Nippon Aqua : Integrated Report (FY2022/12)

AQUA

REPORT

2022

Nippon Aqua Integrated Report

From January 1, 2022 to December 31, 2022

About Nippon Aqua • Management Philosophy / History / Editorial Policy	About Nippon Aqua	Growth Strategy	Business Activities	Sustainability	Data

Management Philosophy

Contributing to society by creating a housing environment

that is friendly to people and the Earth

Vision

We exist to reduce total energy demand through innovation in insulation technology, prevent global warming,

and at the same time, help people lead healthy and comfortable lives.

Action Guidelines

1. Provide the best service with customer satisfaction as the first priority.
2. Create new value in housing.
3. Act sensibly as a member of society and as a corporate citizen based on compliance.
4. Strive for self-improvement through daily learning in order to achieve goals.

Principles

1. We will strive to be fair and just in everything we do.

2. We will strive to never fail to reward good conduct or let a fault go unpunished in everything we try.

History

AQUA BLOW

Listed on the First Section of the Tokyo Stock Exchange

19.4

11.3%

Average annual growth rate since listing

29.0

25.6 Forecast

Moved to the Prime Market following

the market reorganization of the

Tokyo Stock Exchange

AQUA FOAM

Founded by Fumitaka Nakamura (current Presi- dent) as a company engaging in the installation and sales of insulation for single-family homes

2004

Net sales

AQUA FOAM for buildings	Yokohama Technical Center
Entered the insulation market for buildings	Strengthened product development functions
2012	Started manufacturing raw materials
2014

9.8

Listed on Mothers

Section of the Tokyo

Stock Exchange

Urethane materials recycling

Commercialized a blowing insulation product

2016

2019

2020

2021

(Billion yen)

Non-flammable insulation	Ultrarapid-hardening waterproofing
Nippon Aqua's presence grew in the market	Entered the waterproofing market
for buildings	with polyurea waterproofing

AQUA FOAM LITE

30% reduction in raw material usage

(compared to AQUA FOAM)

Formulation using plant derived materials

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021 2022 2023

CONTENTS							Editorial Policy
01 About Nippon Aqua	Management Philosophy / History /		13 Business Activities	Single-family Homes Division	13		Editorial Policy	Please be aware that these are forecasts based on currently available
	Editorial Policy	01		Buildings Division	14
		This report is published to provide our shareholders, investors, and	information and may differ from actual results due to various factors
	Business Model / Strengths	03		Waterproofing Division	15
		in the future.
			other stakeholders with a better understanding of our company and
	Financial / Non-financial Highlights	05		Product Sales Division	16
07 Growth Strategy	Value Creation Process	07	17 Sustainability	Environment	17		to trigger further dialogue by disclosing non-financial information,	Reporting Period
	such as our efforts to enhance our corporate value over the medium
	Message from the President	09		Society	19
			to long term, in addition to financial information, such as our results	From January 1, 2022 to December 31, 2022
	Medium-Term Management Plan	11		Governance	21
			for the fiscal year under review.
			23 Data	Financial Data	23
					Issue Date
				Company Overview /			Cautionary Statement	March 2023
				Stock Information	24
				This report contains forward-looking statements regarding our business.
1 Nippon Aqua Co., Ltd. Integrated Report 2022							Nippon Aqua Co., Ltd. Integrated Report 2022 2

About Nippon Aqua • Business Model / Strengths

Strengths That Drive Our Business

Our strengths lie in our unique business model in which we comprehensively conduct everything in-house, from the development of raw materials for urethane insulation to installation and even recycling. Although there are competitors in the sales and installation of urethane, we are the only company that offers a full range of services, and we differentiate ourselves with our stable product supply and quality of construction.

About Nippon Aqua

Growth Strategy

Business Activities

Sustainability

Data

Raw Material Development and Quality Management

Procurement source diversification and raw material storage and warehousing

In addition to securing global procurement routes that are not limited to North America and Asia, we have established stocking points for urethane raw materials in various parts of Japan, which enables us to procure raw materials

Nationwide Sales Network

We have sales offices, distribution warehouses, and urethane recycling plants in 27 locations throughout Japan, from Hokkaido in the north to Kagoshima in the south, and are engaged in business activities tailored to regional characteristics and the stable supply of urethane raw materials, which are easily affected by market con- ditions. We are also working to enhance the trust of certified contractors and improve their construction capabilities by pro- moting their development through our own properties.

From Material Development to

Installation and Recycling (Unique Business Model)

in a flexible manner. This has allowed us to avoid the im-* pact of the "urethane raw material shortage" that occurred

in Japan from 2021 to 2022.

* There is no fact that we are short of raw materials.

Environmentally Friendly Insulation

Material Derived From Water

web	Please check our website for more details. >>>
https://www.n-aqua.jp/company/branch/
	(available in Japanese only)

Recycling to Reprocess

Recycle blowing Certified operator under the Ministry of the Environment's Wide Area Certification System with four recycling plants

In the installation of sprayed rigid urethane foam, a large amount of urethane scraps (shavings) is generated. We collect urethane scraps from construction sites across Japan and reprocess them as AQUA BLOW (used mainly as insulation to be spread in the ceiling space).

Reprocessing Flow

Industrial waste collection and	Before construction
haulage trucks dedicated to
collecting AQUA FOAM/AQUA
FOAM LITE	During construction
	After construction

Product manufacturing Fabless manufacturer

	AQUA FOAM, which supports the Company, is an insulation material that is foamed on-
	site using water, without the use of chlorofluorocarbon gas, which has a large greenhouse
	effect. The rigid urethane foam material is both human- and earth-friendly, using carbon
	dioxide gas, which is generated by mixing polyol and isocyanate
	containing water, as a foaming agent.
	Conventional insulation materials such as glass wool
	are cut and pasted to fit the insulation area on-site, which	Total construction
	sometimes leaves gaps. However, AQUA FOAM can fill	record in Japan
	even the smallest of areas without gaps, and its	473,400
	high adhesiveness ensures a stable insula-
	tion effect.		buildings
		No.1 share of
		the on-site foam
web	Please check our website for more details. >>>	insulation material
https://www.n-aqua.jp/products/	market

(available in Japanese only)

Focus on Strengthening Construction Capabilities

Nationwide Construction Network In house construction + certified contractors

On-site construction and	Transportation		Processing and		AQUA BLOW
scrap material collection		reprocessing

Construction Quality Management

Ensuring work safety and construction quality

Ensuring a high construction quality

In recognition of the insulation properties and quality control system of our spray-on construction, we have been certified by IBEC (Institute for Built Environment and Carbon Neutral for SDGs) as an "Excellent On-site Insulation Construction Certification System*."

• A system for enhancing the reliability of sprayed and blown-in insulation materials by allowing installation contractors of a certain level of competence to dis- seminate correct construction management and displaying this information externally.

3 Nippon Aqua Co., Ltd. Integrated Report 2022

In order for us to achieve stable growth, it is essential to further strengthen and secure our construction capabilities. To this end, we consider increasing the number of our construction employees to be a top priority and have been promoting work style reform, as we introduce a five-day workweek, raise wages in conjunction with the expansion of various allowances such as the Metropolitan Region Allowance and Child- care Support Allowance, and actively recruit employees through social media and other means.

We undertake insulation installation work projects as the sole contractor and either do them ourselves or subcontract them out to certied contractors

House builders

Insulation installation

Installation service by Nippon Aqua

General contractors

and sales

Trading companies,

Construction

materials sales

etc.

Work order

Subcontract

(outsourcing)

Raw material

Certified

manufacturers

Raw materials

Blowing equipment

Installation

purchase

sales

contractors

service

Construction

Purchase

materials sales

Industrial material

Industrial

manufacturers

materials

Blowing equipment

sales

Urethane

manufacturers

Construction material

insulation

OEM suppliers

contractors

Nippon Aqua Co., Ltd. Integrated Report 2022 4

About Nippon Aqua • Financial / Non-financialHighlightsAbout Nippon Aqua Growth Strategy Business Activities Sustainability Data

Key Financial Data

		FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020	FY2021	FY2022
Net sales	(Million yen)	6,488	9,825	13,020	14,046	15,608	18,052	19,417	21,366	21,872	23,903	25,670
Operating profit	(Million yen)	662	956	944	1,013	1,404	1,313	766	1,909	1,896	1,412	2,329
Ordinary profit	(Million yen)	662	925	937	1,016	1,404	1,419	764	1,909	1,911	1,429	2,359
Profit	(Million yen)	364	512	529	137	979	941	489	1,275	1,342	953	1,549

Net assets

Total assets

(Million yen)	1,080	5,103	5,529	5,590	6,663	5,508	5,885	6,843	7,638	7,951	7,966
(Million yen)	2,787	7,982	9,138	11,254	12,596	12,806	14,381	15,379	16,021	18,279	21,969

Net assets per share	(Yen)	270.19	147.81	160.15	161.01	184.40	171.31	182.36	211.88	236.46	246.09	254.41
Dividend per share	(Yen)	－	15.00	15.00	3.00	3.00	4.00	10.00	17.00	20.00	20.00	24.00
Basic earnings per share	(Yen)	91.24	20.61	15.33	3.97	27.61	27.84	15.19	39.50	41.57	29.52	47.99
Equity ratio	(%)	38.8	63.9	60.5	49.7	52.9	43.0	40.9	44.5	47.7	43.5	36.3
Return on equity	(%)	40.6	16.6	10.0	2.5	16.0	15.5	8.6	20.0	18.5	12.2	19.5
Cash flows from operating activities	(Million yen)	129	770	(146)	(748)	1,502	447	(359)	1,657	694	520	(297)
Cash flows from investing activities	(Million yen)	(217)	(376)	(1,273)	(1,501)	(834)	(492)	(39)	(769)	(609)	(355)	(293)
Cash flows from financing activities	(Million yen)	(7)	3,612	(66)	1,645	(489)	(547)	316	(902)	(311)	109	1,340
Cash and cash equivalents at end of period	(Million yen)	476	4,481	2,995	2,390	2,569	1,976	1,893	1,878	1,651	1,926	2,676

Key Non-financial Data

Number of employees

Male Female

(People)
600
	475	487
		438	422
450	98	108
	95
			99
300
150	377	379	343	323
0
	2019	2020	2021	2022	(FY)

5 Nippon Aqua Co., Ltd. Integrated Report 2022

Diversity index

Percentage of female directors among all Directors

1. Percentage of female managers among all managers

60

45

33.3 33.3 33.3 33.3

30

15	9.2		10.7	14.0
8.4
0
	2019	2020	2021	2022	(FY)

Percentage of paid leave taken

(%)

100

75	71.7	68.7
	65.1

50 43.6

25

0

2019

2020

2021

2022

(FY)

Number of installation work personnel at certified contractors

(People)				794
800			780
		657
600	556
400
200
0
	2019	2020	2021	2022	(FY)

Nippon Aqua Co., Ltd. Integrated Report 2022 6

Growth Strategy • Value Creation Process

Value Creation Process

Nippon Aqua's value creation process is a concrete representation of how we are addressing stakeholders and society under our vision of "we exist to reduce total energy demand through innovation in insulation technol- ogy, prevent global warming, and at the same time, help people lead healthy and comfortable lives."

About Nippon Aqua

Growth Strategy

Business Activities

Sustainability

Data

Goal of Nippon Aqua

We will continue aiming to achieve

sustainable growth as a TSE

Prime-listed company

External environment

International framework for reducing greenhouse gas emissions

"Paris

Agreement"

Japanese government's

"2050 Carbon

Neutral

Declaration"

"Work style reform"

in the construction industry

INPUT

Financial

Net assets

7,966 mil. yen

Manufactured

Raw materials, catalysts, flame- resistant materials Recycling plants

Human

No. of employees 422 people

BUSINESS MODEL

Management philosophy

Contributing to society by creating a housing environment that is friendly to people and the Earth

Raw material development and quality management

Nationwide	Product
construction
manufacturing
network

OUTPUT

AQUA FOAM series

For single-family homes

AQUA FOAM

Highly airtight insulation for wooden homes

AQUA FOAM LITE

Contains plant-derived raw materials

For buildings

AQUA FOAM NEO

Balances environmental performance and thermal conductivity

AQUA MOEN NEO

Non-flammable insulation

AQUA BARRIER

Fireproof coating

OUTCOME

Decarbonization

Achieving highly airtight and insulated homes and buildings

with the AQUA FOAM series

Contributing to the realization of carbon neutrality

Resource and energy conservation

AQUA FOAM LITE

reduces raw material usage by approximately 30%

Uncertainty of international situation

Social and relationship

Manufacturing subcontractors for home brand materials

Recycle	Nationwide
blowing
sales network

For waterproofing

AQUA HAJIKUN

Spray coating waterproofing system for buildings

Waste reduction

Reprocessing of urethane scraps as AQUA BLOW

Increase in electricity	Certified contractors
No. of installation work
and other energy	Construction
prices	personnel at certified
quality
	contractors
	management
	794 people

Urethane scrap recycling

AQUA BLOW

Product recycled from AQUA FOAM

Nippon Aqua SDGs Declaration

Strengthening foundations and increasing capital for growth

7 Nippon Aqua Co., Ltd. Integrated Report 2022

Nippon Aqua Co., Ltd. Integrated Report 2022 8