Air Water : Consolidated Financial Results For the Third Quarter of the March 31, 2023 Fiscal Year

February 8, 2023

Consolidated Financial Results (Under IFRS)

For the Third Quarter of the March 31, 2023 Fiscal Year

AIR WATER INC.

Head Office: 12-8, Minami semba 2-chome,

Chuo-ku, Osaka, Japan

(Note: All amounts are rounded down to the nearest million yen.)

1. Results for the Nine months Ended December 31, 2022

(1) Consolidated operating results

1. Consolidated financial position

2. Dividends

(Note) Changes in forecast of dividends for the fiscal year ending March 31, 2023, from the latest disclosure: No

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3. Forecast of consolidated operating results for the fiscal year ending March 31, 2023

(% of change from previous year)

(Note) Changes in forecast of consolidated operating results for the fiscal year ending March 31, 2023, from the latest disclosure: No

Notes

1. Significant changes in subsidiaries during the period (changes in specified subsidiaries with changes in the scope of consolidation): None
2. Changes in accounting policies and changes in accounting estimates

1. Number of shares outstanding (ordinary shares)
   a. Total number of shares outstanding (including treasury shares)

• This report is exempt from quarterly review procedure based on the Financial Instruments and Exchange Act.
• Explanations and other special notes concerning the appropriate use of business performance forecasts

・The forward-looking statements such as result forecasts included in this document are based on the information available to AIR WATER INC. (hereinafter "the Company") at the time of the announcement and on certain assumptions considered reasonable. Actual results may differ materially from the forecast depending on a range of factors. For matters relating to the forecasts, please, refer to "4-(3) Explanation of future prediction information such as forecast of consolidated operating results".

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4. Qualitative Information relating to Third Quarter Settlement of Accounts

(1) Explanation of Operating Results

1) Operating results for the current period

During the cumulative third quarter of the current consolidated fiscal year, the Japanese economy was trending gradually upward. There was a recovery of social and economic activity which were impacted by the COVID-19 pandemic and a return to normal. Accordingly, consumer spending rallied and capital investment related to the digital shift and the decarbonization of society increased. Meanwhile, the negative impact of the increased goods prices due to the increased energy prices and foreign exchange fluctuations on the real economy was huge, sharply slowing the current economic recovery. To control inflation, several countries raised interest rates. This fueled the slowdown of the global economy. The future outlook remains quite uncertain.

In this business environment, the Company established "terrAWell 30," a long-term vision towards year 2030 for the Company to contribute to the solution of social issues through its business activities in line with two growth bases, namely, the global environment and wellness (healthy life), with an aim to achieve sustainable growth and an increase in corporate value. The Company has also established "terrAWell 30 1st Stage," a medium-term management plan for the three years to FY2024. In accordance with the basic policy and the management strategy, the Company and its affiliates (the "Group") aim to maximize the synergy created from the Group management resources, namely its diverse businesses, human resources and technologies. To achieves this, the Group has built a management system consisting of business units integrating the Company's head office organization and Group companies. Thus, the Group is working to expand growth areas, increase profitability and develop new businesses.

During the cumulative third quarter of the current consolidated fiscal year, the Group implemented proactive capital investments in supply infrastructure in electronics-related businesses which are defined as a growth area and in the industrial gas supply business in India and elsewhere to capture brisk demand and achieved steady growth. After increasing the Group's synergy in its adaptation to change in the business environment following the pandemic, the Health & Safety segment exhibited strong performance on the whole, driving the results of the Company as a whole.

In a situation where energy and raw material prices were expected to continue rising and where cost increases would continue, the Group defined profitability improvement in consideration of soaring costs as a top priority issue and endeavored to reduce costs by streamlining production and logistics and to carry out thorough price revisions. At the same time, we implemented thorough price revisions to cover cost increases that could not be covered by our own efforts. As a result, all operating segments achieved revenue growth primarily through higher selling prices.

However, the electric power business faced the rapidly rising prices of woody biomass and coal, which are the fuel for power generation and sharp increases in marine transportation expenses and other procurement costs. Given its business structure in which the selling price of electric power generated under the feed-in tariff ("FIT") system for renewable energy is fixed, the Company was unable to transfer the cost increase to the selling price. This significantly affected its business result.

The negative impact lingered in some businesses until the price revisions came into effect. The Energy Solutions segment was impacted chiefly by the shortage of raw materials for carbonic acid gas.

As a result, for the current third quarter consolidated cumulative period, the group's revenue was ¥724,769 million (112.0％ that of the corresponding period of the previous year), operating profit was ¥41,429 million (83.6％), and profit attributable to owners of parent was ¥26,492 million (82.4％).

1. Consolidated results by segment for this period
   The Air Water Group has established two key concepts, protection of the global environment and people's wellness, in

view of global social issues we are going to confront such as the impact of climate change and the progress of the super aging of population with an aim to achieve sustainable corporate growth into the future. In April 2022, the Group conducted an organizational reform restructuring the Group's diverse business sectors into four business groups in line with the above two key concepts. As a result, from the first quarter of the current consolidated fiscal year, the conventional eight segments, Industrial Gas Business, Chemical Business, Medical Business, Energy Business, Agriculture and Food Products Business, Logistics Business, Seawater Business and Other Businesses, were reorganized into five segments: Digital & Industry, Energy Solutions, Health & Safety, Agriculture & Foods and Other Businesses.

For the electric power business using woody biomass, the management system has been changed to optimize business

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operations in view of the drastic changes in the business environment. Accordingly, the electric power business using woody biomass is included in the Other Business segment from the third quarter of the current consolidated fiscal year onwards. It was previously categorized as part of Energy Solutions.

The segment information for the cumulative third quarter of the previous consolidated fiscal year shown here was prepared based on the revised reporting segments.

（Unit：Million yen)

(Note) The adjustment to operating profit is due to costs incurred at the Company's headquarters division which was not allocated to any reporting segment.

Revenue in this segment was ¥247,990 million (117.7％ that of the corresponding period of the previous year), and operating profit was ¥20,013 million (97.8％).

Regarding the business as a whole, performance was driven by strong sales of equipment and materials for semiconductor manufacturing and by the buoyancy of the industrial gas supply business in India although there were some signs of a slowdown in the third quarter and later. The Group made intensive efforts to rectify prices in response to the increase of electricity fees. This increase continued to impact the Group until the revised prices came into effect.

In the electronics business, the performance of on-site gas supply for large semiconductor manufacturers was steady. Although there were some signs of a slowdown in the third quarter and later, sales of special chemical materials and equipment for supplying special chemical materials for semiconductor manufacturing as well as heat control equipment for gas refining machinery and for semiconductor manufacturing equipment in the peripheral area were buoyant in general. Also in the information electronic materials sector, sales of semiconductor materials and electronic components were strong in Japan and abroad.

In the functional materials business, there began to be progress in inventory adjustments in the semiconductor supply chain in the third quarter. This led to a decline in demand for precision polishing pads, electronic materials and other items. Meanwhile, sales of O-rings (sealing materials) for semiconductor manufacturing equipment, which had an order backlog, and sales of high-performance circuit products for industrial robots were maintained at a certain level. The increase of the prices of basic chemicals connected to the conditions of the petrochemical market resulted in a revenue increase. Operating profit was supported by increases in sales of sodium acetate as a material for shelf-life enhancers for food and for dialysis fluid and in sales of magnesia for magnesia for electromagnetic steel plates and other products with large market shares. The results of the business as a whole were strong.

In the industrial gas business, the volume of gas sold dropped slightly year on year due largely to a delay in automobile production amid the semiconductor shortage and the shrinking demand for steel materials. Price revisions to pass on a sustained rise in electricity expenses accounting for more than half of the manufacturing cost of gases resulted in an increase in revenue. However, the impact on profit partially remained until the price revision was applied.

The overseas and engineering business remained strong, given that our on-site gas supply services to steel manufacturers maintained at a high operating rate in tandem with buoyant crude steel production in India and that we worked to streamline plant operations. Regarding tanker truck and cylinder gas supply services, climbing demand for services for automobiles led to a growth in sales volume.

Revenue in this segment was ¥63,043 million (109.5％), and operating profit was ¥3,523 million (79.7％).

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The business as a whole suffered a huge dip in profit resulting mainly from a shortage of raw materials in the carbonic acid gas supply despite revenue growth following the rise of the unit selling price of LP gas in connection with the import prices.

The energy business saw sales grow due to a surge in unit selling price for LP gas supply linked to import prices. In addition, we introduced a low-powerwide-area (LPWA) network for streamlining deliveries and actively purchased commercial rights to expand the customer base and increase the percentage of direct sales. Meanwhile, the sales volume of LP gas to households decreased year on year due to a decline in demand from people staying home and consumers' hesitation to consume gas following a price increase, although we carried out a price revision in response to the swelling costs of equipment and other expenses.

In the resources recycling business, sales plunged considerably year on year. This was due to a decrease in dry ice sales in the high-demand summer season chiefly due to a shortage of the raw material gas in the carbonic acid gas supply. In contrast, hydrogen gas achieved brisk sales mainly in on-site supply to the nonferrous metals industry. In addition, the Group developed the small CO2 collection device, ReCO2 STATION, and liquefied biomethane usable as an alternative fuel for LNG and built a business model for the collection and use and new energy.

< Health & Safety>

Revenue of this segment was ¥168,954 million (107.8％), and operating profit was ¥9,700 million (113.8％).

The results of the business as a whole were healthy. After it focused on proposals for products and services that would help stabilize medical service systems in light of the shift to the policy for the endemic COVID-19 era, it steadily captured demand for oxygen concentrators for homebound patients, for the renovation of hospital facilities and for the streamlining of hospital management through supply, processing, and distribution (SPD) management. In addition, the business saw the expansion of the consumer health business, which includes home medical care, dental services, hygiene materials and other operations that are closer to consumers.

In the medical products business, we revised the prices of different products in the medical gas sector. In addition, the sales volume of medical oxygen and nitrous oxide increased due to surging demand for treatments using cardiac catheters. In the home medical care business, contracts for leasing oxygen concentrators to local governments continued and the number of units leased to hospitals increased. In the medical equipment business, the number of patients undergoing nitric oxide inhalation therapy increased and steady progress was made. In the dental sector, sales increased as insurance coverage of CAD/CAM crown materials as inlay for cavity treatment started in April 2022.

In the safety services business, renovation projects increased in the hospital facility construction sector amid growing needs for measures to prevent nosocomial infections. In addition, the inspection and maintenance of facilities resumed after their postponement due to the COVID-19 pandemic. Hospital facility projects in Singapore improved after restrictions on activities were eased. Their sales have been good. In the fire extinguishing system business, demand for products used at power generation facilities and data centers and sales steadily grew.

Steady sales were achieved in the medical service business. Efforts were made to acquire new customers by proposing measures to improve hospital management efficiency, and new projects were gained for SPD management related to medical products. The number of contracts received and profitability grew in the contract sterilization services.

The performance of the consumer health business was strong after the rallying of sales related to vaccination needs in the injection needle sector as well as dental needs and cosmetic needs in overseas markets. In the hygiene material sector, sales of masks, hand sanitizers and other infection control products were solid. Kawamoto Corporation, a Group subsidiary, posted a gain on bargain purchase in an M&A transaction. The aerosol sector partly continued to be negatively affected by the increased costs of raw materials while the commissioned production of ultraviolet (UV) protection sprays and cosmetics was on the increase.

Revenue of this segment was ¥115,486 million (106.9％), and operating profit was ¥5,221 million (90.2％).

In the business as a whole, sales channels expanded for delicatessen products and demand for commercial food products turned around. We proceeded with price revisions in response to rising raw materials and energy costs. However, the increased prices of goods chilled consumer sentiment, leading to poor sales in the sweets sector and in the fruit and

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