Focused on Growth. Driven by People.

2019

Integrated Report
Year Ended March 31, 2019

Philosophy

Guiding Principles“Market-driven
collaborative innovation:
Improving the future
through gases”

Progressive, united in creativity,
forward-looking
We pledge to listen to the views of
stakeholders and to contribute—throughboth our gas technologies and collaboration
with partners in other industries—tothe creation of a spiritually andmaterially wealthy society.

We pride ourselves on our ability to act on customer feedback and to partner witha wide range of industries to help improve the quality of life. Market responsivenessand collaborative innovation are our two core values. These values are at the heartof everything we do as we shape the future through gas technologies, craftinga harmonious relationship between people, society and the planet.
We are the Taiyo Nippon Sanso Group, where professionals come together.

Disclosure System
This report contains important basic information that Taiyo Nippon Sanso particularly wishes to communicate to stakeholders.
For more detailed non-financial information, please visit the CSR section of the Company’s corporate website.

Financial information
ImportantPrintedreportWebsite(Updated)

Detailed

Non-financial information

Integrated Report 2019
Basic information on the Company’s overall operating activities

IR information

CSR information

Detailed financial and

Detailed information

share/shareholder

on the Company’s

information for

CSR initiatives forinvestors

all stakeholders

https://www.tn-sanso.co.jp/en/ir/

https://www.tn-sanso.co.jp/en/csr/

CONTENTS
Our Business ModelESG Information

The Taiyo Nippon Sanso Group’s Value Creation Process .....2

The Taiyo Nippon Sanso Group’s ESG Initiatives .................30

Milestones in Value Creation .................................................4

Corporate Governance .......................................................32

The Taiyo Nippon Sanso Group’s Business Model ................6

A Dialogue Between the Outside Directors .........................36
Members of the Board of Directors, Members of

Our Strategic Focus

the Audit & Supervisory Board and Executive Officers.......40

A Message to Stakeholders ..................................................8Working with Stakeholders .................................................44

The Taiyo Nippon Sanso Group’s Financial Strategies .........14

Environmental Protection Initiatives .....................................46
Non-Financial Highlights .....................................................48

The Front Line of Value Creation
Special Features

Financial and Corporate Information

Technologies That Support Efforts to Ensure Safe,

Six-Year Summary ..............................................................50

Secure and Stable Supplies of Industrial Gases ................16

Management’s Analysis of Operating Results and

Health, Integrity and Resourcefulness:

Financial Position ..............................................................51

Fostering the Next Generation of The Gas Professionals ...18

Consolidated Financial Statements .....................................54

Strategic Perspectives ........................................................20

Investor Information ............................................................91
Global Network...................................................................93
Corporate Data...................................................................94

Editorial Policy
We strive to guarantee management transparency and believe in the importance of building relationships of trust with stakeholders throughdialogue. Accordingly, in this report we place a priority on ensuring that stakeholders understand our overall value creation process. Since fiscal
year 2017, we have published an annual integrated report. The purpose of this report is to provide financial information, including that related tocorporate strategies and operating conditions, and non-financial information, such as that related to environmental protection and social contribution initiatives and to corporate governance. Information has been selected with consideration to relevance to give shareholders, investors andother stakeholders an accurate overall picture of the Taiyo Nippon Sanso Group, its operating activities and its approach to value creation.
In response to feedback from stakeholders, we enhanced the content of our integrated report 2019 as outlined below.
SectionPrincipal content

Pages

A Message to Stakeholders

Progress in the first year of the Ortus Stage 2 medium-term management plan andoutlook for the remaining years

8–13

The Taiyo Nippon Sanso
Group’s Financial Strategies

Medium- to long-term financial strategies, including financing strategies related to major
acquisitions in fiscal year 2019

14–15

Strategic Perspectives

Segment reports (performance, strategies and key initiatives) from the executives incharge20–29

Corporate GovernanceManagement structure and information on the Company’s governance system

32–35

Non-Financial Highlights

Key ESG-related data

48–49

Scope of Reporting
This report covers the activities of Taiyo Nippon Sanso and the companies of the Taiyo Nippon Sanso Group. In principle, non-financial
information is for Taiyo Nippon Sanso and its Group companies in Japan and overseas, although in some cases the scope varies.
Period Covered
Data in this report is for fiscal year 2019, ended March 31, 2019, although some fiscal year 2020 activities are also featured.
Guidelines Used
This report was prepared in accordance with Guidance for Integrated Corporate Disclosure and Company–Investor Dialogue for Collaborative
Value Creation, published by the Ministry of Economy, Trade and Industry; Environmental Reporting Guidelines (2018 Edition), published by
Japan’s Ministry of the Environment; and the GRI Sustainability Reporting Guidelines (2013), published by the Global Reporting Initiative (GRI).

Taiyo Nippon Sanso Corporation | Integrated Report 20191

The Taiyo Nippon Sanso Group’s Value Creation Process
We continue working to address key social imperatives, thereby helping to create social value and increase economic value
and at the same time achieving continued growth. Industrial gases, the raw material for which is air, an infinite resource,play a key role in modern life, supporting everything from basic industries such as steel and chemicals to cutting-edge
fields such as electronics and medicine. Going forward, we will endeavor to increase the application of our state-of-the-art
gas technologies with the aim of responding to issues that affect society and the environment, contributing to sustainability
and enhancing our corporate value.

Management foundation

Business domains

Corporate philosophy“Market-driven collaborative innovation:
Improving the future through gases”• Ortus Stage 2(medium-term management plan)• Compliance• Risk management• Corporate governance

Page 9Industrial gases
Management resources

Electronics-related
products

Stable supplies that
support diverse industries

Provision ofstate-of-the-art solutions

Technologicalprowess Page 16• Stable production of high-grade
products• Production of air separation units• Product development capabilities
derived from gas control
technologies

Reportable segments• Gas Business in Japan• Gas Business in the United States• Gas Business in Europe

Supply base Page 16• Gas Business in Asia and Oceania• Safe and stable supply capabilities• Multiple supply modes• Four-hub global supply network• Thermos

Sales channels• Extensive sales and service network• Robust supply chain centered on
official dealers• Supply network

Human resources Page 18• Diverse global labor force ofapproximately 20,000 individuals• Ability to foster human resources
with the ability to drive sustainablegrowthFinancial foundation• Ability to generate stable cash flows• Fund-raising capabilities

Group capabilities• Extensive product and service
portfolios• Broad network of business bases

2

Taiyo Nippon Sanso Corporation | Integrated Report 2019

MedicalEnergySupply of medical gases andstable isotopes

Environment-friendly LPG that
supports modern lifestyles

Outputs

OxygenO2Nitrogen

OxygenO2Nitrogen

N2

Provides Bistranza-brandproducts, which represent
applications of nitrogenfilled packaging, freezing
and other food-related gas
technologies

Nitrogen

N2

Argon

Ar

CarbondioxideNitrogen

N2

Value chain• Development
and production

Food

Installs on-site plants at
steel production facilities
that ensure stable supplies
of industrial gases, thereby
supporting increased production efficiency

N2

Plant andengineering
Production of top-class
air separation units

SteelElectronicmaterials
gases• Supply

CO2

ChemicalsLife sciences/medical

Provides stable supplies ofnitrogen, essential to thesafety of many production
facilities, via pipeline networks extending acrosslarge-scale industrial
complexes

Produces Water-18O stable
isotope, used in reagents for
positron emission tomography(PET) diagnostics through theapplication of air separation
technologies, and has established the world’s mostextensive supply framework

OxygenO2Nitrogen

N2

Electronics

EnergySupplies nitrogen andelectronics materials gases
from total gas centers(TGCs) built on sites
adjacent to large-scale
semiconductor fabs

Supplies environmentfriendly, safe LPG for
use in homes, as wellas in commercial andother premises

LPG

Transportationequipment andmachinery• Sale• Use by various
industries
Oxygen

O2

Argon

Ar

Supplies gases for cutting
and welding, as well as ofrelated equipment and materials, to automobile manufacturing facilities, shipyards
and construction sites

アセチレン
Acetylene

C2H2

Outcomes
Earth

ThermosSociety• Efficient use of resources and energy• Contribution to maintenance of physical health• Response to climate change• Contribution to medical care
• Response to food and agriculture-related issues

A pioneer in vacuuminsulated bottles with adiverse product range• Increase in consumer satisfaction

People (Companies and organizations)• Product and service reliability• Human development and training• Occupational health and safety• Respect for human rights• Promotion of measures to improveinformation security and privacy• Diversity and inclusion• Contribution to communities• Stakeholder engagement

Taiyo Nippon Sanso Corporation | Integrated Report 20193

Milestones in Value Creation

Since our creation, we have pursued swift global expansion
through a forward-looking program of mergers and acquisitions (M&As) and capital investments. Today, our global
network currently spans four key geographic hubs: Japan,
the United States, Europe, and Asia and Oceania. Having set
targets of consolidated revenue of ¥910.0 billion, core operating profit of ¥100.0 billion, a core operating profit marginof 11.0%, an ROCE of 7.1% and an overseas revenue ratioof 55.0% for fiscal year 2021, the final year of our current
medium-term management plan, Ortus Stage 2, we arepressing ahead with active efforts to ensure these targets
are achieved.

5.9%

507.7

(Billions of yen)

300.0

29 countries andterritories

Production facilities

Core operating profit

130-plus¥ 65,819 million

Overseas revenue ratio

Labor force

47.9%

19,229Operatingprofit2005

Equipment
and installation
5%

Bulk gases
30%

Electronicsrelated
products Consolidated revenue
17%¥ 740,341 million

Gas-related
equipment
8%

4Industrial gases
70%
On-site gases
12%

Packaged gases
11%

Taiyo Nippon Sanso Corporation | Integrated Report 20192006

Nippon Sanso Corporation
Taiyo Toyo
SansoCo., Ltd.

1910
Nippon Sanso isestablished under thename Nippon Sanso Ltd.

Thermos
4%

38.7
29.1

26.7

20.7

Taiyo Sanso
Co., Ltd.

Energy4%

36.4(Billions of yen)

Toyo Sanso K.K.

Hard goods
9%

495.7

458.5

Global presence

Number 4

Gases
12%

6.7%

Net sales(As of March 31, 2019)

Medical4%
Plant andengineering
1%

7.6%

397.3

Business Scale

Global industrial gases
market8.0%
Operatingprofitmargin6.9%

1918
Toyo Sanso K.K.
is established
1946
Taiyo Sanso Co., Ltd.
is established
1995
Taiyo Toyo Sanso Co., Ltd.
commences operations

2007

2008

2009

2004

Created as Taiyo Nippon
Sanso Corporation
October 2004
Taiyo Nippon Sanso is createdthrough the merger of Nippon Sanso
and Taiyo Toyo Sanso
2004
Develops Water-18O, a pharmaceuticalingredient for reagents used in PET
diagnostics
2006
Acquires Linweld Inc., an industrial
gases production and marketingcompany in the western and central
United States
Purchases helium source contracts
and other related assets of the former
BOC Group plc (currently Linde plc) in
the United States and Europe
Acquires all shares in Hitachi Sanso
K.K. and changes the company’s
name to Taiyo Nippon Sanso
Higashikanto Corporation

Core
operatingprofitmargin
8.0%

9.4%

9.3%
8.9%

7.3%

740.3
6.5%

6.4%

6.3%
6.0%
5.3%

483.6

477.4

Revenue
594.4

559.3

646.2
581.5

522.7

468.3

433.3

Core
operatingprofit
47.4
35.4
27.5

2010

31.4

31.0

65.8
60.0
54.7

35.2

24.8

2011

2012

2013

2014

2015

Japanese GAAP2008
Establishes Dalian Changxing Island
Taiyo Nippon Sanso Gas Co., Ltd., in
China and installs air separation unit2009
Acquires Valley National Gases LLC,
the largest independent industrial
gases distributor in the United States
2010
Acquires Western International Gas
and Cylinders, Inc., a leading U.S.
wholesale supplier of acetylene
2012
Acquires Singapore-based industrial
gases and welding equipment
manufacturer Leeden Limited

2016

2017

2018

2019

IFRS

2014

2017

Start of Ortus Stage 1
medium-term management plan

Start of Ortus Stage 2
medium-term management plan2014
Acquires U.S. carbon dioxide gas manufacturer
Continental Carbonic Products, Inc.

2017
Establishes JFE Sanso Center Co., Ltd.’s
Kurashiki Plant

Becomes a wholly owned subsidiary of
Mitsubishi Chemical Holdings Corporation2015
Acquires Australian liquefied petroleum gas(LPG) and industrial gases distributor Renegade
Gas Pty Ltd
2016
Acquires a portion of the U.S. gas businessof France’s Air Liquide S.A., together withrelated assets

2018
Establishes TNSC Technical Academy
Acquires a portion of the European gases
business of U.S. firm Praxair, Inc.
2019
Commences production and sales of Water-17O,
a pharmaceutical ingredient for reagents usedin magnetic resonance imaging (MRI)
Acquires a portion of Linde Gas North America
LLC’s HyCO business2013
Launches Hydro Shuttle package-typehydrogen refueling station

Taiyo Nippon Sanso Corporation | Integrated Report 20195

The Taiyo Nippon Sanso Group’s Business Model
Technological development, production, supply and sales in our mainstay industrial gases businessOur core competency—our ability to provide safe and stable supplies of industrial gases—
reflects technological development, production, supply and sales capabilities accumulated
over the years since our creation. These capabilities are important assets that will continue
to underpin sustainable growth in the years ahead.

Technologicaldevelopment

Technological development capabilities that create value

We work to grasp the needs of customers and, by leveraging our gas technologies,
to help them address key challenges.

Product development thatleverages core technologies

Open innovation

Efforts to enhance product development,
supply and facility-related technologies
and feedback received

Feedback from
customers

Production capabilities:
Ability to produce stable supplies of high-purity industrial gases

Production

We provide safe and stable supplies of a diverse range of industrial gases required by customers
using highly energy-efficient production equipment.

Production and supply technologies
built up over nearly a century

Raw materials

Rigorous safety, quality andtechnological management

Separation/rectification

Products

Air separation unit

Air separated
gases

OxygenO2(Typical industrial gases)

Air

Production
process

Other industrial
gases

Principal supplymodes
On-site gases
Bulk gases
Packaged gases

CarbondioxideHydrogen

N2

Ar

CO2
O2

Helium

H2

LPG

He

CO2

H2

He
*2

*1 Electronics specialty gas*2 Thanks to the acquisition of a HyCO business, we are now able to supply hydrogen via pipeline.

6

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Nitrogen

Argon

N2

Ar

ESG *

1

LPG

Acetylene

C2H2

ESG

C2H2

Investments
in growth• Capital investments• Business investments(including M&As)• Investments in R&D

Returns toshareholders

Value ofbusiness activities(Cash)

Financialsoundness

Customers
Proposals that yield new value and products/efforts tomaintain or add depth to relationships with customers

Sale
Creation of newvalue and efforts
to further
enhance productdevelopment
and quality

Responsiveness and ability to address issues thatenhance relationships of trust with customers

We help customers address issues and to create new value by extending proposals
for gas types, flow rates, pressures, supply formats and backup systems that
respond to their unique needs.

Sales activities

Quality assurance

Gas engineering

Safety training

Introduction of products
and services, developmentof proposals, acceptanceof orders

Various initiatives that
ensure worry-free
products

Joint development withcustomers (applications
for gas technologies)

Protecting customers
and customers’ gasfacilities

SupplyAbility to supply gases in the manner thatbest suits customer needs

We provide safe and stable supplies of a diverse range of industrial gases required by customers
using the optimal supply mode.
On-site gases

Bulk gases

We install on-site plants on sites
adjacent to the customer’s site andsupply gases through pipelines on acontinuous basis.

We install liquefied gas tanks and otherfacilities on the customer’s site andsupply gases in a manner appropriate
to the method of use.

Tanker truck

Packaged gases
We deliver gases to customers incylinders for supply in a manner
appropriate to the method of use.

Filling station

Gases are liquefied at our
production facility and transported
to customers by tanker truck.

Taiyo Nippon Sanso Corporation | Integrated Report 20197

A Message to Stakeholders

Contributing to a society that enjoys
both spiritual and material wealth by
pursuing the development of innovative
gas technologies
In line with our philosophy, “Market-driven collaborative
innovation: Improving the future through gases,” we haveworked consistently to contribute to the realization of a spiritually and materially wealthy society by capitalizing on ourgas technologies to work in collaboration as a vital partner tocompanies in a host of industries, including steel, chemicals,
electronics, automobiles, construction, shipbuilding, foodand healthcare.
Since our founding in 1910, we have grown in tandemwith Japan’s industrial sector. We subsequently expanded
into overseas markets, beginning with the creation of arepresentative office in Singapore and a local subsidiary in
the United States in 1980. Subsequent efforts focused onbroadening our operations in the United States, as well as
on establishing a presence in China, Southeast Asia, India
and other Asian markets. In 2015, we entered the Australianmarket. In December 2018, we acquired a portion of theEuropean business of U.S. company Praxair, Inc. As aconsequence, our global network currently spans four key
geographic hubs: Japan, the United States, Europe, andAsia and Oceania.
We are grateful for the ongoing support of our stakeholders,
without whom the sustained growth we have enjoyed to datewould not have been possible. To fulfill the responsibilities
implied in our corporate slogan, “The Gas Professionals,”
we remain committed to fulfilling our responsibility to maintainsafe and secure supplies of gases for our customers aroundthe world, as well as contributing to a society that enjoys
both spiritual and material wealth by pursuing the development of innovative technologies. To this end, we will remain
attentive to the views of customers and continue to advancethe development of new gas technologies.
It is my hope that readers find this year’s integrated report
both informative and interesting and that it contributes to abetter understanding of the Taiyo Nippon Sanso Group today
and its goals for the future.
September 2019
Yujiro Ichihara
Representative Director, President CEO

8

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Ortus Stage 2: Progress to Date
In fiscal year 2018, ended March 31, 2018, we embarked on
our current medium-term management plan, Ortus Stage 2,
which will guide our efforts through fiscal year 2021. Taking
into account the impact of two large-scale acquisitions infiscal year 2019, that is, a portion of Praxair’s European

business and a portion of Linde Gas North America LLC’s
HyCO business, we have revised our targets for the final yearof the plan.
Note: “Ortus” is a Latin word meaning “beginning” or “birth.”

Initial targets
for the final year of Ortus Stage 2(Fiscal year 2021)

Revised targets
for the final year of Ortus Stage 2(Fiscal year 2021)¥800.0 billion¥910.0 billion

76.0 billion

100.0 billion

Core operating profit margin

9.5%

11.0%

Overseas revenue ratio

45.0%

55.0%

ROCE

9.0%

7.1%

—

1.27 times

RevenueCore operating profit

Adjusted net D/E ratio
Note: Exchange rates used: ¥110.00/U.S.$1.00, ¥125.00/€1.00

Ortus

Final year of
Ortus Stage 1

Stage

2
¥910.0¥890.0¥740.3

Revenue(Billions of yen)¥646.2¥581.5Core
operatingprofit¥95.0¥100.0(Billions of yen)

¥54.7

¥60.0

¥65.8

2017
Actual (IFRS)

2018
Actual (IFRS)

2019
Actual (IFRS)

2020
Forecast (IFRS)

2021
Target (IFRS)¥581.5¥646.2¥740.3¥890.0¥910.0Core operating profit*

54.7

60.0

65.8

95.0

100.0

Core operating profit margin

9.4%

9.3%

8.9%

10.7%

11.0%

Overseas revenue ratio

40.8%

43.3%

47.9%

55.0%

55.0%

ROCE*2

8.4%

8.4%

6.2%

6.6%

7.1%

—

—

1.54 times

1.38 times

1.27 times

Years ended/ending March 31

Revenue
1

Adjusted net D/E ratio*

3*1. Core operating profit is calculated by subtracting losses (nonoperating items) produced by nonrecurring factors from operating profit. Nonrecurring factors include
structural reform charges, including costs associated with business downsizing or withdrawal, special severance payments; losses due to disasters or major
accidents; and other factors such as the disposal of idle assets.
*2. Return on capital employed (ROCE) = Core operating profit / (outstanding interest-bearing debt + equity attributable to owners of parent)*3. Adjusted net debt-to-equity (D/E) ratio = (Net interest-bearing debt – equity-type debt) / (equity attributable to owners of the parent + equity-type debt)
Equity-type debt is debt procured through hybrid financing that has been recognized as equity credit by ratings agencies (50% of the procured amount); hybrid
financing is a form of debt financing that has features resembling equity, including voluntary deferral of interest, extremely long-term redemption periods andsubordination during liquidation or bankruptcy procedures.

Taiyo Nippon Sanso Corporation | Integrated Report 20199

A Message to Stakeholders

Acquisition of Praxair’s European Business and Linde’s U.S. HyCO BusinessResources Accumulated to Date Contribute
Substantially to the Conclusion of Important
Large-Scale Acquisitions
Recent years have seen a steady realignment of the global
industrial gases market. In 2016, France’s Air Liquide S.A.,
at the time the global leader in the industrial gases market,
acquired U.S. firm Airgas, Inc., while in 2017, then-number
two Linde AG of Germany and then-number three Praxair
reached an agreement to merge. Against this backdrop,
since fiscal year 2018 we have promoted a variety of decisive
measures in line with our Ortus Stage 2 medium-term management plan with the aim of swiftly establishing a position
that ensures competitiveness with major global players.
Since the Linde–Praxair agreement, antitrust authorities
reviewed the merger, as a result of which it was ruledthat approval of the transaction was conditional on bothcompanies divesting a portion of their existing businesses.
Recognizing this as a tremendous opportunity to dramatically bolster our presence in the global industrial gases market, we moved to acquire the portion of Praxair’s European
businesses being sold off.* To execute the acquisition, weorganized a team comprising a select few in-house humanresources and external experts who reported directly to thepresident. In-house team members also included executives
from U.S. subsidiary Matheson Tri-Gas, Inc., with extensive
experience making acquisitions in the United States, whoplayed a key role in negotiations with Praxair and with pertinent authorities. High marks given our track record andtechnological capabilities in the manufacture and supply ofindustrial gases by the European Commission also had apositive impact. Moreover, thanks to the positive evaluationof our stable earnings performance by financial institutions
and ratings agencies we were able to borrow the entire
amount required for the acquisition. Valuable resources
accumulated over our years in business thus contributed
substantially to the successful conclusion of this importantlarge-scale acquisition.
*Following Praxair’s sale of a portion of its European businesses, a review ofthe merger by the U.S. Federal Trade Commission determined that Linde
would sell its HyCO business in the United States. Through Matheson Tri-Gas,
we concluded an agreement with Linde Gas North America to acquire thisbusiness.

Acquired European Businesses
Enjoy Outstanding Profitability
The European businesses acquired from Praxair include
industrial gas businesses in Germany, Spain, Portugal, Italy,
Norway, Denmark, Sweden, the Netherlands and Belgium,

10

Taiyo Nippon Sanso Corporation | Integrated Report 2019carbon dioxide gas businesses in the United Kingdom,
Ireland, the Netherlands and France, and helium-related
businesses.
We subsequently created the brand “Nippon Gases” tobe used by the European operating companies in thesebusinesses and established a holding company in Madrid,
Nippon Gases Euro-Holding S.L.U., to serve as our regional
headquarters for Europe. Our gas business in Europe now
generates annual revenue of approximately ¥170 billion,
ranking it second behind our gas business in the UnitedStates, but its stable profit base means that it is top in terms
of profit margin.
Through this transaction, we also gained intact
the acquired businesses’ talented personnel, including
its top management team, and its business platforms.
Efforts to integrate these businesses with our existing
European businesses are proceeding at a favorable pace.
The business is also moving ahead with a number of major
investment projects that it had put on hold prior to being
acquired. These include projects in promising areas new
to the Taiyo Nippon Sanso Group, including the installationof an air separation unit for the salmon farming industry inNorthern Europe and efforts to reinforce a refrigerant gas
business in Italy. Going forward, we will also take steps torealize synergies by collaborating to develop and deploy
strategic products, notably electronics materials gases andhelium, and optimizing supply chains.

HyCO: An Example of Open Innovation
The HyCO business separates hydrogen (H2) and carbon
monoxide (CO) from feedstock such as natural gas andsupplies it to the petroleum refining and petrochemicalindustries on a large scale through pipelines. The HyCO
business that we acquired from Linde Gas North America
encompasses all related assets, including five U.S. HyCO
plants employing a technology called steam methane
reforming (SMR), pipelines, remote monitoring centers,
human resources, supply technologies and existing supply
contracts. We have more than half a century of experiencein the supply of air separated gases from large-scale on-siteplants. This acquisition has enabled us to expand the scopeof our operations by adding new products to our lineup,
underscoring its importance as an example of open innovation. Looking ahead, we will work to strengthen our ability tooffer proposals for new on-site projects in the United States
as well as to deploy newly gained capabilities in other regions
where we have operations.

Global Network Spanning Four Key Geographic Hubs

Emerging onto a Still Wider Stage
Charting Steady Growth and Striving to Become
a Stronger, Better Company
Our Ortus Stage 2 medium-term management plan
outlines five basic strategic policies and carries over four
key strategies of its predecessor, Ortus Stage 1, which aresummarized as “structural reform,” “innovation,” “globalization” and “M&A.” Through the steady execution of thesestrategies, we will aim to become a stronger, better company
by further expanding our global industrial gases businesses
and our Thermos business, which encompasses a variety ofhousewares, and further enhancing our profitability.

Challenges Ahead
Ortus Stage 2 identifies four key challenges.

• Promote globalization
Capitalize on regional networks and competitive strengths toenhance comprehensive Group capabilities, facilitating thefurther expansion of the scale of our operations.
• Improve financial healthWork to create a stable flow of cash provided by operating
activities, facilitating the systematic reduction of interestbearing debt and an improved net debt-to-equity ratio.
• Step up safety, quality and compliance initiatives
Step up efforts to ensure safety, quality and compliance inJapan and overseas with the aim of establishing a stronger
business foundation that will underpin sustainable growth.

• Expand domestic gas business
Chart sustainable growth by maximizing synergies between
our gas business and our gas-related businesses, including
equipment and services, in Japan, and strengthen profitability
by restructuring production and logistics.

Taiyo Nippon Sanso Corporation | Integrated Report 201911

A Message to Stakeholders

Five Basic Policies
Expanding domesticgas business

Safety, quality andcompliance

Accelerating
R&D strategy• Expand gas-related
businesses such as
equipment, in addition
to the gas business• Sustain growth ofbusinesses in Japan(M&As inside Japanand changes to sales
channels)• Strengthen safety,
quality and complianceefforts• Strengthen collaboration with regional
holding companies
in overseas markets
where businesses are
expanding• Accelerate R&D with
open innovation• Concentrate onprioritized development fields based on
portfolio strategies• Make a larger
contribution to
profitability

Globalization

Strengthening
corporate functions• Increase overseas
M&As and capital
investments• Establish new
businesses• Implement humanresource, informationand finance strategies• Strengthen corporate
functions to provide
stronger support to
TNSC and Group
companies

Four Key Strategies
1. Structural reform

Maximize Group power by augmenting
collaboration• Strengthen collaboration insales and marketing functions• Integrate engineering functions• Consolidate production andlogistics• Promote shared services

3. Globalization

Enhance governance• Strengthen the functions of global operations• Strengthen the functions of regional holding
companies

Growth strategies• Expand business areas• “Total Electronics”

Strengthening Global Management
With the realization of a global network spanning four
geographic hubs, revenue in overseas markets is expectedto account for more than 50% of our consolidated revenue infiscal year 2020. To reinforce our global management framework and ensure it better reflects our operations, in June2019 Matheson Tri-Gas Chairman and CEO Thomas Scott

12

Taiyo Nippon Sanso Corporation | Integrated Report 2019

2. Innovation

Promote innovation by capitalizing on external
resources and IoT• Innovation in R&D• Innovation in engineering• Innovation in sales approaches• Innovation in production and logistics

4. M&A

Seek promising M&A opportunities to ensuresustainability and accelerate growth• Expand business territory and reinforce
operational density• Acquire new products, technologies andsupply chains• Expand medical business

Kallman and Nippon Gases Euro-Holding Chairman andPresident Eduardo Gil Elejoste, who oversees our gas businesses in the United States and Europe, respectively, joined
our Board of Directors. Looking ahead, we will continue
working to promote the optimal allocation of management
resources and fortify corporate governance from a global
perspective.

Segment Consolidated Revenue and Core Operating Profit
Years ended/ending March 31

Ortus Stage 2

Final year of
Ortus Stage 1

Revenue(Billions of yen)¥910.0¥890.0¥740.3¥100.0¥95.0¥646.2

Gas Businessin Japan¥581.5
¥54.7

¥65.8

¥60.0

Gas Businessin the United StatesCore
operatingprofitGas Business
in Europe
Gas Businessin Asia and Oceania(Billions of yen)

Thermos Businesses

2017
Actual (IFRS)

2018
Actual (IFRS)

2019
Actual (IFRS)

2020
Forecast (IFRS)

2021
Target (IFRS)

Breakdown of Targets for the Final Year of Ortus Stage 2 (Fiscal Year 2021)
Second year of Ortus Stage 2(Fiscal Year 2019)

Revenue

Thermos Businesses
4%
Gas Businessin Asia and Oceania
14%
Gas Business
in Europe
8%

Thermos Businesses3%
Gas Businessin Asia and Oceania
12%¥740.3(Billions of yen)

Gas Businessin the United States
25%
Thermos Businesses
13%

Core
operatingprofitGas Businessin Asia and Oceania
13%
Gas Business
in Europe
9%
Gas Businessin the United States
22%Core operating profit margin

Overseasrevenue
ratio

Final year of Ortus Stage 2(Fiscal Year 2021)¥65.8(Billions of yen)

Gas
Business
in Japan49%¥910.0Gas Business
in Europe
20%
Gas Businessin the United States
23%

Thermos Businesses
9%
Gas Businessin Asia and Oceania
13%
Gas
Business
in Japan
43%(Billions of yen)¥100.0(Billions of yen)

Gas Business
in Europe
28%

8.9%

Gas
Business
in Japan
42%

Gas
Business
in Japan30%

Gas Businessin the United States
20%

11.0%

47.9%

55.0%

Note: Fiscal year 2019 figures for the Gas Business in Europe segment are for the four months ended March 31, 2019.

Taiyo Nippon Sanso Corporation | Integrated Report 201913

The Taiyo Nippon Sanso Group’s Financial Strategies

We are executing decisive
investments designed toensure the swift restorationof a sound financial structureand support future growth.
Yoshifumi Koide
Executive Officer
Executive General Manager,
Corporate Administration Division

Progress Under Ortus Stage 2
Fiscal Year 2019 in Review

Outlook for Fiscal Year 2020

Our operating environment in fiscal year 2019 benefited fromfirm production levels in both domestic and overseas manufacturing industries, as a consequence of which shipments of
air separated gases (oxygen, nitrogen and argon) were favorable. In contrast, in electronics-related products, shipmentsof electronics materials gases for use in certain product areas
declined in Japan. Against this backdrop, we reported consolidated revenue of ¥740.3 billion, an increase of 14.6%, or¥94.1 billion, and core operating profit of ¥65.8 billion, up
9.6%, or ¥5.8 billion. Nonetheless, profit attributable to owners of parent declined ¥7.7 billion, to ¥41.2 billion, owing primarily to the absence of a ¥12.2 billion taxes decrease inincome taxes recorded in fiscal year 2018 as a result of areduction of the federal corporate income tax rate in the
United States. Discounting this factor, profit attributable toowners of parent would have risen ¥4.5 billion.

Our initial consolidated results forecasts for fiscal year 2020,
announced on May 13, 2019, call for revenue of ¥890.0 billion in fiscal year 2020, up 20.2%, or ¥149.7 billion. We also
forecast core operating profit of ¥95.0 billion, an increase of
44.3%, or ¥29.2 billion, and profit attributable to owners ofparent of ¥57.0 billion, up 38.0%, or ¥15.8 billion. The principal factor behind these sizeable improvements is the inclusion of a full year of results for our recently acquired industrial
gases business in Europe and HyCO business in the UnitedStates and medical equipment sales company IMI Co., Ltd.,in Japan. We also expect net cash provided by operating
activities to rise ¥31.9 billion, to ¥130.5 billion, and free cash
flow to reach ¥35.1 billion.

Swiftly Restoring a Sound Financial Structure
Using Adjusted Net Debt-to-Equity Ratioas an Indicator of Financial Soundness
In making plans for raising funds for major acquisitions infiscal year 2019, we took into account the outstanding

14

Taiyo Nippon Sanso Corporation | Integrated Report 2019

profitability of the acquired businesses, as well as the need to
avoid a decline in capital efficiency due to stock dilution, as
well as to maintain financial soundness. Accordingly, we procured ¥250.0 billion, approximately 40% of the necessaryfunds using hybrid financing*1, thereby maintaining an “A”
credit rating. Going forward, we will work to reduce interestbearing debt, as planned, primarily by using cash flows
generated by the acquired businesses, to restore a soundfinancial position. We have added an adjusted net D/E
ratio*2—a key management indicator—of 1.27 times to our
Ortus Stage 2 targets for fiscal year 2021, an improvementfrom 1.54 times in fiscal year 2019. Beyond fiscal year 2021,
we will take steps to bring this down to below 1.0 times as
swiftly as possible.
*1 Hybrid financing is a form of debt financing that has features resembling
equity, including voluntary deferral of interest, extremely long-term
redemption periods and subordination during liquidation or bankruptcy
procedures.
*2 The adjusted net D/E ratio is calculated taking into account the amount ofdebt procured using hybrid financing that has been recognized as equity
credit by ratings agencies (50% of the procured amount).

Promoting Capital Efficiency
To date, we have sought to ensure capital efficiency in Japanand the United States by using a cash management system.
In Europe, we have established a financial subsidiary to centralize the management of settlements among Group companies in the region and of exchange rate risk, and are in theprocess of building a system that facilitates more efficient
capital management. We will also seek to ensure the effective use of assets, promoting the creation of capital throughongoing efforts to reduce cross-shareholdings, as well as
through the sale of idle assets.

Financial Soundness and Investments in GrowthIn fiscal year 2019, the second year of Ortus Stage 2, weinvested a total of ¥765.2 billion, including in the acquisitionof a business in Europe. As a consequence, we will significantly exceed the ¥340.0 billion estimated for investments
over the four years of the plan. Although some investment
plans have been reassessed, in light of the increase in net
cash from operating activities resulting from these acquisitions we currently plan to invest approximately ¥200.0 billion
over the remaining two years. This will include capital investment in the acquired business in Europe that will be larger
than usual because certain projects were put on hold prior to
the acquisition. With due consideration given to our financial
position, we will also promote investments designed to drive
business expansion in Japan and overseas.
As indicated above, we currently forecast net cash fromoperating activities in fiscal year 2020 of ¥130.5 billion. In
the near future, we anticipate that this will rise to around¥140.0 billion. Once investments in Europe have stabilized,
in approximately two years later, we also expect free cash
flow to exceed ¥60.0 billion. Accordingly, we are confident in
our ability to steadily reduce interest-bearing debt. Assuming
this proceeds as planned, we expect our adjusted net D/E
ratio to fall below 1.0 times in fiscal year 2023.

Outlook for the Restoration of Financial Soundness and Net Cash Provided by Operating Activities

Thanks to sustainable growth in existing businesses and the outstanding profitability and stable resultsof newly acquired businesses, we expect net cash provided by operating activities to increase steadily.

Net Cash Provided by Operating Activities

Free Cash Flow

Years ended/ending March 31

Years ended/ending March 31(Billions of yen)(Billions of yen)

200

90

150

60

100

30

50

0

-700

0
2018
Actual2019
Actual2020
Forecast

2021
Target2022
Estimate

2023
Estimate

2024
Estimate

2018
Actual2019
Actual2020
Forecast

2021
Target2022
Estimate

2023
Estimate

2024
Estimate

Taiyo Nippon Sanso Corporation | Integrated Report 201915

SPECIAL FEATURE

1Technologies That Support Efforts to Ensure Safe,
Secure and Stable Supplies of Industrial Gases
The mission of the industrial gas business is to ensure safe, secure and stablesupplies of high-purity industrial gases. Advanced technologies and know-how
for the safe production, supply and transport of industrial gases are essential tothe continuity of this business. In this special feature, we highlight our extensive
technologies and know-how, focusing on our core air separated gases business.

Capitalizing on Technologies, Know-How andExperience in the Industrial Gases Business
Accumulated over More than 100 Years
Taiyo Nippon Sanso predecessor Nippon Sanso, a plant
manufacturer, realized Japan’s first air separation unit in1935. We still design and produce air separation units today
at our Keihin Factory in Kawasaki, Kanagawa Prefecture.
Founded in 1910, we have more than a century of experience in the production and supply of industrial gases. Our
technologies, expertise and experience in the supply ofgases via pipeline from large-scale on-site plants, whichdate back to the 1960s, are equal to those of any of ourcompetitors around the world.
The technologies and know-how underpinning our industrial gases business are diverse, but the most critical arethose used in the area of plant and engineering, that is, ineverything from the design through to the maintenance of air
separation units, which produce air separated gases; in plant
operations, which facilitate the stable and efficient productionof industrial gases at gas production facilities; and in supply
operations, which enable safe and stable supplies of gases
to customers. Equally crucial are various initiatives that support safety and security and which are thus crucial to building
relationships of trust with customers. These include our quality management, which ensures our ability to maintain thequality expected by customers, and safety education, which
ensures the safety of the environments in which our gases
are used.
We will continue to build on our technologies and knowhow in the years ahead to create systems that ensure safe

16

Taiyo Nippon Sanso Corporation | Integrated Report 2019and stable supplies in locations around the world. We will
also continue working to further enhance our technologicalcapabilities with the aim of continuing to earn the trust ofsociety.

Production and Supply of Industrial Gases
and Related Technologies
Engineering

Production

Installation

Plant and Engineering

Ability to provide services encompassing everythingfrom design to maintenanceAir separated gases (oxygen, nitrogen and argon) are produced
simultaneously by separating atmospheric air into its constituent
gases. The production equipment used varies substantially depending on the separation technology employed. We use state-of-the-art
cryogenic air separation units, which boast a high capacity andyield ultrahigh-purity air separated gases, that are built at the
Keihin Factory. At this facility, we leverage our plant construction
technologies, which are among the world’s most advanced, toprovide comprehensive services encompassing everything fromdesign and production through installation, trial operation and poststart-up maintenance, as a team of professionals in the area of air
separation units.

The Presidential Policy Directive on Technology Risk Management
The President of TNSC requests all the Group members to comply
thoroughly with the applicable laws, regulations and rules as “theGas Professionals,” and herewith has established the following policyon the risk management of public safety/security, quality, products
safety, environmental sustainability and strategy of intellectual
properties, that are essential to running our business.
All the Group members are expected to:• thoroughly comprehend this policy and put it into practice,• minimize the risk of loss by planning, doing and continuously
improving the corporate risk management system and business
continuity plan to cope with disasters, e.g., large-scale
earthquakes,• make sincere efforts to raise customers’ satisfaction over ourbusiness activities,• obtain and maintain social credibility by achieving public safety
and security, and contribution to environmental sustainability of theplanet Earth,• pursue a sound prosperity of our business and an enhancementof our corporate value.

Public safety and security:
We TNSC implement voluntary activities for safety assurance basedon our motto of “Selling gas is selling safety.”
Quality:
We TNSC accurately identify the sophisticated and diversifying
needs of customers and society, and offer the services and productsof the best suited quality in response.
Products safety:
We TNSC offer safer and more reliable products by minimizing
dangers inherent over the life of the products.
Environmental sustainability:
We TNSC drive action to reduce the impact on the global
environment and prevent pollution.
Intellectual properties:
We TNSC, by obtaining the exclusive right of intellectual properties
and exploiting them, protect our business from patent litigation thatmight be imposed by other parties.

Initiatives to Support Technologies
TNSC Technical Academy:
Improving Group Technological and Safety Capabilities
As a company that handles compressed gases, we recognizethat fostering our employees’ ability to sense danger and hazard
awareness is critical. In June 2018, we established the TNSCTechnical Academy, a training facility designed to further bolster
techniques for preventing industrial gas-related accidents andensuring technical skills are passed on to subsequent generations. The laboratory is set up to anticipate all types of accidents
and problems that employees on the front lines might face, creating a framework that makes it possible for Group employees fromaround the world to participate in training. The academy also
provides TNSC Technical Seminars, which focus on instillingunderstanding of basic technologies.

Gas production

Technologies for Optimizing Factories
The production of our core gases and liquid products uses a considerable amount of electric power and thus accounts for a significant portion of the Taiyo Nippon Sanso Group’s overall impact on
the environment. We thus recognize the reduction of electric
power consumption at our factories as a priority for us and aretaking steps to update facilities by replacing existing equipmentwith new high-efficiency alternatives and improving equipment
operating methods, as well as by promoting improvements thatleverage cutting-edge IT, including those used in AI and IoT.
Notable examples include technologies for optimizing combinations ofgases generated by multiple air separation units by analyzing operational
data and for optimizing turbines forgas liquefaction equipment, both ofwhich have earned high marks forhelping reduce electric power consumption without the need for capital
investment. Looking ahead, we will
deploy these technologies acrossthe Group with the goal of further
reducing our environmental impact.

Gas supplies

Gas consumption

Plant Operations

Supply Operations

Ability to ensure stable, efficient production of gases

Ability to ensure safe and stable supplies of gases

The stable, efficient production of air separated gases depends on
improving the skill levels of plant operators, as well as on ensuring
careful everyday operational and equipment management at ourfactories. At steelworks (blast furnaces and converters) and chemical
production facilities, among others, the disruption of industrial gas
supplies, that is, the stoppage of equipment, leads to breakdowns
and accidents. For this reason, advanced plant operations andmaintenance technologies are crucial to maintaining required gas
flow rates, pressure and quality, thereby facilitating uninterrupted
around-the-clock production 365 days a year. We provide practicaleducation, including training for emergency situations, using aproprietary air separation unit simulator developed for this purpose.
We also provide diverse training aimed at improving technical andsecurity capabilities.

Conditions of use for air separated gases, including the amount andpressure thereof, vary depending on the nature of the customer’ssite. Accordingly, we provide gases in the most appropriate supply
mode, including through pipelines from on-site plants or by tanker
truck for storage in tanks located at the customer’s site. In addition
to ensuring strict adherence to safe driving rules by companies
responsible for conveying and supplying gases by tanker truck, wework as one to improve the awareness and technologies of employees involved in supply operations who handle pressurized gases.
We also ensure that customers correctly understand the nature anddangers of the gases they use, i.e., of suffocation due to the lackof oxygen, frostbite caused by low-temperature liquefied gas, fires
and explosions resulting from oxygen enrichment by promoting
self-protection initiatives and holding regular safety workshops.

Taiyo Nippon Sanso Corporation | Integrated Report 201917

SPECIAL FEATURE

2

Health, Integrity and Resourcefulness:
Fostering the Next Generation of
The Gas Professionals
Our ability to fulfill our mission as a provider of industrial gases is supported by
the efforts of individual employees to put the concept of safe, secure and stablesupplies into practice. In this special feature, we look at our human resources
development efforts, through which we foster the skills and sense of duty that
underpin our identity, captured in our corporate slogan, “The Gas Professionals.”

Balancing Basic Training and Training
Tailored to Historical Context and Position

Basic Themes of Human Resources Development

Our human resources development efforts center on four
key themes, summarized as “Globalization,” “The Gas
Professionals,” “Customer Needs” and “Integrity.” These
themes are rooted in the ideas of health, integrity andresourcefulness. “Health, integrity and resourcefulness are
the three key qualities we look for in employees,” says
Executive Officer Satoshi Wataru, Executive General
Manager of Human Resources and Chief Health Officer(CHO). “In addition to fostering the basic skills necessary fora businessperson, the Human Resources Division emphasizes educating employees on the importance of thesequalities, which are essential to their growth as people.”
Our training framework consists of hierarchical, selective,
optional and theme-specific training, which are provided by
the Human Resources Division and division-specific training
designed to cultivate specialized skills. (For more details,
see Social Initiatives—Relations with Employees in the
CSR section of our corporate website.) Training for new
employees is particularly distinctive, with every employee
required to participate annually for his or her first five years
in the Company.
Another part of basic employee training that has a focus
of attention in recent years is line manager training. The
issue of communication gaps
between supervisors andemployees resulting fromdifferences in education fromone generation to another andthe increasing diversification ofvalues continue to draw attention in everyday society. In
response, in fiscal year 2018
we began offering training forline managers.

Human resources
development that
accommodates further
globalization

Human resources
development that trains“The Gas Professionals”

Human resources trainingthat addresses customer
needs

Human resources trainingthat emphasizes
strengthening integrity

Satoshi Wataru

Executive Officer
Executive General Manager,
HR Division and Corporate Planning Office;Chief Health Officer

18

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Key Employee Qualities and Conduct

HealthIntegrity

Resourcefulness

1. Understands the importance of occupational
health and safety (looks after his or her own
health and helps create positive working
environments)
2. Displays a positive attitude (has a positive
attitude and see things through)3. Demonstrates organizational capabilities(uses communication to overcome limited
personnel levels and maximize teamwork)
1. Earns customer trust (exhibits a dedication tostable supplies and quality assurance andresponds with sincerity)
2. Exhibits a well-formed character (maintains
an agreeable temperament and promotes
mutual trust and respect)
3. Endeavors to fulfill responsibility to society(works to comply with safety, security andenvironmental standards, as well as with andsocial norms)
1. Knows the customer (responds tocustomers’ expectations and interests)
2. Knows himself/herself (works to realize
personal goals and acquire knowledge andskills crucial to a professional and strives toact independently)
3. Knows society (strives to be open, graspchanges and looks to the future)

“Prior to this, there was no training for managers beyond
that provided to individuals newly promoted to management positions,” explains Tomoyasu Azuma, managerof the Human Resources Division’s Human Resources
Development Team. “This, plus the fact that as a company
we place an emphasis on the role of line managers, encouraged us to focus on this. Line manager training has proved
effective in enhancing awareness and has led to changes in
how participants’ perception perceive their subordinates.”
Another important focus is on responding to globalization.
Approximately half of the participants in our global training
program in Japan, which was launched in 2007, have subsequently been assigned to positions overseas or to positions
that involve working closely with our overseas bases. In
2016, we launched the Overseas Trainee Program, whereby
employees are dispatched to overseas Group companies forapproximately nine months of on-the-job training. To date,a total of 11 individuals have taken part in this program,enabling them to gain valuable experience.
“The global training program, which aims to improve thebasic ability of employees to function in a global businessenvironment, has been in existence for more than a decade,”says Mr. Wataru. “However, given recent qualitative changes,
namely an increase in the number of new hires who alreadyhave overseas experience gained through, for example,
studying abroad, I think that a review of this program is inorder. We are also considering the introduction of global
leadership training.”

Creating a Framework for Fostering Human
Resources, Including through the Creationof Positive Working Environments
The other principal focus of our efforts besides employee
training is the creation of positive working environments.
As indicated by Taiyo Nippon Sanso’s Health Management
Declaration, announced in 2017, we are actively promoting
initiatives to support employee health and reform work styles,

as well as advancing in-houseglobalization and diversity.
“In recent years, we have
expanded hiring of female
graduates and individuals
who have studied overseas,”
Mr. Azuma elaborates. “Wealso actively seek to hire midcareer candidates and foreign
nationals, both largely new for
us. While we have always had
Tomoyasu Azuma
Managerquite an open atmosphere,
HR Development Team
we continue striving to create
HR Division
positive working environmentsthat are conducive to job satisfaction, enabling us to maintaina comparatively low voluntary separation rate.”“Personally, I think that what is really required to work for
Taiyo Nippon Sanso is a sense of responsibility,” says
Mr. Wataru. “A resolute determination to ensure that gas
supplies are never interrupted, even in the event of a majordisaster, is in our DNA. This is something that is passed
down more through experience than through training.
However, with the progress of globalization and an increasing
number of mid-career hires, it can be difficult to ensure that
all employees share the same awareness. At the same time,
the presence of such individuals brings in new ideas andstimuli to which we would otherwise not have access.
Accordingly, training and mechanisms that bring together
diverse values will be important going forward.”
By providing training tailored to the changing times andevolving requirements, we will continue working to enhance
the skills of each and every employee, as well as to passdown the essence of our identity as The Gas Professionals to
subsequent generations. Through such efforts, we will continue working to ensure safe, secure and stable supplies ofindustrial gases.

Training Programs
Training for Line Managers

Global Training (Selective)

Developed with the aim of improving the skills of managers andline managers, this program focuses particularly on responding tochanging views and the increasing diversification of work styles. In
addition to management lectures given by external speakers on such
topics as the achievement of goals and fostering subordinates, thisprogram includes training in performance evaluation, i.e., how toevaluate employees, provide feedback and conduct performance
reviews; labor management; and compliance training, among others.
By enhancing managers’ ability to communicate logically with theirsubordinates, we aim to nurture managers who can assign targets totheir subordinates and effectively leverage their capabilities. Training
for line managers is currently offered twice annually with the aim ofreaching all lines within three years.

Against the backdrop of a rapidly globalizing industrial gases industry, we provide training with the aim of fostering employees who arecapable of functioning in a global business environment and canthus play an active role both in Japan and overseas and enhancing
their basic capabilities. In fiscal year 2019, a total of 16 employees
participated in the global training program. In principle, training is
conducted entirely in English by instructors who are foreign nationals. Training encompasses seven sessions, including final presentations, held over approximately six months and covers such topics as
mind-set, logical presentation skills, business model generation,case studies, negotiating proficiency and leadership skills. In addition
to improving language capabilities, training seeks to cultivate theconfidence and presentation skills necessary to express one’s own
opinions clearly and effectively whenever and wherever necessary.

Training made use of workshops to further encourage awareness.

Approximately 180 employees have participated in the global training program to date andare leveraging their experiences overseas in their current positions.

Taiyo Nippon Sanso Corporation | Integrated Report 201919

Strategic Perspectives

Gas Businessin JapanTaiyo Nippon Sanso is Japan’s
leading manufacturer of industrial
gases, with a domestic market
Market Presence andshare of approximately 40%.
Competitive Advantages
Taiyo Nippon Sanso Group companies in this business include
Nippon Ekitan Corporation,
Japan’s top supplier of carbon dioxide gas and dry ice;
Nissan Tanaka Corporation, a manufacturer of cutting
and other equipment; and Taiyo Nippon Sanso Gas andWelding Corporation, which provides welding materials.
As a comprehensive supplier of industrial gases andperipheral products, with a product range encompassing diverse industrial gases, as well as plants andequipment, we offer a full selection of products andservices to customers in diverse industries, including
steel, chemicals, electronics, automobiles, shipbuilding,food and healthcare.

Outline of Business

Fiscal Year 2019 in Brief
Revenue: +5.5% from fiscal year 2018
Revenue increased, underpinned byrevenue from JFE Sanso Center’s
Kurashiki Plant.
Electronics-related Falling shipments of electronics
products
materials gases pushed revenue down.
Revenue was bolstered by the
Medical-relatedacquisition of medical equipment sales
products
company IMI Co., Ltd.
Industrial gases

Segment Profit: –5.0% from fiscal year 2018
Industrial gases

Interview: Growth Strategies for the Domestic Gas
Q1 What is your perceptionof the current operating
environment in Japan?
In addition to Japan being amature economy, work stylereforms and a decline in the labor
force have spurred labor shortages. In this environment, we areseeing increasingly active investments across all industries toimprove efficiency and reducelabor requirements, as well as
to enhance product quality and
Kenji Nagata
differentiate offerings. This,
Member of the Board,
together with changes brought
Senior Managing Executive
about by innovation, as well as
Officerby autonomous driving, AI, IT
Executive General Manager,
and digital technologies, is sparkGases Business Division
ing a fundamental transformationof companies.
In the area of industrial gases, innovation is driving
advances in burner technologies, which enhance energy
efficiency, and in gas technologies used in, for example,
additive manufacturing (3D printers); modified atmospherepackaging (MAP), a food packaging process; agriculture;
and aquaculture.
We transport bulk gases to customers’ sites using
approximately 800 tanker trucks and other large vehicles
and are currently promoting decisive efforts to streamline andoptimize our logistics. To address the critical challenge ofimproving working conditions for drivers, it is also necessary
for consignors to promote measures aimed at improving theefficiency and effectiveness of supply chains. However, this is
not something that we can resolve on our own, so in fiscal
year 2020 we will ask customers to bear a portion ofrelated costs.

Profit decreased, as rising fuel prices
pushed up costs.

Electronics-related Declining sales of electronics materials
products
gases led to a decline in profit.
Medical-related
products

Profit was bolstered by the acquisition of
IMI Co., Ltd.

Revenue and Segment Profit
Years ended/ending March 31(Billions of yen)

The key concept underlying the action plan developed for our“structural reform” strategy, one of four strategies of our Ortus
Stage 2 medium-term management plan is “Total TNSC,” bywhich we mean maximizing the power of the Taiyo Nippon
Sanso Group by strengthening collaboration among Group
companies. Guided by this concept, Group companies work
together closely, rallying strengths to enhance customer
service and reinforce market influence and competitiveness,
as well as to bolster sales by extending comprehensive gas
solutions that encompasss both gases and related equipment.

20

Taiyo Nippon Sanso Corporation | Integrated Report 2019

400

40

300

30

200

20

100

10

0

0
2014

Revenue

2015
2016
Japanese GAAP
Segment profit

2016
IFRS

2017

2018

2019

2020
Forecast

2021
TargetNote: Effective from fiscal year 2019, other businesses currently accounted for in the Thermos and Other Businesssegment were shifted to the Gas Business in Japan and the segment was renamed the Thermos Business.
Accordingly, the basis for calculating the revenue and segment profit forecast for fiscal year 2019 differsfrom that used for calculating segment revenue and income reported for the years up to and including fiscal
year 2018. Calculated on the same basis as the fiscal year 2019 forecast, segment revenue and core
operating income in fiscal year 2018 would have been ¥2.5 billion and ¥0.6 billion lower, respectively, thanreported results.

Business
Q2 Can you tell us about the principal measures
you plan to pursue in fiscal year 2020?
In industrial gases, we will step up innovation and advancing
the Total TNSC concept. To promote innovation, we will reinforce efforts to develop applications for gas technologies insuch fields as combustion, heat treatment, processing andfood packaging, as well as to fortify our soft capabilities,
including our ability to provide safety services and assist customers in modifying processes. In the area of air separated
gases (oxygen, nitrogen and argon), we will seek to differentiate our offerings by enhancing both hard and soft deliverables. On the soft side, in addition to leveraging our diverse
customer base, a key competitive advantage, we will workwith other companies that have extensive expertise in soft
services, positioning us to provide solutions that we would
not be able to extend independently.
The response to our efforts to advance the Total TNSC
concept has been tremendous. We will reinforce our ability
to offer comprehensive solutions in collaboration with Group
companies, including Nippon Ekitan, Nissan Tanaka andTaiyo Nippon Sanso Gas and Welding, which have alreadyyielded multiple successes. We will also work with Group
service companies such as Japan Fine Products, Taiyo
Nippon Sanso Engineering Corporation and Cryo One Inc.,in line with our goal of advancing cross-Group efforts to differentiate our products and service. Our focus in the domestic industrial gases business will thus be on value creationand differentiation.
In fiscal year 2018, we augmented our medical businessportfolio, which currently centers on the supply of medical
gases and the provision of products for home medicalcare, respiratory therapy and biotechnology, and of stable
isotopes, by acquiring medical equipment sales company
IMI. We are confident that the ability to offer our medical
products and services through IMI’s robust sales channels
will further enhance the sustainability of this business.
In the area of energy-related products, we aim to capitalizeon the nationwide consumer LPG network of Group LPG
manufacturer Taiyo Nippon Sanso Energy Corporation tobroaden synergies in the LPG business of Japan’s leadingindustrial gases manufacturer. We will continue working togrow this business by proposing conversion from heavy
crude to LPG as an attractive solution.

Q3 What are the principal growth strategies
for the gas business in Japan?
One of the basic policies of Ortus Stage 2 is to expand ourdomestic gas business. Against a backdrop of active innovation in many industries, demand for industrial gases is
expected to continue to increase steadily. To ensure sustainable growth, the provision of solutions that integrate hardand soft deliverables will continue to be a core strategy. To
date, we have grown our electronics-related products business by expanding our lineup beyond the supply of gases toinclude the provision of electronics-related materials and theinstallation of equipment such as cylinder cabinets, purifiers,
abatement systems and bulk specialty gas supply systems(BSGSs), thereby responding to the needs of customers. We
see such an approach, which emphasizes incorporating
technologies, know-how and other soft capabilities accumulated over many years to expand business scope as also
being ideal for the industrial gases business.
Taiyo Nippon Sanso possesses a wealth of important basic
technologies. These include gas control, high-pressure, highand low-temperature control and processing (welding andcutting) technologies. It is important that we look beyond
simply supplying gases by leveraging these basic technologies to offer tailored solutions. One of the distinguishingfeatures of the industrial gases businesses is that it involves
local production for local consumption. That said, we haveintroduced applications developed by Group companies in
Europe and the United States into Japan and vice versa.
Maximizing the resulting benefits will continue to be essential
to the growth of our domestic gases business. We will also
continue to implement the Total Electronics, Total Welding,
Total On-Site and Total Gas-Applications strategies to drive
growth in the domestic gas business.

Business Sites in Japan

Percentage of Revenue(Fiscal Year 2019)49.2%(¥363.9 billion)(Billions of yen)
Industrial gases (¥259.7)

Bulk and on-site gases (¥149.6)

Electronics-related products (¥72.7)
Packagedgases and Plants andhardequipment
goods(¥45.0)(¥38.2)

Electronics
gases(¥46.2)

Energy-related
products (¥31.4)

Gases(¥28.4)

Medical-related products (¥26.7)
Equipment and installation (¥26.4)
Energy-related equipment (¥3.0)

Head office
Branches
Branch offices/sales offices
R&D facilities
Sanso centers/liquid oxygen facilities
Semiconductor gas production facilities

Taiyo Nippon Sanso Corporation | Integrated Report 201921

Strategic Perspectives

Gas Businessin the United States
We first established operationsin the United States in the
1980s. Initial efforts to broaden
Market Presence andour presence, which began inCompetitive Advantages
2004, focused on the southernstates and emphasized reinforcing our operations through an
ambitious M&A program that included multiple major
and other deals and capital investments. These andlater efforts facilitated the establishment of a robust
operating foundation that includes California, whichboasts the largest state economy, as well as Texas andLouisiana, leaders in the development and productionof petroleum. In 2016, we acquired a portion of Air
Liquide’s U.S. operations, a move that enabled us tobuild an industrial gas supply network that stretchesfrom the southern to the eastern and Midwesternstates and establishing us as a major national player.
In fiscal year 2019, we acquired a HyCO business from
Linde Gas North America, including all related assets,
securing a stable highly profitable source of income.
While our U.S. operations center on supplying packaged and bulk gases, in fiscal year 2019 we commenced operation of major-site plants for customers
in the steel and petrochemicals industries. In addition,
we offer an extensive supply of original hard goods,
including welding equipment, which we sell along withpackaged gases, for which we are number three interms of market share. We have also diversified our
product lineup by acquiring manufacturers of acetylene
and carbon dioxide gas, becoming the largest wholesale producer of acetylene and merchant dry ice inthe United States.

Interview: Growth Strategies for the Gas Business
Q1 What is your perceptionof the current operating
environment in the
United States?

Outline of Business*The HyCO business separates H2 and CO from feedstock suchas natural gas and supplies it to the petroleum refining andpetrochemical industries on a large scale through pipelines.

General economic growth isexpected to be mixed, with GDP
forecasted to potentially slow to
below 2% by Q1 of 2020 andinflation at 2% levels. Historically
low unemployment rates are projected to continue to be underThomas Scott Kallman 4% increasing wage cost pressure. International trade conflicts
Member of the Board,
are unfavorably impacting agriChairman and CEO,Matheson Tri-Gas, Inc.
culture equipment fabrication
sales volumes. However, steel
tariffs have bolstered domestic
steel production, resulting in sales volume increases including the startup of two new merchant liquid and pipeline air
separation units in support of two major steel companies thisyear. Oil prices are expected to support ongoing activity inwest Texas and North Dakota and are being supplied by ourmerchant liquid air separation units in each market. Gas andequipment sales related to equipment repair and fabricationof oil field equipment provide additional growth opportunities.
Gulf Coast ethane cracking operations supplied by
MATHESON’s tonnage pipeline network in Louisiana are
ramping up demand and generating significant sales volume
growth. Lastly, our medical oxygen and food industry nitrogen along with dry ice will continue to be a stable source ofsales. MATHESON believes our diversified customer portfolio
will help smooth any potential volatility in the economy overthe next year, allowing the business to continue to grow at a
steady rate.

Fiscal Year 2019 in Brief
Revenue: +8.5% from fiscal year 2018

Revenue and Segment Profit
Years ended/ending March 31

Industrial gases

Impact ofacquisition

Revenue increased, underpinned byrobust orders from U.S. manufacturers(principally in the steel, construction andenergy sectors).
New on-site plants began operating.
Revenue was bolstered by theacquisition of a HyCO business from
Linde.

Segment Profit: +15.3% from fiscal year 2018
Industrial gases
Impact ofacquisition

Profit was bolstered by robust results inall businesses.
Profit was bolstered by the acquisition ofa HyCO business from Linde.

(Billions of yen)
200

24

150

18

100

12

50

6

0

0
2014

Revenue

2015
2016
Japanese GAAP
Segment profit

2016
IFRS

2017

2018

2019

2020
Forecast

2021
TargetNote: In fiscal year 2016, a change in accounting period by Matheson Tri-Gas, Inc., resulted in the inclusion of
15 months of results for the company.

22

Taiyo Nippon Sanso Corporation | Integrated Report 2019in the United States
Q2 Can you tell us about the principal measures
you plan to pursue in fiscal year 2020?
With the support of TNSC, MATHESON has established avertically integrated business with a national footprint. There
has been a significant build-out of our U.S. infrastructure
through acquisition and capital projects, resulting in a national
network of air separation units and package gas distribution
accompanied by the largest U.S. wholesale acetylene andmerchant dry ice production capacities along with new liquidcarbon dioxide production. Our Specialty Gas network production facilities have been upgraded to complement theworld class electronic gas production capabilities at New
Johnsonville, Tennessee. Our emphasis in fiscal year 2020
will be on loading these plants to optimize profitability andcash generation. We are focused on expanding the “Total
TNSC” initiative into the U.S. market, leveraging our verticallyintegrated gases and equipment portfolio to aggressively
implement cross-selling to win customers’ entire industrial gas and equipment requirements. All this is in concert
with rigorous control of operating expenses and capital
expenditures to realize our profit and cash targets.

Q3 What are the principal growth strategies forthe gas business in the United States?
MATHESON’s primary focus is supporting the successful
implementation of TNSC’s medium-term plan and the four
key strategies of ORTUS Stage 2.
1. Structural reform

2. Innovation
MATHESON is pursuing innovation in our operations by
upgrading our U.S. plants remote operations center and ourdata acquisition capabilities related to IoT to refine and speed
up daily tactical decisions and support better longer term
strategic decisions such as capital investments.
3. Globalization
To further globalization, we are enhancing governancethrough our Internal Audit function, performing more aggressive and frequent auditing of field locations. Additionally, we
are increasing coordination with TNSC Group companies
in the electronics segment with focus on the major international semiconductor manufacturers in support of the Total
Electronics initiative and the Group’s drive to grow sales withthese major customers. Further development of the scale ofour dry ice production capacity to continue to reliably serve
customers and take new market share and the extensionof our coverage of acetylene production into geographicalmarkets we do not currently serve will be a priority.
4. M&A
Lastly, MATHESON’s M&A efforts will continue to be focusedon identifying acquisition opportunities for high-quality distribution businesses in key U.S. markets to achieve vertical
integration or gain significant synergies if we already havevertically integrated infrastructure in that market.

Key managers in our helium and the newly acquired HyCO
businesses are actively supporting sales and business development across the TNSC Group to include coordinatedglobal strategies in support of structural reform.

Business Sites in the United States

Percentage of Revenue(Fiscal Year 2019)25.3%(¥187.3 billion)(Billions of yen)
Industrial gases (¥175.2)

Bulk and on-site gases (¥87.1)

Electronics-related products (¥12.0)

Packaged gases and hard goods (¥88.1)

Electronics gases (¥7.0)
Equipment and installation (¥4.9)

Corporate headquarters
Air separation units
Carbon dioxide gas production facilities
Nitrous oxide production facilities
Filling stations and distribution facilities

Taiyo Nippon Sanso Corporation | Integrated Report 201923

Strategic Perspectives

Gas Business
in Europe
In December 2018, Taiyo Nippon
Sanso acquired a portion ofo thebusinessesof
Praxair,
Europeanbus
Significance offacilitating its expansion into theAcquisition andmarket, where it
European mMarket Presence
previously did not have a presprevious
Through this acquisition,ence. T
the Companyy gained industria
industrial gasesase (including carbon
dioxide gas) businesses in 12 coun
countries (Germany,
Spain, Portugal,
Norway, De
Denmark, Sweden,al, Italy, Norw
the Netherlands,
Belgium, the United Kingdom,s, Belgium
Ireland and France) and a helium-related business.
The European industrial gases market is second
only to that of the United States in terms of size. The
regional market share of the acquired businesses is
at approximately 16% (internal estimate). The scaleof these businesses—now operating under the name
Nippon Gases—is comparable to Taiyo Nippon
Sanso’s U.S. business, which has taken three
decades to develop. Like its U.S. counterparts, thesebusinesses are highly profitable. With a robust operating foundation, Nippon Gases is the second-largest
industrial gases manufacturer in Spain and Portugal
and the third-largest in Italy and Germany in terms ofmarket share. Revenue is well balanced among supply
modes, namely bulk, packaged gases and on-sitegases (including supplied by pipeline), with on-sitegases accounting for around 17% of the total. The
Nippon Gases pipeline network encompasses such
key European industrial zones as the Rhineland andSaar areas of Germany and the Antwerp area in
Belgium, enabling it to guarantee stable supplies ofhigh volumes of gases to Europe’s major steel andpetrochemicals manufacturers.

Outline of Business

Principal assets acquired• Approximately 2,800 employees• More than 100,000 customers• Six pipelines• Four specialty gas filling stations• 27 air separation units• Six hydrogen plants• 52 compact on-site plants• 12 carbon dioxide gas plants• 600-plus transport vehicles• 2.6 million-plus cylinders• 34 filling stations• 13 dry ice manufacturing facilities• Seven carbon dioxide gas terminals• Three ships for transporting carbon dioxide gas

Interview: Growth Strategies for the Gas Business
Q1 What is your perceptionof the current operating
environment in Europe?
We have been enjoying favorable economic conditions, withgood GDP and IP growth inmost countries in recent years.
Today, while our company
continues to perform strongly,
we are hearing more concerning news about the current
Eduardo Gil Elejoste
slowdown in the European
Member of the Board,
economy and the probability
Chairman & President,
Nippon Gases Euro-Holding,that the slowdown may accelS.L.U.
erate. This information comesfrom both official and private
relevant sources. Also, some of our most relevant customers
are signaling challenging times ahead. Our company, whichis positioned in very diverse and resilient markets (40% ofsales), is a lean and efficient organization and our cost controls and financial discipline will enable us to react quickly tochanging economic conditions.

Q2 Can you tell us about the principal measures
you plan to pursue in fiscal year 2020?
The current year is the first year for the European businessin the TNSC Group. Other than delivering excellent safety,
compliance and financial results, most important is that

Revenue and Segment Profit
Years ended/ending March 31(Billions of yen)
200

40

150

30

100

20

50

10

0

0
2014

Revenue

2015
2016
Japanese GAAP
Segment profit

2016
IFRS

2017

2018

2019

2020
Forecast

2021
TargetNote: Results for fiscal year 2019 are for the four months ended March 31, 2019. These results include thefollowing amounts based on the use of a purchase price allocation (PPA), an application of goodwill
accounting whereby the purchase price is allocated to various assets and liabilities acquired: a one-timeincrease in cost of sales of ¥700 million due to the market price valuation of inventory assets and expensesof ¥3.2 billion due to an increase in depreciation and amortization expenses related to property, plant andequipment and amortization expenses related to intangible assets.

24

Taiyo Nippon Sanso Corporation | Integrated Report 2019

in Europe
becoming part of the TNSC Group occurs in a fast, smoothand “no surprises” process. To accomplish this, we areworking on a three-pronged approach: (a) separation fromour prior company (completed), (b) integration into TNSC
(completed) and (c) extracting synergy benefits (recently
started). In regard to the last item, we are working on the following items to extract these synergies: (a) electronic gases(increased cooperation with global customers and optimization of our electronic gases plant in Belgium), (b) engineering(work has started with TNSC engineering and a number ofopportunities are being analyzed), (c) applications technology(work is underway in food and beverage, combustion, additive manufacturing, water and wastewater) and (d) productivity (lean practices and cost reduction opportunities are being
shared across the different TNSC businesses).

that we are not doing today. For example, investing in newtechnologies that improve our customer integration andoptimize our operational processes.
We are a strong organization of 2,800 employees that,along with its entire management team, has moved to the
TNSC Group. The successes we had in the past will continue
in the future.

Q3 What are the principal growth strategies forthe gas business in Europe?
Our company is a well-balanced industrial gases company:
37% of sales in merchant liquid, 33% in merchant packaged,
17% in pipeline and onsite and 13% in other. At the sametime, we are well positioned in 12 strategic European countries. In the mid-term, we will maintain the efficient balance of
our supply portfolio, we will continue to build density in areas
where we are strong, while, at the same time, we will belooking for growth opportunities in new areas. Our growth will
be balanced between investment projects, applications technology opportunities and new opportunities in doing things

Percentage of Revenue

Nippon Gases’ tanker truck and storage tank area

Business Sites in Europe(Fiscal Year 2019) (Four months)

Regional headquarters
Principal Nippon Gases companies

7.4%(¥55.1 billion)(Billions of yen)
Industrial gases (¥50.8)

Bulk and on-site gases (¥35.9)

Electronics-related products (¥4.2)

Packaged gases
and hard goods(¥11.0)
Plants and equipment (¥3.8)
Electronics gases (¥4.2)

Taiyo Nippon Sanso Corporation | Integrated Report 201925

Strategic Perspectives

Gas Businessin Asia and Oceania
Our operations in Asia andOceania center on the supply
of industrial gases to customers
Market Presence andin Southeast Asia, China, India
Competitive Advantages
and Australia, and of electronicsrelated products to customers
in China, Taiwan and South
Korea. We entered the Singaporean market in theearly 1980s by establishing National Oxygen Pte. Ltd.
and have expanded our operations there in the years
since. In 2012, we acquired Leeden Limited, a leading
supplier of packaged gases that also provides welding equipment and other products with an extensive
network across Southeast Asia. In 2014, we merged
Leeden with National Oxygen, thereby strengthening
our operations in Singapore and Malaysia. We havealso established a presence in the Philippines andVietnam, where we are currently the top manufacturerof liquefied gases in terms of production capacity, andcontinue to seek promising investment opportunities in both countries that will position us to capitalize
effectively on economic growth. Further expanding our
geographic reach, we established bases in Indonesia—
Southeast Asia’s largest industrial gases market—in
2014, acquired a local distributor in Australia in 2015
and established an operating company in Myanmar in
2016. In the area of electronics-related products, wewill capitalize on rising medium- to long-term demand
from the semiconductor industry in China, Taiwan andSouth Korea. Guided by our Total Electronics strategy,
we are taking steps to reinforce the relationships wehave built with customers in these markets and to
expand sales of electronics-materials gases, of which
we are a leading supplier, as well as to offer equipment
and installation services.

Outline of Business

Interview: Growth Strategies for the Gas Business
Q1 What is your perceptionof the current operating
environment in Asia andOceania?
Exports remain soft across Asia,
including in China, the region’slargest economy. Nonetheless,regional economic growth continues to outpace that of Japan,
the United States and Europe,
driven by solid domestic demand
underpinned by personal consumption. In Australia, moderTsutomu Moroishi
ate economic growth persists,
Executive Officer,
despite slowing growth in perExecutive General Manager,sonal consumption. Demand in
Global Operations Divisionboth Asia and Australia remains
steady. In Asia, in particular,
the bulk gases business continues to see steady growth,particularly for the machinery and materials industries.

Q2 Can you tell us about the principal measures
you plan to pursue in fiscal year 2020?
In Asia, with the aim of ensuring long-term sustainablegrowth, we continue to promote investments to expand bulk
gas production capacity and to capitalize on increased production capacity and cost competitiveness to expand sales
efforts. In China, we are pressing ahead with the constructionof a semiconductor materials gases plant in Yangzhou that isscheduled to commence operations in fiscal year 2020. We
will continue to capitalize on our specialty gases technologies
to promote the development of products not only in China
but also in other regional markets. In India, we are working tobolster profits by capitalizing on our robust helium sales network, while in Australia we began operating an air separation
unit in the north of the country and a liquefied carbon dioxide
gas production facility in the east, positioning us to expand
our business and ensure stable supplies.

Fiscal Year 2019 in Brief
Revenue: +2.9% from fiscal year 2018
Revenue increased, underpinned byIndustrial gases
robust sales of bulk gases in China,
Vietnam and the Philippines.
Despite the negative impact of a changeElectronics-related in accounting treatment in Taiwan,
products
revenue rose, reflecting firm shipmentsof electronics materials gases.
Segment Profit: –0.9% from fiscal year 2018
Industrial gases

Profit increased, underpinned by higher
sales of bulk gases.

Electronics-related Profit was bolstered by an increase inproducts
sales of electronics materials gases.
Impairment loss

26

Profit declined, owing to impairment
losses on assets related to Leeden
National Oxygen’s natural gas
liquefaction business.

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Revenue and Segment Profit
Years ended/ending March 31(Billions of yen)
120

20

90

15

60

10

30

5

0

0
2014

Revenue

2015
2016
Japanese GAAP
Segment profit

2016
IFRS

2017

2018

2019

2020
Forecast

2021
TargetNote: In fiscal year 2016, a change in accounting period by certain subsidiaries resulted in the inclusion of
15 months of results for these companies.

in Asia and Oceania
Q3 What are the principal growth strategies
for the gas business in Asia and Oceania?
In Asia, we will actively promote capital investment to prepare
for future gas demand, as well as to create a foundation for
medium- to long-term growth in our core bulk gases. With
stable supply and backup capabilities for bulk gases, we willreinforce our efforts to supply large quantities through on-site
projects and broad pipeline networks. In addition, we will
expand core business such as carbon dioxide, helium, standard gas and gas-related equipment, and the maintenanceof the production system with support within the Group.
In the electronics-related products business, which is
expected to continue seeing brisk growth in the years ahead,
we plan to expand production facilities in promising Asianmarkets such as Singapore and China. Such efforts to establish an effective supply system that extends across the entire
region will enable us to provide competitive products. Guided
by the Total Electronics strategy, we will take steps to reinforce our marketing capabilities, build a reliable supply chain
and enhance our responsiveness to the needs of strategicallyimportant customers in this key region.
In Australia, in addition to capturing demand for packaged
gases from competitive small and medium-sized customers,
we will take advantage of our position as a national supplierwith a network extending over the entire country and actively
market our services to major users. We will also promote
capital investment aimed at further growing both our LP gas
and industrial gases businesses.
In anticipation of future population growth and the aging ofAustralian society, we will capitalize on our accumulated
experience, including in the area of home oxygen therapy, toreinforce our service structure and expand our services in the
medical business.

TOPIC
Expanding Our On-Site Businessin Southeast Asia
In Vietnam and the Philippines, both of which continue
to see extraordinary economic growth, we are working to capture orders for new on-site projects and create solid supply chains with the aim of reinforcing our
supply capabilities for air separated gases. In Vietnam,
we secured two orders for air separation units fromforeign-owned companies, one from a metals manufacturer and the other from Long Son Petrochemicalsof Thailand. In the Philippines, we also secured twoorders from foreign-owned companies for air separation units from, respectively, an electronic components
manufacturer and a semiconductor manufacturer.
Vietnam

Hanoi

ASU for foreign-owned
metals manufacturer

Philippines

ASU for foreignowned electronic
components
manufacturer

ASU for Long Son
Petrochemicals

ManilaASU forforeign-owned
semiconductor
manufacturer

Business Sites in Asia and Oceania

Percentage of Revenue(Fiscal Year 2019)14.3%(¥106.1 billion)
Regional headquarters
Air separation units
Branches and sales offices(Billions of yen)
Industrial gases (¥70.1)

Bulk and on-site gases (¥43.9)

Electronics-related products (¥36.0)

Plants andequipment(¥15.9)Packaged gases and hard goods(¥10.2)

Electronics gases (¥29.3)

Equipment and installation(¥6.6)

Taiyo Nippon Sanso Corporation | Integrated Report 201927

Strategic Perspectives

Thermos Business
The Thermos business dates
Outline of Business back to 1978, when Taiyo Nippon
Sanso predecessor Nippon Sanso,Market Presence andseeking new applications for its
Competitive Advantages
existing vacuum insulation technologies, developed the world’s
first vacuum-insulated stainless steel bottle. In 1989, Nippon Sanso acquired the
Thermos Group from U.S firm Household International
Inc. and commenced sales of Thermos-brand stainlesssteel vacuum-insulated bottles. In 2001, the business
was spun off as Thermos K.K. Since then, the company
has continued to launch a steady stream of attractive new
products. From a production configuration comprisingfacilities in Malaysia, China and the Philippines, the company currently sells top-quality Thermos-brand products
in more than 120 countries. The Thermos Group is particularly noted for its excellent development capabilities, withapproximately 30% of its annual production accounted
for by newly released products, enabling it to build anextensive portfolio of products across multiple categories.
Backed by rigorous quality control, the Thermos brandcontinues to gain acceptance in markets worldwide.

Interview: Growth Strategies for the Thermos Business
Q1 What is your perceptionof the current operating
environment?
In Japan, the idea of carrying
around one’s own beveragebottle being ecologically soundand cool began to take holdaround 2006. With the economic
downturn precipitated by thecollapse of Lehman Brothers
Holdings Inc. in 2008, the trend
was further fueled by increased
frugality, which drove up theKeiichiro Chujo
popularity of vacuum-insulated
President
mugs. In 2012, we released the
Thermos K.K.
ultralight JNL series of beveragebottles, which rapidly swept thedomestic market thanks to theirlight weight—approximately 30% lower than conventional
products—and slim profile, a cumulative total of approximately 20 million of which have sold to date. With competition for demand associated with rising inbound tourism inJapan intensifying, we anticipate a slowing of growth in thedomestic market. Overseas, we expect demand to continue
rising in South Korea, China and Southeast Asia. We willcontinue working to stimulate demand by further bolsteringawareness of the Thermos brand.

Q2 Can you tell us about the principal measures
you plan to pursue in fiscal year 2020?
We will continue to promote area marketing, tailoring efforts
to cultural and dietary customs in different parts of the world.
In Japan, we are expanding our selection of products in new
categories such as frying pans and tumblers to encourage
new demand from households. We will also endeavor to
deploy well-defined product categories with clear concepts
based on use—for example, a series designed for outdoor

Revenue and Segment Profit

Fiscal Year 2019 in Brief
Revenue: +9.6% from fiscal year 2018

Japan

Overseas

Revenue increased, bolstered by healthy
sales, particularly of sports-use vacuuminsulated beverage bottles. The launch of
new frying pans in the company’s lineup of
cookware also contributed.
Factors behind the increase in revenue
included brisk sales in South Korea.

Years ended/ending March 31(Billions of yen)
40

12

30

9

20

6

10

3

Segment Profit: +18.6% from fiscal year 2018

28

Japan

Higher sales led to an increase in profit.

Overseas

Profit was up, as brisk sales led to higher
profit in South Korea and equity-method
affiliates reported increases.

Taiyo Nippon Sanso Corporation | Integrated Report 2019

0

0
2014

Revenue

2015
2016
Japanese GAAP
Segment profit

2016
IFRS

2017

2018

2019

2020
Forecast

2021
TargetNote: Effective from fiscal year 2019, other businesses currently accounted for in the Thermos and Other Businesssegment were shifted to the Gas Business in Japan and the segment was renamed the Thermos Business.
Accordingly, the basis for calculating revenue and segment profit forecast for fiscal year 2019 differs fromthat used for the years up to and including fiscal year 2018. Calculated on the same basis as in previous
years, segment revenue and core operating income in fiscal year 2018 would have been ¥2.5 billion and¥0.6 billion lower, respectively, than reported results.

use, bottles for mountain climbing and bottles for cycling—
and to cultivate new sales channels. We will promote active
publicity and advertising for categories that are expected tosee increased demand with the aim of bolstering the valueof the Thermos brand.
We have also recently established directly operated brickand-mortar Thermos Styling stores, organized around thetheme of “lifestyles with Thermos.” In March 2019, we
opened a Thermos Styling store in Nishinomiya Kitaguchi,
our first in the Kansai area, which joins previously opened
stores in Tokyo’s Futako-Tamagawa district and the Minato
Mirai area of Yokohama. In addition to Thermos Stylingstores, we are stepping up efforts to establish permanentand pop-up Thermos shops in outlet malls and otherlocations.
Strategies overseas center on expanding our sales channels and further reinforcing the Thermos brand, as well as on
expanding operations in areas other than stainless steel
vacuum-insulated bottles. Thermos-brand products are
currently manufactured at three facilities worldwide. Goingforward, we will expand our production capacity at all threelocations to facilitate swift, effective responses to risingdemand in global markets.

TOPIC
The Taiyo Nippon Sanso Group boasts outstanding
core low-temperature, high-pressure, separation,
vacuum and gas control technologies. The superior heat and cold retention of Thermos’ portablevacuum-insulated mugs and tumblers is thanks to
low-temperature and vacuum technologies cultivatedin the industrial gases business. Industrial gases
are liquefied at cryogenic temperatures below theirrespective boiling points (–183°C for oxygen, –196°C
for nitrogen and –186°C for argon) and stored in
dedicated tanks. These tanks are vacuum-insulated
to keep heat away from the liquid contained, thereby
preventing evaporation. Thermos’ vacuum-insulatedbottles were developed using the same vacuum brazing technologies used in the construction of industrial
gas storage tanks.

Q3 What are the principal growth strategies
for the Thermos Business?
As a global manufacturer of vacuum-insulated bottles, weseek to provide products that enhance lifestyles and areenvironment-friendly, in line with the concept “Thermos:
Maintaining a tasty temperature.” Looking ahead, we intend
to expand our product portfolio beyond vacuum-insulatedbottles, leveraging the insulating technologies we havefostered as pioneer in this field, as well as our ability toenvision unique lifestyles, to develop offerings such as highperformance speakers with dual-structure vacuum-insulatedbodies and insulated drinking containers for babies, to realize
products that help shape bold new lifestyles.

The Thermos Group’s Global Network

Percentage of Revenue(Fiscal Year 2019)

3.8%(¥27.8 billion)(Billions of yen)
Thermos (¥27.8)

Japan (¥22.0)

Asia (¥5.7)

Head office
Sales offices
Production facilities

Taiyo Nippon Sanso Corporation | Integrated Report 201929

The Taiyo Nippon Sanso Group’s ESG Initiatives
Contributing to the achievement of the SDGs and earning the continued trust of societyWith the aim of contributing to the realization of a sustainable society, we work to ensure a solid graspof our impact on the global environment, society and people (Taiyo Nippon Sanso and its organizational structure) through all of our business processes, that is, across our entire value chain. To thisend, we have defined the roles we are expected to play in addressing issues we have identified as
being of material importance, which are grouped under four themes, including management issues.
Theme

Material issues

Management
issues• Compliance• Corporate governance• Process safety

Theme

Material issues

Globalenvironment

Society

People(Taiyo Nippon
Sanso and its
organizational
structure)

30

Role of the Taiyo Nippon Sanso Group• In adherence to high ethical standards, strive to conduct corporate activities in afair, impartial and sincere manner by promoting and maintaining compliance with
relevant laws, regulations, international norms and internal rules.
• Reinforce corporate governance by improving management transparency andfairness, as well as by increasing management agility through efforts to enhance
management oversight functions and accelerate decision making.
• Strengthen independent systems for ensuring process safety in line with our belief
that selling gases is commensurate with selling safety.
• Realize stable supplies of industrial gases, thereby ensuring our ability to provide
the gases our customers need when they are needed.

Role of the Taiyo Nippon Sanso Group• Efficient use of resources andenergy• Climate change• Introduce effective air separation units that help reduce electric power
consumption and CO2 emissions.
• Lower fuel consumption by tanker trucks to reduce related CO2 emissions.
• Fortify framework for mitigating climate change through the reduction ofgreenhouse gas emissions and other efforts.
• Promote the reduction of greenhouse gas emissions and the creation andexpansion of opportunities to mitigate/adapt to climate change through the sale ofvacuum-insulated bottles and cookware.

• Contribution to maintenance ofphysical health• Contribution to medical care
• Response to food andagriculture-related issues• Increase in consumer satisfaction• Contribute to health and medical care through the provision of products for the
medical field.
• Provide industrial gases and related equipment that contribute to the resolution of
key issues by helping protect food resources and improve agricultural productivity.
• Leverage the advantages of LPG, including its low carbon footprint and thedisaster-resistant nature of its distribution system, to create business opportunities
and expand business.
• Contribute to the realization of comfortable and environment-friendly lifestyles
through the sale of Thermos-brand products.
• Ensure that customers can use products with peace of mind by strengthening
systems to ensure quality and safety across the entire product life cycle.

• Respect for human rights• Occupational health and safety• Human development and training• Diversity and inclusion• Product and service reliability• Promotion of measures toimprove information security andprivacy• Stakeholder engagement• Contribution to communities• Respect human rights in corporate activities and require that business partners do
not violate human rights or engage in any form of discriminatory behavior (throughsuch measures as the promotion of anti-harassment initiatives and theestablishment of hotlines).
• Promote health management in accordance with relevant national and regionallaws and regulations, create a safe work environment while at the same time
maintaining and advancing the physical and mental health of employees.
• Offer equal opportunities in hiring, placement, advancement and skill development
as well as seek to foster and develop human resources from a medium- andlong-term perspective.
• Actively seek to secure diverse human resources with diverse values without
regard to considerations such as nationality, age or creed and promote diversity
and inclusion in corporate activities.
• Recognize the importance of and responsibilities associated with protecting
information assets in corporate activities and ensure appropriate information
management to prevent leaks of confidential information pertaining to customers,
business partners, Taiyo Nippon Sanso and other parties.
• Step up efforts to contribute to society through business activities and deepen
understanding of communities while at the same time working continuously torespond to communities’ requests and expectations.
• Earn stakeholders’ trust through respect and close dialogue and by reflecting theirviews in corporate activities, and work with stakeholders to realize a better society.

Taiyo Nippon Sanso Corporation | Integrated Report 2019

We are promoting a variety of initiatives with the aim of contributing to the achievement of the Sustainable Development Goals (SDGs) for 2030,
which were adopted at the UN Sustainable Development Summit in September 2015.

Principal initiatives in fiscal year 2019

Relevant pages• Corporate governance• Initiatives to ensure safe and stable supplies( See corporate website)

P32–35
Website:https://www.tn-sanso.
co.jp/en/csr/

Principal initiatives in fiscal year 2019

• Environmental management• Initiatives to protect the global environment

Relevant pages

P46–47

Relevant SDGs

Ensure access to affordable,
reliable, sustainable andmodern energy for all

Ensure sustainableconsumption andproduction patterns

Website:https://www.tn-sanso.

Take urgent action tocombat climate change
and its impactsco.jp/en/csr/• Developing environment-friendly products( See corporate website)• Initiatives to ensure safe and stable supplies• Relations with employees• Relations with customers• Relations with local communities• Relations with suppliers• Relations with shareholders

Website:https://www.tn-sanso.
co.jp/en/csr/

Ensure healthy lives
and promote well-being
for all at all ages

Build resilient infrastructure,promote inclusive andsustainable industrializationand foster innovation

Ensure healthy lives
and promote well-being
for all at all ages

Promote sustained, inclusive andsustainable economic growth,
full and productive employment
and decent work for all

Build resilient infrastructure,promote inclusive andsustainable industrializationand foster innovation

Ensure sustainableconsumption andproduction patterns

P44 –45
Website:https://www.tn-sanso.
co.jp/en/csr/

Taiyo Nippon Sanso Corporation | Integrated Report 201931

Corporate GovernanceManagement Organization
Basic Approach and Management Policy
Our corporate philosophy is “Market-driven collaborative
innovation: Improving the future through gases.” In line withthis philosophy, we have outlined the following management
policy, which guides our corporate activities and our efforts
to ensure sustainable growth and increase corporate value:“We pride ourselves on our ability to act on customer feedback and to partner with a wide range of industries to help
improve the quality of life. Market responsiveness and collaborative innovation are our two core values. These values areat the heart of everything we do as we shape the future
through gas technologies, crafting a harmonious relationshipbetween people, society and the planet.” From the perspective of fulfilling our responsibility as a corporate citizen, we
have also formulated the Taiyo Nippon Sanso Group Codeof Conduct to guide the conduct of all Group officers andemployees in terms of compliance with laws and regulations
and corporate ethics, in line with which we continue topromote conscious actions designed to respond to the
expectations of customers and society at large.

Relationship with Parent Company
On May 13, 2014, Taiyo Nippon Sanso and parent company
Mitsubishi Chemical Holdings Corporation established acapital alliance. Under the terms of the alliance, Mitsubishi
Chemical Holdings agreed to respect our independence andfully support and cooperate with us in accordance with its
Group Management Regulations. We maintain our status as
an independent company with autonomous management,
financial, sales, R&D and other corporate functions. In addition, two independent outside directors have been appointed
to the Board of Directors to ensure management supervision
is effective, thereby ensuring we fulfill our responsibilities toall shareholders.

Background to Adoption of the Current Structure
for Management Execution and Supervision
We provide air separated gases (oxygen, nitrogen and argon)
and other industrial gases to customers in diverse industries
around the world and carry out a wide range of activities indiverse business areas. For this reason, business judgments,
decision making and oversight must be based on expert
knowledge derived from experience in or close to the industry to facilitate the effective assessment of a wide range ofrisks from multiple perspectives. Our current management
structure centers on the Board of Directors, which is responsible for making decisions related to business execution
above a certain scale, including those regarding M&As andinvestments. We have also adopted the Company with an
Audit & Supervisory Board corporate governance model,
whereby Audit & Supervisory Board members themselves
audit business activities.

32

Taiyo Nippon Sanso Corporation | Integrated Report 2019

The Board of Directors is organized such that directors
familiar with the business of the Group supervise operations
and conduct decision making from various perspectives.
To reinforce our global management framework, in June
2019, Matheson Tri-Gas Chairman and CEO Thomas Scott
Kallman and Nippon Gases Euro-Holding Chairman andPresident Eduardo Gil Elejoste were newly appointed to theposition of director. In addition, two outside directors havealso been appointed to facilitate supervision from a broader
perspective—thereby further enhancing management transparency and fairness, as well as reinforcing compliance,
which is particularly crucial to business continuity—andadvise management from a medium- to long-term perspective. Both individuals satisfy the criteria for the independenceof directors set by the Tokyo Stock Exchange (TSE).
We have also established the Advisory Committee on
Appointments and Remuneration, a voluntary advisory body,as an internal committee of the Board of Directors. The
Board of Directors consults this committee regarding theselection of candidates for the position of director and Audit& Supervisory Board member, the appointment and dismissalof the president (CEO) and executive officers, and revisions
to the rules governing compensation for directors, and seeks
advice from the independent outside directors to ensure thetransparency and objectivity of decision making. The
Advisory Committee on Appointments and Remunerationconsists of the president (CEO) and the outside directors andis headed by an independent outside director.
In addition, to ensure the objectivity, transparency and fairness of the management monitoring function, as well as tostrengthen the supervisory function, the Audit & Supervisory
Board is fully independent of the Board of Directors. In
addition to an understanding of the business, the Audit &Supervisory Board boasts specialized expertise in such areas
as law, finance and accounting, enabling it to effectively
monitor the execution of duties by directors. The Audit &Supervisory Board comprises four full-time members, who
conduct audits by leveraging their extensive experience,
knowledge and ability to exercise authority. Three of the fourare outside, with two satisfying the TSE’s criteria for the
independence of Audit & Supervisory Board members. To
ensure the effectiveness of audits conducted by the Audit &Supervisory Board, we have also established the Office ofCorporate Auditors, which comprises dedicated staff who
are charged with supporting Board members’ efforts.
As this shows, our corporate governance system is
actually a hybrid, combining the Company with an Audit &Supervisory Board model with an outstanding feature of theCompany with Three Designated Committees (Nomination,
Audit and Remuneration) model in the form of the Advisory
Committee on Appointments and Remuneration.

Boards and Committees
Board of Directors

Investment Committee

The Board of Directors is responsible for making decisions
regarding basic management policies and key mattersrelated to business execution, which includes formulating key
management indicators and medium- to long-term strategies, as well as for supervising the execution of businessactivities.

An ancillary body of the Management Committee, theInvestment Committee deliberates capital investment andother investment plans, looking at relevance to future business development plans, investment efficiency, funding plansand profit forecasts, prior to submission to the Management
Committee. The committee also assesses and verifies theresults of capital investments and other investments after
execution.

Advisory Committee on Appointments
and Remuneration
The Advisory Committee on Appointments andRemuneration advises the Board of Directors on theselection of candidates for the position of director and
Audit & Supervisory Board member, the appointment anddismissal of the president (CEO) and executive officers, andrevisions to the rules governing compensation for directors.

Audit & Supervisory Board
The Audit & Supervisory Board is tasked with monitoring
the framework and status of internal control and auditing thedaily execution of management duties, including by directors,
by conducting business and accounting audits.

Management Committee
In accordance with the basic management policy of
Taiyo Nippon Sanso and the Taiyo Nippon Sanso Groupestablished by the Board of Directors, the Management
Committee deliberates and approves important management
matters pertaining to the execution of duties by the president(CEO). The KAITEKI Promotion Committee, the Technological
Development Strategy Committee and the Investment
Committee have been created as ancillary bodies of theManagement Committee.

KAITEKI Promotion Committee
An ancillary body of the Management Committee,
the KAITEKI Promotion Committee identifies key issues,establishes sustainability indicators and monitors related
achievements with the aim of contributing to the realizationof Mitsubishi Chemical Holdings’ achievement of its
KAITEKI vision.

Technological Development Strategy Committee
An ancillary body of the Management Committee, theTechnological Development Strategy Committee is charged
with formulating technological development strategies,
including for themes being pursued in collaboration with
Mitsubishi Chemical Holdings (joint development projects),
as well as with managing related development projects
and budgets.

Compliance Committee
The Compliance Committee is responsible for updating
the Taiyo Nippon Sanso Group’s Code of Conduct anddetermining/amending key policies related to the Code,as well as with deliberating planned initiatives for promoting
compliance, reporting on the status of compliance atGroup companies and confirming the progress of remedial
measures and of related legal actions.

Global Compliance Committee
The Global Compliance Committee is chaired by the Taiyo
Nippon Sanso Group’s Chief Compliance Officer (CCO) andcomprises regional CCOs representing North America,
Europe, East Asia, Taiwan, Southeast Asia, India andAustralia. The committee is tasked with reporting on the status of compliance at regional Group companies and related
legal actions, the provision of training tailored to regional risks
and the operational status of whistleblowing systems.

Risk Assessment Committee
The Risk Assessment Committee identifies and assesses
risks unique to the Taiyo Nippon Sanso Group, verifies measures aimed at reducing these risks and reports on risks thathave manifested as issues. The committee also periodicallyverifies the appropriateness of risk management systems
through risk reduction activities.

Technological Risk Management Committee
In accordance with technology-related Group standards ofconduct and the President’s Basic Policy on Technological
Risk Management, the Technological Risk Management
Committee responds appropriately to technological risks
faced by the Taiyo Nippon Sanso Group with the aim of
reducing these risks and preventing them from manifestingas actual issues.

Information Management Committee
The Information Management Committee is responsible forcreating and operating systems to ensure the appropriate
management of technological, business, management andother key information, as well as with promoting information
management that complies with pertinent laws, regulations
and guidelines.

Taiyo Nippon Sanso Corporation | Integrated Report 201933

Corporate Governance Framework
we strive to guarantee the transparency and fairness of decision making. This reflects our belief that the key to effective
corporate governance is to bolster the strength of management by ensuring the effective use of available management
resources and making swift, resolute decisions.

We have established corporate governance principles toserve as guidelines for corporate governance across the
Taiyo Nippon Sanso Group. With the aim of ensuring sustainable growth and increasing corporate value over the longterm, and taking into account the positions of stakeholders,

Initiatives to Improve Corporate Governance
Date

Area

Initiative

June 2015

Compositionof the Boardof Directors

Revised Articles of Incorporation to reduce the maximum number of directors on the Board of Directors from
20 to 15, reduced the actual number of directors on the Board of Directors from 16 to 11 and appointed two
independent outside directors

June 2015
July 2015

Compliance

Established the position of Chief Compliance Officer (CCO) with the aim of ensuring the effectiveness ofcompliance
Established the Internal Control Office to assist the efforts of the CCO

October 2015

Other

Formulated principles of corporate governance
Formulated disclosure policy

June 2016

Committees

Established the Advisory Committee on Appointments and Remuneration, consisting of the chairperson of
the Board of Directors, the president (CEO) and independent outside directors, to improve the transparency
and objectivity of procedures for appointing and determining remuneration for directors

June 2016

Remuneration
for directors

Introduced performance-linked bonuses tied to degree of achievement of medium-term business plantargets as an incentive with the goal of driving medium-term growth

July 2017

Committees

Established the Information Management Committee to create an appropriate framework for the joint
management of information among pertinent departments

February 2018

ComplianceAppointed a Group CCO and six regional CCOs (North America, East Asia, Taiwan, Southeast Asia, India
and Australia) to create an effective Groupwide compliance framework and formulated global compliancemanagement regulations
Established the Global Compliance Committee, which comprises the regional CCOs and is chaired by theGroup COO, to facilitate the sharing of information on the status of compliance within the Group, theprogress of legal proceedings and various related issues

June 2018

Risk
management

Established the TNSC Technical Academy with the purpose of providing safety training and ensuring
technical skills are passed on, crucial considerations from the perspective of technological risk management

March 2019

ComplianceAppointed a regional CCO for Europe

Auditing and Risk Management Structure
General Meeting of Shareholders
Appointment/dismissal

Advisory Committee on
Appointments andRemuneration

Audit & Supervisory
Board
Four members
three of whom are outside

Appointment/dismissal

Consultation

Board of Directors

Response

Nine members
two of whom are outside

Audit ofoperations

Appointment/dismissal

Audit ofaccounts

Representative Director, President CEO
Management Committee

Coordination

Appointment/dismissal

Coordination

Reporting

Supervision

Independent auditors
Audit of accounts

Compliance Committee
Chairperson: Japan CCO

Global Compliance Committee

Coordination

Chairperson: Group CCO

Corporate Audit Office

Risk Management Committee
Chairperson: Individual responsible for Groupwide
internal control management

Technological Risk Management Committee
Internal audit

Chairperson: Executive General Manager of theTechnological Affairs Division

Information Management Committee
Chairperson: Executive General Manager of the
Corporate Administration Division

Divisions and Group companies

Chaired by the Group CCO and comprises regional CCOs representing North America,
Europe, East Asia, Taiwan, Southeast Asia, India and Australia; tasked with reporting on thestatus of compliance at regional Group companies and related legal actions, the provisionof training tailored to regional risks and the operational status of whistleblowing systems

34

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Policies for Determining Remuneration for Directors
and Audit & Supervisory Board Members
Remuneration for directors and Audit & Supervisory Board
members is determined by resolution at the annual General
Meeting of Shareholders in line with the total compensation limits for directors and Audit & Supervisory Board
members. We have established the Advisory Committee on

Appointments and Remuneration, which comprises multiple
independent outside directors and the president (CEO). The
Advisory Committee on Appointments and Remuneration
deliberates the appropriateness of remuneration proposed
after being consulted by the Board of Directors and Audit &Supervisory Board and reports the results of its deliberations
to the Board of Directors and Audit & Supervisory Board.

Remuneration for directors consists of basic monthly remuneration (base salary) + bonuses (performance linked) (generally
at a ratio of 6:4). Outside directors receive basic monthly remuneration only.

Directors

Audit &
Supervisory
Board members

Basic monthly remuneration

Ranks-specific base salary

Performance-linked bonuses(short-term)

Rank-specific, tied to year-on-year improvements in consolidated operating results(revenue, core operating profit and profit attributable to owners of parent)

Performance-linked bonuses(medium and long-term)

Rank-specific, tied to degree of achievement of medium-term management plantargets (revenue and core operating profit margin)

Remuneration for Audit & Supervisory Board members, including outside members, consists of base salary.
Basic monthly remuneration

Rank-specific base salary

Evaluation of the Board of Directors’ Effectiveness
Our Principles of Corporate Governance stipulate thatthe Board of Directors carry out an annual analysis andevaluation of its overall effectiveness and make a summaryof the results public in a timely and appropriate manner.
The following is an outline of this process and the results
thereof in fiscal year 2019.
Process for Analysis and Evaluation
The process for analyzing and evaluating the effectiveness of
the Board of Directors centers on questionnaires distributed
to individual directors, completed and submitted to thechairperson. The questionnaire distributed at the Board of
Directors’ meeting held in January 2019 contained questions
regarding, among others, the Board of Directors’ role andfunctions, composition and scale, operation, collaboration
with the Audit & Supervisory Board, communication withmanagement and relationship with shareholders. In the past,questionnaires were prepared by the Board of Directors’
secretariat, but in fiscal year 2019 the Board outsourced
preparation to a third-party consulting firm.

Outline of Results(1) Overall summary
At the Board of Directors’ meeting held in May 2019,
directors evaluated the current level of effectiveness of theBoard based on opinions expressed in the questionnaire anddiscussed issues and remedial measures. As a result, it wasdetermined that the Board of Directors is effectively discharging its assigned duties. Based on a proposal from the chairperson, it was resolved that directors will implement initiatives
to further improve the Board’s performance.
(2) Initiatives to further improve the Board’s performance• Upgrade reports regarding operations overseas, particularly in the United States and Europe, at Board of
Directors’ meetings.
• Give periodic reports at Board of Directors’ meetings on
dialogue with shareholders.
(3) Initiatives based on the results of previous evaluations• Goodwill impairment risk was monitored periodically by the
Board of Directors.

Risk Management
In accordance with the provisions of Japan’s Companies
Act, we have established a system for ensuring appropriate
business practices and are reinforcing internal control byclarifying decision-making authority and business processes,
among others. We have also established Compliance,

Risk Assessment, Technological Risk Management andInformation Management committees with the aim ofreinforcing compliance and ensuring the effectiveness of
our internal control system.

Taiyo Nippon Sanso Corporation | Integrated Report 201935

A Dialogue Between the Outside Directors

With the aim of realizing the creation of uniquely Taiyo Nippon Sanso Group value, we areworking to optimize corporate governance by actively debating issues and strategies froma medium- to long-term perspective.

Mitsuhiro Katsumaru

Akio Yamada

Outside Director

Outside Director

Realizing a Board of Directors Capable of the Free Exchange of Views
Katsumaru

Circumstances may make it difficult for regular directors toJapan’s Corporate Governance Code took effect on June 1,

speak up. In such a situation, the ability of outside directors

2015. The two of us were appointed to the position of out-

to express opinions from an independent perspective isside directors at about the same time. Outside directors haveparticularly meaningful.

a variety of responsibilities, but at the time I saw two aspects

36of this role as particularly important. One is the fact in some

Yamadacompanies the Board of Directors is less than proactive. The

The Code was challenging for Japanese companies at theBoard of Directors should play a bigger role in management

time and for many responding to the new requirements

than simply rubber stamping proposals that have already

was an overwhelming task. When I was appointed, my view

been made. Outside directors need to speak freely, not only

was that the most important role of the outside director

expressing their own views, but also drawing out the regular

was to observe economic and social trends and responddirectors, and in so doing to galvanize the Board. The

appropriately, ensuring stakeholders’ perspectives wereother—and this is particularly important—is independence.

reflected. Accordingly, when I attended Board of Directors’

Taiyo Nippon Sanso Corporation | Integrated Report 2019

meetings I asked questions and expressed my views with-to ask questions from the perspective of an amateur,out restraint, drawing on my experience at other companies

maintaining a fairly casual tone. I think my somewhat naïve

and focusing on issues that affect society at large. The

questions made the other directors feel like they should also

atmosphere at meetings of Taiyo Nippon Sanso’s Board of

speak out. Another important aspect is fairness. I know that

Directors makes it easy to speak up, which I saw as very

your background is with the Japan Fair Trade Commission. I

positive.

am a lawyer, so this is something we both see as important.
This is not something that can be assessed easily based on

Katsumaru

one experience or from a single perspective. Outside

I don’t know how it was before I was appointed, but I did

directors are expected to assess fairness from multiple

hear from a long-serving director that it had become muchperspectives, including legality, common sense andeasier to express one’s opinion. For me, being in the midst ofexperience.

a group of industrial gases professionals, I have always tried

Four Years Dedicated to Evaluating and Improving the Board of Directors
Yamadaimprovements. This has produced substantial positive

Over the past four years, Taiyo Nippon Sanso has worked

results, dramatically transforming the Board of Directors.

hard to establish a solid system of corporate governance. I
have been very impressed by this process. Of all the require-

Katsumaru

ments of the Corporate Governance Code, evaluating the

I agree 100%. I was basically in favor of the Code, but at theBoard of Directors is said to have been the most challenging.

time everyone wondered if Japanese companies could really

Most companies have addressed this requirement by distrib-

deal with it. Taiyo Nippon Sanso was also somewhat bewil-uting questionnaires or outsourcing the evaluation process.

dered at first, but took steady, resolute steps to achieve

In Taiyo Nippon Sanso’s case, this is handled by the head ofcompliance. Even we found the evolution astonishing. As you

the committee, that is, the Chairman of the Board ofmentioned, efforts to address the requirement for evaluating

Directors, who has enthusiastically distributed repeated

the Board of Directors were particularly indicative of our suc-questionnaires, discussing views revealed, formulatingcess. Four years ago, I don’t think either of us imagined theindividual countermeasures, setting goals and implementing

degree of progress we would achieve.

Guaranteeing the Independence of Management and Personnel Matters
Yamadafor dismissal and selection, as well as on the selection pro-

One of the principal objectives behind the revision of thecess. The latter is a somewhat lengthy process and steps

Corporate Governance Code in June 2018 was to ensure theare being taken to create a system for cultivating the skills ofobjectivity and transparency of the processes for nominating

candidates for management positions, as well as for potential

and determining compensation for directors. Taiyo Nippon

successors to the CEO, recognizing that this is far from easy.

Sanso established the Advisory Committee on Appointments
and Remuneration in June 2016 to deliberate on the appoint-

Katsumaru

ment of and compensation for the Company’s officers andI think that what you have just said is the most important

key officers of subsidiaries based on consultations withpoint. If I was to add anything, it would be that from the per-the Board of Directors. The new succession plan for the

spective of minority shareholders, among others, there is an

CEO is divided into two parts: the dismissal of the current

increasing emphasis on the independence of our personnel

CEO/selection of a successor and the provision of training

system. This course reflects our status as a listed company

to cultivate necessary skills. The Advisory Committee on

and a subsidiary of Mitsubishi Chemical Holdings.

Appointments and Remuneration deliberates on standards

Taiyo Nippon Sanso Corporation | Integrated Report 201937

A Dialogue Between the Outside Directors

Yamadaautonomy of our management, so there is very little risk of

Absolutely. Most important is the fact that the outside

conflict of interest for our minority shareholders. In the future,

directors of listed subsidiaries are independent of the parent

the TSE plans to prepare and publish new guidelines oncompany. We are fully independent, having no employmentgroup governance. Accordingly, we are confident that we will

history with the parent company and no relations with its

be able to demonstrate that the functions of outside officers

business partners. In addition, three of the four members of

can be leveraged to secure the interests of minority

our Audit & Supervisory Board are independent. Our parent

shareholders.

company, Mitsubishi Chemical Holdings, also recognizes theRealizing Post-Merger Integration and Increasing Corporate Value
Yamadareasons, but the principal one is simply the fact that ensuring

In 2018, we made the huge decision to acquire a business incontinuous, stable supplies of industrial gases is Taiyo

Europe. The biggest task going forward is to realize post-

Nippon Sanso’s mission and responsibility to society. I

merger integration. This is an issue faced by many compa-

believe that it is important to our survival that we do not limit

nies with global operations. Challenges include maximizing

our presence to Japan, but rather create a global supply

organizations and synergies, but because the paramountframework to address the challenge of ensuring stableissue for us is ensuring safety how we go about expanding

supplies.

our operations around the world.
YamadaKatsumaru

I agree completely. This acquisition was completely different

This decision was of course deliberated by the Board offrom moves we have made to date to enter overseas mar-Directors. My position as an outside director made it easy forkets. When Linde and Praxair reached an agreement to

me to offer my opinion. On the issue of going forward withmerge, the EU antitrust authorities ruled that the transaction

the acquisition, regardless of what others said, I stated that I

could not go ahead unless Praxair divested its European

was firmly in favor giving it the “Go” sign. I had various

businesses as not doing so could restrict competition in the“The purpose of Japan’s Corporate
Governance Code is thus to increase
the value of Japanese companies andfacilitate the creation of management andbusiness structures that can grow andsupport robust performance levels likethose we are seeing in the United Statesand Europe.”
Mitsuhiro Katsumaru

38

Taiyo Nippon Sanso Corporation | Integrated Report 2019

“Our ability to deploy and combine
positive practices from Europe,
the United States and Southeast Asia
to yield synergies will play a key rolein the achievement of the targets ofour medium-term management plan.”
Akio Yamada

European market. The merger was subsequently approved

Yamadaon the condition that the divested businesses were acquired

Ortus Stage 2 outlines targets for consolidated revenue of

by Taiyo Nippon Sanso because we are a company with

¥910.0 billion and core operating profit of ¥100.0 billion inextensive experience in the industrial gases field. While thefiscal year 2021. Our ability to deploy and combine positive

size of the investment is substantial, I believe it is necessary

practices from Europe, the United States and Southeast Asia

for our future growth. I am confident that we will be able toto yield synergies will play a key role in the achievement ofdeliberate and resolve any issues that might arise over thethe targets of our medium-term plan. As the Company as acourse of the investment as we continue to push forward.

whole moves in this direction, it will be necessary for outside

Supporting such forward-looking decisions by management

directors to continue to monitor the situation.

is also a responsibility of outside directors.
Katsumaru
Katsumaru

I agree. The main purpose of corporate governance is toCompliance is the biggest challenge in promoting overseas

increase corporate value. There is a big difference in theoperations. What constitutes fair practices varies in different

growth potential of global economies. The United States andcountries and cultures. We have extensive experience in theEurope have grown over the past 10–20 years and are

United States, but now that we have expanded into Europe

expected to continue doing so. In contrast, the Japanese

we need to also look at what is considered fair there andeconomy remains stagnant. The purpose of Japan’sestablish global standards for fair business practices. Safety,

Corporate Governance Code is thus to increase the value offor example, is an important issue for us. The basic definition

Japanese companies and facilitate the creation of manage-of safety is the elimination of accidents, which in other words

ment and business structures that can grow and support

means raising our technological capabilities. We have actively

robust performance levels like those we are seeing in the

promoted technological training in Japan. Going forward, I

United States and Europe. Taking advantage of this recent

think the exchange of technological information with Groupacquisition, I have high hopes that Taiyo Nippon Sanso willcompanies in the United States and Europe will be key tosucceed in creating a unique growth model based on araising our technological capabilities together.

Japan-centered management structure.

Taiyo Nippon Sanso Corporation | Integrated Report 201939

Members of the Board of Directors, Members of the Audit &Supervisory Board and Executive Officers(As of June 20, 2019)

Members of the Board of Directors
Yujiro Ichihara

Masahiro Uehara

Representative Director,
President CEO

Member of the Board,
Senior Managing Executive Officer
Executive General Manager,
Engineering Division

Member of the Advisory Committee
on Appointments and Remuneration
April 1974
June 2005
June 2008
June 2010
June 2012
June 2013
April 2014
June 2014

Joined the Company
Executive officer, deputy general manager of Business Planning Division and General Affairs
Division
Senior executive officer and general manager of General Affairs Division
Managing director and general manager of General Affairs Division
Senior managing director and general manager of Corporate Administration Division
Executive vice president, director, and general manager of Corporate Administration Division
Executive vice president and director, with responsibility for Corporate Administration
Division and Corporate Planning & Global Operations Division
President and representative director, CEO (current)

April 1981
June 2013
June 2015
June 2016
April 2017
June 2018

Kenji Nagata

Kazuyuki Futamata

Member of the Board,
Senior Managing Executive Officer
Executive General Manager,
Gases Business Division

Member of the Board,
Managing Executive Officer
Chief Compliance Officer,(TNSC Group CCO)

April 1981
June 2013
April 2016
June 2016
April 2017
June 2018

April 1980
June 2011

Joined the Company
Executive officer, general manager of North Kanto Branch
Executive officer, deputy general manager of Gases Business Division
Senior executive officer, deputy general manager of Gases Business Division
Senior executive officer, general manager of Gases Business Division
Senior managing executive officer, director, executive general manager of Gases Business
Division (current)

April 2013
April 2015

April 2017
January 2019
June 201940

Joined the Company
Executive officer, deputy general manager of On-site & Plant Division
Senior executive officer, deputy general manager of On-site & Plant Division
Senior executive officer, general manager of On-site & Plant Division
Senior executive officer, general manager of Engineering Division
Senior managing executive officer, director, general manager of Engineering Division(current)

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Joined Mitsubishi Chemical Industries Limited (now Mitsubishi Chemical Corporation)
Executive officer, general manager of Human Resources Division, Mitsubishi Chemical
Corporation; Executive officer, general manager of CEO’s office, Mitsubishi Chemical
Holdings Corporation
Executive officer, Mitsubishi Rayon Co., Ltd. (now Mitsubishi Chemical Corporation)(responsible for Internal Control division)
Executive officer, Mitsubishi Rayon Co., Ltd. (now Mitsubishi Chemical Corporation)(responsible for Human Resources, General Affairs, Information Systems, and Internal
Control divisions); executive officer, general manager of Human Resources Office,Mitsubishi Chemical Holdings Corporation
Director and managing executive officer, Chief Compliance Officer (responsible for Human
Resources, General Affairs, Internal Control divisions), Mitsubishi Chemical Corporation
Managing executive officer, CCO of the Company (Taiyo Nissan Sanso Corporation Group
CCO)
Managing executive officer, director, CCO (Taiyo Nissan Sanso Corporation Group CCO),(current)

Thomas Scott Kallman

Eduardo Gil Elejoste

Member of the Board

Member of the Board

July 1981
January 2000
January 2005
January 2008
June 2009
January 2013
June 2017
April 2019
June 2019

April 1981
January 1992
September 1996
January 2000
October 2004
January 2006
April 2008
December 2016
December 2018

Joined BOC Group, plc.
Vice-president, general manager responsible for Eastern Region, BOC Group, plc.
Executive vice president responsible for Industrial Gas Group, Matheson Tri-Gas, Inc.
Senior executive vice president and COO, Matheson Tri-Gas, Inc.
President and COO, Matheson Tri-Gas, Inc.
President and CEO, Matheson Tri-Gas, Inc.
Chairman, president, and CEO, Matheson Tri-Gas, Inc.
Chairman and CEO, Matheson Tri-Gas, Inc. (current)
Director of the Company (current)

June 2019

Joined Argon S.A.
Director Marketing responsible for Spain and Portugal, Argon S.A.
Director Business Development responsible for Europe, Praxair España S.L.
Director Marketing responsible for Europe, Praxair Euroholding S.L.
CEO, Germany, Praxair Euroholding S.L.
CEO, Germany and Benelux, Praxair Euroholding S.L.
CEO, Praxair España S.L.; CEO, Praxair Portugal S.A.
President, Praxair Euroholding S.L.
Chairman and President, TNSC Euro-holding S.L.U. (now Nippon Gases Euro-Holding
S.L.U.) (current)
Director of the Company (current)

Akio Yamada

Mitsuhiro Katsumaru

Member of the Board(Outside Director)

Member of the Board(Outside Director)

Independent outside director

Independent outside director

Chairman of the Advisory Committee
on Appointments and Remuneration

Member of the Advisory Committee
on Appointments and Remuneration

April 1967
June 1996
June 1997
June 1998
June 2000
December 2003
April 2009
June 2010
March 2014
June 2014
June 2015
March 2018

Joined General Secretariat of Japan Fair Trade Commission
Director general of Trade Practices Department, General Secretariat of Japan Fair Trade
Commission
Director general of Investigation Bureau, General Secretariat of Japan Fair Trade Commission
Director general of Economic Affairs Bureau, General Secretariat of Japan Fair Trade
Commission
Secretary general, Japan Fair Trade Commission
Commissioner, Japan Fair Trade Commission
Senior advisor to Jones Day (current)
Audit & Supervisory Board member, Daiichi Sankyo Co., Ltd.
Audit & Supervisory Board member, Yokohama Rubber Co., Ltd.
Director, Watahan & Co., Ltd.
Outside director of the Company (current)
Chairman, Fair Trade Institute (current)

Hidefumi Date

April 1978
July 1989
June 2000
June 2001
January 2003
April 2005
December 2005
June 2007
October 2008
January 2010
December 2010
June 2012
July 2014
October 2014
June 2015
November 2015
March 2017

Appointed as a public prosecutor assigned to Tokyo District Public Prosecutors OfficeFirst secretary of Embassy of Japan in Germany
Director of Criminal Affairs Division, Criminal Affairs Bureau, Ministry of JusticeDirector of General Affairs Division, Criminal Affairs Bureau, Ministry of JusticeDirector of Finance Division, Minister’s Secretariat, Ministry of JusticeAssistant vice-minister, Ministry of Justice (responsible for general policy integration)
Chief prosecutor, Fukui District Public Prosecutors Office
Chief prosecutor, Mito District Public Prosecutors Office
Chief prosecutor, Saitama District Public Prosecutors OfficeDirector, Public Security Department, Supreme Public Prosecutors Office
Superintending prosecutor, Takamatsu High Public Prosecutors Office
Superintending prosecutor, Hiroshima High Public Prosecutors Office
Retired from superintending prosecutor position
Registered as an attorney
Outside director of the Company (current)
Director of MoriX Co., Ltd. (current)
Director of Shimano Inc. (current)

Member of the Board

April 1982
April 2013
March 2014
April 2014
April 2015
April 2018
June 2019

Joined Mitsubishi Chemical Industries Limited (now Mitsubishi Chemical Corporation)
Executive officer, general manager of Consolidated Management Department, Mitsubishi
Chemical Corporation
Executive officer, general manager of Consolidated Management Department and Finance& Accounting Department, Mitsubishi Chemical Corporation
Executive officer, general manager of Finance & Accounting Department, Mitsubishi
Chemical Corporation
Executive officer and general manager of Corporate Management Office, Mitsubishi
Chemical Holdings Corporation
Managing corporate executive officer and chief financial officer, Mitsubishi Chemical
Holdings Corporation (current)
Director of the Company (current)
Taiyo Nippon Sanso Corporation | Integrated Report 201941

Members of the Board of Directors, Members of the Audit &Supervisory Board and Executive Officers(As of June 20, 2019)

Members of the Audit & Supervisory Board
Kazunari Higuchi

Naoya Fujimori

Member of the Audit &Supervisory Board(Outside Auditor)

Member of the Audit &Supervisory Board(Outside Auditor)

Independent outside auditor
April 1980
April 2009
April 2010
May 2010
June 2011
April 2016
June 2016

Joined The Fuji Bank, Limited (now Mizuho Bank, Ltd.)
Executive officer, general manager, Operational Audit Division, Mizuho Corporate Bank, Ltd.
(now Mizuho Bank, Ltd.)
Adviser, Mizuho Research Institute Ltd.
Managing executive officer, Mizuho Research Institute Ltd.
President and representative director, UC Card Co., Ltd.
Adviser, UC Card Co., Ltd.
Outside auditor of the Company (current)

April 1978
February 2001
June 2003
June 2010
June 2012
April 2014
October 2014
March 2016
April 2016
June 2016

Joined Mitsubishi Chemical Industries Limited (now Mitsubishi Chemical Corporation)
Group manager, Accounting Department, Mitsubishi Chemical Corporation
General manager, Accounting Department, Nippon Kasei Chemical Co., Ltd. (nowMitsubishi Chemical Corporation)
General manager, Accounting Department, Mitsubishi Chemical Logistics Corporation
Director, general manager, Accounting Department, Mitsubishi Chemical Logistics
Corporation
Director, executive officer, responsible for Accounting, LSI Medience Corporation
Director, executive officer, general manager, Administration Department, LSI Medience
Corporation
Retired from LSI Medience Corporation
Advisor of the Company
Outside auditor (current)

Akihiro Hashimoto

Junzo Tai

Member of the Audit &Supervisory Board(Outside Auditor)

Member of the Audit &Supervisory Board

Independent outside auditor
April 1983
April 2010
April 2012
April 2013
July 2013
April 2014
April 2014
May 2014
June 2014
June 2016
June 2016
June 2017

42

Joined The Fuji Bank, Limited (now Mizuho Bank, Ltd.)
Executive officer and general manager of Americas Financial Products
Division of Mizuho Corporate Bank, Ltd. (now Mizuho Bank, Ltd.)Managing executive officer in charge of branches, Mizuho Bank, Ltd. (to July 2013)
Managing executive officer in charge of corporate banking, Mizuho Corporate Bank, Ltd.
Managing executive officer in charge of corporate banking, Mizuho Bank, Ltd. (Mizuho Bank,
Ltd. and Mizuho Corporate Bank, Ltd. merged to form the current Mizuho Bank, Ltd.)
Senior general manager, Mizuho Bank, Ltd.
Resigned from Mizuho Bank, Ltd.
Senior general manager, Sharp Corporation
Director and executive managing officer, Sharp Corporation
Resigned from Sharp Corporation
Senior general manager, Mizuho Bank, Ltd.
Outside auditor of the Company (current)

Taiyo Nippon Sanso Corporation | Integrated Report 2019

April 1979
June 2013
June 2014
January 2015
March 2017
April 2017
March 2018
April 2018
June 2018

Joined the Company
Manager of Corporate Audit Office
Executive officer and manager of Corporate Audit Office
Executive officer assigned to Mitsubishi Chemical Holdings Corporation
Resigned from executive officer position
Executive officer, manager of Industrial Gases Strategy Office in Corporate Strategy
Division, Mitsubishi Chemical Holdings Corporation
Resigned from executive officer position at Mitsubishi Chemical Holdings Corporation
General manager of the Corporate Planning Office of the Company
Member of the Audit & Supervisory Board (current)Senior Executive Officers

Hirohisa Yanagida

Masahisa Kanzaki

Nobuaki Kobayashi

Senior Executive Officer
General Manager,
Kanto Regional Branch

Senior Executive Officer
Executive General Manager,
Energy Division

Senior Executive Officer
Executive General Manager,
Research & Development Division

Kunihiro Kobayashi

Yasuhiko Kawano

Toshikazu Kurishita

Satoshi Wataru

Tsutomu Moroishi

Executive Officer
Executive General Manager,
Innovation Division

Executive Officer
General Manager,
Chubu Regional Branch

Executive Officer
Deputy Executive General
Manager, Gases Business
Division

Executive Officer
Executive General Manager,
Human Resources Division
and Corporate Planning
Office, Chief Health Officer

Executive Officer
Executive General Manager,
Global Operations Division

Toyoyuki Sato

Masaharu Takagi

Toru Yanagawa

Daiji Nakajima

Masanobu Narita

Executive Officer
Deputy Executive General
Manager, Plant Engineering
Center, Engineering Division

Executive Officer
Deputy Executive General
Manager, Gases Business
Division

Executive Officer
Executive General Manager,
On-site & Plant Division

Executive Officer
Executive General Manager,
Production & Logistics
Division

Executive Officer
General Manager,
Kitakanto Regional Branch

Yoshifumi Koide

Tsuneo Tanaka

Takeshi Miki

Kouichi Take

Masayuki Higano

Executive Officer
Executive General Manager,
Corporate Administration
Division

Executive Officer
Executive General Manager,
Medical Division

Executive Officer
Executive General Manager,
Technological Affairs Division,
Chief Sustainability Officer

Executive Officer
General Manager, Chugoku
Shikoku Regional Branch

Executive Officer
General Manager,
Tohoku Regional Branch

Executive Officers

Taiyo Nippon Sanso Corporation | Integrated Report 201943

Working with Stakeholders
Recognizing that our longevity and future prosperity depend on our ability to earn the trust of society as a whole, we haveestablished a framework for fulfilling our responsibilities to stakeholders and are implementing a variety of initiatives aimed
at maintaining a strong corporate culture.

Providing a Working Environment that Encourages Innovation and Diversity
At our Shiba office, home of the Innovation Division, we strive
to facilitate global business expansion and value creation by
providing a working environment conducive to the development of original ideas and new value and to job satisfaction
for a wide range of human resources. As partof this effort, we have established an open areaon the eighth floor of the office based on theconcept of “a work/lounge/office where employees can choose how and where they work.”
The space is suitable for a wide range of uses,
including for meetings, as a workspace and forpresentations using large displays.
The Innovation Division brings together diverse
human resources, including a number of foreign

nationals. In addition to facilitating active in-house communication, the open area has also proven useful in encouraging
innovation and diversity.

Eighth floor open area equipped with tables, counters, meeting spaces and large displays

Thermos Collaborates with Volunteer Environmental Initiativeand Participates in Team ECO Work! 224 Event
In September 2018, 48 Thermos employees and family
members took part in Team ECO Work! 224 Thermos
Zero Waste Action at Teradomari Central Beach Resort,a post-season beach clean-up initiative sponsored by the
UX Niigata Television Network 21, Inc., on the prefecture’s
Teradomari coast. Thermos collaborates actively with
the UX Niigata Television Network 21’s Team ECO: Nature
Support Declaration project and has now participated inthis particular volunteer initiative three times.
The Team ECO: Nature Support Declaration project is avolunteer initiative led by local residents and companies in
Niigata Prefecture. In addition to beautifying the environment,
the initiative aims to deepen people’s love of nature and thus

is a good fit with Thermos’ own environmental activities. The
event also provides a valuable opportunity for Thermos tocommunicate with local residents.

Team ECO Work! 224 participants

Matheson Tri-Gas Wins CGA Safety Awards
On April 24, 2018, the U.S. Compressed Gas Association(CGA) announced winners of its safety awards for 2018 at
its annual meeting, which was held in Florida. In addition
to earning its second consecutive Fleet Safety ExcellenceAward in the Bulk Vehicle Fleets category, Matheson Tri-Gas,
Inc. won the Environmental Recognition Program Award for
its efforts in 2017 to reduce argon gas losses. Matheson
Tri-Gas subsidiary Western International Gas and Cylinders
won its second consecutive Fleet Safety Excellence Award in
the Cylinder Vehicle Fleets category.
The CGA was created to establish safety standards andpromote safe practices in the industrial gases and medical
gases industries. The association presents awards annuallyto companies and individuals exhibiting industry leadership in the areas of safety and environmental performance.

44

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Matheson Tri-Gas places a high priority on companywide
safety and environmental considerations. As evidenced by
its CGA awards, the company continues to earn recognition
across the industry for its efforts.

Fleet Safety Excellence Award (Bulk Vehicle
Fleets category) winner: Matheson Tri-Gas

Fleet Safety Excellence Award (Cylinder
Vehicle Fleets category) winner: WesternInternational Gas and Cylinders

For additional information on CSR initiatives, see the Environmental Data page of the CSR section of the Taiyo Nippon Sanso corporate website:

https://www.tn-sanso.co.jp/en/csr/

Communication with Shareholders and Investors
In addition to our annual general meeting of shareholders, we
conduct results presentations, facility tours and other events
for institutional investors and sell-side analysts. Results presentations make use of visual aids to deepen understandingof our operations, operating results and our forecasts for the
future. Facility tours are designed to enhance understandingof what we do and include regularly scheduled visits to bothproduction facilities and research laboratories. In March
2019, we conducted a tour of the Chiba Sanso Center withthe aim of introducing shareholders and investors to ourindustrial gases business. In September 2018, we conducteda tour of subsidiary Japan Fine Products’ Mie Plant in cooperation with Mitsubishi Chemical Holdings. We also organized a joint IR seminar with Mitsubishi Chemical Holdings
and Tanabe Co., Ltd., another member of the Mitsubishi
Chemical Holdings Group.
We also released a number of regular publications forshareholders and investors, including full-term and interim
business reports and a single integrated report that provides
both financial information, such as that related to businessstrategies and operations, and non-financial information,
including that related to environmental protection, social

contribution and corporate governance, with the aim ofgiving readers an accurate overall picture of the Taiyo Nippon
Sanso Group.
Enhancing our corporate website is another key focus of
our efforts. As well as various key documents, the website
provides a compact outline of our various businesses in acompact, easy-to-understand form and other content thatgive even first timers a clear view of the Group and its
activities.
Corporate website’s IR section:
https://www.tn-sanso.co.jp/en/ir/index.html

Tour of Japan Fine Products’ Mie Plant for
institutional investors and securities analysts

Results presentation

Taiyo Nippon Sanso Major Club Official Dealer System
In April 2005, we launched an official dealer system,
dubbed the Taiyo Nippon Sanso Major Club, with the aimof responding accurately and effectively to the needs of
end users across Japan. In addition to providing official
dealers (“partner companies”) with competitive products,
we leverage our position to provide a wide range of services,
including domestic and overseas sales support, technicalassistance and management consultation.
The Taiyo Nippon Sanso Major Club—comprising the core
Partners’ Club and two functional subgroups, the LP Gas
Club and the Medical Club—boasts a robust national network that is instrumental in ensuring our products are delivered safely and reliably to end users. For each constituent
club, we offer seminars and training sessions on operationalsafety and other themes. Partner companies also promote a
variety of ongoing independent skill-building initiatives aimed
at enhancing customer satisfaction and improving their own
performance as responsible corporate citizens. In fiscal year
2019, the Medical Club conducted training sessions at six
locations, in which a total of 270 individuals participated. A
training session held by the LP Gas Club in Tokyo welcomed
87 participants from 63 companies. Exchanges, training
sessions and production facility tours were also conducted
for Partners’ Club companies in multiple other areas.
Going forward, we will continue working to reinforce
customer satisfaction and enhance our reputation as anorganization worthy of trust through ongoing initiatives with
Taiyo Nippon Sanso Major Club partners.

Organization of the Taiyo Nippon Sanso Major Club

Logo

*The Partners Club is divided into seven regional blocks:
Tohoku, Kita-Kanto, Kanto, Chubu, Kansai, Chugoku–Shikoku and Kyushu.

LP Gas Club
(Functional subgroup)

Partners’ Club*

Medical Club
(Functional subgroup)

Inaugurated: April 1, 2005

Chairperson: Representative Director,
President CEO
Taiyo Nippon Sanso

Number of participating dealers:
284 (as of July 2019)

Secretariat: Gases Business Division,
Taiyo Nippon Sanso

Fiscal year 2018
annual meeting of
the LP Gas Club andproduction facility
tour conducted by
Kyushu-based LP
Gas Club partners
The Major Club Magazine
helps us communicate withMajor Club members.

Taiyo Nippon Sanso Corporation | Integrated Report 201945

Environmental Protection Initiatives
We promote a broad range of initiatives to combat climate change with the aim of helping mitigate global warming, thecentral theme of our environmental protection efforts. Of particular note, we are taking steps to reduce energy consumed
per unit of production at gas production facilities, promoting energy-saving measures at various sites and striving toincrease the efficiency of transport by tanker truck. We also promote the development of products and propose solutions
that reduce our impact on the environment and contribute to global environmental conservation.

Environmental Impact of Oxygen, Nitrogen and Argon Production
Air Separation Unit: Simplified Process Flow
Main heat exchanger
Distillation column

Cold box
Purifier unit
(Removal of CO2 and water)

Argon
GaseousnitrogenAtmospheric
airLiquefied nitrogen and oxygen

The production of the Taiyo Nippon Sanso Group’s core air
separated gases (oxygen, nitrogen and argon) requires a considerable amount of electric power. CO2 emissions attributable
to the use of electric power used for this purpose accounts forapproximately 98% of total Group CO2 emissions.
Air separation units produce oxygen, nitrogen and argon
simultaneously by separating atmospheric air into its constituent gases. Air is first compressed, a process that is highly
energy-intensive and thus uses a significant amount of electric
power. Compressed air is cooled almost to the point where thegases liquefy, after which it is ready for the distillation column,
where it is separated into its gas and liquid components using
a thermal distillation process. Nitrogen, which has a low boilingpoint, concentrates in the gas and is withdrawn from the topof the column, while oxygen, which has a higher boiling point,concentrates in the liquid and is withdrawn from the bottomof the column. Argon, which has an intermediate boiling point,
is withdrawn from the middle of the column.

Waste gas
Gaseousoxygen

Air
inlet

Air
compressor

Atmospheric air(Raw material)

Ambient temperature

Cryogenic temperature

Preventing Global Warming
Our efforts to contribute to the prevention of global warming
center on reducing energy consumption at gas production
facilities. We have established an Energy Saving Working Group
as a subsection of our Environmental Management Committee
to guide these efforts. In fiscal year 2019, consumption ofenergy per unit of production by such facilities was up 0.2%
from fiscal year 2006, the base year used for this measurement,
reflecting changes in the consumption of gases supplied bypipeline by major users. Moreover, these facilities’ consumptionof electric power per unit of production was down 27.2% fromfiscal year 1991. Efforts by gas production facilities to reduceenergy consumption included developing and installing energysaving air separation units, replacing air separation unit components with new high-efficiency versions and optimizing facility
operations to better reflect demand. These facilities also promote initiatives in line with the Commitment to a Low-Carbon
Society plan formulated by the Keidanren (Japan Business
Federation) and the Japan Chemical Industry Association(JCIA)’s action plan for realizing a low-carbon society.
Other Initiatives
Challenges and targets

Principal initiatives

Consumption of Energy and Electricity per Unit of Production
by Gas Production Facilities(Million kWh) 100

1991 = 100

100

10,000

72.8

7,500

75

5,266
50

5,000
2,909

25

2,500
0

1991
Base year
Electricity consumed

2014

2015

2016

2017

2018
2019
(Years ended March 31)
Electricity consumed per unit of production (index)

0

Reporting boundary: Gas production facilities belonging to and gas production companies
managed by Taiyo Nippon Sanso.
Notes: 1. For information on relevant companies/departments/sites, see the Environmental Data
page of the CSR section of the Taiyo Nippon Sanso corporate website.
2. Increases in fiscal years 2018 and 2019 reflect a change in the reporting boundary toinclude JFE Sanso Center’s Kurashiki Plant.

Progress as of
fiscal year 2019

Relevant companies/
departments/sites• Cut unnecessary electric power consumption by office and lighting
equipment
All Taiyo Nippon Sanso sites• Replace air conditioning, OA, lighting, shared and other equipment with
Down 2.1%(excluding gas productionenergy-efficient new models(from fiscal year 2018)
facilities)• Implement no overtime days and Cool Biz (liberal summer dress code to
reduce use of air conditioning)• Optimize shipping routes(2) Increase the efficiency of transport by • Rethink delivery intervals
Down 29.1%
Group and subcontracted
tanker truck to reduce fuel used in the • Promote the weighing of cargo in the presence of the customer(from fiscal year 1991) logistics companies*1
transport of products• Introduce new-model tanker trucks• Reinforce green driving training
Take steps to bolster sales of hydrogen refueling stations, SCOPE-Jet®,(3) Contribute to environmental protection
Contribution to overall Taiyo Nippon Sanso and
MG Shield®, SF6 Recovery Service, Thermos products, nitrogen supply
through our products by increasing
reduction:
directly owned consolidated
systems for laser processing and combustion-type exhaust gas abatement
sales of environment-friendly products
1,779,000 tonnes CO2*2 subsidiaries in Japansystems(1) Promote energy-saving measures atvarious sites to reduce electric power
consumption(Target: Average annual reduction of
1.0% over the medium to long term)*1 For information on relevant companies/departments/sites, see the Environmental Data page of the CSR section of the Taiyo Nippon Sanso corporate website.
*2 Contributions to the reduction of greenhouse gas emissions are calculated in accordance with the Japanese Ministry of Economy, Trade and Industry’s Guideline for Quantifying GHG Emission
Reduction Contribution (formulated in March 2018).

46

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Environmental Inputs and Outputs of the Taiyo Nippon Sanso Group’s Operating Activities
Raw material

Atmospheric air isthe raw material used to produce
industrial gases.

Argon

0.9%

OxygenOther

Electricity used here represented
99.8% of the Group’s total
electricity consumption.

Atmospheric air consists of oxygen,nitrogen, argon and other gases.

0.1%

20.9%

Nitrogen 78.1%

Development and production
Electricity
Heat

Greenhouse gas emissions
4,057,000 tonnes CO2

7,278 million kWh
706,000 GJ

Fuel

316,000 GJ

Water

13.62 million m3

Gas filling
stations

INPUT

Gas production
facilities

Calculated Emissions of CO2 due to
in tonnes the use of electricityof CO2Emissions of CO2 due tothe use of heat
Emissions of CO2 due tothe use of fuelEmissions of greenhousegases other than CO2

OUTPUT

4,009,000 tonnes CO2
41,000 tonnes CO2
4,000 tonnes CO2
3,000 tonnes CO2(Estimate)

Supplied incylinders

Supplied bytanker trucks

Water discharged

Supplied bypipeline

4.54 million m3

Supply2,000 kL

Diesel oil/gasoline*1

INPUT

OxygenO2

CarbondioxideCO2

Hydrogen

H2

HeliumHe

Nitrogen

Argon

LPG

Specialty
gases

N2

Liquefied gases are transported from production facilities bytanker truck to filling stations, where vaporized gases arecompressed into cylinders.

Electricity*2
Fuel*2
Diesel oil/gasoline*3

Ar

OxygenO2OxygenO2Nitrogen

Nitrogen

N2

Argon

INPUT

Sites

Ar

Service vehicles

300 kL

Use
Most industrial gases return tothe atmosphere after use,
resulting in minimal waste.

Customers• Steel/nonferrous metals• Glass/
papermaking• Electronics• Healthcare• Petroleum/chemicals• Food• Automobiles/
machinery*1 Used by trucks in Japan(Fuel used by Group-designated consignors is included in Scope 3.)*2 Used by Group sites in Japan*3 Used by Taiyo Nippon Sanso service vehicles*4 Calculated based on item 3 in the “Other initiatives” table on page 46.

Ar

Argon

N2

Sales

12 million kWh
14,000 GJ

Greenhouse gas emissions
5,000 tonnes CO2

OUTPUT• Others

Industrial gases are used in a broad
range of industries, from healthcare
and food to petroleum/chemicals
and electronics.

Greenhouse gas emissions
8,000 tonnes CO2
OUTPUT

Calculated Emissions of CO2 due to
in tonnes the use of electricityof CO2Emissions of CO2 due tothe use of fuelEmissions of CO2 due tothe use of diesel oil/gasoline

6,000 tonnes CO2
1,000 tonnes CO2
1,000 tonnes CO2

Total greenhouse gas
emissions
4,070,000 tonnes CO2
Contribution to the reduction ofgreenhouse gas emissions*4
1,779,000 tonnes CO2
Note: Reporting boundary for environmental inputs and outputs
Development and production:
Taiyo Nippon Sanso, directly owned consolidated subsidiaries in Japan andprincipal consolidated subsidiaries overseas
Supply, Sales:
Taiyo Nippon Sanso and directly owned consolidated subsidiaries in Japan(For information on principal overseas subsidiaries, see the Environmental
Data section of the CSR portion of the Taiyo Nippon Sanso corporate website.)

Taiyo Nippon Sanso Corporation | Integrated Report 201947

Non-Financial Highlights

Greenhouse Gas Emissions

Energy Consumption(Thousands of tonnes CO2)

(Thousands of GJ)

5,000

100,000

3,856

4,000

4,070
80,000

3,372
3,000

2,000

1,000

0
Japan

2,614
764

2,669
784

1,525

2,733
948

1,575

62,51660,0001,503

43,80740,000

1,850

1,884

1,785

1,869

2014

2015

2016

2017

Overseas

2,331

2018

2,495

2019

(Years ended March 31)

67,61344,62047,59932,181

Japan

33,681

14,935

15,423

18,911

28,872

29,197

28,68830,33535,14338,333

2014

2015

2016

2017

2018

2019

20,000032,47072,014

Overseas(Years ended March 31)

Reporting boundary: Taiyo Nippon Sanso, directly owned consolidated subsidiaries in Japan and principal
consolidated subsidiaries overseas

Reporting boundary: Taiyo Nippon Sanso, directly owned consolidated subsidiaries in Japan and principal
consolidated subsidiaries overseas

Greenhouse gas emissions (Scope 1 and Scope 2) in fiscal year 2019rose to 2,495,000 tonnes of CO2 in Japan and 1,575,000 tonnes of CO2
overseas, owing to the expansion of operations as a result of forwardlooking M&As and capital investment.

Energy consumption in fiscal year 2019 rose to 38,333,000 tonnes inJapan and 33,681,000 metric tonnes overseas, owing to the expansionof operations as a result of forward-looking M&As and capital investment.
We continue to promote the efficient use of energy by developing andinstalling energy-saving air separation units and replacing existing air
separation unit components with new high-efficiency alternatives.

Electric Power Consumption

Fresh Water Withdrawn(Millions of kWh)

(Thousands of m3)

10,00015,000

8,000

6,389

6,874

6,000

4,000

4,860

Japan

3,423

4,451

4,539

1,530

1,580

1,938

2,921

2,959

2,923

3,092

3,570

3,867

2014

2015

2016

2017

2018

2019

3,297

12,00010,140
9,000

6,000

2,000

0

3,304

7,290

Overseas(Years ended March 31)

13,620

3,000

0
Japan

8,060

7,910

8,160
5,390

10,920
6,800
5,640

2,720

2,810

3,430

5,350

5,100

4,740

4,760

5,290

2014

2015

2016

2017

2018

Overseas

6,830

2019

(Years ended March 31)

Reporting boundary: Taiyo Nippon Sanso, directly owned consolidated subsidiaries in Japan and principal
consolidated subsidiaries overseas

Reporting boundary: Gas production facilities of Taiyo Nippon Sanso and directly owned consolidated
subsidiaries in Japan, and principal consolidated subsidiaries overseas

Production processes for industrial gases use a significant amount ofelectric power. The bulk of our electric power consumption goes to theoperation of air separation units. Owing to the establishment of JFE
Sanso Center’s Kurashiki Plant and other efforts to expand our operations, electric power consumption in fiscal year 2019 rose to 3,867 million
kWh in Japan and 3,423 million kWh overseas. We continue to curb
increases in our use of electric power by developing and installingenergy-saving air separation units and replacing existing air separation
unit components with new high-efficiency alternatives.

The production of industrial gases uses a water cooler to cool atmospheric air, the principal raw material. Replenishing the water for thispurpose uses the bulk of our water withdrawal. Fresh water withdrawn infiscal year 2019 rose to 6,830,000 m3 in Japan and 6,800,000 m3 overseas, owing to the expansion of operations as a result of forward-looking
M&As and capital investment.

Reporting boundary:Owing to a change in the reporting boundary to Taiyo Nippon Sanso, directly owned consolidated subsidiaries in Japan and principal consolidated subsidiaries overseas effective from fiscal year 2019, datafor previous periods (fiscal year 2014 through fiscal year 2018) has been revised. For information on principal overseas subsidiaries, see the Environmental Data section of the CSR portion of the Taiyo
Nippon Sanso corporate website.
Greenhouse gas emissions: Greenhouse gas emissions in Japan are calculated using emissions factors provided in Japan’s Act on Promotion of Global Warming Countermeasures. For greenhouse gas emissions overseas, Scope 1
emissions are calculated using emissions factors set forth in Japan’s Act on Promotion of Global Warming Countermeasures, while Scope 2 emissions are calculated using country-specific emissions
published by the International Energy Agency (IEA) in 2016.
Energy consumption:
The unit calorific values for fuel used are calculated based on values provided in Japan’s Act on the Rational Use of Energy.

48

Taiyo Nippon Sanso Corporation | Integrated Report 2019For additional non-financial data, see the Environmental Data page of the CSR section of the Taiyo Nippon Sanso corporate website:

https://www.tnsanso.co.jp/en/csr/non-financial_data.html

Number of Employees (Consolidated)

Number of Employees (Parent Company)(Number of individuals)(%)

25,000100

20,00015,00012,955

13,142

14,107

10,000
5,000
0

53.9%

56.3%

2014

2015

16,746

15,860

63.3%

59.1%

2016

63.1%

2017

2018

2,000

80

1,500

66.4% 70

1,000

60

500

0

2019

(%)

2,500

19,229 90(Years ended March 31)

Overseas (Left scale)Japan (Left scale)
Overseas employees as a percentage of total labor force (Right scale)(Number of individuals)

0

25

2,027

1,913

1,881

1,890

1,940

10.0%

7.7%

7.6%

7.9%

9.2%

1.2%

1.3%

1.2%

1.2%

1.5%

2014

2015

2016

2017

2018

Male (Left scale)
Female (Left scale)
Female employees as a percentage of total labor force (Right scale)
Female managers as a percentage of management team (Right scale)

1,983
11.3%

20
15
10

1.4%
2019

In fiscal year 2019, the parent company’s labor force comprised 1,758
male employees, 225 female employees and 76 foreign nationals. Whilefemale employees as a percentage of the parent company’s total labor
force rose 1.3 percentage points, female managers as a percentage ofthe management team remained level. Going forward, we will continue
working to expand career opportunities for female employees byimproving working environments and establishing pertinent systems.

Frequency Rate* of Occupational Accidents Resulting
in Lost Workdays (Consolidated)

Percentage of Labor Force Accounted for by Individuals
with Disabilities

4.15

4.09

4.0

2.5

3.49

2.0

3.20

3.0

1.5

2.0

1.0

1.0

0.71

0.45

0

2016
Japan

2017

0.45

0.71

2018

2019

Overseas

0(Years ended March 31)

In fiscal year 2019, the number of individuals employed by the consolidated Taiyo Nippon Sanso Group rose to 6,461 in Japan and 12,768
overseas. Owing to the expansion of operations as a result of forwardlooking M&As, overseas employees as a percentage of the total labor
force was also up from fiscal year 2018.

5.0

5

(%)

1.94%

2.09%

2.04%

2.00%

2016

2017

2018

2.22%

1.63%

0.5
0

(Years ended March 31)*The frequency rate expresses the frequency of accidents resulting in lost workdays in a fiscal year,
calculated as the number of injuries/deaths due to occupational accidents per million work hours.
Reporting boundary: Taiyo Nippon Sanso, directly owned consolidated subsidiaries in Japan andconsolidated subsidiaries overseas (principal production departments) (Dataused in fiscal year 2019 includes data for Europe for the three months ended
March 31, 2019.)

In fiscal year 2019, the frequency rate of accidents resulting in lost
workdays was 0.71 in Japan and 3.20 overseas. We continue to promote
efforts to prevent occupational accidents, including providing hands-on
safety training to improve employees’ ability to recognize danger, andKiken Yochi Training (KYT) (“hazard prediction training”), introducing 5S(a workplace organization methodology based on five words (Seiri (Sort),
Seiton (Set in Order), Seiso (Shine), Seiketsu (Standardize) and Shitsuke(Sustain)) and fostering a safety-oriented corporate culture.

2014

2015

2019

(Years ended March 31)

In fiscal year 2019, individuals with disabilities accounted for 2.22% of
our labor force, slightly higher than the legally mandated rate for privatesector companies in Japan of 2.2%. We endeavor to provide working
environments in which individuals with disabilities can reach their full potential and to support the realization of a society that enables individuals withdisabilities to play an active role that leverages their abilities.

Directors and Outside Directors(Number of individuals)

20

87%

12

100

88%
17

16

(%)

15

2
9

8
4
0

2014

2015

80

64%
50%

60

29%

33%

40

5

2
4

20

2018

2019

50%
2
8

18%

20%

2016

2017

2

In fiscal year 2019, the Board of Directors comprised four inside and two
independent outside directors, with directors serving concurrently as
executive officers accounting for 50% of the Board as a whole and 33%
of independent outside directors. The Advisory Committee on Appointments and Remuneration, which is chaired by an independent outside
director and comprises the president (CEO) and independent outside
directors, was established to improve the transparency and objectivity ofprocedures for appointing and determining remuneration for directors.

0(Years ended March 31)
Inside directors (Left scale)
Independent outside directors (Left scale)
Percentage of directors serving concurrently as executive officers (Right scale)
Independent outside directors as a percentage of total Board members (Right scale)
Regarding the number of directors and outside directors, the president and deputy chairman of the Board of
Directors are counted as executive officers. Our executive officer system was introduced in fiscal year 2016.
For prior years, directors responsible for business execution are counted as executive officers.
Taiyo Nippon Sanso Corporation | Integrated Report 201949

Six-Year Summary
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries(Millions of yen)

Financial indicators
Years ended/as of March 31

Japanese
GAAP

Japanese
GAAP

Japanese
GAAP

IFRS

IFRS

IFRS

IFRS

2014

2015

2016

2016

2017

2018

2019

¥522,746¥559,373¥641,516¥594,421¥581,586¥646,218¥ 740,341

Core operating profit*1

—

—

—

47,45654,73660,03365,819Core operating profit margin

—

—

—

8.0%

9.4%

9.3%

8.9%

31,48935,29743,362

48,92553,664

59,862

66,863

6.0%

6.3%

6.8%

8.2%

9.2%

9.3%

9.0%

20,194

20,76425,84529,03034,74048,91941,291

Overseas revenue ratio
Selling, general and administrative
expenses/revenue

31.4%

35.0%

44.4%

40.7%

40.8%

43.3%

47.9%

26.4%

26.7%

28.4%

27.1%

28.4%

27.7%

27.7%

Return on equity

8.4%

7.0%

8.2%

9.1%

10.3%

13.3%

10.4%

Return on capital employed*3

6.2%

6.2%

7.4%

8.1%

8.4%

8.4%

6.2%

Capital expenditures

32,53235,201

53,611

52,657

43,79662,56976,657

Investment and loans

35,7495,710

32,94125,507102,034

4,556

691,126

Depreciation and amortization

33,50735,56844,864

39,69640,04843,266

56,111

Amortization of goodwill

3,668

4,959

7,352

—

—

—

—

Research and development expenses

3,170

3,430

3,348

3,238

3,323

3,255

3,494

Interest-bearing debt

278,063266,276

274,424

266,215

359,528

326,959

1,005,402

Net interest-bearing debt

219,727

212,855

223,638

215,492

304,308

274,968

941,117

Net debt-to-equity (times)

0.80

0.67

0.71

0.67

0.87

0.71

—

Adjusted net D/E ratio*4 (times)
Total equity attributable to owners ofparent

—

—

—

—

—

—

1.54

298,475

341,207337,974

320,457

351,576

386,457

406,602

Total assets

731,677

782,357

783,248787,505

924,281

931,047

1,771,015

Revenue

Operating profit
Operating profit margin
Profit (loss) attributable to owners ofparent*2

Cash flows from operating activities

56,716

58,61581,55573,34774,596

83,19998,685

Cash flows from investing activities(55,295)(30,583)(82,130)(74,252)(147,082)(52,088)(754,969)

Cash flows from financing activities

27,884(33,866)(1,825)(2,385)80,777(39,859)

664,925

Free cash flow

1,421

28,032

(575)

(905)

(72,486)

31,111(656,284)

49.42

47.98

59.72

67.08

80.28

113.04

95.42

Amounts of per share of common stock
Profit (loss) (yen)Cash dividends (yen)

12.0

13.0

16.0

16.0

20.0

23.0

25.0

Dividends payout ratio

24.3%

27.1%

26.8%

23.9%

24.9%

20.3%

26.2%

Price earnings ratio (times)

16.43

34.16

17.88

15.92

16.22

14.25

17.67

Share price (March 31) (yen)

812

1,639

1,068

1,068

1,302

1,611

1,686

*

1 Core operating profit is calculated by subtracting losses (nonoperating items) produced by nonrecurring factors from operating profit. Nonrecurring factors include

structural reform charges, including costs associated with business downsizing or withdrawal, special severance payments; losses due to disasters or major
accidents; and other factors such as the disposal of idle assets.
*2 Return on equity (ROE) = Profit attributable to owners of parent / average shareholders’ equity
Shareholders’ equity = Net assets – non-controlling interests; average shareholders’ equity = (Shareholders’ equity at beginning of period + shareholders’ equity at
end of period) / 2*3 Return on capital employed (ROCE) = Core operating profit / (outstanding interest-bearing debt + equity attributable to owners of parent)*4 Adjusted net debt-to-equity (D/E) ratio = (Net interest-bearing debt – equity-type debt) / (equity attributable to owners of the parent + equity-type debt)
Equity-type debt is debt procured through hybrid financing that has been recognized as equity credit by ratings agencies (50% of the procured amount); hybrid
financing is a form of debt financing that has features resembling equity, including voluntary deferral of interest, extremely long-term redemption periods andsubordination during liquidation or bankruptcy procedures.

50

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Management’s Analysis of Operating Results and Financial Position

Operating Results
Consolidated revenue in fiscal year 2019, ended March 31,
2019, increased 14.6%, to ¥740,341 million.
Cost of sales climbed 15.0%, to ¥473,332 million,
equivalent to 63.9% of revenue, up 0.2 percentage point.
Selling, general and administrative expenses rose 14.6%,
to ¥204,789 million, equivalent to 27.7% of revenue. As aconsequence, operating profit advanced 11.7%, to ¥66,863
million, while the operating profit margin edged down 0.3
percentage point, to 9.0%. Core operating profit—operating
profit excluding gains or losses associated with nonrecurring
factors such as withdrawals from or the scaling back ofbusinesses—amounted to ¥65,819 million, up 9.6%, or¥5,786 million.
Owing to these and other factors, profit attributable toowners of the parent declined 15.6%, to ¥41,291 million.
Basic earnings per share, at ¥95.42, were down ¥17.62,
while ROCE, at 6.2%, was down 2.2 percentage points.
At the general meeting of shareholders held on June 20,
2019, shareholders approved a proposal to pay a year-end
dividend of ¥13.00 per share, up ¥1.00, bringing cash
dividends to the period, comprising interim and year-end
dividends, to ¥25.00 per share. This represented a payout
ratio of 26.2%.
Capital expenditures, on a final acceptance basis, totaled¥76,657 million, an increase of ¥14,088 million. Depreciation
and amortization rose ¥12,845 million, to ¥56,111 million.
Research and development expenses, at ¥3,494 million,
were up ¥239 million, equivalent to approximately 0.5% ofrevenue.

Results by Segment
Gas Business in Japan
In the area of industrial gases, revenue from core air
separated gases (oxygen, nitrogen and argon) were favorable, particularly to customers in the key steel and chemicals
industries. Revenue from on-site gas services advanced,
owing to the establishment of a new on-site plant in
October 2017. Revenue from sales of hard goods soared,
particularly for metal processing, was up sharply. The
October 2018 acquisition of medical equipment sales
company IMI contributed to revenue in the area of medical
equipment. Among electronics-related products, sales ofelectronics materials gases declined. As a consequence of
these and other factors, revenue from external customers
rose 5.5%, to ¥363,951 million. Nonetheless, segment profit
declined 5.0%, to ¥29,808 million.

Gas Business in the United States
In industrial gases, firm production levels underpinned
significant increases in revenue from sales of both bulk gases
and hard goods. Revenue in on-site gases was bolsteredby the start of operations at a new on-site unit for a major
chemicals manufacturer and the February 2019 acquisitionof a HyCO* business from Linde AG subsidiary Linde Gas
North America also contributed. In electronics-related products, revenue from equipment and installations rose substantially. As a consequence, revenue from external customers
increased 8.5%, to ¥187,323 million, and segment profit
advanced 15.3%, to ¥15,634 million.
*HyCO is an acronym for H2 and CO, which are separated from natural andother gases using a technology called steam methane reforming (SMR). The
newly acquired HyCO business provides large-scale supplies of H2 and CO tooil refining and petrochemicals manufacturers via pipelines.

Gas Business in Europe
The European businesses acquired from Praxair of theUnited States include industrial gases businesses inGermany, Spain, Portugal, Italy, Norway, Denmark, Sweden,
the Netherlands, Belgium and France, carbon dioxide businesses in the United Kingdom, Ireland, the Netherlands andFrance, and helium-related businesses. Four months ofresults from these businesses were included in fiscal year
2019, including revenue of ¥55,101 million and segment
profit of ¥6,567 million.
Gas Business in Asia & Oceania
In the area of industrial gases, revenue from externalcustomers was bolstered by steady sales, particularly of bulk
gases in China and Southeast Asia. In Australia, sales of
propane gas and related equipment were brisk. Revenue inelectronics-related products declined, owing to the impactof a change in the accounting treatment of this business in
Taiwan, although shipments of electronics materials gases
were firm. Owing to these and other factors, revenue fromexternal customers was up 2.9%, to ¥106,164 million, while
segment profit edged down 0.9%, to ¥9,149 million.
Thermos
Revenue in Japan was robust, bolstered by solid sales ofsports-use vacuum insulated bottles, as well as by the positive impact of sales promotions for a new frying pan with adetachable handle launched in February 2019. Overseas,revenue was firm in South Korea. As a consequence, revenue from external customers increased 9.6%, to ¥27,800
million. Segment profit rose 18.6%, to ¥9,189 million.

Taiyo Nippon Sanso Corporation | Integrated Report 201951

Financial Position
Total assets as of March 31, 2019, advanced ¥839,967
million, to ¥1,771,015 million, owing to the acquisition ofcertain European businesses from Praxair. The depreciationof the yen, which was down ¥4.75 against the U.S. dollar at
fiscal year-end from a year earlier, had a positive impact ofapproximately ¥13,400 million. Total current assets rose
¥68,841 million, to ¥347,143 million, bolstered by higher
trade receivables. Non-current assets climbed ¥771,126
million, to ¥1,423,871 million, reflecting increases in goodwill
and both tangible and intangible assets.
Total current liabilities, at ¥719,177 million, were up¥498,089 million, owing to higher bonds and borrowings
and other factors. Non-current liabilities rose ¥318,095 million, to ¥615,983 million, also as a consequence of higher
bonds and borrowings, among others. Interest-bearing debt
as of March 31, 2019, amounted to ¥1,005,402 million, an
increase of ¥678,443 million.
Total equity rose ¥23,782 million, to ¥435,854 million.
This result reflected an increase in equity attributable toowners of parent and a decline in retained earnings paid
as dividends. Total equity attributable to owners of parent
accounted for 23.0% of total liabilities and equity, down
18.5 percentage points from the previous fiscal year-end.
Total equity attributable to owners of parent per share was¥939.6, up ¥46.6.

Cash FlowsNet cash provided by operating activities amounted to¥98,685 million, up ¥15,486 million from fiscal year 2018.
Contributing factors included increases in profit before
income taxes, depreciation and amortization, and income
taxes paid.
Net cash used in investing activities, at ¥754,969 million,
was up ¥702,881 million. This was attributable to payments
for acquisition of subsidiaries, purchase of property, plantand equipment, and payments for acquisition of business.
Net cash provided by financing activities was ¥664,925
million, compared with ¥39,859 million used in such activities
in the previous fiscal year. Principal factors behind this result
include net increases in short-term borrowings and long-termborrowings and proceeds from issuance of bonds.

52

Taiyo Nippon Sanso Corporation | Integrated Report 2019As a result of the Company’s operating, investing andfinancing activities, the balance of cash and cash equivalents
at end of fiscal year, after accounting for the effects of
exchange rates, was ¥59,620 million, up ¥11,810 million
from fiscal year 2018. The Company reported a negative free
cash flow of ¥656,284 million, compared with a positive free
cash flow of ¥31,111 million in the previous fiscal year.

Business Risks
Management Policy- and Business-Related Risks
Capital Investment
The Company maintains large-scale gas supply facilities for
major customers and needs to spend heavily to build, maintain and upgrade these facilities. Accordingly, interest rate
trends could have a material impact on the Company’sbusiness performance.
Manufacturing Costs
Electricity is the major component of the cost of manufacturing such core products as oxygen, nitrogen and argon.
Accordingly, a sharp increase in the price of crude oil could
result in substantially higher electricity charges, which theCompany may be unable to reflect in the pricing of its products, which may have an adverse impact on its businessperformance.
Overseas Factors
The Company maintains operations overseas, particularly in
the United States, Europe, and Asia and Oceania. Politicaland economic changes in countries and territories where theCompany has operations may have an adverse impact on its
business performance.
Technological and Safety Factors
Technological Development
With the aim of realizing distinctive, market-leading technologies that will ensure its position as a leading global
player, the Company promotes technological development
activities aimed at facilitating future business expansion.
However, the creation of new products and technologies
entails various risks.

Intellectual Property
The Company’s business depends on proprietary technological development. The Company endeavors to obtain
intellectual property rights as necessary for its proprietary
technologies. However, there are no guarantees that its
technologies are completely protected.
Product Safety and Security
The Company sells compressed gases and related equipment, with a portfolio of electronics-related products that
includes toxic and flammable gases. While the Company
strives to ensure the effective management of related risks,
it cannot guarantee the safety and security of all of its
products.
Financial Risks and Other Factors
Foreign Exchange Risk
The Company exports products for sale outside of Japan.
The Company strives to hedge foreign exchange risks byentering into forward exchange contracts and other derivative transactions. However, the Company may not be able
to respond to sudden fluctuations in currency rates, which,therefore, may have an adverse impact on its businessperformance.
Retirement Benefit Liabilities
A sudden deterioration in retirement plan returns resulting in
an increase in retirement benefit costs may have an adverse
impact on the Company’s business performance.
Natural Disasters and Contingencies
The occurrence of earthquakes or other natural disasters
in areas where the Company has manufacturing facilities
may damage those facilities. In particular, damage to theCompany’s large-scale manufacturing facilities may leadto a significant decline in production capacity, push down
revenue and incur major recovery costs. Such factors may
adversely affect the Company’s business performance. Major
accidents occurring as a result of contingencies, including
those attributable to human factors, may also adversely
affect the Company’s business performance.

Legal Issues
Unanticipated changes to existing laws and the introductionof new laws—particularly in countries and territories overseas
where the Company maintains operations—may adversely
affect the Company’s business performance. Revisions toenvironmental laws that result in a tightening of restrictions
may lead to an increase in costs to ensure compliance,
which may also adversely affect the Company’s businessperformance.
Because the Company does business both in Japan andoverseas, there is a risk that it may become involved in legal
disputes or be the subject of investigations and/or legal
action by relevant authorities in the markets in which it operates. Such legal and regulatory action may significantly affect
the Company’s operations, business performance, financial
condition, reputation and reliability.
Medium-Term Management Plan
The Company’s ability to meet the targets of its medium-term
management plan may be adversely affected by a number offactors, including changes in the operating environment.
Capital Alliance with Mitsubishi Chemical Holdings
Mitsubishi Chemical Holdings Corporation owns a 50.59%
stake in the Company. With the aim of further strengthening
the capital alliance between the two companies, establishedon May 13, 2014, and enhancing corporate value, the twocompanies have agreed that Mitsubishi Chemical Holdings
will maintain its stake in the Company at the current level.
Accordingly, the Company does not at present anticipate
any increase or decrease in the percentage of its shares heldby Mitsubishi Chemical Holdings. However, there is still achance that the capital alliance will change. Any such change
has the potential to significantly affect the Company’s
financial condition and business performance.
Goodwill and Intangible Assets
The Company has recorded goodwill and intangible assets(“goodwill and others”) as the result of recent businessacquisitions. There is also a possibility that new goodwill andothers may be recorded as a result of new acquisitions by
the Group in the future. The Group tests goodwill and others
for impairment on an annual basis. The recognition of any
loss on impairment of goodwill and others has the potential
to affect the Group’s financial condition and businessperformance.

Taiyo Nippon Sanso Corporation | Integrated Report 201953

Consolidated Financial Statements
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Consolidated Statement of Financial Position(Millions of Yen)
Notes

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

AssetsCurrent assets
Cash and cash equivalents

659,620¥ 47,809

Trade receivables

7

197,952

164,247

Inventories

866,28851,481Other financial assets

13

10,051

6,412

Other current assets

14

13,231

8,351

347,143

278,302

Total current assets¥

Non-current assets
Property, plant and equipment

9639,332

391,930

Goodwill

10

437,722

119,221

Intangible assets

10

253,897

44,932

Investments accounted for using the equity method

12

34,43428,148Other financial assets

13

51,31460,836Retirement benefit asset

19

1,773

2,338

Other non-current assets

14

720

704

Deferred tax assets

29

4,676

4,632

1,423,871

652,744¥1,771,015¥931,047

Total non-current assets

Total assets
See notes to consolidated financial statements.

54

Taiyo Nippon Sanso Corporation | Integrated Report 2019

(Millions of Yen)
Notes

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

Trade payables

15¥ 105,966¥ 79,483

Bonds and borrowings

16

533,925

87,372

Liabilities and equity
Liabilities
Current liabilities

Income taxes payable

10,704

9,342

41,81831,693

Other financial liabilities

17

Provisions

20

352

754

Other current liabilities

21

26,41012,441

719,177

221,087

Total current liabilities
Non-current liabilities
Bonds and borrowings

16466,206

233,694

Other financial liabilities

17

4,054

4,923

Retirement benefit liability

19

12,377

4,511

Provisions

20

7,603

5,742

Other non-current liabilities

21

20,336

14,937

Deferred tax liabilities

29

105,403

34,077

Total non-current liabilities
Total liabilities

615,983

297,887

1,335,160

518,975

EquityShare capital

22

37,34437,344

Capital surplus

22

53,11653,072

Treasury shares

22

(261)

(256)

Retained earnings

22

339,393

305,400

Other components of equity

22

Total equity attributable to owners of parent(22,991)(9,105)

406,602386,457

Non-controlling interests

29,251

25,614

Total equity

435,854

412,072¥1,771,015¥931,047

Total liabilities and equity

Taiyo Nippon Sanso Corporation | Integrated Report 201955

Consolidated Statement of Profit or Loss
(Millions of Yen)FYE2019
Notes (From April 1, 2018 to March 31, 2019)

Revenue
Cost of sales
Gross profit¥ 740,341(473,332)
267,008¥ 646,218(411,447)
234,770(204,789)
4,748(3,940)(178,690)
4,069(3,123)12

3,836
66,863

2,836
59,862Finance income
Finance costs
Profit before income taxes

28
28

2,294
(7,074)62,083

1,299(5,264)55,897

Income taxes
Profit29(18,373)¥ 43,709(5,143)¥ 50,754¥ 41,291
2,417¥ 48,919
1,834¥¥ 113.04

Selling, general and administrative expenses
Other operating income
Other operating expenses
Share of profit of investments accounted for using theequity method
Operating profit

4, 26

FYE2018(From April 1, 2017 to March 31, 2018)27
27

Profit attributable to:
Owners of parent
Non-controlling interests
Earnings per share
Basic earnings per share (Yen)

30

95.42

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income(Millions of Yen)FYE2019
Notes (From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥ 43,709¥ 50,75424
24(2,485)
(623)

1,644
819

24

1
(3,107)

21
2,485

24

(7,955)(10,099)

24(2,944)

26

24

43

429

(10,856)(13,963)¥ 29,745(9,643)(7,157)¥ 43,596¥ 27,532
2,212¥ 41,871
1,725

ProfitOther comprehensive income
Items that will not be reclassified to profit or loss
Financial assets measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Share of other comprehensive income of investments
accounted for using the equity method
Total of items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Effective portion of net change in fair value of cash flow
hedgesShare of other comprehensive income of investments
accounted for using the equity method
Total of items that may be reclassified subsequently to
profit or loss
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

56

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Consolidated Statement of Changes in Equity(Millions of Yen)FYE2019 (From April 1, 2018 to March 31, 2019)

Balance at April 1, 2018
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Business combinations or business divestitures
Transfer from other components of equity to retained earnings
Transfer from other components of equity to non-financial assets
Change in scope of consolidation
Other changes

Notes

Share capital

Capital surplus

Treasury shares

Retainedearnings

24¥37,344——¥53,072——¥(256)——¥305,400
41,291
—

—
—
—
—
—
—
—
—
—
—

—
—
0
—
43
—
—
—
—
—

—
(5)
0
—
—
—
—
—
—
—

41,291——(10,389)
—
—
3,070
—
20
—

22
22
23

Total transactions with owners
Balance at March 31, 2019

—

43

(5)

(7,298)¥37,344¥53,116¥(261)¥339,393

Total

Total equity
attributable toowners ofparentNon-controllinginterests

Total equity

Other components of equity

Balance at April 1, 2018
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in
subsidiaries
Business combinations or businessdivestitures
Transfer from other components ofequity to retained earnings
Transfer from other components ofequity to non-financial assets
Change in scope of consolidation
Other changes

Notes

Exchangedifferences ontranslation offoreign
operations

24¥(25,699)—(7,740)2222
23(7,740)———Total transactions with owners

Effective portionof net change infair value of cash
flow hedges

¥

(38)
—
(2,944)¥16,632—(2,470)

¥ —
—
(602)

¥ (9,105)—(13,759)¥386,457
41,291(13,759)¥25,614
2,417
(204)

¥412,072
43,709(13,963)(2,944)———(2,470)
—
—
—

(602)
—
—
—

(13,759)———

27,532(5)
0(10,389)

2,212
—
—
(852)

29,745(5)
0(11,242)

—

—

—

—

—

43

42

86

—

—

—

—

—

—

2,265

2,265

—

—

(3,673)602(3,070)

—

—

—

—
—
—

2,943
—
—

—
—
—

—
—
—

2,943
—
—

2,943
20
—

—
49
(80)

2,943
69
(80)

—

Balance at March 31, 2019

Financial assets
measured at fairvalue throughother Remeasurements
comprehensive of defined benefit
incomeplans¥(33,440)

¥

2,943

(3,673)

602

(127)

(7,387)

1,424(5,963)(39)¥10,488¥ —¥(22,991)¥406,602¥29,251¥435,854(Millions of Yen)FYE2018 (From April 1, 2017 to March 31, 2018)

Balance at April 1, 2017
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Transfer from other components of equity to retained earnings
Change in scope of consolidation
Other changes

Notes

Share capital

Capital surplus

Treasury shares

Retainedearnings

24¥37,344——¥52,988——¥(250)——¥261,717
48,919
—

—
—
—
—
—
—
—
—

—
—
0
—
84
—
—
—

—
(6)
0
—
—
—
—
—

48,919——(9,524)
—
1,832
2,455
—

22
22
23

Total transactions with owners
Balance at March 31, 2018

—

84

(6)

(5,236)¥37,344¥53,072¥(256)¥305,400

Total

Total equity
attributable toowners ofparentNon-controllinginterests

Total equity

Other components of equity

Balance at April 1, 2017
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in
subsidiaries
Transfer from other components ofequity to retained earnings
Change in scope of consolidation
Other changes

Financial assets
measured at fairvalue throughother Remeasurements
comprehensive of defined benefit
income
plans

Notes

Exchangedifferences ontranslation offoreign
operations

Effective portionof net change infair value of cash
flow hedges

24¥(16,135)—(9,563)

¥(64)
—
26

¥15,975
—
1,675

¥ —
—
814

¥ (224)—(7,048)¥351,576
48,919(7,048)¥25,286
1,834
(108)

¥376,862
50,754(7,157)22
22
23(9,563)
—
—
—

26
—
—
—

1,675
—
—
—

814
—
—
—

(7,048)———41,871(6)
0(9,524)

1,725
—
—
(814)

43,596(6)
0(10,338)

—

—

—

—

—

84

(1,161)(1,077)

—
—
—

—
—
—

(1,018)
—
—

(814)
—
—

(1,832)
—
—

—
2,455
—

—
552
26

—
3,008
26

Total transactions with owners
Balance at March 31, 2018——

(1,018)(814)(1,832)(6,990)(1,396)(8,387)¥(25,699)¥(38)¥16,632¥ —¥(9,105)¥386,457¥25,614¥412,072

See notes to consolidated financial statements.

Taiyo Nippon Sanso Corporation | Integrated Report 201957

Consolidated Statement of Cash Flows(Millions of Yen)FYE2019
Notes (From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)

Cash flows from operating activities
Profit before income taxes¥ 62,083¥ 55,897

Depreciation and amortization

56,111

43,266

Impairment losses

1,459

163

Interest and dividend income(1,402)(1,299)Interest expenses

7,072

5,005

Share of (profit) loss of investments accounted for using theequity method(3,836)(2,836)

Loss (gain) on sales and retirement of property, plant andequipment, and intangible assets

(582)

(949)

(Increase) decrease in trade receivables(20)(13,857)(Increase) decrease in inventories(4,883)

1,061

Increase (decrease) in trade payables

2,469

5,871

(Increase) decrease in retirement benefit asset

(470)

(209)

Increase (decrease) in retirement benefit liability

588

144

(2,376)(722)

116,214

91,535

Other
SubtotalInterest received

250

226

Dividends received

4,718

2,687

Interest paid

(6,445)(4,994)

Income taxes refund (paid)(16,052)(6,256)

Net cash provided by operating activities

98,68583,199Cash flows from investing activities
Purchase of property, plant and equipment(74,152)(58,266)

Proceeds from sales of property, plant and equipment

2,649

2,387

Purchase of investments(1,494)(787)

Proceeds from sales and redemption of investments

8,740

7,543

Payments for acquisition of subsidiaries(638,731)—

Payments for acquisition of business(50,899)

(343)

Other

(1,080)(2,621)(754,969)(52,088)

Net increase (decrease) in short-term borrowings

433,773

1,619

Net increase (decrease) in commercial papers

12,000—

Proceeds from long-term borrowings

179,028

29,780

Repayments of long-term borrowings(37,720)(45,275)

Proceeds from issuance of bonds

107,035—

Redemption of bonds(15,000)(10,000)

Net cash used in investing activities
Cash flows from financing activities

Purchases of investments in subsidiaries not resulting inchange in scope of consolidation
Dividends paid

23

Dividends paid to non-controlling interests
Other(3,044)(9,524)

(852)

(814)

(2,780)(2,600)Net cash provided by (used in) financing activities

664,925(39,859)

Effect of exchange rate changes on cash and cash
equivalents

3,128

1,841

Net increase (decrease) in cash and cash equivalents

11,770(6,907)

Balance of cash and cash equivalents at beginning offiscal year

47,80952,857

Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation

40

1,640

Increase in cash and cash equivalents resulting from merger—

218¥ 59,620¥ 47,809

Balance of cash and cash equivalents at end of fiscal year
See notes to consolidated financial statements.

58

(169)
(10,389)

Taiyo Nippon Sanso Corporation | Integrated Report 20196

Notes to Consolidated Financial Statements
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

1. Reporting Entity
Taiyo Nippon Sanso Corporation (the “Company”) is a company
located in Japan and is listed on the First Section of the Tokyo Stock
Exchange. The registered address of the Company’s head office isdisclosed on its website (https://www.tn-sanso.co.jp/en). The consolidated financial statements of the Company and its subsidiaries(collectively, the “TNSC Group”) comprise interests in the TNSCGroup, its associates and joint arrangements, with March 31 as theend of the fiscal year. The TNSC Group conducts gas businesses inJapan and overseas, mainly for customers in the steel, chemical, andelectronics industries. In addition, the TNSC Group manufacturesand sells housewares such as stainless steel vacuum bottles. Details
are described in Note “4. Segment Information.”
The Company’s parent is Mitsubishi Chemical Holdings
Corporation.

2. Basis of Preparation(1) Conformity with IFRSThe consolidated financial statements of the TNSC Group have been
prepared in compliance with International Financial ReportingStandards (IFRS) published by the International AccountingStandards Board. Since the Company meets the requirements of a“Specified Company Applying Designated IFRS” prescribed under
Article 1-2 of the Japanese Ordinance on Terminology, Forms, andPreparation Methods of Consolidated Financial Statements, theCompany has adopted the provisions of Article 93 of said ordinance.
(2) Approval of financial statements
The TNSC Group’s consolidated financial statements were approved
by Yujiro Ichihara, President and CEO of the Company, on June 20,
2019.
(3) Basis of measurement
The TNSC Group’s consolidated financial statements were preparedon a historical cost basis, except for certain assets and liabilities
including financial instruments measured at fair value as described in
Note “3. Significant Accounting Policies.”(4) Presentation currency
The TNSC Group’s consolidated financial statements are presented
in Japanese yen, which is the functional currency of the Company,
and amounts are rounded down to the nearest million yen.
(5) Use of judgments, estimates, and assumptions
In preparing the TNSC Group’s consolidated financial statements inaccordance with IFRS, management is required to make judgments,
estimates and assumptions that affect the application of accounting
policies and reported amounts of assets, liabilities, income andexpenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. The impacts of changes in accounting estimates are recognized in the accounting period in which the estimates are changed
and in future accounting periods affected.
Major information on accounting judgments, estimates, andassumptions that may have significant impacts on the TNSC Group’s
consolidated financial statements is as follows:• Impairment of non-financial assets (“11. Impairment Losses”)• Recoverability of deferred tax assets (“29. Income Taxes”)• Measurement of defined benefit obligations (“19. Postemployment Benefits”)• Fair value of financial instruments (“32. Financial Instruments”)• Contingent liabilities (“36. Contingent Liabilities”)(6) New accounting standard applied from the fiscal year
The major accounting standard applied by the TNSC Group from the fiscal year ended March 31, 2019 is as follows:
Accounting standard and interpretation

Outline of newly established/revised standard

IFRS 15This standard revised the accounting treatments and disclosure
requirements on revenue recognition.
Primarily, the standard requires entities to recognize revenue todepict the transfer of goods or services to customers in an amountthat reflects the compensation to which the entities expect to beentitled in exchange for such goods and services.

Revenue from Contracts with Customers

The impact of the application of IFRS 15 on the TNSC Group’s consolidated financial statements was immaterial.
Regarding the application of IFRS 15, as a transitional measure in applying the accounting standard, the TNSC Group adopted a method torecognize cumulative effects of the application of IFRS 15 at the date of initial application. However, the amount of the cumulative effects on thedate of initial application of this standard was immaterial. Information in the related note, “26. Revenue,” has been disclosed following the
aforementioned application.

Taiyo Nippon Sanso Corporation | Integrated Report 201959

(7) New accounting standards and interpretations that are not yet applied
Regarding the major accounting standards and interpretations issued before the approval date of the consolidated financial statements, theaccounting standards and interpretations that are not yet applied as of March 31, 2019 because the application is not mandatory are as follows.
Meanwhile, it is estimated that the application of IFRS 16 will increase the carrying amount of the TNSC Group’s lease-related assets
approximately by ¥35.0 billion, while also increasing lease liabilities by approximately the same amount. As a transitional measure in applying theaccounting standard, the TNSC Group adopts a method to retrospectively recognize cumulative effects at the date of initial application (modified
retrospective method).

Accounting standard andinterpretation

Timing of mandatory
application(Effective fiscal year
beginning on or after)

IFRS 16January 1, 2019

Leases

Effective fiscal year of
the TNSC Group

Fiscal year ending
March 31, 2020

Outline of newly established/revised standard and interpretation

This standard revised the existing accounting standard anddisclosure requirements on lease transactions.
Specifically, the standard introduces a single model, and for allleases with a term of more than 12 months, the standard in principle requires a lessee to reflect the right-of-use of its assets andan obligation to make lease payments on the financial statements.

3. Significant Accounting Policies(1) Basis of consolidation
1) Subsidiaries
Subsidiaries refer to companies controlled by the TNSC Group. The
TNSC Group judges that it controls a company if the TNSC Group
has the exposure or rights to variable returns arising from its involvement in the investee and has the ability to influence such returns due
to power over the investee.
In preparing the consolidated financial statements, the financial
statements of each Group company prepared at the same closing
date based on the unified accounting policies of the TNSC Group areused. If accounting policies applied by a subsidiary are different fromthe accounting policies applied by the TNSC Group, adjustments are
made to the financial statements of such subsidiary as necessary.
Consolidation of subsidiaries begins on the date when the TNSCGroup acquires control over the subsidiaries until the date when thecontrol over the subsidiaries is lost.
Transactions between consolidated companies, as well as the balance of receivables and payables and unrealized gains and losses
arising from such transactions, are eliminated in preparing theconsolidated financial statements.
If there is a change in interests in consolidated subsidiaries without
involving a loss of control, it is accounted for as an equity transaction.
The difference between the adjustment amount of the non-controllinginterest and the fair value of the consideration is recognized directly inequity as equity attributable to owners of the parent.
In the event of a loss of control, the TNSC Group measures andrecognizes the remaining investment at fair value on the date when
the control has been lost. Gains and losses arising from the loss ofcontrol are recognized in profit or loss.
Non-controlling interests in consolidated subsidiaries’ net assets
are identified separately from the TNSC Group’s interests. Comprehensive income of consolidated subsidiaries is attributable toowners of the parent and non-controlling interests, even if this resultsin the non-controlling interests having a deficit balance.
2) Associates
Associates refer to companies over which the TNSC Group has asignificant influence on their financial and operating policies but does
not have control or joint control.
The TNSC Group accounts for investments in associates using theequity method.
Investments in associates under the equity method are recognizedat cost at the time of acquisition and recorded in the consolidated
statement of financial position after adjusting the TNSC Group’s
interests in changes in net assets of the associates after acquisition.
The consolidated statement of profit or loss reflects the TNSCGroup’s interests in the performance of associates. If there is achange in the amount recognized in other comprehensive income ofassociates, the TNSC Group’s interests in such change arerecognized in other comprehensive income.
Adjustments are made to consolidated financial statements inorder to eliminate the TNSC Group’s interests in unrealized gains andlosses arising from transactions between the TNSC Group andassociates.

60

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Financial statements of associates are prepared for the same
reporting period as the TNSC Group. Adjustments are made to makeaccounting policies of the associates consistent with the TNSCGroup’s accounting policies.
In the event of loss of significant influence over associates, the
TNSC Group measures and recognizes the remaining investment at
fair value on the date when significant influence is lost. Gains andlosses arising from the loss of significant influence are recognized in
profit or loss.
3) Joint arrangements
Joint arrangements refer to arrangements that require the unanimous
consent of the parties sharing control over decision-making on
relevant activities.
A joint venture (jointly controlled entity) refers to a joint agreement
where parties with joint control over the arrangement have the rightto the net assets of such arrangement.
If the TNSC Group has a share in a joint venture, the TNSC Groupaccounts for such share using the equity method.
A joint operation (jointly controlled business) refers to a business inwhich parties with joint control substantially have the right to assets
and the obligation to liabilities related to joint arrangements.
If the TNSC Group has a share in a joint operation, the TNSCGroup recognizes the investment concerning such joint operation
only at the equivalent amount of the TNSC Group’s interests in theassets, liabilities, income, and expenses arising from jointly-controlled
operating activities. Transactions between the TNSC Group companies, as well as the balance of receivables and payables and unrealized gains and losses arising from such transactions are eliminated.
The TNSC Group has more than 50% of voting rights of Sakai Gas
Center, Inc. The TNSC Group judges that said company qualifies asa joint operation.
(2) Business combinations
Business combinations are accounted for using the acquisition
method.
If the initial accounting for business combinations has not been
completed by the end of the period in which the business combinations occurred, they are accounted for at a provisional amount for theitems for which the accounting is incomplete. The provisional amountis adjusted during the measurement period, which is within one year
from the acquisition date.
The consideration transferred in a business combination is calculated as the sum of acquisition-date fair values of assets transferredby the acquirer, liabilities incurred by the acquirer to former owners of
the acquiree, and equity interests issued by the acquirer.
Non-controlling interests in the acquiree are measured for eachbusiness combination either at fair value or at the amount equivalent
to the non-controlling interest in proportion to the fair value ofidentifiable net assets of the acquiree.
Acquisition-related costs incurred in connection with businesscombinations are recognized as expenses for the period in whichsuch costs were incurred.

When the TNSC Group acquires a business, it classifies and designates assets to be acquired and liabilities to be assumed based oncontract terms, economic conditions and related conditions at theacquisition date. In addition, identifiable assets acquired and liabilities
assumed are in principle measured at fair value on the acquisition
date.
If a business combination is achieved in stages, the interest held
before acquiring the control of the acquiree is revalued at fair value atthe acquisition date, and the difference is recognized in profit or loss.
The amount of the interest in the acquiree that was recorded in othercomprehensive income before the acquisition date is accounted forin the same manner as in the case where the acquirer disposed of its
interests.
Goodwill is measured as the amount of the aggregate amount of
the consideration transferred and the amount recognized as noncontrolling interests exceeding the net of identifiable assets acquired
and liabilities assumed.
If the aggregate amount recognized as the consideration transferred and non-controlling interests is less than the net of identifiable
assets acquired and liabilities assumed, the difference is recognizedin profit or loss.
After initial recognition, goodwill acquired through a business combination is not amortized but is recorded at the amount initially recognized less the accumulated impairment loss. In addition, impairment
tests are performed each year and whenever there is an indication of
impairment.
(3) Foreign currency translation
The consolidated financial statements of the TNSC Group are presented in Japanese yen, the functional currency of the Company. In
addition, each company within the TNSC Group designates its ownfunctional currency, and transactions of each company are measured
in its functional currency.
Transactions denominated in a foreign currency are translated intofunctional currencies at the spot exchange rate at the transaction
date or at a rate similar thereto.
Monetary assets and liabilities denominated in a foreign currency
are translated into functional currencies at the spot exchange rate at
the end of the reporting period. Translation differences arising fromsuch translation and settlement are recognized in profit or loss.
However, financial assets measured through other comprehensive
income and translation differences arising from cash flow hedges arerecognized in other comprehensive income.
The assets and liabilities of foreign operations are translated into
Japanese yen at the spot exchange rate at the end of the reporting
period, and the income and expenses of foreign operations are translated into Japanese yen at the spot exchange rate at the transaction
date or at a rate similar thereto. The translation differences arerecognized in other comprehensive income.
If a foreign operation is disposed of, the cumulative translation differences related to such operation are recognized in profit or loss forthe period in which the disposal occurs.
(4) Financial instruments
1) Financial assets (excluding derivatives)(i) Initial recognition and measurement
The TNSC Group initially recognizes trade receivables on the date ofoccurrence. All other financial assets are initially recognized at thetransaction date when the TNSC Group becomes a contractual party
to such financial assets.
The TNSC Group classifies its financial assets into (a) financial
assets measured at amortized cost and (b) financial assets measured
at fair value through other comprehensive income. The classification
is determined at the time of initial recognition of the financial assets.
(a) Financial assets measured at amortized cost
Debt financial assets are classified as financial assets measured atamortized cost if both of the following criteria are met:
• Financial assets are held based on a business model with anobjective of holding financial assets to recover contractual
cash flows.

• Contractual terms of financial assets give rise to cash flowsthat are solely payments of principal and interest on theprincipal amount outstanding on a specified date.
Financial assets measured at amortized cost are measured atfair value plus transaction costs directly attributable to theacquisition of such financial assets.
(b) Financial assets measured at fair value through othercomprehensive income
Debt financial assets are classified as financial assets measured atfair value through other comprehensive income if both of thefollowing criteria are met:
• Financial assets are held based on a business model with anobjective of collecting contractual cash flows and selling
financial assets.
• Contractual terms of financial assets give rise to cash flowsthat are solely payments of principal and interest on theprincipal amount outstanding on a specified date.
Equity financial assets are designated as financial assets measured at fair value through other comprehensive income, and suchdesignation is applied on an ongoing basis.
Financial assets measured at fair value through other comprehensive income are measured at fair value plus transaction costs
directly attributable to the acquisition of such financial assets.
(ii) Subsequent measurement
After initial recognition, financial assets are measured according totheir classification as follows:(a) Financial assets measured at amortized cost
Financial assets measured at amortized cost are measured atamortized cost using the effective interest method.
(b) Financial assets measured at fair value through othercomprehensive income
Financial assets other than financial assets measured at amortizedcost are measured at fair value.
For financial assets measured at fair value through other comprehensive income, changes in fair value are recognized in othercomprehensive income. If they are derecognized or their fair value
significantly declines, they are transferred to retained earnings.
(iii) Derecognition
The TNSC Group derecognizes financial assets only if contractual
rights to cash flows arising from the financial assets cease to exist, or
if the financial assets are transferred and substantially all the risks andrewards have been transferred.
If the TNSC Group does not transfer or retain substantially all therisks or rewards but continues to control the financial assets transferred, recognition of such financial assets is continued to the extent
to which the TNSC Group has a continuing involvement, and in thatcase, related liabilities are also recognized.
(iv) Impairment
The TNSC Group recognizes impairment of financial assets based onwhether there is a significant increase in credit risk from the time ofinitial recognition in financial assets or financial asset groups
measured at amortized cost at the end of each reporting period.
For financial assets or financial asset groups measured at amortized cost, expected credit losses for 12 months are recognized asallowance for doubtful accounts, if credit risk has not significantly
increased from the time of initial recognition. However, for tradereceivables, expected credit losses over the remaining period arerecognized.
If there is a significant increase in credit risk from the time of initialrecognition, expected credit losses over the remaining period arerecognized as allowance for doubtful accounts.
Whether or not the credit risk has significantly increased is judged
based on a change in the default risk. In judging whether there is any
change in the default risk, overdue (past-due information) is mostly
considered.
In addition, expected credit losses are measured based on the discounted present value of the difference between the amount receivable on a contract basis and the amount expected to be received
based on past credit losses, etc.

Taiyo Nippon Sanso Corporation | Integrated Report 201961

2) Financial liabilities (excluding derivatives)(i) Initial recognition and measurement
The TNSC Group classifies its financial liabilities into (a) financial liabilities measured at amortized cost and (b) financial liabilities measured
at fair value through profit or loss. The classification is determined atinitial recognition of the financial liabilities. All financial liabilities are initially measured at fair value. However, financial liabilities measured atamortized cost are measured at fair value less transaction costs
directly attributable to such financial liabilities.
(ii) Subsequent measurement
After initial recognition, financial liabilities are measured according totheir classification as follows:(a) Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost are measured atamortized cost using the effective interest method after initial recognition. Amortization by the effective interest method and gains
and losses from derecognition are recognized in profit or loss.
(b) Financial liabilities measured at fair value through profit orloss
For financial liabilities measured at fair value through profit or loss,
the portion related to changes in the TNSC Group’s credit risk fromchanges in fair value is recognized in other comprehensive income
after initial recognition, and the remaining amount is recognized in
profit or loss.
(iii) Derecognition
The TNSC Group derecognizes financial liabilities in cases of the performance, exemption or expiration of the obligation of financial liabilities, the exchange occurs under substantially different terms, orwhen there has been a substantial modification of the terms.
3) Offset of financial instruments
Financial assets and financial liabilities are offset only if there is a current enforceable legal right to offset the recognized amounts, and if
there is an intention to settle at a net amount or realize the assets
and settle the liabilities simultaneously. They are then recorded at a
net amount in the consolidated statement of financial position.
4) Derivatives and hedge accounting
The TNSC Group uses derivatives such as forward exchange contracts, interest rate swap contracts and currency swap contracts tohedge currency risks and interest rate risks. These derivatives are
initially measured at fair value at the time when the contracts wereentered and remeasured at fair value thereafter.
Fair value changes of derivatives are recognized in profit or loss.
However, the effective portion of cash flow hedges is recognized inother comprehensive income.
At inception of the hedge, the TNSC Group formally designatesand documents the hedging relationships to which hedge accounting
is applied and the risk management objective and strategy for undertaking the hedge. Such documentation includes specific hedging
instruments, hedged items or transactions, the nature of the risk
being hedged, and how the TNSC Group will assess effectiveness ofthe hedging instruments in fair value changes when offsetting theexposure to changes in fair value or cash flows of the hedged items
attributable to the hedged risks. The TNSC Group evaluates whether
or not derivatives used for hedging transactions are effective for offsetting changes in fair value or cash flows of the hedged items at
inception of the hedge and on an ongoing basis. Specifically, the
TNSC Group determined that a hedge is effective in the case where
the economic relationship between the hedged item and the hedging
instruments results in an offset.
Hedges that meet strict criteria for hedge accounting are classified
and accounted for under IFRS 9 as follows.
(i) Fair value hedges
Fair value changes in derivatives are recognized in profit or loss. For
fair value changes in the hedged items attributable to the risks to behedged, the carrying amount of the hedged items is adjusted andrecognized as profit or loss.

62

Taiyo Nippon Sanso Corporation | Integrated Report 2019(ii) Cash flow hedges
The effective portion of gain or loss on the hedging instruments is
recognized as other comprehensive income, and the ineffective portion is immediately recognized in profit or loss.
The amount related to the hedging instruments recorded in othercomprehensive income is transferred to profit or loss when hedgedtransactions affect profit or loss. If the hedged item results in the recognition of non-financial assets or non-financial liabilities, the amountrecognized in other comprehensive income is treated as an adjustment of the initial carrying amount of the non-financial assets or nonfinancial liabilities.
If forecasted transactions are no longer expected to occur, thecumulative gain or loss previously recognized as equity through othercomprehensive income is transferred to profit or loss.
If the hedging instrument is terminated or exercised without expiration, sale or exchange or renewal to another hedging instrument, or if
it no longer qualifies for hedge accounting due to events such as achange in risk management objective, the cumulative gain or loss
previously recognized in equity through other comprehensive income
is continuously recorded in equity until the forecasted transaction
occurs, or is no longer expected to occur.
5) Fair value of financial instruments
The fair value of financial instruments traded in active financial markets as of the end of the reporting period refers to quoted prices inmarkets or dealer prices.
The fair value of financial instruments for which active markets do
not exist is calculated by referring to appropriate valuation techniquesor prices provided by counterparty financial institutions.
(5) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits thatcan be withdrawn at any time, and short-term investments with amaturity of three months or less from the acquisition date that arereadily convertible into cash and subject to an insignificant risk ofchanges in value.
(6) Inventories
The cost of inventories includes costs of purchase, costs of conversion, and all other costs incurred in bringing the inventories to theirpresent location and condition.
Inventories are measured at the lower of cost and net realizablevalue. The weighted average method is principally used to calculate
the cost. In addition, the net realizable value is calculated at the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to
make the sale.
(7) Property, plant and equipment
The TNSC Group adopts the cost model for measurement ofproperty, plant and equipment.
Property, plant and equipment are presented at cost lessaccumulated depreciation and accumulated impairment losses.
The cost includes the costs directly attributable to the acquisitionof the assets, the costs of their dismantlement, removal or
restoration, and the borrowing costs that meet the recognition
criteria.
All property, plant and equipment other than land are depreciated
so that the depreciable amount, which is cost less the residual value
at the end of the fiscal year, is allocated on a systematic basis using
the straight-line method.
Estimated useful lives of major property, plant and equipment are
as follows:
Buildings and structures:
Machinery and vehicles:
Tools, furniture and fixtures:

3 to 50 years
3 to 20 years
2 to 25 years(8) Intangible assets
The TNSC Group adopts the cost model for measurement ofintangible assets.
Intangible assets are presented at cost less accumulated
amortization and accumulated impairment losses.

Intangible assets acquired separately are initially measured at cost.
The cost of intangible assets acquired through business combinations is measured at fair value as of the acquisition date. For internallygenerated intangible assets, except for development costs that qualify for capitalization, all expenditures are recognized as expenses forthe periods when they are incurred.
Intangible assets with finite useful lives are amortized over theirestimated useful lives using the straight-line method. Impairment
tests are performed whenever there is an indication of impairment.
Estimated useful lives and method of amortization of intangible
assets with finite useful lives are reviewed at the end of each reporting period, and if there is any change, it is applied prospectively as achange in accounting estimates.
Estimated useful lives of major intangible assets are as follows:
Customer-related intangible assets:

2) Reversal of an impairment loss
For assets other than goodwill, impairment losses recognized in theprevious fiscal years are assessed at the end of the reporting period
as to whether or not there is any indication of possibility of a decreaseor extinguishment of loss, due to factors such as a change in theassumption used in calculating the recoverable amount. If such indication exists, the recoverable amount of such assets, cashgenerating units or groups of cash-generating units is estimated. Ifsuch recoverable amount exceeds the carrying amount of such
assets, cash-generating units or groups of cash-generating units, theimpairment loss is reversed up to the lower of the recoverable amountcalculated and the carrying amount less the accumulated depreciation if the impairment loss was not recognized in previous fiscal years.
The reversal of impairment loss is recognized in profit or loss.
For goodwill, impairment loss is not reversed.

5 to 30 years

Intangible assets with indefinite useful lives and intangible assets
not available for use are not amortized. Impairment tests are performed separately or by a cash-generating unit whenever there is anindication of impairment.
(9) Leases
Lease contracts are classified as finance leases if the risks andrewards incidental to ownership of the lease assets are substantiallytransferred to the TNSC Group. Otherwise, they are classified as
operating leases.
For finance lease transactions, lease assets and lease liabilities arerecorded in the consolidated statement of financial position at thelower of the fair value of the leased property and the present value ofthe minimum lease payment calculated at the inception date of thelease. In addition, lease payments are allocated to financial expenses
and repayment of lease liabilities under the interest method, and suchfinancial expenses are recognized in profit or loss. Lease assets are
depreciated using the straight-line method over the shorter of theirestimated useful lives or the lease term.
For operating lease transactions, lease payments are recognized
as expenses using the straight-line method over the lease term. In
addition, variable lease payments are recognized as expenses for theperiod when they are incurred.
Whether or not a contract is a lease or whether or not a lease isincluded in a contract is determined according to the substance ofthe contract, even if it is not in the legal form of a lease.
(10) Impairment of assets
1) Impairment of non-financial assets
The TNSC Group assesses at the end of each reporting period
whether there is any indication that an asset may be impaired. If any
such indication exists, and if assets need to be annually tested for
impairment, the TNSC Group estimates the recoverable amount of
the asset. The recoverable amount of the asset is the higher of anasset’s fair value less costs of disposal and its value in use. If therecoverable amount of each asset cannot be estimated, the recoverable amount of a cash-generating unit or a group of cash-generating
units to which the asset belongs is estimated. If the carrying amountof a cash-generating unit or a group of cash-generating units
exceeds the recoverable amount, impairment loss of the asset is recognized and write-downs of the asset are recorded up to the recoverable amount. In measuring the value in use, the discounted present
value of expected future cash flows is calculated using the pre-tax
discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. The business planused to estimate future cash flows is in principle limited to five years.
Future cash flows beyond the projected period of the business plan
are calculated based on the long-term average growth rate according
to individual circumstances.
In calculating fair value less costs of disposal, an appropriate
valuation model is used supported by indices of fair value available.
Goodwill is allocated to individual cash-generating units, or groupsof cash-generating units, that are expected to benefit from thesynergies of a business combination after the acquisition date.
Goodwill or intangible assets with indefinite useful lives, and intangible assets not available for use are tested for impairment annuallyor whenever there is an indication of impairment.

(11) Assets held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as “assets held
for sale” if their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use.
The above requirements only apply if the sale is highly probablewithin one year and such assets (or disposal groups) are available for
immediate sale in their present condition. Non-current assets (or disposal groups) classified as assets held for sale are measured at thelower of their carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets classified asassets held for sale are not depreciated or amortized.
Discontinued operations include a component of an entity that has
already been disposed of or classified as assets held for sale, andthey are recognized if they constitute one operation of the TNSCGroup and if there is a plan to dispose of one of the operations.
(12) Borrowing costs
For assets that necessarily take a substantial period of time to prepare for intended use or sale, borrowing costs directly attributable toacquisition, construction or production of such assets are capitalized
as part of the cost of such assets. Other borrowing costs are recognized as an expense for the period when they are incurred.
(13) Retirement benefits
The TNSC Group provides defined benefit plans and defined
contribution plans as retirement benefit plans for employees.
The TNSC Group separately calculates the present value of thedefined benefit obligations, related current service costs and past
service costs for each plan using the projected unit credit method.
The discount rate is calculated based on market yields at the endof the reporting period on high quality corporate bonds.
Liabilities or assets related to the defined benefit plans are calculated by deducting the fair value of plan assets from the present valueof defined benefit obligations.
Remeasurements of liabilities or assets relating to the defined benefit plans are all recognized in other comprehensive income for theperiod when they are incurred, and immediately reflected in retained
earnings. In addition, past service costs are expensed for the period
when they are incurred.
Expenses related to defined contribution plans are recognized as
expenses for the period when they are incurred.
(14) Provisions
A provision is recognized when the TNSC Group has a present obligation (legal or constructive) as a result of a past event, when it isprobable that an outflow of resources embodying economic benefits
will be required to settle the obligation, and when a reliable estimate
can be made of the amount of the obligation.
The TNSC Group measures the provisions at the present value of
expenditures expected to be required to settle the obligation, whenthe effect of the time value of money is material. In calculating thepresent value, the TNSC Group uses a pre-tax discount rate thatreflects current market assessments of the time value of money andthose risks specific to the liability.

Taiyo Nippon Sanso Corporation | Integrated Report 201963

(15) Equity
1) Ordinary shares
The issue price of ordinary shares is recorded in share capital andcapital surplus.
2) Treasury shares
When the TNSC Group purchases treasury shares, the consideration
paid is recognized as a deduction from equity.
When the TNSC Group disposes of treasury shares, the difference
between the carrying amount and the consideration at the time ofdisposal is recognized in capital surplus.
(16) Revenue
The TNSC Group recognizes revenue in an amount that reflects thecompensation to which the entities expect to be entitled in exchange
for goods and services transferred to customers based on thefollowing 5-step model.
Step 1: Identify the contract with the customer
Step 2: Identify performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performanceobligations in the contract
Step 5: Recognize revenue when (or as) the performanceobligations are satisfied
The TNSC Group conducts gas businesses in Japan and overseas, mainly for customers in the steel, chemical, and electronics
industries, and has built production and sales structures for its main
products in Japan, the United States, Europe, and Asia and Oceania.
In addition, the TNSC Group manufactures and sells housewares
such as stainless steel vacuum bottles.
Regarding product sales in these businesses, because a customer
acquires control over a product at the time the product is delivered,
TNSC judges that its performance obligations have been satisfied
and recognizes revenue at the time the product is delivered.
Revenue is measured at the price promised in the contract withthe customer, after deducting such amounts as discounts, rebates,
and returns.
The amount of the price in the sales contract of a product isgenerally collected within one year from the time when control overthe product is transferred to a customer, and does not include asignificant financing component.
(17) Government grants
A government grant is recognized at fair value when there is reasonable assurance that the TNSC Group will comply with any conditions
attached to the grant and the grant will be received.
Government grants are recognized in profit or loss on a systematic
basis over the periods in which the TNSC Group recognizes
expenses for the related costs for which the grants are intended tocompensate.

Government grants related to assets are recorded by deducting
the amount of such grants from the cost of the assets.
(18) Income taxes
Current taxes for the current and prior periods are calculated at theamount expected to be paid to (or recovered) from taxation authorities. The rates and laws used to calculate the tax amount are thosethat have been enacted or substantively enacted at the end of thereporting period.
Deferred taxes are recorded as the difference between the tax
bases and the carrying amounts of assets and liabilities at the end of
the reporting period (temporary difference) using the asset andliability method.
Deferred tax liabilities are in principle recognized for all taxable temporary differences. Deferred tax assets are recognized for deductible
temporary differences, unused tax losses and unused tax credits tothe extent that it is probable that taxable profit will be available
against which the deductible temporary differences can be utilized.
However, there are exceptions in which deferred tax assets andliabilities are not recorded for the following temporary differences:• Arising from initial recognition of goodwill• Arising from initial recognition of an asset or liability in a transaction other than a business combination which does not affecteither the accounting income or the taxable profit (or loss) at thetime of the transaction• For deductible temporary differences associated with investments in subsidiaries and associates, and interests in joint
arrangements, when it is probable that the reversal will notoccur in the foreseeable future, or it is less probable that taxable
profit will be available against which the deductible temporary
differences can be utilized• For taxable temporary differences associated with investments
in subsidiaries and associates, and interests in joint arrangements, when the TNSC Group is able to control the timing of thereversal of the temporary differences and it is probable that thereversal will not occur in the foreseeable future
The carrying amount of deferred tax assets and liabilities (including
unrecognized deferred tax assets) is reviewed at the end of eachreporting period. Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the period when theassets are realized or liabilities are settled, based on tax rates andlaws that have been enacted or substantively enacted at the end of
the reporting period.
(19) Earnings per share
The amount of basic earnings per share is calculated by dividing net
income attributable to ordinary shareholders of the Company by theweighted average number of ordinary shares outstanding after
adjusting for treasury shares during the period. The amount of diluted
earnings per share is calculated by adjusting the effects of all dilutive
potential ordinary shares with dilutive effects.

4. Segment Information(1) Overview of reportable segments
The reportable segments of the TNSC Group are those for which
discrete financial information is available and whose operating results
are regularly reviewed by the Board of Directors to make decisions
about resource allocation and to assess performance.
The TNSC Group conducts gas businesses in Japan and overseas, mainly for customers in the steel, chemical, and electronics
industries, and has built production and sales structures for its main
products in Japan, the United States, Europe, and Asia and Oceania.
In addition, the TNSC Group manufactures and sells housewares
such as stainless steel vacuum bottles. Therefore, the Company has
established the following five reportable segments: Gas Business inJapan, Gas Business in the United States, Gas Business in Europe,
Gas Business in Asia and Oceania, and Thermos Business.

64

Taiyo Nippon Sanso Corporation | Integrated Report 2019

(Changes to reportable segments)
To display the results of the Thermos Business more clearly, from thefiscal year ended March 31, 2019, the TNSC Group has changed thefour existing reportable segments of Gas Business in Japan, Gas
Business in the United States, Gas Business in Asia and Oceania,
and Thermos and Other Businesses, to the four segments of Gas
Business in Japan, Gas Business in the United States, Gas Businessin Asia and Oceania, and Thermos Business. Furthermore, the Gas
Business in Europe has been added as a new reportable segment
due to the acquisition of the European business of Praxair, Inc.
headquartered in the United States.
To facilitate the year-on-year comparisons, the figures for theprevious fiscal year have been reclassified based on the changes tothe reportable segments.

The principal products and services included in the five segments are shown in the table below.
Reportable segments

Major products and services

Gas Business in Japan
Gas Business in the United States
Gas Business in Europe
Gas Business in Asia and Oceania

Oxygen, nitrogen, argon, carbon dioxide, helium, hydrogen, acetylene, gas-related equipment, specialty
gases (electronic materials gases, pure gases, etc.), electronics-related equipment and installation,
semiconductor manufacturing equipment, cutting and welding equipment, welding materials, plants andmachinery, liquid petroleum gas (LPG) and related equipment, medical-use gases (oxygen, nitrous oxide,etc.), medical equipment, stable isotopes
Housewares

Thermos Business

The accounting methods adopted for the reported operating
segments are the same as the TNSC Group’s accounting policies
described in “3. Significant Accounting Policies.”

Revenue from intersegment transactions and transfers is based
primarily on prevailing market prices.

(2) Revenue and profit (loss) amounts by reportable segment
FYE2019 (From April 1, 2018 to March 31, 2019)(Millions of Yen)Gas Businessin Japan

Revenue
Revenues from externalcustomers
Intersegment revenues
and transfers
Total
Segment profit (Note 2)
Other items
Depreciation andamortization
Impairment losses
Share of profit (loss)of investments
accounted for using
the equity method

Gas Business
Gas Businessin the United Gas Businessin Asia andStatesin Europe
Oceania

Thermos
Business

Total

Reconciling
items(Note 1)

Amounts on theConsolidated
Statement ofProfit or Loss

¥363,951¥187,323¥55,101¥106,164¥27,800¥740,341¥—¥740,341

8,177
372,129
29,80814,426
201,749
15,634—
55,101
6,567

3,813
109,977
9,149

37
27,8379,189

26,454
766,795
70,350(26,454)(26,454)(4,531)—
740,341
65,81918,077
97

21,710
—

8,855
—

6,257
1,340

1,090
—

55,992
1,438

118
—

56,111
1,438

52

(121)

(6)

(10)

3,923

3,835

0

3,836

Notes: 1. The ¥4,531 million negative reconciling item for segment profit is comprised of ¥237 million of intersegment eliminations, companywide expenses of¥1,598 million that were not allocated to any particular reportable segment, and acquisition-related costs of ¥2,695 million to acquire the European
business. These companywide expenses related principally to basic research expenses that were not allocated to a particular reportable segment.
2. Segment profit represents core operating profit, which is calculated as operating profit excluding certain gains or losses attributable to non-recurring factors(losses incurred by business withdrawals, streamlining, and others).

FYE2018 (From April 1, 2017 to March 31, 2018)(Millions of Yen)Gas Businessin Japan

Revenue
Revenues from externalcustomers
Intersegment revenues
and transfers
Total
Segment profit (Note 2)
Other items
Depreciation andamortization
Impairment losses
Share of profit (loss)of investments
accounted for using
the equity method

Gas Business
Gas Businessin the United Gas Businessin Asia andStatesin Europe
Oceania

Thermos
Business

Total

Reconciling
items(Note 1)

Amounts on theConsolidated
Statement ofProfit or Loss

¥345,048¥172,646¥—¥103,166¥25,356¥646,218¥—¥646,218

10,837355,886
31,38011,430184,076
13,559

—
—
—

2,132
105,299
9,236

30
25,386
7,749

24,431
670,649
61,925(24,431)(24,431)(1,891)—
646,218
60,033

16,2830

19,319
—

—
—

6,603
—

1,050
—

43,2560

10—43,266
0

279

(121)

—

(28)

3,357

3,487

0

3,488

Notes: 1. The ¥1,891 million negative reconciling item for segment profit is comprised of ¥312 million of intersegment eliminations and companywide expenses of¥1,578 million that were not allocated to any particular reportable segment. These companywide expenses related principally to basic research expenses
that were not allocated to a particular reportable segment.
2. Segment profit represents core operating profit, which is calculated as operating profit excluding certain gains or losses attributable to non-recurring factors(losses incurred by business withdrawals, streamlining, and others).

Taiyo Nippon Sanso Corporation | Integrated Report 201965

Reconciliation of segment profit with profit before income taxes is as follows:(Millions of Yen)

Segment profit
Gain on sales of fixed assets
Share of profit (loss) of investments accounted for using the equity
methodImpairment losses
Other
Operating profit
Finance income
Finance costs
Profit before income taxes

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥65,819
1,336¥60,033
1,209

—
(20)
(272)
66,863
2,294(7,074)¥62,083

(651)
(162)
(565)
59,862
1,299(5,264)¥55,897(3) Information about geographical area
A breakdown of revenues from external customers and non-current assets by geographical area are as follows:
Revenues from external customers(Millions of Yen)Japan
The United States
EuropeAsia, Oceania and others
Total

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥376,536
177,940
59,324
126,540¥740,341¥360,108
165,739
3,783
116,587¥646,218

Note: Revenue is classified by country or region based on the customers’ location.

Non-current assets(Millions of Yen)Japan
The United States
EuropeAsia, Oceania and others
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 170,094
367,101
682,686
111,789¥1,331,673¥155,759
292,821—108,207¥556,788

Note: Non-current assets are classified by their location, and they do not include financial assets, deferred tax assets or retirement benefit asset.

(4) Information about major customers
Information about major customers is not disclosed since there is no single external customer that accounts for 10% or more of revenue.

5. Business Combinations
FYE2019 (From April 1, 2018 to March 31, 2019)
Acquisition (100% Ownership) of Praxair, Inc. (“Praxair”)’s
European Businesses (Praxair is headquartered in the
United States)(1) Overview of business combination
1) Name and business description of acquired companies
Names of acquired companies:
Praxair Espana S.L.U. and other 36 companies
Business description:
The industrial gas business of Praxair’s European territories inGermany, Spain, Portugal, Italy, Norway, Denmark, Sweden, theNetherlands, and Belgium, the carbon dioxide gas business in the
United Kingdom, Ireland, the Netherlands, and France, and thehelium-related businesses.
2) Acquisition date
December 3, 20183) Main reason for business combination
The Company upholds a long-term vision with the aim of achieving
consolidated revenue of ¥1 trillion, an operating profit margin of 10%,a return on capital employed (ROCE) of 10% or above and an overseas revenue ratio of 50% or above, with a view toward sharpening

66

Taiyo Nippon Sanso Corporation | Integrated Report 2019its global competitive edge and securing its position as a major
player, amid a realignment of the industry. The Company regards thisacquisition as a means to make a large advancement towardrealizing such vision and an attractive investment opportunity withstrategic significance at the same time.
The industrial gas market in Europe is the second largest behind
the North American market, and its competition environment is stable. This acquisition will accelerate the TNSC Group’s global expansion by obtaining businesses with a certain share in the market where
it has not had previous participation. Furthermore, the TNSC Groupwill be able to acquire profitable businesses with a certain scale andnetwork (e.g., manufacturing base) as well as talented personnel
including the current top management and business platform. Basedon such business foundation, the TNSC Group is planning to provide
its products, such as environmentally responsive products, and to
reinforce its groupwide functions, such as enhancement of marketing
to global firms.
4) Percentage of voting rights acquired
Essentially 100.0%
5) Method for gaining control of acquired companies
Consolidated subsidiary, Nippon Gases Euro-Holding S.L.U. andother companies acquired the shares of the acquired companies bypurchasing shares for cash.

(2) Fair value of consideration transferred(Millions of Yen)
Acquisition date
(December 3, 2018)

Cash
Total of consideration transferred¥635,847¥635,847(3) Goodwill, assets acquired, liabilities assumed andnon-controlling interests(Millions of Yen)
Acquisition date
(December 3, 2018)

Current assets:
Cash and cash equivalents
Trade receivables (Note 2)Inventories
Other
Non-current assets:
Property, plant and equipment (Note 1)
Intangible assets (Note 1)
Investments accounted forusing the equity method
Other
Assets acquired
Current liabilities:
Trade payables
Other financial liabilities
Other
Non-current liabilities:
Retirement benefit liability
Deferred tax liabilities
Other
Liabilities assumed
Net assets acquired and liabilities assumed
Non-controlling interests (Note 3)
Goodwill (Note 4, 5)

¥

4,354
32,664
8,368
3,681

190,561
208,301
5,998
4,196
458,123
23,882
13,593
12,254
6,942
72,444
1,297
130,412
327,7112,265¥310,401

Notes: 1. Details of property, plant and equipment and intangible assets
Property, plant and equipment are mainly machinery and vehicles of¥136,460 million. Intangible assets are mainly customer-related
intangible assets of ¥203,900 million.
2. Fair value of acquired receivables, contractual amounts receivableand estimated uncollectible amountThe fair value of acquired receivables and contractual amounts
receivable are approximately equal. None of the contractual amounts
receivable are estimated to be uncollectible.
3. Non-controlling interest
Non-controlling interest is measured at the amount of the noncontrolling interest in proportion to the fair value of identifiable net
assets of the acquired company.
4. Goodwill
Goodwill mainly comprises anticipated synergies and excess
earnings capabilities arising from the acquisition that do not match
specific recognition criteria. Goodwill is not tax-deductible.
5. Basis adjustment
In order to hedge the currency risks involved in investment in theacquired company, a forward exchange contract was executed. For
such forecasted transactions, hedge accounting was applied for the
purpose of a cash flow hedge, with the fair value of the hedging
instruments on the acquisition date of ¥3,791 million negative
applied as a basis adjustment to goodwill derived from this businesscombination, resulting in an increase in the amount of goodwill
initially recognized by the same amount.

(4) Acquisition-related costs
Acquisition-related costs were ¥6,722 million. Of these, “Selling, general and administrative expenses” and “Finance costs” were recordedat ¥2,695 million and ¥548 million, respectively, in the consolidated
statement of profit or loss. “Bonds and borrowings” in “Current liabilities” and “Bonds and borrowings” in “Non-current liabilities” wererecorded at ¥771 million negative and ¥2,708 million negative,
respectively, in the consolidated statement of financial position.
Acquisition-related costs recorded in the consolidated statement offinancial position represent the unexpired balance yet to be recorded
as financial costs, as of the end of the fiscal year, of the fair value atthe initial recognition of such bonds and borrowings for financing theacquisition, less related bond issuance costs and organization fees.
(5) Impact on the TNSC Group’s results
The TNSC Group’s consolidated statement of profit or loss includes
revenue and profit generated by the acquired companies subsequent
to the acquisition date of ¥55,101 million and ¥6,167 million,
respectively.
The TNSC Group’s revenue and profit (pro forma information)
assuming that the business combination was undertaken on April 1,
2018, the beginning of the fiscal year, were ¥857,543 million and¥53,761 million, respectively. The pro forma information has notbeen audited.

Acquisition of the HyCO Business and Related Assets
in the United States(1) Overview of business combination
1) Name and business description of counterpart
Name of counterpart:
Linde Gas North America LLC (“Linde America”)
Business description:
A portion of the HyCO business* operated in the United States byLinde America* “HyCO” stands for hydrogen (H2) and carbon monoxide (CO), which areseparated from natural gas and other gases through a technology called
Steam Methane Reforming and other equipment. The HyCO businessprovides large-scale supply of H2 and CO to customers in oil refining andpetrochemical industries by way of a pipeline.

2) Acquisition dateFebruary 27, 20193) Main reason for business combination
The Company is aiming to expand in the gas technology field byutilizing M&A as a strategy for its medium-term management plan
entitled “Ortus Stage 2.” The Company decided on full-scale entry
into the HyCO business from the perspective of strengthening its
proposal capabilities with enhancements to its product lineup. The
acquisition further realizes this endeavor, and the following can be
expected as a result of the agreement:(i) Steady generation of earnings over the medium to long termfrom on-site supply of H2 and CO(ii) Acquisition of resources (people / technology) further facilitating
efficient operation of HyCO business(iii) Strengthening of the ability to offer proposals that will capture
demand for new on-site projects in the U.S. (petroleum refining
and petrochemicals, etc.)
4) Method for gaining control of acquired company
Consolidated subsidiary, Matheson Tri-Gas, Inc. acquired part of the
HyCO business conducted in the United States by Linde America
and related business assets thereto through purchases for cash.
(2) Fair value of consideration transferred(Millions of Yen)
Acquisition date(February 27, 2019)

Cash
Total of consideration transferred¥46,133¥46,133

Taiyo Nippon Sanso Corporation | Integrated Report 201967

3. Basis adjustment
In order to hedge the currency risks involved in investment in theacquired company, a forward exchange contract was executed. For
such forecasted transactions, hedge accounting was applied for the
purpose of a cash flow hedge, with the fair value of the hedging
instruments on the acquisition date of ¥452 million negative applied
as a basis adjustment to the goodwill derived from this businesscombination, resulting in an increase in the initially recognizedamount of goodwill by the same amount.

(3) Goodwill, assets acquired and liabilities assumed(Millions of Yen)
Acquisition date(February 27, 2019)

Current assets
Non-current assets:
Property, plant and equipment (Note 1)
Intangible assets (Note 1)
Assets acquired
Non-current liabilities
Liabilities assumed
Net assets acquired and liabilities assumed
Goodwill (Notes 2, 3)¥

215

30,8758,356
39,446498
498
38,948¥ 7,185

As the initial accounting treatment at the time of the businesscombination has yet to be completed, the amounts above are provisional fair values based on prevailing best estimates. Amounts may
be revised up to one year after the acquisition following an assessment of additional information relating to facts and circumstances at
the acquisition date.
Notes: 1. Details of property, plant and equipment and intangible assets
Property, plant and equipment are mainly machinery and vehicles of¥30,851 million. Intangible assets are customer-related intangible
assets of ¥8,356 million.
2. Goodwill
Goodwill mainly comprises anticipated synergies and excess earnings capabilities arising from acquisition that do not match specificrecognition criteria. Goodwill is deductible for a certain period underfull taxation.

(4) Acquisition-related costs
Acquisition-related costs were ¥149 million, and are included in“Selling, general and administrative expenses” in the consolidated
statement of profit or loss.
(5) Impact on the TNSC Group’s results
The TNSC Group’s revenue and profit (pro forma information) assuming that the business combination was undertaken on April 1, 2018,
the beginning of the fiscal year, were ¥749,999 million and ¥46,026
million, respectively. The pro forma information has not been audited.

FYE2018 (From April 1, 2017 to March 31, 2018)
There were no significant business combinations.

6. Cash and Cash Equivalents
A breakdown of cash and cash equivalents is as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

Cash and deposits¥59,620¥47,809

Total¥59,620¥47,809

7. Trade Receivables
A breakdown of trade receivables is as follows:(Millions of Yen)

Notes and accounts receivable—trade
Allowance for doubtful accounts
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥204,418¥166,578(6,466)(2,330)¥197,952¥164,247

Trade receivables are classified as financial assets measured at amortized cost.

8. Inventories
A breakdown of inventories is as follows:(Millions of Yen)

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥43,815
10,728
11,744¥66,288¥33,604
9,153
8,723¥51,481

Amounts of inventories measured based on net realizable value at March 31, 2019 and March 31, 2018 were ¥3,064 million and ¥3,362
million, respectively.
Amounts of write-downs of inventories recognized as expenses for FYE2019 and FYE2018 were ¥165 million and ¥262 million, respectively.

68

Taiyo Nippon Sanso Corporation | Integrated Report 2019

9. Property, Plant and Equipment(1) Table of changes
Changes in costs, accumulated depreciation and accumulated impairment losses, and carrying amounts of property, plant and equipment are
as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)
Costs(Millions of Yen)

Balance at April 1, 2018
Individual acquisition
Impairment losses
Acquisition through business combination, etc.
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2019

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand fixtures¥626,736
46,357—
167,690(15,297)(584)¥137,356
5,330—
11,624(2,112)
1,179¥47,361
155
—
9,526
(288)
(1,449)Total¥41,297
12,748(1,340)
6,798
(284)
389

¥116,308
11,203—28,446(3,944)(177)¥ 969,061
75,796(1,340)224,087(21,927)
(641)

2,288
¥827,191(395)¥152,983

451¥55,757

1,544¥61,153

1,300¥153,137

5,188¥1,250,224

Construction inLand
progress

Tools, furnitureand fixtures

Total

Accumulated depreciation and accumulated impairment losses(Millions of Yen)

Balance at April 1, 2018
Depreciation
Impairment losses
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2019

Machinery andvehiclesBuildings andstructures¥(419,810)(35,937)—
14,276624¥(81,850)(4,751)
(13)
1,855
29

¥(2,822)
—
(84)
48
—

¥—
—
—
—
—

¥(72,647)(7,566)—3,743
48¥(577,130)(48,255)(97)
19,924702(4,385)¥(445,232)(233)¥(84,963)(68)¥(2,927)—¥—(1,347)¥(77,768)(6,034)¥(610,891)

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand fixtures

Total¥206,925¥381,959¥55,506¥68,020¥41,297¥61,153¥43,661¥75,369¥391,930¥639,332

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand fixtures

Total¥608,772
37,071
1,510(11,695)(1,064)¥131,784
4,776
2,619
(1,387)(0)¥46,873
609
1,214(1,392)(96)¥36,358
11,097
—
(296)
(235)

¥114,870
8,468
216(2,598)(29)¥938,659
62,023
5,560(17,370)(1,426)(7,857)¥626,736(436)¥137,356

153¥47,361(5,626)¥41,297(4,618)¥116,308(18,386)¥969,061

Construction inLand
progress

Tools, furnitureand fixtures

Total

Carrying amounts(Millions of Yen)

Balance at April 1, 2018
Balance at March 31, 2019¥44,538¥52,829

FYE2018 (From April 1, 2017 to March 31, 2018)
Costs(Millions of Yen)

Balance at April 1, 2017
Individual acquisition
Acquisition through business combination, etc.
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2018

Accumulated depreciation and accumulated impairment losses(Millions of Yen)

Balance at April 1, 2017
Depreciation
Impairment losses
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2018

Machinery andvehiclesBuildings andstructures¥(406,839)(27,961)—
10,690599¥(78,371)(4,380)
(162)
1,093
0

¥(3,135)
—
(0)
323
(0)

¥—
—
—
—
—

¥(70,759)(6,589)
(0)
2,178
12

¥(559,106)(38,930)(163)
14,285612

3,699¥(419,810)(29)¥(81,850)(10)¥(2,822)

—
¥—

2,511
¥(72,647)

6,170¥(577,130)

Taiyo Nippon Sanso Corporation | Integrated Report 201969

Carrying amounts(Millions of Yen)

Balance at April 1, 2017
Balance at March 31, 2018

Machinery andvehiclesBuildings andstructures¥201,933¥206,925¥53,413¥55,506

Construction inLand
progress¥43,737¥44,538¥36,358¥41,297

Tools, furnitureand fixtures

Total¥44,111¥43,661¥379,553¥391,930

Depreciation of property, plant and equipment is included in “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statement of profit or loss.
(2) Leased assets
Carrying amounts of leased assets under finance leases included in property, plant and equipment are as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥2,0501,718¥3,768¥2,248
1,838¥4,087

Machinery and vehicles
Other
Total

10. Goodwill and Intangible Assets(1) Table of changes
Changes in costs, accumulated amortization and accumulated impairment losses, and the carrying amounts of goodwill and intangible assets
are as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)
Costs(Millions of Yen)
Intangible assets

Balance at April 1, 2018
Individual acquisition
Acquisition through business combination, etc.
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2019

Goodwill

Customer-related
intangible assets

Other

Total

¥120,773
223
324,284(13)¥ 56,490—
216,899—¥16,059
646
4,600
(156)

¥ 72,549
646
221,500(156)(5,907)¥439,361(4,479)¥268,910

110¥21,259(4,369)¥290,170

Accumulated amortization and accumulated impairment losses(Millions of Yen)
Intangible assets

Balance at April 1, 2018
Amortization
Impairment losses
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2019

Goodwill

Customer-related
intangible assets

Other

Total

¥(1,551)—(20)—¥(16,778)(6,635)——¥(10,838)(1,221)—
152¥(27,617)(7,856)—152(66)¥(1,638)(671)¥(24,085)(279)¥(12,186)(951)¥(36,272)

Carrying amounts(Millions of Yen)
Intangible assets

Balance at April 1, 2018
Balance at March 31, 201970

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Goodwill

Customer-related
intangible assets

Other

Total

¥119,221¥437,722¥ 39,711¥244,824¥5,220¥9,073¥ 44,932¥253,897

FYE2018 (From April 1, 2017 to March 31, 2018)
Costs(Millions of Yen)
Intangible assets

Balance at April 1, 2017
Individual acquisition
Acquisition through business combination, etc.
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2018

Goodwill

Customer-related
intangible assets

Other

Total

¥125,238
264
1,046
—

¥59,648———¥16,252
478
9
(145)

¥75,900
478
9
(145)

(5,776)¥120,773(3,157)¥56,490(535)¥16,059(3,693)¥72,549

Accumulated amortization and accumulated impairment losses(Millions of Yen)
Intangible assets

Balance at April 1, 2017
Amortization
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2018

Goodwill

Customer-related
intangible assets

Other

Total

¥(1,636)——¥(14,235)(3,416)—¥(10,359)
(977)
142

¥(24,594)(4,394)142

84¥(1,551)873¥(16,778)

355¥(10,838)

1,229¥(27,617)

Carrying amounts(Millions of Yen)
Intangible assets

Balance at April 1, 2017
Balance at March 31, 2018

Goodwill

Customer-related
intangible assets

Other

Total

¥123,602¥119,221¥45,412¥39,711¥5,892¥5,220¥51,305¥44,932

There were no significant internally generated intangible assets for
FYE2019 or FYE2018.
Amortization of intangible assets is included in “Cost of sales” and“Selling, general and administrative expenses” in the consolidated
statement of profit or loss.
Research and development costs recognized as expenses for
FYE2019 and FYE2018 were ¥3,494 million and ¥3,255 million,
respectively.

The carrying amount of assets with indefinite useful lives in theintangible assets above was ¥1,069 million at March 31, 2019 and¥1,110 million at March 31, 2018. Principally, the assets were trademarks acquired at the time of a business combination, and the TNSCGroup determined that their useful lives cannot be estimatedbecause the assets will exist for as long as the business continues.

(2) Significant intangible assets
Significant intangible assets recorded in the consolidated statement of financial position were customer-related intangible assets held by Nippon
Gases Euro-Holding S.L.U. and Matheson Tri-Gas, Inc., which are consolidated subsidiaries. Their carrying amounts and the remaining period ofamortization are as follows:(Millions of Yen)

Nippon Gases Euro-Holding S.L.U.
Matheson Tri-Gas, Inc.

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

Remaining period of amortization¥194,267¥ 43,966—¥35,912Mainly 29 years
Mainly 17 years

Taiyo Nippon Sanso Corporation | Integrated Report 201971

11. Impairment Losses
The TNSC Group groups assets into the smallest cash-generating units that generate cash flows largely independently. For idle assets,
recognition of impairment loss is determined by individual assets.
Impairment losses for FYE2019 and FYE2018 were ¥1,459 million and ¥163 million, respectively. Impairment losses were included in “Other
operating expenses” in the consolidated statement of profit or loss.
Major assets for which impairment losses were recognized are as follows:
FYE2019 (April 1, 2018 to March 31, 2019)(Millions of Yen)

Usage
Natural gas liquefier

Location

Type

Reportable segment

Impairment losses

Indonesia

Construction in progress

Gas Business in Asia and Oceania¥1,340

Breakdown of impairment losses• Natural gas liquefier ¥1,340 million
The carrying amount of the natural gas liquefaction business in progress in Indonesia was reduced to the recoverable amount, since its
profitability was expected to decline due to drastic changes in the market environment surrounding the raw fuel. The recoverable amount ismeasured at value in use, and calculated by discounting the future cash flows at 11.0%.
FYE2018 (April 1, 2017 to March 31, 2018)
There were no individually significant impairment losses incurred for FYE2018.
Carrying amounts of goodwill and intangible assets with indefinite useful lives allocated to a cash-generating unit (group of cash-generating units)
are as follows:(Millions of Yen)
Cash-generating unit
(group of cash-generating units)

FYE2019(March 31, 2019)

Nippon Gases Euro-Holding S.L.U.
Matheson Tri-Gas, Inc.
TNSC (Australia) Pty Ltd
Other
Total

FYE2018(March 31, 2018)¥300,702
100,343
23,55014,195¥438,792¥—
87,54023,692
9,100¥120,332

Note: The two entities, Renegade Gas Pty Ltd and Supagas Holdings Pty Ltd, which separately constituted cash-generating units as of the end of the previous fiscal
year, integrated their business operations on April 1, 2018, and were renamed as Supagas Pty Ltd. Accordingly, the holding company of Supagas Pty Ltd,TNSC (Australia) Pty Ltd is presented as a cash-generating unit.

The carrying amounts of intangible assets with indefinite useful
lives at March 31, 2019 and March 31, 2018 were ¥1,069 million and¥1,110 million, respectively, and were included in TNSC (Australia)
Pty Ltd.
The recoverable amount of a cash-generating unit (group of
cash-generating units) is measured by value in use.

Value in use is calculated reflecting past experiences andexternal information based on business plans within five years
approved by the management. Cash flows exceeding the period ofa business plan are determined by reference to the long-term average growth rate of a market or a country that the cash-generating
unit belongs to.

Growth rates and discount rates used in the measurement of the value in use are as follows:

Cash-generating unit
(group of cash-generating units)

Nippon Gases Euro-Holding S.L.U.
Matheson Tri-Gas, Inc.
TNSC (Australia) Pty Ltd

Growth rate

FYE2019(March 31, 2019)
Discount rate

Growth rate

FYE2018(March 31, 2018)
Discount rate

1.7%
3.9%
3.0%

6.9%
9.6%
8.5%

—
3.8%
3.0%

—
9.7%
8.5%

The recoverable amount of Nippon Gases Euro-Holding S.L.U. as of March 31, 2019 exceeded its carrying amount by ¥58,060 million; it isestimated that if the discount rate rises by 0.5% these amounts would be approximately the same.

12. Investments Accounted for Using the Equity Method
The carrying amount of investments in joint ventures accounted for using the equity method that are individually insignificant is as follows:(Millions of Yen)

Carrying amount of investments in joint ventures

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥6,256¥914

Share of comprehensive income of joint ventures accounted for using the equity method is as follows:(Millions of Yen)

Share of profit
Share of other comprehensive income
Total share of comprehensive income

72

Taiyo Nippon Sanso Corporation | Integrated Report 2019

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥(205)
1¥(203)¥(1,048)30¥(1,017)

The carrying amount of investments in associates accounted for using the equity method that are insignificant is as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥28,177¥27,234

Carrying amount of investments in associates
Share of comprehensive income of associates accounted for using the equity method is as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥4,04243¥4,085¥3,884420¥4,305

Share of profit
Share of other comprehensive income
Total share of comprehensive income

13. Other Financial Assets
A breakdown of other financial assets is as follows:(Millions of Yen)

Equity securities and investments in capital
Other
Allowance for doubtful accounts
Total
Current assets
Non-current assets
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥38,676
23,331(642)¥61,365¥10,051
51,314¥61,365¥48,675
19,424(850)¥67,248¥ 6,41260,836¥67,248

Equity securities and investments are classified as equity financial assets measured at fair value through other comprehensive income. Otheris classified mainly as financial assets measured at amortized cost.
Equity securities are designated as equity financial assets measured at fair value through other comprehensive income because they are held
mainly for the purpose of maintaining and strengthening business and collaborative relationships and financial transaction relationships, etc.
Names of issuers and fair value of principal equity financial assets measured at fair value through other comprehensive income are as follows:
FYE2018 (March 31, 2018)

FYE2019 (March 31, 2019)(Millions of Yen)

(Millions of Yen)

Name

AmountName

Amount

JFE Holdings, Inc.
Tosoh Corporation
Koatsu Gas Kogyo Co., Ltd.
IBIDEN CO., LTD.
Tokyo Tatemono Co., Ltd.

¥4,833
3,834
2,862
2,227
1,723

JFE Holdings, Inc.
Tosoh Corporation
Azbil Corporation
Koatsu Gas Kogyo Co., Ltd.
IBIDEN CO., LTD.

¥5,515
4,649
3,468
2,957
2,096

In order to improve the efficiency and effective utilization of assets held, the TNSC Group conducts sales (derecognition) of equity financial assets
measured at fair value through other comprehensive income. The fair value at the time of sales and cumulative gains or losses on sales are as
follows. Cumulative gains or losses (after tax) recognized in other comprehensive income in equity were transferred to retained earnings at thetime of sales.
(Millions of Yen)

Fair value
Cumulative gains or losses

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥8,7404,428¥7,503
1,507

For equity financial assets measured at fair value through other comprehensive income, dividends received were recognized as follows:(Millions of Yen)

Financial assets that were derecognized
Financial assets held at the end of the fiscal year

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)

¥ 149
1,006

¥ 72
994

Taiyo Nippon Sanso Corporation | Integrated Report 201973

14. Other Assets
A breakdown of other assets is as follows:(Millions of Yen)

Prepaid expenses
Other
Total
Current assets
Non-current assets
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 5,500
8,451¥13,951¥13,231720¥13,951¥3,796
5,260¥9,056¥8,351704¥9,056

15. Trade Payables
A breakdown of trade payables is as follows:(Millions of Yen)

Notes and accounts payable—trade
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥105,966¥105,966¥79,483¥79,483

Trade payables are classified as financial liabilities measured at amortized cost.

16. Bonds and Borrowings
A breakdown of bonds and borrowings is as follows:(Millions of Yen)

Short-term borrowings
Current portion of long-term borrowings
Commercial papers
Current portion of bonds
Long-term borrowings
Bonds
Total
Current liabilities
Non-current liabilities
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 461,510
60,41512,000—319,141
147,065¥1,000,132¥ 533,925
466,206¥1,000,132¥ 35,403
36,969—15,000
193,694
40,000¥321,067¥ 87,372
233,694¥321,067

Bonds and borrowings are classified as financial liabilities measured at amortized cost.
Average interest rates applicable to short-term borrowings and long-term borrowings at March 31, 2019 were 0.67% and 1.84%, respectively.
Average interest rates applicable to short-term borrowings and long-term borrowings at March 31, 2018 were 2.22% and 1.52%, respectively.
The repayment term of long-term borrowings at March 31, 2019 is from 2019 to 2059.
A breakdown of bonds is as follows:(Millions of Yen)
Company
name
Name

*1
*1
*1
*1
*1

*1

The 11th Domestic Unsecured
Straight Corporate Bonds
The 12th Domestic Unsecured
Straight Corporate Bonds
The 13th Domestic Unsecured
Straight Corporate Bonds
The 14th Domestic Unsecured
Straight Corporate Bonds
The 1st Series Deferrable
Interest and Callable Unsecured
Subordinated Bonds
The 2nd Series Deferrable
Interest and Callable Unsecured
Subordinated Bonds
Total

Issuance dateFebruary 27, 2014

FYE2019(March 31, 2019)¥

FYE2018 Interest rate
(March 31, 2018)(%) Collateral

Maturity date—

¥15,000

0.32

None

February 27, 2019

February 27, 2014

10,00010,0000.56

None

February 26, 2021

December 15, 2016

15,00015,0000.14

None

December 15, 2021

December 15, 2016

15,00015,0000.39

None

December 15, 2026

January 29, 201999,153

—

1.41
(*2)

None

January 29, 2054

January 29, 2019

7,911
¥147,065—¥55,000

1.87
(*3)

None

January 29, 2059

*1 The bonds were issued by the Company.
*2 A fixed interest rate is applied to the period between the day following January 29, 2019 and January 29, 2024, while a variable interest rate is to be applied fromthe day following January 29, 2024 (step-up in interest rate occurring on January 30, 2024).
*3 A fixed interest rate is applied to the period between the day following January 29, 2019 and January 29, 2029, while a variable interest rate is to be applied fromthe day following January 29, 2029 (step-up in interest rate occurring on January 30, 2029).

74

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Assets pledged as collateral and secured obligations are as follows:
Assets pledged as collateral(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥1,463¥1,463¥1,540¥1,540Property, plant and equipment
Total
Secured obligations(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

¥716
126
¥843

¥826
137
¥963

Bonds and borrowings
Other financial liabilities (current)
Total

17. Other Financial Liabilities
A breakdown of other financial liabilities is as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 5,269
30,5898,064
1,949¥45,873¥41,818
4,054¥45,873¥ 5,892
21,6807,002
2,041¥36,617¥31,693
4,923¥36,617

Lease liabilities
Accrued expenses
Accounts payable—other
Other
Total
Current liabilities
Non-current liabilities
Total
Other financial liabilities are mainly classified as financial liabilities measured at amortized cost.

18. Lease Transactions(1) Finance leases
Minimum lease payments and their present value are as follows:(Millions of Yen)FYE2019(March 31, 2019)

One year or lessMore than one year but within five years
More than five years
Total

FYE2018(March 31, 2018)

Minimum lease
payments

Future financecharges

Present value

Minimum lease
payments

Future financecharges

Present value¥2,227
2,627
503¥5,358

¥(25)
(39)
(22)
¥(88)

¥2,201
2,587
480¥5,269¥2,0163,375
615¥6,008¥ (24)(72)(18)¥(115)¥1,992
3,303
597¥5,892(2) Operating leases
Future minimum lease payments under non-cancellable operating lease contracts are as follows:(Millions of Yen)

One year or lessMore than one year but within five years
More than five years
Total

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 5,709
12,108
5,210¥23,029¥ 3,159
7,161
3,897¥14,219

Lease payments recognized as expenses for FYE2019 and FYE2018 were ¥7,388 million and ¥6,745 million, respectively.

Taiyo Nippon Sanso Corporation | Integrated Report 201975

19. Post-employment Benefits
The Company and certain consolidated subsidiaries have funded andunfunded retirement defined benefit plans and defined contributionplans for employees’ retirement benefits, and the plans coversubstantially all the employees.
(1) Defined benefit plans
Major defined benefit plans of the Company’s consolidated subsidiaries are cash balance plans. Amounts of benefits under the cash balance plans are set based on various conditions such as years ofservice, points based on achievements during the service period, etc.

The investment yield is determined taking into consideration the yieldon government bonds.
In accordance with laws and regulations, the pension plans aremanaged by the Company’s consolidated subsidiaries or a pension
fund that is legally separate from the Company’s consolidated subsidiaries. The Company’s consolidated subsidiaries, or the Board of
Directors of the pension fund and the trustees of pension fund management are required by laws and regulations to act in the best interest of policyholders, and responsible for operating plan assets basedon the prescribed policies.

Amounts of defined benefit plans in the consolidated statement of financial position are as follows:(Millions of Yen)

Present value of defined benefit obligations
Fair value of plan assets
Net amount of defined benefit obligations and assets
Retirement benefit liability
Retirement benefit asset
Net amount of defined benefit obligations and assets

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 45,920(35,317)¥ 10,603¥ 12,377(1,773)¥ 10,603¥ 32,929(30,756)¥ 2,173¥ 4,511(2,338)¥ 2,173

For defined benefit plans, amounts recognized as expenses in the consolidated statement of profit or loss are as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥1,872269(444)¥1,696¥1,294
198(178)¥1,314Current service cost
Interest expenses
Interest income
Total
Changes related to the present value of defined benefit obligations are as follows:(Millions of Yen)

Balance at beginning of the fiscal year
Current service cost
Interest expenses
Remeasurements
Actuarial gains and losses arising from changes in financial
assumptions
Retirement benefits paid
Changes from business combinations
Other
Balance at end of the fiscal year

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥32,929
1,872
269¥32,694
1,294
198

922
(2,349)12,816(540)¥45,920132(1,645)—
255¥32,929

Changes related to the fair value of plan assets are as follows:(Millions of Yen)

Balance at beginning of the fiscal year
Interest income
Remeasurements
Return on plan assets
Contributions from companies
Retirement benefits paid
Changes from business combinations
Other (Note)
Balance at end of the fiscal year

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥30,756444¥36,921
178

(47)
972
(1,925)
5,275(157)¥35,317

1,343
918(1,403)—(7,201)¥30,756

Note: Plan assets decreased by ¥7,185 million, due to the cancellation of the retirement benefit trust during the fiscal year ended March 31, 2018.

76

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Major actuarial assumptions used to calculate the present value of defined benefit obligations are as follows:

Discount rate

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

0.45%

0.57%

If discount rates, the major actuarial assumptions, fluctuate, the present values of defined benefit obligations at March 31, 2019 and 2018change as follows. This sensitivity analysis is based on the assumption that all actuarial assumptions other than actuarial assumptions subject toanalysis remain constant.
(Millions of Yen)

Increase by 0.5%
Decrease by 0.5%

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥(2,818)
2,700¥(1,522)
1,659

Fair values of plan assets at March 31, 2019 are as follows:(Millions of Yen)
Plan assets for which there
are quoted market prices
in an active market

Cash and cash equivalents
Equity financial instruments
Jointly managed trusts
Total equity financial instruments
Debt financial instruments
Jointly managed trusts
Total debt financial instruments
Life insurance general accounts
Other
Total

¥1,967

Plan assets for which there
are no quoted market prices
in an active market

¥

Total

—

¥ 1,967

—
—

2,444
2,444

2,444
2,444

—
—
—
—
¥1,967

15,812
15,812
15,051
40¥33,349

15,812
15,812
15,051
40¥35,317

Plan assets for which there
are quoted market prices
in an active market

Plan assets for which there
are no quoted market prices
in an active market

Fair values of plan assets at March 31, 2018 are as follows:(Millions of Yen)

Cash and cash equivalents
Equity financial instruments
Jointly managed trusts
Total equity financial instruments
Debt financial instruments
Jointly managed trusts
Total debt financial instruments
Life insurance general accounts
Other
Total

¥1,618

Total—¥ 1,618

—
—

4,494
4,494

4,494
4,494

—
—
—
—
¥1,61812,856
12,856
11,767
19¥29,137

12,856
12,856
11,76719¥30,756

Under the TNSC Group’s plan asset management policy, the purpose of management is to secure the required combined returns
over the medium and long term to the extent of allowable risks inorder to ensure payments of the benefits of the defined benefit
obligations in the future.
For plan assets, the TNSC Group seeks to reduce risks by diversifying investments widely in domestic and foreign equity securities,
debt securities and life insurance general accounts based on asset
allocation objectives of a policy asset mix formulated to achieve
management objectives.
For asset allocation, the TNSC Group sets the allocation to be
maintained for the medium and long term, based on the correlation
between expectations of risks and returns for the medium and longterm and actual management results of each asset. The TNSC Group¥

reviews asset allocation according to the situation as necessary, suchas when there is a significant change in the market environment.
Contributions to the defined benefit plans are readjusted basedon periodic actuarial reviews, in order to ensure balanced pension
finance in the future. In such actuarial reviews, the adequacy of contribution is verified by reviewing the basic rates for determining contributions (such as expected rate of interest, expected mortality, andexpected rate of withdrawal).
For FYE2020, the TNSC Group plans to contribute ¥1,789 million
to plan assets.
The weighted average durations of the defined benefit obligation atMarch 31, 2019 and 2018 were 11.9 years and 12.0 years,
respectively.

(2) Defined contribution plans and public pension systems
Amounts recognized as expenses under defined contribution plans and public pension systems are as follows:(Millions of Yen)

Expenses under defined contribution plans
Expenses under public pension systems

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥2,174
4,261¥1,867
4,079

Taiyo Nippon Sanso Corporation | Integrated Report 201977

20. Provisions
A breakdown of changes in provisions is as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)(Millions of Yen)

Balance at April 1, 2018
Increase during the fiscal year
Decrease during the fiscal year (intended use)
Decrease during the fiscal year (reversal)
Other
Balance at March 31, 2019
Current liabilities
Non-current liabilities
Total

Provision for
construction warranties

Asset retirement
obligations

Other provisions

Total

¥ 674
24
(373)
(14)
0
¥ 310
¥ 310
—
¥ 310

¥5,742
1,261
(32)
—
633
¥7,603¥ —7,603¥7,603

¥ 80
12
(50)
—
—
¥ 42
¥ 42
—
¥ 42

¥6,496
1,298
(456)
(14)
633
¥7,956¥ 352
7,603¥7,956

Provision for
construction warranties

Asset retirement
obligations

Other provisions

Total

¥ 471
410
(172)
(34)
—
¥ 674
¥ 674
—
¥ 674

¥5,859
67
(102)
—
(81)
¥5,742¥ —5,742¥5,742

¥ 63
80
(48)
(14)
—
¥ 80
¥ 80
—
¥ 80

¥6,394
557
(323)
(49)
(81)
¥6,496¥ 754
5,742¥6,496FYE2018 (From April 1, 2017 to March 31, 2018)(Millions of Yen)

Balance at April 1, 2017
Increase during the fiscal year
Decrease during the fiscal year (intended use)
Decrease during the fiscal year (reversal)
Other
Balance at March 31, 2018
Current liabilities
Non-current liabilities
Total

Provision for construction warranties
In order to prepare for construction-related compensation expenses
for machinery and device products, provision for construction warranties is recorded based on the latest estimated amount of compensation based on shipment amounts of machinery and device
products in the previous fiscal year. Of these, amounts expected tobe paid within one year are recorded. However, there is uncertainty inthe occurrence of construction-related compensation expenses.

Asset retirement obligations
If the TNSC Group has legal obligations required by laws andregulations or contracts concerning retirement of fixed assets that areused for the ordinary course of business, such as obligations to
restore the original condition accompanying lease contracts of factory facilities and properties used by the TNSC Group, asset retirement obligations are recognized based on the estimated amount of
future expenditures calculated based on historical results, etc.
Although these expenses are expected to be paid mainly after one
year or more, they will be affected by future business plans, etc.

21. Other Liabilities
A breakdown of other liabilities is as follows:(Millions of Yen)

Advances received
Deferred income
Employees’ bonuses
Employees’ paid absence
Other
Total
Current liabilities
Non-current liabilities
Total

78

Taiyo Nippon Sanso Corporation | Integrated Report 2019

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ 3,924
6,290
4,545
3,709
28,277¥46,747¥26,410
20,336¥46,747¥ 2,499
4,233
3,908
2,193
14,543¥27,378¥12,441
14,937¥27,37822. Equity(1) Share capital and treasury shares
Numbers of shares authorized and shares issued are as follows:(Thousand shares)
FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)

1,600,000

1,600,000

433,092—
433,092

433,092—
433,092

Number of shares authorized
Number of shares issued
Beginning of the fiscal year
Changes during the fiscal year
End of the fiscal year
All shares are ordinary shares with no par value. Shares issued are fully paid.
Changes in the number of treasury shares during the fiscal year are as follows:(Thousand shares)
FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)

332
3
(0)
335

328
4
(0)
332

Beginning of the fiscal year
Increase
Decrease
End of the fiscal year

Major factors of changes during the fiscal year were due to the purchase or requests for sales of shares less than one unit.
(2) Capital surplus and retained earnings
Capital surplus consists of amounts not included in share capital aspart of the amounts arising from capital transactions, and the main
component is capital reserve. Retained earnings consist of legal
retained earnings and other reserves.
The Companies Act of Japan stipulates that more than one-half of
payments or delivery in relation to the issuance of shares shall be
included in share capital, and the remaining shall be included in capital reserve. Capital reserve may be incorporated into share capital byresolutions of the shareholders’ meeting.
In addition, the Act stipulates that one-tenth of the amount to be
paid as cash dividends from surplus shall be appropriated as capitalreserve or legal retained earnings until the total amount of capitalreserve and legal retained earnings equals one-fourth of sharecapital.
The accumulated legal retained earnings may be used to eliminate
or reduce a deficit, and the legal retained earnings may be reversedby resolution of the shareholders’ meeting.

(3) Other components of equity
Other components of equity are as follows:(Exchange differences on translation of foreign operations)Exchange differences on translation of foreign operations are translation differences arising when consolidating the financial statements offoreign operations prepared in foreign currencies.
(Effective portion of net change in fair value of cash flow hedges)
The effective portion of net change in fair value of cash flow hedges
is the cumulative amount of the effective portion of hedges as part ofgains or losses arising from changes in fair value of the hedging
instrument related to cash flow hedges.
(Financial assets measured at fair value through othercomprehensive income)
Other components of equity include valuation differences in fairvalue of financial assets measured at fair value through othercomprehensive income.
(Remeasurements of defined benefit plans)Remeasurements of defined benefit plans are the effect of differences
between actuarial assumptions at the beginning of the fiscal year andthe actual results and the effect of changes in actuarial assumptions.
These are recognized in other comprehensive income when incurred,and immediately transferred from other components of equity toretained earnings.

23. Dividends
Payments of dividends are as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)
Resolution

Type of stock

Ordinary General Meeting of Shareholders
held on June 20, 2018
Board of Directors’ meeting
held on October 31, 2018

OrdinarysharesOrdinarysharesTotal cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥5,194¥12

March 31, 2018

June 21, 2018

5,194

12 September 30, 2018

December 3, 2018

FYE2018 (From April 1, 2017 to March 31, 2018)
Resolution

Type of stock

Ordinary General Meeting of Shareholders
held on June 20, 2017
Board of Directors’ meeting
held on November 1, 2017

OrdinarysharesOrdinarysharesTotal cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥4,762¥11

March 31, 2017

June 21, 2017

4,762

11 September 30, 2017

December 1, 2017

Taiyo Nippon Sanso Corporation | Integrated Report 201979

The dividends of whose effective date falls in the next fiscal year are as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)
Resolution

Type of stock

Ordinary General Meeting of Shareholders
held on June 20, 2019

OrdinarysharesTotal cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥5,627¥13

March 31, 2019

June 21, 2019

Total cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥5,194¥12

March 31, 2018

June 21, 2018

FYE2018 (From April 1, 2017 to March 31, 2018)
Resolution

Type of stock

Ordinary General Meeting of Shareholders
held on June 20, 2018

Ordinaryshares

24. Other Comprehensive Income
Changes in each item in other comprehensive income during the year are as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥ (3,247)761(2,485)¥ 2,434
(789)
1,644

(970)
346
(623)

1,210
(391)
819

(7,955)(7,955)(10,099)(10,099)(4,148)(95)
1,299(2,944)

(15)
52
(11)
26

45
45
¥(13,963)451451¥ (7,157)

Financial assets measured at fair value through other comprehensive
incomeAmount arising during the fiscal year
Tax effects
Net amountRemeasurements of defined benefit plans
Amount arising during the fiscal year
Tax effects
Net amount
Exchange differences on translation of foreign operations
Amount arising during the fiscal year
Net amount
Effective portion of net change in fair value of cash flow hedges
Amount arising during the fiscal year
Reclassification adjustments
Tax effects
Net amount
Share of other comprehensive income of investments accounted forusing the equity method
Amount arising during the fiscal year
Net amount
Total other comprehensive income

25. Employee Benefit Expenses
Employee benefit expenses other than post-employment benefits are as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥102,985¥102,985¥91,537¥91,537

Wages and salaries
Total

26. Revenue(1) Revenue disaggregated by source and by reportable segment
FYE2019 (From April 1, 2018 to March 31, 2019)(Millions of Yen)
Reportable segment

Revenue
Gas
Equipment and otherHousewares
Total

Gas Business inJapan

Gas Business in
the United States

Gas Business in
EuropeGas Business in
Asia and Oceania¥243,038
120,913—¥363,951¥146,136
41,186—¥187,323¥50,347
4,753—¥55,101¥ 78,565
27,599—¥106,164

Thermos Business¥——
27,800¥27,800

Total¥518,088
194,453
27,800¥740,341

Determination of the timing of the fulfillment of performance obligations in contracts with customers, and the method for calculating thetransaction price and its allocation to performance obligations are as described in “3. Significant Accounting Policies.” The amount of revenue
recognized arising from other revenue sources is insignificant.

80

Taiyo Nippon Sanso Corporation | Integrated Report 2019

(2) Outstanding contract amountContract assets mainly comprise consideration for construction in progress. Contract liabilities mainly comprise consideration received from
customers prior to the delivery of products. Receivables, contract assets, and contract liabilities derived from contracts with customers are
as follows:(Millions of Yen)

Receivables arising from contracts with customers
Contract assets
Contract liabilities

At the beginning of
the fiscal year ended March 31, 2019
(April 1, 2018)

At the end of
the fiscal year ended March 31, 2019
(March 31, 2019)¥165,626
951
7,402¥202,568
1,850
11,316Of the outstanding amount of contract liabilities, as of the beginning of the fiscal year ended March 31, 2019, the amount recognized as revenue for the fiscal year is insignificant. For FYE2019, the amount of revenue recognized based on the performance obligations that were fulfilled inprior periods is also insignificant. Outstanding amounts of contract assets and contract liabilities have not undergone any significant changes.
(3) Transaction price allocated to remaining performance obligations
Since the TNSC Group has no significant transactions with individual expected contract periods exceeding one year, information on the remaining performance obligations has been omitted, as a practical expedient. Meanwhile, there is no significant variable consideration included in thetransaction price arising from contracts with customers.

27. Other Operating Income and Other Operating Expenses
A breakdown of other operating income is as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

Grant income
Gain on sales of property, plant and equipment
Other
Total

¥

61
1,479
3,208
¥4,748FYE2018(From April 1, 2017 to March 31, 2018)

¥ 714
1,518
1,836
¥4,069A breakdown of other operating expenses is as follows:(Millions of Yen)

Impairment losses
Loss on sales and retirement of property, plant and equipment
Loss on reduction of property, plant and equipment
Other
Total

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥1,459897
57
1,526¥3,940

¥ 163
569
714
1,677
¥3,123

28. Finance Income and Finance Costs
A breakdown of finance income is as follows:(Millions of Yen)

Interest income
Financial assets measured at amortized cost
Dividend income
Financial assets measured at fair value through other comprehensive
incomeForeign exchange gains
Other
Total

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)

¥ 246

¥ 232

1,156
881
9
¥2,294

1,066——¥1,299A breakdown of finance costs is as follows:(Millions of Yen)

Interest expenses
Financial liabilities measured at amortized cost
Foreign exchange losses
Other
Total

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥7,072—
1¥7,074¥5,005189
69¥5,264

Taiyo Nippon Sanso Corporation | Integrated Report 201981

29. Income Taxes(1) Deferred tax assets and deferred tax liabilities
Major factors giving rise to deferred tax assets and deferred tax liabilities and their changes are as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)(Millions of Yen)

April 1, 2018

Deferred tax assets
Employees’ bonuses
Accrued expenses
Property, plant and equipment and intangible assets
Retirement benefit liability
Unused tax losses
Unrealized gains (inventories and property, plant and equipment)
Other
Total
Deferred tax liabilities
Securities and other investments
Property, plant and equipment and intangible assets
Retained earnings of overseas consolidated subsidiaries, etc.
Other
Total
Net deferred tax liabilities

Recognized in
profit or loss

¥ 2,400
3,172
4,022
1,232
—
1,931
2,589
15,347¥(7,938)(31,825)(4,341)(687)(44,793)¥(29,445)

Recognizedin othercomprehensive
income

(127)
241
142
539
7,666
248
1,860
10,570

Other(Note) March 31, 2019

¥

—
—
—
209
—
—
1,462
1,671

¥

59
107
2
1,855
(5)
—
(507)
1,511

¥

2,332
3,521
4,166
3,835
7,661
2,179
5,404
29,101—(15,525)(1,039)952(15,613)¥ (5,042)

1,039
—
—
(302)
736
¥2,408

1,954(70,835)—(1,278)(70,159)¥(68,648)

Recognized in
profit or loss

Recognizedin othercomprehensive
income¥ 2,266
4,489
3,999
1,046
2,117
2,843
16,762¥134(1,316)
24
196
(186)
(216)
(1,364)

¥

—
—
—
(11)
—
(38)
(49)

¥ —
—
—
—
—
—
—

¥ 2,400
3,172
4,022
1,232
1,931
2,589
15,347(7,186)(41,053)(4,235)(388)(52,864)¥(36,102)

—
9,228
(105)
(589)
8,533
¥ 7,168

(752)
—
—
(390)
(1,142)¥(1,192)

—
—
—
681
681
¥681

(7,938)(31,825)(4,341)(687)(44,793)¥(29,445)(4,944)(118,186)(5,381)(1,317)(129,829)¥(100,727)

FYE2018 (From April 1, 2017 to March 31, 2018)(Millions of Yen)

April 1, 2017

Deferred tax assets
Employees’ bonuses
Accrued expenses
Property, plant and equipment and intangible assets
Retirement benefit liability
Unrealized gains (inventories and property, plant and equipment)
Other
Total
Deferred tax liabilities
Securities and other investments
Property, plant and equipment and intangible assets
Retained earnings of overseas consolidated subsidiaries, etc.
Other
Total
Net deferred tax liabilities

Other(Note) March 31, 2018

Note: Other includes exchange differences on translation of foreign operations and changes from business combinations, etc.

For recognition of deferred tax assets, the TNSC Group considers
the possibility that some or all deductible temporary differences will
be available for future taxable income. For the assessment of therecoverability of deferred tax assets, the TNSC Group considers theplanned reversal of deferred tax liabilities, projected future taxable
income and tax planning. For deferred tax assets recognized, the
TNSC Group believes that it is probable the tax benefits will be

realized based on historical taxable income levels and the projectionof future taxable income during periods when deferred tax assets
may be deducted.
Deductible temporary differences for which deferred tax assets
have not been recognized at March 31, 2019 and 2018 were¥18,385 million and ¥14,799 million, respectively.

(2) Income taxes
A breakdown of income taxes is as follows:(Millions of Yen)

Current income taxes
Deferred income taxes
Total

82

Taiyo Nippon Sanso Corporation | Integrated Report 2019

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥13,331
5,042¥18,373¥12,311(7,168)¥ 5,143

In the United States, the Tax Cuts and Jobs Act was enacted on
December 22, 2017, and the federal corporate income tax rate has
been reduced effective January 1, 2018. Accordingly, deferred tax
assets and deferred tax liabilities as of the end of the third quarter ofthe fiscal year ended March 31, 2018 and thereafter are calculatedusing an effective tax rate based on the revised tax rate corresponding to the fiscal year in which the temporary differences, etc. are
expected to reverse.
As a result, income taxes decreased by ¥12,193 million for the
fiscal year ended March 31, 2018.

(3) Table of reconciliation of effective tax rates
The Company is mainly subject to corporate income tax, inhabitant tax and enterprise tax. The statutory tax rates based on these taxes for
FYE2019 and FYE2018 were 30.62% and 30.86%, respectively. Overseas subsidiaries are subject to the corporate income tax, etc. of theirlocation.
A breakdown of major items that caused differences between the statutory tax rate and the effective tax rate is as follows:
FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)30.62%
0.86
1.33(2.46)
1.68

30.86%
0.27
0.13(1.17)
0.19(1.89)—(0.54)
29.60%(1.57)(21.81)
2.30
9.20%

FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥41,291
432,758¥95.42¥48,919432,762¥113.04

Statutory tax rate
Permanently non-deductible or non-taxable items
Unrecognized deferred tax assets
Differences in tax rates for overseas consolidated subsidiaries
Retained earnings of overseas consolidated subsidiaries, etc.
Share of profit of investments accounted for using the equity
methodImpact of reduction in U.S. federal corporate income tax rate
Other
Effective tax rates

30. Earnings Per Share
Basic earnings per share and the basis of calculation are as follows:

Profit attributable to owners of parent (Millions of Yen)
Average number of shares during the fiscal year (Thousand shares)
Basic earnings per share (Yen)
Note: Diluted earnings per share are not presented as there are no dilutive potential shares.

31. Cash Flow Information
Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)(Millions of Yen)

Short-term borrowings
Commercial papers
Long-term borrowings (Note)
Bonds (Note)
Total

Balance atApril 1, 2018

Changes fromcash flows¥ 35,403—
230,664
55,000¥321,067¥433,773
12,000141,307
92,035¥679,117

Non-cash changes
Exchangedifferences ontranslation of foreign
operations, etc.

Balance at
March 31, 2019

87
—
2,026
—
¥2,113¥(7,754)—5,559
29¥(2,165)¥ 461,510
12,000379,556
147,065¥1,000,132

Balance at
March 31, 2018

¥ 35,403
230,664
55,000¥321,067

Changes frombusiness
combinations, etc.

¥

Note: Balances include the current portion of long-term borrowings and bonds.

FYE2018 (From April 1, 2017 to March 31, 2018)(Millions of Yen)

Short-term borrowings
Long-term borrowings (Note)
Bonds (Note)
Total

Balance atApril 1, 2017

Changes fromcash flows

Changes frombusiness
combinations, etc.

Non-cash changes
Exchangedifferences ontranslation of foreign
operations, etc.

¥ 34,973
252,580
65,000¥352,553¥ 1,619(15,495)(10,000)¥(23,875)

¥—
54
—
¥54

¥(1,190)(6,475)—¥(7,665)

Note: Balances include the current portion of long-term borrowings and bonds.

Taiyo Nippon Sanso Corporation | Integrated Report 201983

32. Financial Instruments(1) Equity management
The TNSC Group manages equity aiming at maximizing corporate value through sustainable growth. The major indices used by the Company inequity management are return on capital employed (ROCE) and adjusted net D/E ratio.
FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

6.2%
1.54

8.4%
0.71

Return on capital employed (ROCE) (Note 1)
Adjusted net D/E ratio (Note 2)

Note 1: Core operating profit / invested capital (average of the beginning and the end of the fiscal year)
Invested capital refers to total of interest-bearing liabilities and equity attributable to owners of parent.
Note 2: (Net interest-bearing liabilities - equity-type liabilities) / (equity attributable to owners of parent + equity-type liabilities)
Net interest-bearing liabilities refer to interest-bearing liabilities less cash and cash equivalents.
Equity-type liabilities refer to liabilities created through financing activities that are certified as equity-type by credit rating agencies.

(2) Matters related to risk management
The TNSC Group is exposed to financial risks in the course of conducting business activities in various countries and regions throughout a wide range of fields. In order to reduce or avoid such risks, the
TNSC Group manages risks based on certain policies, etc.

In addition, derivative transactions are used to hedge currency
fluctuation risk or interest rate fluctuation risk. In principle, derivativetransactions are only conducted based on actual demand and notused for speculative purposes.

(3) Credit risk
Trade receivables, etc., which are receivables arising from the TNSCGroup’s business activities, are exposed to the credit risk of customers. In addition, derivative transactions that the TNSC Group uses tohedge financial risks are exposed to the credit risk of financial
institutions that are counterparties to the transactions.
In accordance with internal policies of each Group company, suchas credit management regulations, the TNSC Group monitors due
dates and outstanding balances of individual customers and establishes a system to periodically assess credit status. The TNSC Group
thereby aims to early identify and alleviate collection concerns due toa deteriorating financial situation. In addition, derivative transactions
are limited to financial institutions with high creditworthiness in orderto minimize counterparties’ credit risk related to contract default.
The TNSC Group records allowance for doubtful accounts at an
unrecoverable amount for individually significant financial assets, andat an amount based on historical experience, etc. for individuallyinsignificant financial assets, at the end of each fiscal year. Allowancefor doubtful accounts related to such financial assets is included in“Trade receivables” and “Other financial assets” in the consolidated
statement of financial position.

Allowance for doubtful accounts is as follows. Since the amount of expected credit losses for 12 months is not material, it is included in theamount of the expected credit losses for the entire period.
(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥3,180
4,871
(605)
(364)
26
¥7,108¥2,495
1,253
(249)
(255)
(62)
¥3,180

Balance at beginning of the fiscal year
Increase during the fiscal year
Decrease during the fiscal year (intended use)
Decrease during the fiscal year (reversal)
Other
Balance at end of the fiscal year

The maximum exposure to credit risk of financial assets is the carrying amount after impairment that is presented in the consolidated financial
statements.
(4) Liquidity risk
The TNSC Group’s trade payables and borrowings, etc. are exposed to liquidity risk. The TNSC Group manages the risk by preparing cash
management plans and secures liquidity by establishing commitment lines with several financial institutions.
Balances of financial liabilities (including derivative instruments) by due date are as follows:
FYE2019 (March 31, 2019)(Millions of Yen)

Non-derivative financial liabilities
Trade payables
Accounts payable—other
Short-term borrowings
Long-term borrowings
Commercial papers
Bonds
Lease liabilities
Accrued expenses
Other
Derivative liabilities
Forward exchange contracts
Currency swaps
Interest rate swaps

84

Carrying
amountUndiscounted
contractual
cash flows

One yearor less¥105,966
8,064
461,510379,556
12,000147,065
5,269
30,5891,881¥105,966
8,064
461,510
381,603
12,000148,000
5,358
30,5891,881¥105,966
8,064
461,51060,41512,000—2,226
30,589
904

22
3
41

22
3
41

22
0
33

Taiyo Nippon Sanso Corporation | Integrated Report 2019

More than
one year
but within
two years

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
five years

More than
five years

¥

¥

¥

¥

¥

—
—
—
58,474—10,000
1,152
—
3
—
0
8

—
—
—
45,781—
15,000
805
—
1
—
0
—

—
—
—
23,564
—
—
460
—
1
—
0
—

—
—
—
31,275
—
—
209
—
1
—
0
—

—
—
—
162,092—
123,000
503
—
968
—
1
—

FYE2018 (March 31, 2018)(Millions of Yen)

Non-derivative financial liabilities
Trade payables
Accounts payable—other
Short-term borrowings
Long-term borrowings
Bonds
Lease liabilities
Accrued expenses
Other
Derivative liabilities
Forward exchange contracts
Currency swaps
Interest rate swaps

Carrying
amountUndiscounted
contractual
cash flows

One yearor less¥ 79,483
7,002
35,403
230,664
55,0005,892
21,6801,829¥ 79,483
7,002
35,403
230,664
55,0005,981
21,6801,829¥79,483
7,002
35,40336,96915,0002,016
21,680
856

97
24
90

97
24
99

97
4
56

More than
one year
but within
two years

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
five years

More than
five years

¥

¥

¥

¥

¥

—
—
—
56,712
—
1,896
—
277
—
4
30

—
—
—
56,335
10,000
798
—
1
—
4
5

—
—
—
39,79415,000
463
—
1
—
4
—

—
—
—
15,835
—
190
—
1

—
—
—
25,017
15,000
615
—
690

—
2
—

—
4
6

(5) Currency risk
Receivables and payables denominated in foreign currencies arising from the TNSC Group’s global business development are exposed to therisk of exchange rate fluctuations. The TNSC Group hedges trade receivables and payables denominated in foreign currencies, borrowings, andloans by using forward exchange contracts and currency swaps as necessary.
Currency sensitivity analysis
The following is the impact on profit before income taxes on the consolidated statement of profit or loss from the foreign currency financial
instruments held by the TNSC Group at the end of the fiscal year, if the yen appreciates by 1% against the U.S. dollar and Euro, respectively, atthe end of the fiscal year.
This analysis is calculated by multiplying each exposure of currency risk by 1%. It is assumed that there is no impact of the fluctuation of eachexchange rate on other variables (foreign exchange rates of other currencies, interest rates, etc.).
(Millions of Yen)

U.S. dollar (1% appreciation of the yen)Euro (1% appreciation of the yen)

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥ (40)
125

¥(21)
(4)

(6) Interest rate risk
The TNSC Group’s interest rate risk arises from interest-bearing liabilities, net of cash equivalents, etc. Borrowings and corporate bonds that are
based on floating interest rates are exposed to interest rate fluctuation risk.
The TNSC Group hedges such risks by using derivative transactions (interest rate swaps) as necessary.
Interest rate sensitivity analysis
The following is the impact on profit before income taxes on the consolidated statement of profit or loss if the interest rate rises by 1% forfinancial instruments held by the TNSC Group at the end of the fiscal year.
This analysis is intended for financial instruments impacted by fluctuations in interest rates, and it is assumed that other factors, such as theimpact of exchange rate fluctuations, remain constant.
(Millions of Yen)

Profit before income taxes

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥(2,522)¥(674)(7) Risk of market price fluctuations
Securities, etc. held by the TNSC Group are exposed to the risk of market price fluctuations.
The TNSC Group periodically evaluates the fair value and the financial status of issuers (business partners) for securities, etc., and eachsupervising department reviews the holding status taking into consideration the relationship with the business partners on an ongoing basis.
(8) Fair value of financial instruments
For fair value hierarchy of financial instruments, Level 1 to Level 3 is categorized as follows:
Level 1: Fair value measured by the unadjusted quoted prices in active markets of identical assets or liabilities
Level 2: Fair value calculated using observable prices directly or indirectly, other than Level 1
Level 3: Fair value calculated by valuation techniques including inputs not based on significant observable market data
Transfers between levels of financial instruments are determined at the end of each reporting period. There were no financial instruments withsignificant transfers between levels for FYE2019 or FYE2018.

Taiyo Nippon Sanso Corporation | Integrated Report 201985

1) Financial instruments measured at fair value on a recurring basis
Financial instruments measured at fair value are as follows:
FYE2019 (March 31, 2019)(Millions of Yen)

AssetsEquity securities and investments in capital
Derivative assets
Total
Liabilities
Derivative liabilities
Total

Level 1

Level 2

Level 3

Total

¥29,050—¥29,050¥—65¥65¥9,625—¥9,625¥38,676
65¥38,741

¥
¥

—
—

¥67
¥67

¥
¥

¥
¥

Level 1

Level 2

Level 3

Total

¥38,272—¥38,272

¥ —
192
¥192

¥10,403—¥10,403¥48,675
192¥48,867

¥
¥

¥212
¥212

¥
¥

¥
¥

—
—

67
67

FYE2018 (March 31, 2018)(Millions of Yen)

AssetsEquity securities and investments in capital
Derivative assets
Total
Liabilities
Derivative liabilities
Total

—
—

—
—

212
212

Equity securities and investments in capital
The fair value of marketable equity securities categorized as Level 1 is based on unadjusted quoted prices in active markets of identical assets or
liabilities.
The fair value of unlisted stocks categorized as Level 3, for which quoted prices are not available in active markets, is calculated using thesimilar company comparison method or other appropriate valuation techniques based on reasonably available inputs. In addition, certain
illiquidity discounts, etc. are added as necessary.
Derivative assets and liabilities
The fair value of derivative assets and derivative liabilities categorized as Level 2 is calculated based on observable inputs such as prices
provided by counterparty financial institutions or exchange rates and interest rates.
For financial instruments categorized as Level 3, the evaluator determines the valuation techniques to measure each financial instrument
covered in accordance with valuation policies and procedures including valuation techniques to measure fair value approved by the appropriate
authorized person, and the fair value is calculated. The results are reviewed and approved by the appropriate authorized person.
Changes in financial instruments classified as Level 3 are as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)¥10,403
1,394
1,119(3,137)(104)(49)¥ 9,625¥16,548(2,200)752(71)(4,104)(521)¥10,403

Balance at beginning of the fiscal year
Other comprehensive income (Note)
Purchase
Sale
Change in the scope of consolidation
Other changes
Balance at end of the fiscal year

Note: This is included in “Financial assets measured at fair value through other comprehensive income” in the consolidated statement of comprehensive income.

2) Financial instruments measured at amortized cost
The carrying amount and fair value of financial instruments measured at amortized cost are as follows:
FYE2019 (March 31, 2019)(Millions of Yen)

Liabilities
Long-term borrowings
Bonds
Total

86

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Carrying amount

Level 1

Level 2

Level 3

Fair value
Total¥379,556
147,065¥526,622¥——¥—¥392,708
148,830¥541,538¥——¥—¥392,708
148,830¥541,538

FYE2018 (March 31, 2018)(Millions of Yen)
Carrying amount

Level 1

Level 2

Level 3

Fair value
Total¥230,664
55,000¥285,664¥——¥—¥229,382
55,127¥284,509¥——¥—¥229,382
55,127¥284,509

Liabilities
Long-term borrowings
Bonds
Total

For financial instruments measured at amortized cost other than long-term borrowings and bonds, their fair value reasonably approximatesthe carrying amount.
Long-term borrowings
The fair value of long-term borrowings is calculated based on the present value calculated by discounting the total amount of principal andinterest by the interest rate assumed when similar borrowings are newly made.
Bonds
The fair value of bonds is calculated based on market price.
(9) Transfer of financial assets
At March 31, 2019 and 2018, for trade receivables transferred without meeting the requirements for derecognition of financial assets, ¥2,057
million and ¥2,101 million were included in “Trade receivables,” respectively, and the amounts received due to the transfer of ¥1,446 million and¥1,520 million were included in “Bonds and borrowings,” respectively. Of these Trade receivables, it is determined that the TNSC Group holds
almost all of the risks and rewards related to ownership of the transferred assets, because it will assume the payment obligations if the issuer ofthe notes or the debtor fails to make payment.
(10) Derivative transactions
1) Derivative transactions for which hedge accounting is applied
Analysis of contract amounts, etc. of the hedging instruments by due date is as follows:
FYE2019 (March 31, 2019)(Millions of Yen)

Cash flow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

Contract
amounts, etc.

One yearor lessMore than
one year
but within
two years¥ 2,294¥ 1,624

¥ 670

¥ —

¥ —

¥ —

¥ —

18,844

16,284

1,283

283

283

283

425

Contract
amounts, etc.

One yearor lessMore than
one year
but within
two years

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
five years¥ 6,673¥6,634

¥

—

¥ —

¥ —

19,8201,064

15,451

1,271

271

271

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
five years

More than
five years

FYE2018 (March 31, 2018)(Millions of Yen)

Cash flow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

39¥

More than
five years

¥

—
1,489

Major forward rates of foreign exchange contracts and major interest rates of interest rate swaps are as follows:

Cash flow hedges
Currency risk
Forward exchange contracts
U.S. dollar
EuroInterest rate risk
Interest rate swaps
Fixed payables and floating receivables

FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥107.13–¥111.68¥124.43–¥131.48¥103.36–¥111.91¥130.41–¥132.96

0.34%–0.70%

0.34%–0.70%

Taiyo Nippon Sanso Corporation | Integrated Report 201987

Amounts related to items designated as hedging instruments are as follows:
FYE2019 (March 31, 2019)(Millions of Yen)
Carrying amountItems on the
consolidated statementof financial position

Changes in fair value used to
calculate ineffective portion ofhedges for the fiscal year

Contract
amounts, etc.

AssetsLiabilities¥ 2,294¥ 0¥22

Other financial assets
Other financial liabilities¥(40)

18,844

22

41

Other financial assets
Other financial liabilities

24

Carrying amountItems on the
consolidated statementof financial position

Changes in fair value used to
calculate ineffective portion ofhedges for the fiscal year

Cash flow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

FYE2018 (March 31, 2018)(Millions of Yen)
Contract
amounts, etc.

AssetsLiabilities¥ 6,673¥115¥97

Other financial assets
Other financial liabilities¥ 27

19,82047

90

Other financial assets
Other financial liabilities

121

Cash flow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

Amounts related to items designated as hedged items are as follows:(Millions of Yen)FYE2019(March 31, 2019)
Changes in fairvalue used to
calculate ineffective
portion of hedges
for the fiscal year

FYE2018(March 31, 2018)

Cash flow hedge
reserves

Changes in fairvalue used to
calculate ineffective
portion of hedges
for the fiscal year

Cash flow hedge
reserves

¥(40)

¥(12)

¥ 27

¥ 17

24

(27)

121

(56)

Changes in fair valueof hedging
instruments
recognized in othercomprehensive
incomeIneffective portion ofhedges recognized in
profit or loss

Items on the
consolidated
statement of profit
or loss that include
ineffective portion ofgain or loss onhedgesReclassification
adjustments fromcash flow hedge
reserves toprofit or loss

Items on the
consolidated
statement of profit
or loss that include
gain or loss due toreclassification
adjustments¥(2,973)¥—¥—¥(115)

Finance costs

29

—

—

48

Finance costs

Changes in fair valueof hedging
instruments
recognized in othercomprehensive
incomeIneffective portion ofhedges recognized in
profit or loss

Items on the
consolidated
statement of profit
or loss that include
ineffective portion ofgain or loss onhedgesReclassification
adjustments fromcash flow hedge
reserves toprofit or loss

Items on the
consolidated
statement of profit
or loss that include
gain or loss due toreclassification
adjustments

¥ 27

¥—

¥—

¥(14)

Finance costs

121

—

—

51

Finance costs

Cash flow hedges
Currency risk
Planned purchase
Interest rate risk
Interest on borrowings
Details of cash flow hedges are as follows:
FYE2019 (From April 1, 2018 to March 31, 2019)(Millions of Yen)

Cash flow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

FYE2018 (From April 1, 2017 to March 31, 2018)(Millions of Yen)

Cash flow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

88

Taiyo Nippon Sanso Corporation | Integrated Report 20192) Derivative transactions for which hedge accounting is not applied
Amounts related to items not designated as hedging instruments are as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)

Contract amount,
etc.

More than one year

Fair value

Contract amount,
etc.

More than one year

Fair value

¥627

¥168

¥38

¥793

¥171

¥5

Currency swaps

33. Subsidiaries
For FYE2019 or FYE2018, there were no individually significant subsidiaries with non-controlling interests.

34. Related Parties
Remuneration for major executives
Remuneration for the TNSC Group’s major executives is as follows:(Millions of Yen)FYE2019(From April 1, 2018 to March 31, 2019)

FYE2018(From April 1, 2017 to March 31, 2018)

¥377
¥377

¥458
¥458

Remuneration and bonuses
Total

35. Commitments
Commitments on acquisition of property, plant and equipment and intangible assets are as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥3,952¥12,057

Acquisition of property, plant and equipment and intangible assets

36. Contingent Liabilities
Guaranteed obligations
Guarantees and quasi-guarantees for borrowings from financial institutions are as follows:(Millions of Yen)FYE2019(March 31, 2019)

FYE2018(March 31, 2018)¥¥

Joint ventures
Associates
Other (Note)
Total

55
372
1,002
¥1,430

77
343
1,333
¥1,754

Note: Other mainly consists of guarantees for employees’ bank loans based on the employees’ house ownership support system.

37. Subsequent Events(1) Not applicable.
(2) Other
Quarterly information for FYE2019 (From April 1, 2018 to March 31, 2019)
First quarter of
FYE2019First half of
FYE2019First three quarters of
FYE2019

FYE2019

Revenue (Millions of Yen)
Profit before income taxes (Millions of Yen)
Profit attributable to owners of parent (Millions of Yen)
Basic earnings per share (Yen)¥158,662
14,2239,684
22.38¥329,426
27,073
17,67740.85¥518,030
42,20027,23462.93¥740,341
62,083
41,291
95.42(Quarterly period)First quarter

Second quarter

Third quarter

Fourth quarter

22.38

18.47

22.08

32.48

(Cumulative period)

Basic earnings per share (Yen)Taiyo Nippon Sanso Corporation | Integrated Report 201989

Report of Independent Auditors

90

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Investor Information(At March 31, 2019)

Number of shares authorized:

1,600,000,000

Number of shares issued:

433,092,837

Number of shareholders:

14,831

Major Shareholders:Thousands of shares owned

Percentage of total

Mitsubishi Chemical Holdings Corporation

218,996

50.59

Taiyo Nippon Sanso Client Shareholding Society

18,595

4.30

JFE Steel Corporation

12,627

2.92

Japan Trustee Services Bank, Ltd. (Trust Account)

11,916

2.75

The Master Trust Bank of Japan, Ltd. (Trust Account)

10,146

2.34

Meiji Yasuda Life Insurance Company

10,0072.31

Mizuho Bank, Ltd.

8,182

1.89

The Norinchukin Bank

7,000

1.62

THE CHASE MANHATTAN BANK, N.A. LONDON
SPECIAL ACCOUNT NO.1

6,633

1.53

SSBTC CLIENT OMNIBUS ACCOUNT

5,020

1.16

Notes: 1. The Company holds 179,000 treasury shares.
2. Percentage of total is calculated excluding treasury shares.

Common Stock Price Range and Trading Volume

Stock price

Trading volume(Yen)(Thousands of shares)

2,400

60,0002,000

50,0001,600

40,0001,200

30,000800

20,000400

10,000

0

2015
4

2016
1

2017
1

2018
1

2019
1 3

0

Taiyo Nippon Sanso Corporation | Integrated Report 201991

Investor Information(At March 31, 2019)

Total Shareholder Return (TSR*) (Tokyo Stock Exchange)
TSR (Annual rate)(Years ended March 31)

Rate (%)

2015

2016

2017

2018

2019

Taiyo Nippon Sanso

203.4

135.1

166.4

207.3

219.6

TOPIX (including dividends)

130.7

116.5

133.7

154.9

147.1

*TSR = Total capital return to shareholders, including capital gains and income gains

Reference: Share Price Index (Tokyo Stock Exchange)(Index)(1,000 shares)

4,000

400
Taiyo Nippon Sanso’s average daily trading volume
Taiyo Nippon Sanso’s share price index
TOPIX

300

3,000

200

2,000

100

1,000

0

2014
4

2015
1

2016
1

2017
1

Notes: 1. Taiyo Nippon Sanso and TOPIX share price index: Fiscal year 2014 closing prices =100.
2. Share price and trading volume data is for the First Section of the Tokyo Stock Exchange.

92

Taiyo Nippon Sanso Corporation | Integrated Report 2019

2018
1

2019
1

0

Global Network(At March 31, 2019)

Affiliated Companies in Japan

Affiliated Companies Overseas

141

174

Nippon Gases Euro-Holding S.L.U.

Taiyo Nippon Sanso Corporation

Matheson Tri-Gas, Inc.

Calle Orense, 11, 9th floor,

1-3-26 Koyama, Shinagawa-ku,

909 Lake Carolyn Parkway, Suite 1300,

28020 Madrid, Spain

Tokyo 142-8558, Japan

Irving, Texas 75039, U.S.A.

Tel: +34-91-453-72-00

Tel: +81-3-5788-8000

Tel: +1-972-560-5700

Europe

China

Japan

60

23

141

North
America

12

Asia and
Oceania

79

Taiyo Nippon Sanso Holdings Singapore Pte. Ltd.

Taiyo Nippon Sanso (China) Investment Co., Ltd.

8 Jurong Town Hall Road, #23-03/04,

3F, No. 2 Bldg. BaoWu Tower,

The JTC Summit, Singapore 609434

1859 Expo Boulevard,

Tel: + 65-6804-6230

Shanghai, P.R. China
Tel: +86-411-6528-4066

Taiyo Nippon Sanso Corporation | Integrated Report 201993

Corporate Data
(At March 31, 2019)

Company name:Taiyo Nippon Sanso Corporation (Stock code: 4091)

Date founded:

October 30, 1910

Paid-in capital:¥37,344 million

Head office:1-3-26 Koyama, Shinagawa-ku, Tokyo 142-8558, Japan
Tel: +81-3-5788-8000

Number of employees:

19,229

Independent public accountants: Ernst & Young ShinNihon LLC
Stock exchange listing:Tokyo

Transfer agent:Mizuho Trust & Banking Co., Ltd.
2-8-4 Izumi, Suginami-ku, Tokyo 168-8507, Japan
Tel (toll free in Japan): 0120-288-324

Contact:

Corporate Communications Department, Taiyo Nippon Sanso Corporation
Tel: +81-3-5788-8015

Number of Employees and Percentage of Total Labor Force by Reportable Segment

Shared/support (309)

1.6%
Thermos Businesses (1,392)

7.2%

Gas Business in Japan (5,899)

30.7%

Gas Business in Asia and Oceania (4,207)

21.9%

Gas Business in Europe (2,661)

13.8%

Gas Business in the United States (4,761)

24.8%

Disclaimer Regarding Forward-Looking Statements
This integrated report contains forward-looking statements, including operating results forecasts, which reflect management’s assumptions andbeliefs based on information available at the time of publication. These statements are inherently subject to risks and uncertainties and are notintended as a guarantee or promise regarding the achievement of these results. Investors are cautioned to refrain from relying solely on theseforward-looking statements in making investment decisions. Please note that various factors may cause actual results to differ materially fromthese statements.

94

Taiyo Nippon Sanso Corporation | Integrated Report 2019

Corporate Symbol
Taiyo Nippon Sanso’s corporate logo represents the seamlessintegration of state-of-the-art technology and nature, as well as
the Company’s business domain, founded on its advanced
technologies for controlling oxygen, nitrogen, argon and othergases. The logo also evokes the Company’s resolve to achieve
growth through superior quality and transparency and toensure a future that is clean, safe and healthy.

Taiyo Nippon Sanso Corporation | Integrated Report 201995

1-3-26, Koyama, Shinagawa-ku,Tokyo 142-8558, Japan
Tel: 81-3-5788-8000
www.tn-sanso.co.jp/en

Printed in Japan