Emerging ontoa Still Wider Stage
Medium-term Management Plan
Ortus Stage 2* Ortus: A Latin word meaning “beginning and birth”

AgendaOrtus Stage 1: Achievements and Challenges
Changes in Environment Surrounding Industrial Gas Industry

Ortus Stage 2
Basic Policies
Financial Targets
Safety & Quality
Compliance
Organization & Human Resource Policy
Key Strategies2

Ortus Stage 1

Achievements and Challenges

Ortus Stage 2

3

Business Results
JGAAP

641.5

IFRS

610.0

580.0

559.3

522.7
Sales
Revenue(Units: ¥billion)

52.0

54.0

43.3
31.4

35.2

Operating Income(Units: ¥ billion)

FYE2014
ActualFYE2015
ActualFYE2016
ActualFYE2017
Projection

FYE2017
Forecast

JGAAP: Sales revenue
IFRS: Revenue

522.7

559.3

641.5

610.0

580.0

JGAAP: Operating income
IFRS: Core operating income

31.4

35.2

43.3

52.0

54.0

JGAAP: Operating income ratio
IFRS: Core operating income ratio

6.0%

6.3%

6.8%

8.5%

9.3%

JGAAP: Overseas sales ratio
IFRS: Overseas revenue ratio

31.4%

35.0%

44.4%

41.4%

40.5%

ROCE※

6.2%

6.2%

7.4%

8.6%

8.6%

* ROCE (Return on capital employed) = Core operating income /(Outstanding Interest-bearing Debt + Equity attributable to owners of parent)* Core operating income: Numerical value calculated by subtracting losses (nonrecurring items*) produced by nonrecurring factors from operating income.
* Nonrecurring items are costs of structural reform (cost for withdrawal or downsizing business operations and special retirement allowances), losses caused by disasters
or serious accidents, and other expenses (such as disposal of idling assets).

4Issues
Key
Strategies

Review of
Ortus Stage 1
 Implement early retirement program Shift human resources to growth market

Structural
Reform(¥ billion)

◎
◎
△
△
○
△

 Restructuring of domestic group companies
 Optimize engineering function
 Strengthen supply chain network
 Promote in-house shared service function
 Development of new products via businessdevelopment (H2Innovation

stations & water-18 O etc.)

 Expand overseas operations via strategic

Investments

Globalization○

 Strengthening collaboration with Mitsubishi Chemical Global expansion of developed product Localization of overseas operations

 Cultivation of global human resources (trainee

program) Strengthen supply chain network

5.9

development

1.7

Hawaii, Air Liquide USA, RGP and Supagas
Australia etc.)* Changes in operating income from FYE2014.

5 Strengthening collaboration with Mitsubishi Chemical

Holdings Group Global expansion of developed product Expansion of group products

 Improve global management infrastructure Strengthen management system of overseas risks

such as safety, quality and compliance○

1.7

 Expand overseas operations via strategic

investment
 Improvement of Asian performance Geographic expansion for new area○
 Globalization M&A

 Implementation of overseas M&A (Air Liquide

M&A

 Restructuring of group companies

 Open innovation◎◎

 Promote in-house shared service function

 Development of new products via business○○(establishment of regional holding companies) Implement IFRS Optimize engineering function◎

 Open innovation

Holdings Group

Issues of
Ortus Stage 2

Result*◎3.9

 Medical M&A
 Innovation M&A

Changes in Environment Surrounding
Industrial Gas Industry

Ortus Stage 2

6Changes in Environment Surrounding Industrial Gas Industry(Growth of Overseas Markets and Oligopolization)
Rapid strategy execution is indispensable in responding to overseas market growthand oligopolization
Industrial Gases (Market Size by Region)
Size of Industrial Gas Market –2015: US$71.6 billion

Basis: FYE2017 Japan as 100(Estimate by Taiyo Nippon Sanso)
FYE2017

FYE2021

100

Japan

N. America

Asia and Oceania

1990 share

Air Liquide
18%

BOC
14%

Messer
5%TNSC
5%Linde & AGA
10%
Air Products
10%

Praxair
14%

Others17%

Airgas4%

Latin America

Messer
1%
Air Liquide
23%

TNSC
6%
Air Products
12%

Linde
23%
Praxair14%

Source: Gas Diorama* The share of Taiyo Nippon Sanso in 1990 is the simple sum of shares of Nippon Sanso, Taiyo Sanso and Toyo Sanso.
* Reflects the influence of the integration of Linde and Praxair and the integration of Air Liquide and Airgas.
The figure if integration is achieved represents a simple sum of 2014 actuals. Share fluctuation by sale of assets is not taken into account.

7

Middle East and Africa

Share if integration is achieved

2014 share
Messer1%

Others24%

EuropeOthers17%
Linde +
Praxair
37%

TNSC
6%
Air Products
12%
Air Liquide +Airgas27%

Ortus Stage 2

Basic Policies

Ortus Stage 2

8Basic Policies
Domestic Gas Business Expansion
 Expansion in gas-related businesses such as gas

equipment, in addition to the gas business Sustain growth of businesses in Japan(M&As inside Japan and changes to sales channels)

Safety, Quality and Compliance
Strengthening Corporate Functions
 Implement human resource, information and financestrategies

 Strengthen safety, quality and compliance efforts
 Strengthen collaboration with regional holding

companies in overseas markets undergoing
business expansion

 Strengthen corporate functions to provide stronger

support to TNSC and group companies

Accelerating R&D Strategy
Globalization
 Increase overseas M&A andcapital investments
 Establishing new business9

 Accelerate R&D with open innovation
 Concentrate on prioritized development fields basedon portfolio strategies
 Make a larger contribution toward TNSC profitability

Policy by Segment

Gas Businessin Japan

Consolidating our No. 1 position in Japan by expanding gas and gas-related

Gas Business inExpansion of business areas, building depth of business in new business areas,

U.S.

and expansion of product groups through active capital investment and M&A.

Gas Business in
Asia and Oceania

Thermos andOther Businesses

10businesses and maximizing group synergy.

Business expansion by improving market share in new regions and businessundertakings in unoccupied regions. Reinforcement of governance through regional
holding companies.

Expansion of businesses in global regions by fully utilizing our brand power.

Ortus Stage 2

Financial Targets

Ortus Stage 2

11

Financial Targets

FYE2017 (Forecast)

FYE2021 (Projection)

Revenue¥580 billion¥800 billion

Core Operating Income¥54 billion¥76 billion

Core Operating Income
Ratio

9.3％

9.5％

Overseas Revenue Ratio

40.5％

45.0％

ROCE

8.6％

9.0％

12

Activities to Accomplish Financial Targets

76 billion

FYE2021 Core Operating Income ¥Improve ROCE to

9.0％Core Operating Income(Core Operating income ratio) (in ¥billion)

ROCE (％)

76

9.0%(9.5％)

8.6%

54(9.3％)

FYE2017

FYE2021

Measures for Expanding Core
Operating Income
 Business expansion inside and outside ofJapan Improvement in profitability by implementing

structural reform
13

FYE2017

FYE2021

Measures for Improving ROCE Strengthening earning power Improving asset efficiency

Investment Plan
Investment of ¥340 billion over a period of four years(Total projected value of operating cash flow over four years: ¥325 billion)

By
Strategy
Strategic
investments 70%

Ordinary
investments 30%

Total¥340 Billion

Allocating 70% of all investments to strategic investments while maintaining financial discipline (net D/E ratio [netdebit equity ratio] and other indicators)

14

Ortus Stage 2

Safety & Quality

Ortus Stage 215

Safety & Quality(Steady Implementation of Technical Risk Management)
Continue to improve technological capabilities and maintenance of vitality in Japan(TNSC, domestic affiliates)
 Reinforce safety capabilities (fostering a cultureof safety)“Establish facilities to teach potential
hazards and the mastery of technology”
 Enhance technical capabilities by humanresource development and technology transfers(Establish TNSC Technical Academy)(continuously fostering ‘The Gas Professionals’) Strengthen quality control
 Utilize group technology databases (technical data, intellectual property information, and work accident
information, etc.)

Improve safety and technological capabilities overseas (Asia and Oceania)
 Expand technology and safety systems of regional holding companies Improve voluntary safety systems
 Enhance quality control (foster TNSC Group standard quality)

 Compiling and maintaining global standards (safety and quality), technical information, and education andtraining manuals)
Targeting “zero” work accidents and quality problems at each workplace

16Ortus Stage 2

Compliance

Ortus Stage 2

17

Strengthening Compliance
Basic Policy

To strengthen the governance of the entire TNSC Group, enact compliancemeasures commensurate with each business risk, and promote the effective
operation of the internal control system.

Action Plan
Establish compliance on a daily basis
 Continuously implement the compliance education system Ensure the effectiveness of the compliance promotion structure Regional monitoring by regional CCOs

Appointing group CCO and regional CCOs
 Appoint a group CCO as the officer responsible for promoting andimplementing legal compliance within the entire group.
 Appoint regional CCOs and promote the establishment of acompliance structure within the region.
 Establish global committees of group CCO and regional CCOs

Rigorous education about important themes
 Foster the TNSC Group Code of Conduct in group companies Education about important themes by regional CCOs based on

the socio-economic environment, laws and regulations, of eachregionEstablish compliance promotion systems at overseas
bases Regional CCOs thoroughly disseminate Global Code of Conduct

within the region.

 Conduct risk surveys and education programs as regards

country-specific risks
 Strengthen collaboration with regional holding companies

Expand the compliance promotion system to groupcompanies Strengthen the human resources in the compliance divisions to

reduce legal risk, enhance internal audits, and strengthen internal
control Develop a compliance system at all core group companies
 Conduct risk surveys and education programs at all groupcompanies* CCOs is the abbreviation of Chief Compliance Officers.

18

 Individual regions will set up whistle-blower systems

Ortus Stage 2

Organization &Human Resource Policy
Ortus Stage 2

19Reviewing the Organization [April 1, 2017]

Corporate Divisions
Business Divisions
20

Organization

Review Item

Corporate Planning Office

To strengthen corporate strategy functions, the Corporate Planning Office will be newly organized by separating
the Corporate Secretary and Corporate Planning Depts. from the Corporate Planning & Global Operations Div.,and by merging the IT Dept., which is separated from the Corporate Administration Div.

Corporate Administration Division

To strengthen corporate administration functions, the IT Dept. will be separated from the Corporate
Administration Div., which will be merged with the PR and IR Depts. and Corporate Treasury Dept. separated
from the Corporate Planning & Global Operations Div. The Corporate Treasury Dept. and Accounting Dept. will
be merged into the Treasury & Accounting Dept.

Development Division

To strengthen development functions, after separating the gas engineering function from the Development &Engineering Div., the division will be renamed the Development Div.

Production and Logistics Division

To optimize industrial gas operations, the Production & Logistics Div. will be established to integrate thefunctions of the Gas Production Technology Dept. (On-site & Plant Div.), Product Planning & Operations
Dept. (Gases Business Div.), and Logistics Center (Gases Business Div.).

Engineering Division

To reinforce the functions of engineering organizations, the Engineering Div. will be established via integration of
the plant engineering function (On-site & Plant Div.) and gas engineering function (Development & EngineeringDiv.).

Energy Division

With our expansion of other energy products besides LP gases in response to energy liberalization, the LP
Gases Div. will be renamed the Energy Div.

Global Operations Division

To strengthen the function of global operations, the Global Operations Div. will be newly organized by merging
the International Department, after separating it from the Corporate Planning & Global Operations Div., with the
Global Innovation Div.

Organization

President &CEO

Corporate Audit
OfficeProduction &Logistics Div.

21

Internal Control
OfficeEngineering
Div.

Plant
Engineering

Gas
Engineering

Gases Sales
Sec.

Electronics
Gases Sec.

Gases
Business Div.

Electronics
Equipment
Sec.

Legal Dep.

HR Dep.

Medical Div.

SI Sec.

Bio Medical
Sec.

Electronics
Overseas
Sec.

Planning &Strategic
Sales Sec.

Corporate
Planning Office

Corporate
Admin. Div.

On-site & Plant
Div.

On-site Sec.

Plant Sec.

Technological
Affairs Div.

Energy Div.

Development
Div.

GlobalOperations
Div.

Innovation
Sec.

GlobalOperations
Sec.

BranchesHuman Resource Policy

Implementing Measures to Support Ortus Stage 2

 Human resource development corresponding to

globalization• Formulating a succession plan for the global

management of human resources• Hiring and fostering global human resources Reforming work style and promoting diversity• Effectively matching human resources anddiversity• Programs for promoting employee wellness• Consider introducing flexible work

(flextime, telework, etc.)• Upgrading education and training programs Allocation of staff to priority measures• Development divisions, medical divisions,

corporate divisions, etc.

22

Ortus Stage 2

Key Strategies(1) Structural reform(2) Innovation(3) Globalization(4) M&A

23

Ortus Stage 2

Key Strategy 1

Structural Reform

Ortus Stage 2

24

Action Plan for Structural Reforms
Maximizing Group Power by
Augmenting Collaboration

25

1

Strengthen collaboration in the sales andmarketing functions

2

Integration of engineering functions

3

Integration of production & logistics

4

Promotion of shared services

Action Plan for Structural Reforms

1

Strengthen collaboration in the sales andmarketing functions

Strengthen collaboration in the sales andmarketing functions
Maximizing the group power of Taiyo Nippon
Sanso by stepping up collaboration incustomer relations (CRM) among the groupcompanies (TNSC, Nissan Tanaka, Nippon
Ekitan, and Taiyo Nippon Sanso G&W).
→ Customer service beefed up by the groupas one entity.
Develop a total solutions business for themarket and customers based on a moreclose-knit, cooperative group.

* CRM: Customer Relationship Management

26

2Integration of engineering functions

Reinforce functions of engineeringorganizations


Unify the management of a wide variety ofengineers and secure mobility and flexibility inresponse to changes in business conditions.
Strengthen customer relations by unifying thegroup's elemental technologies anddeveloping engineers with multi-skilledcapabilities

Action Plan for Structural Reforms

3

Integration of production & logistics

Optimization of industrial gas operations


Optimizing industrial gas operation by

Promotion of shared services

Widen the target of shared services
Promote shared services for all domestic

integrating and operating the gas production

subsidiaries to strengthen internal controls,

technology department and logistics

ensure the quality of operations, and thedepartment.

efficiency and optimization of business.

Management integration of bulk gas
production facilities & Sanso centers toachieve higher efficiency and optimization.

27

4

Key Strategy 2

Innovation

Ortus Stage 2

28

Action Plan for Innovation Strategies

Innovation:
R&D

Innovation:
Engineering

Innovation:
Sales Approaches

Innovation:
Production & Logistics

New product development

Strengthen competitiveness ofASU

Upgrading service capability

Improve efficiency and cost
reduction on a company-widebasis

Create synergy with Mitsubishi
Chemical Holdings along thetheme of a harmonious
relationshipStrengthen capabilities of project
proposal & management

Innovation of sales approaches
for gas application

Improve transfer of in-house
technologies and skills, such as
in production

Open innovation

Strengthen global engineering
capabilities

Import material gases from ouroverseas supply chain for thedomestic market

Global expansion of existing
businesses & newly developed
products

29

Respond to gas needs ofMitsubishi Chemical Holdings

Ｏpen-innovation
Clean Technology
Developing products and technologies that promote the use ofclean energy

Core technology of
Taiyo Nippon Sanso

Electronics
Developing state-of-the-art materials for more sale of gases

Introduction of Outside
Technologies

Gas Technologies
Expanding scope of plant manufacturing and gas-related
technologies

30Improve efficiency and cost reduction on a company-wide basis
Reduce energy consumption through continuous effort as an energyconsuming industry

Gas Production Facilities

Customers
Tank Truck
Delivery

Optimization

CylinderDelivery

Filling
StationOptimize and maximize group operations
31

Key Strategy 3

Globalization

Ortus Stage 2

32

Basic Strategy
 TNSC strives to enhance the functions of its global operations (Global Operations Div.

Basic
Policyand regional holding companies), and the cooperation among global operations andcorporate functions, while strengthening cross-organizational management functions.
 By developing the Ortus Stage 1 strategy, TNSC intends to accelerate theimplementation of geographical expansion and the improvement of profitability withaggressive investment activities.

Basic Strategy
Enhancement of Governance

Growth Strategy

Strengthen the function of the Global Operations

Expanding business areas

Adding a planning management function and a marketing function to
the Global Operations Div. for reinforcement of the division.

Expanding production and sales shares to gain a scale advantage byacquiring new sales channels and manufacturer positions.

 M&A and large capital investments Creating group business synergy

Strengthen the function of regional holding companies
Further reinforcing the administrative and support functions ofregional holding companies, which are part of the corporate
functions in their regions, and to enhance the financial structuresof these regional holding companies. Assign a group CCO as theofficer responsible for promoting and implementing legal
compliance within the entire group. Assign regional CCOs inregional holding companies and promote the establishment of acompliance structure within each region.

* CCOs is the abbreviation of Chief Compliance Officers.

33

Total Electronics
Under the concept “Total Electronics,” a global strategic customer
management function will be created in China (Shanghai), where
capital investments will be concentrated, to meet customer
globalization trends in a flexible manner.

Enhancing Governance and Growth Strategy
GrowthStrategy

Regional Holding
Companies● Shanghai● Singapore

East Asia (China)
 Total Electronics function established Investments in facility to produce material

gases for semiconductors

Oceania Reinforcing manufacturing

position for industrial gases

South Asia & Middle East
 M&A (local gas manufacturers)

North America

 Making investments in ASUs

 Capital investments in ASUs and CO2(air separation units), CO2, H2and helium equipment

equipment

Southeast Asia
 M&A (Taking the first-mover advantage

in the new market)
 ASU, H2, CO2, and investment inspecialty gases* ASU: Air Separation Unit

34

 M&A (acquisition of distributors)

Key Strategy 4

M&A

Ortus Stage 2

35

M&A Support Strategies
Expand Business Territory and Reinforce
Operational Density

Acquiring New Products, Technologies and Supply
Chains

 Ensuring market presence

M&A Pursuing management efficiency

 Clean technology

including open
innovation

 Electronics
 Gas technology

Gasapplication

ASU
engineering

Gas separation,
synthesis and analysis
technology

Expansion of Medical
Business

Existing
Business
Areas* ASU: Air Separation Unit

36

M&A

 Medical gases

 Medical equipment

 Stable Isotopes

 Home healthcare Biotechnology

 Hospital facilities

Thank you

Ortus Stage 2

37

Reminders

The information contained here is not disclosure information for securities trading. The accuracy
and completeness of this information are not guaranteed.
The briefing session and this material describe future plans and strategies, as well as forecasts

and outlooks of business performance. These plans and strategies, as well as forecasts andoutlooks, are made by Taiyo Nippon Sanso based on its judgments and estimations made inaccordance with the information available at present. Actual performance will be subject tochanges caused by a variety of risks and uncertainties (such as economic trends, market demand,exchange rates, taxation systems and various other systems and institutions, but not limited tothem).
We wish to remind you, therefore, that the actual business performance may differ from theforecasts and outlooks made at this time. Please refrain from making investment judgments based
solely on this information.

38