Air Water has been in the news with M&A in medicine, agriculture, food products and other life style-related businesses, and according to The Gas Review, the company also took part in M&A in industry-related business going into 2018.
One of these is with Japan Pionics, who sells gas purification equipment and waste gas abatement equipment in the electronics field, and another is with TOMCO2 Systems, a USA carbon dioxide (CO2)-related equipment manufacturer. Both of these companies are engaged in industrial gas-related equipment and engineering.
For Japan Pionics, talks have been in progress with its parent company, Mitsubishi Gas Chemical, behind closed doors for the last three years and purchase conditions have just been agreed upon. In the currently active electronics gas market, the M&A of Japan Pionics will provide Air Water with gas purification and abatement system technology, which they previously lacked.
Air Water is making moves to strengthen their equipment and engineering capabilities for gas-related business. At the end of last year, Air Water Plant & Engineering (AWP) built a new plant at their Sakai location to manufacture gas tanks.
President Shirai says, “We now have our own system to manufacture the equipment that is essential to gas business. Making this equipment ourselves will clarify the cost structure. We also anticipate that adding the equipment and technology that were previously lacking will create a synergy.”
Work to fill other blanks in our gas business is also underway with cryogenic container manufacturer Taylor-Wharton Malaysia as well as with Japan Pionics.
USA and Singapore seen as overseas business centres
Adding a gas equipment manufacturer that is active in business in the USA under the umbrella raises interest in the direction of Air Water in terms of expansion overseas. It is not difficult to imagine that exporting TOMCO2 Systems equipment to Japan may be joined by gaining a foothold in business in the USA.
President Shirai commented, “We established a local subsidiary in the USA, Air Water America, to integrate various business companies which had already been operating in the USA.”
The USA is experiencing active capital investments in energy, such as shale gas, and in equipment facilities. There is also vigorous demand for generators, such as ASUs. AWP President Ryosuke Matsubayashi was appointed to be the representative of the local subsidiary (effective as of the stockholders meeting at the end of June this year), providing further indication of the strong desire of Air Water to expand into the USA market in industrial gases, equipment and engineering.
Air Water is developing the Japanese market with a target of YEN 1 trillion in annual sales by 2020, and full-scale expansion overseas is an important policy for focusing the business for 2020 and beyond.
President Shirai sees that “in addition to the USA, we also see Singapore as a business centre for Southeast Asia”. In Singapore, Air Water purchased Globalwide International, who designs and builds operating rooms. President Shirai wants to go further. “In Japan, Air Water Safety Service handles this business, but we want to expand our business region with this as a starting point.” Previously, industrial gases served as a starting point for medical, energy, chemical, agricultural and food product business expansion in Japan, and they plan to use the same business model to expand business overseas.
Individual in-house companies used their strong points to continue to grow
Air Water has six in-house companies, such as Industrial, Medical, Life Solution & Energy, Chemical, Agriculture & Food, and Distribution Companies. It also adds seawater and aerosols to develop eight business areas in what they call the All-Weather Management System.
President Shirai said, “Each business area grows independently to form a stable business basis that is not influenced by market environments. Air Water creates its strength by adding our Order Bodentia Style of Business to our All-Weather Management System in a unique management model. For example, Printec works in electronic circuit boards, while Air Water Mach manufacturers O-ring. All of our companies use their strengths in individual industries to increase their performance.”
This illustrates the strength of the Air Water Group, where individual companies used their strong points to continue to grow.
Chemical business, which has been a matter of concern, is being reorganised, and the coke furnace gas business, that is, the coal chemical business, will be sold to Nippon Steel & Sumitoma Metal in April 2019, just a year later. The joint venture in tar distillation business, which handles needle coke, will be dissolved in April this year.
President Shirai said, “This business is affected by fluctuations in the product market condition, and supply and demand, and in terms of raw material procurement, it is also greatly influenced by the operating trends of iron mills. At the scale at which we operate, changes in the business environment have too great of an impact on performance, and also it is difficult for us to independently make structural reforms, so we have decided to sell this business. From now on, we want to specialise in fine chemicals business to handle electronics materials, pharmaceuticals and agrochemical intermediates. This involves reviewing our business at the Kashima and Wakayama iron mills while creating a synergy with our subsidiary, Kawasaki Kasei Chemicals, who has a stable business base as a functional chemicals manufacturer.”
Of Air Water’s eight local business companies, seven of them have grown so as to exceed YEN 10bn in sales at the end of this term. President Shirai concluded, “We still have high expectations of our local business companies. If you concentrate your thinking on industrial and medical businesses, limits will naturally appear. We therefore, want everyone to work as if they were also responsible for all of the eight business areas of the group, including agriculture, food, products, energy etc. Our goal is that our eight local business companies will weave the eight businesses into their own businesses.”
The Gas Review, issue no. 451