be on a positive trend, but unfortunately, the product mix had a negative impact.
So from tier 0 to 2 and tier 3 to 6 cities, in tier 0 to 2 cities, they were flat or slight decline, and tier 3 to 6 were positive, big plus. And this difference between those two groups remained the same. 3 to 6, compared to Q3, tier 3 to 6 cities' growth improved, but in terms of mix or in terms of margin, it tends to be lower for tier 3 to 6. So overall, it is 2%, but it is not satisfactory. But I think we still believe that we made good efforts. In the guidance, well, I'm talking about page six. Well, I think you are talking about page six. From 11.1%, we're expecting a slight improvement in the guidance.
And as you pointed out, for one thing, trading businesses' business model is going to be what it has been revised to a distributor model, and the margin doesn't have to be too high. So there will be some improvement there. In other areas, we are going to pursue growth of TUC because it has the highest margin overall. We're expecting growth there. And IU, industrial coatings, it does not necessarily have high margin, especially sales to Chinese manufacturers is progressing, so we will be able to enjoy economies of scale. In total, the economic condition is not going to be rosy. So based on that assumption, we have to be conservative in our guidance. The other point, within TUC, paints and coatings and adjacencies are also sold in the TUC channel.
Paints and coatings and also adjacencies business, that is something we want to expand using our channels even further. CCM needs to be pursued and expanded. That will be something we will work on proactively in 2024. The market share growth is something we believe that we will definitely be able to achieve. In terms of the mix, we need to see how much improvement we can make there. Again, they are consumables. It is difficult for us to have a perfect estimation. As I've been saying, what we need to do is to utilize our brand strength to expand. We believe that we'll be able to grow to a certain extent even under the current circumstances.
Thank you. A follow-up question. TUC is + 10% for this year.
So from tier 0 to tier 2 and tier 3 to tier 6, in those two groups, I believe there is a wide gap. So what is the impression? And has TUB bottomed out, or do you see signs of bottoming out? Real estate deregulation, is that going to happen? Can you please give us some color on the market condition?
Well, first, let me respond to the TUB portion. -18% in Q4. We have made much efforts here in order to expand the channels. In the past, we were focusing on developers and new builds and then shifting to government-related projects and real estate subsidies. If we have a favorable relationship with the government, we can enjoy subsidies, and that is why we've been able to have it every year. But that is something one-off.
Even in government-related projects, we are a Japanese manufacturer, but we have a local brand, Li Bang, so we are confident that we'll be able to win projects, and we have been making efforts to expand channels already, but I'm hoping that it's going to bottom out and start to bear fruit. The baseline is declining, and we don't want to continue to see this. We will be implementing various measures for TUB. On the other hand, in TUC, our biggest strength is in Tier 0-2 cities. In our sales, they account for about 80%, so the mix improvement here will be the key, and this is also related to the brand strategy. Consumer sentiment needs to improve in order for the improvement here to be visible, but in Tier 3-6 cities, we believe that is a white space where we have more room for growth.
So compared to Tier 0-2, we are expecting more growth in Tier 3-6 cities. But because of the volume, we also have to work hard in Tier 0-2 cities. And the good news, maybe I shouldn't use this word, but good news is competitors in the premium segment are losing momentum. So in the premium sector, we believe this is the timing where we can become the dominant player. So if that materializes, I think these numbers are achievable. That's it.
Thank you. Thank you for the detailed explanation.
Thank you. Next question is from Mizuho Securities, Yoshida-san.
This is Yoshida from Mizuho Securities.
Hello. I would like to ask about Dulux. According to your guidance for this term, Pacific and Europe, there will be a growth of around 5%. For Pacific, the market growth you said is zero, and you had factored in price increase.
So could you give me the background for why you are able to grow exceeding the market? But on the other hand, operating profit ratio is 13.3%, which is flat. So I was wondering why that is. In Europe, revenue increase of around 5% is what you're expecting. Do you think this is achievable? I would like to confirm on that point.
Thank you for your question. First is the Pacific region. 24 versus 23 in terms of the revenue, 4.5% growth on a local currency basis. Even though the amount was small, there was a small M&A conducted locally, and that contributed to this growth. So on a pure Apple-to-Apple comparison basis, it was almost flat. But starting from the latter half, we had conducted the reform in the brand, renewal in the brand.
If you look at the track record of Dulux, each year, they had been increasing the price by 2%-3%, and the volume in the market is either flat or 1%, but Dulux had been able to increase about 2% or so. In total, they have a track record of the growth of about 5% annual growth, putting aside the COVID years. If you look at that track record, the growth that we have put in the guidance has probably a high level of accuracy. It's a dominant market. If you look at the margins, if we reduce the marketing spend, it will go up. We need to conduct a certain amount of marketing investment versus the revenue. We do have competition.
Even though we have the majority of 50% share, there is remaining 50% of other players, and we need to defend our positions, and we need to grow, so 13% is not a bad figure for us, so we want to continue our growth. That's the basic stance that we have. It applies to the other regions as well, so we would not be focusing only on the improvement in margin. We will be thinking about the balance of that with sustainable growth. We would not be spending wastefully, but we would proactively be spending for growth, and based on that, we believe we can grow 5%. In terms of Europe, as I have said earlier, France was struggling. Two years in a row, the market was a - 5% growth, and this is something that rarely happens, so we believe that it would recover at some point in time.
However, we would like the growth to get back to flat at least. We are conducting initiatives to improve the cost as well as the brand initiatives. And if these are successful, I believe that we can accomplish the growth target that we have set out. The market itself, if the conflict between Russia and Ukraine ceases, it would work positively. And because of that conflict, the economy in Europe is stagnating. In Cromology, France has 60%-70%. The remaining is Portugal, Italy, and Spain. The performance is robust, and the market is not dipping. So the bottleneck is the French market. If there is a consecutive negative growth of 5% three years in a row, that would be problematic. But we don't see any negative factor that would lead to the three consecutive years of 5%.
If we are able to keep it flat, we would be able to grow as much as we have put in the guidance.
Okay. In terms of Europe, on a four-year basis, the margin seems to go up about one point. Is this coming from the cost reduction?
Yes. Starting from around last year, we have started a full-scale reform of supply chain as well as investment in the brands. Zolpan and Tollens, the main brands. What we had been operating in different stores will now be more integrated. We are working on those initiatives step by step. The market itself is stagnating, and the stagnating market has been offsetting the positive impact of the initiatives that we have been taking. This is the area where we are struggling with. Cromology is generating cash. We are not in a situation where we need to inject funds.
We want to look at the recovery in mid to long term, and we want to get to the double-digit growth. We need to look at the business more in the longer term. Thank you very much for your response.
That would be all for me.
Thank you. Next question is from Millennium Capital, Fujita-san. Please go ahead.
This is Fujita from Millennium Capital. Can you hear me all right?
Yes, we can. Hello.
Hello. So I have a question about AOC. I'm sure that you only can share limited information since it's before closing, but I hope you can try as much as possible. So this is the largest chunk, so I'm interested in knowing what will be the impact, and that will really change the performance of this year. Well, since there is no track record, I am trying to understand what is the business's current situation.
Is it in any up cycle or down cycle? So there were figures announced last year in terms of forecast. And do you say the business is still in line? And the EPS impact was mentioned earlier. In your previous material from last year, you showed a JPY 15-JPY 17 impact, just a simple sum. And the EPS contribution that you mentioned today was the same. So is that a result of a simple calculation or PPA one-off expenses? Do you expect them to be small? So even when including those, do you think EPS will be about JPY 10 from year one, and you will eventually get incremental positive impact?
Thank you for your question. I also hope that I can share more with you, but as you pointed out, we're before closing, and the authority's approval is awaited. We have one country left.
We believe that it will be approved soon, but it is difficult for me to share anything concrete since this is before approval, so I hope you will understand that assumption. In last October, I mentioned JPY 15-JPY 17 EPS growth. Acquisition cost and inventory step-up. Well, when we look at AOC, also intangible amortization, we try to do as much diligence as possible, and we included everything to give out the number JPY 15-JPY 17 EPS. In the previous material, OP margin was 34% in 2024. That's an actual number. This does not include intangibles amortization. As EPS impact, we are including the intangibles amortization as well as the interest rate. In year one, we are also including the one-off expenses. The result of the calculation is a JPY 15-JPY 17 EPS in year one, and that remains unchanged.
Since last October to the beginning of this year, we thought about what is going to be the outlook for 2025. And that is also taken into account in my commentary. So we are not expecting any major change in the business. And as I said previously, our customized products are not exposed to many competitions. And this is not a general purpose, so we can say that this is a sticky revenue flow. But to be honest, under the Trump administration, we are not sure what the U.S. economy will look like going forward. After closing, and let's say we can consolidate from March, then we will have 10-month contribution. And if it's from April, we will have 9-month contribution. So this year's expected impact will be communicated post-closing, but that is very unsure at the moment, uncertain at the moment.
In worst case, there is a risk that we cannot close the deal in March or April. It may take six months. At this juncture, it's hard for me to share anything more. About JPY 15-JPY 17 EPS assumption is, as I explained earlier. We are not seeing any deterioration of the business this year. Rather, it has been trending at least flat. One more thing I want to mention is the interest rate in the U.S. Because the products are related to infrastructure, it is impacted by the interest rate. I think the administration and the FRB are not necessarily aligned at the moment, so we need to pay careful attention. We continue to have very robust fundamental business. A simple sum that we calculate is the number that I said earlier, and we are expecting a good accretion.
I understand that the market is unable to take that into account at the moment. Just to reconfirm, acquisition and OP, if you calculate it in the context of EPS, there is not much gap. JPY 20 or JPY 18 is the number I get. Acquisition cost, PPA, they shouldn't be a significantly huge amount, but they should be something manageable if we calculate backwards. Is that a fair assumption? Of course, they are manageable. I think that sounds pessimistic. Again, JPY 15-JPY 17 includes our assumption for the amortization. The acquisition cost and one-off inventory step-up are also taken into account for the year one estimation. This is a business that is easy to have visibility. It's just that the timing of the closing of the deal is not sure at the moment.
I look forward to any updates in the future.
Thank you. The next question is from Nikkei newspaper. Fujita-san. Thank you for your presentation.
My name is Fujita from Nikkei newspaper. I have one question. In terms of the automotive, the Japanese OEMs are struggling currently, and I think that you have a lot of sales for paint to the Japanese automotive manufacturers, and I was wondering how you see the future.
Your voice was a bit breaking up, but as you have pointed out, we are primarily selling to the Japanese OEMs, and the Japanese OEMs are struggling in China. Japanese OEMs are lagging behind in getting on the waves of the EVs, so we have been saying that in China, there has been a struggle. However, we are seeing an increase in the delivery to the local players, and because of that, in the Chinese automotives, our revenue is going up.
Japanese OEMs remain to be our core customers. But we will be taking the strategy of expansion to other players, not only in China but elsewhere in the world. With that said, the Japanese OEMs remain strong in Europe. There has been some review in the EV strategy. We are not so strong in the European market, so that would not be impacting too much in our performance. But we will continue to make progress and evolution in the provision of services to our main Japanese OEM customers. I don't think that we will be shifting towards the American OEMs. And in the U.S., our strength is providing to the Japanese OEMs. And I don't believe that the Chinese EVs will be exported en masse to the U.S. So our core customer remains to be Japanese OEMs, and we will try to expand from there.
Thank you very much.
Thank you very much. Next question is from Citigroup Securities, Nishiyama-san. Please go ahead.
This is Nishiyama from Citigroup Securities.
Hello, Nishiyama-san.
Thank you. I have a question about Japan. In Q4, the demand environment was difficult, but 11% margin on a non-GAAP basis was achieved, and likewise, competitors were also improved their margins. Can you please give us some more color on the situation? In the new year, 9.6% was last year, and you're assuming flat margin, so that means a decline from the Q4 margin. And you're explaining that there will be more expenses, so do you think it's difficult to achieve double-digit margin? How much growth and expenses are you expecting?
Well, in Q4, yes, they did a good job. In Q4, for our DIY, we saw contribution in improving margins and CR, cost reduction. We made a lot of efforts.
We revisited raw materials and how we procured them, as well as processes. We are doing these processes on a regular basis, and that will continue through 2025. As I said earlier, 15% continues to be our long-term target. For this fiscal year, ERP revamp expenses are going to be incurred. That is a one-off, but the R&D building will be completed. There will be a few hundreds of millions of depreciation expenses that will be incremental. The base wage increase, and as a result, labor cost could increase. Also export, excuse me, import cost. There is a pressure if yen continues to be weak. How much we can absorb through price pass-through is a challenge. It is always a balance.
We continue to have ambitious targets internally, but at least in guidance, we would like to say that we at least want to keep flat margin.
When I look at page nine, the decorative paint market, you are expecting 10% revenue growth, and DX is going to be utilized in order to grow market share in your commentary, so can you please elaborate on that part as well?
Yes. In decorative paints, we have a new CEO. They achieved, well, Enomoto-san used to be a vice president of a company selling marine products. They achieved a great turnaround in profitability, so in this decorative paint business, we will be looking at a new approach to improve profitability as well as the market share. I'm not going to mention the details, but we believe that we have opportunities to seize.
I think we just need to achieve good performance to prove what I'm seeing is right. So that is the aspiration we have.
Understood.
Thank you. The next question is from CLSA Securities, Cho-san.
From CLSA, this is Cho.
Hello, Cho-san.
I have a question relating to a detailed point. First, China. In terms of trading in the, I think it's included in the others in the TUC. It's not TUC. It's in TU, but it's other than TUC and TUB. The outside of that, the trading is located. So I was wondering what kind of trading business that you have been doing. Could you explain about the background? Also, I have a question related to Turkey. In the fourth quarter, the revenue and margin had increased. It is very hard to foresee what's going to happen there because of the hyperinflationary accounting.
In Kazakhstan and India, in the fourth quarter, there were many fluctuations. In Kazakhstan, the margin was in the negative. And in terms of India, there was margin of around 30%. In India, there will be more competition. So I was wondering how sustainable the growth is.
So I don't have much time, so I will be brief. To your first question about trading, we have outsourcing. We use outsourcing companies. For us, buying raw materials by us will be cheaper. So we will be buying the raw materials, and they will use it. But we have shifted more to the dealer model, and we have started booking it in the net. And there will be booking of the fees. So the flow of the commerce would not be changing so much. It's a technical change.
In terms of the fourth quarter margin, there is a lot of seasonality to it. If you look at just the fourth quarter, you would not understand anything. You should look at the trend in the course of several years. So this quarter is more of a quiet period for commerce. And in December, the market is not so active. But overall, our company was able to do better.
Thank you very much. That's all from me.
So we still have multiple questions, so we'd like to continue. But please feel free to leave if you have a next appointment. Next question is UBS Securities, Omura-san. Please go ahead.
This is Omura from UBS Securities.
Hello, Omura-san.
Q4 Dulux Pacific is where I'd like to ask about. The profit level was much higher than my expectation. Is this in line with your expectation?
If not, what was an unexpected factor? The factors for this improvement, do you think they will be sustainable for 2025 as well?
Thank you. In November, we announced the numbers. I think in Dulux, it was one of the companies where we had an upside in the profitability. We tried to reduce the SG&A, and this is the result. It was better than we expected. I recommend that you should look at the full year. We are expecting plus 5% growth, which is a flat figure. 13.3%, like you see on page seven, should be a normalized number. I believe the full year growth is as what we're guiding for.
Thank you. The next question is from Toyo Keizai Shinpo, Yamada-san.
This is Yamada from Toyo Keizai. Can you hear me?
Yes. Yamada-san, I can hear you.
I will be quick.
Fiscal year 2025. In fiscal year 2025, outside of AOC, what is the biggest risk, and what is the biggest opportunity? Where do you think will change the most, and my second question is, Indonesia has high margin. I was wondering if this margin is sustainable. These are my two questions.
Thank you for your questions. In terms of the risk, whether we would be able to overachieve the target, the paint business is linked closely to GDP. Whether the Trump administration will be exercising its tariffs, then there will be a huge impact, and as I have been saying, the demand to paint, it would not be taken over by a new player right away. And there would be a cash generated, and the investors always ask me whether there is anything that keeps me awake at night in terms of the risk, and I always answer stock price.
Operationally, I don't see unmanageable risk operation-wise, so my biggest concern is the market not understanding our potential, and outside of that, there's not much concern to me. To your second question about Indonesia, for a long time, it has been maintaining the level of margin that you see. There are some market attributes in Indonesia. There's not much discount in the market, and there is no shopping around. When you provide a discounted product, they may have doubts that it may be a counterfeit product or something. The GDP and the population of Indonesia, if we think about those two things, I think that Indonesia is a country of opportunity, and we would like to improve the share there, and I believe under those circumstances, we have sustainability potential, so there are many risks regarding the Trump administration, forex, tariffs.
But I don't think that there's much fluctuation in terms of that. Well, we have the local production, local consumption model. Of course, when there are raw materials that would be hitting the tariff conditions, but we don't have the materials and products crossing the border so much. So we have a decoupled model. So more impact would be on us in terms of what's happening to the GDP. So our business is lower risk compared to others.
Thank you for your response.
Now we'd like to conclude the Q&A session. Wakatsuki-san, can we have your closing remarks?
We apologize for going over time. I apologize for giving long responses. But once again, our assembler model is what I tried to focus on, and its basis is the organic growth. But we will also have AOC contribution.
And in 2025, we would like to look forward to how much growth we can achieve. And in 2026, we will be pursuing organic growth again. And we're hoping to talk more about it after closing. And as a basis, we have the current portfolio. And as we discussed, we have been able to control risks, and sustainable growth and profit growth are likely to be achieved. So I hope you will continue to check out our information.
Thank you. With this, we would like to conclude our earnings call for Nippon Paint Holdings for the fourth quarter of fiscal year ending December 2024. Thank you very much for joining us despite your busy schedules today. Please feel free to leave the conference room. Thank you.