May 14, 2009

Business Performance for Fiscal 2008
(on a consolidated basis)
1. Outline of business operations for fiscal 2008 (April 1, 2008 to March 31, 2009)(1) Operating results(Amounts less than ¥1 million are omitted.)
Net sales(¥ million)

Fiscal 2008
Fiscal 2007
Fiscal 2008
Fiscal 2007

(YoYchange)Operating income

Recurring income(YoYchange)(YoYchange)(¥ million)

495,746(2.4)%
507,718
10.7%
Earnings per share (Yen)
41.21
54.48

29,16438,783(24.8)%
6.3%(¥ million)

27,94838,510(27.4)%
3.9%

Net income(¥ million)(YoYchange)16,533
21,930(24.6)%
9.1%

ROE

ROA

Operating margin

8.6%
10.8%

5.2%
7.0%

5.9%
7.6%

Business performance for fiscal 2008
Overview
During the reporting term, the real economy worldwide was impacted by a financial sector
crisis originally triggered by the subprime mortgage loan problem in the United States. As aresult, major downturns in economic activity were seen in the Japanese economy. Added tohigh prices of raw materials and fuels, plus the rapid appreciation of the yen against major
currencies, this led to a sharp deterioration in the business environment.
Among the principal customer industries of the TNSC Group, the steel industry was hit
by a weak demand due to a steep decline in the number of construction starts (both forbuildings and houses), as well as a falloff in demand for high-end steel materials fromautomobile and electric appliance makers. As a result, crude steel production volume has been
declining sharply from the autumn onward. Chemical manufacturers, meanwhile, struggledwith higher raw materials prices due to the rise in oil prices, and also saw a decline in demandfor high-performance resins. As a result, ethylene production volume has plummeted.
Among other customer industries, electronic equipment and components makers –notably makers of semiconductor devices and flat panel displays (FPDs) – have suffered due toa decline in demand for digital consumer appliances, PCs, and automotive electronics, amongothers, resulting in drastic production cutbacks accompanying inventory adjustments. These
companies have consequently put off plans for capital investments for the time being, and an
integration and reorganization of production facilities has taken place, involving the closure ofsome manufacturing plants.
It was amid this decline in demand for the Group’s products by principal customer
industries that we commenced our new medium-term business plan, under the name of Stage
10 – Toward Becoming a Global Player: Part II. Our main goals under this plan are: 1) toaccelerate profitable growth; 2) to move further along the path to globalization; 3) to pursue
further cost reductions; and 4) to more closely integrate the operations of TNSC Group
companies. We have employed a variety of strategies in the pursuit of these four priority
themes.
During the reporting term, amid a rapidly worsening business environment we took
active measures to develop our business operations in regions of the world where we see good
growth prospects. These include North America and East/Southeast Asia, particularly China,
where strong growth is expected in the product fields of photovoltaic cells and light-emitting
diodes (LEDs). In Japan, we focused on achieving more thoroughly integrated and efficientGroupwide management, as well as on cost-cutting efforts.
In North America, which we regard as a promising growth market, we further
expended our operational base in the gas business. In March 2008 we acquired Five Star Gas& Gear, Inc. of Southern California, and in October we acquired Aeris, Inc. of Northern
California. Both these regional distributors were made into consolidated subsidiaries of TNSC.
To increase our gas production capacity in parallel with these acquisitions, we began
construction of new large-scale air separation plants in Texas and Iowa.
In East/Southeast Asia, our newly constructed air separation units in Singapore and thePhilippines came steadily online during the reporting term, contributing to the growth of ourgas operations. In China, we set up Taiyo Nippon Sanso (China) Investment Co., Ltd. with theaim of making further investments in the air separation plant construction project being
pursued by Dalian Changxing Island Taiyo Nippon Sanso Gas Co., Ltd. Over the near term,
we will be constructing an industrial gas supply system that will pave the way for further
business expansion in China.

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In Japan, meanwhile, we established the Sakai Gases Center Co., Ltd. to handle
expected strong demand for gas for use by electronics companies at the Manufacturing
Complex for the 21st Century being constructed by Sharp Corporation in Sakai City, Osaka
Prefecture. Construction of air separation facilities and piping is now ongoing with the goal of
supplying the principal industrial gases to the LCD plant located in the complex, which is due
to start operation in October 2009.
During the reporting term we established Taiyo Nissan Engineering Co., Ltd. as part ofour program of amalgamating and reorganizing the Group’s functions in the field of installationand maintenance of equipment for the supply of industrial gases, principally for the productionof electronic devices. The new company is expected to help raise the efficiency of the Group’s
operations in this area, and improve competitiveness.
In the medical gases field, we established MegaCare Services Kansai Co., Ltd. toexpand our operations in the at-home medical services field in the Kansai region.
In the bottled gas supply business (supply of gas in cylinders), our filling company
Kawaguchi Gas Center Co., Ltd. completed construction of a new filling plant boasting one of
the largest monthly filling capacities in Japan, at 800,000 cubic meters. The start of operationof this plant will help to raise the operational efficiency of our overall supply network and tolower labor costs.
In the field of welding and cutting equipment, we concluded a business tie-up
agreement with Koike Sanso Kogyo Co., Ltd. under which we have begun talks on theestablishment of a new company to undertake joint development and production. This will
facilitate the efficient development and production of competitive products, taking fulladvantage of the fund of expertise possessed by both companies.
As a result of these measures, demand in the first half of the reporting period for our
mainline gases, as well as our equipment and installation/construction services, heldcomparatively firm from the previous term. In the second half, however, a sharp drop in
demand was seen from our principal users and a wide range of other customer enterprises. The
business slowdown led to major production cutbacks and inventory adjustments, as well as
further declines in capital investment levels. As a result, the TNSC Group recorded a year-onyear decline of 2.4% in sales on a consolidated basis, to ¥495,746 million.

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Regarding earnings, we posted an increase in depreciation expenses accompanying ashortening of the useful life of property, plant and equipment in line with amendments totaxation legislation in fiscal 2008. Additionally, expenses for the amortization of goodwill heldby overseas subsidiaries rose as a result of changes in accounting standards, and electric power
costs were sharply higher than forecast. These negative factors were compounded by a steep
and sudden decline in demand from the start of second half. As a result, recurring income
registered a year-on-year decline of 27.4%, to ¥27,948 million. Extraordinary income wasposted on the sale of property, plant and equipment, but this was more than offset byextraordinary losses resulting from the costs of disposal of these assets, and losses on the saleof the assets. Consequently, the Group posted a net income of ¥16,533 million, for a decline of
24.6% from the previous term.
On a non-consolidated basis, sales were down by 2.0% at ¥267,047 million, recurringincome fell 32.8% to ¥14,672 million, and net income posted a sharp 39.8% decline, to ¥8,274
million.

Breakdown of business performance by operational segment
Gas BusinessSupply volume and sales of the Group’s mainline gases – oxygen, nitrogen, and argon – posted
figures in line with our expectations for the first half of the reporting term, both in Japan andoverseas, thanks partly to the effects of M&As. In the second half, however, the worsening
global business downturn caused a sharp drop-off in demand for gases. Demand from Japanesemanufacturers fell due to sharp cutbacks in production accompanying drastic inventory
reductions. As a result, year-on-year declines were recorded in both shipment volume andsales.
Shipments and sales of oxygen posted year-on-year declines due to a steep drop in
demand from large-lot users such as steel and chemicals manufacturers. Shipments and sales ofnitrogen remained roughly at the previous term’s level, thanks to a firm undertone in demand
from steelmakers, chemical companies, and electronics manufacturers for nitrogen for use inensuring process safety, for purging (protection from impurities), and for other qualityassurance purposes. Shipments and sales of argon fell from the previous year’s level owing to4steep falls in demand for use in stainless steel smelting, welding, and the manufacture of silicon
crystals, among other applications.
In the category of other industrial gases, demand for carbon dioxide from shipbuilders
held firm, but demand from automotive firms and construction machinery makers declined. As
a result, shipments and sales of carbon dioxide stayed at roughly the same level as the previous
term. Supply was tight for the raw-material gases from which carbon dioxide is derived, due to
production cutbacks by petrochemical companies, but the TNSC Group took steps to ensure
uninterrupted supply. Shipment volumes of helium to electronics makers and optical fiber cablemanufacturers registered a decline, but the Group was able to push through increased selling
prices in the North American and European markets, thanks to which sales rose over theprevious term.
A decline was seen in demand for hydrogen from the glass-making and electronics
industries, but we were able to keep sales at the previous term’s level.
Sales of LPG fell below the previous term’s level, due to the combined effect of asudden drop in imported oil prices against the background of the global economic downturn,and a sharp fall in industrial demand, also as a result of the downturn.
Demand for specialty gases remained steady in the first half of the reporting term,
thanks to production capacity increases implemented in the previous term by domestic
electronics makers, who are our principal customers. In the second half, however, sharp
production cutbacks were carried out by makers of semiconductor devices, LCDs, digitalconsumer appliances, and automotive components. In addition, capacity utilization rates at
Taiwanese semiconductor and LCD makers also fell dramatically. As a result of these factors,
sales of specialty gases posted a year-on-year decrease.
The electronics industry expects to see a strong increase in demand for photovoltaic
cells and LEDs on a worldwide scale, thanks to rising public awareness of the importance ofenergy conservation and environmental preservation initiatives. In view of this, in line with theGroup’s priority strategic stance, we are focusing management resources on products andservices targeting these growth industries. We are also collaborating with IBM in a project todevelop materials gases for use in technology for the production of next-generation
semiconductors, and with the Belgian research center Interuniversitaire Micro-Electronics

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Centrum vzw in a project to develop a production method for high-intensity green-light LED
devices.
As a result of the above, the Group’s Gases Business recorded sales of ¥329,813
million for the reporting term, for a year-on-year decline of 2.5%.
Machinery & Equipment Business
The TNSC Group’s machinery and equipment business was also heavily impacted by the global
financial crisis and its concomitant economic downturn. Our main customer industries madesharp cuts in expenditure on plant and equipment, and sales fell below the previous year’s levelin both the domestic and overseas markets.
In the field of electronics-related equipment, the Group sells a wide range of products
and systems to ensure safe and uninterrupted gas supplies, including gas piping systems,
exhaust gas purifiers, and gas purification systems. We also offer construction and maintenanceservices for such equipment. In the Japanese market, large-scale projects made steadyprogress, but a major fall in demand from digital appliance makers was seen in the latter half ofthe term, against the backdrop of the sudden economic downturn. This led to a drop in thenumbers of semiconductor devices and LCDs manufactured for installation in such digitalappliances, and all companies in the electronics industry implemented major cuts in their capital
investment plans. As a result, sales in this category by the Group failed to reach the previous
year’s level.
In the field of compound semiconductor manufacturing equipment (MOCVD),
although the Group experienced a slowdown in demand for such equipment for the productionof white-light LEDs, which are forecast to grow strongly for use as backlights in LCDs and as
general light sources, the basic undertone of demand was still firm. We have recently seen aresurgence in inquiries for large-sized models of compound semiconductor manufacturing
equipment, and we expect this to translate into increased orders as soon as the economy
bottoms out.
Shipments of welding equipment and welding materials to shipbuilding companies
posted a steady trend during the reporting term, in line with our expectations, as the
shipbuilders continue to hold a solid backlog of orders. On the other hand, a decline was seen6

in demand for welding equipment and materials from the transportation equipment andconstruction machinery industries, leading to a year-on-year decrease in sales.
In the field of the construction of air separation plants, as the deterioration of theeconomy became increasingly clear during the reporting term, moves to cut back on capital
investments were seen by customer industries such as steel, digital appliances, carbon fibers,
automobiles, and electronics (both in Japan and overseas), all of which had hitherto beenbullish on contracting for additional gas supplies.
Demand for cryogenic equipment from universities and research institutions registereda decline, and demand from government bodies for equipment related to aerospace researchcontinued to follow a long-term weakening trend. However, a resurgence was seen in privatesector plans for large-scale equipment, and we have hopes of receiving increased orders in thenear future.
Amid these business circumstances, orders received during the reporting term on thedomestic market amounted to 1 air separation plant, 1 oxygen compressor, and 1 nitrogencompressor. On the overseas market we received orders for 2 air separators and 3 nitrogenproduction plants.
As a result of the foregoing, sales for the reporting term by the Group’s Machinery &Equipment Business declined by 2.8% from the previous year, to ¥147,445 million.
Housewares Business and Others
In the Group’s production and sale of housewares, carried out principally by Thermos K.K.,
we enjoyed an increase in sales for the reporting term. This was attributable to good sales of
newly launched products and firm shipments of existing products including mainline sports
bottles, insulated mugs, and the Shuttle Chef slow-cooking pot. As a result, sales for thisbusiness rose 4.7% year-on-year, to ¥18,488 million.
2. Prospects for fiscal 2009
The economic downturn is expected to worsen on a global scale for some time to come.
Although Japan and other leading economies are taking concerted countermeasures, theoutlook remains extremely uncertain. It is likely to take quite some time before the economy
hits bottom and begins once more to follow an upward path. For the time being, at the TNSC

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Group we will continue taking every measure we can to reduce total costs and secure anadequate level of earnings.
Business performance forecasts for fiscal 2009(¥ million)
Net sales
Operating income
Recurring income
Net income
FY2009
450
27.4
24.6
13.3
FY2008
495.7
29.1
27.9
16.5
YoY decrease (%)
9.2
6.0
12.0
19.6
Note: For the purposes of these forecasts, the average exchange rate of the Japanese yen against the U.S. dollar
in fiscal 2009 is assumed to be ¥95/$1.

3. Results by operating segment
Fiscal 2007 (April 1, 2007 to March 31, 2008)(Millions of yen)
MachineryandEquipment
Business

Housewares
Business andOthers338,347

151,717

17,653507,718-

507,718

19

11,720150

11,890(11,890)-

338,366
307,42130,945

163,438
153,037
10,40017,804
15,871
1,932

519,608
476,331
43,277(11,890)(7,396)(4,494)

507,718
468,934
38,783394,125
22,50733,31275,1782,121
2,081

19,322647
826

488,626
25,27636,22058,611
230
49
40

547,237
25,50649
36,260Gas
Business
I. Sales and operating
incomeSales(1) Sales to externalcustomers(2) Sales from intersegment transactions andtransfers
Total
Operating expenses
Operating income
II. Assets, depreciation,
impairment and capital
expenditures
AssetsDepreciation
Impairment loss
Capital expenditures

8

Total

Eliminations or
Corporate

Consolidated

4. Fiscal 2008 (April 1, 2008 to March 31, 2009)(Millions of yen)
MachineryandEquipment
Business

Housewares
Business andOthers329,813

147,445

18,488495,746-495,746

20

23,36257

23,441(23,441)-

329,834
307,384
22,449170,807
159,219
11,587

18,546
16,3132,232

519,187
482,917
36,269(23,441)(16,335)(7,105)495,746466,582
29,164

390,458
25,141
58,86279,7572,454
7,939

19,405767
667

489,62128,36367,46944,729(23)
141(1,459)534,350
28,339141
66,010Gas
Business
I. Sales and operating
incomeSales(1) Sales to externalcustomers(2) Sales from intersegment transactions andtransfers
Total
Operating expenses
Operating income
II. Assets, depreciation,
impairment and capital
expenditures
AssetsDepreciation
Impairment loss
Capital expenditures

Total

Eliminations or
Corporate

Consolidated

Notes
1. Segmentation method
Products (whether developed and/or made in-house or by other companies [i.e. bought-in
merchandise]) are allocated to one of the three segments of the Gas Business, the Machineryand Equipment Business, and the Housewares Business and Others.
2. The principal products and services included in the three segments are shown in the tablebelow.
Business segment
Main products
Oxygen, nitrogen, argon, carbon dioxide, helium, rare gases such as
xenon and neon, hydrogen, medical gases(oxygen, dinitrogen
Gas Businessmonoxide), specialty gases (semiconductor materials gases, standard
reference gas), dissolved acetylene, liquid petroleum gas (LPG), othergases, stable isotopes, equipment lease
Cutting and welding equipment, welding materials, cylinders,
semiconductor related engineering/equipment, semiconductor
manufacturing equipment, medical equipment, air separation plants(oxygen, nitrogen, argon, rare gases), cryogenic air separation plants,
Machinery andultra-low-temperature equipment, high-vacuum equipment, pressure
Equipment Businessswing adsorption (PSA) gas generators, hydrogen generators, gas
compressors, gas expanders, liquefied gas storage/pumps, vacuum
brazing, atomic power/space development equipment and other related
equipment
Stainless steel vacuum bottles(household, laboratory), vacuum thermalHousewares Business insulation cooking pots, assembly, processing and inspection ofand Others
electronic components, maintenance of facilities, other outsourced
business9

5. Results by geographical segment
Fiscal 2007 (April 1, 2007 to March 31, 2008)(Millions of yen)Japan
I. Sales and operating
incomeSales(1) Sales to externalcustomers(2) Sales from intersegment transactions
Total
Operating expenses
Operating income
II. Assets

North
America

Other countries

Total

Eliminations or
Corporate

Consolidated

393,227

84,83329,656

507,718-

507,718

5,762

13,1283,178

22,069(22,069)-

398,990369,542
29,447
311,037

97,962
87,94010,021
121,374

32,83430,7782,056
40,479529,787
488,261
41,525472,890(22,069)(19,326)(2,742)
74,346

507,718
468,934
38,783547,237

Fiscal 2008 (April 1, 2008 to March 31, 2009)(Millions of yen)Japan
I. Sales and operating
incomeSales(1) Sales to externalcustomers(2) Sales from intersegment transactions
Total
Operating expenses
Operating income
II. Assets

North
America

Other countries

Total

Eliminations or
Corporate

Consolidated

383,936

82,00629,802495,746-495,746

7,177

9,985

3,298

20,461(20,461)-

391,114368,386
22,728324,729

91,992
83,462
8,529
102,332

33,101
31,513
1,587
34,653516,208
483,362
32,846
461,715(20,461)(16,779)(3,682)
72,635495,746466,582
29,164534,350

Notes
1. Principal countries in the North America and Other Countries segments are as follows:(1) North America: The United States of America(2) Other countries: Singapore, Malaysia, Philippines, China, Taiwan etc.

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