Air Water : About the Air Water Group

Management Philosophy

and will rise to the challenge of creating new value.

Backed by an entrepreneurial spirit, we dedicate ourselves and our resources to the creation and development of businesses linking air, water, and the earth.

The origins of the Air Water Group's business can be found in its name, which consists of two words: "air" and "water."

We make use of the resources of our precious earth to create businesses and contribute to society and everyday life.

Amid a business environment that continues to change at a dizzying pace, we will continue to leverage the Group's collective capacities to tackle problems faced by our customers and society,

Contents

About the Air Water Group

• 01 Management Philosophy

• 03 History

• 05 Business Overview

• 07 Management Resources

Air Water's Value Creation Story

• 09 Value Creation Model

• 11 Pillars to Success (Materialities)

• 13 CEO Message

Growth Strategy for Value Creation

• 18 COO Message

• 21 Regional Strategy

• 23 Global Strategy

• 25 Technology Strategy

The Air Water Group's Businesses

• 27 Industrial Gas Business

• 28 Chemical Business

• 29 Medical Business

• 30 Energy Business

• 31 Agriculture and Food Products Business

• 32 Logistics Business

• 33 Seawater Business

• 34 Aerosol Business

• 35 Other Businesses

• 36 Business Concept for 2030

ESG Report Environment

• 37 Air Water Group 2050 Environmental Vision

• 38 Environmental Management System and Basic Environmental Policy

• 39 Material Balance / Decarbonized Society

• 41 Resource Recycling Society /

  A Society in Which Humanity and Nature Coexist

Social

• 42 Workforce Diversity

• 44 Health Management / Human Rights

• 45 Creating a Rewarding Workplace

• 46 Offering Safe and Secure Products and Services Fair Business Practices across the Supply Chain

• 47 Promoting Social Contribution Activities

• 48 Workstyle Innovation Project

Governance

• 49 Basic Approach / System Summary

• 50 Board of Directors and Business Execution System / Board of Director Skillset

• 51 Officers' Remuneration / Gauging the Board's Efficacy

• 52 Enforcing Compliance / Reinforcing Risk Management

• 53 Directors and Auditors

Basic Information

• 55 Financial Data (10-Year)

• 57 Financial Information

• 61 Major Group Companies

• 62 Corporate Profile / Stock Information

Editorial Policy

In the Air Water Report 2021, to clearly convey the continued growth of the Air Water Group conglomerate, as well as its efforts in a diverse range of fields, the content centers on the social value the Group creates through its business.

In addition to formulating our Sustainability Vision for the year 2050, we have positioned the year 2030 as a milestone to coincide with the final year of the Sustainable Development Goals. The specific links between our ESG-based materialities (key challenges) and our SDG contributions can be seen in our Value Creation Model.

In putting together this report, we have referred to the International Integrated Reporting Framework of the International Integrated Reporting Council (IIRC).*

*The IIRC merged with the Sustainability Accounting Standards Board (SASB) in June 2021 to establish the Value Reporting Foundation (VRF). *Throughout this report, "ton," or its abbreviation "t," refers to a metric ton, i.e. 1,000 kilograms.

Forward-looking Statements (Business Risk Factors, etc.)

The forward-looking statements in this Report regarding estimates of business performance and predictions of future developments reflect Air Water's judgments based on currently available information but do involve potential risks and uncertainties. Actual business performance could be significantly different from the projections made herein due to changes in various factors.

History of the Air Water Group

Pioneering business developments in each era to enrich society

Air Water Inc. was established in 2000 through the consolidation of three companies-Hoxan Corporation, Daido Sanso Co., Ltd. and Kyodo Oxygen Co., Ltd.-each with different histories and cultures, but with a common interest in air and water, and a shared sense of mission to contribute to innovation in industry and society. Later, proactive M&A activities served to strengthen our business foundations and expand our business domains. In addition to industrial gas and medical domains, we launched businesses in various other new fields such as agriculture, food products, and seawater. Since 2010, we have sought to expand our lifestyle-related businesses, such as "lifestyle medical," enabling us to create an optimally balanced business portfolio covering industrial and lifestyle-related fields. Air Water will continue pioneering developments in each era to contribute to the creation of a better society.

FY2020

Revenue*1

806.6

billion yen

FY2020

Operating profit*2

51.2

billion yen

FY2020

Net income attributable to owners of the parent*3

27.3

billion yen

2020 (FY)

121.3 billion yen

Other

53.3 billion yen

Seawater

Logistics

Agriculture and Food Products

41 billion yen

4% 33.4 billion yen

Industrial Gas

185.6 billion yen

Chemical

Medical

186.4 billion yen

Energy

FY202053.1 billion yen

132.6 billion yen

1955

1988

2002

2015

2016

1929 Hokkaido Sanso Co., Ltd. is established

(Company renamed Hoxan Corporation in 1966)

Sales of LPG begin

Aiming to save lives and help develop local industries

Industrial-use magnesia business is launched through investment in Tateho Chemical Industries

Agriculture and food products business is expanded

Lifestyle medical segment begins in earnest

In the years before the war, a certain individual passed away due to poor transportation conditions and the inability to receive sufficient oxygen inhalation. The deceased's elder brother, the then head of the Chamber of Commerce and Industry of Sapporo City, poured his efforts into founding Hokkaido Sanso Co., Ltd.

1933 Daido Sanso Co., Ltd. is established

To improve the quality of lifestyles that were centered on firewood- and coal-based cooking, the company began selling LPG for residential use in Hokkaido.

Founded with a desire for collaboration and a united front

Air Water's investment in Tateho Chemical Industries-which produces various types of magnesia using bittern and mineral-based magnesia-was not only its first M&A; it also marked the launch of its seawater business.

At the time, the military-support industry was given priority access to oxygen and acetylene, and so both were difficult for small businesses to obtain. Daido Sanso was established when oxygen-using businesses decided to take matters into their own hands, and band together and produce it themselves.

Upon inheriting the Hayakita Factory (in Abira Town, Hokkaido) from Snow Brand Foods, the company entered the ham and deli foods business and launched Saveur SS. This drove the rapid growth of the company's agriculture and food products business.

Having welcomed Kawasaki Kasei Chemicals, a comprehensive quinone manufacturer, into the Group, Air Water sought to utilize the new company's wide-ranging lineup of products and advanced, proprietary technologies to achieve synergy in the functional chemicals business.

In 2016, the Air Water Group acquired Kawamoto Corporation and launched the sanitary products business. The Group's lifestyle medical segment began in earnest with the expansion of the dental care business. Thus began the Group's new, two-pronged medical business, comprising the advanced medical and lifestyle medical segments.

1983

1995

2004

2015

2019

V1 high-purity nitrogen gas generator is developed

Unified and joint management begins

No. 1 VSU unit (high-efficiency, compact liquefied oxygen/nitrogen production plant) begins operations

Power generation business using woody biomass begins

Industrial gas business begins in India to enhance business foundation

1962 Kyodo Oxygen Co., Ltd. is established

Supporting Japan's rapid economic growth with oxygen

Kyodo Oxygen was established in the midst of the Japanese economic miracle. Sumitomo Metal Industries established Kyodo Oxygen inside its Wakayama Ironworks to meet rapidly increasing steel demand, and the supply of oxygen for converter steelmaking began.

At the time, demand for high-purity nitrogen- essential for semiconductor production-was rapidly rising. The company thus developed a unique production plant that could cool air using ultra-low temperature nitrogen. The mold-breaking technology was welcomed by the industry as an optimal gas supply system.

In addition to unified management, whereby the company established sales companies in each region to offer tailored sales and services and strengthen its downstream operations, the company also promoted joint management by emphasizing tie-ups with other companies. This unified management was the start of the regional business company system in the Air Water Group today.

In establishing compact VSUs, which are regional liquefied gas plants unique to Air Water, the company achieved stable energy supplies, reduced energy use, lower CO2 emissions, and improved business continuity. Unlike conventional methods, in which industrial gas mass-produced at large-scale plants would be transported long distances to areas of demand, this was a revolutionary gas supply model.

Air Water began its power generation business to secure its own power and ensure business continuity. Self-sufficiency also ensured a stable supply of industrial gas, which uses a huge amount of power when produced. Through Feed-in Tariffs, the power generation business will be a stable source of revenue for 20 years.

Air Water entered the Indian market in 2013 with capital participation in a local Indian industrial gas company. Later, in 2019, it acquired industrial gas businesses in the east and south of India, establishing a firm business foundation in the country. Currently, the business in India caters to growing industrial gas demand from, among others, steel and automotive industries.

About the	Air Water's Value	Growth Strategy	The Air Water	Basic
Air Water Group	Creation Story	for Value Creation	Group's Businesses	Environment	Social	Information

Meeting Society's Needs with Nature's Blessings

Aligning with people and communities to support healthy lifestyles and quality manufacturing

The Air Water Group's purpose is to "meet society's needs with nature's blessings."

It speaks of our strengths and the social value we provide, such as how our technologies, expertise, and business model combine seamlessly to transform air and water into a stable,

sustainable supply of invaluable products, services, and solutions for industries and lifestyles.

Indeed, it encapsulates our determination to serve as a valued partner, providing essential resources from the earth in ways that meet the requirements of all people, communities, and industries.

In addition to electronic materials, pharmaceutical and agrochemical intermediates, and circuits-products that make use of our long-accumulated advanced separation and synthesis techniques-we also offer a range of organic acid products courtesy of Air Water Performance Chemical (formerly Kawasaki Kasei Chemicals), the only company in the world to successfully produce quinone-based products, as well as phthalic anhydride on a commercial scale. In this way, we supply various high-value-added products based on the diverse needs of our customers.

Chemical Business P. 28

Medical Business

Not only do we supply medical gases, we also offer comprehensive medical solutions for everything from advanced medical care to everyday, general medical care. We are expanding our business domains to include the construction of operating rooms and other hospital facilities, respiratory and other medical equipment, SPD (Supply, Processing and Distribution), contract sterilization, and home healthcare, as well as sanitary products, injection needles, and dental materials.

We launched the Energy Business in Hokkaido in 1955 with the goal of enriching people's lives. Today, we operate our LPG and kerosene businesses under the Hello Gas brand, still with the same aspiration. As a comprehensive energy service provider we are also engaged in various other energy businesses, such as supplying LNG, manufacturing and selling LNG tank containers and satellite supply systems, and retailing electricity.

Energy Business

Due to their unique characteristics, industrial gases such as oxygen, nitrogen, and argon are used in everything from manufacturing to everyday life and support the very foundations of society. Utilizing our nationwide sales and production network that extends from Hokkaido to Okinawa, we supply a diverse range of industrial gases in an optimal manner based on our customers' needs.

Industrial Gas Business P. 27

P. 29

Agriculture and Food Products Business P. 31

The Food Products Business, which started with the sales of frozen foods utilizing liquid nitrogen, entered the agriculture sector in earnest in 2009. We now handle everything from cultivation and procurement to processing and sales. We ensure a secure supply of safe food for consumers in three domains: processed agricultural products, including products such as ham, deli food, frozen food, and confectionery; beverages, where we have particular strengths in fruit and vegetable juices; and independent food and farming, covering produce retail and agriculture machinery.

Logistics Business P. 32

We operate a comprehensive range of logistics businesses, including container transport between Hokkaido and Honshu, distribution services with warehouse functions, and the transportation of high-pressure gases such as liquid oxygen and nitrogen. Taking advantage of the low-temperature transportation technologies accumulated in these areas, we also offer food logistics for retaining freshness through nuanced temperature control, medical logistics for transporting blood (plasma), and even the manufacturing of vehicles.

Seawater Business P. 33

Recognizing further potential in industries where air and water combine, we made a capital investment in Tateho Chemical Industries in 1988. Since then, we have pursued seawater as a business to effectively harness its resources and create an extensive range of products, including industrial and household salt (in which we have the dominant Japanese market share) as well as high-value-added magnesia products.

PP. 34-35

Unique technologies and products such as aerosols, O-rings, ECOROCA® building material made from recycled wood, and NV metal surface treatments underpin the growth of the Air Water Group. We are also pursuing new businesses in order to drive the future growth of the Group, such as power generation using woody biomass, high-power uninterruptible power supplies (UPS), and our engineering and equipment ventures predominantly in North America.

Air Water's Management Resources

Since its founding, Air Water has combined its diverse air and water technologies, proprietary business models, and expertise to provide a stable, sustainable supply of invaluable products, services, and solutions that have become essential to people's lives and industry. Through proactive M&As and portfolio reforms, we have gone on to expand our business domains to create a better society. Looking ahead, we will use the strengths and management resources we have accumulated throughout our history, and further these strengths to enhance our corporate value from both a social and economic standpoint.

A locally rooted 03business network

Our nationwide network of business sites allows us to drive growth strategies forward by combining locally rooted businesses with diverse business domains.

676	Industrial gas filling sites	Logistics and sales sites
Domestic
65	97
business sites

Technology 04and intellectual property

The technological resources we have accumulated through our diverse business domains allow us to add value to products and services and provide solutions that meet customer needs.

No. of researchers and developers

349

No. of patents 1,549

(As of October 2021; valid patents only)

No. of current industry-government-academia projects

138

Diverse 05organizations and personnel

The Air Water Group is home to individuals with diverse experience and expertise. These individuals are utilizing their diversity to play active roles in a corporate climate that brings together an array of corporate cultures.

No. of employees

(consolidated)

18,843

No. of M&As

(from 2000 onward)

224

*Includes non-consolidated subsidiaries

No. of overseas employees

(in 18 countries)

4,386

No. of engineers

290