Corporate Social Responsibility (CSR) / Environmental and Social Report 2015

Working to achieve the targets of our current medium-term business plan, Ortus* Stage 1, which was launched in fiscal year 2014, the 10th anniversary of the merger that created Taiyo Nippon Sanso

In fiscal year 2015, ended March 31, 2015, we reported significant advances in net sales and operating income in North America and Asia, the former attributable to the gentle economic rally and the positive impact on results of a newly consolidated carbon dioxide manufacturer, and the latter to the robust performance of our Electronics segment businesses in Taiwan, China and South Korea. In contrast, the pace of recovery in Japan was measured, as trends varied from one sector to another. These factors contributed to a 7% increase in consolidated net sales and a 12% gain in operating income.

Fiscal year 2015 was the 10th year since the merger that created Taiyo Nippon Sanso. This important milestone in our history saw us formulate a long-term vision that calls for net sales of ¥1 trillion, an operating margin of 10%, a return on capital employed (ROCE) of at least 10%, and an overseas sales ratio of 50% or higher, by the end of fiscal year 2023. We also embarked on a new medium-term business plan, Ortus Stage 1, which we have positioned as the first phase of our long-term vision. Our operating results targets for the final year of Ortus Stage 1, fiscal year 2017, include consolidated net sales of ¥600 billion, operating income of ¥45.0 billion, an ROCE of at least 8% and an overseas sales ratio of 40% or higher. Over the next year, we will continue to promote restructuring initiatives, particularly in Japan, and to accelerate the expansion of our overseas operations, with the aim of meeting these targets.

Owing to a tender offer by our principal shareholder, Mitsubishi Chemical Holdings Corporation (MCHC), which concluded in November 2014, the company’s stake in Taiyo Nippon Sanso increased to 50.6%, resulting in a change in our relationship with MCHC from that of equity-method affiliate to consolidated subsidiary. Looking ahead, we will maintain our status as a listed company with independent management, while at the same time capitalizing on our new role in the MCHC Group, which we expect to yield broad synergies.

*Ortus is a Latin word meaning “birth” or “origin.”

President and CEO

Yujiro Ichihara

President and CEO

Stepping up efforts to reinforce safety management, which is fundamental to a sound business foundation, and to enhance awareness of corporate governance

Acting in accordance with Japan’s Corporate Governance Code, in June 2015 we modified our management configuration with the goal of improving our management efficiency and strengthening our corporate governance. This involved reducing our Board of Directors from 17 members to 11—including two individuals invited to serve as independent outside directors—to clarify the separation between decision making/oversight and business execution. Under our new management configuration, we will continue working tirelessly to further enhance corporate value by working in concert with MCHC and implementing the strategies of Ortus Stage 1, with the ultimate goal of realizing our long-term management vision.

In December 2014, an industrial accident occurred at affiliate Oita Sanso Center Co., Ltd. Fortunately, there were no casualties, but the accident caused considerable anxiety to residents of neighboring communities and other individuals connected to the facility. Having reminded ourselves once again of our fundamental belief that selling gas is commensurate with selling safety and peace of mind, we vow to do everything in our power to ensure such an accident does not happen again.

Addressing key social imperatives with the aim of helping to realize the KAITEKI concept

Going forward, we will continue working to help reduce the negative environmental impact of human activity and minimize energy consumption through the advancement of gas technologies, as well as through the development of products and technologies that support improved productivity.

The MCHC Group is promoting a diverse range of initiatives in line with its proprietary KAITEKI concept, which describes “a sustainable condition which is comfortable for people, society and the earth, transcending time and generations.” Accordingly, in addition to fulfilling the responsibilities implied in our corporate slogan, “The Gas Professionals,” we are committed to helping to realize the KAITEKI concept by addressing key social imperatives. At the same time, we will strive tirelessly to ensure sustainable growth for the Taiyo Nippon Sanso Group, thereby earning the trust of both our stakeholders and society at large.

I hope that readers find this report on the Taiyo Nippon Sanso Group’s environmental and social initiatives both informative and interesting.

October 2015

Yujiro Ichihara
President and CEO

President’s Basic Policy on Technological Risk Management

To fulfill the responsibilities implied in our corporate slogan, “The Gas Professionals,” we recognize that we have an obligation to ensure stringent compliance with pertinent laws and regulations and to prioritize the management of key technological risks, i.e., risks related to security, product quality, product safety, the environment and intellectual property. Accordingly, we have formulated the President’s Basic Policy on Technological Risk Management.

We will continue taking steps to minimize such risks and to enhance customer satisfaction across all areas of our operations. These include ensuring the President’s Basic Policy on Technological Risk Management is fully understood and applied by every Taiyo Nippon Sanso Group employee, as well as formulating and implementing a Groupwide technological risk management system and effective business continuity planning (BCP) to guarantee critical operations are maintained in the event of a disruption caused by an earthquake or other major disaster. At the same time, we will work to contribute to greater public safety and environmental preservation, thereby earning the trust of society at large, ensuring the sound growth of our businesses and building greater corporate value.

Safety: Implement decisive, practical measures to ensure the safety of our operations, in line with our belief that selling gas is commensurate with selling safety and peace of mind.
Product quality: Accurately grasp the increasingly sophisticated and diverse customer needs and social imperatives and respond by ensuring optimum product quality.
Product safety: Minimize safety risks at all stages of the product life cycle to ensure the safety and security of the products we supply.
Environment: Take steps to reduce the negative impact of our operations on the global environment and to prevent pollution.
Intellectual property: Obtain and make use of intellectual property rights as necessary to preclude competition with other companies.

(As of June 27, 2014)

Corporate Philosophy "Market-driven collaborative innovation:improving the future through gases"
Corporate Guidelines Progressive United in creativity Forward looking

We pledge to listen to the views of stakeholders and to contribute—through both our gas technologies and collaboration with partners in all industries—to the creation of a spiritually and materially wealthy society.

Corporate Slogan The Gas Professionals

Striving tirelessly to fulfill our potential as industrial gas professionals and as the global leader in this field in terms of both market position and expertise

Corporate Logo
TAIYO NIPPON SANSO The Gas Professionals

Taiyo Nippon Sanso’s corporate logo represents the seamless integration 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 other gases. The logo also evokes the Company’s resolve to achieve growth through superior quality and transparency and to ensure a future that is clean, safe and healthy.