So we will now begin Nippon Paint Holdings IRD 2025. Thank you for joining us today despite your busy schedule. Today's event will consist of individual programs, each featuring a presentation followed by a Q&A session. I'm Tanaka from Investor Relations, and I'll be the emcee for today's event, thank you. Let us begin with the opening remarks from Yuichiro Wakatsuki, Director, Representative Executive Officer, and Co-President of Nippon Paint Holdings. Wakatsuki-san, the floor is yours.
Okay, thank you, Tanaka-san. Well, good morning, good evening, and afternoon, wherever you're dialing in from. Today I am pleased to present to you our second IRD event, and thank you all for listening in. Last year, if you recall, we had our first IRD with a focus on our brand, NIPSEA, and governance. We have always felt that the power of our brands are not well understood, and as a showcase, asked my partner CEO, Pat Houlihan from DuluxGroup and NIPSEA representative Gladys Goh to go through our brand strategy and why it is important. I hope investors receive the impression that in the decorative space we are not really a chemicals company, but more a consumer goods company, a slow-moving one where brand matters, and we have come a long way to establish one which is not easy to replicate by our competitors.
More importantly, I hope you took away the people aspect, where talent matters, and that we have the right talents. Today we have three sessions, also in an attempt to respond to many investors' interests: AOC, NIPSEA, China, and Turkey, as well as M&A. I have been talking about the AOC business to the public on behalf of Mr. Joe Salley, CEO of AOC, and this session will give you an opportunity to hear directly from the people on the ground. NIPSEA, China, has always been on the spot, and most recently investors reacted negatively to the second-quarter degrowth in TUC. My partner Co-President, Wee Siew Kim, who is also the CEO of NIPSEA Group, will discuss our continued commitment to grow the business and how to go about it.
Finally, I will discuss our M&A strategy, which has not really changed and may be nothing new, but with emphasis on the successful track record and our thinking on the way forward. I hope these sessions will deepen your understandings towards Nippon Paint as an attractive investment opportunity, noting that we do not have AI, semiconductors, or dot-com in our labels. So with all that, let me turn the stage to Joe Salley, the CEO of AOC, and Bob Seidel, the CFO of AOC. Joe—Joe, Bob, the floor is yours.
Thank you very much. Good morning, good afternoon, and good evening. It's a privilege to speak with you. I'm Joe Salley, and today I'm joined by my CFO, Bob Seidel. If we can advance to the first slide, I would like to give a brief overview of AOC. AOC is a leading formulator of unsaturated polyester and vinyl ester solutions with a focus on the most attractive parts of the market: coating and protective barriers, colorants and visual effects, adhesives, and custom formulations. As you can see on the right, these product lines make up about 80% of our volume. You can also see from the green chart on the right that about 70% of our revenues are in North America, which we consider to be the most attractive geography, and about 70% of our stock-keeping units are custom products.
This means they are unique formulas tailored for and sold to only one customer. We will give more detail in this presentation, but we believe we are competitively advantaged in the market by providing to our customers the best-performing products with the best service. The way we drive performance and value is through a highly disciplined set of business systems, which we will also describe further. We believe these business systems, along with the market rebound and acquisitions, will help drive above-market growth going forward. On page 2, you can see that we have over 3,000 stock-keeping units and over 1,000 customers. Our products are used in many applications that enhance daily living.
Many of our products service coatings or protective barriers, such as relining or cured-in-place pipe, to give longer life to existing pipes. Corrosion and fire protection in industrial equipment and glass intermediates. Colorants and visual effect solutions enable Class A finishes in automotive parts. And gel coats are used in applications such as marine and bathroom. Our solutions in conventional composites enable lamination applications in kitchen and bath, panels for construction and transportation, and castings for infrastructure. On page 3, we can see that on the left-hand side of the chart, the market for unsaturated polyester resin formulations has evolved substantially over the last 15-20 years, with the emergence of three global players, including AOC. However, on the right-hand side of the page, you can see that AOC positions itself very differently in the market than others.
By our estimate, about 28% of the market is in the Cast, colorant and customized segments, which we favor for their attractiveness. Yet almost 80% of our volume comes from these segments. On page 4, we can see how we have our assets and capabilities deployed. It is important to note that with our customers, typically the most important factor in their buying decision is product performance. So we invest in research and development as well as commercial resources locally because it's critical to understand the individual customer requirements intimately and to be able to formulate bespoke solutions to meet their requirements. We believe that our customers view AOC as number one in product quality and performance. I will also note that many of these formulations have a limited shelf life, and some of our customers have dynamic and demanding delivery requirements.
So we have manufacturing facilities to produce these products locally and enable short lead times. Meeting their delivery requirements is usually the second most important factor in our customers' buying decision, and they view AOC as number one in delivery as well. Finally, we understand that the third most important criteria in our customers' buying decision is typically technical service. As many of our customers and the end customer processes are very technical, our ability to have local technical resources who can service our customers is critical, and our customers typically view AOC as number one in technical service as well. Now, if we turn to page 5, so we would like to explain in a bit more detail what we mean when we say that AOC is a formulations company and why that's important in our focus segments.
As we highlighted before, we have over 1,000 customers and over 3,000 stock-keeping units, and approximately 70% of those products are custom products, meaning they are unique formulations for one customer. Often, our in-use manufacturers have very demanding performance requirements that involve multiple parameters. They might simultaneously need, for example, high strength and light weight and a Class A finish, among additional factors. Sometimes we sell directly to the final manufacturer, but sometimes there is another manufacturer in the supply chain to whom we sell directly, who in turn sells to the end manufacturer. In this case, in addition to helping the final manufacturer meet all their requirements, we also have to satisfy our direct customers' requirements. These customers can have unique plant-level processes with customized requirements. For example, they may simultaneously need a formulation that enables low shrinkage, has consistent thickening, and fast curing.
Then, in addition to solving all of the downstream requirements in the context of our own operations, in which we are managing a lot of complexity, serving over 1,000 customers with over 3,000 products, there are an additional set of requirements we must meet to practically service the market. For example, we may need certain raw material and changeover flexibility, rapid introduction of new stock-keeping units, batch and plant consistency, as well as other requirements. Ultimately, to satisfy the requirements of all of these players, it's like solving a complex and many-faceted Rubik's Cube. We believe that being able to solve that well, all the while providing the highest performing products with the flexible delivery, provide the best technical service, and do so cost-competitively is what differentiates AOC from others in the market.
On page 6, we can see that AOC has a strong set of differentiated capabilities that enable its advantage to position. We believe that we have unique formulations expertise that starts with a deep understanding of the downstream requirements and includes proprietary expertise to develop tailored solutions to meet those requirements. AOC has a suite of highly relevant and differentiated technologies that enable its formulation capabilities. We have a dedicated team of technical service experts who are deployed locally to our customers. These technical service experts are instrumental in the design, commercialization, and post-commercialization support. Finally, AOC has a robust operating system that we believe simultaneously enables the lowest cost position, the highest quality, the best delivery, with the most complex offering of highly customized products. Page 7 explains AOC's approach, which is very unique in the industry.
We have a robust set of business systems which we believe ensure the highest level of performance in the industry in a way that is sustainable and repeatable. On the left-hand side of the page, you can see that we focus our business systems in new product development, commercial excellence, Lean, and procurement. In our view, these are critical business processes to master for a well-run formulations business. We could speak in-depth for many hours about each of these systems, but to briefly summarize, each is guided by a robust set of process management, people management, and performance management elements. For each of these business systems, there are established processes with clearly defined steps, a rich set of tools, templates, and systems that are tailored for each process.
Great care is taken to architect the right organizational design in which each position has defined roles on how to support the business system. In addition, there's a robust performance management component to ensure that the business system achieves the desired ambition. On page 8, we highlight a few examples of how our differentiated technologies serve demand-driven by secular trends. For example, AOC has best-in-class ultra-low-density Class A formulations aimed at displacing traditional materials like steel, unique formulations for carbon fiber spar caps aimed at displacing epoxy, novel formulations for use in relining for potable water, which are also aimed at displacing epoxy, and a number of formulations with recycled content aimed at displacing materials with virgin input. These are but a few examples of focusing our industry-leading innovation in markets that will likely benefit from strong demand tailwinds.
That leads us to page 9, where we share our optimism about the future. We believe AOC is well-positioned for significant value creation. First, we will discuss the market tailwinds. Based on the data we are reviewing, we believe that the industry is at or near its cyclical low point for demand, and we expect that we will experience a full rebound. That implies that we can expect to experience demand tailwinds for the first time in over three years, with the market volumes being down between 20%-25% from their prior high point. Favorable exposure to growing megatrends and a robust set of business systems, we believe it is plausible to expect mid-single-digit growth over the medium-term horizon.
In addition, we are looking to participate in the continued market evolution in Europe through bolt-on acquisitions, and we believe that our business systems can help ensure success in these activities. In summary, on page 10, AOC is a leading formulator that is uniquely positioned in the attractive market segments with a focus on highly customized products and with a fragmented customer base. The company is competitively positioned to differentiate itself in the most important dimensions for our customers: the best performing products with the best delivery and the best technical service. We have developed a unique set of robust business systems that ensure value delivery and a rich set of controllable and multifaceted growth opportunities. With that, I will conclude my remarks, and I would be happy to take any questions that you may have.
The next program is Nippon Paint Group Business Strategy. Our speaker is Wee Siew Kim, Director, Representative Executive Officer, and Co-President of Nippon Paint Holdings. Wee Siew, please begin.
Good morning, good afternoon, or good evening, everybody. At the IRO day last year, I gave a presentation on Nippon Paint Group with specific focus on our China Group and Malaysia Plus Group, as together they constitute a very substantial part of our business. Today, I will update on our business in China. I will also spend some time on our Turkey Group, as I only spoke briefly about it as part of the Malaysia Plus Group last year. For 2025, we estimate that our addressable decorative market in China for TUC, which is the business unit focusing on the consumers, is down by about 5%, while we expect our TUC revenue to end the year by a drop of about 1%.
For TUB, which is the business unit that's facing the business enterprises, we believe that because of the measures we have taken to manage our risk, our TUB revenue will drop by about 20%, which we estimate to be about the same decrease as that in our addressable TUB market. The expected lower revenue growth performance in TUC reflects the ongoing weak consumer sentiments in China. The continual decline in our TUB revenue stems from the long winter in the residential property sector, and our efforts to pivot to other sectors for TUB are just beginning to bear fruit. Overall, together with our automotive and industrial coatings segments, Nippon Paint China's operating top-line revenue will be flat, but we will have margin growth and increased operating profits. Our investors are familiar with Nippon Paint's sole mission of maximizing shareholder value, or MSV.
In Nippon Paint China, this comes to life in our balanced growth strategy of delivering profitable growth through a careful balance between market share gains and profit margin. We try not to chase after market share at the expense of long-term sustainable profitability. As a responsible market leader with the key premium brand in China, it is always incumbent upon us to resist major price adjustments to avoid precipitating a race to the bottom, especially in these trying market conditions. Cost optimization is a constant in the equation to increase profit margin and profitability, and it is ingrained in our operating culture. Our efforts in utilizing our scale to extract further cost improvements, as well as innovative ways to manage our supply chains, are reflected in the current margin growth. This chart is a depiction on where we think we are in the TUC market space in 2025.
In a shrinking market, we achieved small market share gains in all city tiers in China while maintaining relatively high top-of-mind and higher operating profits. We are also taking the time to strengthen internally and manage our risk exposure. For example, in TUB, cash collection is top priority, and we have actually walked away from a lot of businesses that carry high credit risk. For TUC, where account receivables from specific customers become significantly overdue, we tighten credit terms. Where stocks remain high in certain regions of our market, we hold back from pushing sales in these areas. As our responses to these continuing sluggish market conditions are different in TUC and TUB, I will attempt to discuss them separately. For TUC, it is about leading and expanding.
Nippon Paint China currently holds about 25% of the TUC market in China, while the next two competitors each hold about high single-digit shares. In TUC, what continues to be of critical importance for our business going forward is, one, a strong brand that reflects the quality and value of our products and allows us to find willing and able partners to forge mutually beneficial relationships, the so-called strong brand and partners linkage. And two, an effective and efficient distribution network that allows us to penetrate markets and deliver quality service to our customers to the last mile, which is the efficient distribution and penetration quality service linkage. And three, a sufficiently comprehensive product portfolio that allows us to target different markets with suitable products at appropriate price points and also complementary non-paint products to meet our customers' complete needs, the competitive and brand range product portfolio aspect.
By following these three guiding points, we had achieved significant success in the Chinese market in the past. These points remain relevant as we respond to the changing competitive landscape and consumer needs and preferences in China. In the course of the next 10 minutes, I will illuminate with actions we have taken in 2025 along these lines. Going forward, the TUC market is supported by stable and recurring repainting demand each year. In this stable and possibly sluggish environment, in order to capture additional growth, we continue to one, pursue a color and texture strategy, two, penetrate into tier three to six cities with paints and complementary products, and three, enhance customer service at the last mile through operational innovations. As you may recall from last year, we are in the fourth year of our color and texture strategy with the aim to dominate the TUC market.
As market leader, Nippon Paint China has to take the lead in color innovation and color trend setting. As for texture strategy, Magic Paint is our superior texture paint product, coupled with our advantage of having the infrastructure to train a large group of painters in the specialized application of texture paints. In this regard, Nippon Paint China holds the distinction of being the first foreign private enterprise to be certified by the Chinese government for extending this type of training. As for growing our businesses in the tier 3-6 cities, the smaller cities in China, I also mentioned previously that we have adopted an asset-light approach of partnering regional players, also in the paint industry, as our tollers to produce our formulations. In this win-win arrangement, we bring our brand technologies and formulations while they bring their local capabilities to the partnership.
We also adopted a similar asset-light approach for our complementary product offerings of dry mix, putty, and mortar, although for these non-paint products, we started by setting up our own factories to learn the trade until we gained enough confidence. Now, by adopting this asset-light approach, Nippon Paint China is able to expand quickly into tier 3 to 6 cities, some in far-flung regions of China, without the need to invest hard assets on the ground. Remember, I mentioned three guiding points earlier. In our progress in texture paints and the tier 3 to 6 cities business expansion in 2025, the strong brand and partners linkage and the efficient distribution and penetration quality service linkage guiding points are clearly seen in action.
As we become more attuned to the different market dynamics in the smaller tier 3 to 6 cities, from our experience in the big metros, we adopted our distribution concept to country distributor and application service providers, or ASP model. See the right-hand chart of an illustrative example of Zhumadian cities in Henan Province. By having the ASPs who offer application services for paint jobs to sell paints and also complementary products typically needed in any building refurbishment or home renovation, we believe we are beginning to accelerate the penetration into the tier 3 to 6 cities. Here, both the strong brand and partners penetration quality service linkages are in play. The strong Nippon Paint brand attracts service providers as our partners, and the support by key county distributors to the web of service providers ensures that these ASPs can focus on customer acquisition and service delivery.
Specifically on texture paints, we have enhanced our production efficiency and reviewed our raw material purchases to enable our texture paint to be price competitive in these smaller markets, which is the third guiding point of competitive and broad-range product portfolio. With these adjustments in our texture paints and the tier 3 to 6 cities business expansion activities in 2025, we are confident that we will be able to further gain ground by leaning on our 5,000+ ASPs. While we are holding well in the tier 0 and the tier 1 to 2 cities, there is no room for complacency, and we will continue to innovate and improve. As it is our belief that the repainting market in the tier 0 to 2 cities will continue to grow, we are enhancing our sales reach and consumer experience beyond our traditional retail store model.
Working with partners, we are setting up community stores dedicated to our repainting service so as to be closer to the customer, with a target of 2,000+ community stores in 2026. With the community stores carrying our flagship texture Magic Paint and other quality paint products, tapping on professional service by painters trained and certified by us, offering a standard menu of products and services, we believe we will make renovation and repainting so much more accessible and appealing to our customers. As an operational innovation, we have developed and implemented a concept to centralize supply chain management and execution for our distribution networks in tier 0 and selected tier 1 to 2 cities.
The key idea of this centralized direct-to-the-front logistics concept for large urban cities is to leverage our better logistics capabilities, coupled with our advantage of scale, to send products directly to the retail stores and also construction sites, reducing friction in the current process. This way, our distributors can save on logistics overheads, and the retail stores can focus on customer acquisition and experience. We have successfully implemented this concept in Shanghai with 2 central depots, and are working to implement it in other cities. China comprises different complex markets, even for TUC, and we have adapted different approaches to appropriately tackle the multitude of markets and their dynamics. Now I'll turn to TUB, which focus is stabilizing and diversifying. We have stabilized our TUB business in China following the serious downturn in the residential property sector.
We went on a very strict credit regime and exited from many of the trouble counters. As a result, we have successfully reduced debt associated with TUB customers. If there was a silver lining to this difficult period, it was. It awakened us to opportunities that we had neglected in the past. In the past, like our competitors, we were single-mindedly focused on providing products and services to the big property developers. Pre-COVID, they were really racing away. Today, our customer base is more broad-based, including regional developers, contractors, and service providers. We are also pivoting to the non-residential sectors such as government offices, schools, hospitals, district rejuvenation, factories, and even central kitchens.
In time to come, this diversification of our TUB customer base, which includes those with specialized requirements, will fortify our sales volume and OP margin and reduce our dependence on new-build construction in the residential sector. As our TUB colleagues break new grounds in a non-residential area, they can utilize the product offerings from Nippon Paint industrial businesses. One area that we are banking on to grow is to offer integrated solutions for industrial new-build and renovation. This is a new business segment we call the MRO, Maintenance, Repair, and Operations to Industrial Facilities across China. We could potentially count 6 million sizable enterprises as customers. And apart from our usual provision of industrial coatings, we aim to provide MRO spray chemicals such as lubricants, degreasers, cleaners for parts and contact services, and sticker removers, for example. So watch this space. 2025, we continue on innovation and improvement.
As a company, Nippon Paint aims to continually innovate and excite the market. At the China International Import Expo in Shanghai earlier this month, under the theme "Together Refresh a Sustainable Future," Nippon Paint China showcased its innovative products and scenario-based solutions aligned with China's key development priorities, which are namely the low-altitude economy, AI in manufacturing, new energy vehicles, high-quality housing, and ESG. We had the global debut of our Nippon Paint low-altitude aviation comprehensive coating solution developed by our global R&D. We presented the protective outerwear coating for the composite airframe of eVTOL aircraft and the resilient ground coating system engineered to withstand rotor downwash and impacts during the vertical takeoff and landing.
At our booth, you would have also seen our radiative cooling coating under our industrial coating solutions, the insulation fire-resistant and protective polyurea coatings for new energy vehicles, and integrated solutions for building exterior and interior walls and garages for existing and new houses to be safer, more comfortable, and to enhance eco-friendliness. Through the Nippon Paint Group's purpose statement, we use the power of science plus imagination to enrich the living world. Now for Nippon Paint in 2026, we believe the business environment in China has not made a meaningful recovery that we have hoped for in 2025. Nevertheless, we recognize that there are areas where we could have done better, and we have undertaken various initiatives to address growth in a sluggish market situation. For TUC, we are targeting high single-digit growth for 2026.
As for TUB, our team in China believes our TUB business has bottomed out in 2025, and we are optimistic that we have arrested the decline that we have seen over the last four years. Overall, we believe we have done what we should strategically, staying the course in our balanced growth strategy, managing our risk prudently, and laying the groundwork to strike when the market is ripe again, with many more cylinders firing in our engine of growth. While we have focused on the decorative market, let me round out China by reporting that in the industrial sector, our auto business grew at a compounded annual growth rate of 7.6% over the last four years with enhanced profitability. We are poised to ride the tailwinds of Chinese auto OEMs internationalizing.
We won the lion's share of the business in the latest 3 international competitions in Thailand, Indonesia, and Hungary as a case in point. Now moving on from the market of a long and proud civilization in Asia, China, to another at the crossroads of Asia and Europe. Let me spend a little time on our Turkey group. In our Nippon Paint organization, Betek Boya is part of the Malaysia Plus Group, which I covered broadly last year. Grouping Betek Boya in this way in the Malaysia Plus Group facilitates sharing and learning as Betek Boya integrates into the Nippon Paint Group. However, as Betek Boya finds his feet, executes his growth, we decided that it can also be our vanguard for growth, and we formed the Turkey group in 2024, comprising Betek Boya headquartered in Istanbul as the core with presence in Turkey, Egypt, and Kazakhstan.
Our Kazakhstan presence substantially enlarged with the acquisition of Alina in late 2023. Alina is bolted onto the Turkey group centered in Almaty, Kazakhstan. Alina operates in four countries in Central Asia. The Turkey group, led by Tayfun Küçükoğlu, now has over 4,000 employees across 17 manufacturing sites and exports to more than 30 countries. Betek Boya was acquired in mid-2019, immediately giving us a strong position in Turkey. With a young and growing population, now 87 million, Turkey offers high growth potential due to its population, urbanization, and long-term rising GDP. In Betek Boya, we gained a company with the highest market share in the decorative paint segment in Turkey at a time of acquisition in 2019, 25% market share. We gained a very established brand portfolio with high recognition and a strong sales and distribution network in the country.
We also benefited from gaining entry into a new product segment of External Thermal Insulation composite systems, ETICS for short, in which Betek Boya commanded about 30% of the market in Turkey at the time of acquisition. Above all, we inherited an outstanding and experienced management team with a positive track record of expanding the business. With Betek Boya and as part of leading the Turkey Group, we are now not only seeking to win in Turkey. We wanted the Turkey Group to be our regional base to expand into the Middle East, North Africa, and Central Asia. Let me turn to Alina. We acquired 75% of Alina in 2023 and got to work with a strong local partner, our 25% shareholder. Alina has the leading position in the dry mix mortar market in Kazakhstan and a good presence in the paints and coatings market.
The acquisition of Alina brought enhanced competence in a dry mix segment, which is a subset of the construction chemical segments, which we now see as a key adjacency to paint and coatings. Alina, together with Betek Boya, are intended to be our springboard for expansion into Central Asia. In 2024, the Turkey group achieved a top-line revenue of $735 million and an operating profit margin of 15.6%. 2024 was the first year when Alina was consolidated with a full-year performance. Betek Boya itself achieved strong growth since our acquisition in 2019 despite the hyperinflationary pressures in Turkey. From 2022, when hyperinflationary accounting IAS 29 was first applied to 2024, the top-line revenue grew from JPY 71 billion to JPY 95 billion, a 35% increase over two years. Operating profit increased to JPY 13 billion. Of course, we will strive to do even better.
Our investors often wondered how Betek Boya fared in this turbulent inflationary environment. This slide shows the two paint brands of Betek Boya, which are Filli Boya and Fawori, and how they fared against our competing brands in the market over the first nine months of this year. These are all publicly available information as the competing brands in Turkey are all publicly listed companies. As you can see, while we did not record positive growth in net sales compared to the same nine-month period last year, we fared significantly better than our main competitors based on this metric. We also achieved an increase in OP margin to 8.9% as compared to last year.
Our market share of the decorative paints market in Turkey is expected to reach 36% in 2025, an increase of 1% from last year, but a massive improvement from the 25% when we acquired the company in 2019. Our share of the ETICS market in Turkey is projected to grow by an additional 3% to 50% this year from the 30% in 2019. Betek Boya sales by value is expected to grow 28%, while the decor market value in Turkey is only expected to grow by 21%, beating the market pace by 7%. For the ETICS market, the similar comparative number is the market growing at 24% and we have grown by 31%. In addition, we have also grown our exports by some 11% in 2025. From this view, we believe that Betek Boya continues to make good headway despite the challenging market conditions in the country.
How we think we prevailed. This slide captures the competitive strengths that enable Betek Boya to continue to make good headway despite the headwinds. One, on the left-hand side of the picture, we have a robust multi-brand strategy across the market segments for decorative paints, with Nippon Paint occupying the premium paint segment, Filli Boya the upper middle segment, and Fawori the economy to lower middle segments. Two, if you look at the center part of the chart, the cost of application is now constituting a larger and larger percentage of the overall cost vis-à-vis the product cost. We find more consumers moving up to the upper middle and premium segments over time, which is a very good development for us.
And three, if you look at the right-hand side of the chart, our Filli Boya brand occupies top spots in perceived quality and as a trusted brand with a top of mind of 51% across both socio-economic groups and age groups in a survey done in 2024 by FutureBright, which is a research agency in Turkey accredited to the Turkish Researchers Institute. We believe that the initial placement of Betek Boya within the Nipsea Group has brought us a lot of advantages to both Betek Boya and the Turkey group, and the Nipsea Group has also learned from Betek Boya. One of the things we have learned and achieved is the transfer of technical expertise both ways. But more importantly, Betek Boya has access to lower-cost raw materials. And without these strengths, we believe we will not have prevailed and grown in the difficult operating conditions in Turkey.
The strength of the Nippon Paint Group is clearly demonstrated against the standalone competitors in Turkey. These are some photographs to highlight key activities of the Turkey group, including Alina this year. We continue to try harder. Having inbuilt the Nippon Paint values and ethos, the Turkey group continues to innovate, strengthen its brands, expand the business, and drive market share growth. I started my presentation by recapping and explaining our strategic rationale of acquiring Betek Boya and Alina. Our plans to expand across product lines and regional countries are still very much work in progress. In essence, our expansion plans have not been derailed significantly due to the challenges of hyperinflation in Turkey. As you can see, the growth story of the Turkey group continues to unfold. Thank you so much for your attention.
Thank you, Wee Siew-san. The next program is M&A strategy. Our speaker is Yuichiro Wakatsuki. Wakatsuki-san, please begin.
Okay. So hello again. Well, again, I would like to express my gratitude to you all for listening in to our IRD sessions. And here I am happy to elaborate on our M&A strategy. We have been somewhat consistent in strategy since MSV, maximization of shareholder value, became our one and only mission back in 2018. But with some evolvements, we have really endeavored to maximize the potential of our platform through our asset assembler model. Today, I would like to summarize where we stand, our strength, and where we are heading towards the longer-term future. Well, page two gives the executive summary for today. Maybe I would like to stress three key points, and you probably have heard it already.
First, our strategy to assemble good assets and drive growth both organically and inorganically remains unchanged, and our aspiration to compound EPS in a safe and sound manner should prove effective in the long run. Our M&A aspiration may be split into two dimensions. One, whereby our partner companies aspire for growth through bolt-on M&As, which would generally be in the nearby geography or business arena, usually effectuating real synergies. This is probably not so different from typical M&As you see. We encourage our partners to look into those more aggressively compared to pre-Nippon Paint ownership days. The other is the assembly of assets or build-out of pillars, which would be more standalone, more autonomy, but with accountability, less reliance on synergies to justify our valuation, and maybe more sizable. Acquisition of DuluxGroup in 2019, and more recently, AOC this year would fall into this category.
Bear in mind that our most recent decision to acquire our own stock is, as stated, a pure financial decision with a stock price extremely low. One investor put to me, "As an ex-M&A banker, wouldn't you recommend your client to buy Nippon Paint at this valuation without a premium and without due diligence?" So in a sense, it is a slightly different form of EPS compounding and remains consistent with our overall strategy. Number two, we started to publicly state asset assembler back in 2022, at which point in time the intent was not to limit ourselves to just a paint assembler, but with a broader arena to acquire. Adjacencies we referred to then were more SAF, sealants, adhesives, and fillers, or construction chemicals.
Well, I have to confess that given our share price trading at a premium, maybe 40-60 times PE around then, coupled with a significantly low cost of debt and with targets highly cash-generative, our primary focus was really on EPS accretion and maybe less about ROIC, as you can imagine. A real, not the theoretical, cost of capital was very low. Unfortunately, with our share valuation coming low on the back of slowdown in China and other macro issues, which implies a much higher cost of capital, we came to revisit our arena further. In 2024 April midterm strategy briefing, we have stated no limits to our acquisition targets. This is a reflection of us redefining our strength as a buyer, not just reliant on low-cost yen funding, but other features which I will talk about later.
Still, we have also made clear that it should be low risk and good return, which means good assets, good management, less geopolitically sensitive EPS accretion from year one at all. Acquisition of AOC is a reflection of such evolution, and we are happy to have such a high-margin, cash-generative company with excellent management be part of our group. Going forward, we would most likely still keep our chemical hat on as we see ample attractive opportunities in the space that there is less need to broaden our universe as of today. That said, are we regretting historical acquisitions at higher multiples? The answer is no. We have been acquiring very capital-efficient companies with good cash generation, and all of them have been improving returns over the years. They have been making a lot of contribution to our group, including, but not limited to, best practices.
Well, the Selleys example later shown highlights some of those successful effects brought to our group, which may not directly show in the individual ROIC numbers. Number three, with that in mind, I would like to remind you that I am not on vacation for the pursuit of M&A. We have made some offers which either were rejected or we declined thereafter recently post-AOC acquisition. While keeping in mind our strong deleveraging status, our board of directors continues to believe the pursuit of further attractive M&A is the right place to allocate capital in order to maximize the potential of our platform. We are also very mindful of the financial discipline to ensure the trust we obtain from financial institutions, they remain intact. I always state the possibility of an equity offering only if and only when it is meaningfully EPS accretive post-money.
But you can imagine that we would be somewhat reluctant to issue shares under this level of valuation for our stock. Well, this does not mean that I cannot go beyond the, let's say, the 4 times net debt to EBITDA at all. With the strong cash generation, I may still obtain comfort from our lending banks to go beyond the 4x and wait for the deleveraging to go through before the next acquisition thereafter. Well, but this is all predicated on a good acquisition opportunity. I always state M&A is only a means to an end and in and of itself is not the objective. Well, the good news about our portfolio is that there is no must-do deal for us. This precludes the possibility of an overpay at the expense of shareholder value.
Well, the next page 3, this is the fuller version of what we have started to show in Q3. You can see that our asset assembly is working with the growth engines coming both from organic and inorganic activities. This would continue as we end year 2025 with another successful growth as we include the addition of AOC. We are here to say that we look to continuing and even accelerating our growth journey going forward through this very model. Next page is a recap of our inorganic growth model for asset assembly. Our advantage over many corporations around the world stems from: A, low-cost funding, but not just that, our will to make use of such low-cost funding. B, or number two, our discipline to motivate and enhance the ability of our assets in EPS contribution.
C- 3, our ability to attract world-class talent who empathize with our business model. Next, I would like to touch upon our 2 pillars in M&A. One deriving from our partner companies, which we would call bolt-ons. But we are not limiting them to buy only in their arena. As management of our partners show their confidence for returns, we would encourage them to look beyond the traditional zone, noting that management resource in and of itself is limited, thus encouraging them to look for high-value added ones, but only with reasonable valuations. Well, Mr. Goh Hup Jin, our chairman, Wee Siew Kim, my partner Co-President, and myself, all three of us sit on the board of Nippon Paint, DuluxGroup, and AOC, and for certain transaction size, requires Nippon Paint Holdings' board approval. Thus, our discipline will still be kept.
Then comes the right-hand side where we talk about a larger asset assembly. Well, given our holding company only having 50 people, we are not here to do massive standardization and post-merger integration, and I definitely do not want to build bureaucracy into our organization. Still, one M&A takes a lot of effort to complete: a lot of due diligence, a lot of researching, interviews, in which case we would rather have a higher return on our resource investment, thereby size matters. Well, all in all, M&A have to serve for our one and only mission, MSV. It not only has to be EPS accretive from year one, it has to provide meaningful return on capital employed with good prospect for a sustainable contribution to Nippon Paint. Here, we showcase the mindset change in our partner, Dulux Group.
They have been an excellent company from its ASX-listed companies days, and in the 9 years, they have completed 9 acquisitions. Well, since it joined Nippon Paint Group, a slightly more aggressive growth mindset has resulted in 24 acquisitions, including Cromology and JUB in the last 6 years. It is quite important to note that the parent never forces them to buy. It is upon their conviction and will to acquire these with discipline. It is not what the holding company wants them to do, but what DuluxGroup wants to do and why, and the question is how the parent can help. Needless to say, money is not free, and there are several cases where the DuluxGroup board rejected the proposal. At the end of the day, it all has to make sense, and we are not afraid to have a healthy debate about it.
Well, this is a detailed chart. From here onwards, I would like to touch upon our excellent track record, you know, to be frank, seemingly a bit underestimated and undervalued. I understand we are not yet a Danaher or a Berkshire Hathaway, and of course, M&A comes with certain risk. That said, we do invest in very easy-to-understand, cash-generating assets that serve for MSV. Since 2019, we have continuously acquired companies, as seen on the left-hand of the chart. Number includes some of the smaller ones undisclosed. A quick glance on the improvement post being part of our group on the right-hand side, with good improvement in sales, OP, and market share. Bottom right shows our growth in SAF, sealants, adhesives, fillers business within Nippon Paint. The DuluxGroup acquisition accompanied the Selleys business, which is an excellent non-paint business in the SAF arena.
DuluxGroup had a standalone Asian business before our acquisition, which were, to be frank, not really making progress, and eventually sold it to Nippon Paint, which already had a scalable distribution. With the initial launch being successful, we have become more confident in this field, leading to the acquisition of Vital Technical in Malaysia in 2021. This area has shown significant growth, which stems from the partner companies talking to each other and making sense, as opposed to the holding company instructing to do this and that. Well, this highlights the power of our group with a very strong growth mindset and talent. Page 8, here we display our ROIC, inclusive and exclusive of goodwill and intangibles. Yes, we pay for the goodwill, so may not be able to omit this totally.
Still, this chart shows you that each asset is improving year on year, well, maybe with the exception of Cromology. Also, noting that exclusive of goodwill and intangibles, these provide very high return on tangible assets, which indicate a very asset-light model. We have disclosed the ROIC on a local currency basis, well, noting that the funding is all Japanese yen-based without hedging, so we believe yen-based returns are similarly important. Page 9 refers to our EPS compounding journey through asset assembly. Well, when we first showed this, some people got misguided by the dark blue, which is existing business since 2018, and it being lower in 2021 and 2022 compared to the previous years.
You need to know that this is all EPS, and you have to take into account the 46% increase in share count in 2021, and the addition of the 49% of Nippon Paint business, as in the light blue color, altogether of which have shown significant growth over the years. We have made a high-level estimate of adjusted EPS guidance in 2025 to be JPY 74.1, adjusting to the EPS guidance of JPY 69 non-adjusted, effectuating a 15.3% CAGR since 2018. I have to stress that I am not sure there are many companies that have delivered this level of consistent and stable growth under such volatile and uncertain times. Let me turn to capital allocation.
Coupled with our stronger focus on cash conversion across our partner companies recently, we believe a deleveraging of 0.6-0.8 turns to EBITDA per annum is doable, which implies we are ready for the next one. One banker told me that the chart on the left side, which was shown in the past, could imply that I am either busy working on PMI or on vacation, and the next one is way ahead. Thereby, my initial comment: I'm not on vacation. A very important point is that we only buy companies that require minimum post-merger integration PMI. AOC is already in good shape under our umbrella. Just to be clear, the chart was meant to show our readiness for the next one. Also, note that we are in the process of finalizing permanent financing for the bridge we borrowed upon the closing of AOC acquisition earlier this year.
Indicative duration post such completion is around 4.8 years in total duration, with average interest rate at 1.3% pre-tax. The right-hand side is a repetition of what has been shown and also stated. There is no change in dividend policy. Buyback is not the primary use of capital. We will continuously look for M&A opportunities and the allocation of capital towards M&A. I wanted to supplement the high cash conversion of our asset base. As a holding company, I have very limited concerns on the day-to-day cash operation of our assets, as they are so much cash generative. We are putting a further emphasis on the cash conversion cycle. Well, my job is not to be annoyed for the redistribution of capital for normal operations. Organically, they can grow without any capital injection.
It is pretty much all about M&A that requires additional capital at our partner companies or at a holding level, which we examine carefully with discipline. Page 12 is an illustration of our mid to long-term growth. Organically, we would look for a 10%+ growth on EPS. This is unchanged. Inorganically, we would want to meaningfully add to such growth by reinvesting the capital for good and sizable companies. We see our way to achieving 100, 200, and even 300 yen Japanese Yen EPS in the long run if we execute right. I believe the key is to obtain conviction from our investors about the certainty of these organic and inorganic capabilities, which I understand is difficult to model. I hope I can continue to show a meaningfully successful track record going forward, as we have done in the past.
I would like to conclude my presentation here with our usual statement of continued commitment towards MSV. We are very proud of being a unique company that has the strong will towards unlocking our full potential through the assembly of assets, backed with a very vigilant mindset and always keeping the option to say no to opportunities that do not serve for our MSV. Well, thank you very much for listening.
This concludes Nippon Paint Holdings' IR Day 2025. Thank you very much for taking the time to join us today, so you may now disconnect from the session. Thank you very much.
Thank you.
Thank you.