Financial Results for Second Quarter FY 2009
(for the year ending March 31, 2010)

November 2, 2009
Kawasaki Heavy Industries, LtdTable of Contents
I. Consolidated Results for Second Quarter FY2009
 Summary of Financial Results1 Details of Change in Profit ①
2
 Details of Change in Profit ②
3
 Financial Results by Segment
4
Shipbuilding
5
Rolling Stock6
Aerospace
7
Gas Turbines & Machinery
8
Energy & Environmental Engineering
9
Consumer Products & Machinery
10
Hydraulic Machinery
11
Others12 Financial Condition and Cash Flows
13

Ⅱ．Forecast for FY2009
 Consolidated Operating Performance Forecast by Segment
 R&D/CAPEX/Number of Employees

14
15
16

Ⅲ．Operating Policy for FY2009
 Company Policy
 Measures in Individual Businesses

17
18

I. Consolidated Results for Second Quarter FY2009

Summary of Financial Results(¥ Billion)

FY2008 1H

Forecast
in Apr.

【Orders Received】

ChangeFY2009 1H

FY2009 1H vs.

Actual

FY2008 1H

Significant decrease in Shipbuilding
segment that secured no orders for
Forecast in Apr. new building ships and in Rolling
Stock segment that had no such a- large order as there was in the same
period last year.
Actual vs.

Orders Received

717.2

-

403.0

- 314.2

Net Sales

652.9

570.0

516.0

- 136.8

Operating Income

24.3- 12.0- 6.1- 30.5

5.8 Products & Machinery segment due to

Recurring Profit

30.7

- 8.0

- 1.2

- 31.9

6.7 and European markets.

Net income

12.3

- 6.0

- 6.2

- 18.6- 0.2 【Profits】

Exchange Rates ( weighted-average )

￥/US$

106

95

96

￥/EUR

159

125

133

-1-

- 53.9 【Net Sales】
Significant decline in Consumer

sales decrease of motorcycles in U.S.

・Profit declined sharply incomparison with the same period lastyear due to the adverse impact ofsales decrease and the appreciationof the yen, despite implementation of
fixed cost reduction especially inmass production businesses.
・Operating income and recurring
profit exceeded company forecast in
Apr.

Details of Change in Profit ①- FY2009 1H vs. FY2008 1H 【Operating Income/loss】
24.3- 30.5 billion yen （FY2008 1H 24.3 billion yen ⇒ FY2009 1H - 6.1 billion yen）
Actual vs. Forecast in Apr. + 5.8 billion yen（Forecast in Apr. - 12.0 → Actual - 6.1)
Impact of fluctuation of foreign exchange rate + 0.4
Impact of sales decrease- 3.4
Expenses deferrals+ 3.6
Cost reduction and other factors+ 5.2

Adverse impact offluctuation of foreignexchange rate

Adverse impactof sales decrease
Impact of changes in accounting
methods
・Valuation of inventories +2.0
・Construction contracts +0.3

-10.2
Impact of decline
in material priceDecrease in selling,
general & administrative
expenses＋2.3

Changes in product mix
and other factors＋2.4

FY20091H＋6.9

FY2008
1H
-20.0

-11.9

-2-

- 6.1

Details of Change in Profit ②- FY2009 1H vs. FY2008 1H【Non-operating Income/Expenses】- 1.4 billion yen （FY2008 1H 6.3 billion yen ⇒ FY2009 1H 4.9 billion yen）

Net Interest expense ( incl. dividend income )Equity in income of unconsolidated subsidiaries and affiliates

Gain and loss on foreign exchange
Others

+ 0.1
- 0.7
+ 0.2
- 1.1

(¥ Billion)（- 0.9 ⇒ - 0.7 ）（ 3.3 ⇒ 2.5 ）（ 3.0 ⇒ 3.2 ）（ 0.9 ⇒ - 0.1 ）【Extraordinary Income/Losses】- 0.6 billon yen （FY2008 1H - 5.1 billion yen ⇒ FY2009 1H - 5.7 billion yen)※1(¥ Billion)※2- 1.8 （ - 5.1 ⇒ - 6.9 ）+ 1.2 （ 0 ⇒ 1.2 ）Provision for losses on damages suit
Others※１ Amount equivalent to fine claimed by Japan Fair Trade Commission in relation to refuse incineration plants※２

Estimated loss for the company in case of losing a suit for damages by owner of refuse incineration plants-3-

Financial Results by Segment(¥ Billion)

Orders Received

Operating Income

Net Sales

FY20081H

FY20091H

ChangeFY20081H

FY20091H

ChangeFY20081H

FY20091H

ChangeShipbuilding

58.4

2.7

- 55.7

53.7

65.2

11.5

0.2

1.4

1.1

Rolling Stock

136.0

44.5

- 91.5

83.6

80.1

- 3.5

7.0

3.2

- 3.7

Aerospace

58.3

46.5

- 11.895.2

73.3- 21.9

0.5

2.6

2.0

Gas Turbines& Machinery

119.3

99.8

- 19.4

91.7

83.4

- 8.3

4.7

0.6

- 4.1

Energy & Environmental
Engineering

49.0

32.5

- 16.5

46.6

35.7- 10.9

4.6

1.0

- 3.5

Consumer Products& Machinery

177.6

106.2

- 71.3

177.6

106.2

- 71.30.3- 16.6- 16.9Hydraulic Machinery

55.0

27.5

- 27.547.2

29.0- 18.2

5.0

1.9

- 3.0

Others

63.2

42.9- 20.256.8

42.8- 13.9

1.8

- 0.3

- 2.1

Eliminations and Corporate

−

−

−

−

- 0.1

- 0.3

- 0.1

Total

717.2

403.0

652.9

516.0

24.3

- 6.1

- 30.5- 314.2-4-- 136.8

Shipbuilding
Main Products： LNG Carriers、LPG Carriers、VLCCs、Bulk Carries、Submarines and others（Billion ¥ / In accumulated amount）

Orders Received(Forecast in Apr. 110.0)

100.0
58.4
50.0

64.1

71.5
50.0

20.6
1.8

2.7

1Q

2Q

0.0
1Q

2Q

3Q

FY2008FY2009Forecast

 FY2009 1H （ vs. FY2008 1H ）Orders Received:
No orders received of new building ships due to downturn of shipping
marketNet Sales: Increase in sales units and sales of large-scale vessels
Operating Income:
Income increased due to sales increase and improvement of
profitability by decline of material price, and other factors<U nit of O rders R eceived and Sales of N ew Building Ships>

O rders R eceived

Net Sales(Forecast in Apr. 150.0)

FY 2008 1H

LN G carriers
LP G carriers
V LC CB ulk carriers
Submarines

150.0
126.4
120

95.8

80
40

65.2

53.7

39.4

Total

19.0

FY 2009 1H

Sales
FY 2008 1H

FY 2009 1H

5（5）
2（1）

5

2（0）
1（1）

4（4）
2（2）
1（0）
7（5）
2（2）

6

10（7）

16（13）

1

N ote: ( ) = Sales units by percentage-of-com pletion m ethod

0
1Q

2Q

3Q

FY2008

1Q

2Q

Operating Income

FY2009Forecast(Forecast in Apr. 3.5)

3.5
1.4
0

0.2

1Q

2Q

3Q

FY2008

- 1.0
- 2.5

1Q

- 0.6

2Q

FY2009Forecast

 FY2009 Forecast （ vs. Forecast in Apr. ）・ Orders received was revised down through considering decline ofdemand for new building ships
・ Operating income remains unchanged because decline in material
price and cost reduction offset the adverse impact of change inassumed foreign exchange rate (For Reference) Joint Venture in China
NACKS was established in Nantong in Dec. 1995, as a joint venture between
KHI and China Ocean Shipping(Group) Company, the biggest shipping
company in China. At NACKS, various types of commercial vessels are built
for both domestic and overseas customers under the technical support from
Kawasaki Shipbuilding Corporation. (NACKS is an equity method affiliate.)-5-

Rolling Stock
Main Products : Electric train cars (incl. Shinkansen), Electric and diesel locomotives, Passenger coaches, Monorail cars, Platform screen doors（Billion ¥ / In accumulated amount）
excl. Construction Machinery
119.9

300.0
250.0
200.0
150.0
100.0
50.0
0.0

(Forecast in Apr. 150.0)

264.6
186.4
98.2

1Q

140.0

136.0

2Q

3Q

excl. Construction Machinery
64.5

200

FY2008

28.0

44.5

1Q

2Q

Net Sales

FY2009Forecast(Forecast in Apr. 170.0)

186.4

165.0

131.8

150
83.6

100
50

 FY2009 1H

Orders Received

80.1
40.8

36.1

0
1Q

2Q

3Q

excl. Construction Machinery
6.5

12.0
10.0
8.0
6.0
4.0
2.0
0.0

FY2008

1Q

2Q

Operating Income(Forecast in Apr. 9.0)

11.3
7.0

9.0

7.7
3.2

2.3

1Q

FY2009Forecast

1.6
2Q

3Q

FY20081Q

2Q

FY2009Forecast※ vs. FY2008 1H which excludes figures of Construction Machinery business unit

Orders Received :・ 132 cars for Singapore Land Transport Authority
・ Decrease in large-scale orders received for Japan Railways
Net Sales :Increase in sales for Japan Railways and overseas market
Operating Income :Income decreased due to deterioration in profitability for overseas
projects by the appreciation of the yen, and other factors
 FY2009 Forecast ( vs. Forecast in Apr. ）・ Net sales was revised down because a part of delivery for overseas
projects deferred until the next fiscal year
・ Operating income remains unchanged because cost reduction offsets
the adverse impact of sales decrease and change in assumed foreignexchange rate (For Reference) The Present Status of New Overseas Projects
・Cargo Trains in India （Delhi 〜 Mumbai）- Japanese ODA project, working as Japanese consortium
・Ho Chi Minh City Metro- Japanese ODA project , working with other companies
・North America- Working to receive orders mainly for subway and commuter trains
・High-speed railways- There are plans in Brazil, U.S., India, Vietnam and other countries-6-

Aerospace
Main Products : Aircrafts for Japan Ministry of Defense, Component parts for commercial aircrafts (BOEING , Embraer), Missiles（Billion ¥ / In accumulated amount）

Orders Received
250.0
200.0
150.0
100.0
50.0
0.0

(Forecast in Apr. 170.0)

239.1

160.0

27.5
1Q

58.3

87.7
46.5
11.4

2Q

3Q

FY2008

1Q

2Q

Net Sales(Forecast in Apr. 190.0)

200.4
180

180.0

126.4
95.2

120
60

FY2009Forecast

73.3

39.5

26.6

0
1Q

2Q

3Q

FY2008

1Q

2Q

Operating Income

0.2

0.5

-1.0

1Q

2Q

 FY2009 Forecast （ vs. Forecast in Apr. ）・ Orders received and net sales were revised down due to expenses
deferrals regarding B787 project and production decrease ofcommercial aircrafts in consequence of economic downturn・ Operating income remains unchanged because the adverse impact ofsales decrease and change in assumed foreign exchange rate areoffset by decrease in cost with the revision of development scheduleof B787 project

2.5<Sales units of components parts for commercial aircraft>

3Q

FY20081Q
FY2009Forecast

B777
B767
Embraer170/175
Embraer190/195

- 2.1
- 4.3

(unit)

Sales
2Q

-3.0
-5.0

FY2009Forecast(Forecast in Apr. 2.5)

2.6

3.0
1.0

 FY2009 1H （ vs. FY2008 1H ）Orders Received :Decrease in orders received for component parts for BOEING
including B777
Net Sales :Decrease in sales for Japan Ministry of Defense and component partsfor BOEING
Operating Income :Income improved due to expenses deferrals regarding B787 projectwith the revision of development schedule of the said aircraft, andother factors

- 4.1

-7-

FY2008 1H

FY2008FY2009 1H

FY2009

42

73

38

77

7

13

4

10

30

46

10

21

58

112

20

63

Gas Turbines & Machinery
Main Products : Jet engines, Gas turbine co-generation system, Gas turbines & Steam turbines for marines & land, Diesel engines, Marine propulsion system（Billion ¥ / In accumulated amount）

Orders Received
355.5
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0

(Forecast in Apr. 220.0)

279.3
220.0
119.3
59.1

1Q

52.3
2Q

3Q

FY2008

1Q

99.8

2Q

Net Sales
200
160
120
80
40
0

FY2009Forecast(Forecast in Apr. 200.0)

200.0

195.1
138.8
91.7

83.4

44.9

1Q

44.7

2Q

3Q

FY20081Q

2Q

FY2009Forecast

 FY2009 1H ( vs. FY2008 1H )Orders Received :Decrease in orders received for marine diesel engines and marine
propulsion systems
Net Sales :Decrease in sales of gas turbines for naval vessels and gas compression
module, despite stable sales of component parts for commercial
aircraft engines
Operating Income :Income decreased due to the adverse impact of sales decrease and theappreciation of the yen, and other factors
 FY2009 Forecast ( vs. Forecast in Apr. ）・ Net sales remains unchanged due to increase in sales for industrial
gas turbines and aerodynamic machinery despite decrease in sales ofmarine propulsion systems
・ Operating income remains unchanged because the bulk of spare parts
sales for jet engines are expected to be posted in the second half of
this fiscal year

Operating Income
12.0
10.5
9.0
7.5
6.0
4.5
3.0
1.5
0.0

<Summary of Major Projects for Commercial Aircraft Jet Engines>

11.0

Aircraft

V2500
A320 and others

Trent1000
B787

TrentXWB
A350

Participation Type

Full Partner

RRSP（※)RRSP（※)

Share

Approx. 6%

Approx. 8.5%

Approx. 7%(Forecast in Apr. 7.0)

7.0

6.7
4.7
2.2

1Q

2Q

3Q

FY2008

0.9

0.6

1Q

2Q

Responsible
Components
FY2009Forecast（※）-8-

Intermediate
Intermediate
Fan case, vane, disc,pressurepressure
low-pressure compressor blade compressor (IPC) compressor (IPC)
modulemoduleRisk & Revenue Sharing Partner

Energy & Environmental Engineering
Main Products: Industrial plants (cement, chemical and others), Power plants, LNG & LPG tanks、Municipal refuse incineration plants, Shield machines（Billion ¥ / In accumulated amount）

Orders Received(Forecast in Apr. 80.0)

90.0

83.6
61.6
49.0
50.0

32.5

28.7
13.2

 FY2009 1H （ vs. FY2008 1H ）Orders Received :Decrease in large-scale projects (A large-scale LNG tank project was
obtained in the same period last year.)
Net Sales :Decrease in large-scale projects for overseas customers
Overseas large-scale projects for FY2008
Ferronickel plant / Korea
Urea production facility / Pakistan
Cement plant / Vietnam

0.0
1Q

2Q

3Q

FY20081Q

2Q

FY2009Forecast(Forecast in Apr. 95.0)

Net Sales
105.1

100.0

66.1
46.6

35.7

20.2

1Q

13.1
2Q

3Q

FY20081Q

2Q

FY2009Forecast(Forecast in Apr. 4.0)

8.9
9.0
4.0
-1.0

6.0

5.3

1.6

1Q

1Q
2Q

3Q

FY2008- 0.6

 FY2009 Forecast ( vs. Forecast in Apr. ）・ Orders received and net sales were revised up due to increase of
rehabilitation contracts
・ Operating income was revised up due to sales increase andimprovement in profitability of some projects
 (For Reference) Joint Ventures in China

Operating Income

4.6

Operating Income :Income decreased due to the adverse impact of sales decline

1.0
2Q

FY2009Forecast

In 2006, KHI started a joint venture with Anhui Conch Cement Company Ltd.,
China’s largest cement manufacturer. KHI has established three joint ventures
for the time being and set up an integrated system in China encompassing thedesign, production, sales and after-sale services of waste heat recovery power
generation systems for cement plants and cement producing facilities (Preheaters, Rotary Kilns and Roller Mills) with sophisticated technologies it has
accumulated. KHI will contribute further to bring technologies forenvironment and energy conservation in China.
-9-Consumer Products & Machinery
Main Products: Motorcycles, All-Terrain Vehicles(ATVs), Utility Vehicles, Personal Watercraft、General-Purpose Gasoline Engines, Industrial Robots（Billion ¥ / In accumulated amount）

Net Sales(Forecast in Apr. 260.0)

336.4
247.8

300

240.0

177.6

200

94.0

100

60.2

106.2

0
1Q

2Q

3Q

FY20081Q

2Q

FY2009Forecast

Operating Income

-7.0

1Q

0.3

- 1.8

2Q

3Q

- 7.7
-17.0

FY20081Q

FY2009Forecast

2Q- 5.6- 10.1- 16.6-27.0- 26.0(Forecast in Apr. -26.0)（Thousands of unit/Billion \）＜Sales by Geografic Segment for Consumer Products＞
FY2008 1H
FY2008FY2009 1H
FY2009 Forecast
Unit AmountUnit
Amount Unit Amount Unit Amount
Domestic
13
9.1
19
14.7
10
8.0
18
13.1
North America 82(41)61.9 197(118) 134.3 44(30)31.1 107(67)75.2Europe
52
45.8
97
73.2
36
29.0
75
58.6
Other
87
21.5
210
44.9
99
19.1
240
47.1
Total
234
138.3
523
267.1
189
87.2
440
194.0
Note: 1) Sales units and amount include the following products.
Units: Motorcycles, All-Terrain Vehicles(ATV), Utility Vehicles(MULE) and Personal Water Craft(Jet Ski)
Amount: The products mentioned above and parts for those products.
2) Figures in the Parenthesis( ) represent motorcycle sales units.

 FY2009 1H ( vs. FY2008 1H ）Net Sales:
・Decrease in sales of motorcycles due to shrinking of U.S. andEuropean markets
・Decrease in sales of industrial robots
Operating Income:
Income decreased due to the adverse impact of sales decrease and theappreciation of the yen and other factors, while improvement ofmarginal profitability and fixed cost reduction and other measures were
implemented
 FY2009 Forecast ( vs. Forecast in Apr. ）・ Net sales was revised down due to larger-than-expected decrease insales of motorcycles in the main market of U.S., and also of industrial
robots・ Operating loss remains unchanged because fixed cost reduction andimprovement of marginal profitability offset the adverse impact ofsales decrease and change in assumed foreign exchange rate For Reference
・A joint venture was established with Kwang Yang Motor Co., Ltd.
(KYMCO) of Taiwan for production and sales of general purpose gasoline
engines. Production will start in Jan. 2010.
・New motorcycle production plant started up at Kawasaki’s Brazilian
subsidiary in Oct. 2009.

- 10 -

Hydraulic Machinery
Main Products： Hydraulic components (pumps, motors & valves), Hydraulic systems for industrial use, Hydraulic marine machinery and others（Billion ¥ / In accumulated amount）

Orders Received(Forecast in Apr. 70.0)

84.1

90.0

71.5

70.0

55.0

60.0
28.9

27.5

30.0

10.9

0.0
1Q

2Q

3Q

FY20081Q

2Q

FY2009Forecast

Net Sales
84.9

90

30

(Forecast in Apr. 65.0)

68.2

65.0

47.2

60

29.0

23.0

14.3

0
1Q

2Q

3Q

FY2008

1Q

2Q

8.3
7.0

(Forecast in Apr. 3.0)

5.0
2.6
1.1
1Q

2Q

3Q

FY2008

1Q

1.9

2Q

 FY2009 Forecast ( vs. Forecast in Apr. ）Both net sales and operating income remain unchanged because
increase in sales of hydraulic components for construction machineryin strong Chinese market offsets sales decrease in Japanese, U.S. andEuropean markets.

FY2009Forecast

Operating Income
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0

 First Half FY2009 ( vs. FY2008 1H ）Orders Received :Decrease in orders received due to demand decline for hydrauliccomponents for construction machinery in Japanese, U.S. andEuropean markets.
Net Sales :Decrease in sales of hydraulic components for construction machineryOperating Income :Income decreased due to the adverse impact of sales decline

3.0

 （For Reference） Businesses Development in China
In Aug. 2006, production of hydraulic pumps started at Chinese subsidiary in
Suzhou to meet the increasing demand in China.
In Sep. 2008, the production facility was expanded, and in Jan. 2009,
production of hydraulic marine machinery started at the same facility.

FY2009Forecast- 11 -

Others
Main Products： Construction Machinery and others（Billion ¥ / In accumulated amount）
incl. Construction Machinery
79.3

Orders Received(Forecast in Apr. 120.0)

110.0

105.5
88.6
63.2
42.9

32.1
13.5
1Q

2Q

3Q

FY2008

1Q

2Q

Net Salesincl. Construction Machinery
75.9

FY2009Forecast(Forecast in Apr. 110.0)

103.5

100.0

79.8
56.8

42.8

25.4

1Q

17.2
2Q

3Q

incl. Construction Machinery
2.3

FY20081Q

2Q

FY2009Forecast

As of Apr. 1, 2009, Construction Machinery business unit was
separated and its operations were taken over by a new company named“KCM Corporation”.
→ From FY2009, Construction Machinery business unit is included in“Others” segment.

Operating Income
4.2

2.6
1.8
(Forecast in Apr. 2.0)

0.9

1Q

 For Reference

2Q

3Q

FY2008

0

2Q

0

1Q

- 0.3

FY2009Forecast- 12 -

Financial Condition and Cash Flows【Financial Condition】(¥ Billion)

FY2008End of Mar.2009

FY2009End of Sep.2009

1,399.7

1,368.0

Shareholders’ Equity

290.4

284.5

（Ratio of shareholders’ equity to total assets）(20.7%)（20.8%）

Interest-bearing debt

389.2

448.9

（Net Interest-bearing debt）（357.3）（424.1)Net Debt Equity Ratio

123%

149%

Total Assets

Note) Interest-bearing debt includes lease obligations.

【Cash Flows】(¥ Billion)

FY2008 1H

FY2009 1H

Cash flows from operating activities

8.5- 25.2

Cash flows from investing activities- 29.5- 36.4

Free Cash Flows- 21.0- 61.6

Cash flows from financing activities

11.8

56.5

- 13 -

II. Forecast for FY2009

Consolidated Operating Performance(¥ Billion)【Orders Received】

ChangeFY2009 Forecast

Orders Received

1,540.5

1,180.0

1,080.0- 460.5

Forecast was revised down throughvs. Forecast considering deterioration in market
in Apr.
environment, especially for Shipbuilding
and Consumer Products & Machinery- 100.0 segments

Net Sales

1,338.5

1,240.0

1,200.0- 138.5- 40.0 Forecast was revised down throughOperating Income

28.7

5.0

5.0

- 23.70 for Consumer Product & Machinery andRecurring Profit

38.8

10.0

10.0

- 28.70

Net Income

11.7

6.0

3.0

- 8.7

- 3.0

￥/US$

101

95

90

￥/EUR

142

125

130

FY2008in Apr.

in Nov.
(Revised)

vs. FY2008【Net Sales】

considering demand decline, especially
Aerospace segments

Exchange Rates (actual & assumed)

Note) Assumed rate is applied to the foreign exchange exposure as of Nov. 2, 2009.
（Billion \）（For Reference）
Impact on profit by FX fluctuation of 1 yen
US$
EUR

Operating Recurring
IncomeProfit
1.2
0.8
0.1
0

- 14 -【Profits】
・Operating income and recurring profit
remain unchanged because the effects ofthe measures to improve profitability
such as fixed cost reduction andimprovement in productivity offset theadverse impact of sales decrease andchange in assumed foreign exchange rate
・However, forecast for net income wasrevised down due to recognition of
extraordinary loss

Forecast by Segment(¥ Billion)

Orders Received

Net Sales

FY2009 Forecast
FY2008in Apr.

in Nov.
(Revised)

Operating Income

FY2009 Forecast
FY2008in Apr.

in Nov.
(Revised)

FY2009 Forecast
FY2008in Apr.

in Nov.
(Revised)

Shipbuilding

71.5

110.0

50.0

126.4

150.0

150.0

- 1.0

3.5

3.5

Rolling Stock

264.6

150.0

140.0

186.4

170.0

165.0

11.3

9.0

9.0

Aerospace

239.1

170.0

160.0

200.4

190.0

180.0

- 4.1

2.5

2.5

Gas Turbines& Machinery

355.5

220.0

220.0

195.1

200.0

200.0

11.0

7.0

7.0

Energy & Environmental
Engineering

83.6

80.0

90.0

105.1

95.0

100.0

8.9

4.0

6.0

Consumer Products& Machinery

336.4

260.0

240.0

336.4

260.0

240.0

- 10.1- 26.0- 26.0

Hydraulic Machinery

84.1

70.0

70.0

84.9

65.0

65.0

8.3

3.0

3.0

Others

105.5

120.0

110.0

103.5

110.0

100.0

4.2

2.0

0

Total

1,540.5

1,180.0

1,080.0

1,338.5

1,240.0

1,200.0

28.7

5.0

5.0

- 15 -

R&D/CAPEX/Number of Employees(￥Billion/ Persons)

FY2009 Forecast

FY2008in Apr.

R&D Expenses
CAPEX(Construction Base)
Depreciation andAmortization
Domestic

38.2

in Nov.

40.0

78.0

（38.4）

44.3

54.0

Number of
Employees

7,955

24,60052.0

Decrease mainly inConsumer Products &Machinery Segment
Consumer Products &Machinery- 4.5
Shipbuilding- 2.0
Others
- 0.5

- 2.0

24,400- 200（24,712）8,400（7,558）32,266- 7.0

Reasons for change（23.5）（24,410）

Overseas

71.0（34.3）（20.0）

24,311- 2.0（17.2）（17.6）

82.4

38.0

Change

7,700

- 700

（7,914）33,000（31,968）

32,100（32,626）Note) Figures in parenthesis ( ) represent the results of the second quarter- 16 -- 900

Intermediate recruitment
plan was revised due tolowering of factory
operations
Labor reduction inoverseas subsidiaries

III. Operating Policy for FY2009

Company Policy
We have positioned FY2009 as a year for taking emergency measures andimplemented the following policies aimed at thoroughly and aggressively
consolidating our business and financial positions in all aspects of our operations.
1. To implement thoroughgoing risk management measures throughout the GroupIn taking orders and in sales activities, we have fully analyzed and considered profitability andcarried out thorough cost control

2. To lower our breakeven point
Watching carefully change of market environment, we have given priority to lowering ourbreakeven point especially in businesses where demand is trending downward by implementing
thorough cost reduction initiatives and other measures

3. To strengthen our financial position
We have moved ahead with measures to increase the efficiency of cash through recovering
receivables as quickly as possible, reviewing investments and other measures, and to improve
cash flow by restraining the rise in interest-bearing debt.

4. To continue to make strategic investments
・ R&D, human resource development, and capital equipment investment in growth businesses
fields, such as energy and the environment, and the future technological base of the KHI Group・ Continued investments of human and other resources in the key markets- 17 -

Measures in Individual Businesses
Basic Policy: “Quality followed by Quantity” and “Thoroughness of Risk Management”
Shipbuilding

Solidify the improvement in earnings through optimizing the Kawasaki shipbuilding production
systems, including our Chinese operations

Rolling StockStrengthen operating systems in the three regions of Japan, North America, and the rest of Asia

Aerospace

Move ahead with major projects:
Moving into the mass production of next fixed-wing maritime patrol aircraft(P-1) and completing thedevelopment of next transport aircraft (C-X) of Japan Ministry of Defense, and responding to mass
production requirements for supplying components for the Boeing787

Gas Turbines & Machinery

・ Proceed with the development of new jet engines for commercial aircraft
・ Strengthen our position in the energy and environment- related businesses

Energy & Environmental
Engineering

Accelerate the development of our energy & environment-related businesses

Consumer Products& Machinery・ Increase the profitability of motorcycles supplied to the developed countries by boosting the profit
margin ratio and reducing fixed costs
・ Strengthen our development & production systems on a global basis in the aim of boosting thecompetitiveness of our products
・ Industrial Robots ： Strengthen development capabilities and develop new customers

Hydraulic Machinery

・ Make flexible investments of corporate resources while lowering the breakeven point
・ Strengthen the global pentapolar system (covering Japan, U.S., Europe, China and South Korea)

Construction Machinery

Improve development and sales capabilities through the alliances with Hitachi Construction MachineryCo., Ltd. and TCM Corporation- 18 -

Kawasaki,
Working as One for the Good of the Planet

Cautionary Statement
The performance outlook and the forecasts stated in this material were prepared by Kawasaki Heavy Industries, Ltd.
(hereinafter, KHI) based on the circumstances at the release point, and include potential risks and uncertain factorsthat relate to economic conditions, foreign currency exchange rates, tax rules, regulations and other factors.
Accordingly, please note that the actual operating results, financial position, and business deployment of KHI
may sometimes differ considerably from the descriptions in the present projections.