MANAGEMENT MESSAGE CEO Message

Air Water, which started in 2000 as a group of three companies with industrial gas as its business foundation, has been growing its comprehensive strength as a group through related diversification with industrial gas as its origin. In FY2022, we as a group have achieved the goal of 1-trillion-yen revenue, an important milestone for the company’s growth stage.

Now that we have become a one-trillion-yen company, we feel more than ever the greater expectations of our stakeholders and society. At the same time, we are bracing ourselves to enter a stage where we must create value beyond that point. We will respond to their expectations and steer our management with an even greater emphasis on profitability and capital efficiency to further grow.

Our Group has advantages in diverse businesses, human resources, and technologies that it has cultivated on its path to becoming a trillion-yen company. We will maximize these strengths to achieve new growth that cannot be realized by existing businesses alone. We are turning global social issues into business opportunities while promoting partnerships and alliances with major companies, universities, and local governments, all of which can only be realized now with our increased presence.

To achieve sustainable growth in today’s world where society and the economy are changing at an unprecedented speed, we are committed to manage our business with the utmost importance on increasing the social value we provide to the world by solving social issues, while constantly changing the form of our company and business.

We set our 2050 Sustainability Vision as “achieving a recycling-oriented society through coexistence with society and the earth.” Under the long-term vision “terrAWell30” for 2030, which is a milestone of the 2050, we have started working to create new corporate value through the solution of social issues. I can already see a path for our Group to evolve under this vision. We will contribute to the less burden on the global environment and to the more healthy lives of people by leveraging our management base cultivated through our diverse businesses. While doing so, we can continue to be chosen by local communities, customers, employees, and shareholders, as well as meet their expectations through sustainable growth. I see the route for becoming such a presence.

In the following, I would like to discuss the path we are on, starting with (1) our Group’s vision, (2) our growth policy, and (3) our challenges and solutions.

Under the “terrAWell30,” our Group has integrated its diverse business vectors into two growth axes, “Global Environment” and “Wellness,” reflecting global social issues such as energy decarbonization, population growth, and the food crisis.

As carbon neutrality becomes a precondition for business activities in many countries and companies, decarbonization is an urgent and long-term challenge that cannot be avoided. The need for both a stable energy supply and decarbonization is increasing, as is the need for products to be green. Also, as we rapidly shift to a smart society with AI and IoT, there is a growing need to address DX and other digital technologies.

As we enter the “100-year life era,” extending healthy life expectancy and advancing preventive medicine have become important issues. As we face food insecurity issues due to the growing world population and heightened geopolitical risks, it is also essential to expand the agriculture and food industry.

These social issues are risks, but at the same time, can also be great business opportunities for our Group. We should identify the essence of such problems, provide solutions by leveraging our diverse businesses, human resources, and technologies, and pursue the social values. This is the theme of “terrAWell 30.” In today’s rapidly changing and uncertain society, we are confident that by pursuing the values leading to a sustainable future, we can inevitably create new economic values.

Our Group has established a position as a comprehensive industrial gas manufacturer in the first founding stage since 2000. And then, built a diversified “All-Weather” portfolio in the
second founding stage since 2010. In the third founding stage, we achieved 1-trillion-yen revenue in FY2022 as the grand finale to our efforts to date. We are now looking to “creating new corporate value through solving social issues,” where we leverage synergies from our “diverse businesses, human resources, and technologies” gained through the preceding phases as well as “presence as a trillion-yen company.”

The “terrAWell30” is our long-term vision to face our own Materiality and promote sustainability management in the third founding period. Assuming that we cannot expect significant future growth from our existing businesses alone, especially within Japan, it sets forth three basic growth policies. First, we will continue to restructure our existing  businesses in Japan, including the integration and reorganization of group companies, while improving profitability through price management, optimal allocation of human resources, and DX to increase earning power.

Second, in addition to the engineering expertise we have developed to date in the domestic market, including the acquisition of large-scale gas plant technology, we will seek future
growth overseas by taking advantage of the strategic alliance with MITSUI & CO. that was realized in 2022. For overseas expansion, we are currently accelerating the expansion of our
industrial gas business with India and North America as key strategic areas. There we aim to establish a business platform for industrial gasses, and in the future, develop businesses that take advantage of our Group’s diverse businesses and technological capabilities in areas such as medical care, environment and energy, and food products.

Third, in order to respond to the changing times, we will create and explore new businesses that contribute to solving social issues in the region. Instead of relying on existing businesses, we will move forward based on innovation through technology and the social relationship capital we built with local governments, universities, and other entities in each region.

Going for that, the “terrAWell30” sets targets and indicators for economic values (profitability/business expansion/capital efficiency) and social values (non-financial indicators/target society) respectively to be achieved by FY2030. (For details, see “Realizing‘terrAWell30’”)

Our Group has the earnings base and strengths that can support growth for the foreseeable future. What I need to do now as CEO is to improve the “quality” of the organization so we can use the profits and cash generated to create new markets, develop them into businesses, and realize our vision of sustainability. Specifically, it means to transform our Group into an organization that (1) flexibly responds to change and continues to innovate, and (2) is capable of autonomously creating synergies through a combination of technologies, human resources, and businesses.

When I became CEO in 2019, our Group was only partially optimized with fixed businesses and human resources due to business expansion based on a Company System. I recognized that our greatest strengths of diverse businesses, human resources, and technologies were not being fully optimized as a whole, which was a key management issue. In order to resolve this issue and move from partial to total optimization, we have been working to build an organizational structure that provides a cross-rganizational framework for functions essential to the Group’s growth, such as technology development, engineering, and gas products.

In April 2022, we reorganized our diverse business fields into four groups (Digital & Industry, Energy Solutions, Health & Safety, and Agriculture & Foods) and introduced the Unit System. It shifted us to a new group management structure which integrates the headquarters organization of Air Water and the group companies. In May 2023, we also established a new Global & Engineering Group to promote and manage our overseas business development.

The Unit System aims to develop next-generation management personnel by selecting presidents of the group companies, each of whom plays the core role of respective business operations, as head of the business units, a key position in the main organization. Under the system, we identify talented personnel in our Group and also appoint those who are familiar with the business to such positions to ensure there is no discrepancy between the overall strategy of the unit and the on-site sense
of business promotion. In addition, the Unit System serves as a milestone in pursuing truly integrated group management, as it opens the way for the group employees to be promoted to managerial personnel and increases their motivation.

This is the main reason why we moved from the Company System to the Unit System. The Unit System allows us to flexibly change the relationship between each business and the group companies in response to changes in the environment, and also promotes the fluidity of human resources within the Group, thereby revitalizing the organization. Our group companies have been expanding their performance and largely contributed to the one-trillion-yen revenue, behind which there was the Unit System in place.

Going forward, we will evolve the Unit System to promote group management that integrates the organization of AIR WATER INC. and its 30 group companies that play a core role in each business domain. While maintaining the business characteristics of our diverse group companies, the corporate division at the headquarters will be taking the lead in standardizing common management functions of each group company, such as financing, investment, and governance, and further promoting the mobility of human resources. Simultaneously, we will develop the data infrastructure and reform the personnel system to realize these goals.

Our Group has focused on M&A and capital investments to date, but in this era of uncertainty ahead, we consider intangible asset investments are critical, such as intellectual property, human capital, and brand power.

As expectations for us have risen with our becoming a onetrillion-yen company, we are building a framework for new value creation structures, including open innovation that will contribute to solving social issues.

At the same time, we are promoting integrated group management to achieve “management that leverages human resources.” People and business are inextricably linked. Without the growth of human resources, the growth of a company is not possible.

I believe that the most important part of developing people is to make them realize and to place them in roles with responsibilities as early as possible after having them gain experience in various departments. Taking on a position with more responsibility will change your view and broaden the scope of what you can do. In a place like our Group with diverse business operations, we need to think of the best combination of human resources to create and change the shape of our business. It has unlimited possibilities, just like art.

Our Group is currently revamping the personnel system to encourage employees to gain various experiences and raise their hands, as well as to ensure that their achievements are fairly rewarded. We believe that encouraging challenges and increasing the mobility of human resources within our Group will create synergies and foster a culture of self-initiated innovation.

Today, we are witnessing megatrends such as a smart society, a decarbonized society, a 100-year life span, and increasing food self-sufficiency. The future is more uncertain and changing than ever before. In such times, it is important to keep changing with an understanding of such megatrends, and not taking the “risk of change” would be a serious risk.

For now, our Group is making profits from its existing businesses. It is precisely at such times that we must break away from businesses that assume existing values and continued growth, dare to seek change, and create new businesses with the ability to earn even more revenue.

As a company that achieved a trillion-yen mark, what can we do to help solve social issues? We are determined to take a higher perspective, make better use of the assets we have today, and continue to take on the challenge of creating a new era.