Emerging ontoa Still Wider Stage
Consolidated Business Performancefor the First Half of the FYE2019
November 14, 2018

Contents
Business Performance for the First Half of the FYE2019
Overview of business performance for the first halfBusiness performance by segment

Full-Year Forecasts for FYE2019
Overview of forecasts for the full-year
Forecasts by segment

Business Expansion Initiatives
Medical Business in Japan: Acquisition of IMI Co., Ltd.
Gas Business in the U.S. : Acquisition of Weld Specialty
Acquisition of European Businesses

Business Performancefor the First Half of FYE2019

Ortus Stage 23

Overview of business performance for the first half(Billions of yen)

RevenueCore Operating income
Non-recurring profit and loss

Operating income

FYE2018 Q2

FYE2019 Q2

Results(IFRS)Results(IFRS)

MarginMargin

305.7

329.4

FYE2019 Q2
Announced

YoY% change+23.7

targets(IFRS)
Margin

328.0

+7.8%

28.1

29.3
9.6%

-1.2
8.5%

30.5
-4.0%

9.3%

0.2

0.8

+0.6

0.7

29.6

28.9

-0.7

31.2

9.7%

8.8%

-2.2%

9.5%

Finance costs

-1.9

-1.8

+0.1

Income before income taxes

27.6

27.0

-0.6

Income tax expenses

-9.3

-8.3

-1.0Net income

18.3

18.7+0.4

19.0

17.6

17.6

+0.0

18.0

(Attribution of net income)Net income attributableto owners of the parent
Net income attributable to noncontrolling interests

5.8%

0.6

5.4%

1.0

+0.0%

5.5%

+0.4

Impact of foreign currency translations (US$→¥): FYE2018 Q2 rate: $1=¥111.29 FYE2019 Q2 rate: $1=¥110.71→Impact of currency gains led to decreases of ¥1.0 billion in revenue and ¥0.1 billion in core operating income
4In its FYE2019 Q2 results, the Company has recorded advisory costs of ¥1.3 billion in connection with the acquisitionof European businesses.

4

Business performance by segment
Revenue

FYE2018 Q2

FYE2019 Q2

ResultsResults

YoY(IFRS)(IFRS)% change

158.7

171.9

+13.2
+8.3%

Gas Businessin Japan *Segment
income14.6

12.7(Billions of yen)

Factor➢On-site: JFE SANSO CENTER Kurashiki Factory contributed to revenue➢Hard goods: Favorable sales of laser cutting equipment (for metal processing)➢Electronics gases: Weaker shipments for some product areas➢Increased costs in line with rising crude oil prices-1.9-13.6%➢Higher costs mainly due to a lack of a raw material gas for carbon dioxide gas➢Electronics gases: Lower proﬁt due to weaker shipments for some product areas➢Bulk gases: Increased shipments of air separation gases, plus increased shipments of carbon dioxide gas, due partly to anRevenue

84.3

91.4

Gas Businessincrease in production capacity+7.1➢On-site: Started supply of gases to new on-site customers in Texas➢Hard goods: Favorable sales for the construction and energy industry+8.4% ➢Impact of foreign currency translation: -\0.4 billion

in the U.S.
Segment
income6.4

6.8➢Industrial gas-related business performed ﬁrmly overall+0.4+7.4%

Revenue

49.5

52.3+2.8

Increased segment income mainly due to higher revenue from bulk gases, packaged gases and hard goods➢Impact of foreign currency translation: -\0.0 billion➢Industrial gas-related business: Solid sales of safety products at Leeden National Oxygen Ltd. (Leeden NOX)
Increased revenue from China industrial gases and in Thailand and Australia➢Electronics gases: Revenue increased, excluding the impact of changes in accounting methods in Taiwan (-\1.5 billion)+5.7% ➢Impact of foreign currency translation: -\0.7 billion

Gas Businessin Asia andOceaniaSegment
income

4.8

6.3

+1.5

➢Industrial gas-related: Higher segment income due to increased revenue at Leeden NOX
Higher segment income due to increased revenue in China, Thailand and the Philippines➢Electronics-related business: Higher proﬁt from gases, but lower proﬁt from equipment and installation+31.3% ➢Impact of foreign currency translation: -\0.1 billion

Revenue

13.0

13.5

➢Japan: Recovery in sales of mainstay vacuum insulated portable mugs and tumblers and sports bottles in Q2+0.5+4.1%

ThermosBusiness*➢Overseas: Steady sales in South Korea. Increased shipments from plants in the Philippines and Malaysia➢Impact of foreign currency translation: +\0.0 billion➢Japan: Increased segment income in Q2 due to a rebound in sales

Segment
incomeEliminations or Corpotrate

4.2

4.5+0.3➢Overseas: Increased proﬁt due to higher revenue in South Korea, as well as increased proﬁt at production plant. Improved
profits at Group companies accounted for by the equity method.

+4.9% ➢Impact of foreign currency translation: +\0.0 billion-0.9-2.3-1.4➢Recorded \1.3 billion in expenses related to the acquisition of European businesses* From FYE2019, businesses other than the Thermos business that had previously been classified under the “Thermos and Other Businesses”
segment have been transferred to the “Gas Business in Japan.” .The columns in the above table have been adjusted to reflect the transfer in order touse the same basis of comparison.
※ Segment income: Numerical value calculated by subtracting losses (nonrecurring items) produced by nonrecurring factors from operating income.
55Full-Year Forecasts for FYE2019

Ortus Stage 26Overview of forecasts for the full-year(Billions of yen)

FYE2018

FYE2019

Results (IFRS)Forecasts (IFRS)

MarginRevenue
Core operating income
Non-recurring profit and loss

Operating income
Net income attributableto owners of the parent
Income tax decrease(Exceptional item)
Net income attributableto owners of the parent(excluding impact of income tax increase)

646.2

Margin670.0

YoY% Change+23.8
3.7%

60.0

64.0
9.3%

+4.0
9.6%

+6.6%

-0.1

0.5

+0.659.8

64.5

+4.7

9.3%

48.9

9.6%

40.0
7.6%

-8.9
6.0%

-12.20(U.S. corporate tax reduction)(Not scheduled)

36.7

40.0
5.7%

+7.7%

-18.2%

+12.2

+3.3
6.0%

+8.9%

In FYE2018, income tax expenses decreased by ¥12.2 billion due to the reversal of deferred tax
liabilities at a subsidiary based in the U.S.
77

Forecasts by Segment
Gas Businessin Japan*

Revenue
Segment
incomeGas Businessin the U.S.

Revenue
Segment
incomeGas Businessin Asia and Oceania

Revenue
Segment
incomeThermos
Business*Revenue
Segmentincome(Billions of yen)

FYE2018

FYE2019

FYE2019

Results (IFRS)Forecasts

Forecasts(IFRS)(IFRS)(IFRS)

Announced May 9

Announced Oct. 31

360.0

355.0

345.0
31.3

31.8

30.3

172.6

175.0

181.0

13.5

14.0

14.4

103.1

107.0

107.0

9.2
25.3
7.7

10.7
28.0
9.3

12.1
27.0
9.0

Change% change

-5.0
-1.4%

-1.5
-4.7%

+6.0
+3.4%

+0.4
+2.9%

+0.0
+0.0%

+1.4
+13.1%

-1.0
-3.6%

-0.3
-3.2%

【Reason for change in segment income（Forecast Announced May 9. vs. Forecast Announced Oct. 31. ）】Costs to increase further than anticipated due to rising crude oil prices

Gas Businessin Japan

Increased costs for carbon dioxide gas due to a lack of a raw material gas in
the first half of the fiscal year
Lower segment income based on decreased revenue from electronic gases
Effects of the acquisition of IMI, a medical equipment sales company

Gas Businessin the U.S.

Solid U.S. economy
Increased segment income based on higher revenue from the industrial gasrelated business
Impact of revision to exchange rate assumption
Stronger-than-expected recovery in business performance at Leeden NOXGas Businessin the Asia & Oceania
Thermos Business

China industrial gases to post increased segment income based on improved
market conditions
Electronics gases in East Asia to perform favorably as planned
Recovery trend from Q2 onward, despite the impact of lower profits fromdecreased revenue in Japan in Q1* From FYE2019, businesses other than the Thermos business that had previously been classified under the “Thermos and Other Businesses” segment have beentransferred to the “Gas Business in Japan.” .The columns in the above table have been adjusted to reflect the transfer in order to use the same basis of comparison.
8 ※ Segment income: Numerical value calculated by subtracting losses (nonrecurring items) produced by nonrecurring factors from operating income.

8Business Expansion Initiatives
Medical Business in Japan: Acquisition of IMI Co., Ltd.

Ortus Stage 2

9Expand Medical Business in JapanTo develop the medical business into one of the Company’s core businesses, the Company will
effectively utilize external resources through M&As and alliances, with the aim of expanding
business in existing fields and capturing business in new fields.

Existing fields in the medical business
Medicalgas

Stableisotopes

HospitalfacilitiesHome
healthcare

Biotechnology-related

Medicalequipment

Acquisition

IMI Co., Ltd. (IMI)（Medical equipment sales company focused on
respiratory and emergency medical equipment fields）

Press release dated August 30, 2018
1010

Expand the Medical Business Through the Acquisition of IMI
Through the acquisition of IMI Co., Ltd. (IMI), a medical equipment sales company focusedon respiratory and emergency medical equipment fields, the Company will seek to capturesynergies between IMI and Taiyo Nippon Sanso Group, thereby gaining a solid foothold in
the medical equipment business.

Company outline
NameFeatures

IMI Co., Ltd. (IMI)

1

Establish and expand the Taiyo Nippon Sanso Group’s medicalequipment businessJapan’s largest ventilator enterprise
IMI has an extensive product lineup, ranging fromhigh-end devices to general models.

Expand the medical equipment business for hospitals in

IMI carries products in the emergency medicine,surgery and intensive care fields

Strengthen rental and maintenance services

IMI provides rental and maintenance services acrossits entire product range, and its expertise in these
services are a major strength.

Businesssize

Expected synergies

Net sales ¥5.96 billion（result for the year ended December 2017）

areas related to Taiyo Nippon Sanso’s business fields

2

Enhance and expand business in the respiratory field in collaboration
with Taiyo Nippon Sanso and Pacific Medico Co., Ltd.

Upgrade and expand the product lineup
Mutual sharing and use of sales and logistics sites
Enhance and expand the home healthcare business

Expand the medical business by strengthening
the medical equipment business and the home healthcare business
1111Business Expansion Initiatives
Gas Business in the U.S. : Acquisition of Weld SpecialtyOrtus Stage 2

12Further Enhance and Expand the Gas Business in the U.S.
Establish a nationwide production and sales platform in the U.S. by expanding business fields
and increasing the density of operations through M&As and capital investments in ASUs*Acquired the business assets of Weld Specialty (a distributor) in Wisconsin in August 2018
*ASU： Air Separation Unit

Area around business sites owned by Weld Specialty

LegendCorporate HQs
Air Separation Unit
Air Separation Unit

（Under construction）

LCO2 Plant
LCO2 Plant（Under construction）

N2O Plant

Business bases

13

Increase the density of operations by expanding the sales network in Wisconsin,
thereby strengthening the core business13

Increase the Density of Operations Through the Acquisition of Weld Specialty
Enhance synergies with existing businesses and expand the sales network through theacquisition of the Weld Specialty business and business assets

Business expansion
in Wisconsin, U.S.
Backgroundto theacquisition

Weld Specialty
business network（red circle）

Kaukauna
Fond Du Lac
Waukesha

Milwaukee

BusinesssizeProducts

The Air Liquide assets acquired in September 2016
included one air separation unit (ASU) in Wisconsin.
The Taiyo Nippon Sanso Group took this opportunity
to enter Wisconsin in earnest.
In GDP rankings by state, Wisconsin is ranked in themiddle tier. The state’s primary industries, specificallythe food processing, manufacturing, agriculture, andhealthcare sectors, have been growing firmly.

Net sales US$25.8 million(result for the year ended December 2017)

Industrial gas overall (bulk and packaged),
welding equipment and materials, etc.
Sales mix

Air Separation Unit

Matheson Tri-gas
existing business network（orange circle）：Weld Specialty business sites (acquisition target)：Air separation unit (former Air Liquide asset)：Business bases
14（result for the year ended December 2017）2％Industrial gas
Welding equipment

29％
69％

and materials
Others14

Business Expansion Initiatives
Acquire businesses in Europe― Major acquisition deal as part of global industrial realignment

Ortus Stage 215

Progress of Business Acquisition

July 5, 2018

Taiyo Nippon Sanso Corporation (TNSC) announced that it had executed ashare purchase agreement to acquire the shares of the corporations runningcertain European businesses of Praxair.
・The execution of the share purchase agreement was conditional upon the current Linde (Linde AG) and Praxair obtainingapproval from the competition authorities for the merger in the relevant countries and TNSC obtaining approval from theEuropean Commission and the other relevant competition authorities for executing the acquisition.

August 20, 2018

The European Commission granted conditional approval of the merger ofLinde and Praxair.

October 17, 2018

The European Commission approved the acquisition of a part of Praxair’sEuropean businesses by TNSC.

October 22, 2018

The U.S. Federal Trade Commission (FTC) granted conditional approval of themerger of Linde and Praxair (conditional upon the sale of a portion of the current
Linde’s businesses in the U.S.).

Now that all of the conditions for the acquisition of the European businesses
have become clear, TNSC has entered the final stages of closing the deal.
1616

Purpose of Business Acquisition
To make significant strides toward the achievement of target of the Ortus stage 2 infinal fiscal year, we will execute the acquisition of Praxair’s European businesses.
The acquisition will give us a solid position as an industrial gas manufacturer in Europe,a region we have not yet entered.

BackgroundSignificance ofthe Acquisition

Merger of Linde AG and Praxair, Inc.

Acquire businesses with a certain scale in Europe, the world’s second largest
industrial gas market behind the U.S.
The businesses to be acquired are highly profitable, with a 16% share of themarket areas of businesses to be acquired* (internal estimate)
Acquire talented personnel, including the current top management team, andbusiness platforms＊In U.K., Ireland, the Netherlands and France, the scope of the businesses to be acquired is limited only the carbon dioxide gas business.

Post-Merger
Integration(PMI) Strategy

Strengthen Group-wide collaboration (across Japan, the U.S., Asia, and Europe)and governance
Strengthen the Customer Relationship Management through the TNSC’s global
business network
Optimize the TNSC’s supply chain of strategic products
1717

Summary of the Businesses to Be Acquired
The acquisition covers the shares of companies engaged in the industrial gas business (including thecarbon dioxide gas business) undertaken by the U.S. company Praxair in 12 European countries andcompanies engaged in helium-related businesses. Acquired Business is equivalent scale to TNSC’s U.S.
Business which has grown over a period of 30 years.
Consolidated management performanceof the target businesses

Scope of the businesses
to be acquired

It is a highly profitable business including a certain
scale business of Bulk and Piping.

The businesses hold a market share of 16% throughout
the market areas of businesses to be acquired, with aNo.2 or No.3 position in each regional market.

(result for the year ended December 2017)

Net sales €1,273 million（approx. ¥165 billion*）*converted at the exchange rate of one Euro to ¥130

SESales mix by delivery formatNO(result for the year ended December 2017)

Regional share

No.3

The business portfolio is well balanced and diversified,with on-site/pipeline business – a steady source ofstrong earnings – accounting for 17% of the whole.

DKIE

NL

UK
BE

34％

Regional share

No.2

PT6％

On-site/Pipeline

No.3

ES

Regional share

17％

No.2

＜Summary of major assets＞

Including 6 piping facilities
Package

IT
Regional share

6％

18FR

33％

6％

BulkDEHomecare

Medicalcare

OthersAir Separation
Units

Cylinder filling
plantsLiquide CO2plants

Dry iceplants

2735

121918

Raising Capital
Capital will first be raised through bridge loans, followed by efforts to promptly shift topermanent financing.

Bridge loan scheme

Borrowingfrom financial
institutions

Permanent financing scheme
Borrowingfrom financial
institutions

Issuing
straight
corporatebonds

Hybridfinancing*

Equityfinancing（No execution）

FormatBorrowing from financial institutions

FormatCombination of borrowing from financial
institutions, issuing straight corporate
bonds, and hybrid financingAmount€ 5.0 billion

Amount

€ 5.0 billion (using both yen- and eurodenominated financing)
Procure the full amount via debt to avoid
any dilution of shares.

Considerations

Measures to mitigate foreign exchange risk
Maintain an “A” external credit rating(current credit ratings are“A” from R&I and “A+” from JCR)

19
19

Thank youReminders
The information contained here is not disclosure information for securities trading. The
accuracy and completeness of this information are not guaranteed.
The briefing session and this material describe future plans and strategies, as well as forecasts
and outlooks of business performance. These plans and strategies, as well as forecasts andoutlooks, are made by Taiyo Nippon Sanso based on its judgments and estimations made inaccordance with the information available at present. Actual performance will be subject tochanges caused by a variety of risks and uncertainties (such as economic trends, market
demand, exchange rates, taxation systems and various other systems and institutions, but notlimited to them).
We wish to remind you, therefore, that the actual business performance may differ from theforecasts and outlooks made at this time. Please refrain from making investment judgments
based solely on this information.