Nippon Sanso Holdings Corp

Thank you.

Hello, everyone. Thank you very much for taking time out of your business schedule to attend Nippon Sansa Holdings Corporate Earnings Call for the first quarter, where the financial results of devolved fiscal year ending in March 2025. My name is Momiyama, and I'm in charge of IR team. I'd like to give some information about today's conference. First of all, the conference materials are the financial results, and earnings call reference materials that we have just released. I would like all the participants to have them at your hand. Next, we have three main presenters today. Representative Director, President and CEO Hamada, Senior Executive Officer, Group Finance and Accounting Office and CFO Draper, and General Manager of IR Kajiyama. Also, Kubo, Executive Officer, Group Corporate Planning Office, Miki, Senior Executive Officer and CSO, and Group's Sustainability Management Office, and Yoshida, General Manager of Accounting, are also in attendance. As for the program today, at first, Hamada, President and CEO, Draper, CFO, and Kajiyama, General Manager of IR, will present the first quarter financial results along with the presentation materials. We will have time for questions and answers at the end. Please note that today's session will be conducted bilingual in English and Japanese using the simultaneous interpretation function via Zoom. Please select the language you would like to communicate with us in the Zoom control panel using interpretation button. During the Q&A sessions, if you wish to communicate in Japanese, please set the audio to Japanese, and if you wish to communicate in English, please set the audio to English. We now would like to ask President Hamada to give his presentation.

Good evening. This is Hamada speaking from Nippon Sansou Holdings. Thank you very much for participating in our Q1 earnings call out of your busy schedule. As I always say, I would like to once again touch upon the global situation because that does impact our company's business. Unfortunately, regarding the global situation with a series of clashes in Israel and ongoing conflict around Russia during the past few months, basically geopolitical tensions remain high. In the global economy, under such circumstances, compared with the COVID-19 times, it is indeed a fact that we are seeing recovery in the US and Europe. Interest rates have remained high for a long time, and in Europe, In June, there was an interest rate cut in Europe, and there are expectations of a rate cut growing in the United States as well. In Japan, for the first time in a long time, interest rates have been restored, and I think it is because of the impact of these factors that the depreciation of the Japanese yen has finally come to a halt, as some people say. On the other hand, as you may know, There are major elections being held one after another in countries around the world. This year is said to be a global election year. That is what the media says. I will not comment on the individual elections here. doing business with a lot of companies in major countries. And regardless of whether we do business with major or developed countries or not, changes in government in major or developed countries may have a significant impact on economies of those countries and regions. Therefore, we are closely monitoring whether there's going to be an impact on our gas business. We are closely monitoring the policies of each country and their impact on the global situation, including the foreign exchange rate. We think we have to closely watch the trends in the world. In this business climate, our company is making steady progress towards And with the sincere efforts of our employees and staff, customers, as well as our other stakeholders, we are making steady progress towards the final year goals of our medium-term management plan, NS Vision 2026. That is the impression we have of the first quarter. And in this environment, it is important for our company to continue our business, maintain a stable supply while also growing and enhancing corporate value. To this end, we will clarify how we will proceed with the focus fields of NS Vision 2026 and the strategy decided for each segment. as well as what we need to do to firmly establish the role of the holding company, NSHD Holdings, and take effective measures. That is how we would like to operate the group as a whole. Details of our business performance will be explained later by Mr. Alan Draper and Mr. Kajiyama. What was the first quarter like for us, if I may summarize? The key highlights were that we continued the productivity improvement effort and price management. And during the past one year or one and a half years, we've been making this effort, and this is impacting our performance. We would like to continue such effort. Secondly, we have continued to seize opportunities to expand business continually. Mega deals, it's not that we pursued mega M&A deals, but as was explained later, we are making sure to seize opportunities towards capital investment for future growth. And number three, diversity. increasing women, female engagement, engaging people with various ethnic backgrounds. In the way we do business, how we perceive our business, we want to ensure that we have diversity before we make decisions. We worked on initiatives with greater emphasis on diversity. And number four, We've been trying to maintain a strong commitment to improving corporate value. This is taken for granted as a listed company. Stakeholders and shareholders, what is important for all of these people, we need to be clear on that. And for that, we want to always aim to improve and enhance the corporate value globally. the situation is full of uncertainties including the economic environment whatever happens in the world around us we have to be able to respond promptly and in an agile manner with regards to customer and social trends and we mainly supply industrial gas and We have to think about the surrounding environment around our customers. There are indeed various kinds of users, and not everything will impact our company directly, but we also have to be cognizant of what factors impact our customers and the stakeholders. Bearing that in mind, it's important for us to respond promptly to customer and social needs and social trends. In May 2022, we announced the Medium-Term Management Plan, NS Vision 2026. And as written here, we set out five focused fields. and explained our initiatives for the four years through March 2026. And this information remains unchanged. Today, we would like to introduce to you a number of themes that relate to our meeting to management plan. First, in June of this year, a new management structure was approved at the ordinary general meeting of shareholders. I would like to introduce to you our new management structure. We would also like to explain about our recently revised compensation for remuneration system or compensation system for internal directors as a result of TSE recommendations and so forth. We have decided to revise our compensation system for internal directors. And we also want to explain about the recently announced business acquisition in Australia as a main topic. Following the ordinary general meeting of shareholders held on June 19th, we were able to conclude this shortage meeting successfully, and we established a new management structure, including one newly appointed director. Currently, we have nine directors. The total number of directors remains unchanged. The majority of these directors are independent outside directors. Five of them are independent outside directors in order to maintain management independence. On the right-hand side of the slide, we show the expertise and experience of each director. As you can see, our board of directors is made up of experienced members from diverse backgrounds. In a sense, this is one important point to ensure diversity. Including myself, there are four internal directors. And three of the four internal directors are well-versed in their respective businesses. They are professionals in their respective businesses. When I worked for TNSC, I was head of the electronics division and president of the sub-Syria. I do regard myself as being a gas professional. And Raul Giudici. a newly appointed director and president of the European business, has many years of experience in sales and marketing. And he is one of the four internal directors who are presidents of original companies. And he is responsible for sales and marketing in the European industrial gas industry, who succeeded Eduardo Hostet as head of a European business. He's based in Italy. And Eduardo El Hoste was based in Spain. We do hope that he will introduce a slightly different perspective. But Europe is not necessarily large, and Raoul also has experience in other businesses besides Italy in Europe, and he has experience traveling around in Europe. I think he's about 52 years old or 53 years old. He's very young, and he's a member of a new generation of management. From that perspective as well, we look forward to having him introduce new perspectives in taking initiatives. The board of directors also established a voluntary advisory committee called the Nomination and Remuneration Advisory Committee, which is headed by Mr. Nagasawa, an independent outside director. After discussions at the nomination and remuneration advisory committee, we appointed Rao as director and revised the compensation system for internal directors. I would now like to go on to the next page to explain about our compensation system. The board of directors resolved to make three changes to the internal director's compensation system. In order to achieve the performance and non-financial targets in our medium-term management plan and to continuously enhance our corporate value, we introduced more incentives in our compensation system. First, we added ROCE after-tax as a KPI for performance-linked compensation. In March 2023, the TSE, Tokus Stock Exchange, requested that companies take steps to implement management that is conscious of the cost of capital and stock price. And this request included examples of measures such as including improvements in return on capital in the indicators for calculating executive compensation. Our company had originally set ROC after taxes, one of the financial KPIs for a medium term management plan. Against this background, after discussion, we decided to reflect this in executive compensation and by so doing, we are further clarifying our commitment to continuously improving capital efficiency.