Air Water : Consolidated Financial Results (Under IFRS) For the Second Quarter of the March 31, 2022 Fiscal Year

November 5, 2021

Consolidated Financial Results (Under IFRS)

For the Second Quarter of the March 31, 2022 Fiscal Year

AIR WATER INC.

Head Office: 12-8, Minami semba 2-chome,

Chuo-ku, Osaka, Japan

(Note: All amounts are rounded down to the nearest million yen.)

1. Results for the Three Months Ended September 30, 2021

(1) Consolidated operating results

(% of change from previous year)

													Profit	Total
	Revenue		Operating profit	Profit before tax		Profit	attributable to	comprehensive
													owners of parent	income
	Million	%		Million	%	Million	%	Million	%	Million	%	Million	%
	yen		yen	yen		yen	yen	yen
Six months
ended	419,604	12.1		31,639	61.7	31,176	65.6	22,223	89.0	20,589	92.2	26,252	55.4
September 30,
2021
Six months
ended	374,423	-2.8		19,561	-11.6	18,825	-13.9	11,758	-18.7	10,710	-12.2	16,896	6.4
September 30,
2020
			Basic earnings			Diluted earnings
				per share			per share
					Yen			Yen
Six months ended			91.11			91.01
September 30, 2021
Six months ended			47.08			47.02
September 30, 2020

(2) Consolidated financial position

				Ratio of equity
	Total assets	Total equity	Equity attributable	attributable
	to owners of parent	to owners of parent
				to total assets
	Million yen	Million yen	Million yen	%
As of September 30,	968,439	394,283	375,473	38.8
2021
As of March 31, 2021	926,821	372,389	357,797	38.6

2. Dividends

Dividend per share

End of first

End of second

End of third

Year-end

Annual

quarter

quarter

quarter

Yen

Yen

Yen

Yen

Yen

The fiscal year

－

22.00

－

22.00

44.00

ended March 31, 2021

The fiscal year

－

27.00

ending March 31, 2022

The fiscal year

－

27.00

54.00

ending March 31, 2022

(Forecasts)

(Note) Changes in forecast of dividends for the fiscal year ending March 31, 2021 from the latest disclosure: Yes

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3. Forecast of consolidated operating results for the fiscal year ending March 31, 2022

(% of change from previous year)

	Revenue	Operating profit	Profit before tax	Profit attributable to	Basic earnings
	owners of parent	per share
	Million	%	Million	%	Million	%	Million	%	Yen
	yen	yen	yen	yen
The fiscal year	890,000	10.3	65,000	26.9	64,000	28.9	43,000	57.1	190.20

(Note) Changes in forecast of consolidated operating results for the fiscal year ending March 31, 2022 from the latest disclosure: Yes

Notes

1. Significant changes in subsidiaries during the period (changes in specified subsidiaries with changes in the scope of consolidation): None
2. Changes in accounting policies and changes in accounting estimates

a. Changes in accounting policies required by IFRS:	None
b. Changes in accounting policies other than (a):	None
c. Changes in accounting estimates:	None

1. Number of shares outstanding (ordinary shares)
   a. Total number of shares outstanding (including treasury shares)

As of September 30, 2021:	229,755,057 shares
As of March 31, 2021:	229,755,057 shares
b. Number of shares of treasury shares
As of September 30, 2021:	3,589,327 shares
As of March 31, 2021:	3,995,259 shares
c. Average number of shares during the term
First Six months of the fiscal year ending March 31, 2022:	225,988,759 shares
First Six months of the fiscal year ended March 31, 2021:	227,514,825 shares

• This report is exempt from quarterly review procedure based on the Financial Instruments and Exchange Act.
• Explanations and other special notes concerning the appropriate use of business performance forecasts

・The forward-looking statements such as result forecasts included in this document are based on the information available to AIR WATER INC. (hereinafter "the Company") at the time of the announcement and on certain assumptions considered reasonable. Actual results may differ materially from the forecast depending on a range of factors. For matters relating to the forecasts, please, refer to "4-(3) Explanation of future prediction information such as forecast of consolidated operating results".

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4. Qualitative Information relating to Second Quarter Settlement of Accounts

(1) Explanation of Operating Results

1) Operating results for the current period

During the cumulative second quarter of the current consolidated fiscal year under review, the Japanese economy maintained steady production activities in the domestic manufacturing industry centered around the semiconductor and materials industries, and appeared to trend toward recovery on the back of the normalization of economic activity in Europe, the United States, and China. Meanwhile, the outlook for the future remained uncertain due to continuously low consumer spending and the stagnation of the recovery of business confidence due to the continuing the novel coronavirus (hereinafter "COVID-19") pandemic.

In these economic conditions, the Company and its consolidated subsidiaries (hereinafter the "Group") focused on entering markets which have been growing in response to the COVID-19 pandemic. In the industrial gas business, we expanded into peripheral areas such as gas, special chemicals, and gas purification equipment used for semiconductor manufacturing processes and equipment for semiconductor manufacturing equipment, while in the chemical business, we responded to robust electronics-related demand mainly by supplying electronic components and highly functional chemicals. The medical business captured demand associated with the recovery of the business environment, fulfilled its corporate social responsibilities and missions during the continuing COVID-19 pandemic by increasing its production of medical-use oxygen concentrators and supplying injection needles for vaccination, and also met society's needs during the COVID-19 pandemic by supplying medical-use oxygen in India. At the same time, we promptly addressed changes in the social environment including new lifestyles, which contributed to the continuing growth and improved performance of the energy, agriculture and food products, logistics, and sea water businesses.

In addition, the ongoing structural reforms the Group has undertaken in each business sector, which include the restructuring of Group companies including regional business companies, overseas development in the industrial gas business focusing on India and North America, and the optimization of production systems in the medical, chemicals, and agriculture and food products businesses, improved resilience of the revenue base. Additionally, the promotion of digital transformation (DX) improved the efficiency of operations management and work-style reforms increased productivity, resulting in a steady increase in profitability.

Moreover, with the aim of creating a carbon neutral society, the Group carried out an array of business activities to contribute to the resolution of diverse social issues and the achievement of the Sustainable Development Goals (SDGs) by focusing on two core fields, the global environment and wellness, to widely contribute to people's health and welfare.

As a result, for the current second quarter consolidated cumulative period, the group's revenue was ¥419,604 million (112.1％ that of the corresponding period of the previous year), operating profit was ¥31,639 million (161.7％), and profit attributable to owners of parent was ¥20,589 million (192.2％).

2) Consolidated results by segment for this period

				（Million yen）
	Revenue	Operating profit
	FY 2021.2Q	YoY Growth	FY 2021.2Q	YoY Growth
Industrial Gas Business	92,439	108.1％	10,477	130.8％
Chemical Business	19,150	130.3％	1,736	301.1％
Medical Business	92,225	107.7％	4,391	143.5％
Energy Business	23,690	113.9％	1,101	102.1％
Agriculture and	70,208	105.2％	3,104	176.7％
Food Products Business
	106.2％		111.3％
Logistics Business	27,934	1,547
Seawater Business	20,529	116.4％	1,683	208.6％
Other Businesses	73,426	128.6％	4,971	278.7％
（Adjustment）	－	－％	2,626	239.6％
Total	419,604	112.1％	31,639	161.7％

(Note) The adjustment to operating profit is due to costs incurred at the Company's headquarters division which was not allocated to any reporting segment.

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This segment has been expanding its businesses in the electronics market where further growth is expected, as well as in overseas markets with significant potential such as India, while instituting a reform of its business portfolio.

Japanese semiconductor manufacturers are increasing production, and the Group is investing an unprecedented amount of capital to meet demand for gas, and expand gas purification equipment, thermal control equipment for semiconductor manufacturing equipment and other peripheral businesses with the aim of establishing itself in a position where the company is comparable to the global gas giants in the electronics market.

In India, we will expand our on-site steel business using gas production plant technologies for a complete range from small to large plants, in addition to our track record of supplying gas to India's major local steel manufacturers. At the same time, we will increase off-site sales of industrial and medical-use gas products to strengthen the foundation of our business.

In Japan, we are developing infrastructure networks for the production, storage, and distribution of industrial gases that include VSUs, high-efficiency liquefied oxygen/nitrogen generators, while we are increasing our sales capacity and maximizing the effect of combining regional companies in the restructuring our revenue base.

Revenue in this segment was ¥92,439 million (108.1％ that of the corresponding period of the previous year), and operating profit was ¥10,477 million (130.8％).

The overall business performed strongly and exceeded the pre-COVID-19 levels due to the recovery trend generally observed in production activities in the domestic manufacturing industry, in addition to the strong results of the gas supply services for electronics applications, the sale of special chemicals and equipment, and the industrial gas business in India.

In the gas business, our gas supply services for electronics applications remained firm thanks to the ongoing capital expenditures and high-level operation of domestic semiconductor manufacturers, our major customers, on the back of growth in demand for semiconductors. In our on-site gas supply services for steel manufacturers, the sales volume of gas increased due to the recovery of crude steel production. In our tanker truck and cylinder gas supply services, the services for electronic components, chemicals, machinery, and other products performed steadily, securing sales at pre-pandemic levels. Carbon dioxide sold well due to an increase in demand for dry ice for home delivery.

The overseas business remained strong as our on-site gas supply services for steel manufacturers maintained a high operating rate given increased crude steel production in the mainstay Indian business. In the off-site sales of our tanker truck and cylinder gas supply services, we prioritized our response to the serious shortage of medical-use oxygen during the rapid resurgence of COVID-19 infections.

The equipment and construction-relatedbusiness focused on meeting demand related to semiconductor manufacturers' investment in the growth of their production, resulting in an increase of sales related construction, special chemical equipment, gas purification equipment, machinery for semiconductor manufacturing equipment, and other products.

This segment is implementing a structural reform to shift to the functional chemicals business focusing on electronics materials, and the results began to appear in the aspects of development, production, and sales. On October 1, 2021, as an important step in the structural reform, our Electronic Material Development Division, Kawasaki Kasei Chemicals Ltd., and Daito Chemical Co., Ltd. were combined, establishing Air Water Performance Chemicals Inc.

We will pursue synergy across the Air Water Group enabled through the cooperation of this company, Printec Corporation's circuit product/circuit material/semiconductor substrate businesses, FILWEL Co., Ltd.'s precision polishing pad business, the Company's SIC Division's SiC and GaN substrate business, and other strategies, to leverage our diverse technical resources which are essential in semiconductor/electronic equipment manufacturing processes and our customer base. We aim to continue to grow by providing solutions for a smart, recycling-oriented society.

Revenue of this segment was ¥19,150 million (130.3％ that of the corresponding period of the previous year), and operating profit was ¥1,736 million (301.1％).

The comprehensive business results were strong with revenue improving significantly thanks to growth in the sales of electronic materials, a recovery in demand for basic chemicals, and improved market conditions.

In the functional chemicals business, sales of electronic materials such as raw materials for displays increased due to high demand for electronics, and in addition, revenue improved due to the restructuring of production systems that has continued since the previous fiscal year. At Daito Chemical Co., Ltd. sales of its mainstay product, sodium acetate, for food products recovered and the contract synthesis business for electronic materials expanded. At FILWEL Co., Ltd., sales of precision polishing pads remained strong on the back of growing demand for hard disk drives in response to growth of data center market.

Sales at Kawasaki Kasei Chemicals Ltd. remained strong thanks to the improvement of the domestic organic acid market and the recovery of demand for its mainstay, naphthoquinone, used for agrochemicals.

This segment is leveraging its comprehensive capabilities to create a new form of medical services, including its diverse business sectors ranging from advanced medical care primarily handling medical gas and medical equipment, to everyday

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medical care such as dental and hygiene materials. To respond to peoples needs during the COVID-19 pandemic, we are further increasing production of our prevention products, supplying oxygen concentrators, and installing oxygen supply equipment for oxygen stations to support the measures to end the COVID-19 pandemic. Meanwhile, our goal is to continue to improve revenue based on the integration and reorganization of the Air Water Group companies and the enhancement of cooperation with regional companies.

Revenue of this segment was ¥92,225 million (107.7％ that of the corresponding period of the previous year), and operating profit was ¥4,391 million (143.5％).

In the overall business results, due to trend towards a recovery in the environment surrounding our hospital business and steady demand for infection control products, revenue improved substantially compared to the same period in the previous year when nearly all business segments had been seriously affected by the COVID-19 pandemic.

The result in the facility business was strong thanks to repair work and inspection and maintenance of hospital facilities such as operating rooms, which had been suspended because of the impact of COVID-19. Revenue in the medical service business continued to rise thanks to increased efficiency in material procurement, despite the impact of a decline in the number of outpatients and the number of operations remaining in SPD (supply, processing, and distribution management for hospitals). Results in the medical gas business remained strong thanks to a trend toward recovery beginning in the second half of the previous year and increased demand for oxygen for COVID-19 patients. In the medical equipment business, the number of patients undergoing nitric oxide respiratory therapy increased, while in the home medical care business, rental oxygen concentrators increased due to an increase in patients suffering from COVID-19, and thus both businesses showed firm performance. The hygiene products business remained strong despite a reactionary fall from temporary large demand for masks, hand sanitizers, and other infection control products by capturing demand for these products that have taken root in our lives. In other businesses, mail order sales of infection control products increased, particularly to dentists, at our equity method affiliate Ci Medical Co., Ltd. Demand in the injection needle business remained strong due to recovered overseas sales and an increase in sales of syringe needles used for vaccination.

This segment posted a steady increase in revenue through the strengthening of direct sales of LP gas and the expansion of sales through the acquisition of new customers by improving customer services and obtaining the commercial rights of retailers. Moreover, initiatives have begun to develop LNG-related equipment and new biogas energy systems that are able to contribute to carbon neutrality and to construct the foundations for an LP gas business in the Vietnamese market, which we entered in 2019.

Revenue of this segment was ¥23,690 million (113.9％ that of the corresponding period of the previous year), and operating profit was ¥1,101 million (102.1％).

Results of the overall business were strong because sales volume of LP gas increased by capturing the recovered industrial demand and because unit selling price increased as well.

In the LP gas business, the unit selling price increased in connection with the CP price used as an indicator of import prices, while the unit selling price of kerosene also rose in response to an increase in oil prices, resulting in revenue growth. Sales volume for household use was lower than that in the previous year as the stay-at-home demand gradually decreased, and another factor was temperatures comparatively higher than typical. On the other hand, the business captured demand for commercial and industrial uses which showed signs of recovery, and as a whole, sales volume increased year on year. Improvements in operation process such as the streamlining of LP gas delivery using IoT also contributed to revenue growth.

In the natural gas business, LNG sales volume increased and sales of related equipment such as LNG tankers remained strong.

In response to the significant change in demand for food caused by the pandemic, this segment revamped its development and sales structure centered on commercial-use products, and has now focused on development of frozen food and ready-to-eat products for consumers, merchandise for home delivery and similar products, and also on the cultivation of new sales channels including e-commerce. On October 1 this year, the Group companies were restructured, including the integration of development/sales functions into the newly established Air Water Agri & Foods Co., Ltd. We are also shifting our business structure to the new food distribution and processing business that combines our food processing technology and distribution functions.

Revenue of this segment was ¥70,208 million (105.2％ that of the corresponding period of the previous year), and

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