for Customer

Medium-TermBusiness
Plan
“MTBP
2016”
PRESENTATION TITLE(FY2016-2018)
April 27, 2016

Ⅰ. Looking Back on MTBP 2013©
2 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved2Changes in Business Performance(Billion yen)
Changes in Net Sales andOperating Income
95.9(Billion yen)

100.0

1,800.0

10.4%

87.2

1,600.0

9.4%

10.0%
80.0

72.3

1,400.0

8.1%
8.0%

1,200.0

1,541.0

1,000.0

42.0

800.0
600.0

12.0%

Changes in Before-tax ROIC

60.0
6.0%

1,486.1
40.0

1,385.4

6.1%

4.0%

1,288.8

400.0

20.0

2.0%

200.0
0.0

0.0
FY2012FY2013

Net sales (left)

FY20140.0%

FY2015FY2012FY2013

FY2014FY2015

Operating income (right)

 Net sales

Net sales rose, buoyed mainly by contributions from Aerospace, Motorcyle & Engine and Gas Turbine & Machinery segments

 Operating income

Offset effect of slower growth in emerging markets, primarily through higher net sales, successful cost cutting and merits ofdepreciation of the yen

Higher earnings and improved capital efficiency pushed ratio into double-digit territory, but fiscal 2015 level adversely
affected by the booking of extraordinary losses on shipbuilding joint venture in Brazil*Before-tax ROIC (return on invested capital) =EBIT (Income before income taxes + Interest expense) / Invested capital at year-end (Interest-bearing debt + Shareholders’ equity) Before-tax ROIC*© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved3Improved Financial Position
Changes in Interest-bearing Debt
and Free Cash Flow
484.6
444.6
414.3
398.4
74.1

(Billion yen)

500.0
400.0

(Billion yen)

60.2

300.0
200.0

11.8

100.0

140.0%

100.0
80.0

120.0%

60.0

100.0%

40.0

80.0%

20.0

131.9%
109.3%
83.9%

82.5%

FY2014FY2015

60.0%

0.0

0.0
FY2012FY2013

FY201440.0%

FY2015▲ 100.0▲ 20.0▲ 200.0▲ 40.0▲ 300.0

Changes in Net Debt Equity Ratio▲ 60.0▲ 53.0Interest-bearing debt （left）

20.0%
0.0%
FY2012FY2013

Free cash flow (right)

Results achieved during MTBP 2013
Free cash flow

¥146.2 billion created (MTBP 2010 saw -¥5.2 billion)Interest-bearing debt

Down ¥86.2 billionNet debt equity ratio*

Down 49.3%* Net debt equity ratio = Net interest-bearing debt (Interest-bearing debt - Cash on hand and in banks) / Shareholders’ equity© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved4Degree of Success in Reaching MTBP 2013 Targets(Billion yen)

FY2013
ActualLevel of
Achievement

95.9

90.0

○

5.2%

5.8%

6.2%

5.6%

○

60.6

84.2

93.2

85.0

○

4.3%

5.6%

6.0%

5.3%

○

Before-tax ROIC

8.1%

10.4%

9.4%

11.0%

△

Ratio of shareholders’equity to total assets

23.3%

25.9%

26.6%

23.4%

〇

Interest-bearing debt

444.6

414.3

398.4

430.0

〇

Net debt equity ratio

109.3%

83.9%

82.5%

110%

〇

Net sales

1,385.4

1,486.1

1,541.01,600.0△¥99.63/$¥109.51/$¥118.99/$¥95/$

Recurring profit(Ratio to net sales)

GrowthFY2015
Original Target

87.2(Ratio to net sales)

Stability

FY2015
Actual

72.3

Operating income

Profitability

FY2014
ActualActual/assumed exchange rates© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

5

Ⅱ. Picture of Business in 2025©
6 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

6

Positioning of MTBP 2016
Group Mission/Group Vision••

MTBP 2016
 Measures and plans for
immediate three years with view
10 years down the road
 Investment and strengthening ofbusiness foundation for mediumto long-term growth Response to changes in businessenvironment and issues requiring
attention

Picture of business 10 years on
Quantitative view of FY2025

Rethink Kawasaki Business Vision
2020

Realization of Group Mission and Group Vision
Picture of business 10 years on

MTBP 2016(FY2016-2018)
FY2016

Action plan

FY2018© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2025

7

Corporate IdealGroup Mission“Kawasaki, working as one for the good of the planet”(Enriching lifestyles and helping safeguard theenvironment: Global Kawasaki)Group VisionPrincipal Business Sectors of Kawasaki
Group
Air Transportation
Systems

Land/Sea Transportation
Systems

New value creation driven by technology

Products and services that open up possibilities
for customers and society

Adaptability to changes in business environmentPortfolio that delivers both profitability andstabilityContinuous growth investment



Development and utilization of diverse humanresources© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Energy & Environmental
Engineering

ROBO-MECH(Coined from“Industrial Equipment”)

Continuous enterprise value
improvement

High level of cash flowSolutions to social problems
through business

Stable return to shareholders

8Prospective Business Environment in Fiscal 2025

Developed
Countries

Economic GrowthSocial Issues

Technology innovation
Tapped into economic growth inemerging markets
Stable growth

Graying of society and shrinking
workforce

Spread of Globalization
 Increasingly dynamic movement of people,
things and money across national borders
 Heightened competition amongcorporations

Emerging
Countries

Larger population and better income
statusHigh-level growth© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Insufficient social infrastructure
More environmental risks

9Key Products and Services That Drive Growth

Air Transportation
Systems
Commercial aircraft
Commercial aircraft jetenginesEnergy & Environmental
Engineering

Distributed power generation
Oil and gas

Land/Sea Transportation
SystemsRolling stock for overseas
markets© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

ROBO-MECH

Industrial robots
Medical robots

10Predicted Sales from Key Products and Services
That Drive Growth(Billion yen)

【Robots, including Medicaroid】
Expand demand for human-friendly robots
that coexist with humans and for medical
robots1,000.0

800.0【Energy】
Aggressively expand demand for gas turbinesand gas engines, not only in Japan but foroverseas markets as well

600.0

【Rolling stock for overseas markets】
Tap into railroad infrastructure projects,
which are on the rise against a backdrop ofgreater urbanization

400.0【Commercial aircraft jet engines】
Returning period on new projects (higher
sales not only from engines but from aftermarket services as well)

200.0【Commercial aircraft】
Stable growth paralleling wider demand overmedium- to long-term

0.0
FY2013

FY2015

FY2020© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY202511

Steady Improvement in Profitability
Changes in Composition of Net Sales by Business Segment
and Operating Income Margin■ Air Transportation Systems

FY2025 (Ideal)

FY2018 (Target)■ ROBO-MECH■ Energy & Environmental Engineering■ Land/Sea Transportation Systems■ Other

27%
3%

FY2012

29%
5%
26%
38%

30%

4%

FY2015

Operatingincomemargin
3.2%

39%

38%

Operatingincomemargin
6.2%

17%
16%

18%

Operatingincome margin
5.7%

30%
Operatingincome marginMore than 9%

20%

20%

14%

13%

13%
Improve profitability in each business segment

Business portfolio designed to deliver highprofitStrengthen core competence

New products and businesses using high-tech
capabilities and synergies

Raise ratio of net sales contribution for highprofitability businessesInnovations in monozukuri utilizing IoT and robots

Prioritize investment into air transportation,
robots and energy© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

12New Products and Businesses of the Future© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

13New Products and Services Using ICT/IoT© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

14Picture of Business in 2025
Kawasaki Group Growth hinging on key investment areas of air transportation, robots and energy
 Enhanced enterprise value through portfolio boasting high profitability, sustainable growth andstability
Air Transporation Systems

Land/Sea Transportation Systems

 Steady growth paralleling extended demand foraircraft worldwide

 Growth by tapping into overseas demand,
especially in emerging markets

 System integrator, module supplier Promoted high-value-added products,
underpinned by technological capabilities andbrand strength High profitability through after-market/MRO*
business*Maintenance, Repair, Overhaul

Energy & Environmental Engineering Growth fueled by wider demand for distributed
power generation and oil & gas
 Promoted solution-style business and system
marketing Leader toward realization of hydrogen society© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved Global production structure
ROBO-MECH
 Expanded business sectors for human-friendly
robots that coexist with humans and for medical
robots Promoted products maximizing synergy
between robots and hydraulic component
 Top brand in motion control

15

Quantitative View of Fiscal 2025
FY2012 (Actual)

FY2015 (Actual)

FY2018 (Target)

FY2025 (Ideal)

Before-tax ROIC

6.1%

9.4%

11.0%

14% or higher

Operating income margin

3.2%

6.2%

5.7%

9% or higher

Return-on-equity (ROE)

9.5%

10.6%

14.0%

15% or higher¥28.1 billion¥86.0 billion¥140.0 billion¥200.0 billion or
higherTotal asset turnover (times)

0.87

0.95

1.00

1 or more（Reference value: Net sales）(¥1,288.8 billion)(¥1,541.0 billion)(¥1,740.0 billion)(¥2,400.0 billion)

Operating cash flow

16.0%

Changes in Operating Income Margin and Before-tax ROIC
Above 14%
11.0%

12.0%

8.0%

9.4%
6.1%

Above 9%
6.2%

4.0%

5.7%

3.2%
0.0%
FY2012 (Actual)

FY2015 (Actual)
Operating income margin© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018 (Target)

FY2025 (Ideal)

Before-tax ROIC
16

Ⅲ. Medium-term Business Plan
“MTBP 2016” (Group Targets)©
17 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

17Basic Direction of MTBP 2016
Business Environment During MTBP 2016
 U.S. economy expanding, other developed countries in moderate growth Growth rate in emerging markets sluggish at present → Should return to growth track in
FY2018
 Exchange rates in low yen to be revised (assumed exchange rate during MTBP 2016:¥110/$)
 Price of oil currently shifting low → Expect West Texas Intermediate price recovery to $60
by end of 2017

Basic Direction 1
Further progress on
Kawasaki-ROIC Management

Basic Direction 2
Investments targeting
medium- to long-term growth Status update on KawasakiROIC Management

 R&D

 All employees engaged in
Kawasaki-ROIC Management Spotlight on hydrogen business CAPEX

Basic Direction 3
Business realignment
 Ship & Offshore Structure
Business Hydraulic Machinery Business Enhance risk management
position© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

18Basic Direction 1 — Further Progress on Kawasaki-ROIC Management- Status update on Kawasaki-ROIC Management【Actions】
Plan and execute growth strategies
Action 1 through the strengthening of corecompetence in each BU
Set our optimal financial indicator,
Action 2 with a focus on ROIC, and create
specific action plans for achievement
Create new value through internal
Action 3 company synergies generated by ourconglomerate advantage
Define scale-down or withdrawal
Action 4 strategies broken down to each SubBU and productAction 5

Create a portfolio focusing on
profitability, stability and growth© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved【Concrete Examples of Progress】
Action 1:
 Began constructing new facility for Boeing
777X
 Full-scale start on development of medical
robots Launched line-builder operations in robot
business
Action 1・2・5：
 Formulated “Picture of Business in FY2025”
under MTBP 2016
Action 3:
 Established CO2-Free Hydrogen Supply
Chain Promotion Association (nicknamed
HySTRA)
Action 4：
 Scaled down offshore vessel business
Action 4・5：
 Completed transfer of KCM Corporation(construction machinery business) to
Hitachi Construction Machinery Co., Ltd.
19

Basic Direction 1 — Further Progress on Kawasaki-ROIC Management- All employees engaged in Kawasaki-ROIC Management

Set targets (KPI*) matched to characteristics of each businesssegment* Key Performance Indicators: Quantitative indicators that measure success in reaching business goals

Efficiency

 Promote Kawasaki-ROIC Management
as endeavor engaging all employees
throughout the Group by setting KPIs
and tracking progress Apply to risk management as wellwhile seeking higher efficiency andgrowthApplication of KPI

GrowthRisk
Management© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

20Basic Direction 1 — Further Progress on Kawasaki-ROIC Management- Enhance risk management position
Pre-bidding/orderThorough front-end engineeringIdentification of latent risksKey project management system Thorough check by specialist
department

Finance

MarketingLarge Projects

After completion

Early identification and cause
analysis of changes in conditions

Follow-up after projectcompleted

Track project balance sheets,
cash flow
Use KPIs to check for unusual
numbersProject review
Know-how accumulation

Risk control


Production

Post-orderGauge risk volume (lossamounts)
Imagine risk scenarios, and draft
and implement measures in
response

Feedback for use in
next projectProcurement

Legal
Technology© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

21Basic Direction 2 — Investments Targeting Medium- to Long-term Growth- CAPEX

Changes in CAPEX (Acquisition Basis) During Each
MTBP (Cumulative)

MTBP 2016 (Forecast)■ Air Transportation Systems

10%

MTBP 2013 (Actual)■ ROBO-MECH■ Energy & Environmental Engineering■ Land/Sea Transportation Systems■ Other

17%

MTBP 2010 (Actual)

25%
38%

24%

Total
¥244.1 billion

19%
Total
¥197.8billion27%

Total
About ¥280.0
billion

45%

5%
15%

24%

5%

27%

13%

6%
MTBP 2010 (Actual)
Key Capital
Investment
Projects

Increased production capacity forhydraulic componentFacilities for producing Boeing 787(Nagoya Works I)

MTBP 2013 (Actual)

Facilities for producing jet engines

Increased production of component
parts for Boeing 787 and derivativemodelsFacilities for producing jet engines,
including Trent XWB and PW1100G-JM



Established global structure formotorcycle productionIncreased production of robots for China© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

MTBP 2016 (Forecast)

New plant for Boeing 777X



Facilities for producing jet engines,
including PW1500G/1900G and Trent
7000



Increased production of robots

22Basic Direction 2 — Investments Targeting Medium- to Long-term Growth- R&D

Changes in R&D Investment During Each
MTBP (cumulative)

MTBP 2016 (Forecast)■ Air Transportation Systems

MTBP 2013 (Actual)■ ROBO-MECH

10%■ Energy & Environmental Engineering■ Land/Sea Transportation Systems■ Other

10%

MTBP 2010 (Actual)
13%

12%

Total
¥118.7billion

40%

20%

20%

15%

Total
¥125.6billion

35%

Total
About ¥150.0
billion

22%

20%

15%
13%

42%
13%

Key R&D Projects

MTBP 2010 (Actual)Production technology for Boeing 787

L30A gas turbine, gas engines

Human-friendly robots that coexist
with humans

MTBP 2013 (Actual)Production and assembly technology
for commercial aircraftPower generation system for aircraft

MTBP 2016 (Forecast)Future commercial aircraft

Modules for commercial aircraft jetengines

Robots for emerging markets

Medical robots

Hydrogen-related activities

Hydrogen-related activities© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

23Basic Direction 2 — Investments Targeting Medium- to Long-term Growth- Spotlight on hydrogen businessToward realization of hydrogen energy society
Begin verification of hydrogen supply chain(2020)
Established TechnicalResearch Association
for CO2-free
Hydrogen Energy
Supply Chaindevelopment,
nicknamed HySTRA

Power generation, co-generation markets

Fuel-cell car market

Overseas hydrogen transport and storage

Hydrogen energy supply chain
Production

Liquefication plant

Transportation

Large liquid hydrogen carrier© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Storage

Loading base

Usage

Hydrogen gas turbine
24

Basic Direction 3 — Business Realignment- Ship & Offshore Structure Business (1)Maximize profits through integrated operation of Sakaide Works,
NACKS and DACKS*

Achieve stable business activities at Kobe Works by focusing onsubmarine-related operations



Shrink offshore service vessels business* NACKS and DACKS: Affiliated companies accounted for by equity method as joint ventures with companies in China.

© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

25Basic Direction 3 — Business Realignment- Ship & Offshore Structure Business (2)Submarines

Offshore service
vessels

Profit maximization through integrated operations

Increased
production

Shrink operations

Sakaide Works(mother factory)

Kobe WorksGas carriers

Merchant ships & gas carriers

NACKS

DACKS

Technology
Enhanced profitability throughdevelopment
mass production
Personnel training
Profit/dividends based on equitymethod accounting
Blueprint fees and other support-related
payments
Develop/build newtechnologies & hullforms
Innovative production &control technologies
Accept trainees
Exchange personnel

Shift to high-valueadded ships
Focus on construction of
LNG carriers, ships withdual-fuel engines, andmega-containerships

Rapid expansion ofoperations and profits
Second dock to go into
operation in mid-2018© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Operations focusing on
construction and repair ofsubmarines
Increased production(16 vessels → 22 vessels)

Concentrate on
construction of offshore
service vessels destinedfor Norway

26

Basic Direction 3 — Business Realignment- Hydraulic Machinery Business (1) Make “Kawasaki” top brand in hydraulic market

 Develop business beyond excavators, to construction andagricultural machinery Seek synergies and enhanced efficiency through integrated
operations with Robot Division© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

27Basic Direction 3 — Business Realignment- Hydraulic Machinery Business (2)Make “Kawasaki” top brand in hydraulicmarket Maintain high share but seek even bigger sliceof high-pressure hydraulic equipment market
 Develop and promote products utilizing themost cutting-edge technologies in the world

Seek synergies and enhanced efficiency
through integrated operations with Robot
Division
 Utilize human resources and facilities
effectively
 Produce robots at Kawasaki Precision
Machinery (Suzhou) Ltd., hydraulic component
manufacturing base in China
 Relocate some functions of Robot Division to
Nishi-Kobe Works

Develop business beyond excavators, toconstruction and agricultural machinery Decrease reliance on China’s excavator market

Hydrauliccomponent Enrich lineup of wheel-loaders and products
for agricultural machinery Differentiate with compact, highly efficient andlow-noise products© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Hydrauliccomponent& robots
RobotsSeek synergies andenhanced efficiency

28

Financial Strategy
 MTBP 2013： Improve capital efficiency and push operating income to higher level through Kawasaki-ROIC
Management → Stronger financial position
 MTBP 2016： High level of investing cash flow to fuel future growth → Medium- and long-term growth(Billion yen)

700.0

Gross interest-bearing debt

Net interest-bearing debt

Shareholders' equity

Net debt equity ratio (right)
Investment capacity
exceeding ¥100.0 billion
Use this to accelerate
growth and engage in M&A
and other opportunities for
growth131.9%

600.0

109.3%
500.0

83.9%

140%

120%

100%

82.5%
70～80%

400.0

Operating cash flowMore than ¥110 .0
billion/year

80%

60%

300.0

Toward further
growth200.0

Investing cash flow
Approx. ¥90.0 billion/year

40%

20%

100.0
Stronger financial structure
Secure investment capacity

0.0
FY2012FY2013

FY2014FY2015© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Payout ratio
30%

0%FY201829

Policy on Return to Shareholders
Dividend PolicyStable profits exceeding capital costs → Improvement in enterprise value
Continuous R&D, CAPEX → Improvement in long-term shareholder value
Take future business outlook and financial status into account → Medium- to long-term consoldiated payout ratio
benchmark of 30%

Changes in Consolidated Payout Ratio

50.0%

35.8%

40.0%

43.5%
34.0%

32.3%

30.0%

27.0%

25.9%

FY2012FY2013

19.3%
20.0%
10.0%
FY2010FY2011FY2014FY2016(forecast)

FY2015

Net income (Billion yen) *

25.9

23.3

30.8

38.6

51.6

46.0

49.0

Dividends per share (yen)

3

5

5

6

10

12

10

Number of shares issued(Billion)

16.7

16.7

16.7

16.7

16.7

16.7

16.7

*From fiscal 2015, “Net Income Attributable to Owners of Parent”

Treasury Stock Buybacks
There are no plans at present to execute any repurchase of treasury stock© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved30Quantitative Targets(Billion yen)

FY2012 (Actual)
Operating income

Stability

GrowthActual/assumed
exchange rates

FY2018 (Target)

42.0

95.9

100.0

3.2%

6.2%

5.7%

39.3

93.2

97.0

3.0%

6.0%

5.5%

Before-tax ROIC

6.1%

9.4%

11.0%

ROE

9.5%

10.6%

14.0%

Ratio of shareholders’ equity tototal assets

23.0%

26.6%

More than 30%

Net debt equity ratio

131.9%

82.5%

70～80%

Operating cash flow

28.1

86.0

140.0

Total asset turnover （times)

0.87

0.95

1.00

Orders received

1,369.5

1,693.6

1,740.0

Net sales

1,288.8

1,541.0

1,740.0

Yen/US$

82.86

118.99110

Yen/EUR107.76132.43125(Ratio to net sales)
Profitability

FY2015 (Actual)

Recurring profit(Ratio to net sales)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved31Management Resources Allocation Plan
(Billion yen/person)

FY2012 (Actual)

FY2015 (Actual)

FY2018 (Target)

R&D investment

41.7

43.6

50.0

CAPEX (Note 1)

78.6

76.3

90.0

Depreciation andamortization (Note 2)

48.3

49.0

60.0

Domestic

25,22225,897

27,700Overseas

8,788

8,708

9,300

34,01034,60537,000

Number of employees at fiscal
year-end

Notes: 1. Newly recorded property, plant and equipment and intangible assets
2. Depreciation/amortization expenses for property, plant and equipment and intangible assets© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved32

Ⅳ. Medium-term Business Plan
“MTBP 2016” (Segment Targets)©
33 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved33

Ship & Offshore Structure<Business Vision>

One of the world’s most prominent shipbuilding and offshore structure engineering groups with a focus on businesses involving low-temperature, high-pressure gas
technology, submarine technology and global production structure

MTBP 2016 Outlook
Operating environment

Business and management directions



Prolonged shipping overcapacity due to sluggish growthin cargo movement and large supply of newly built
ships



Movement toward fuel conversion for ships, against
backdrop of strengthening environmental regulations

Persistent slump in oil prices, indicating a bottomingoutChange in competitive environment, highlighted byhuge losses for South Korea’s Big Three and Japan’smajor companies, and a targeted selection of shipyards
in ChinaEmphasize technology/product development with 10year perspective, especially such as LNG-fueled
vessels/LNG fuel supply ships, IoT-utilizing, liquefiedhydrogen carriers, new-type submarines, application ofsubmarine technology
Expand profits through integrated operations at
Sakaide/NACKS/DACKS* (Sakaide Works, as motherfactory, will forward results from advanced technology
development, new ship development, production
technology/control technology and investment in factory
automation to NACKS and DACKS)

Operating Income (Billion yen)Orders Received and Net Sales(Billion yen)

4.1

Orders received
Net sales
105.7
90.3

140.0
98.3 94.8

1.5

Toward achieving FY2018 targets


Boost sales and reinforce profitability at NACKS/DACKS(Start operations at DACKS No.2 dock)

Trim fixed costs at domestic operations, pursue cost
cutting on existing orders for ships* NACKS and DACKS: Affiliated companies accounted forby equity method as joint ventures with companies in
China.

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC
17.3%

110.0

6.1%
4.6%

1.3%
-8.3%

-7.9
FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved-38.4%FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)34

Rolling Stock<Business Vision>

Most trusted rolling stock systems manufacturer, drawing on top-notch teamwork and top-level technology and quality to deliver dreams and inspiration tocustomers around the world

MTBP 2016 Outlook
Operating environment

Business and management directions



Domestic: Amid flat demand for new rail cars, market
seeks value across overall product lifecycle, and demandfor high-value-added components likely to riseNorth America: Thriving demand for subway andcommuter train systems to continue, and demand forstock-style businesses, such as components andmaintenance, to expandDomestic: Differentiate with high-value-added productsthat leverage synergies and high-tech expertise built oncomprehensive heavy industry strengths as well as
ability to provide value across whole product lifecycleNorth America: Tap into constant order activity for new cars on high-share northeastern corridor, and actively
promote high-profit stock-style business underpinned by 
delivery record exceeding 4,000 cars

Asia: Demand for new railcars to parallel opening of newlines and replacement in Taiwan and Singapore, andbrisk demand for system projects in emerging Asia
markets

Orders Received and Net Sales

14.0

Orders received
Net sales

124.4 129.9

Asia: Secure revenue base in markets, particularly
Taiwan and Singapore, where Kawasaki brand is known
for excellence, and develop wider presence in emerging
markets with growth potential

Operating Income (Billion yen)(Billion yen)

Toward achieving FY2018 targets

200.0 200.0

Solidify sales position with Shinkansen (bullet trains) for
JR, electric train cars for domestic private railways, andcommuter train cars for North American market, andexpand sales in Asia
Deepen cost-cutting efforts on existing orders/projects
Reinforce bogie business through promotion of efWING
Expand earnings through wider presence in stock-stylebusinesses

Respond to orders for systems, on the rise, and bundled
projects for rail cars and maintenanceStrengthen existing and peripheral businesses throughM&A and alliances

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC

11.7%

9.2

146.6
132.1

4.6%
2.2

13.1%

6.3%

7.0%

FY2015(Actual)

FY2018(Target)1.7%
FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018(Target)

FY2012(Actual)35

Aerospace<Business Vision>

A leader in Japan’s aerospace industry and an aircraft manufacturer with international competitiveness in terms of quality, cost and on time delivery

MTBP 2016 Outlook
Operating environment

Business and management directions

Toward achieving FY2018 targets

Defense Dramatic increase in defense budget unlikely
 New trends, including bulk procurement contracts
covering several fiscal years

Defense Steady progress on existing development projectorders and production contracts
 Expand orders for new projects

Defense Complete XC-2 development, and push ahead withsteady production contracts of P-1 patrol aircraft
and C-2 transport aircraft

Commercial
Commercial
Commercial
 Push ahead on development of Boeing 787-10 and  Emphasize enhanced productivity through KPS*
 Average annual growth in air passenger and airactivities to offset causes of reduced earnings,
respond to production increases
freight volume to increase about 5% over medium
namely drop in number of Boeing 777 deliveries
 Smooth start on Boeing 777X
to long termand start-up of 777X
 Tough pricing environment against backdrop
characterized by competition between Boeing and*KPS: Kawasaki Production System
Airbus for market share

Orders Received and Net Sales

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC

Operating Income (Billion yen)(Billion yen)

45.6

Orders received
Net sales

464.2
351.8

283.4
239.1

33.9%

320.0
300.0

24.0
15.9%

14.8

11.2%
12.9%
7.5%

6.1%
FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)36

Gas Turbine & Machinery<Business Vision>

Global equipment and system manufacturer in transportation systems and energy & environment sectors

MTBP2016 Outlook
Operating environment

Business and management directions

Jet Engines
 Commercial aircraft market to sustain favorable growth New-type engines to gradually shift into mass
production, with after-market services to rise from fiscal
2018 onward
Energy & Environmental Engineering Construction/full operation of distributed power
generations
 Increase in after-market demand from fiscal 2018
onwardMarine Lackluster offshore vessel market conditions paralleling
low oil prices
 LNG-powered ships beginning to appear

Jet Engines
 Enhance presence in jet engine sector by improving
development capabilities

Jet Engines
 Implement planned reinforcement of production
capabilities over whole supply chain to boost output

Energy & Environmental Engineering Expand share in distributed power generation market
with industry’s most efficient, environment-friendly
performance equipment

Energy & Environmental Engineering Accelerate overseas expansion, especially in SoutheastAsia Enhance product competitiveness by developing highefficiency equipment

Marine Strive to expand share by developing and bringing tomarket next-generation marine equipment and systems,
and take a spot among the world’s top manufacturers(Billion yen)

16.9

Orders received
Net sales

255.5
207.0

MarineOperating Income (Billion yen)Orders Received and Net Sales

Toward achieving FY2018 targets

16.5

345.0

Strive to strengthen competitive edge and enhance
product lineup through debut of new-type propulsion
systems and marine gas engines, and promote shift tosystems
Maintain stable profitability with after-market services

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC

8.8%

290.0

288.9
236.4

5.3%

7.0

8.5%

7.1%
4.7%

3.3%
FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)37

Plant & Infrastructure<Business Vision>

Emphasizing energy and environment, to become a distinctive plant manufacturer that provides products and services to help protect the global environment andalso earn high customer satisfaction through technologies and quality underpinned by high product development expertise and engineering know-how

MTBP 2016 Outlook
Operating environment

Business and management directions

Toward achieving FY2018 targets

Domestic
 Stable shift in replacement demand for refuse
incineration plants
 Increase in number of material handling systems
and ash treatment facilities for coal-fired thermal
power plants
 Increase in number of shield machines for civilengineering projects in Kanto area
Overseas Plans delayed on such projects as LNG tanks andindustrial plants, mainly due to drop in oil prices,concern over economic slowdowns in emerging
markets and resource-producing countries, andheightened geopolitical risk

 Improve profitability: Carefully select orders withemphasis on profitability over scale, ensure
thorough risk management on upstream
processes, and improve estimate accuracy Improve profitability through committed approachto careful project selection

 Ensure stability: Execute projects mindful of
human resources, assign engineers flexibly inresponse to market trends, and emphasize QCD
management

 Steady progress toward completion of existingordersOrders Received and Net Sales

Operating Income (Billion yen)

 Seek growth: Develop market for next-generation
products by improving upon existing products, andpromote hydrogen projects(Billion yen)Orders received
Net sales

113.6 115.8

138.7 135.6

10.0

9.7
160.0

8.5

145.0

 Reduce failure costs, such as cost of defective
work and guarantees on construction

 Transfer technologies and know-how to next
generation of engineers and develop skills ofhuman resources

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC

21.2%

8.4%
FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018(Target)

FY2012(Actual)

17.5%

17.3%

6.2%

6.8%

FY2015(Actual)

FY2018(Target)38

Motorcycle & Engine<Business Vision>

Guided by “Kawasaki, working as One” philosophy, grow and endure as manufacturer with core competence underpinned by high brand power firmly rooted incustomer value, product competitiveness far exceeding that of other companies and efficient management at world class level and with primary focus on domains
with high value-added in the power sports and general-purpose engine markets

MTBP 2016 Outlook
Operating environment

Business and management directions

 Set prices based on high brand power firmly
rooted in customer value
 Establish development structure to maintain
constant market debut of attractive new models
 Strive for efficient operation through integrated
 Product competitiveness far sharper than that ofoperations of sales and manufacturing basesother companies
globally, with emphasis on faster R&D, more
Be frontrunner with product development structure
efficient marketing practices and optimized supply
geared to customer requirementschain Generate investment capacity by reinforcing profit Industry’s highest management efficiency
making capabilities and improving free cash flow
Build efficient management structure throughto capitalize on growth markets of the future
realignment according to functions of consolidated
companies

Motorcycles
 Economic conditions in developed countries
showing gradual recovery but competition isintensifying due to pricing strategies of othercompanies
 Economic conditions in emerging markets remain
sluggish at present but should return to growth
track in 2018, with competition getting fierce asother companies debut new products
General-purpose engines
 Gradual recovery in number of housing starts in
the United States, heralding favorable shift indemand for engines for yardcare market

 High brand value
Create brand that is clearly different from othercompanies and is worth a higher priceNet Sales (Billion yen)

Operating Income (Billion yen)

333.5

Toward achieving FY2018 targets

350.0

21.0

15.7

251.8

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC

14.1%

3.4%

2.3

0.9%
FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

16.8%

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018(Target)

FY2012(Actual)

4.7%
FY2015(Actual)

6.0%
FY2018(Target)39

Precision Machinery<Business Vision>

World’s top brand in motion control, creating and providing total solutions for providers of medical and healthcare services and for various industries, including
automobile, construction machinery and electronic equipment, with a focus on hydraulic components and robots boasting a level of performance and quality far
surpassing that of other companies

MTBP 2016 Outlook
Operating environment

Business and management directions

Hydraulic equipment
 Sluggish construction machinery market in China
 Global construction machinery market should hit bottom in fiscal
2016 and start gradual recovery
 Heightened pressure to drop prices on marine equipment, owing
to low ship prices
 Heightened interest in energy-saving, differentiated products forindustrial machinery market

Hydraulic equipment
 Maintain high share of excavator market but strive to expand Develop business beyond excavators, to construction andagricultural machinery sectors
 Explore business potential for industrial machinery and marine
application machines
Robots Increase current market share Develop and debut new technologies and new types of humanfriendly robots that coexist with humans
 Actively promote innovative development of robots for medical
applications

Robots Wider use of robots for automobile production, not only in
welding and painting but also assembly Increased demand for semiconductor, electric appliance,electronics and other industrial sectors overall
 Progress in application of robots in non-industrial sectors, such as Both
 Pursue efficiency by demonstrating synergistic effect as businessmedical services and nursing caresegment comprising Hydraulic Machinery and Robot Division

Operating Income (Billion yen)Orders Received and Net Sales(Billion yen)

18.5

Orders received
Net sales

109.7

130.4

200.0

185.0

133.1 133.1

Toward achieving FY2018 targets
Hydraulic equipment
 Expand sales by having components incorporated into products
made in-house by major global construction machinery
manufacturers and by promoting sales beyond excavators toconstruction machinery and agricultural machinery sectors
 Enrich lineup featuring world’s most cutting-edge technologies,
and sharpen competitive edge
 Apply wide-ranging technology to products, from high-pressure,large-capacity components to fluid-pressure microactuators for
medical robots, and expand after-market services
Robots Increase sales by cultivating demand in emerging markets
 Use new technologies and higher level technology for humanfriendly robots that coexist with humans, to expand sales
 Expand service business using IoT
 Strengthen brand profile of Kawasaki robots

Operating Income Margin and
Before-tax ROIC
Operating income margin
Before-tax ROIC

14.0%
8.4

16.1%

9.5%

8.5

10.0%

FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018(Target)

6.4%

6.4%

FY2012(Actual)

FY2015(Actual)

FY2018(Target)40

Quantitative Targets by Segment (1)(Billion yen)Orders Received

Net Sales

Operating Income

FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)Ship & Offshore
Structure

105.7

98.3

140.0

90.3

94.8

110.0

4.1

-7.9

1.5

Rolling Stock

124.4

132.1

200.0

129.9

146.6

200.0

2.2

9.2

14.0

Aerospace

283.4

464.2

300.0

239.1

351.8

320.0

14.8

45.6

24.0

Gas Turbine &Machinery

255.5

288.9

290.0

207.0

236.4

345.0

7.0

16.9

16.5

Plant &
Infrastructure

113.6

138.7

160.0

115.8

135.6

145.0

9.7

8.5

10.0

Motorcycle &Engine

251.8

333.5

350.0

251.8

333.5

350.0

2.3

15.7

21.0

Precision
Machinery

109.7

133.1

200.0

130.4

133.1

185.0

8.4

8.5

18.5

Other

125.1

104.4

100.0

124.2

108.8

85.0
-6.7

-0.8

-5.5

42.0

95.9

100.0

Eliminations andcorporate*
Total

-

-

-

-

-

-

1,369.5

1,693.6

1,740.0

1,288.8

1,541.0

1,740.0* “Eliminations and corporate” includes some expenses incurred at Head Office but not allocated to any particular business segment for internal reporting.

© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

41

Quantitative Targets by Segment (2)Before-tax ROIC((EBIT + Interest Expense) /Invested Capital)

Operating Income Margin(Operating Income / Net Sales)

Asset Turnover (Times)(Net Sales / Total Assets)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)

FY2012(Actual)

FY2015(Actual)

FY2018(Target)Ship & Offshore
Structure

17.3%-38.4%

6.1%

4.6%

-8.3%

1.3%

0.80

0.61

0.70

Rolling Stock

4.6%

11.7%

13.1%

1.7%

6.3%

7.0%

0.79

0.85

1.00

Aerospace

15.9%

33.9%

11.2%

6.1%

12.9%

7.5%

0.76

0.92

0.70

Gas Turbine &Machinery

5.3%

8.8%

8.5%

3.3%

7.1%

4.7%

0.82

0.75

0.90

Plant &
Infrastructure

21.2%

17.5%

17.3%

8.4%

6.2%

6.8%

1.00

1.12

1.20

Motorcycle &Engine

3.4%

14.1%

16.8%

0.9%

4.7%

6.0%

0.92

1.36

1.35

Precision
Machinery

14.0%

9.5%

16.1%

6.4%

6.4%

10.0%

1.13

0.93

1.00

Total

6.1%

9.4%

11.0%

3.2%

6.2%

5.7%

0.87

0.95

1.00

© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved42Figures recorded in the business forecasts are forecasts that reflect the judgment of the Company based on theinformation available at the time of release and include risks and uncertainties. Accordingly, the Company cautions
investors not to make investment decisions solely on the basis of these forecasts.
Actual business results may differ materially from these business forecasts due to various important factors resulting
from changes in the external environment and internal environment. Important factors that may affect actual
business results include, but are not limited to, economic conditions, the yen exchange rate against the U.S. dollar
and other currencies, the tax system, and laws and regulations.

© 2016 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

43