日本酸素ホールディングス（4091） – NS Vision 2026～Enabling the Future～ Key Strategies

NIPPON SANSO HOLDINGS CORPORATION Medium-term Plan Key Strategies (FYE2023 – FYE2026)Agenda■ Medium-term Management Plan Policy■ Review of Ortus Stage 2 (FYE2018 – FYE2021)■ Business Environment Outlook During the Next Medium-term (FYE2023 – FYE2026)■ Focused Fields of NS Vision 20261. Sustainability Management 2. Exploring New Business toward Carbon Neutrality3. Total Electronics4. Operational Excellence5. DX Initiatives■ Regional Business Strategy- Japan, the U.S., Europe, Asia & Oceania- Thermos■ Numerical Target, Financial & Non-Financial KPI■ Appendix©2022 NIPPON SANSO Holdings Corporation All rights reserved.1Medium-term Management Plan PolicyMedium-term Management Plan NameMedium-term Management Plan SloganWe formulated our first medium-term management plan, NS Vision 2026,after the establishment of Nippon Sanso Holdings in October 2020 with the vision that, “We aim to create social value through innovative gas solutionsthat increase industrial productivity, enhance human well-being and contribute to a more sustainable future.”Under the four global regions + Thermos business structure, we established five strategies:Sustainability Management, Exploring New Business toward Carbon Neutrality, Total Electronics, Operational Excellence, and DX Initiatives.We will strengthen the group’s comprehensive capabilitiesand achieve further growth to provide a bright and comfortable future for people, society, and the Earth.Review of Ortus Stage 2(FYE2018 – FYE2021)Look Back on Past Medium-term Management PlanSales Revenue & Core OIReview of Ortus stage 2■ Sales Revenue ■ Core OI ■ Core OI Margin10.7%Main efforts, strong focus, and achievements: 1. Increased globalization and expansion through the acquisition of the European business and the U.S. HyCO* business818.22. Commissioned on-site projects and CO2 Projects in the U.S.3. Strengthened the electronics specialty gases business in East Asia87.24. Enhanced and expanded supply base in the Asia & Oceania region5. Transitioned to holdings company structure which fosters improved communication, faster decision making and mobilization9.4%600581.554.7900BillionJPY300010.6%9.8%100BillionJPY500Ortus Stage 1(2014-2017)Ortus Stage 2(2017-2021)*On-site supply of H2 and CO to the petroleum refining and chemical industries.©2022 NIPPON SANSO Holdings Corporation All rights reserved.4Characteristics of Nippon Sanso Holdings GroupWhat we are aiming forFurther global expansion and growthSafe and reliable supply of industrial gas to all industriesIn the Thermos business, we propose a comfortable andeco-friendly lifestyle for people and societyWhat are the characteristics of our system?Local business with production and consumption in same geographic areaRegional organization and management structure 4 global regions + Thermos business structure©2022 NIPPON SANSO Holdings Corporation All rights reserved.5What will Change?Management team was formally running the domestic gas business and overseeingits ownership in the overseas group companiesWe changed three things after becoming a holding company123Speedier decision-makingthrough authority delegation, and appropriate management resource allocationGreater clarity in business execution responsibilitiesand performanceEnhance the group’s comprehensive capabilitiesby sharing regional strengths and advantages©2022 NIPPON SANSO Holdings Corporation All rights reserved.6Business Environment Outlook During the Next Medium-term(FYE2023 – FYE2026)Key Considerations: Environment and Society©2022 NIPPON SANSO Holdings Corporation All rights reserved.8Key Considerations: Industrial Gas MarketReliable Acquisition of Business OpportunitiesImprove ProfitabilityRegional Market overviewEBITDA MarginJapanthe U.S.EuropeAsia & Oceania5,71921,99418,51920,21534.8%33.1%ABC#1#4#4#627.1%1.0 – 1.5% 2.5 – 3.0% 2.0 – 2.5% 4.0 – 4.5%NSHD20.4%*Estimation based on “Gasworld Industrial Gas Market Forecast 2020″0.0%10.0%20.0%30.0%40.0%Source: Refinitiv Eikon most recent fiscal year end2019Industrial GasMarket* (MM USD)2019 Market RankingGDP Growth Rate -Assumption©2022 NIPPON SANSO Holdings Corporation All rights reserved.9Focused Fields ofNS Vision 2026(FYE2023 – FYE2026)Structure of NS Vision 2026Focused Fieldsof NS Vision 2026RegionalBusiness StrategyNumerical Target©2022 NIPPON SANSO Holdings Corporation All rights reserved.11Sustainability Management: ConceptWe will strive to engage in dialogue and collaboration with our stakeholders and aim to continuously enhance our corporate value by contributing to a sustainable society.EnvironmentSafety & QualityHRComplianceResource-recycling societyProcess safety and securityRespect people and their rightsIn a sincere and fair manner Harmonizing with environmentCommunity basedReduce environmental impact“Selling gas is selling safety”▷▷Work worthwhile for eachand every employee▷▷International/regional rulesand the laws▷▷▷▷▷▷▷Quality management and assuranceNippon Sanso Holdings Corporation signed the United Nations Global Compact (UNGC) advocated by the United Nations and was registered as a participant on January 18, 2022.©2022 NIPPON SANSO Holdings Corporation All rights reserved.13Sustainability ManagementBased on TCFD recommendations, we conducted scenario analysis of climate related issues identified as the next materiality.Carbon Neutral Program ICarbon Neutral Program IILower Customer GHG emissions through environmental product offerings and applications＞NSHD Group GHG emission(FYE2026)Global GHG reduction through NSHD’s products and technologies-18%-32%FYE2019＊FYE2026FYE203120402050Energy conservation and efficiency of energy useRenewable energy and green powerCarbon capture and offsets]e2OC-t dnasuoht[ snossme GHGii7,0006,0005,0004,0003,0002,0001,0000▷▷▷▷▷▷▷Zero Waste ProgramSustainable Water ProgramJapan: HALD (Halve Amount of Landfill Disposal)Reduce TNSC’s landfill waste disposed by 50% by FYE2026Appropriate waste management and recyclingInvestigation of water stress by use of the “Aqueduct” (WRI)Identify gas production plants in high-risk areas every year©2022 NIPPON SANSO Holdings Corporation All rights reserved.※Base year: set in FYE2019, when the European gas business and the US HyCO business joined to the GroupGHG emissions in FYE2019 show the actual GHG emissions in FYE2019 plus the following:①emissions of European gas business in FYE2019:②estimated emissions of the US HyCO business in FYE201914Sustainability ManagementSafety First ProgramQuality Reliability ProgramLost Time Injury Rate (LTIR)*≤1.6**until FYE2026Sharing information on work related injuries and best practicesSafety capability by using DX, AI and IoTSafety education/utilizing the Technical AcademyInvestment for safetyTalent Diversity ProgramTalent development strategies for sustainable growthEmbrace and motivate diversified talents Promote cross regional talent exchanges Enhance successor development plans ▷▷▷▷▷▷▷▷▷▷▷▷▷▷Quality ethics and compliance educationQuality audit programAutomatization of test, inspection and analysis recordingIncreasing customer satisfaction through the activities of Semiconductor Specialty Gas Quality CommitteeCompliance Penetration ProgramContinue compliance training in each region to instill awareness and ethics among all employeesPrevent compliance violations Detect compliance violations through disseminating and operating the whistleblowing system* Number of lost time injuries per one million working hours** The average value of FYE2017-2021 (2.53) is set as a benchmark,and a reduction of about 40% by FYE2026 is set as a goal©2022 NIPPON SANSO Holdings Corporation All rights reserved.1515Exploring New Business toward Carbon Neutrality: Action PlanGaining “quick-win” CN projectsJoin/Gain CN project in Steel/Glass/Ceramics/Aluminum/non-ferrous marketHyCO projects for a hydrogen society with internal training to sales repR&D development and strategic partnersJoin various CN projects and share knowledge among the Group Find potential strategic partnersIncrease resources into dedicated R&D themes such as combustion technology etc.External/Internal communicationEstablish communication platformEnhance our presence through proactive efforts such as posting CN activities on social networking service▷▷▷▷▷▷▷©2022 NIPPON SANSO Holdings Corporation All rights reserved.17Exploring New Business toward Carbon NeutralitySolutions for the Steel MarketReducing CO2 footprintProvide alternatives to replace coal by using well proven HyCO technologiesCO2 capture solution and expertise in transport of LCO2* by ship for a CCS** projectH2 burner to reduce CO2 emissions in electric furnaces*Liquified CO2** Capturing CO2 emissions from industrial processfor storage deep undergroundSolutions for the Glass and Non-Ferrous MarketGreening combustion processFrom air-fuel to 100% Oxy-fuel▷▷▷▷BiomethanePartial oxidationAutothermal reformingRDF gasificationDry reformingBFGC0 H2Blast furnaceCO2Other uses outside steel mill1Steel mill2CO2 purification & liquefaction3Transport, storage & loading4TransportRich CO2flue gasUse of CO2 as feed stock for syngas production5Offloading & storage©2022 NIPPON SANSO Holdings Corporation All rights reserved.18Total Electronics: Action PlanWe have a long history in the semiconductor materials and gas business.Global supplier in semiconductor ecosystemOffering robust/updated quality assurance, new product and technology solutionsLeverage and enhance our existing group capability and solutions▷▷©2022 NIPPON SANSO Holdings Corporation All rights reserved.20Total ElectronicsInitiatives to Achieve Financial Target123Enhance SSG* businessDX IntroductionIncrease the product line-up and production capability Improving group SSG qualityand responsiveness▷▷Enhancing semiconductor quality through DX▷Group capability enhancementfor equipment, ASUand engineeringLeverage group capability for equipment in ElectronicsEnhance the possibility to acquire on-site business for semi-investmentExpand the opportunity for semi/PV**opportunity in Asia▷▷▷*SSG: Semiconductor Specialty Gases**PV: Photovoltaics©2022 NIPPON SANSO Holdings Corporation All rights reserved.21Operational ExcellenceAction Plan123Fostering a group-wide productivityimprovement mindsetthrough global Operational Excellence Day eventsGroup GoalsGroup GoalsEarly success by horizontal sharing of best practicesacross operating companiesCost reductionCost reduction effect effect ofof over ¥ ●●100 millionover ¥ 56.0 billionin total for 4 years.in total for 4 years.Promotion of standardization and optimization ofoperations throughout the group©2022 NIPPON SANSO Holdings Corporation All rights reserved.23DX Initiatives: Action PlanFocus on Digitization & Digitalization efforts1234Prioritize the three fieldsCustomer EngagementOperational ExcellenceEmployee EngagementInitiatives by regional managementDedicated DX organization in the NSHD Group©2022 NIPPON SANSO Holdings Corporation All rights reserved.25DX InitiativesDigital Initiatives Bring New ValueProcurementProductionShipment & LogisticsSales & MarketingTechnology Development, EngineeringValueGeneral AdministrationHR – Employee Engagement・Digital Marketing ・Process Automation・Data Science・Remote Operation・Autonomic SystemsGlobal IT Security©2022 NIPPON SANSO Holdings Corporation All rights reserved.2626Regional Business StrategyGlobal Business NetworkTotal Revenue¥ 957.1bn.Total Sales Ratio100%EuropeEuropeRevenue¥209.7bn.Segment OI¥26.3bn.OI margin12.5%22%A&O13%Revenue¥123.5bn.Segment OI¥12.8bn.OI margin10.4%Japanthe U.S.Thermos39%Revenue¥372.0bn.Segment OI¥30.9bn.OI margin8.3%Revenue¥224.8bn.Segment OI¥27.3bn.OI margin12.2%23%3%Revenue¥26.8bn.Segment OI¥6.4bn.OI margin24.0%©2022 NIPPON SANSO Holdings Corporation All rights reserved.28Industrial Gas Business – RegionJapanGrowth- Enhance new products and services- Provide and expand Industrial Gas Solutions for customersBusiness Transform- Review of low profitable business portfolio EuropeGrowth – Focus on resilient markets- M&A opportunity Optimize Base Business – Invest in application technology- Evaluate market mix- Geographical footprint Focused FieldsSustainability ManagementExploring New Business toward Carbon NeutralityTotal ElectronicsOperational ExcellenceDX Initiativesand expand ASU capabilities the U.S.Growth- Organic Growth: Enhance cross-selling efforts- Expand plant networks, onsite generator installs and pursue targeted distributor M&AAsia & OceaniaGrowth- Large scale onsite project acquisition – New products & sales area expansion- Global HyCO OpportunitiesManagement- Launch of new management structure©2022 NIPPON SANSO Holdings Corporation All rights reserved.29New Management Structure of Asia and OceaniaSoutheast Asia and IndiaEast Asia (TE)East Asia (Industrial gas)OceaniaAsia and Oceania business segmentSoutheast AsiaIndiaChinaKoreaTaiwanChinaOceaniaOrganized the region into four sub-segments based on differences in business environment and strategic directionEach of four sub-segments is responsible for managing its own regionAt the beginning of FYE2024, target to launch new management structure in Asia and Oceania (governance structure, authority delegation level, key meetings, internal audit structure, etc.)©2022 NIPPON SANSO Holdings Corporation All rights reserved.30Thermos BusinessWhat is THERMOS?Providing a wide variety of products to create new lifestyles for a sustainable society. The Thermos Business is solely a B2C business, creating a broad range of contact points with general consumers.Why have THERMOS?-Strong profitability, cash flow generation, and favorable growth rates as a result ofshifting consumer trends from disposable bottles to long lasting replacementproducts -Proactive customer service and tailoring products to meet customer demands which the Industrial Gas businesses constantly strive to achieveGrowth- New products, direct operating stores, EC platform business- Develop an interactive communication system- Increase Thermos brand awareness and maximize the brand equity©2022 NIPPON SANSO Holdings Corporation All rights reserved.31Numerical TargetFinancial & Non-financial KPIsTargeted Group KPI – SummaryRevenueEnvironmentFinancial KPIsFYE2026Non-Financial KPIsJPY 975.0-1,000.0Billion*Core Operating IncomeJPY 125.0-135.0Billion*EBITDA MarginGroup:≥24%Japan, the U.S., EU, A&O, Thermos:≥17~33%Adjusted net D/E Ratio≤0.7Reduction rate of GHG emissions (Base year: FYE2019)18% :FYE202632% :FYE2031GHG reduced emissions through environmental product offerLower GHG emissions through environmental productofferings＞NSHD Group GHG emissionFYE2026Safety ManagementHRLost Time Injury RateRate of female employees≤1.6FYE2026ComplianceRate of receivingcompliance training100%FYE2026≥22% :FYE202625% :FYE2031Rate of femalemanagement posts≥18% :FYE202622% :FYE2031* Due to the uncertainty in the global economy, revenue and core operating income are shown in range.ROCE after Tax≥6%©2022 NIPPON SANSO Holdings Corporation All rights reserved.33Capital AllocationINOUTNS Vision 2026(The Total for 4 years)Operating CF730.0bn JPY©2022 NIPPON SANSO Holdings Corporation All rights reserved.StrategicInvestment433.0bn JPYDividend & Repayment of debtStrategic investment 38.0bn JPYInvestment for- Carbon Neutral related initiatives- Digital Transformation initiativesThermos2%Strategic9%A&O14%Japan24%Europe24%the U.S.27%Strategic Initiatives12%Growth Initiatives37%Sustaining45%Japan: 7.4%, the U.S.: 10.5%, Europe: 12.9%, A&O: 11.1%, Thermos: 6.9%M&A6%34ENDAppendixOur MaterialityPreconditions for the existence of an enterpriseRespect forHumanRights(UNGC)Corporate Ethics(CPP)Safety and Security(SFP)Extremey hghilVery hghiiHghImportancetostakehoderslReflecting the incremental social awareness of sustainability and global environmental issuesas well as change of the corporate structure, our materiality was revised after previous version in 2015, and obtained approval of NSHD board on December 2nd, 2021.> Strengthening communication withstakeholders> Sustainable supply chain (QRP)> Contribution to regional and industrialdevelopment as social infrastructure> Diversity & Inclusion (TDP)> Product and service safety and quality（SFP)> Providing products and services that contribute to solving environmental and social issues (CNPⅡ)> Climate change mitigation and adaptation (CNPⅠ, TCFD)> Effective use of resources and prevention of pollution (ZWP, SWP)> Strengthening information security measures> Improvement of productivity and promotion ofproduction optimization> Development and maintenance of human resources (TDP)> Conservation of water > Pursuit of customer satisfaction resources (SWP)(QRP)> Coexistence with the local community> Technology and R&D capabilities thatsupportthe creation of customers and socialvalue> Promotion of initiatives for digital innovation> Employee and family health> Conservation of biodiversity> Protection and effective utilization of intellectual property> Improvement of employee engagement> Provision of comfortable and prosperouslifestyleHighVery highExtremely highImportance to Nippon Sanso HoldingsKey issues related to the global environmentKey issues related to social systemsKey issues related to the Company and its organizational structureAbbreviationsSFP: Safety First Program, CNP I: Carbon Neutral Program I, CNP II: Carbon Neutral Program II, ZWP: Zero Waste Program,SWP: Sustainable Water Program, QRP: Quality Reliability Program, TDP: Talent Diversity Program, CPP: Compliance Penetration Program, UNGC: United Nations Global Compact, TCFD: Task Force on Climate-related Financial Disclosures©2022 NIPPON SANSO Holdings Corporation All rights reserved.37TCFD Scenario AnalysisConduct scenario analysis of climate related issues identified as the next materiality, based on TCFD recommendations, using “transition scenarios” and”physical climate scenarios””Transition scenario” is considered by IEA SDS, “physical scenario” by IPCC RCP8.5Organize the Group’s opportunities and risks, and analyze the impact of “procurement”, “operations” and “products and services”TypeClimate change risksBusiness risksBusiness opportunitiesResponse / Actions by NSHDFinancialImpactPolicy regulationsIntroduction of carbon pricingLarge《Medium- to long-term》> Decrease in profits due to increased tax burden《Medium- to long-term》> Acquire business opportunities by differentiatingthrough early response> Increase introduction of renewable energy by power purchase agreement and green powercertificatesTechnologyMediumReplacement to low-carbonalternative products/Progress in energy saving《Medium- to long-term》> Decrease in sales of existing products due to screeningof low-carbon products《Short- to medium-term》> Increase profit margin by energy saving> Increase in demands for existing products thatcontribute to low carbonization《Medium- to long-term》> Increase in business opportunities for environment-friendly products that contribute to low carbonization> Promote the development of environment-friendlyproducts that contribute to low carbonization> Promote energy saving by improvingproductivity through the introduction of DX technology, etc. (Introduction of SAITEKI,optimization of delivery)MarketsChanges in market needs/Changes in customers’ business activities《Long-term》> Decrease in sales due to changes in the manufacturingprocess of the steel and chemical sector> Decrease in sales due to new entrants utilizing byproduct O2 Largegas as demand for water electrolysis process expands《Medium- to long-term》> Increase in demand for blue and green H2> Increase in demand for green fuels> Increase in demand for CO2 capture for CCUSReputationIndustry criticismLarge《Medium- to long-term》> Investor valuation decline for GHG emitting companies《Medium- to long-term》> Continue stable funding by demonstrating contributionto GHG reductionAcuteIntensification of Disasters/Frequent Mediumtyphoons/Heavy rain/Droughts《Medium- to long-term》> Plant shutdowns due to disasters caused by abnormal weather> Increase in premiums paidChronicSea level rise/SmallRise in average temperatures《Long-term》> Narrowing of profit margin due to increase in running costs《Medium- to long-term》> Increasing demand for medical products to treat diseasesof air separation unit caused by rising temperatures> Replacement of aging air separation unitto reduce running costs> Provision of medical oxygen, etc.Short-term（～ 2025）、Medium-term（2025 ～ 2030）、Long-term（2030 ～ 2050）> Promote the introduction of carbon-free (H2,NH3) combustion technology> Expanding the use of oxygen combustion> Acquire demand for medium-scale CO2 captureinresponse to CCS/CCUS> Expansion of H2 supply business by HyCO business> Increase sales environment-friendly productsthat contribute to low carbonization> Disclosure of quantitative data on GHGreduction contributions through integrated reports,etc.> Promote disclosure of non-financial information> Promotion of disaster countermeasures> Use of insuranceTransitionPhysical©2022 NIPPON SANSO Holdings Corporation All rights reserved.38