March 8, 2017
Company Name:
Taiyo Nippon Sanso Corporation
Name of Representative: Yujiro Ichihara, President & CEO(TSE Code: 4091, First Section of the TSE)
Contact:
Hisataka Ose
General Manager, Public Relations/IR
Department(Telephone: 03-5788-8015)
Announcement of New “Ortus Stage 2” Medium-Term Management Plan
Taiyo Nippon Sanso Corporation (President Yujiro Ichihara) hereby announces that it has finalized
its new “Ortus Stage 2” four-year medium-term management plan starting in fiscal year ending
2018.
1. Positioning of the New Medium-Term Management Plan
The company set the “Ortus Stage 1” three-year medium-term management plan, started in FYE2015 focused on strengthening resources to increase global competitiveness and establish astrong position within the market. The new “Ortus Stage 2” four-year medium-term management
plan, starting in FYE 2018 is the second stage after “Ortus Stage 1” and will focus on the
promotion of profitable growth.
* Ortus: A Latin word meaning “beginning and birth”
2. Overview of the New Medium-Term Management Plan
(1) 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%

(2) 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)1

Safety, Quality and Compliance• Strengthen safety, quality, and compliance efforts• Strengthen collaboration with regional holding companies in overseas markets
undergoing business expansion
Accelerating R&D Strategy• Accelerate R&D with open innovation• Concentrate on prioritized development fields based on portfolio strategies• Make a larger contribution toward TNSC profitability
Globalization• Increase overseas M&A and capital investments• Establishing new business
Strengthening Corporate Functions• Implement human resource, information, and finance strategies• Strengthen corporate functions to provide stronger support to TNSC and groupcompanies(3) Policy by Segment
Gas Business in Japan
Consolidating our No. 1 position in Japan by expanding gas and gas-related businesses
and maximizing group synergy.
Gas Business in U.S.
Expansion of business areas, building depth of business in new business areas, andexpansion of product groups through active capital investment and M&A.
Gas Business in Asia and Oceania
Business expansion by improving market share in new regions and businessundertakings in unoccupied regions. Reinforcement of governance through regional
holding companies.
Thermos and Other Businesses
Expansion of businesses in global regions by fully utilizing our brand power.

2

(4) Investment Plan under the New Medium-Term Management Plan
We plan to carry out investments totaling ¥340 billion over a period of four years while
maintaining financial discipline. We will allocate 70% of all investments to strategic
investments, which include M&A and large-scale capital expenditures in Japan and abroad.
(5) Safety, Quality and Compliance
Steady implementation of technical risk management• Continue to improve technological capabilities and maintenance of vitality in Japan(TNSC, domestic affiliates)• Improve safety and technological capabilities overseas
Strengthening compliance• Strengthen the governance of the entire TNSC Group• Enact compliance measures commensurate with business risk
• Promote the effective operation of the internal control systems(6) Organization and Human Resource Policies
Reviewing the organizational structure• Organizational changes for promoting key strategies (as of April 1, 2017)
Human resource policies• Human resource development corresponding to globalization• Allocation of staff to priority measures• Reforming work style and promoting diversity(7) Key Strategies
Structural Reform (Total TNSC: Maximizing Group Power by Augmenting Collaboration)• Strengthen collaboration in the sales and marketing functions• Integration of engineering functions• Integration of production & logistics• Promotion of shared services
Innovation• Innovation: R&D (new product development, open innovation, etc.)• Innovation: Engineering (strengthen competitiveness of ASU, etc.)• Innovation: Sales approaches (upgrading service capability, etc.)• Innovation: Production & logistics (improve efficiency and cost reduction on acompany-wide basis, etc.)3Globalization• Enhancement of governance (strengthen the functions of global operations and regional
holding companies)• Growth strategy (expanding business areas, Total Electronics)* Total Electronics: a global strategic customer management function will becreated in China (Shanghai)
M&A• Expand business territory and reinforce operational density• Acquiring new products, technologies, and supply chains• Expansion of medical business
3. Policy on Returns to Shareholders
The company considers returns to shareholders one of its highest priorities, and seeks to perform
a dividend payout policy in a manner that fairly reflects its business performance while maintaining
stable dividend payouts. Going forward, we will strive to further improve our business performancebased on the strategic policy set forth in the new medium-term management plan, and we aim toraise consolidated dividend payout ratios during the period of the plan (FYE2018 – FYE2021).

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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)

31.4

35.2

43.3

52.0

54.0

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

Structural
ReformShift human resources to growth market

Result*(¥ billion)◎◎

Restructuring of domestic group companies △Optimize engineering function
Strengthen supply chain network
Promote in-house shared service function△○△

Optimize engineering function
Strengthen supply chain network

5.9

Open innovation

Strengthening collaboration with Mitsubishi Chemical
Holdings Group○
Global expansion of developed product
Expand overseas operations via strategic
investments

Globalization○

Localization of overseas operations◎

Australia etc.)◎

Strengthening collaboration with Mitsubishi
Chemical Holdings Group

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
Hawaii, Air Liquide USA, RGP and Supagas

Open innovation

Expansion of group products

Cultivation of global human resources (trainee
program)○

M&A

Restructuring of group companies

Global expansion of developed product◎(establishment of regional holding companies)
Implement IFRS

1.7

○

○

Promote in-house shared service function

Development of new products via businessdevelopment

Development of new products via businessdevelopment (H2 stations & water-18 O etc.) ◎Innovation

Issues of
Ortus Stage 2

3.9

Medical M&A
Innovation M&A* Changes in operating income from FYE2014.

5

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 tooverseas market growth and 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

FYE2021100
Japan

N. America

Asia and Oceania

1990 share

Others24%

Messer5%TNSC
5%Europe2014 share

Air Liquide
18%
BOC
14%

Praxair
Linde &
14%
AGA
Air
10%
Products
10%

Messer1%

Others17%

Airgas4%

Air Liquide
23%

TNSC
6%
Air
Products
12%

Linde
23%
Praxair
14%

Latin America

Middle East and Africa

Share if integration is achieved
Messer1%

Others17%
Linde +
Praxair
37%

TNSC
6%
Air
Products
12%
Air Liquide+ Airgas
27%

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

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)Strengthening Corporate
Functions
Implement human resource, information andfinance strategies

Safety, Quality and Compliance
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 groupcompanies

Accelerating R&D Strategy
Globalization
Increase overseas M&A andcapital investments
Establishing new businessAccelerate R&D with open innovation
Concentrate on prioritized development fields
based on portfolio strategies
Make a larger contribution toward TNSC
profitability

9

Policy by Segment

Gas Businessin JapanGas Business in
U.S.

Gas Business in
Asia and Oceania

Thermos andOther Businesses

10

Consolidating our No. 1 position in Japan by expanding gas andgas-related businesses and maximizing group synergy.

Expansion of business areas, building depth of business in new
business areas, and expansion of product groups through active
capital investment and M&A.

Business expansion by improving market share in new regions andbusiness undertakings in unoccupied regions. Reinforcement ofgovernance through regional holding companies.

Expansion of businesses in global regions by fully utilizing ourbrand 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
Overseas Revenue
Ratio

9.3％

9.5％

40.5％

45.0％

ROCE

8.6％

9.0％

12

Activities to Accomplish Financial Targets
FYE2021Core Operating Income ¥76 billion

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

76

54

Improve ROCE to

ROCE (％)(9.5％)(9.3％)

FYE2017

9.0％

FYE2021

8.6%

9.0
%

FYE2017

FYE2021

Measures for ExpandingCore Operating Income

Measures for Improving ROCE

Business expansion inside andoutside of Japan

Improving asset efficiency

Strengthening earning power

Improvement in profitability byimplementing structural reform
13

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 [net debit equity ratio] and other indicators)

14

Ortus Stage 2

Safety & Quality

Ortus Stage 2

15

Safety & Quality(Steady Implementation of Technical Risk Management)
Continue to improve technological capabilities and maintenance of vitality inJapan (TNSC, domestic affiliates)
Reinforce safety capabilities (fostering a culture“Establish facilities to teach potentialof safety)
hazards and the mastery of
Enhance technical capabilities by humantechnology”
resource 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, andeducation and training manuals)
Targeting “zero” work accidents and quality problems at each workplace

16Ortus Stage 2

Compliance

Ortus Stage 2

17Strengthening Compliance
Basic
PolicyTo strengthen the governance of the entire TNSC Group, enact
compliance measures commensurate with each business risk, andpromote 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

Rigorous education about important themes
Foster the TNSC Group Code of Conduct in groupcompanies
Education about important themes by regional CCOs
based on the socio-economic environment, laws andregulations, of each region
Regional CCOs thoroughly disseminate Global Code of
Conduct within the region.

Appointing group CCO and regional CCOs
Appoint a group CCO as the officer responsible for promoting
and implementing 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

Establish compliance promotion systems atoverseas bases
Conduct risk surveys and education programs as regards
country-specific risks
Strengthen collaboration with regional holding companies

Expand the compliance promotion system togroup companies
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

Strengthen the human resources in the compliancedivisions to reduce legal risk, enhance internal audits, andstrengthen internal control
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 theDevelopment & 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 tointegrate the functions 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 engineeringfunction (Development & Engineering Div.).

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 Office

Production &Logistics Div.

Internal
Control Office

Engineering
Div.

Plant
Engineering

Gas
Engineering

Gases Sales
Sec.

Electronics
Gases Sec.

Legal Dep.

Gases
Business
Div.

Electronics
EquipmentSec.

HR Dep.

Medical Div.

SI Sec.

Bio Medical
Sec.

Electronics
Overseas
Sec.

Planning &Strategic
Sales Sec.

Corporate
Planning
OfficeCorporate
Admin. Div.

On-site & Plant
Div.

On-site Sec.

Plant Sec.

Technological
Affairs Div.

Development
Div.

GlobalOperations
Div.

Energy Div.

Innovation
Sec.

GlobalOperations
Sec.

21

Human Resource Policy
Implementing Measures to Support Ortus Stage 2
Human resource development
corresponding to globalization

Reforming work style and promoting
diversity• Formulating a succession plan for the• Effectively matching human resources

global management of human resources• Hiring and fostering global humanresources• Upgrading education and training

programs

Allocation of staff to priority measures• Development divisions, medical divisions,

corporate divisions, etc.

22and diversity• Programs for promoting employee

wellness• Consider introducing flexible work

(flextime, telework, etc.)

BranchesOrtus Stage 2

Key Strategies(1) Structural reform(2) Innovation

Ortus Stage 2(3) Globalization(4) M&A

23

Key Strategy 1

Structural Reform

Ortus Stage 2

24

Action Plan for Structural Reforms
Maximizing Group Power by
Augmenting Collaboration

1

Strengthen collaboration in thesales and marketing functions

2

Integration of engineeringfunctions3

Integration of production &logistics

4

Promotion of shared services

25

Action Plan for Structural Reforms
collaboration in the
1 Strengthen
sales and marketing functionsof engineering
2 Integration
functions

Strengthen collaboration in thesales and marketing functions

Reinforce functions ofengineering organizations

Maximizing the group power of Taiyo
Nippon Sanso by stepping up
collaboration in customer relations(CRM) among the group companies(TNSC, Nissan Tanaka, Nippon Ekitan,
and Taiyo Nippon Sanso G&W).
→ Customer service beefed up by thegroup as one entity.

Unify the management of a wide

Develop a total solutions business forthe market and customers based on amore close-knit, cooperative group.

technologies and developing* CRM: Customer Relationship Management

26

variety of engineers and secure
mobility and flexibility in response tochanges in business conditions.
Strengthen customer relations byunifying the group's elemental
engineers with multi-skilledcapabilities

Action Plan for Structural Reforms

3

Integration of production &logistics

Optimization of industrial gas
operations

4

Promotion of sharedservices

Widen the target of sharedservices

Optimizing industrial gas operation by

Promote shared services for all

integrating and operating the gas

domestic subsidiaries to strengthen

production technology department

internal controls, ensure the quality ofand logistics department.

operations, and the efficiency andManagement integration of bulk

optimization of business.

gas production facilities & Sanso
centers to achieve higher efficiency
and optimization.

27

Key Strategy 2

Innovation

Ortus Stage 2

28

Action Plan for Innovation Strategies
Innovation:
R&D

Innovation:
Engineering

Innovation:
Sales Approaches

New product development

Strengthen
competitiveness of ASU

Upgrading service
capability

Improve efficiency and cost
reduction on a companywide basis

Create synergy with
Mitsubishi Chemical Holdings
along the theme of aharmonious relationshipStrengthen capabilities ofproject proposal &management

Innovation of sales
approaches for gas
application

Improve transfer of inhouse technologies andskills, such as in production

Open innovation

Strengthen global
engineering capabilities

Import material gases fromour overseas supply chain
for the domestic market

Global expansion ofexisting businesses &newly developed products

Innovation:
Production &Logistics

Respond to gas needs ofMitsubishi Chemical
Holdings

29

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

Core technology of
Taiyo Nippon Sanso

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

Introduction of Outside
Technologies

Gas Technologies
Expanding scope of plant manufacturing and gasrelated technologies

30Improve efficiency and cost reduction on a companywide basis
Reduce energy consumption through continuous effort as anenergy-consuming 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
Basic
PolicyTNSC strives to enhance the functions of its global operations (Global
Operations Div. and regional holding companies), and the cooperation
among global operations and corporate 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 with aggressive 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 scaleadvantage by acquiring new sales channels andmanufacturer positions.
M&A and large capital investments

Strengthen the function of regional holding companies

Creating group business synergy

Further reinforcing the administrative and support
functions of regional holding companies, which are partof the corporate functions in their regions, and toenhance the financial structures of these regional
holding companies. Assign a group CCO as the officer
responsible for promoting and implementing legal
compliance within the entire group. Assign regional
CCOs in regional holding companies and promote theestablishment of a compliance structure within eachregion.

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

* CCOs is the abbreviation of Chief Compliance Officers.
33

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
(air separation units), CO2, H2and helium equipment

Southeast Asia
M&A (Taking the first-moveradvantage in the new market)
ASU, H2, CO2, and investment inspecialty gases* ASU: Air Separation Unit

34

Capital investments in ASUs andCO2 equipment
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
Ensuring market presence

Acquiring New Products, Technologies andSupply Chains

M&A

Pursuing management efficiency

including open
innovation

Clean technology
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

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, aswell as forecasts and outlooks, are made by Taiyo Nippon Sanso based on its
judgments and estimations made in accordance with the information available atpresent. Actual performance will be subject to changes 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 the forecasts and outlooks made at this time. Please refrain from making
investment judgments based solely on this information.

38