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Kurita Water Industries Ltd.
Results Presentation for 1st Half Ended 9/30/04

November 9, 2004

Table of Contents

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Financial Results of First Half Ended September 30, 2004
1st Half Ended Sep. 30, 2004: Topics

・・・・・・・・・・・・・・・・・・・・・・・ 1

1st Half Ended Sep. 30, 2004: Earnings Results Highlights

・・・・・・・・・・・・・・ 2

Results of 1st Half Ended Sep. 30, 2004: Orders

・・・・・・・・・・・・・・・・・・・ 3

Results of 1st Half Ended Sep. 30, 2004: Sales

・・・・・・・・・・・・・・・・・・・ 4

Results of 1st Half Ended Sep. 30, 2004: Operating Income

・・・・・・・・・・・・・・ 5

Results of 1st Half Ended Sep. 30, 2004: Analysis of Change in Operating Income

・・・・ 6

Results of 1st Half Ended Sep. 30, 2004: Capital Expenditure/Depreciation/R&D Expenses
1st Half Ended Sep. 30, 2004: Summary of Business Performance

・7・・・・・・・・・・ 8

Business Plan for the Fiscal Year Ending March 2005
Assumptions of the Business Plan
Business Plan: Overview

・・・・・・・・・・・・・・・・・・・・・・・・ 9・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 10

Business Plan: Earnings by Segment・・・・・・・・・・・・・・・・・・・・・・・ 11

Business Plan: Operating Income Margin by Segment・・・・・・・・・・・・・・・・ 12

Efforts Toward Achieving the Business Plan (1)・・・・・・・・・・・・・・・・・・・ 13

Efforts Toward Achieving the Business Plan (2)・・・・・・・・・・・・・・・・・・・ 14

Efforts Toward Achieving the Business Plan (3)・・・・・・・・・・・・・・・・・・・ 15

Efforts Toward Achieving the Business Plan (4)・・・・・・・・・・・・・・・・・・・ 16

Business Plan: Analysis of Change in Operating Income

・・・・・・・・・・・・・・・ 17

Business Plan: Capital Expenditure/Depreciation/R&D Expenses

・・・・・・・・・・・ 18

平成16年度中間決算報告

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Financial Results ofFirst Half Ended September 2004

1st Half Ended Sep. 30, 2004: Topics

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Manufacturing
Manufacturing

Establishment
Establishmentand
andlaunchlaunchof
ofKurita
Kurita(Suzhou)(Suzhou)asasthe
themanufacturing
manufacturingcenter
centerofwater
treatment
facilities
inChinaof water treatment facilities in China
Decision
Decisionmademadetotoconsolidate
consolidatethree
threechemicalchemicalmanufacturing
manufacturinglocations
locationsinto
intotwolocations
two locations

Development
Development

Decision
Decisionmademadetotoconsolidate
consolidateR&D
R&Dcenters
centers

LaunchLaunchofofhydrogenhydrogenfuelingfuelingstations
stations

MarketingMarketingTwo
Twowaterwatertreatment
treatmentdistributing
distributingagentsagentshadhadbecomebecomefully
fullysubsidiaries
subsidiaries
Promotion
Promotionof
ofthe
theTaiwan
Taiwanrepresentative
representativeoffice
officeto
tomarketing
marketingoffice
officestatus
status
Decision
Decisionto
topromotepromoteShanghai
Shanghaioffice
officeof
ofKurita
KuritaDalian
Dalianto
tobranchbranchstatus
status11st Half Ended Sep. 30, 2004: Earnings Results Highlights

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（billion yen））

1H ended
9/03(Actual)1H ended
9/04(Projected)

1H ended
9/04(Actual)Orders

78.2

84.5

84.7

Net Sales

64.6

72.0

Gross Profit

20.9

Operating
IncomeChange versus
projected
amountChange versus
previous year

percentage

amountpercentage

+0.2

+0.2%

+6.5

+8.3%

71.2

-0.8

-1.2%

+6.6

+10.2%

22.6

23.1

+0.5

+2.3%

+2.2+10.4%

4.2

5.6

6.4+0.8+15.0%+2.2+52.5%

Ordinary
Income

4.4

5.7

6.8+1.1+18.6%+2.3+52.7%

Net Income

2.4

3.2

3.8+0.6+19.8%+1.4+58.8%

zOrders exceeded projections due to strong orders in chemicals and in
facilities to the electronics industryz

Net sales grew year-on-year although still short of projectionz

Operating income exceeded projections while lower-than-expected SG&A
expenses2

Results of 1st Half Ended Sep. 30, 2004: Orders

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z Orders of water treatment chemicals exceeded projections due to recovery in coolingwater treatment and growth in pulp and paper chemicals
z Orders of facilities from the electronics industry exceeded projections
projections as investments forsemiconductors and FPD (flat panel displays) remained strongz Orders of facilities from the general industry grew yearyear-onon-year as capital expenditure

remained on a recovery trend especially in the basic materials industry
industry(billion yen)
100

80

78.2

Water treatment chemicals
Water treatment facilities

84.7
25.6

24.2

chemicals

装置：電子産業

84.5

26.260electronics industry

装置：一般産業
general industry
装置：官公需40

public sector

200

27.4

23.0
12.8

28.1
58.9

54.0

58.4

18.2

15.8

18.2

13.3

14.5

1H ended 9/03(Actual)

1H ended 9/04(Projected)

1H ended 9/04
(Actual)3

Results of 1st Half Ended Sep. 30, 2004: Sales

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z

In the chemical segment, sales of cooling water treatment, pulp and paper
chemicals and contractcontract-based services increasedz

Sales of facilities to the electronics industry grew reflecting an increase inorders and firm maintenance businessz

Sales of facilities to the public sector increased reflecting an increase in orders
received in the previous year
(billion yen)

80

71.2

72.0
64.6
Water treatment chemicals

60

24.6

23.7

薬品
Water treatment facilities

24.8

装置：電子産業
electronics industry
装置：一般産業

40

general industry

装置：官公需24.6

18.6

public sector

047.4

40.9

20

23.4
46.4

15.3

15.3

14.5

7.0

7.5

8.5

1H ended 9/03
(Actual)1H ended 9/04
(Projected)

1H ended 9/04
(Actual)4

Results of 1st Half Ended Sep. 30, 2004: Operating Income

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z

The chemical segment exceeded projections as highhigh-margin products such as pulp andpaper chemicals grewz

In the water treatment facilities segment, increase in sales to the electronics industry
and strong maintenance services contributed toward a growth in profits
profits(billion yen)

87
Water treatment chemicals

6

Water treatment facilities

5装置：電子産業

electronics industry

4

装置：一般産業
general industry

3

装置：官公需2

薬品

public sector

1
0

6.4

5.6
4.2

3.9

3.7
3.3
2.4

2.3
1.3
0.4
-0.8

-1

1.9
0.9

0.5-0.9

0.5-0.4

1H ended 9/04
(Projected)

1H ended 9/04
(Actual)2.5-2
1H ended 9/03
(Actual)5

Results of 1st Half Ended Sep. 30, 2004:
Analysis of Change in Operating Income

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z

Improvement in profit margin owing to launch of new chemical products
productsz

Improvement of profits due to revenue growth in both the chemicalchemical segment and thewater treatment facilities segmentzGroup affiliates contributed to an increase in profits through improved
improved profitabilityand revenue growth(billion yen)
2.522.2

2.1
1.5
10.5

0.8

0.03

0-0.5-1

Effect ofcost reduction-0.75
Changes in prices
and profit margin

Effect of revenue
increase due togrowthin volume, etc.

Change in
SG&A expenses

Net change inoperating income(billion yen)

Operating
Income1H ended 9/03
(Actual)1H ended 9/04
(Actual)

4.2

6.4

change+2.2% change+52.5%
6

Results of 1st Half Ended Sep. 30, 2004:
Capital Expenditure/Depreciation/R&D Expenses
zThe main capital expenditure was related to the acquisition of businessfacilities for the ultrapure water supply businessz

R&D expenses declined due to streamlining and a portion of it was carriedover to 2H

Capital expenditure(billion yen)5

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Depreciation

R&D expenses(billion yen)
2.5

4.7

2.2

4

2

2.8

3

2

2.1

1.6

1.5

1.6

11

0.5

00

1H ended 9/03
(Actual)1H ended 9/04
(Actual)1H ended 9/03
(Actual)1H ended 9/04
(Actual)7

1st Half Ended Sep. 30, 2004: Summary of Business Performancewww.kurita.co.jp
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InInthethechemicalschemicalssegment,segment,profit
profitprojection
projectionwas
wasachievedachievedthroughthroughrevenue
revenue
growthandefforts
toimprove
profitmargins
growth and efforts to improve profit margins

In
Infacilities
facilitiesto
tothetheelectronics
electronicsindustry,
industry,thetheultrapure
ultrapurewater
watersupply
supplybusinessgrew
steadilywhilemaintenancebusiness
also
expandedbusiness grew steadily while maintenance business also expanded

OrdersOrdersfor
forfacilities
facilitiesfrom
fromthethegeneralgeneralindustry
industryincreased,increased,helped
helpedmainly
mainlybythestrong
demandfromthebasicmaterials
industryby the strong demand from the basic materials industry

Overseas
Overseasbusinesses
businessesare
areoperating
operatingin
inlinelinewithwithoriginal
originalprojections
projections

Eco-Solution
Eco-SolutionGroup
Groupisisachieving
achievingsteadysteadygrowth
growthof
oforders
orders8

平成16年度

計画

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Business Planfor the Fiscal Year Ending March 2005

Assumptions of the Business Plan

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MarketMarketOutlook
Outlook【Water Treatment Chemicals】
z Operating ratios among Japanese corporations remain at high levelsz Increasing demand for solution business from clientsz Existing pressure of rising costs as prices of raw materials surge【Water Treatment Facilities】
z Capital expenditure by the domestic electronics industry remains

strongz Capital expenditure for LCD in South Korea and basic materials

industry/electronic components in China remain firmz Increasing needs for reinforcement of facilities and renewed capital

expenditure, and demand for solutions in the domestic generalindustryz Budget cuts in the public sector
9Business Plan: Overview

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(billion yen)
Change versus previousyear

FY ended 3/04(Actual)

FY ending 3/05
(Initial projection)

FY ending 3/05
(Revisedprojection)amountOrders

149.7

168.0

168.0

+18.3+12.2%

Net Sales

146.8

161.8

161.8

+15.0

+10.2%

Gross profit

45.4

50.8

50.8

+5.4

+11.9%

31.9

33.7

33.7

+1.8

+5.7%

13.5

17.1

17.1

+3.6

+26.8%

0.4

0.3

0.6

+0.2

+33.9%

Ordinary income

13.9

17.4

17.7

+3.8

+27.0%

Specialgains/losses

1.0--0.3-1.3-8.4

10.0

10.0+1.6+18.4%

SG&A expensesOperating income
Net Non-operating
Income/expenses

Net income

percentage【Main Strategies】
z

Accelerate “aggressive”
aggressive” business expansion both domestically and overseaszRaise profitability of new business models as well as bolster new
new product development andlaunch of new businesseszEnhance profitability through cost reduction
10

Business Plan: Earnings by Segment
OrdersOrders(billion yen)

180
149.7

135

50.8

50.8

54.4

48.4
102.2

450

180

168.0

47.5

90SalesSales(billion yen)

168.0

117.2

135

117.2

45

27.8

36.8

35.8

25.0

26.0

25.0

FY ended 3/04(Actual)

FY ending 3/05
(Initial projection)

FY ending 3/05
(Revised projection)

0161.8

161.8
146.8

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50.2

50.2
47.4
53.0

45.1
99.4

55.0
111.6

111.6

30.2

33.6

32.6

24.1

25.0

24.0

FY ended 3/04
(Actual)FY ending 3/05
(Initial projection)

FY ending 3/05
(Revised projection)

OperatingOperating incomeincome(billion yen)

20

17.1

17.1
15

Water treatment chemicals

13.5

7.9

7.9

Water treatment facilities

6.6

electronics industry

10
5.9

5

4.9
0.70

6.9

1.96.39.2

1.7

general industry
9.2

1.3

1.4

1.2

FY ended 3/04
(Actual)FY ending 3/05
(Initial projection)

FY ending 3/05
(Revised projection)

public sector

11Business Plan: Operating Income Margin by Segment

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OperatingOperating Income
Income Margin
Margin ofofWater
Water Treatment
Treatment Facilities
Facilities Segment
Segment

OperatingOperating Income
Income Margin
Margin byby Segment
Segment

Water treatment facilities for the electronics sector

Operating income margin for water treatment chemicals

Water treatment facilities

Operating income margin

Water treatment facilities for the public sector
Operating income margin for water treatment facilities

Water treatment facilities for general industry

2015(%)

1510

15.7
14.0

10.9
108.2

10.6
9.2

11.5

6.9

8.2

6.9

5

5.4

5

5.2

5.0

2.2
0

FY ended 3/04(Actual)0

FY ending 3/05
(Projected)

FY ended 3/04
(Actual)FY ending 3/05(Projected)
12Efforts Toward Achieving the Business Plan (1)Reinforcement of the Group’Group’s
domestic marketing network【Water Treatment Chemical Business】
zExpansion of Solution Businessz

Sales expansion of process chemicals for pulp andpaper, incinerator chemicals, and high-margin productsz

Reinforcement of the Group’s marketing networkz

Bolstering of businesses in China and Europe
OperatingOperating Income
IncomeOrdersOrders /Sales/Sales（billion yen））

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（billion yen）
）

60

47.5

47.4

50.8 50.2

10
7.9

45

7.5

30

5

15

2.5

6.6

orderssales

0

FY ended 3/04
(Actual)0
FY ending 3/05
(Projected)

FY ended 3/04
(Actual)FY ending 3/05
(Projected)

13

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Eco-Solution
Eco-SolutionGroup’sGroup’sactivities
activities
Eco-Solution Groupchemicals

New business model
facilities

maintenance
Providing solutions to customers
Cost cuts

Less impact onenvironment

Expanding scope of business andexploring potential clients

OrdersOrdersandandNet
NetSalesSalesofofthe
theEco-Solution
Eco-SolutionGroupGroupFY ended 3/04
(Actual)(billion yen)

1H ended 9/04
(Actual)FY ending 3/05
(Projected)

Orders

1.7

2.1

5.0

Net Sales

0.7

1.0

3.014

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【Ultrapure Water Supply Business】z

Breakdown of clients: 2 LCD plants and3 semiconductor plants

Customer Plant
KuritaSupply ultrapure water・ownership・maintenance・operation &management

ultrapure water facilities

Semiconductor/
LCD production
lines
Payment of fees

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【Overseas Business Expansion】
z

Establishment of comprehensive solution framework for chemicals,facilities, and maintenance in the Chinese marketz

Business expansion of Kurita Europe GmbH through PITCO’s oil processingchemicals business

Overseas
Overseas Sales
Sales

Kuritec (Shanghai) Co., Ltd.
Maintenance services of water
treatment facilities

water treatment chemicals
water treatment facilities(billion yen)

25.0

22.1
20.0

6.0

Kurita Water Industries(Dalian) Co., Ltd.
Manufacturing & marketing ofwater treatment chemicals

Kurita Water Industries (Suzhou) Ltd.
Manufacturing ofwater treatment facilities

16.0
15.0

5.2

10.3

10.0

5.0

2.7

16.1

10.8
7.6

0.0
FY ended 3/04
(Actual)1H ended 9/04
(Actual)FY ending 3/05
(Projected)

Kurita Europe GmbH
Acquired the oil processing chemicals businessof PITCO NV-5-16

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Business Plan: Analysis of Change in Operating IncomezProjected amount of cost reduction to remain in line with initial projectionzSignificant contribution from revenue growth in chemicals segment and water
treatment facilities segmentz

Projected SG&A expenses remain the same as initial projection（billion yen））
5.0
4.0

4.6

3.0

3.6
2.0

2.0

1.0
0.0
-1.0
-2.0

Effect ofcost reduction-1.2
Changes in pricesand profit margin

Effect of increase
in revenue
due to growthin volume, etc.

Net change inoperating income-1.8
Change inSG&A expenses（billion yen））
FY ended 3/04
(Actual)FY ending 3/05
(Projected)

13.5

17.1

Operating
Income-change+3.6% change+26.8%
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Business Plan: Capital Expenditure/Depreciation/R&D Expenses

z Projected capital expenditure was revised upwards to reflect a growth in theultrapure water supply businessz Projected depreciation maintained at same levels as initial projectionz Projected R&D expenses to remain at levels similar to previous year

Capital expenditure

Depreciation(billion yen)
54.3

（billion yen）
）
98.3

8
7

R&D expenses

4.4

4.4

FY ending 3/05
(Initial projection)

FY ending 3/05
(Revised Projection)

4

6.4

63

54

4.2
3.3

3.6

3.6

2

32

1

1
00
FY ended 3/04
(Actual)FY ending 3/05
(Initial projection)

FY ending 3/05
(Revised Projection)

FY ended 3/04
(Actual)18

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Kurita Water Industries Ltd.
Web site ＜http://kurita.web-ir.jp/＞
E-mail ＜ir@kurita.co.jp＞

Forward-looking Statements
This presentation material contains forward-looking statements, business plan projections and judgments based on
information available to management at the time of writing. Due to the existence of a variety of risk factors and uncertainties,
these statements and projections may differ from actual results.