ENVALITH
エア・ウォーター株式会社 logo

AIR WATER INC.

4088・Prime Market・Chemicals

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エア・ウォーター株式会社 logo
AIR WATER INC.4088

Business

Air Water Inc. traces its origins to an industrial gas manufacturer founded in 1929, and now operates as a group of 147 companies, including 136 consolidated subsidiaries and 11 equity-method affiliates. The company has five segments—Digital & Industry (industrial gases, semiconductor-related), Health & Safety (medical, disaster prevention), Agri & Foods (agriculture and food), Energy Solutions (LP gas, LNG), and Others (logistics, overseas industrial gas, UPS)—and achieved ¥1 trillion in revenue in FY2022. Its main customers range widely from steel, chemical, and semiconductor manufacturers to medical institutions, general households, and farmers, and while the company is based in Hokkaido, it is also expanding overseas into India and North America.

Business Model

The company owns high-barrier-to-entry infrastructure such as on-site plants and distribution networks for industrial gases and medical gases, with stable gas supply revenue based on long-term contracts as its foundation. On top of this, it builds up peripheral businesses such as specialty chemicals and purification equipment for semiconductors, medical equipment and hospital facility construction, food processing and logistics, and direct LP gas sales, layering revenue through group synergies. The company continues to improve profitability through thorough price management and the review of low-profitability projects.

Company Strengths

The Digital & Industry segment posted revenue of ¥351,094 million and operating profit of ¥36,267 million. In addition to large-scale plant investments for semiconductor fabs and the development of new client relationships, an integrated capability to provide specialty chemicals, gas purification equipment, and thermal control systems together serves as a key differentiator. In January 2025, the company opened the Shonan Innovation Lab to strengthen its development capabilities.

The Health & Safety segment posted revenue of ¥246,083 million, ranking second within the group. Building on its medical gas supply infrastructure, the business extends into Hospital Facility Construction / SPD Services, home healthcare, disaster-prevention construction, and consumer health. High-value-added areas are growing, including gas fire extinguishing equipment construction for data centers and an increasing number of cases using nitric oxide inhalation therapy.

The Agri & Foods segment posted revenue of ¥174,480 million. The company has built an integrated platform spanning procurement, processing, distribution, and overseas sales, through direct purchasing of potatoes, carrots, and other produce from contract farmers in Hokkaido, mechanization outsourcing via the Agri Support business, the newly consolidated fruit and vegetable wholesaler Marushin Seika, and expanded sales of frozen broccoli in North America.

ENVALITH's Perspective

The improper accounting treatment of inventories and other items (deferral of losses, shifting of revenue recognition timing, double-counting, etc.) discovered in July 2025 has reached a scale that reduces retained earnings from prior periods by ¥36,596 million. The Special Investigation Committee's inquiry still has unresolved matters remaining at Air Water Safety Service, Mechatronics, and Ecoloca, among others, and additional special investigation costs of approximately ¥9.3 billion are expected to be recorded from the third quarter onward. Restoring the reliability of the financial statements and rebuilding internal controls are prerequisites for investment decisions, and the timing of the investigation's completion and the correction of prior-period securities reports will be a key catalyst for the share price.

In the first half of FY2026 (ending March 2026), revenue increased to ¥516,639 million (up 2.4% year on year), but earnings deteriorated significantly, with an operating loss of ¥5,447 million (versus operating profit of ¥27,612 million in the same period of the prior year) and a net loss attributable to owners of the parent for the interim period of ¥21,179 million. The main causes were the recorded impact of the improper accounting treatment, a sharp increase in impairment losses to ¥37,827 million (versus ¥3,340 million in the same period of the prior year) centered on overseas businesses (withdrawal from the North American low-temperature equipment business and the India steel on-site business), and a sharp expansion in financial expenses to ¥15,115 million (versus ¥3,020 million in the same period of the prior year). The full-year forecast presents a difficult outlook, with operating profit of ¥14,000 million (down 77.2% year on year), pre-tax profit of ¥0 million, and a net loss of ¥10,000 million.

Amid continuing headwinds, the Health & Safety segment achieved revenue of ¥121,898 million (up 6.5% year on year) and operating profit of ¥7,261 million (up 238.9% year on year), the only segment to post a substantial profit increase. This was driven by demand for digitalization in the dental industry, increased production of injection needles, and strong performance of Kawamoto Sangyo's consumer products. In addition, as a subsequent event, the tender offer for Shiai Medical (acquisition consideration of ¥30,266 million) was completed, and with the consolidation of this company—which does business with approximately 90% of dental clinics nationwide—as a subsidiary, an expansion in revenue scale is expected from the third quarter onward. A commitment line of ¥113,000 million (concluded in February 2026) has also been secured to stabilize the financial base, which has helped to contain liquidity risk to a certain extent.

Growth Strategy

Prioritizing the resolution of improper accounting issues and the rebuilding of internal controls, while pursuing profitability and concentrated investment in the medical and digital domains

Continuing investigation by the Special Investigation Committee (comprising external experts) and self-inspection are being advanced as top priorities. The investigation report (as of February 9, 2026) was received on February 12, 2026, but unresolved matters remain at Air Water Safety Service, Mechatronics, and other entities. Correction reports for past annual securities reports are planned to be filed after the investigation is completed. Additional special investigation costs and related expenses of approximately ¥9.3 billion are expected to be recorded from the third quarter onward.

As of February 12, 2026, a syndicated commitment line facility (total amount ¥113,000 million, one-year term) was concluded with Sumitomo Mitsui Trust Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank. This addresses funding needs arising from the response to the improper accounting issue and the tender offer for Shiai Medical, among others, aiming to secure working capital and stabilize the financial base.

The tender offer (acquisition consideration ¥30,266 million) was completed on October 14, 2025, increasing the voting rights ratio from 38.29% to 78.65%. By fully integrating Shiai Medical, which does business with approximately 90% of dental clinics nationwide (65,000 clinics), the company aims to maximize synergies in Dental Materials / Digital Dentistry Solutions, digital molding equipment, and dental pulp regeneration therapy (Air Water and Aellas Bio). The accounting treatment for the business combination under IFRS 3 has not yet been completed as of the current time.

Following a sharp decline in hydrogen-related demand originating from U.S. policy, a partial withdrawal from the North American low-temperature equipment business was decided. The India steel onsite business recorded an impairment loss reflecting a temporary impact from long-term blast furnace maintenance. This has been the main cause of the Digital & Industry segment's operating loss of ¥16,708 million, and the company will continue to review overseas investment projects with low profitability on an ongoing basis.

Gas supply for generative AI and advanced semiconductor manufacturing (including Gas Purification Equipment / Thermal Control Systems for Semiconductor Manufacturing Equipment) maintained an upward trend during the current interim period as well. The price management effect for industrial gases also continues, and excluding the impact of the improper accounting and impairment losses, the Digital unit's business itself remains on a growth trajectory. The company will continue large-scale plant investments and the development of new business partners in response to the expansion of semiconductor manufacturing facilities.

Last updated: July 17, 2026