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Looking back on the first year of the 18th Medium Term Plan: Back to basics in a time of challenges
Today, as we stand at the start line of the second year of the 18th Medium Term Plan after completing its first year, even more than a response to last year?s financial results my feelings are of deep gratitude to all stakeholders.
In the first year of the 18th Medium Term Plan, we made considerable progress in markets around the world and tackled difficult challenges in the process of doing so. In January,
we began to take on one of the Group?s most difficult challenges: updating our enterprise resource planning (ERP)*1 system. While the adoption of the ERP system itself was successful, we encountered unexpected difficulties in linking it to existing related systems. This led to considerable inconvenience and concerns among our customers, distributors, suppliers, and logistics partners in aspects like product supply and logistics. I want to take this opportunity to express our heartfelt apologies once again to our stakeholders, as well as our gratitude for their support.
This experience showed me Kansai Paint?s true colors, if you will, as an enterprise. The employees who rushed to the field, even beyond their own job
responsibilities, in order to find solutions and, above all, our business partners, who encouraged and supported us in what they recognized to be a time when Kansai Paint needed their support. This showed us anew how our businesses involve more than just manufacturing and selling paints and coatings. They?re based on the ties of trust that we?ve built with our stakeholders.
We managed to overcome the difficulties encountered on adopting the new system thanks to the support of all the distributors and logistics companies who allocated their own resources to cover in areas where we faced challenges and suppliers who worked so hard to maintain supplies. I?m confident this demonstrates in both name and deed to society our ideal vision of ONE KANSAI. I?m certain the experience of meeting this challenge will further strengthen our sense of solidarity.
*1 Integrated backbone business system
Promoting a global organization with four bases:Parallel growth engines
While the Japan segment faced the trials of internal reforms, our global regions led Group business results or launched reforms to powerfully accelerate the strategies of the 18th Medium Term Plan. We finished building a dynamic business portfolio in which the four bases around the world move in parallel while sharing knowledge as equal partners. This is in contrast to the preceding paradigm, in which Japan merely supported overseas facilities.
In particular, the Four Party Meetings launched in FY2025, in which top management from Japan, India, Europe, and Africa seek to find solutions to global challenges, generated greater than expected results. We made significant progress toward realizing the ONE KANSAI ideal.
Japan Demonstrating digital transformation (DX) and Group leadership based on ERP adoption
As noted above, we updated the backbone system we had been using for 40 years and adopted a new ERP system. We had repeatedly planned to update the legacy system in the past, but kept putting it off. I had long hoped to transform this negative legacy into an asset for the future as part of my mission as Company President.
Above all, as a manager, I realized that fulfilling our responsibilities as a supplier means avoiding the major risks associated with the lack of human resources capable of recovering from any failure of or attacks on the former backbone system. These reforms also lay the foundations for resilience and data management over the coming decades.
For the participants in the first year of the Digital Leadership Academy (DLA) 100, the centerpiece of the human resource investment launched under the 18th Medium Term Plan, it was a challenging year. We plan to rise to the challenge of developing a second generation Global Digital Platform (GDP) based on the state-of-the-art ERP system, which will link the Group through data. The head office will demonstrate leadership to drive Group growth by transforming what was once a weakness in IT into a strength.
India Maintaining a course of orderly growth
While the Indian market continues its strong growth, rather than growing merely in scale, we plan to prepare for the next phase of growth. We plan to strengthen our unique presence in the Indian market based on the three businesses of automotive paints and coatings, industrial paints and coatings, and architectural paints and coatings. In this way, we?ll realize stable, sustained growth to boost stable earnings while continuing to ensure transparency in investment decision-making.
In particular, in automotive paints and coatings, where we hold a more than 60% market share, India has entered a phase of full-scale growth as an automobile exporter alongside the booming domestic demand. We?re securing clear advantages to meet the full range of mobility needs —not just automobiles, but motorcycles, tricycles, and EVs. Backed by our technological leadership in automotive paints and coatings, we?re also focusing on the rapidly growing industrial paints and coatings field. To ensure that we build a high-quality business, we?re maintaining a course marked by steady growth while selectively targeting business opportunities in this growing market. In the increasingly competitive architectural paints and coatings business, we?re promoting a strategy of differentiation by focusing on our strengths. In this way we hope to establish a position a step above the fierce competition for market share driven by new entrants.
Furthermore, from the ONE KANSAI perspective, we?ve begun promoting activities as a leading player in the Group, including the deployment of architectural chemicals products in Europe and Africa.
Europe Implementing True Color structural reforms
In January, the Europe business launched the True Color campaign thorough a structural reforms project. This aggressive plan seeks to achieve EBITDA margins of 15% in two years and 18% in 2030 by selecting highly profitable businesses on which we plan to focus resources and by optimizing production plants. Completing these structural reforms in two years is the Group?s most important task right now, and the last in a series of major challenges. We will rise to the challenge of this major project while taking the Group to the next stage by continuing to build on the results of the True Color reforms.
Other initiatives currently underway include the global deployment of rail paints and coatings, a focus of the WEILBURGER business, and the aggressive deployment of non-stick technologies around the world, including in Japan. The Europe business has begun to demonstrate its independence as a technological leader within the Group.
Africa Structural reforms and pioneer efforts in emerging markets
The success of structural reforms has enabledthe Africa business to break out of years of lossesto achieve Group-leading profitability. Furthermore, we?re promoting the fusion and integration of the Southern Africa and Eastern Africa businesses, which had been pursuing optimization individually. In a sense, we?re finding success in realizing our ideal vision in this region more quickly than in other regions. A look at the external environment shows that
Africa, whose population is growing to account for about 25% of the world?s population,* has the potential to become our second largest territory after India. As we prepare to pursue these possibilities, the Group has begun to address the challenge of geographical growth based on a solid foundation. Although we have an overwhelming lead in market share on the African continent, the areas in which we do business are limited. We consider this to be an important time to lay firm foundations in the region before African economic growth fully takes off.
Africa also plays an important role in supporting the True Color structural reforms project launched this year in Europe. We can raise the chance of success of True Color reforms by providing concrete support based on communicating to the Europe team the experience and knowledge gained from Africa?s successful structural reforms.
Africa?s contributions to the Group are also growing rapidly in terms of financial results. It aims to achieve an EBITDA margin of 18%.
* Source: United Nations, Department of Economic and Social Affairs, Population Division
Human capital management: Generating synergies from the efforts of 17,000 people
The most powerful force in promoting the 18th Medium Term Plan is the Group?s people. The energy of individual employees in the field that makes it possible to overcome the challenges of ERP system adoption and achieve global growth.
We regard human capital investments to be the top priority for growth investment, and we are increasing the exchange of human resources and knowledge sharing on a global scale. This fiscal year, we plan to implement a full-scale design of a global HR system and to build a structure to enable its execution during the period covered by the 18th Medium Term Plan. As we did last year, we will do what we can as soon as possible, rather than waiting for the completion of design work on this system.
Organizationally, we?ve consolidated the previously decentralized regional business units into the Asia Business Segment and the EMEA Business Segment, led respectively by Pravin D. Chaudhari and Prejay R. Lalla. We?ve established a simplified but strong governance structure on which we will bring the Group?s potential to the forefront by promoting the optimized allocation of capable human resources from each region on a global scale. The Rail / ACE Business Segment, which we launched after a yearlong preparatory phase, represents a major challenge and the potential to lead the Group into the future. We plan to make the most of our multinational human resources in this segment as we deploy our successful business model from automotive paints and coatings in other global businesses.
These investments in human capital will require financial strength and resources. The message from CFO Tomioka describes in detail the strong financial foundation to support our growth aims and our sincere commitment to the capital markets. We will carry out reforms that combine both offensive and defensive strategies.
Resolutions for the second year of the 18th Medium Term Plan
The Group is breaking free from its previous position as a global firm based in Japan, and is making every effort to become a truly global enterprise. I consider this second year of the 18th Medium Term Plan to be the turning point of this transformation. This year?s Integrated Report communicates to readers that we have actually reached the moment of transformation. I hope readers will use it to learn more about Kansai Paint as it is now. I hope it will strengthen their expectations for our future progress.
I?m reminded that taking on challenges always entails difficulties and failures, and I take full responsibility for moving the Group forward. I believe what matters most at this time is for all members of the organization to express our gratitude to our stakeholders, without whose support we would not be able to take on these challenges.
I?m resolved to repay our debts to stakeholders by contributing to a sustainable society and dramatically boosting our corporate value.
Representative Director of the Board, President
