Paint Makers FY2025 Full Year: AOC deal widens the profit gap

The comparison shows differences not only in scale, but also in the ability to generate profits. The companies have different fiscal year-ends, and the figures below are a simple average of the two companies, not an industrywide average.

• M&A fuels growth: Nippon Paint newly consolidated AOC. The acquisition helped lift revenue by 8.3% year on year.
• Materials and labor costs shape earnings: Stable raw material prices benefited Nippon Paint. Kansai Paint could not offset higher materials and labor costs, and operating profit declined.
• Demand and competition vary by region: Kansai Paint's automotive coatings performed steadily. In India's architectural coatings market, however, a shift toward lower-priced products weighed on results.
• Sales growth alone does not tell the profit story: Both companies recorded higher revenue year on year. Operating profit rose 38.1% at Nippon Paint but fell 4.5% at Kansai Paint.

The strongest performer was Nippon Paint. Revenue rose 8.3% year on year to ¥1.7742 trillion, while operating profit climbed 38.1% to ¥257.1 billion. Its operating margin reached 14.5%, 6.1 percentage points above Kansai Paint's 8.4%.

The weakest performer was Kansai Paint. Revenue edged up just 0.2% to ¥589.8 billion. Operating profit fell 4.5% to ¥49.7 billion, and net profit dropped 17.4% to ¥31.6 billion.

The gap reflected the acquisition and differing cost environments. At Nippon Paint, AOC's consolidation, lower raw material costs and the impact of price increases supported earnings. A gain from the sale of its Tokyo site also contributed, so not all of the profit growth necessarily came from recurring operations. Kansai Paint pursued price improvements but could not fully offset rising logistics and labor costs.

Net profit increased 42.8% at Nippon Paint and declined 17.4% at Kansai Paint. The simple average for the two companies was a 12.7% increase, not an industrywide average.

Nippon Paint is pursuing an asset assembler strategy, acquiring quality businesses to drive growth. It completed the acquisition of AOC, a specialty chemicals business, in March 2025. Alongside revenue growth, its operating margin increased to 14.5% from 11.4% a year earlier.

Kansai Paint is restructuring its European operations. Restructuring costs weighed on net profit, while the company raised its dividend to ¥110 per share from ¥50. The higher payout despite declining earnings signals a focus on capital efficiency, though the key question is whether it can sustain profits.

For the full year, Nippon Paint forecasts revenue of ¥1.92 trillion and operating profit of ¥283 billion. Kansai Paint forecasts revenue of ¥610 billion and operating profit of ¥53 billion. The forecasts are based on each company's own fiscal year, so they are not a direct like-for-like comparison.

Paint makers are exposed to swings in raw material costs, foreign exchange rates and regional demand. The latest results highlight several risks for the companies:

• Another rise in materials and logistics costs: If price increases lag, margins could come under pressure, as at Kansai Paint.
• Higher labor and other fixed costs: When sales growth slows, fixed costs can weigh heavily on profits.
• Currency and geopolitical risks: These can shift overseas sales and procurement costs, making earnings harder to forecast.
• Competition from lower-priced products: As seen in India's architectural coatings market, price competition can erode profitability.
• Post-acquisition integration and restructuring costs: If acquisitions fail to deliver, investment and integration expenses can drag on earnings.

Nippon Paint ranked first in both revenue and operating profit among the two companies. Its revenue was about three times Kansai Paint's, and its operating profit was about five times as large. In this comparison, the difference in margins stands out more than any change in ranking.

Nippon Paint's operating margin was 14.5%, compared with 8.4% at Kansai Paint. Scale, the profitability of acquired businesses and cost management widened the gap. But the companies have different fiscal year-ends and business mixes, so the figures should not be treated as a straightforward measure of overall superiority.

The paint industry serves a broad range of markets, including housing, automobiles and industrial products. Companies differ in their exposure to overseas markets and product categories, which shapes the expertise they need.

At Nippon Paint, post-acquisition business management and coordination with overseas operations are likely to be important. At Kansai Paint, cost control, the restructuring of its European business and regional product strategies are areas to watch. Job seekers should consider growth areas and restructuring plans, not just company size.