Kurita Water Industries Ltd. ANNUAL REPORT 2011

4-7, Nishi-Shinjuku 3-chome, Shinjuku-ku, Tokyo 160-8383, Japan
Tel: 81 (3) 3347-3111

URL: http://www.kurita.co.jp/english/

Kurita –Wherever Business Needs Water
ANNUAL REPORT 2011

This report was printed on FSC-approved paper using vegetable oil ink.
Printed in JapanFor the year ended March 31, 2011

INVESTOR INFORMATIONAs of March 31, 2011

Stock Exchange Listings

PROFILEFirst Section of the Tokyo Stock ExchangeFirst Section of the Osaka Securities Exchange
Authorized: 531,000,000 shares
Issued: 132,800,256 shares(Stock trading unit: 100 shares)
36,089Grant Thornton Taiyo ASG
Akasaka DS Bldg. 9F, 8-5-26, Akasaka, Minato-ku, Tokyo 107-0052, JapanThe Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Common Stock

Guided by its corporate philosophy, “study the properties of water, masterthem, and we will create an environment in which nature and man are inharmony,” Kurita Water Industries Ltd. is a leader in the industrial water field.
Kurita provides quality products and high-value-added outsourcing andmaintenance services to customers in a wide range of industries.
Since its establishment in 1949, Kurita has accumulated a high level oftechnical expertise and know-how. Today, Kurita leverages these assets in aunique business portfolio that includes both chemicals and facilities to realize
its corporate vision of becoming an advanced water and environmental
management company. As our customers and society wrestle with improving
productivity and reducing environmental impact, we are working to help
create a sustainable society by recycling the limited resource that is waterand proposing comprehensive water treatment solutions.

WATER TREATMENT CHEMICALS

Number of Shareholders
Independent Auditor
Transfer Agent

Main Shareholders

Distribution of Shares
Shareholdings
Percentage of total(Number of shares) shares issued (%)

ITOCHU Corporation
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)
Kurita Water Industries Ltd.
Pictet and Cie (Europe) S.A.
Tokio Marine & Nichido Fire Insurance Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
NT RE GOVT OF SPORE INVT CORP P. LTD.
Mizuho Trust & Banking Co., Ltd.
Retirement Benefit Trust ITOCHU Corporation
Account Retrustee Trust & Custody Services
Banking Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)

7,448,000
6,644,283
6,264,500
6,139,744
3,770,100
3,472,626
2,936,131
2,823,190
2,820,000

2,767,100

5.60
5.00
4.71
4.62
2.83
2.61
2.21
2.12
2.12

2.08

WATER TREATMENT FACILITIESTreasury Stock

Government andMunicipalities

Individuals
Financial
Institutions
Foreign
Owned

Securities
Firms

Shareholdings(Number of shares)

n
n
n
n
n
n
Total

Other Domestic
Firms
Percentage of total
shares issued (%)

2,000

0.0%

40,584,720

30.6%

1,210,600

0.9%

18,368,313

13.8%

49,263,880

37.1%

17,230,999

13.0%

6,139,744
132,800,256

100.0%

4.6%

Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Stock price (Yen)

CONTENTS
cover 2 PROFILE

07 Feature: Kurita’s New President Talks about Kurita’s Strategy for Growth

01 CONSOLIDATED FINANCIAL HIGHLIGHTS
02 Water Solutions for Industry

09

Leading the Industry in Comprehensive Solutions

11

Stepping up the Global Expansion of the Kurita Group04 BUSINESS REVIEW

13 RESEARCH AND DEVELOPMENT

05 BUSINESS HIGHLIGHTS

14 SUSTAINABLE MANAGEMENT FRAMEWORK

06 TO ALL OUR STAKEHOLDERS

14

Corporate Governance17

Environmental Improvement Activities

19 BOARD OF DIRECTORS AND CORPORATE AUDITORS

Trading volume (Hundreds of shares)

4,000

800,000

3,000

600,000

2,000

400,000

1,000

200,000

Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains forward-looking statements regarding forecasts, plans, strategies and business performance in the future. These forward-looking statements
represent judgments made by the Company based on information currently available to it and involve a variety of risks and uncertainties.
Actual results may be materially different from these forward-looking statements. Such risks and uncertainties include (but are not limited to) changes in the economic
environment, business conditions, market, demand and currency exchange rates.

0

Jan. ’09

June ’09

Jan. ’10

June ’10

Jan. ’11

June ’11

Kurita Water Industries Ltd. Annual Report 2011 55

CONSOLIDATED FINANCIAL HIGHLIGHTS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars(Note 1)Millions of yen
2011

2010

2009

2011

For the year:¥ 181,234¥ 178,520¥ 199,706$2,183,550   Water Treatment Chemicals

56,73553,74358,331

683,558   Water Treatment Facilities

124,499

124,777

141,374

1,499,991

Operating income

27,131

26,35827,935

326,889

Income before income taxes and minority interests

27,84428,178

26,103

335,470

Net income

17,13817,28816,299206,483

Total assets

253,298

251,620

245,406

3,051,790

Equity (Note 2)

198,042

192,588

177,291

2,386,059

Net sales

At year-end:%

Ratios:Return on equity (ROE) (Note 3)

8.8

9.3

9.4

Return on assets (ROA) (Note 3)

6.8

7.0

6.8

Equity ratio

78.2

76.5

72.2

Yen

U.S. dollars

Per share of common stock (Note 4):
Net income
Cash dividends applicable to the year
Equity¥  134.02¥  134.38¥  126.69$ 1.61

38.00

36.00

34.00

0.46

1,563.57

1,496.98

1,378.04

18.84

Notes: 1. The U.S. dollar amounts are given solely for convenience at the rate of ¥83 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market
on March 31, 2011.
2. Equity represents net assets less minority interests.
3. ROE = Net income ÷ Equity (Average) ×100
ROA = Net income ÷ Total assets (Average) ×100
4. Net income and cash dividends per share are calculated using the average number of shares for the year under review. Calculation of equity pershare is based on the number of shares at year-end (excluding treasury stock).

20 SIX-YEAR FINANCIAL SUMMARY
21 MANAGEMENT’S DISCUSSION AND ANALYSIS

Kurita FACT BOOK 201132 CONSOLIDATED BALANCE SHEETS

Kurita’s Fact Book 2011 provides a wide rangeof long-term, historical data, including financial
indicators and quantitative management data.

34	CONSOLIDATED STATEMENTS OF INCOME ANDCONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME
35 CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS

http://www.kurita.jp/pdf/factbook_2011.pdf

36 CONSOLIDATED STATEMENTS OF CASH FLOWS
37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
53 REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
54 CORPORATE DATA
55 INVESTOR INFORMATION
Kurita Water Industries Ltd. Annual Report 2011 01

Water Solutions for Industry
When our customers need solutions involving water, they turn to us for products and services
reduce the environmental impact of their activities.You’ll find Kurita helping in many areas toPure water production systems

Wastewater treatment systems

These systems produce water for a variety ofThese systems treat many kinds ofindustrial uses including medical-grade waterindustrial wastewater to ensure thatfor injectable drugs and eye medications,

it does not affect the environment.

drinking water for alcoholic beverages andsoft drinks, and boiler water for the electric
power and steel industries.

Pulp & Paper

Oil Refining &Petrochemicals Pharmaceuticals

Steel

Customers in general industries

Soil remediation services
Kurita services in this area include
contamination surveys of soil andgroundwater, and removal andmonitoring of volatile organic
compounds and heavy metals.

Land requiring decontamination

Maintenance services

Water Treatment Facilities

Kurita provides preventive maintenance ser vices to ensure
continued high performance of water treatment systems supplied
to clients. Kurita also proposes modifications to help clients boost
productivity and reduce their environmental impact.

WATER TREATMENT CHEMICALSn

Boiler water treatment chemicalsnCooling water
treatment chemicalsnnE quipment and systems forwater treatment chemicals

WATER TREATMENT FACILITIESFor the Electronics IndustrynUltrapure waterproduction systems

For General IndustriesnPure water production systemsnWastewater reclamation systems

 ackaged water treatment
P
management contractsnWastewater reclamation systemsnSteam supply contract

Wastewater treatment systemsnWastewater treatment systemsnSoil remediation servicesnTool cleaning servicesnChemical cleaning servicesn

Maintenance servicesnnUltrapure water supply business

Operation andmaintenance servicesnWastewater treatment chemicals

nProcess treatment chemicals

lnIncinerator chemicalslBlanket contracts
for factories, etc.

02 Kurita Water Industries Ltd. Annual Report 2011

Food &
Beverages

that boost their productivity andrealize a sustainable society.

Water Treatment Chemicals
The Water Treatment Chemicals business supplies
all industries.

Boiler water treatment chemicals
Cooling water treatment chemicals
Kurita’s water treatment chemicals help to prevent various faults
that occur in boilers and coolingwater systems, and to ensure
efficient operation.

Factories, office buildings, regional
heating / cooling centers

Ultrapure water production systems
These systems remove ions, microscopic particles, and bacteria fromwater to produce ultrapure waterthat is as close as possible to theo-

Customers in theelectronics industry

LCDs

Semiconductors Electronic
Components

retically pure H2O.

Wastewater reclamation systems
These systems recover wastewa-

SOCIETY
The achievement ofa sustainable society
Solutions forwater-related issues
on a global scale

ter discharged from manufacturing processes and treat it forreuse in plants as pure water or
cooling water.

RESOLVING FUNDAMENTAL ISSUES

Improved productivity
Reduced environmental impact

Kurita Water Industries Ltd. Annual Report 2011 03

BUSINESS REVIEW Segment Highlights

Water Treatment Chemicals

Water Treatment Facilities

In the fiscal year ended March 31, 2011, capacity

Orders for the fiscal year ended March 31, 2011

utilization improvements at customers’ plants spurred

increased 2.8% as a whole from the previous year.

an increase in domestic sales of mainstay products,

Higher orders for ultrapure water production systems

namely, boiler water treatment chemicals, coolingoverseas and maintenance services for the electronics

water treatment chemicals, and wastewater treatment

industry compensated for lower orders for water treat-chemicals. Overseas, performance improved at mostment systems for general industries in Japan. However,

Kurita Group companies as production in various

segment sales declined slightly year on year. Whileindustries recovered in Asia and Brazil. As a result ofKurita recorded growth in sales to the electronics

these higher sales, segment operating income grew byindustry both in Japan and overseas, overall sales fell

23.5% year on year. Together with an improved prod-

due to a lull of large projects for the steel industry in

uct mix, the segment operating margin rose fromJapan. Operating income fell 6.3% year on year as the

15.2% in the previous year to 17.8%.

impact of lower sales of systems for general industrial
use outweighed profitability improvements in otherbusinesses.
See p. 21 Management’s Discussion and Analysis

OrdersOrders(Millions of yen)

(Millions of yen)

56,56059,02958,470

2007

2008

2009

53,37056,7142010

2011

135,969

2007

2009

140,479

146,228

141,374

2007

2008

Sales

(Millions of yen)

(Millions of yen)

56,66758,331

2007

2008

2009

53,74356,735

2010

2011

Operating Income

Operating Income(Millions of yen)

(Millions of yen)

8,806

9,525

2007

2008

10,099

8,417

8,177

2009

2010

2011

136,595

2008

Sales

58,646

149,659

20,9392009

19,517

15,471

2007

2008

2009

121,791

125,237

2010

2011

124,777

124,499

2010

2011

18,181

17,032

2010

2011(Years ended March 31)

04 Kurita Water Industries Ltd. Annual Report 2011

Business Highlights

Successful Demonstration of
Ashing-less Process

New Electro-Osmosis
Dehydrator Launched

During the past fiscal year, Kurita demonstrated

Kurita has launched a new electro-osmosis dehydra-that its electrolyzed sulfuric acid generator, Green

tor, Hydropress™ E, that enables users to reduce

Sulfaceed KD™, enables manufacturers to eliminate

sludge volume and save energy. The system uses tech-

the ashing process used when removing resist

nology that makes the sludge dewatering processlayers in the semiconductor manufacturing process.

more efficient by using internally mounted electrodes

Conventionally, this is a necessary pre-process step.

to apply a voltage to sludge that makes it easier forThis development allows semiconductor manufac-

the water molecules to be separated. Whereas con-turers to cut their resist removal processing by asventional mechanical dewatering processes are only

much as 50% and reduce the volume of chemicals

able to reduce the water content of sludge to aroundused. This is one example of how Kurita continues

80%, Kurita’s new technology can reduce it to up toto propose solutions to

60%, enabling the total volume of sludge to be com-semiconductor manufac-

pacted by up to 50%. Since the new technology also

turers to meet theirobviates the need for drying sludge, the process emits

strong demand forless than one-third of theincreased productivity

CO2 that conventionaland more environmentallymechanical processes emit.

friendly processes.

Kurita will aggressively
Green Sulfaceed KD™

market Hydropress™ E tocustomers worldwide who

Saving Energy in Cooling
Kurita has developed a new “hybrid” cooling waterneed to reduce sludge.

Hydropress™ E

treatment technology that delivers significant energy
systems installed in factories and office buildings. The

Contribution of the Ultrapure Water
Supply and Maintenance Services

new technology combines three elements:

In its ultrapure water supply business, Kurita contin-1) Cooling water treatment chemicals that are highly

ued in the fiscal year under review to supply cus-savings by preventing sliming and scaling of cooling

effective at preventing scaling and sliming,

tomers with the required quality and volume of2) Technology to automatically control the concentra-

ultrapure water at one site overseas and six sites intion of the chemicals in the cooling water, andJapan. The business also contributed on the earnings

3) Technology to monitor sliming and scaling, andfront to Kurita achieving a robust earnings structure

thermal efficiency of cooling systems.

able to weather economic fluctuations. The mainte-

Kurita will pro-

nance services inmote the use of thisJapan also helped

technology to cus-stabilize earnings,

tomers who arerecovering as cus-looking to reduce

tomers’ capacity

CO2 and utility costs.

utilization improved.

Kurita Water Industries Ltd. Annual Report 2011 05

To all our stakeholders

The Kurita Group pursues new functionsand value for water. We seek to create abetter society through water management.

I took up my post as president of Kurita Water Industries Ltd. on June 29, 2011, inheriting the business base created by my predecessors. I will work diligently to retain the trust and meet the
expectations of our shareholders and other stakeholders. In doing so I will return to the Group’s
corporate philosophy: “study the properties of water, master them, and we will create an environment in which nature and man are in harmony.”
The Great East Japan Earthquake that struck in March 2011 has had a serious impact on theJapanese economy. I offer my sincere condolences to the many people who have suffered in thedisaster, and assure you that the Kurita Group is working together to help affected areas recoveras quickly as possible.
Water is a limited resource for all of humanity. Contamination and shortages are affecting us
on a global scale. The Kurita Group is dedicated to solving these issues in industrial and social contexts through water management—a vital mission in today’s environment. In this way, all Kurita
Group employees are working together toward the sustainable progress of society.
July 2011

Toshiyuki Nakai



President and Representative Director

06 Kurita Water Industries Ltd. Annual Report 2011

Feature: Kurita’s New President Talks about Kurita’s Strategy for Growth

In a rapidly changing world, the Kurita Group has set its sights on becoming an
advanced water and environmental management company. To this end, we arecontinuing to evolve and expand our products and services on a global scale.

Overview of the Fiscal Year Ended March 31, 2011
During the fiscal year ended March 31, 2011, Kurita’s steady business performance in the face of a persistently adverse business environment demonstrated once again the comprehensive strength of theGroup. The Company’s consolidated order bookings were up 3.9% year on year to ¥181,951 million andnet sales rose 1.5% to ¥181,234 million. Operating income climbed 2.9% to ¥27,131 million, and net
income declined 0.9% to ¥17,138 million. Net income per share was substantially the same at ¥134.02
compared with ¥134.38 in the previous year.
During the fiscal year under review, the business environment in

Kurita’s steady business performancein the face of a persistently adverse
business environment demonstrated
once again the comprehensive
strength of the Group.

Japan began to improve, with operating rates at customers’ factories
gradually rising as exports increased and consumer spending recovered.
However, capital expenditure has yet to recover fully, and the Japanese economy now faces even greater difficulties in overcoming theimpact of the Great East Japan Earthquake.
On the other hand, the business environment overseas contin-

ues to see strong economic expansion, particularly in Asia.
Kurita itself suffered only minor damage to some of its facilities as a result of the earthquake. In termsof the impact on our business, some deliveries were affected in the Water Treatment Chemicals businessas customers were obliged to halt their operations, while the Water Treatment Facilities business saw the
stopping of some construction projects and delays in capital investments, which resulted in a slight dip in
earnings for the fiscal year under review.The entire Kurita Group worked with customers in disaster-affected
regions to assist their recovery, and to supply stricken areas with drinking water and financial assistance.

Status of Medium-term Management Plan Make Progress 2011 (MP-11)
This year we saw positive results in promoting two key strategies in the medium-term management
plan, Make Progress 2011 (MP-11).
The first of these strategies is “expanding and evolving the service business.” Here, we have strengthened our customer proposal capabilities in the Water Treatment Chemicals business and seen a significant increase in earnings as a result. The second key strategy is “expanding global operations.” This
strategy has also proved successful with business results in Asia growing in line with our expectations.
These strategies have set Kurita on a path of working together as a Group to capture overseas
economic growth while maintaining a stable, highly profitable management structure. We see our success this year as confirmation that this is the right way forward. Throughout the final year of MP-11, thefiscal year ending March 31, 2012, we will work swiftly to entrench these strategies even further.
Kurita Water Industries Ltd. Annual Report 2011 07

Feature: Kurita’s New President Talks about Kurita’s Strategy for Growth

Our Vision–Our Mission
The Kurita Group is evolving its service business with thegoal of using water management to help customers tosolve key challenges such as improving productivity andreducing environmental impact. These efforts are starting
to bear fruit—we are already better at proposing comprehensive solutions for water and the environment.
These proposals seamlessly integrate elements from ourWater Treatment Chemicals, Water Treatment Facilities, and maintenance service businesses.
Moreover, Kurita seeks to evolve water management to the next level using cutting-edge products,
technologies and services. Our goal is to realize advanced management for providing customers withthe required quality and volume of water, when and where they

Our goal is to realize advanced
management for providing customers
with the required quality and volume ofwater, when and where they need it.

need it. One area where we are already achieving this is in ourultrapure water supply business. This business is helping to build
on our already steady earnings base, and has become a supporting pillar for the management of the entire group.
However, the ultrapure water supply business is just the start.

We aim to build on this success in all our businesses. This represents the full realization of our corporate
vision of becoming an advanced water and environment management company, and is the real purpose
behind our MP-11 strategy of evolving and expanding the service business. I believe it is a strategy thatwill maximize the inherent strengths of the Kurita Group’s business portfolio.

n Water Treatment Chemicalsn	Water Treatment Facilities(service)n	Water Treatment Facilities(hardware)

Service Business Revenue(Billions of yen)

199.7
178.5

181.2

Net Sales

58.3
53.7

98.9

42.5
2009

98.4

26.4
2010

56.7

96.1

28.4
2011
(Years ended March 31)

08 Kurita Water Industries Ltd. Annual Report 2011

ServiceBusiness
Revenue	Setting Kurita Apart and Realizing High Added
Value in the Maintenance Businessl

The maintenance services business is just as importantas the Water Treatment Chemicals business foranswering the recent surge in demand for improved
productivity and reduced environmental impact. Maintenance services effectively prevent performance deterioration or faults at customers’ water treatment
facilities, and ensure that equipment operates efficiently.

Leading the Industry inComprehensive Solutions

In this business, we leverage our accumulated data andknowledge to offer distinctive, high-value-added services that contribute to consistently high profit margins.
Revenue from maintenance services improved during
the fiscal year ended March 31, 2011 as customers’
demand increased the operating rates at their plants.

	High Quality Services in the Water Treatment
Chemicals Businesskey element in maintaining high quality services in our

Kurita’s water treatment chemicals offer customers aultrapure water supply business. In this business weway to prevent day-to-day equipment faults caused byearn fees for supplying customers with the quality andwater from occurring, thereby ensuring efficient opera-

volume of ultrapure water they require. Sales in thetions. Recently we have focused on helping customers

ultrapure water supply business came to ¥35.1 billion

to save even more energy and water in response toin the fiscal year ended March 31, 2011, and continued

growing demand for productivity improvements andto contribute to stable earnings for the Kurita Group.

lThis maintenance-related data and knowledge is areduced environmental impact.
To do this, we propose high-value-added services
utilizing technologies for sensing and automaticallycontrolling the concentration of treatment chemicals

Ultrapure Water Supply Incorporating
Wastewater Reclamationin water. These technologies allow Kurita and its customers to use advanced functions for visualizing andsharing key information to effectively manage custom-

Solar cells
plant

LCD panel
manufacturing plant

Glass substrates
plant

Color filters
plant

Kurita’s
ultrapure waterproduction
andwastewater
reclamation
facility

Glass substrates
plant

ers’ issues.
This initiative has seen the segment operating margin
for the fiscal year ended March 31, 2011 rise by 2.6
percentage points to 17.8%.
Kurita’s services are unique, and deliver real customer satisfaction. We will encourage customers withmultiple plants to adopt them across all their production sites. In addition, we will use them as a strategic
tool for distinguishing Kurita from competitors as we
expand our overseas business.

Color filters
plant

Ultrapure Water Supply
Wastewater Recovery

Kurita Water Industries Ltd. Annual Report 2011 09

Feature: Kurita’s New President Talks about Kurita’s Strategy for Growth

Global Expansion Driven by Comprehensive Strength
Overseas business expansion will play a critical part in
Kurita’s growth, and as such, we will tackle this task witheven greater urgency. Most of our expansion has been inregions where high economic growth is expected, such as
Asia and Brazil. However, the contribution to consolidated
net sales from our overseas businesses was still only 15%
in the fiscal year ended March 31, 2011. High economic
growth is of course a powerful accelerator for our Water Treatment Chemicals business, which serves
all types of industry. Furthermore, in emerging countries we can also expect industrial development toboost the need for water treatment systems for recycling waterIn emerging countries we can also
expect industrial development to boost
the need for water treatment systems
for recycling water.

since it is a limited resource. Kurita can provide sophisticatedsolutions to meet these needs, leveraging its outstanding technologies and rich knowledge in wastewater reclamation andrecycling. In China especially, remarkable growth and increasing
sophistication of industry have led to an emerging demand for

improved productivity and reduced environmental impact. This situation presents the Kurita Group with
an important opportunity to harness the comprehensive strength that stems from its chemicals, facilities, and maintenance businesses to supply optimal solutions to customers, building partnerships withthem as they grow.

Overseas Businessesn Othern Europen North American AsiaSales by Region(Billions of yen)

26.0

2.9
1.6
1.4

26.4
19.0

20.1

2.6
1.4
1.6

3.1
1.3
2.8

26.4

26.0
14.9

19.0

15.5
9.6

2010

11.0
2011

(Years ended March 31)

10 Kurita Water Industries Ltd. Annual Report 2011n	Water Treatment
Chemicals(Billions of yen)

19.2
13.4

2009

Sales by Overseas n	Water Treatment
Facilities
Business Segment

2009

9.4
2010

10.9
2011

(Years ended March 31)

strengths, including optimization of water flows
throughout an entire factory, data analysis and monitoring of water quality, and skilled use of water treatment chemicals. Demand for these systems is widely
expected to grow in emerging countries such as

Stepping up the Global
Expansion of
the Kurita Group

China, where economic growth is driving industry togrow in size and sophistication. Kurita will meet thisneed by prioritizing expansion and development of its
overseas business.

	New Water Treatment Chemical Factory inBrazil Starts OperationslKurita do Brasil LTDA (KDBL), a water treatment

	Kurita Technologies Enable Water Recycling
and Reusechemicals manufacturing and sales subsidiary in Brazil,

As global concern over water shortages deepens andfactory in May 2011. The new factory has about twice

governments move to tighten restrictions on wastewa-

the manufacturing capacity of its predecessor andter, there is a growing demand for wastewater treat-began operations from June 2011.

lment and wastewater reclamation systems forrelocated and enlarged its water treatment chemical

KDBL was established in 1975 as the South American

recovering and reusing factory wastewater. Suchbase of the Kurita Group. The company has worked

systems are already in common use among semi­

mainly in the steel, petroleum, automobile, and foodconductor and LCD panel manufacturers around theindustries, supplying water treatment chemicals forworld. Kurita plans to promote the uptake of these

cooling water and boiler water, and other applications.

systems in non-electronics fields with strong needs for

The previous factory had been in operation since 1988,

environmental impact reduction, including foodbut the company decided to increase its manufacturing

products, automobiles, and electroplating.

capacity to meet a projected increase in demand for

The field of reclamation systems is one wherewater treatment in line with economic development in

Kurita can leverage its advanced technologies to

Brazil. KDBL has also decided to relocate its head officeoutshine competitors. The systems present formidable

function to the site of the new factory with the aim oftechnical challenges that correspond to Kurita’sbuilding an efficient business management framework
while strengthening sales capabilities.

Creating Global Markets for
Wastewater Reclamation Systems

Kurita’s Global Network● Wastewater reclamation systems leverage Kurita’s
comprehensive strengths

Water Treatment Chemicals locations
Water Treatment Facilities locations

EuropeMaintenanceservices

Data analysis
and monitoring

Operational
management

Wastewater
reclamation systems

Water treatment
chemicals

Systemoptimization

DalianPharmaceuticals

Automobiles

Plating

US

TaiwanThailand
Malaysia
Singapore

Foods

South Korea

ShanghaiSuzhouBrazilIndonesia

Target markets

Kurita Water Industries Ltd. Annual Report 2011 11

Feature: Kurita’s New President Talks about Kurita’s Strategy for Growth

Maximizing Shareholder Value
In making returns to shareholders, our basic policy is tocontinue to deliver a stable dividend, while aiming toreturn profits to shareholders through dividend increases
after considering business performance and reinvestment
needs. Based on this policy, we have increased the annual
dividend for the fiscal year ended March 31, 2011 by ¥2from the previous year to ¥38. This makes the seventh consecutive year of increased dividends. Also in
the fiscal year under review we conducted a share buyback, acquiring

Our first priority for use of cash is
to allocate it to investments ingrowth sectors.

1,988,400 shares of our own stock for ¥4,776 million to improve thecapital efficiency and allow for a flexible capital policy. Going forward, we
will consider various ways to return profits to shareholders, taking into
account our capital funding requirements and cash on hand. In this way

we hope to meet shareholders’ expectations and uphold their trust.
Our first priority for use of cash is to allocate it to investments in growth sectors. We aim to set
aside sufficient funds to ensure that we can respond quickly to business opportunities including alliancesand M&As, as well as new projects in the capital-intensive ultrapure water supply business.
We will also consider using some funds for investments to reduce risk and further stabilize management. This follows a reexamination of our future risk management that was prompted by the recent
earthquake, although Kurita fortunately sustained only minor damage.
I would like to thank all of our shareholders, investors, and other stakeholders for understanding
our policies and ask for your continued support.

Dividends per Share
(Yen)

34.0

2009

38.0

36.0

2010

2011
(Years ended March 31)

12 Kurita Water Industries Ltd. Annual Report 2011

Research and Development

The Kurita Group’s research and development activi-

chemical meets Chinese environmental regulations.

ties are carried out primarily by the Research and•K urita developed chemicals for boiler water treat-

Development Division of Kurita Water Industries Ltd.

ment made from ingredients that are environmen-

The Kurita Group has a combined R&D staff oftally friendly and not controlled under theapproximately 150 personnel, equivalent to 3.3% of

Pollutant Release and Transfer Register (PRTR) law.

the Group’s total workforce. In the fiscal year ended
March 31, 2011, R&D expenses totaled ¥4,225

Water Treatment Facilities

million, or 2.3% of net sales.

In the Water Treatment Facilities segment, Kurita is

R&D activities cover a wide range of fields.

improving the quality of ultrapure water used by the

These include technology to strengthen the coreelectronics industry, and developing wastewater

areas of business such as boiler and cooling water

treatment and soil remediation technologies intreatment, ultrapure water production, water andanticipation of future environmental regulations.

wastewater treatment, wastewater reclamation, andKurita is also developing technologies conducive tosoil and groundwater remediation. Other R&D

a closed-loop economy, including those for waste-activities focus on basic areas such as analysis tech-water reclamation and reuse, and technologies tonologies, IT controls, and technologies for monitor-

reduce society’s environmental footprint, including

ing water treatment effectiveness. Kurita is alsosludge volume reduction systems.

exploring new functions of water for the development of entirely new businesses.
Research activities in the business segments are
explained below.

The Water Treatment Facilities segment’s R&D
expenses in the fiscal year totaled ¥2,940 million.
• Kurita developed an energy-efficient biotreatment
system featuring an anaerobic bacteria immobilization carrier. Compared to conventional anaerobic

Water Treatment Chemicals
In the Water Treatment Chemicals segment, Kurita isdeveloping chemicals that contribute to energy

systems, this system can be used on lower organic
concentration wastewater.
• Kurita developed a low-cost pre-treatment systemefficiency, environmental impact reduction, and pro-for industrial water which efficiently removes

ductivity enhancement at customer sites. Research issuspended matter and organic substances fromfocused on enhancing the functions of water treat-

polluted raw water.

ment chemicals and developing systems to monitor
water treatment effectiveness.
The Water Treatment Chemicals segment’s R&D
expenses in the fiscal year totaled ¥1,285 million.
• Kurita developed chemicals that prevent membrane fouling in reverse osmosis (RO) systems
used for ultrapure water production and thewastewater reclamation process.

• Kurita developed a two-bed single-tower typeion-exchange system which reduces running costs
by significantly lowering the amount of chemicals
used to regenerate ion-exchange resins.
R&D Expenses(Millions of yen)4,363

• Kurita developed technology to significantly

3,990

4,225

reduce the amount of treatment chemicals
needed to neutralize acidic gases released by
garbage incinerators. The technology automaticallycontrols the amount of chemicals injected in
response to concentration of acidic gases.
• Kurita developed chemicals to prevent corrosion
and scaling in cooling tower heat exchangers. The

2009

2010

2011
(Years ended March 31)

Kurita Water Industries Ltd. Annual Report 2011 13

Sustainable Management Framework

Corporate Governance
Basic Policy

Directors has also established an authorization proto-

Kurita and Kurita Group companies aim to contributecol based on authorization and review regulations.

broadly to society and meet the expectations of their

In terms of operational execution, Kurita has

stakeholders, including shareholders and investors.

employed an executive officer system since 2005

The Group does this through corporate activities inwith the aims of realizing swift decision making by

the fields of water and environment in accordance

separating management and execution and strength-with the Kurita corporate philosophy, “study theening officers’ capabilities. Kurita currently has six

properties of water, master them, and we will create

executive officers.

an environment in which nature and man are in har-

The external director monitors management by

mony.” To realize these aims, the Group has adopted

voicing opinions from an independent position ata basic corporate governance policy with two main

Board of Directors’ meetings. This ensures a multilat-

components. The first is establishing management

eral perspective and greater objectivity in directors’

systems that improve management transparency anddecisions on execution.

efficiency and sustainably increase corporate value
over the long term. The second is rigorous oversight

Corporate Auditor System

of management and operational execution.

Kurita employs a corporate auditor system. The
Board of Corporate Auditors comprises three cor-

Corporate Governance Structure

porate auditors, including two external corporate

Kurita’s Board of Directors currently comprises 12

auditors. The Board of Corporate Auditors decides

directors, including one external director. The Boardon audit policies for the fiscal year, allocation ofof Directors’ meetings set management policy, makeduties to each corporate auditor, specific items to

management decisions, and oversee directors’ exe-

be performed, schedules, and other items for exe-

cution of their duties. The Board of Directors’ meet-cuting audits.

ings are chaired by the president and held monthly

Corporate auditors attend Board of Directors’

on a regularly scheduled basis and whenever else

meetings, Executive Committee meetings, and othernecessary on an ad hoc basis.

important company meetings and monitor the

Kurita has an Executive Committee comprising

directors’ fulfillment of its oversight responsibilities.

committee meets twice monthly as a general rule toCorporate auditors’ other responsibilities include

deliberate on important management matters andconducting asset status surveys of the entire group,

assist the Board of Directors’ decision-making.

including subsidiaries, checking the status and func-

To complement its decision-making, the Board oftionality of internal control systems implemented by
the directors, confirming accounting auditors’ inde-

Organization

pendence and fulfillment of duties, and meeting withthe accounting auditors regularly and as otherwise

General Meetingof Shareholders

Board of Directors

directors’ execution of duties and the Board of

six directors including representative directors. The

necessary to discuss the accounting audit andexchange opinions.

Board of Corporate
Auditors

The Internal Auditing Department, which reports
directly to the president, is tasked with strengthening

Corporate Auditors

internal control. The head of the department and eight
subordinate staff conduct internal audits of the entire

Executive Committee

President

14 Kurita Water Industries Ltd. Annual Report 2011

Internal Auditing
Department

Operating Divisions

Group to ascertain any issues or problems arising in
the execution of duties. The department then recommends measures for improvements to the president.
From the fiscal year beginning April 1, 2008, thedepartment has been responsible for monitoring theappropriately as needed, mainly from a specialist

status of internal controls and recommending andlegal expert’s perspective.

supporting improvements in response to the introduccial reporting mandated by on the Japanese Financial

Internal Control System and
Risk Management System

Instruments and Exchange Act.The department also

In May 2006 the Board of Directors prescribed themonitors the Group’s implementation and improve-

Fundamental Policy Regarding the Establishment ofment of risk management.

Internal Control Systems in accordance with thetion of the internal controls reporting system for finan-

The corporate auditors and the Internal Audit-

requirements of Japan’s Companies Act and has subse-

ing Department discuss the department’s audit planquently augmented Kurita’s internal controls in line

for each fiscal year and exchange opinions regardingwith this basic policy.The following systems are in place

the status and results of audits, assessment of inter-to enhance management of compliance and safety.

nal control over financial reporting, and assessment• Compliance Committeesof risk management.

Compliance is one of Kurita’s top management

Kurita has appointed Grant Thornton Taiyo ASG

priorities. Kurita has established a Compliance Com-

as its accounting auditor, in accordance with the law,

mittee chaired by an executive senior managing

to implement and enhance the Company’s account-director (representative director) and a Grouping audits.

Compliance Committee comprising representative

The two external corporate auditors enhance

directors from Group companies.

objectivity in monitoring management by auditing

The Kurita Group regards compliance activities

from an independent perspective, drawing on theiras entailing more than simple law abidance. Rather, it

specialized knowledge. In March 2010, Kurita regis-

is conceived as a broad ethical practice aimed attered the external director and the two external

realizing five values: fairness, transparency, integrity,

corporate auditors as independent officers insafety, and coexistence. Kurita set forth these values

accord with the Tokyo Stock Exchange’s listing regu-

in its Code of Ethical Conduct, prescribed in 2000.

lations, as amended.

Kurita has also instituted whistleblower protection• Main Activities of the External Director andregulations, and established an internal consultation

External Corporate Auditors fordesk while at the same time contracting an outside

the Fiscal Year Ended March 31, 2011

party to provide consultation and reporting services.

Mr. Hayata, Kurita’s external director, attended Board• Headquarters Health and Safety Committeeof Directors’ meetings and voiced appropriate opin-

The Headquarters Health and Safety Committeeions as required on the proposals and deliberations

reports directly to the president. The committee

at the meetings.

oversees several subcommittees: the On-site Divi-In addition to conducting regular audits, Mr.

sion Health and Safety Committee, the Facilities

Kuzuu, one of the external corporate auditors,

Production Division Health and Safety Committee,

attended Board of Directors’ meetings, Board of

the Ultrapure Water Supply Group Health andCorporate Auditors’ meetings and other important

Safety Committee, the Maintenance Group Healthmeetings to offer a specialist financial and accounting

and Safety Committee, and the Headquarters,

perspective on matters, as well as appropriately

Branch and Office Health and Safety Committees.

exchanging opinions with the accounting auditors

Together these committees work to maintain andand Internal Auditing Department.

improve health and safety at workplaces and in

Mr. Uda, the other external corporate auditor,
attended Board of Directors’ meetings and Board

business activities from the perspective of Group
companies and cooperating partners.

of Corporate Auditors’ meetings to offer opinions

Kurita Water Industries Ltd. Annual Report 2011 15

• Risk Management

component that reflects the Company’s business

An officer is designated to promote oversight andresults. Specifically, for directors the basic annual salary

management of risk by regularly conducting risk

is set separately for each office, while for corporate

analysis and evaluation, and taking steps to prevent

auditors the basic annual salary reflects the full-timerisk events from occurring where possible.

or part-time status of the officer. The performance-

The Group suffered only minor damage tolinked amount is variable and dependent on achieve-

facilities at some of its business sites from the Great

ment of performance targets for the fiscal year. To

East Japan Earthquake that occurred on March 11,

incentivize improved business performance over the

2011. The Group responded on March 11 by estab-medium to long term, a certain proportion of thelishing a Disaster Response Headquarters, under thebasic annual salary is paid to the Directors’ and Cor-president, to ascertain damage and assist withporate Auditors’ Shareholding Scheme and allocatedrecovery at customers’ sites in the affected areas,for purchasing the Company’s shares. Based on thisand to offer assistance by supplying drinking water

policy, the compensation for each director is decided

and through monetary donations.

by the Board of Directors and the compensation foreach corporate auditor is decided by the Board ofCompensation Paid to Directors andCorporate Auditors

Corporate Auditors within the total limit set by the

Total Amounts of Compensation Paid to Directors and Corporate Auditors
by Classification and Total Amounts and Number of Recipients for
Each Type of Compensation for the Fiscal Year Ended March 31, 2011

Information Disclosure and IR Activities

Total
compensation
paidClassification

General Meeting of Shareholders.

Kurita aims to gain the trust of society and build

Total compensation paid by type (Millions of yen)

Number of
Retirement recipients(Persons)
package

Basic

Stock
options

Bonus

509

509

–

–

–

12

(Excluding external
corporate auditors)

31

31

–

–

–

1

External corporate
auditors

43

43

–

–

–

2

(Millions of yen) compensation

Directors(Excluding external director)

Corporate auditors

Hiroshi Saito

disclose information in a timely manner, in compliance with the Companies Act, the Financial Instruments and Exchange Act, and the rules of the

Director

The
Company106––

To achieve greater transparency, Kurita has set
up an investor relations Web site to ensure timely
and fair disclosure even of information outside the

Total consolidated
Total consolidated compensation paid by type (Millions of yen)compensation Classification Company
Retirement
Basic
Stock
paid
Bonus
packagecompensation options(Millions of yen)106

The Company therefore endeavors to adequately

Tokyo Stock Exchange.

Total Amounts of Consolidated Compensation Paid to Directors andCorporate Auditors
Namefair and transparent relationships with stakeholders.

–Note: Total consolidated compensation paid is reported only for persons who received ¥100 million or more.

purview of the disclosure laws and regulations.
Moreover, in addition to the Web site and quarterly
publication of shareholders’ newsletters, Kurita also
holds results briefings attended by top management
for explaining the half-year and full-year results. The
materials for these briefings are also made available• Amount of Compensation for Directors andCorporate Auditors, Policy foron the investor relations Web site.
Kurita also conducts investor relations activities

Calculation, and Method of Determination

including individual meetings and interviews with

Kurita’s system for compensating directors andinvestors and analysts, overseas roadshows, results

corporate auditors is intended to create incentives topresentations, and other events. These events serve

continuously work to increase the Company’s enter-not only as a means of disclosure, but also as

prise value and business results. To this end, the com-opportunities for management to engage in dia-

pensation packages comprise two components: alogue with investors. Kurita is therefore committed

basic annual salary and a performance-linked

to enhancing these activities further.

16 Kurita Water Industries Ltd. Annual Report 2011

Environmental Improvement Activities
The Kurita Group’s business operations are closelyin the field of water and the environment. As such,

Basic Environmental Improvement
Activities Policy

we focus on contributing to society through our

The Kurita Group will conduct business activities

main business. Our efforts to help realize a sus-

based on its corporate philosophy and will

tainable society naturally begin with reducing ourendeavor to solve water and environmental

own impact on the environment. We also consider

issues with the aim of making broad contributions

it important to promote proposals for reducing

to society.

linked with environmental improvement activities

environmental impact to our customers.
As a framework for promoting environmental

Activity Guidelines

improvement activities, Kurita has an Environmental

1. We will contribute to the realization of a

Improvement Promotion Committee that deliber-

resource-recycling society by developing newates on matters relating to the status of the Group’s

products and technologies conducive to environ-environmental activities and formulates policies. In

mental improvement.

accordance with these policies, Environmental

2. We will work with customers to improve the

Improvement Promotion Committees within Kurita’senvironment by providing products, technologies,

administrative and business divisions, as well as busi-

and services that improve productivity, reduce

ness sites and Group companies each formulate andenvironmental impact, and offer innovative

pursue their own measures and targets, and executeenergy solutions.

them. To check on the progress and achievement of

3. In conducting business activities, we will reducethese targets and measures, environmental improve-environmental impact by daily practicing the threement activity facilitators from each business site andRs (Reduce, Reuse, Recycle) through operational

subsidiaries convene an Environmental Improvement

improvement and innovation.

Activity Promotion Meeting, at which they assess
the activities’ adequacy and effectiveness.

Framework for Promoting Environmental Improvement Activities
President

Environmental Improvement
Promotion Committee

Environmental Improvement
Activity Promotion Meeting

Environmental Improvement
Promotion Committee
within operating divisions

Business sites(Environmental improvement
activity facilitators)

Group companies(Environmental improvement
activity facilitators)

Employees

Employees

Employees

Kurita Water Industries Ltd. Annual Report 2011 17

Distinctive Environmental
Improvement Activities

Results of Environmental Activities in theYear Ended March 31, 2011

A distinctive aspect of Kurita’s environmental

With respect to societal needs, in the Water Treat-

improvement activities is their close links with thement Chemicals business, the Kurita Group has

Company’s business activities. Kurita’s main businessdeveloped new products for reducing usage of

involves developing products and technologies thatheavy oil and chemicals at customers’ plants. In

help to improve the environment, then leveraging

water treatment facilities, we have developed newthem to help customers reduce their environmental

wastewater treatment systems that reduce elec-

impact. For this reason, the Kurita Group approaches

tricity usage and the volume of sludge generated

environmental improvement activities from threeby customers.

aspects: responding to societal needs, meeting customer needs, and pursuing internal change.
To respond to societal needs, the Group develops new products and technologies that help toRegarding customer needs, Kurita helped customers to realize environmental benefits that surpassed Kurita’s initial targets for reducing CO2
emissions and water pollutants.

improve the environment for society as a whole. To

For internal change in addition to its previous

meet customers’ needs, the Group works to makeinitiatives, Kurita formulated an integrated policy forcustomer sites and offices more environmentally-

the entire Group that sets out water quality man-friendly by formulating and providing solutions thatagement and a response to emergency situations at

accurately meet the customers’ needs for reducing

all levels. The policy was based on results of a risk

their environmental impact. The Group measures its

evaluation for wastewater treatment facilities man-

performance here in terms of numbers of newagement. Details and concrete data are scheduled

developments and effective environmental benefits

to be published in the Kurita Group Environmental

to customers. These environmental benefits are

Report in October 2011.

calculated as an estimate (i.e., deemed effect) of the
reduction in the environmental impact after thecustomer has adopted Kurita’s proposal.
With regard to internal change, the Group setstargets for reduction of CO2 emissions and reduction of waste disposal volume, and strives to reduce
the environmental impact from its operations.

TopicsIn response to the Great East Japan Earthquakethat struck in March 2011, the Kurita Group
donated ¥100 million in assistance to support
victims of the disaster and to help recovery
efforts in affected areas. The Group also supplied

The Three Aspects of Kurita’s Environmental Improvement Activities
Customers’ environmental
improvement activities

Kurita’s own
environmental
improvement activities

Aspect 1:
Societal needs

Aspect 2:
Customer needs

Aspect 3:
Internal change

Realizing a
resource-recycling society
through the developmentof new products andtechnologies that
contribute toenvironmental
improvement

Products, technologies
and services that will
enable customers to
improve the environment

Reducing environmental
impact by putting the 3Rs
into practice throughoperational improvement
and innovation

18 Kurita Water Industries Ltd. Annual Report 2011its own drinking water product Minerise Water tostricken areas.
The Kurita Group will continue working tosupport people in affected areas.

Board of directors and corporate auditors (As of June 29)
Directors

Toshiyuki Nakai*Kazufumi Moriuchi*

2011	President
Representative Director
2009	President, Kurita Engineering Co., Ltd.
2005	Director
1979	Joined Kurita Water Industries Ltd.

2010	to present
General Manager of Facilities Division2009	to present
Representative Director
2007	to present
Executive Senior Managing Director
1971	Joined Kurita Water Industries Ltd.

Tetsuo Saeki

Kaoru Kajii

Shigeaki Takeda

2011	General Manager of Facilities Production
Division
2007	to present
Managing Director
1974	Joined Kurita Water Industries Ltd.

2011	General Manager of Research andDevelopment Division2009	to present
Managing Director
1974	Joined Kurita Water Industries Ltd.

2011	Managing Director
General Manager of Chemicals Division2007	Director
1973	Joined Kurita Water Industries Ltd.

Tetsuo Kai

Heiju Maeda

Motoyuki Yoda

Kiyoshi Itou

2011	General Manager of Ultrapure Water
Supply Group, Facilities Division2007	to present
Director
1972	Joined Kurita Water Industries Ltd.

2009	to present
Director
2006	to present
General Manager of 2nd Group,
Chemicals Division1975 Joined Kurita Water Industries Ltd.

2011	General Manager of Water andResource Recycling Group, Facilities
Division
2009	to present
Director
1978 Joined Kurita Water Industries Ltd.

2009	to present
Director
General Manager of Administrative
Division
1979 Joined Kurita Water Industries Ltd.

Takahito Namura

Youichi Kurokawa

Noriyuki Hayata

2011	Director
2009	to present
General Manager of 3rd Group,
Chemicals Division1977	Joined Kurita Water Industries Ltd.

2011	Director
General Manager of Corporate
Planning Division
1984	Joined Kurita Water Industries Ltd.

2011	General Manager, Planning and
Administration Department, ICT &Machinery Company, ITOCHU
Corporation2009	to present
External Director
1981	Joined ITOCHU Corporation

Tohru Ishizaka

Chiaki Kuzuu

Tamio Uda

2004	to present
Corporate Auditor
1966	Joined Kurita Water Industries Ltd.

2004	to present
External Corporate Auditor
2002	Chief Financial Officer, Machinery
Company, ITOCHU Corporation
1971 Joined ITOCHU Corporation2009	to present
External Corporate Auditor
1977	Established Harada Uda Law Office(currently Uda Law Office)1974	Admitted to the Japan Bar
Association

Corporate Auditors* Representative Director

Kurita Water Industries Ltd. Annual Report 2011 19

Six-Year Financial Summary
Kurita Water Industries Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars(Note 1)Millions of yen
2011

2010

2009

2008

2007

2006

2011

¥181,234¥178,520¥199,706¥204,875¥197,146¥173,683$2,183,550

Water Treatment Chemicals

56,73553,74358,33158,646

56,66754,549683,558

Water Treatment Facilities

124,499

124,777

141,374

146,228

140,479

119,133

1,499,991

Cost of sales

118,573

117,221

135,874

138,549

137,819

122,630

1,428,600

Selling, general and administrative expenses

35,52834,94135,89635,85735,05033,741

428,059

Operating income

27,131

26,35827,93530,46824,276

17,311

326,889

Income before income taxes and minority interests

27,84428,178

26,10331,27924,591

18,200335,470

Net income

17,13817,28816,29918,297

14,207

10,519206,483

Capital expenditures

5,965

8,083

56,32224,097

19,563

16,53771,875

Research and development (R&D) expenses

4,225

3,990

4,363

4,551

4,421

4,213

50,910Depreciation and amortization

16,066

15,523

11,716

9,425

6,512

4,906

193,571

Total current assets

117,852

109,297

98,689121,562

137,004

125,231

1,419,905

Total current liabilities

34,771

38,59247,93549,08065,49654,877418,928

Equity (Note 2)

198,042

192,588

177,291

169,402

156,772

145,366

2,386,059

Total assets

253,298

251,620

245,406

231,498

235,137

212,774

3,051,790

Number of shares issued (thousands)

132,800

132,800

132,800

132,800

132,800

132,800

Number of employees (persons)

4,490

4,445

4,404

4,249

3,992

3,668

134.02134.38126.69142.21110.42

81.76

1.61

1,563.57

1,496.98

1,378.04

1,316.65

1,218.42

1,129.74

18.84

38.00

36.00

34.00

32.00

28.00

22.00

0.46

Total assets turnover (times)

0.72

0.72

0.84

0.88

0.88

0.86

Equity ratio (%)

78.2

76.5

72.2

73.2

66.7

68.3

Return on sales (%)

9.5

9.7

8.2

8.9

7.2

6.1

For the year:
Net sales

At year-end:

Per share of common stock (yen) (Note 4):
Net income
EquityCash dividends applicable to the year
Ratios:Return on equity (ROE) (%) (Note 3)

8.8

9.3

9.4

11.2

9.4

7.5

Return on assets (ROA) (%) (Note 3)

6.8

7.0

6.8

7.8

6.3

5.2

Notes: 1. The U.S. dollar amounts are given solely for convenience at the rate of ¥83 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2011.
2. Equity represents net assets less minority interests.
3. ROE = Net income ÷ Equity (Average) ×100
ROA = Net income ÷ Total assets (Average) ×100
4. Net income and cash dividends per share are calculated using the average number of shares for the year under review. Calculation of equity per share is based on the number ofshares at year-end (excluding treasury stock).

20 Kurita Water Industries Ltd. Annual Report 2011

MANAGEMENT’S DISCUSSION AND ANALYSIS

Business Overview
Markets in which the Kurita Group operates were challenging on the wholeduring the fiscal year ended March 31, 2011. In Japan, although customer factories’ capacity utilization rose moderately, capital expenditure levels in both theelectronics industry and general industries remain low, having yet to achieve afull-fledged recovery.
Overseas business, on the other hand, was steady, particularly in Asia, which isseeing continued economic growth.
The fiscal year ended March 31, 2011 was the second year of MP-11, ourthree-year medium-term management plan. The basic objectives of the plan are
to strengthen customer trust, enhance business quality, and carve out new business domains. Under the plan, the Group has worked to achieve sustained
growth by further expanding its service businesses and global operations anddeveloping new products and businesses.
In tandem with its sales activities, the entire Group also worked to implement rigorous risk management.
For the fiscal year ended March 31, 2011, the Kurita Group saw increases inorders received, net sales, and operating income. Gain on liquidation due totermination of contract declined, with the result that net income came in slightly
lower compared with the previous year.
The Kurita Group received only minor damage to some facilities in the Great
East Japan Earthquake of March 2011.
Operating Results

Orders by Segmenta) Orders
In the Water Treatment Chemicals segment, Kurita bolstered sales efforts bystrengthening alliances with its domestic and overseas sales subsidiaries and pursued order bookings through a consultative sales approach. Specifically theYears ended March 31 (Millions of yen)

192,529

208,689

195,065

175,162 181,951

approach involved helping customers successfully meet the challenges of reducing their environmental impacts and enhancing productivity.
In the Water Treatment Facilities segment, Kurita worked to secure orders byfocusing on service businesses, such as the ultrapure water supply business andmaintenance services. The Group also stepped up consultative sales targeting key
customers and sales activities in Asia, with an emphasis on China.
In both the Water Treatment Chemicals and Water Treatment Facilities segments,
the Group also worked to increase future orders by developing and expanding sales

135,969 149,659 136,595 121,791 125,237
56,5602007

59,0292008

58,4702009

53,3702010

56,7142011

n Water Treatment Facilities
n Water Treatment Chemicalsof new products.
Total consolidated orders for the Kurita Group in the fiscal year ended March
31, 2011, were up 3.9% versus the previous fiscal year to ¥181,951 million.
Orders increased in both the Water Treatment Chemicals and Water Treatment
Facilities segments.

Kurita Water Industries Ltd. Annual Report 2011 21b) Net Sales
In the Water Treatment Chemicals segment, net sales increased 4% in Japan, led
by higher sales of mainstay products, and grew a significant 15% overseas, mainlyin Asia. The result was a 6% increase for the entire segment.
In the Water Treatment Facilities segment, the ultrapure water production

Sales by Segment
Years ended March 31 (Millions of yen)

197,146 204,875 199,706

178,520 181,234

systems’ net sales to the electronics industry increased on the back of progresson construction projects in Japan and overseas. Sales of maintenance services
also rose, while sales of tool cleaning services dropped slightly. In general industries, sales of water treatment systems declined amid a lull in sales from large
projects in the steel industry. Sales of soil remediation services also dropped, but
sales of maintenance services increased versus the previous fiscal year.
Overall, the Kurita Group’s net sales increased 1.5% versus the previous fiscal
year to ¥181,234 million.

140,479 146,228 141,374 124,777 124,499
56,667
2007

58,646
2008

58,331
2009

53,743
2010

56,7352011

n Water Treatment Facilities
n Water Treatment Chemicalsc) Cost of Sales and Gross Profit
Cost of sales was up 1.2 % to ¥118,573 million from ¥117,221 million in thefiscal year ended March 31, 2010.

Gross Profit
Years ended March 31 (Millions of yen)

As a percentage of sales, cost of sales declined to 65.4% in the year ended
March 31, 2011, an improvement of 0.3 of a percentage point from 65.7% in theprevious fiscal year.

66,32563,831

61,29962,660

2008

2009

2010

2011

59,326In the Water Treatment Chemicals segment, the main factors behind thecost-of-sales ratio’s decrease were the effect of increased sales and an increasein the proportion of sales of relatively more profitable mainstay products.
d) Selling, General and Administrative (SG&A) Expenses
SG&A expenses were ¥35,528 million, up 1.7% or ¥587 million from ¥34,941 in2007

the fiscal year ended March 31, 2010.
The increase in SG&A expenses was attributable to a ¥341 million increasein personnel-related expenses including salaries and allowances, provision for
employees’ bonuses and retirement benefit expenses. As a percentage of sales,
SG&A expenses remained unchanged from the previous year at 19.6%.

SG&A Expenses
Years ended March 31 (Millions of yen)

22 Kurita Water Industries Ltd. Annual Report 2011

35,05035,85735,89634,941

35,528

2007

2008

2009

2010

2011

e) Operating Income
Operating income increased to ¥27,131 million in the year ended March 31,
2011, up 2.9% from ¥26,358 million in the fiscal year ended March 31, 2010. The

Operating Income by Segment
Years ended March 31 (Millions of yen)operating margin improved to 15.0% from 14.8% in the previous fiscal year.
30,468f) Segment Information

27,93524,276

26,35827,131

Water Treatment Chemicals
Orders and Sales
In Japan, orders for boiler water treatment chemicals, cooling water treatment
chemicals, and wastewater treatment chemicals, the Group’s mainstay products,
increased versus the previous fiscal year, due to stronger consultative sales efforts
and higher capacity utilization by customers.
Kurita focused on controlling rising raw materials and sales costs to15,471

20,93919,51718,181

8,806
2007

9,525
2008

8,417
2009

8,177
2010

17,032
10,0992011

n Water Treatment Facilities
n Water Treatment Chemicals

secure profits.
Regarding new products and technologies, Kurita has developed highperformance chemicals for removing contaminants from the membranes used inreverse osmosis (RO) membrane systems.

Operating Margin by Segment
Years ended March 31 (%)

Overseas, orders and sales increased in Asia and Brazil. This increase was due

17.8

to recoveries in production activity in various industries, particularly in Asia. At
the same time, Kurita enhanced sales activities by acquiring more customers in
the process treatment chemicals field and providing technological support.
Operating Income
Operating income increased significantly as Kurita worked to control rises in costof sales and SG&A expenses while recording higher sales.
Overall, the Water Treatment Chemicals segment booked orders of ¥56,714
million (up 6.3 % versus the previous fiscal year) and earned operating income of

16.2
15.5

15.2

14.9

14.4

14.3

14.0
13.8

2008

2009

12.3

15.0
14.8
14.6

13.7

11.0
2007

2010

2011

n Water Treatment Chemicals
n Totaln Water Treatment Facilities¥10,099 million (up 23.5%) on sales of ¥56,735 million (up 5.6%).
Water Treatment Facilities
OrdersIn the electronics industry, orders for the ultrapure water supply business roseslightly versus the previous fiscal year, while orders for ultrapure water production systems increased overseas. Orders for maintenance services rose due to arecovery in capacity utilization at customer plants in Japan. Orders for tool cleaning services were down slightly as stronger competition depressed prices.
Orders for hardware and soil remediation services for general industries inJapan decreased due to a slump in capital expenditures and demand, and a
downturn in the real estate market. However, orders for maintenance services
for privately owned plants increased mainly due to a recovery in capacity utilization and stronger consultative sales activities.
Kurita Water Industries Ltd. Annual Report 2011 23

Sales
The sales of ultrapure water production systems to the electronics industry
increased as construction projects in Japan and overseas made progress. Sales ofmaintenance services also rose, primarily due to a recovery in capacity utilization
at customer plants in Japan, while sales of tool cleaning services dropped tracking
lower orders due to stronger competition and lower prices.
Sales of maintenance services to general industries recovered, but sales of hardware decreased amid a lull in sales from large projects in the steel industry. Sales ofsoil remediation services also declined due to a stagnating business environment.
In China, the Group responded swiftly to customer needs for water quality
analysis and moved to provide sales support by establishing a water quality
analysis team at Kurita Water Industries (Suzhou) Ltd. Moreover, the Group
continued building a completely local production framework in China for designing, manufacturing, and testing the capacity of water treatment facilities.
In new products and services, Kurita developed a carrier-type anaerobic
treatment system applicable to low-concentration organic wastewater that has
previously not been treatable with such systems. The Group also expanded sales

Breakdown of Net Sales
Fiscal year ended March 31, 2011of electrolyzed sulfuric acid generators for semiconductor manufacturers.
14.5%

Operating Income
Total Net Sales

Segment operating income declined tracking lower sales of hardware to general¥181,234

industries and soil remediation services. The effect was offset somewhat by amillionrecovery in hardware sales to the electronics industry and maintenance services

85.5%

to clients in Japan.
Total Group orders for the Water Treatment Facilities segment were
¥125,237 million (up 2.8%) and earned operating income of ¥17,032 million(down 6.3%) on sales of ¥124,499 million (down 0.2%).

n Domestic

¥154,867 millionn Overseas¥26,367 milliong) Overseas Sales
Overseas sales rose 38.7% to ¥26,367 million in the year ended March 31, 2011.
Overseas sales’ share of consolidated net sales increased to 14.5% from 10.6% inOverseas Sales by Region
Fiscal year ended March 31, 2011

the previous fiscal year.
Sales by Region

11.7%• Asia: Up 43.2% to ¥19,195 million, equivalent to 72.8% of total
overseas sales• North America: Up 73.4% to ¥2,820 million, 10.7% of total overseas sales

72.8%

4.8%
10.7%

Overseas Sales¥26,367
million• Europe: Down 8.8% to ¥1,276 million, 4.8% of total overseas sales• Other regions: Up 19.1% to ¥3,075 million, 11.7% of total overseas sales

24 Kurita Water Industries Ltd. Annual Report 2011n Asia¥19,195 millionn North America

¥2,820 million

n Europe

¥1,276 millionn Other regions¥3,075 millionh) Other Income and Expenses
The balance of other income and other expenses was net other income of ¥712
million, down from ¥1,820 million in the previous fiscal year.

Net Income per ShareYears ended March 31(Yen)142.21This decline was mainly attributable to the absence of a gain on liquidation

134.38134.02

2009

2010

2011

9.4

9.3

8.8

2009

2010

2011

126.69due to termination of contracts of ¥1,507 million in the previous fiscal year.

110.42The net balance of interest and dividend income and interest expense
increased to ¥390 million versus ¥305 million in the previous fiscal year.
The Group recorded loss on disaster of ¥124 million in connection with damages incurred at some business sites, and support expense of disaster restorationof ¥115 million.
2007

2008

i) Income before Income Taxes and Minority Interests
Income before income taxes and minority interests decreased 1.2% to ¥27,844
million from ¥28,178 million in the previous fiscal year.
The pretax profit margin consequently decreased to 15.4% from 15.8% in
the previous fiscal year.

Return on Equity
Years ended March 31(%)j) Net Income
After deducting income taxes and income from minority interests, Kurita earned
net income of ¥17,138 million for the fiscal year ended March 31, 2011, a 0.9%
decrease from ¥17,288 million in the previous fiscal year.
Net income per share decreased to ¥134.02 from ¥134.38 in the previous

9.4

11.2

fiscal year, and the net margin fell to 9.5% from 9.7% in the previous fiscal year.
Return on equity decreased to 8.8% from 9.3% in the previous fiscal year.
2007k) Returns to Shareholders

2008

Kurita’s basic policy is to pay stable dividends on an ongoing basis. Kurita strives
to increase its dividends, taking into consideration earnings performance andNote: Return on equity = Net income ÷ Equity (Average) ×100

investment in its businesses.
In light of future business prospects and to reward shareholders for theirsupport, Kurita paid an annual dividend of ¥38 per share (of which ¥19 per
share was an interim dividend), an increase of ¥2 per share versus the previous

Dividends per ShareYears ended March 31(Yen)fiscal year’s ¥36 per share (of which ¥17 per share was an interim dividend).
The Company decided to acquire a portion of its own stock with the aim of
improving capital efficiency and ensuring a flexible capital strategy. Between

32.00

34.00

36.00

38.00

28.00

November 8, 2010 and December 22, 2010, the Company acquired 1,988,400
shares of its own stock at a cost of ¥4,776 million. The acquired shares represented
1.55% of the total issued shares of the Company, excluding treasury stock.
2007

2008

2009

2010

2011

Kurita Water Industries Ltd. Annual Report 2011 25

Capital Expenditures
The Kurita Group is committed to making necessary investments in technological innovation, expansion of production capacity, and competitiveness enhance-

Capital Expenditures andDepreciation and Amortization
Years ended March 31 (Millions of yen)

56,322

ment in response to intensification of sales competition. In the year ended March
31, 2011, Capital expenditures totaled ¥5,965 million, a decrease of ¥2,118 million year on year (Leased assets and leased obligations were included for transactions for finance leases which do not transfer ownership).
The Water Treatment Chemicals segment invested a total of ¥1,183 million in
assets, an increase of ¥32 million from the previous fiscal year. Most of this was for
new installation and overhaul of chemical production equipment.
The Water Treatment Facilities segment invested a total of ¥4,781 million in
assets, primarily to newly install and expand facilities for the ultrapure watersupply business. This was a substantial ¥2,150 million decline from the previous

24,097

19,563

9,425

6,512
2007

2008

15,523 16,066
11,716
8,083
5,965
2009

2010

2011

n Capital Expendituresn Depreciation and Amortization

fiscal year.
Depreciation and amortization increased 3.5% year on year to ¥16,066 million in the year ended March 31, 2011, reflecting an increase in depreciation on
facilities for the ultrapure water supply business.

R&D Expenses
Years ended March 31 (Millions of yen)

4,421

4,551

Research and Development

4,363

3,990

4,225

Kurita conducts R&D through its Research and Development Division. In theyear ended March 31, 2011, total R&D expenses increased 5.9% to ¥4,225 million, equivalent to 2.3% of net sales. The Kurita Group employs approximately
150 R&D personnel, equivalent to 3.3% of its total workforce (4,490 personnel
on a consolidated basis).
The Water Treatment Chemicals segment’s R&D activities predominantly
involved developing chemicals that help customers improve energy efficiency,
reduce their environmental impact, and boost productivity. Other developments
include technologies for systems that monitor water treatment effectiveness. The
segment’s R&D expenses for the fiscal year ended March 31, 2011 totaled¥1,285 million, a 15.4% increase versus the previous fiscal year.
In the Water Treatment Facilities segment, Kurita endeavored to further
improve ultrapure water quality and develop wastewater treatment and soil
remediation technologies in anticipation of future environmental regulations.
Kurita also endeavored to develop technologies conducive to a recycling-based
economy, such as wastewater reclamation for reuse and sludge volume reduction. Segment R&D expenses totaled ¥2,940 million, a 2.3% increase versus theprevious fiscal year.

26 Kurita Water Industries Ltd. Annual Report 2011

2007

2008

2009

2010

2011

Financial Positiona) Total Assets
At March 31, 2011, Kurita had total assets of ¥253,298 million, an increase of¥1,678 million from ¥251,620 million at March 31, 2010.
Current Assets

Total Assets and Return on Assets
As of March 31 (Millions of yen)

235,137 231,498

245,406 251,620 253,298

7.8

6.3

6.8

7.0

Current assets at March 31, 2011 totaled ¥117,852 million, an increase of ¥8,555

6.8

million from ¥109,297 million at March 31, 2010.
The increase was mainly due to an increase of ¥18,710 million in cash andtime deposits, which was partially offset by declines of ¥2,128 million in notes
and accounts receivable, trade and ¥8,500 million in marketable securities.
Property, Plant and Equipment, Intangible Assets, and Investments and

2007

2008

2009

2011

2010

n Total Assets
n Return on Assets
Note: Return on assets = Net income ÷ Total assets (Average)×100

Long-term Receivables
At March 31, 2011, property, plant and equipment totaled ¥106,608 million, adecrease of ¥9,892 million from ¥116,500 million at March 31, 2010. Thisoccurred because depreciation on facilities for the ultrapure water supply busi-

Property, Plant and Equipment, net
As of March 31 (Millions of yen)ness for which capital expenditures were made up until the previous fiscal year

126,063

exceeded capital expenditures in the year under review.
Investments and long-term receivables were ¥26,897 million at March 31,
2011, an increase of ¥3,248 million from ¥23,649 million a year earlier. The

116,500

106,608

81,98467,288increase was mainly attributable to an increase in investment securities.

2007

2008

2009

2010

2011

Kurita Water Industries Ltd. Annual Report 2011 27

b) Liabilities
At March 31, 2011, liabilities totaled ¥53,946 million, a decrease of ¥3,734 million
from ¥57,680 million at March 31, 2010.
Current liabilities
Current liabilities at March 31, 2011 were ¥34,771 million, a decrease of ¥3,821
million from ¥38,592 million at March 31, 2010. The decrease was mainly due toa ¥2,304 million decline in accounts payable, other and a ¥1,804 million decline
in income taxes payable. The decrease in accounts payable, other was due topayment of consumption taxes, while the decrease in income taxes payable
resulted from the payment of annual and interim income taxes.
Long-term Liabilities
Long-term liabilities at March 31, 2011 were ¥19,175 million, a small increase of¥87 million from ¥19,088 million at March 31, 2010.
c) Net Assets
At March 31, 2011, net assets totaled ¥199,351 million, a ¥5,412 million
increase from ¥193,939 million at March 31, 2010. The change mainly reflects a

EquityAs of March 31 (Millions of yen)

¥12,237 million increase in retained earnings due to positive net income forthe fiscal year. This increase was partially offset by a ¥4,785 million increase intreasury stock due to open market repurchases, dividend payments made from

156,772

169,402177,291

192,588 198,042

retained earnings and a decrease in total accumulated other comprehensive
income due to a decrease in unrealized gains on available-for-sale securities
reflecting a drop in the market prices of investment securities held by theGroup. At March 31, 2011, Kurita had an equity ratio of 78.2%, up 1.7 percentage points from 76.5% a year earlier.
Equity per share at March 31, 2011 was ¥1,563.57, an increase of ¥66.59
from ¥1,496.98 a year earlier.
*Equity is defined as net assets less minority interests.

28 Kurita Water Industries Ltd. Annual Report 2011

2007

2008

2009

2010

2011

Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥29,796 million in the fiscal year

Cash Flows from Operating Activities
Years ended March 31 (Millions of yen)

43,644

ended March 31, 2011, a decrease of ¥13,848 million versus the previous fiscal
year. This primarily reflects a net inflow comprising income before income taxes
and minority interests of ¥27,844 million, ¥16,066 million in depreciation and

33,65829,796

27,070amortization, and a ¥1,213 million decrease in trade receivables, which was par-20,380tially offset by income taxes paid in the amount of ¥13,371 million.
The main reasons for the drop in cash flow from operating activities of¥13,848 were a decline of ¥2,260 million in cash flow from the decrease intrade receivables, an increase in outflows for increase in inventories of ¥2,655

2007

2008

2009

2010

2011

million, a change of ¥3,375 million from an increase in other liability to adecrease in other liability due to an increase in payments of consumption taxes
and other items, and an increase in income taxes paid of ¥5,162 million.
Cash Flows from Investing Activities
Investing activities used net cash of ¥30,169 million, a decrease of ¥14,181 million
versus the previous fiscal year. This primarily reflects an increase in time deposits, net of ¥23,987 million and outflows totaling ¥6,014 million for the paymentsfor purchase of property, plant and equipment, mainly for the ultrapure watersupply business. The net result of payments for purchase, and proceeds from saleand redemptions of marketable securities and investment securities resulted in asmall inflow of ¥240 million.
The main reason for the ¥14,181 million decline in outflows was a change of¥24,758 million from a decrease in time deposits, net to an increase in time
deposits, net, while the net result of payments for purchase, and proceeds fromsale and redemptions of marketable securities and investment securities changedby ¥25,478 million from a net outflow to a net inflow, and the outflows for payments for purchase of property, plant and equipment, such as facilities for theultrapure water supply business, declined by ¥13,264 million.
Cash Flows from Financing Activities
Financing activities used net cash of ¥9,032 million, an increase of ¥4,173 million
versus the previous fiscal year. The main use of cash was ¥4,886 million in cash
dividends paid and ¥4,784 million in payments for purchase of treasury stock, net.
The main reason for the ¥4,173 million increase in outflows was the increaseof ¥4,776 million in cash used for payments for purchase of treasury stock, net.
Cash and Cash Equivalents’ Ending Balance (on a consolidated basis)
At March 31, 2011, Kurita had cash and cash equivalents totaling ¥10,834 million,a decrease of ¥9,756 million versus March 31, 2010.

Kurita Water Industries Ltd. Annual Report 2011 29

Business Risks
The following are summaries of major foreseeable risks present in the businessenvironments in which the Kurita Group operates. Forward-looking statements
herein are based on judgments made by management as of March 31, 2011.
1. Economic and Market Conditions
The Group’s Water Treatment Chemicals and Water Treatment Facilities businesses are affected by economic conditions in Japan and countries and regions
outside Japan where the Group operates. Demand in the Water Treatment
Chemicals business fluctuates in response to factory capacity utilization rates inindustries such as steel, petroleum refining and petrochemicals, and pulp andpaper—the main areas of demand for the business. Such demand fluctuations
may affect the Group’s financial results. Demand in the Water Treatment Facilities
business fluctuates in response to trends in capital expenditure in electronics—
the main areas of demand for the business—and other industries. Such demand
fluctuations may affect the Group’s financial results.
More intense competition with rivals in the Group’s business domains could
lead to declines in prices of products and services, which could lower theGroup’s profitability.
2. Materials and Parts Procurement
The Group procures raw materials and parts from outside the Group for the
manufacture of products and fabrication of facilities. The prices of raw materials
and parts fluctuate based on changes in market conditions, and this may affect
the Group’s financial results.
3. Overseas Business Development
The Group is striving to expand its business outside Japan. In contrast to theJapanese market, doing business in overseas markets involves a number ofinherent, unforeseen risks, including the risk of changes to local laws and regulations, the risk of political and economic instability, and the risk of foreignexchange rate fluctuations. If such risks materialized, the Group’s financial
results could be affected.

30 Kurita Water Industries Ltd. Annual Report 2011

4. New Product Development
The Group continuously endeavors to develop new technology and appealing
new products.
The success of new technology and product development efforts cannot be
guaranteed. The Group may not be able to offer new technologies and productsthat meet the needs of its customers or launch new products in a timely fashion.
The Group may also fail to keep pace with rapid changes in technological innovation and changing customer needs. If the Group were to fail to develop
appealing new products, this could hamper its future growth and profitability orotherwise affect its financial results.
5. Intellectual Property
The Group recognizes the importance of intellectual property and continuallyseeks to register its own intellectual property while avoiding infringing the intellectual property rights of third parties, both in Japan and overseas. Given thewide scope of the Group’s business, however, there is potential for the Group’s
intellectual property rights to be infringed and potential for the Group to
infringe the rights of third parties. Such occurrences may affect the Group’s
financial results.
6. Dependence on Information Systems
The Group’s use of information systems is increasing, as is the importance of
information systems to the Group’s business. If a computer virus or some otherfactor were to obstruct the functions of the Group’s information systems, theGroup’s business activities, financial results, and financial condition could be
negatively affected.
7. Large-Scale Natural Disasters
If an earthquake, typhoon, or other kind of natural disaster were to directly or
indirectly upset the Group’s business execution, the Group’s business activities,
financial results, and financial condition could be negatively affected.

Kurita Water Industries Ltd. Annual Report 2011 31

CONSOLIDATED BALANCE SHEETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
As of March 31, 2011 and 2010

Thousands of
U.S. dollars(Note 1)Millions of yen

AssetsCurrent assets:

2011

2010

2011

Cash and time deposits (Notes 3 and 4) ��������������������������������������������������������������������������

¥ 35,073¥ 16,363$  422,567

Notes and accounts receivable, trade (Note 4) ��������������������������������������������������������������

53,241

55,369641,463

Allowance for doubtful accounts ����������������������������������������������������������������������������������������

(40)

(132)

(491)

Marketable securities (Notes 4 and 5) ������������������������������������������������������������������������������

20,00028,500240,963

Inventories (Note 6) ������������������������������������������������������������������������������������������������������������

5,480

5,121

66,028Deferred tax assets (Note 8) ����������������������������������������������������������������������������������������������

2,312

2,463

27,857

Other current assets ������������������������������������������������������������������������������������������������������������

1,785

1,611

21,516

Total current assets ����������������������������������������������������������������������������������������������������������

117,852

109,297

1,419,905

15,987

14,443

192,616

Investments and long-term receivables:
Investment securities (Notes 4 and 5) ������������������������������������������������������������������������������
Investments in unconsolidated subsidiaries and affiliates ��������������������������������������������������

1,070

1,299

12,898Deferred tax assets (Note 8) ����������������������������������������������������������������������������������������������

8,306

6,184

100,078

Other investments ����������������������������������������������������������������������������������������������������������������

1,717

1,926

20,694

Allowance for doubtful accounts ����������������������������������������������������������������������������������������

(184)

(205)

(2,220)Total investments and long-term receivables ����������������������������������������������������������������

26,897

23,649324,067

14,072

13,981

169,546

Property, Plant and Equipment, at cost:
Land (Note 11) ��������������������������������������������������������������������������������������������������������������������
Buildings and structures ������������������������������������������������������������������������������������������������������

64,296

64,101

774,657

Machinery and equipment ��������������������������������������������������������������������������������������������������

86,96280,472

1,047,738

Construction in progress ����������������������������������������������������������������������������������������������������

3,001

5,273

36,164

Other facilities ����������������������������������������������������������������������������������������������������������������������

11,158

11,042

134,438

Leased assets ������������������������������������������������������������������������������������������������������������������������

7,668

7,599

92,386

Total ����������������������������������������������������������������������������������������������������������������������������������

187,159

182,4712,254,931

Accumulated depreciation ��������������������������������������������������������������������������������������������������

(80,550)(65,971)(970,488)

Property, plant and equipment, net ��������������������������������������������������������������������������������

106,608

116,500

1,284,443

Intangible assets ������������������������������������������������������������������������������������������������������������������������

1,939

2,173

23,373

Total assets ������������������������������������������������������������������������������������������������������������������������

¥253,298¥251,620$3,051,790

The accompanying notes are an integral part of these statements.
32 Kurita Water Industries Ltd. Annual Report 2011

Thousands of
U.S. dollars(Note 1)Millions of yen

Liabilities and Net Assets
Current liabilities:

2011

2010

2011

Short-term borrowings and current portion of long-term liabilities (Note 7) ������������

¥   1,607¥    520$   19,363

Notes and accounts payable, trade (Note 4) ��������������������������������������������������������������������

16,46016,830198,321

Accounts payable, other ������������������������������������������������������������������������������������������������������

4,785

7,089

57,651

Income taxes payable ����������������������������������������������������������������������������������������������������������

5,626

7,430

67,794

Advances received ����������������������������������������������������������������������������������������������������������������

1,057

1,955

12,742

Accrued employees’ bonuses ����������������������������������������������������������������������������������������������

2,336

2,377

28,152

Provision for product warranties ����������������������������������������������������������������������������������������

927

546

11,172Other current liabilities ��������������������������������������������������������������������������������������������������������

1,969

1,841

23,730Total current liabilities ������������������������������������������������������������������������������������������������������

34,771

38,592418,928

Lease obligations (Note 7) ��������������������������������������������������������������������������������������������������

6,535

6,925

78,738Long-term liabilities:
Accrued employees’ retirement benefits (Note 9) ����������������������������������������������������������

9,936

9,465

119,716

Accrued retirement benefits for directors and corporate auditors ������������������������������

440

449

5,302

Deferred tax liabilities on revaluation of land (Note 11) ������������������������������������������������

1,509

1,509

18,190

Other long-term liabilities (Note 7) ����������������������������������������������������������������������������������

754

737

9,086

Total long-term liabilities ��������������������������������������������������������������������������������������������������

19,17519,088231,034

Total liabilities ��������������������������������������������������������������������������������������������������������������������

53,946

57,680649,963

13,45013,450162,057

Net assets:
Shareholders’ equity (Note 10):
Common stock, 2011 and 2010
Authorized: 531,000,000 shares
Issued: 2011—132,800,256 shares
2010—132,800,256 shares ��������������������������������������������������������������������������������
Capital surplus ����������������������������������������������������������������������������������������������������������������������

11,426

11,426

137,672

Retained earnings ����������������������������������������������������������������������������������������������������������������

184,954

172,7172,228,362

2010—4,148,311 shares ������������������������������������������������������������������������������������������������

(9,640)(4,855)(116,147)

Total shareholders’ equity ������������������������������������������������������������������������������������������������

200,191

192,738

2,411,944

623

1,989

7,506

Treasury stock, at cost
2011—6,139,744 shares

Accumulated other comprehensive income:Unrealized gains on available-for-sale securities ����������������������������������������������������������������
Unrealized losses on revaluation of land (Note 11) ��������������������������������������������������������

(764)

(764)

(9,213)Foreign currency translation adjustments ��������������������������������������������������������������������������

(2,006)(1,374)(24,177)

Total accumulated other comprehensive income ��������������������������������������������������������

(2,148)(149)(25,885)

Minority interests ��������������������������������������������������������������������������������������������������������������������

1,308

1,350

15,767

Total net assets ����������������������������������������������������������������������������������������������������������������

199,351

193,9392,401,826

Liabilities and net assets ��������������������������������������������������������������������������������������������������

¥253,298¥251,620$3,051,790

Kurita Water Industries Ltd. Annual Report 2011 33

CONSOLIDATED STATEMENTS OF INCOME ANDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2011 and 2010

CONSOLIDATED STATEMENTS OF INCOME

Thousands of
U.S. dollars(Note 1)Millions of Yen
2011

2010

2011

Net sales (Note 13) ����������������������������������������������������������������������������������������������������������������
Cost of sales ����������������������������������������������������������������������������������������������������������������������������
Gross profit ��������������������������������������������������������������������������������������������������������������������������

¥181,234
118,573
62,660¥178,520
117,221
61,299$2,183,550
1,428,600
754,949

Selling, general and administrative expenses (Note 12) ����������������������������������������������������
Operating income (Note 13) ��������������������������������������������������������������������������������������������

35,52827,131

34,941
26,358428,059
326,889

Other income (expenses):
Interest and dividend income ����������������������������������������������������������������������������������������������
Interest expense ������������������������������������������������������������������������������������������������������������������
Equity in earnings of unconsolidated subsidiaries and affiliates ��������������������������������������
Gain on liquidation due to termination of contracts ��������������������������������������������������������
Loss on disposal of properties ��������������������������������������������������������������������������������������������
Loss on disaster ��������������������������������������������������������������������������������������������������������������������
Support expense of disaster restoration ��������������������������������������������������������������������������
Other, net ������������������������������������������������������������������������������������������������������������������������������
Other income (expense), net ����������������������������������������������������������������������������������������������
Income before income taxes and minority interests ��������������������������������������������������������

424
(34)
308
—
(28)
(124)
(115)
282
712
27,844

331
(26)
270
1,507
(253)
—
—
(9)
1,820
28,178

5,116
(411)
3,714
—
(343)
(1,504)(1,395)3,405
8,580
335,470

Income taxes (Note 8):
Current ����������������������������������������������������������������������������������������������������������������������������������
Deferred ��������������������������������������������������������������������������������������������������������������������������������
Total income taxes ����������������������������������������������������������������������������������������������������������������
Income before minority interests ����������������������������������������������������������������������������������������

11,653(1,069)10,583
17,26012,197(1,379)10,817
17,360140,406(12,888)
127,517
207,952

Minority interests in income ��������������������������������������������������������������������������������������������������
Net income ������������������������������������������������������������������������������������������������������������������������������

121¥ 17,13872¥ 17,288

1,468$  206,483

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thousands of
U.S. dollars(Note 1)Millions of Yen

Income before minority interests ����������������������������������������������������������������������������������������
Other comprehensive income:Unrealized gains (losses) on available-for-sale securities ��������������������������������������������������
Foreign currency translation adjustments ��������������������������������������������������������������������������
Share of other comprehensive income of associates accounted forusing equity method ����������������������������������������������������������������������������������������������������������
Total other comprehensive income ������������������������������������������������������������������������������������
Comprehensive income ����������������������������������������������������������������������������������������������������������
Comprehensive income attributable toComprehensive income attributable to owners of parent ����������������������������������������������
Comprehensive income attributable to minority interests ����������������������������������������������

2011

2010

2011

¥17,260¥17,360$207,952(1,364)
(639)

1,817
574

(16,438)(7,703)(46)(2,050)¥15,20941
2,434¥19,795(560)(24,702)$183,250¥15,13970¥19,682
112$182,403
847
U.S. dollars(Note 1)Yen

Per share of common stock:
Net income ��������������������������������������������������������������������������������������������������������������������������Cash dividends applicable to the year ��������������������������������������������������������������������������������
The accompanying notes are an integral part of these statements.
34 Kurita Water Industries Ltd. Annual Report 2011

2011

2010

2011

¥134.02
38.00¥134.38
36.00

$1.61
0.46

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2011 and 2010

Millions of yen
Shareholders’ equity (Note 10)

Accumulated other comprehensive income
Unrealized
Total
gains (losses)
Unrealized
Foreign accumulated
on availablelosses oncurrency
otherfor-sale revaluation of translation comprehensive
securities land (Note 11) adjustments
incomeCommonstock

CapitalsurplusRetainedearnings

Total
Treasury shareholders’stockequity¥13,450¥11,426¥159,792¥(4,847) ¥179,821

Cash dividends paid ���������������������������

(4,374)(4,374)(4,374)

Reversal of unrealized gains(losses) on revaluation of land �������

13

13

13

Other �������������������������������������������������

(2)

(2)

(2)

Net income for the year �������������������

17,28817,28817,288(8)(8)

Balance as of March 31, 2009 ���������������

¥   170¥(750) ¥(1,950)

Minority
interests

Total
net assets¥(2,530) ¥1,335¥178,626

Changes during the year

Acquisition of treasury stock �����������

(8)

Net changes of net assets otherthan shareholders’ equity ���������������
(8)

1,818

(13)

575

2,380

15

2,395

12,916

1,818

(13)

575

2,380

15

15,312¥ 1,989¥  (149) ¥1,350¥193,939

Total changes during the year �������������

——12,925

Balance as of March 31, 2010 ���������������

¥13,450¥11,426¥172,717¥(4,855) ¥192,738

Cash dividends paid ���������������������������

(4,888)(4,888)(4,888)Other �������������������������������������������������

(12)

(12)

(12)

Net income for the year �������������������

17,13817,13817,138(4,784)(4,784)¥(764) ¥(1,374)

Changes during the year

(4,784)

Acquisition of treasury stock �����������
Net changes of net assets otherthan shareholders’ equity ���������������
12,236

Total changes during the year �������������
Balance as of March 31, 2011 ���������������

¥13,450 ¥11,426¥184,954(1,366)(632)(1,998)(42)(2,040)7,452(1,366)(632)(1,998)

(42)

5,411

¥(9,640) ¥200,191¥   623¥(764) ¥(2,006)¥(2,148) ¥1,308¥199,351(4,784)

Thousands of U.S. dollars (Note 1)
Shareholders’ equity (Note 10)

Commonstock

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Total
Treasury shareholders’stockequityBalance as of March 31, 2010 ��������������� $162,057 $137,672 $2,080,929 $ (58,505) $2,322,153

Unrealized
Total
gains (losses)
Unrealized
Foreign accumulated
on availablelosses oncurrency
otherfor-sale revaluation of translation comprehensive
securities land (Note 11) adjustments
income$23,966$(9,213) $(16,556)

Minority
interests

Total
net assets$ (1,804) $16,273 $2,336,623

Changes during the year
Cash dividends paid ���������������������������

(58,900)(58,900)(58,900)

Other �������������������������������������������������

(150)

(150)

(150)

Net income for the year �������������������

206,483

206,483

206,483(57,641)(57,641)(57,641)

Acquisition of treasury stock �����������
Net changes of net assets otherthan shareholders’ equity ���������������

(16,459)(7,620)(24,080)(506)(24,587)

89,791(16,459)(7,620)(24,080)(506)

65,203

Balance as of March 31, 2011 ��������������� $162,057 $137,672 $2,228,362 $(116,147) $2,411,944$ 7,506$(9,213) $(24,177)

Total changes during the year �������������

147,432(57,641)$(25,885) $15,767 $2,401,826

The accompanying notes are an integral part of these statements.

Kurita Water Industries Ltd. Annual Report 2011 35

CONSOLIDATED STATEMENTS OF CASH FLOWS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2011 and 2010

Thousands of
U.S. dollars(Note 1)Millions of yen
2011

2010

2011

¥ 27,844
16,066
455
225
(308)
(424)
34
18

¥ 28,178
15,523
799
(645)
(270)
(331)
26
245

$ 335,470
193,571
5,490
2,714(3,714)(5,116)411
224

Interest and dividends received ����������������������������������������������������������������������������������������������
Interest paid ������������������������������������������������������������������������������������������������������������������������������
Income taxes paid ��������������������������������������������������������������������������������������������������������������������
Others, net ��������������������������������������������������������������������������������������������������������������������������������
Net cash provided by operating activities �������������������������������������������������������������������������

1,213
(461)
(573)
(350)
(1,430)182
42,490703(33)(13,371)
8
29,7963,473
2,194(1,936)(230)
1,945(1,386)47,586685(38)(8,209)3,621
43,644

14,625(5,565)(6,907)(4,228)(17,236)
2,195
511,9368,470(405)(161,107)101
358,994

II. Cash flows from investing activities
Decrease (increase) in time deposits, net ��������������������������������������������������������������������������
Payments for purchase of property, plant and equipment ����������������������������������������������
Proceeds from sale of property, plant and equipment ����������������������������������������������������
Payments for purchase of marketable securities and investment securities ������������������
Proceeds from sale and redemption of marketable securities and investment securities ������
Others, net ����������������������������������������������������������������������������������������������������������������������������
Net cash used in investing activities ������������������������������������������������������������������������������

(23,987)(6,014)30(68,810)69,050(438)(30,169)770(19,278)
56(30,108)
4,870
(661)
(44,350)(289,006)(72,461)367(829,036)
831,929(5,285)(363,492)

III. Cash flows from financing activities
Increase (decrease) in short-term borrowings, net ����������������������������������������������������������Cash dividends paid ��������������������������������������������������������������������������������������������������������������Cash dividends paid to minority shareholders of consolidated subsidiaries ������������������
Payments for lease obligations ��������������������������������������������������������������������������������������������
Payments for purchase of treasury stock, net �������������������������������������������������������������������
Net cash used in financing activities ������������������������������������������������������������������������������

1,183(4,886)(64)(480)(4,784)(9,032)67(4,369)
(96)
(451)
(8)
(4,859)14,254(58,872)(771)(5,792)(57,641)(108,822)(397)(9,802)
20,590832(4,732)25,262(4,787)(118,107)
248,08046¥ 10,83460¥ 20,590

560$ 130,532

I. Cash flows from operating activities
Income before income taxes and minority interests ��������������������������������������������������������
Depreciation and amortization (Note 13) ������������������������������������������������������������������������
Increase (decrease) in accrued employees’ retirement benefits ������������������������������������
Increase (decrease) in other allowances ����������������������������������������������������������������������������
Equity in earnings of unconsolidated subsidiaries and affiliates ��������������������������������������
Interest and dividend income ����������������������������������������������������������������������������������������������
Interest expense ������������������������������������������������������������������������������������������������������������������
Loss (gain) on sales and disposal of properties ����������������������������������������������������������������
Changes in assets and liabilities:
Decrease (increase) in trade receivables ����������������������������������������������������������������������
Decrease (increase) in inventories ��������������������������������������������������������������������������������
Increase (decrease) in trade payables ����������������������������������������������������������������������������
Decrease (increase) in other assets ������������������������������������������������������������������������������
Increase (decrease) in other liability ������������������������������������������������������������������������������
Others, net ����������������������������������������������������������������������������������������������������������������������������

IV. Effect of exchange rate changes on cash and cash equivalents ��������������������������������
V. Net decrease in cash and cash equivalents �����������������������������������������������������������������
VI. Cash and cash equivalents at beginning of year ����������������������������������������������������������
VII.	Cash and cash equivalents of newly consolidated subsidiaries,
net of excluded subsidiaries from consolidation ������������������������������������������������������
VIII. Cash and cash equivalents at end of year (Note 3) ��������������������������������������������������
The accompanying notes are an integral part of these statements.
36 Kurita Water Industries Ltd. Annual Report 2011

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kurita Water Industries Ltd. and Consolidated Subsidiaries.

1. Basis of presentation of consolidated financial statements
Kurita Water Industries Ltd. (the “Company”) and its domestic subsidiaries maintain their books of accountand prepare their financial statements in accordance with accounting principles and practices generally
accepted in Japan, while its foreign subsidiaries maintain their books of account and prepare their financial
statements in conformity with those of the countries of their domicile. Certain accounting principles andpractices generally accepted in Japan are different from International Financial Reporting Standards andstandards in other countries in certain respects as to application and disclosure requirements. Accordingly,
the accompanying consolidated financial statements are intended for use by those who are informed
about Japanese accounting principles and practices.
The Company’s consolidated financial statements, prepared in accordance with accounting principles
and practices generally accepted in Japan, were originally filed with the Japanese Ministry of Finance andthe Tokyo Stock Exchange as required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications of accounts and modifications have been made in the accompanying consolidated financial statements to facilitate understanding by readers outside Japan. In addition, certain reclassifications have been made in the 2010 financial statements to conform to the classification used in 2011.
All figures in the consolidated financial statements and notes are stated in millions of Japanese yen bydiscarding fractional amounts of less than ¥1 million. As a result, the totals shown in the consolidated
financial statements and notes in yen do not necessarily agree with the sum of the individual amounts.
The translation of yen amounts as of or for the year ended March 31, 2011 into U.S. dollars is
included solely for the convenience of readers and has been made, as a matter of arithmetical computation only, at the rate of ¥83 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March
31, 2011. The translation should not be construed as a representation that yen amounts have been, could
have been or could in the future be converted into U.S. dollars at the above or any other rate.

2. Significant accounting policies(1) Consolidation
Scope of consolidation
The consolidated financial statements included the accounts of the Company and its significant subsidiaries (together, the “Group”). For the years ended March 31, 2011 and 2010, 37 subsidiaries were consolidated, respectively.
Under the control concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated.
All significant inter-company transactions and balances have been eliminated in consolidation.
Names of principal consolidated subsidiaries:
Kuritaz Co., Ltd.
Kurita Engineering Co., Ltd.
Kuritec Service Co. Ltd.
Kurita Chemical Manufacturing Ltd.
In the year ended March 31, 2011, Kurita Chemical Hokuriku Co., Ltd., which increased its materiality,
was newly consolidated, and one foreign subsidiary, which was liquidated, was excluded from consolidation.
Fiscal years of consolidated subsidiaries
The fiscal years of Kurita (Singapore) Pte. Ltd. and 12 other consolidated subsidiaries (14 in 2010) end on
December 31. For these consolidated subsidiaries, the financial statements as of December 31 were used
for consolidation purposes. However, material transactions that have occurred during the three-month
period from January 1 to March 31 of the following year have been adjusted as necessary for consolidation.

Kurita Water Industries Ltd. Annual Report 2011 37

Amortization of goodwill
Goodwill is amortized using the straight-line method over practically estimated effective years whereapplicable, or otherwise, three years, except for minor amounts that are charged to income in the periodof acquisition.
(2) Equity method
Scope of equity method application
Under the influence concept, significant investments in unconsolidated subsidiaries and affiliates over which
the Company has the ability to exercise significant influence with regard to the operating and financial
policies of the investees are accounted for by the equity method. For the years ended March 31, 2011
and 2010, 3 companies were accounted for by the equity method.
Name of principal company applying the equity method:
Kurita Sogo Service Co., Ltd.
Investments in the remaining unconsolidated subsidiaries and affiliates were stated at cost. If the equity
method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
Fiscal years of companies accounted for by the equity method
Adjustments were made to the financial statements of the companies accounted for by the equity method
whose fiscal year-ends were not identical to the Company.
(3) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand,readily available bank deposits, and short-term investments with an original maturity of three months orless and subject to a minor risk of fluctuations in value.
(4) Available-for-sale securities
Available-for-sale securities that have available fair values are stated at fair value at the balance sheet date,with resulting unrealized holding gains and losses reported as a separate component of net assets.
­Available-for-sale securities with no available fair values are stated at cost computed by the moving-­
average method. The cost of sold securities is computed by the moving-average method.
(5) Inventories
Inventories held for sale in the ordinary course of business are stated at the lower of cost determined by
the moving average method, except for work in process determined by the specific-identification method,or net selling value.
(6) Derivative transactions
Derivative transactions utilized by the Group are composed of only forward currency contracts enteredinto when necessary to hedge the risk, as the Company maintains the policy not to engage in speculativetransactions. The Company believes that the risk of counterparty default is negligible because its forward
currency contracts are entered into only with banks with high credit ratings. In addition, transactions inforward currency contracts are executed and managed by the finance and accounting department on acontract-by-contract basis after they have been approval by prescribed internal procedures.
(7) Depreciation of property, plant and equipment
Property, plant and equipment is depreciated by the declining-balance method for the Company and its
domestic consolidated subsidiaries, expect for buildings (other than building equipment) acquired on and
38 Kurita Water Industries Ltd. Annual Report 2011

after April 1, 1998, and ultrapure water supply equipment located at the clients’ sites, for which thestraight-line method is applied. The straight-line method is applied by foreign consolidated subsidiaries.
The estimated useful lives of these assets are as follows:
Buildings and structures 2–65 years
Machinery and equipment 4–10 years(8) Impairment of long-lived assets
The Company reviews its long-lived assets for impairment in accordance with the accounting standards for
impairment of fixed assets whenever events or changes in circumstances indicate the carrying amount ofan asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying
amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected toresult from the continued use and eventual disposition of the asset or asset group. The impairment loss
would be measured as the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual dispositionof the asset or the net selling price at disposition.
(9) Accrued employees’ bonuses
The Company and its domestic consolidated subsidiaries accrue the amount of employees’ bonuses basedon the anticipated bonus payments to employees.
(10) Accrued employees’ retirement benefits
Accrued employees’ retirement benefits are recorded based on the estimated amount of projected benefit
obligation at the balance sheet date by the Company, certain of its domestic consolidated subsidiaries andcertain consolidated foreign subsidiaries, and based on the estimated amounts of projected benefit obligationand pension plan assets, at the balance sheet date by other domestic consolidated subsidiaries. Actuarial
differences are subject to amortization over a period of 1–2 years from the year when they are incurred.
(11) Leases
Finance leases which do not transfer ownership are capitalized to recognize leased assets and lease obligations in the consolidated balance sheets. Leased assets are depreciated using the straight-line method over
the respective lease periods without residual value.
(12) Consumption taxes
Consumption taxes are accounted for separately from transaction prices and are not reflected in the
consolidated statements of income.
(13) Construction contracts
The percentage-of-completion method has been applied to the contracts if the outcome of the construction activity is deemed certain for the percentage of performance of the contractor’s obligation at the endof the balance sheet date and otherwise, the completed-contract method is applied. The percentage ofcompletion is determined using the cost incurred to the estimated total cost.
(14) Foreign currency translation
Monetary receivables and payables denominated in foreign currency are translated using the spot
exchange rate prevailing at the balance sheet date, and the differences are charged to income as foreignexchange gains or losses.
Foreign subsidiaries’ assets and liabilities are translated using the spot exchange rate at their balance
sheet date, and their income and expenses are translated using the average exchange rate during the year.
Kurita Water Industries Ltd. Annual Report 2011 39

The translation differences are recorded in “Foreign currency translation adjustments” and “Minority interests” in net assets.
(15) Appropriation of retained earnings
The accompanying consolidated statements of changes in net assets reflect the appropriations of retained
earnings of the Company in the fiscal year in which the appropriations are approved at the general shareholders’ meeting.
(16) Earnings per share
Earnings per share are computed using the weighted-average number of common shares outstanding.
(17) Additional information
Effective the fiscal year ended March 31, 2011, the Group adopted the “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, June 30, 2010). The amounts of “Valuationand translation adjustments” and “Total valuation and translation adjustments” of the previous fiscal year
are shown as those of “Accumulated other comprehensive income” and “Total accumulated other comprehensive income.”

3. Reconciliation between cash and cash equivalents
The reconciliation between the fiscal year-end cash and cash equivalents (See Note 2 (3)) in the consolidated statements of cash flows and cash and time deposits in the consolidated balance sheet items
is as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen
For the years ended March 31

Cash and time deposits ������������������������������������������������������������������
Time deposits with original maturity of more than
three months ��������������������������������������������������������������������������������
Certificates of deposits included in marketable securities,
excluding deposits maturing over three months ����������������������Cash and cash equivalents ������������������������������������������������������������

2011

2010

2011

¥ 35,073¥16,363$ 422,567(24,238)(272)(292,035)—¥ 10,834

4,500¥20,590—$ 130,532

4. Financial instruments and related disclosures
On March 10, 2008, the ASBJ revised ASBJ Statement No. 10 “Accounting Standard for Financial Instruments” and issued ASBJ Guidance No. 19 “Guidance on Accounting Standard for Financial Instruments andRelated Disclosures.” The Company applied the revised accounting standard and the new guidance effective March 31, 2010.
(1) Policy for financial instruments
The Group invests its funds in low risk financial assets (deposits, etc.) in principle. The Group finances its
working fund and capital investment fund internally and does not need external funds, but may raise necessary funds from external resources in case of special demand for significant capital investment, if any. Insuch cases, financing from external resources would be possible without any problem thanks to our soundfinancial position. With respect to derivatives, only forward foreign currency contracts are used if necessary
to avoid foreign exchange risk, and not for speculative purposes.

40 Kurita Water Industries Ltd. Annual Report 2011

(2) Nature of financial instruments and their related risks
Trade receivables such as notes and accounts are exposed to customer credit risk. Certain trade receivables denominated in foreign currencies arising from overseas operations are exposed to the market riskof fluctuation in foreign currency exchange rates.
Marketable securities and investment securities are exposed to the risk of market price fluctuations
and business risk of the investees.
Payment terms of trade payables such as notes and accounts are mostly less than one year. Leaseobligations under finance lease transactions are mainly related to ultrapure water supply business and its
payment term is 18 years (19 in 2010) later at maximum.
(3) Risk management system for financial instruments
Credit risk management (customers’ default risk):
The Company manages its credit risk involved in trade receivables based on the Credit Control Policy andManual. The Control Division of each business unit and the Legal Department are collecting credit information on a regular basis and control the payment terms and outstanding balances by customer, and theCompany is making efforts to prevent them from damages and to improve the soundness of the transactions by monitoring the default risk of customers due to the deterioration of their financial position at an
early stage. The consolidated subsidiaries are also making efforts to reduce credit risk by controlling payment terms and outstanding balances of customers. Counterparties of forward foreign currency contracts
to be used to avoid foreign exchange risk when necessary are limited to high-credit-rating financial institutions and accordingly, we believe there is very little credit risk.
Market risk management (foreign exchange risk and interest rate risk):
The Company and certain consolidated subsidiaries utilize forward foreign currency contracts to hedge
the market risk of fluctuations in foreign exchange rates involved in trade receivables and payables by
currency and by month. Forward foreign currency contracts are executed and controlled by the Finance
Department after the individual contract is approved in accordance with the predetermined rule.
Liquidity risk management (risk that the Company may not be able to settle on the payment due date):
The Finance Departments of the Company and its consolidated subsidiaries prepare and update the fundmanagement plan every month based on reports from each business unit and hold a sufficient amount ofliquidity in hand and manage the liquidity risk.
Carrying amounts, fair values and unrealized gain (loss) of financial instruments at March 31, 2011 and2010 are as follows (financial instruments whose fair values cannot be reliably determined are notincluded in the following table):
Millions of yen
At March 31, 2011

Cash and time deposits ������������������������������������������������������������������������
Notes and accounts receivable ����������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities ��������������������������������������������������������������
Total assets ��������������������������������������������������������������������������������������������
Notes and accounts payable ����������������������������������������������������������������
Total liabilities ����������������������������������������������������������������������������������������

Carrying
amountFair value

Unrealized
gain/loss¥ 35,073
53,241¥ 35,073
53,241¥——35,897124,211
16,460¥ 16,460

35,897124,211
16,460¥ 16,460———¥—

Kurita Water Industries Ltd. Annual Report 2011 41

Thousands of U.S. dollars (Note 1)
Carrying
Unrealized
amountFair value
gain/loss

At March 31, 2011

Cash and time deposits ������������������������������������������������������������������������
Notes and accounts receivable ����������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities ��������������������������������������������������������������
Total assets ��������������������������������������������������������������������������������������������
Notes and accounts payable ����������������������������������������������������������������
Total liabilities ����������������������������������������������������������������������������������������

$  422,567
641,463$  422,567
641,463$——432,495
1,496,526
198,321$  198,321

432,495
1,496,526
198,321$  198,321

—
—
—
$—

Millions of yen
At March 31, 2010

Cash and time deposits ������������������������������������������������������������������������
Notes and accounts receivable ����������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities ��������������������������������������������������������������
Total assets ��������������������������������������������������������������������������������������������
Notes and accounts payable ����������������������������������������������������������������
Total liabilities ����������������������������������������������������������������������������������������

Carrying
amountFair value

Unrealized
gain/loss¥ 16,363
55,369¥ 16,363
55,369¥——42,603
114,337
16,830¥ 16,830

42,603
114,337
16,830¥ 16,830———¥—

Notes:
1. Computation method of fair values
Cash and time deposits and notes and accounts receivable:
Fair values approximate carrying amounts because of their short maturities.
Marketable securities and investment securities:
Fair values approximate carrying amounts because of their short maturities since marketable securities consist of certificatesof deposits. Fair values of investment securities are determined based on the quoted market price of the stock exchange.
Notes payable and accounts:
Fair values approximate carrying amounts because of short maturities.
2. Financial instruments whose fair values cannot be reliably determined are as follows:
Thousands of
U.S. dollars

Unlisted equity securities ����������������������������������������������������������������������������

(Note 1)Millions of yen
2011

2010

2011

¥90

¥340

$1,084

These securities are not included in above “Marketable securities and investment securities” since their fair values cannot be
reliably determined.
3. Maturities of monetary receivables and securities after the balance sheet dateYear Ending March 31, 2011

Deposits �����������������������������������������������������������������������������
Notes and accounts receivable ���������������������������������������
Marketable securities and investment securities
Available-for-sale securities with maturities   (Certificates of deposits) �������������������������������������������
Total �������������������������������������������������������������������������������������

Year Ending March 31, 2011

Deposits �����������������������������������������������������������������������������
Notes and accounts receivable ���������������������������������������
Marketable securities and investment securities
Available-for-sale securities with maturities   (Certificates of deposits) �������������������������������������������
Total �������������������������������������������������������������������������������������
42 Kurita Water Industries Ltd. Annual Report 2011

Due in one
year or lessMillions of yen
Due after one
Due after five
year throughyears throughfive years
ten years

Due after
ten years¥ 35,033
53,241

¥—
—

¥—
—

¥—
—

20,000¥108,275

—
¥—

—
¥—

—
¥—

Thousands of U.S. dollars (Note 1)
Due after one
Due after five
year throughyears throughfive years
ten years

Due after
ten years

Due in one
year or less$  422,091
641,463

$—
—

$—
—

$—
—

240,963$1,304,519

—
$—

—
$—

—
$—

5. Marketable securities and investment in securities(1) Available-for-sale securities with fair value at March 31, 2011 and 2010 are summarized as follows:
Millions of yen
At March 31, 2011

Carrying
amountAcquisition
cost

Difference¥ 7,197¥ 5,076¥ 2,121

—
—
7,197

—
—
5,076

—
—
2,121

Carrying amount exceeding acquisition cost:
Stocks ������������������������������������������������������������������������������������������������
Bonds:
Corporate bonds ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ������������������������������������������������������������������������������������������������
Bonds:
Corporate bonds ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������

8,699

10,024(1,325)——
8,699¥15,897——
10,024¥15,100——(1,325)¥   796

At March 31, 2010

Carrying
amountAcquisition
cost

Difference¥10,839¥ 7,413¥3,425——
10,839

—
—
7,413

—
—
3,425

Millions of yen

Carrying amount exceeding acquisition cost:
Stocks ������������������������������������������������������������������������������������������������
Bonds:
Corporate bonds ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ������������������������������������������������������������������������������������������������
Bonds:
Corporate bonds ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������

3,264

3,657

(392)

—
—
3,264
¥14,103——
3,657¥11,071——(392)¥3,032At March 31, 2011

Carrying
amountAcquisition
cost

Difference$ 86,722$ 61,156$ 25,565——
86,722——
61,156——25,565

104,809

120,780(15,970)——
104,809$191,531——
120,780$181,936——(15,970)$  9,594

Thousands of U.S. dollars (Note 1)

Carrying amount exceeding acquisition cost:
Stocks ������������������������������������������������������������������������������������������������
Bonds:
Corporate bonds ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ������������������������������������������������������������������������������������������������
Bonds:
Corporate bonds ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������

Kurita Water Industries Ltd. Annual Report 2011 43

(2) Available-for-sale securities sold during the years ended March 31, 2011 and 2010 are summarized as follows:

Sales amount ����������������������������������������������������������������������������������
Total gains on sales ��������������������������������������������������������������������������
Total losses on sales ������������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)Millions of yen
2011

2010

2011

¥50
26
—

¥70
16
0

$603
324
—

6. Inventories
Inventories at March 31, 2011 and 2010 consist of the following:
Millions of yen
2011

Finished products ����������������������������������������������������������������������������
Raw materials ����������������������������������������������������������������������������������
Work in process ������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������

¥1,303
1,533
2,643¥5,480Thousands of
U.S. dollars(Note 1)

2010

2011

¥1,3341,186
2,600¥5,121$15,704
18,47331,849$66,028

7. Short-term borrowings and lease obligations(1) Short-term borrowings and current portion of lease obligations
The short-term borrowings and current portion of lease obligations at March 31, 2011 and 2010 consistof the following:
Millions of yen
2011

Short-term borrowings ������������������������������������������������������������������
Current portion of lease obligations ��������������������������������������������
Total ��������������������������������������������������������������������������������������������

¥1,128478¥1,607

Thousands of
U.S. dollars(Note 1)

2010

2011

¥ 67
453
¥520

$13,594
5,768$19,363

The weighted-average annual interest rate of short-term borrowings for the year ended March 31, 2011
and 2010 were 3.92% and 4.37%, respectively.
(2) Lease obligations
Lease obligations at March 31, 2011 and 2010 are summarized as follows:
Millions of yen
2011

Lease obligations ����������������������������������������������������������������������������
Less current portion of lease obligations ������������������������������������
Lease obligations with maturing dates coming in 2013
and thereafter �������������������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)

2010

2011

¥7,014478¥7,378453$84,506
5,768¥6,535¥6,925$78,738

Annual maturities of lease obligations at March 31, 2011 are as follows:
Years Ending March 31

2012 ���������������������������������������������������������������������������������������������������������������������������
2013 ���������������������������������������������������������������������������������������������������������������������������
2014 ���������������������������������������������������������������������������������������������������������������������������
2015 ���������������������������������������������������������������������������������������������������������������������������
2016 and thereafter ��������������������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������������������������������������
44 Kurita Water Industries Ltd. Annual Report 2011

Millions of yen¥  478
468
445
387
5,233
¥7,014

Thousands of
U.S. dollars(Note 1)

$ 5,768
5,649
5,366
4,670
63,052$84,506

(3) Other long-term liabilities
Other than the short-term borrowings and lease obligations described above, ¥735 million (US$8,863
thousands) and ¥717 million of interest-bearing long-term deposits received were included in other longterm liabilities as of March 31, 2011 and 2010, respectively. The weighted-average annual interest rates forsuch deposits received for the years ended March 31, 2011 and 2010 were 0.36%.

8. Income taxes
Significant components of the deferred tax assets and liabilities as of March 31, 2011 and 2010 are as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Deferred tax assets:
Excess depreciation of property, plant and equipment ���������
Excess provision for accrued employees’
retirement benefits ������������������������������������������������������������������
Excess provision for accrued bonuses to employees ������������
Accrued enterprise taxes not deductible ��������������������������������
Excess provision of allowance for product warranty ������������
Loss on revaluation of investment securities ��������������������������
Unrealized gain on sale of property, plant and equipment ����
Accrued retirement benefits for directors andcorporate auditors ������������������������������������������������������������������
Impairment loss ��������������������������������������������������������������������������
Loss on revaluation of golf membership ��������������������������������
Excess portion of design expenses ������������������������������������������
Other ������������������������������������������������������������������������������������������
Subtotal ����������������������������������������������������������������������������������
Valuation allowance ��������������������������������������������������������������
Total deferred tax assets ������������������������������������������������������
Deferred tax liabilities:
Capital gains on properties deferred for tax purposes ��������
Estimated income taxes pertaining to retained earnings ofoverseas consolidated subsidiaries ����������������������������������������
Unrealized losses on available-for-sale securities ��������������������
Total deferred tax liabilities ��������������������������������������������������
Deferred tax assets, net ��������������������������������������������������������

2011

2010

2011

¥ 4,992¥ 3,834$ 60,147

3,984
922
445
362
279
214

3,796
945
565
213
277
240

48,002
11,119
5,372
4,367
3,367
2,589

179
169
134
105
824
12,614(685)
11,929

181
309
134
203
860
11,562(687)
10,875

2,156
2,046
1,616
1,266
9,929
151,982(8,257)
143,724

(732)

(734)

(8,829)

(404)
(173)
(1,310)¥10,618(443)(1,049)(2,227)¥ 8,648(4,873)(2,086)(15,789)$127,935

A reconciliation between the normal effective statutory tax rate and the effective income tax rate as apercentage of income before income taxes and minority interests for the years ended March 31, 2011
and 2010 was as follows:
Normal effective statutory tax rate ������������������������������������������������������������������������������
Expenses not deductible for income tax purposes ����������������������������������������������������
Reversal of deferred tax liabilities on retained earnings of foreign
consolidated subsidiaries ����������������������������������������������������������������������������������������������
Dividend income not taxable for income tax purposes ��������������������������������������������
R&D expense tax credit ������������������������������������������������������������������������������������������������
Difference in statutory tax rates of foreign subsidiaries ��������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������������������
Actual effective tax rate ������������������������������������������������������������������������������������������������

2011

2010

40.6%
0.4

40.6%
0.4

(0.1)
(0.2)
(0.8)
(0.9)
(1.0)
38.0%

(0.4)
(0.2)
(0.7)
—
(1.3)
38.4%

Kurita Water Industries Ltd. Annual Report 2011 45

9. Retirement benefits and pension plans
The Company and 6 domestic consolidated subsidiaries provide lump-sum retirement benefit plans anddefined contribution pension plans. Other consolidated subsidiaries, 24 companies (18 domestic and 6 overseas companies) provide lump-sum retirement benefit plans (16 domestic and 4 overseas companies), qualified pension plans (2 domestic companies), and a defined contribution pension plan (2 overseas companies).
(1) Benefit obligations
Thousands of
U.S. dollars(Note 1)Millions of yen

Retirement benefit obligation ��������������������������������������������������������
Fair value of plan assets ������������������������������������������������������������������
Unfunded retirement benefit obligations ������������������������������������
Unrecognized actuarial gain ����������������������������������������������������������
Unrecognized prior service cost ��������������������������������������������������
Accrued employees’ retirement benefits ��������������������������������������
Prepaid pension cost ����������������������������������������������������������������������
Accrued employees’ retirement benefits ��������������������������������������

2011

2010

2011

¥(19,870)
9,895(9,975)38—(9,936)—¥ (9,936)¥(19,570)
9,985(9,584)
118—(9,465)—¥ (9,465)$(239,406)
119,225(120,181)
464—(119,716)—$(119,716)(2) Net periodic benefit costs
Thousands of
U.S. dollars(Note 1)Millions of yen

Service cost ������������������������������������������������������������������������������������
Interest cost ������������������������������������������������������������������������������������
Expected return on plan assets ����������������������������������������������������
Amortization of actuarial differences ��������������������������������������������
Additional retirement payments ����������������������������������������������������
Loss at transition to defined contribution pension plan ����������������
Other ������������������������������������������������������������������������������������������������
Net periodic benefit cost ����������������������������������������������������������

2011

2010

2011

¥  764
149
—
280
2
0
667
¥1,864¥  877
191
—
663
4
1
639
¥2,376$ 9,204
1,802
—
3,384
28
0
8,039
$22,459

In the above table, benefit cost incurred for the domestic consolidated subsidiaries, which use the simplified method for computing benefit obligations, is included in “Service cost,” and “Other” represents contribution to the defined contribution pension plan.
(3) Assumptions to determine above obligation and cost:
Periodic allocation of projected benefit obligation �������
Discount rate �������������������������������������������������������������������
Expected rate of return on plan assets �������������������������
Amortization period of actuarial differences ���������������

46 Kurita Water Industries Ltd. Annual Report 20112011
Equal amountover each period
1.7–1.8%
0.5–0.7%
1–2 year2010
Equal amountover each period
1.7–1.8%
0.5–0.7%
1–2 year10. Shareholders’ equity
Japanese companies are subject to the Companies Act. A summary of the sections of the Companies Act
that affect financial statements and accounting matters is as follows:(1) Distribution of dividends to shareholders
Under the Companies Act, if companies meet certain criteria, dividends can be paid at any time during the
fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Semiannualinterim dividends may also be paid once a year upon resolution by the Board of Directors’ meeting if thearticles of incorporation of the company so stipulate.
The Companies Act provides certain limitations on the amounts available for dividends and/or thepurchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, and it is calculated mainly based on capital surplus other than paid-in capital, retained earnings,
and treasury stock, but the amount of net assets after dividends must be maintained at no less than ¥3
million.
(2) Increases/decreases; transfer of common stock, reserve, and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends. However, suchappropriation may not be made if the aggregate amount of legal reserve and additional paid-in capital
exceeds 25% of the common stock. Under the Companies Act, this legal reserve and additional paid-in
capital may be reversed without limitation.
The Companies Act also provides that common stock, legal reserve, additional paid-in capital, othercapital surplus, and retained earnings can be transferred among the accounts under certain conditions
upon resolution of the shareholders.
(3) Treasury stock
The Companies Act provides that companies may purchase, hold or dispose of such treasury stock byresolution of the Board of Directors’ meetings. The amount of treasury stock purchased cannot exceed
the amount available for distribution to the shareholders which is determined by a specific formula.

11. Unrealized gains on revaluation of land
The Company implemented a revaluation of land for business use in accordance with the Land
­Revaluation Law (enacted on March 31, 1998). The revaluation difference, net of taxes is stated as“­Unrealized gains (losses) on revaluation of land” in the valuation and translation account in net assets. The
tax equivalent is stated as deferred tax assets or liabilities in long-term liabilities.
When any revaluated land is sold, the related unrealized gain or loss on revaluation of land is transferred to retained earnings.
Revaluation method:	The revaluation of land was computed in accordance with Article Two, Item Oneof the Land Revaluation Law Enforcement Order.
Revaluation date: March 31, 2002

Kurita Water Industries Ltd. Annual Report 2011 47

12. Selling, general and administrative expenses
Selling, general and administrative expenses for the years ended March 31, 2011 and 2010 consisted of
the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Salaries and allowances ������������������������������������������������������������������
Provision for employees’ bonuses ������������������������������������������������
Retirement benefit expenses ��������������������������������������������������������
Travel expenses ������������������������������������������������������������������������������
Research and development expenses ������������������������������������������
Other ������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������

2011

2010

2011

¥13,986
1,356
1,033
2,468
4,225
12,458¥35,528¥13,127
1,492
1,415
2,379
3,990
12,535¥34,941$168,511
16,34012,45729,73850,910150,100$428,059

13. Segment information
Effective the fiscal year ended March 31, 2011, the Company adopted the “Revised Accounting Standard
for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17,
revised March 27, 2009) and its accompanying “Guidance on the Accounting Standard for Disclosuresabout Segments of an Enterprise and Related Information” (ASBJ Guidance No. 20, March 21, 2008).

For the year ended March 31, 2011
(1) Overview of reportable segments
The Company’s reportable segments are the components of the Company about which separate financial
information is available. These segments are subject to periodic examinations to enable the Company’s
Board of Directors to decide how to allocate resources and assess performance.
The Company’s business divisions are based on product and service categories. Each of the divisions
conducts business based on comprehensive strategies formulated for the products and services that theyhandle in domestic and overseas markets. The Company’s consolidated subsidiaries conduct businessunder the relevant business divisions’ supervision.
The Group’s operations are therefore segmented based on the products and services handled by eachof the divisions. The Company’s reportable segments correspond to the segments it has used thus far,namely the Water Treatment Chemicals segment and Water Treatment Facilities segment.
The Water Treatment Chemicals segment manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities segment manufactures andsells water treatment equipment and facilities, provides ultrapure water, chemical cleaning, tool cleaning, soil
and groundwater remediation services, and provides maintenance services that encompass operation,
maintenance, and management of water treatment facilities.
(2) Accounting methods used to calculate sales, income, assets, liabilities, and other amounts byreportable segment
The accounting treatment and methods for the reportable segments are largely consistent with the Notes
to the Consolidated Financial Statements. The segment income item represents figures for operating
income. Intersegment transactions are measured based on prices that reflect actual market conditions,while inter-division sales at the Company are primarily based on cost.
The segment information of the Company and its consolidated subsidiaries for the years ended March,
31 2011 is outlined as follows:
48 Kurita Water Industries Ltd. Annual Report 2011

Millions of yen
Reportable segments

Year ended March 31, 2011

Sales
1) Sales to outside customers �������
2) Intersegment sales �����������������������
Total ���������������������������������������������
Segment income �����������������������������
Segment assets ���������������������������������
Segment liabilities �����������������������������
Other items
Depreciation and amortization �
Increase in property,
plant and equipment andintangible assets �������������������������
Amortization of goodwill �����������
Goodwill ���������������������������������������

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated¥56,735
349¥57,084¥10,099
36,444
16,919¥124,499
180¥124,680¥ 17,032
158,414
37,155¥181,234
530¥181,764¥ 27,131
194,859
54,075¥    —(530)¥   (530)¥     058,439(128)¥181,234—¥181,234¥ 27,131
253,298
53,946

1,539

14,527

16,066—

16,066

1,183
59
44

4,781
—
—

5,965
59
44

—
—
—

5,965
59
44

Thousands of U.S. dollars (Note 1)
Reportable segments

Year ended March 31, 2011

Sales
1) Sales to outside customers �������
2) Intersegment sales �����������������������
Total ���������������������������������������������
Segment income �����������������������������
Segment assets ���������������������������������
Segment liabilities �����������������������������
Other items
Depreciation and amortization �
Increase in property,
plant and equipment andintangible assets �������������������������
Amortization of goodwill �����������
Goodwill ���������������������������������������

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated$683,558
4,211$687,770$121,679
439,094
203,846$1,499,991
2,178$1,502,169$  205,206
1,908,608
447,660$2,183,550
6,389$2,189,939$  326,886
2,347,702
651,507$     —
(6,389)$  (6,389)$      3704,087(1,544)$2,183,550—$2,183,550$  326,889
3,051,790
649,963

18,543

175,027

193,571—

193,571

14,263722
541

57,611——

71,875
722
541

—
—
—

71,875
722
541

Note:
“Adjustments” represents the following:
1. Sales: Elimination of intersegment transactions.
2. Segment income: Amount resulting from eliminations of intersegment transactions.
3. Segment assets: Mainly corporate assets of ¥58,572 million (US$705,697 thousand) unallocated to reportable segment
assets (cash deposits, securities in trust, and long-term investments).
4. Segment liabilities: Amount resulting from eliminations of intersegment claims and liabilities.

Kurita Water Industries Ltd. Annual Report 2011 49

Related Information(Information by geographic region)(1) Net Sales

Millions of yen
Japan

Asia

North
America

Europe

Other

Total

¥154,867¥19,195¥2,820¥1,276¥3,075¥181,234

Year ended March 31, 2011

Sales �������������������������������������������������

Thousands of U.S. dollars (Note 1)
Japan

Asia

North
America

Europe

Other

Total

$1,865,868$231,272$33,976$15,380$37,052$2,183,550

Year ended March 31, 2011

Sales �������������������������������������������������

Note:
Sales are allocated to regions based on the location of the customer to which the products or services are delivered or provided.

(2) Property, Plant and Equipment
The Company has omitted disclosure here because property, plant and equipment holdings in Japanaccount for more than 90% of the amount of property, plant and equipment reported on the consolidated balance sheet.
(Information by major customer)
Year ended March 31, 2011

Millions of yen

Thousands of
U.S. dollars (Note 1)

Reportable segment¥28,149$339,145

Water Treatment Facilities

Sales to:Sharp Corporation ����������������������������������

For the year ended March 31, 2010
The figures appearing in the segment information for the year ended March 31, 2010 that the Company
has disclosed for its previous segmentation are the same as figures that would result through the use of
the “Revised Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, revised March 27, 2009.)
The segment information of the Company and its consolidated subsidiaries for the year ended March
31, 2010 is outlined as follows:(Business segment information)
Millions of yen

Year ended March 31, 2010

I. Sales and operating income
Sales1) Sales to outside customers �����
2) Intersegment sales �������������������
	  Total �������������������������������������������
Operating costs and expenses �����
Operating income �����������������������
II.	Assets, depreciation andcapital expenditures
Assets ���������������������������������������������
Depreciation ���������������������������������
Capital expenditures �������������������

50 Kurita Water Industries Ltd. Annual Report 2011

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Eliminationor corporate

Consolidated¥53,743455
54,19946,022¥ 8,177¥124,777
78
124,855
106,674¥ 18,181¥178,520
534
179,055
152,697¥ 26,358¥    —
(534)
(534)
(534)
¥    —¥178,520—
178,520
152,162¥ 26,358¥35,194
1,662
1,151

¥168,119
13,8606,932¥203,314
15,523
8,083¥48,306——¥251,620
15,5238,083

Notes:1. Method of Classification of Business Segments
The Group’s main operations include the manufacture and sales of water treatment chemicals, and the manufacture andsales of water treatment equipment and facilities. The Group is therefore divided into two business segments based on
the products and services handled by each of the divisions: the Water Treatment Chemicals segment and the Water
Treatment Facilities segment.
2. Principal products and services of each segment are as follows:
Water Treatment Chemicals Business	Boiler water treatment chemicals, cooling water treatment chemicals, wastewater treatment chemicals, process treatment
chemicals used in oil refining and pulp and paper incinerator chemicals, equipment and systems for water treatment chemicals, and packaged water treatment management, including a steam supply contract and blanket contracts for factories
Water Treatment Facilities Business
For the electronics industry:	Ultrapure water production systems, wastewater reclamation systems, wastewater treatment systems, wastewater reclamation systems, tool cleaning services, maintenance services, and ultrapure water supply businessFor general industries:	Pure water production systems, wastewater treatment systems, wastewater reclamation systems, operation and maintenanceservices, soil remediation services, and chemical cleaning services
3.	There were no costs and expenses included in “Elimination or corporate” that cannot be allocated to business segments forthe years ended March 31, 2010.
4.	Total assets under “Elimination or corporate” include corporate assets, consisting primarily of deposits with banks, marketable portfolio securities, and long-term investment funds (deposits, marketable securities and investment securities). Suchcorporate assets as of March 31, 2010 amounted to ¥48,369 million.
5.	The Company adopted ASBJ Statement No. 19 “Partial Amendments to Accounting Standard for Retirement Benefits (Part3)” effective from the year ended March 31, 2010. Accordingly, operating income of “Water Treatment Chemicals business”
and “Water Treatment Facilities business” decreased by ¥290 million and ¥585 million, respectively.
6.	The Company and certain consolidated subsidiaries adopted ASBJ Statement No. 15 “Accounting Standard for Construction
Contracts” and Guidance No. 18 “Guidance on Accounting Standard for Construction Contracts.” Accordingly, net sales andoperating income of “Water Treatment Facilities” increased by ¥6,265 million and ¥1,244 million, respectively.

(Geographic segment information)
Millions of yen
Year ended March 31, 2010

I. Sales and operating income
Sales1) Sales to outside customers �����
2) Intersegment sales �������������������
	  Total �������������������������������������������
Operating costs and expenses ���Operating income �����������������������
II. Assets ���������������������������������������������

Japan

Other
regions

Total

Eliminationor corporate

Consolidated¥163,696
1,561
165,257
140,733¥ 24,523¥185,816¥14,824238
15,063
13,544¥ 1,518¥ 8,116¥178,520
1,799
180,320
154,278¥ 26,042¥193,932¥    —(1,799)(1,799)(2,115)¥   315¥57,687¥178,520—
178,520
152,162¥ 26,358¥251,620

Notes:
1. Countries and regions are classified into segments according to geography and proximity.
2. “Other regions” are composed primarily of countries in Asia.
3. There were no costs and expenses under “Elimination or corporate” that cannot be allocated to geographical segments.
4. Assets under “Elimination or corporate” include corporate assets, the amount and components of which are the same as
those provided in Note 3 to the above “Business segment information.”
5. The Company adopted ASBJ Statement No. 19 “Partial Amendments to Accounting Standard for Retirement Benefits (Part3)” effective from the year ended March 31, 2010. Accordingly, operating income of “Japan” decreased by ¥876 million.
6. The Company and certain consolidated subsidiaries adopted ASBJ Statement No. 15 “Accounting Standard for Construction
Contracts” and Guidance No. 18 “Guidance on Accounting Standard for Construction Contracts.” Accordingly, net sales andoperating income of “Japan” increased by ¥6,265 million and ¥1,244 million, respectively.

Kurita Water Industries Ltd. Annual Report 2011 51

(Overseas sales)
Thousands of
U.S. dollars(Note 1)Millions of yen
Asia

North
America

EuropeOther
regions

Total

Total

¥13,404—¥1,626—¥1,399—¥2,581 ¥ 19,011—
178,520$  204,336
1,918,753

7.5%

0.9%

0.8%

For the year ended March 31, 2010

Overseas net sales �������������������������
Consolidated net sales �����������������
Percentage of overseas net sales
to consolidated net sales �����������

1.4%

10.6%

Notes:
1. Countries and regions are classified according to geography and proximity.
2. The major countries or regions included in respective categories are as follows:
Asia: South Korea, China, Taiwan, Singapore, Indonesia, Thailand / North America: United States of America /Europe: Germany / Other: Brazil
3. Overseas net sales refers to sales outside Japan generated by the Company and its consolidated subsidiaries.
4. The Company and certain consolidated subsidiaries adopted ASBJ Statement No. 15 “Accounting Standard for Construction
Contracts” and Guidance No. 18 “Guidance on Accounting Standard for Construction Contracts.” Accordingly, overseas net
sales of “Asia” increased by ¥1,794 million.

14. Subsequent events
Appropriation of retained earnings
The following appropriation of retained earnings for the year ended March 31, 2011 was approved at theordinary general meeting of shareholders of the Company held on June 29, 2011.
Millions of yen

Thousands of
U.S. dollars(Note 1)

¥2,406$28,994

Cash dividends (year-end dividends) ����������������������������������������������������������������������

15. Per share information
U.S. dollars(Note 1)Yen

Net assets per share ����������������������������������������������������������������������
Net income per share (EPS) ����������������������������������������������������������

2011

2010

2011

¥1,563.57
134.02¥1,496.98
134.38$18.84
1.61

The basis of calculation for EPS is as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Net income ��������������������������������������������������������������������������������������
Net income attributable to common stock ��������������������������������
Average number of shares outstanding ����������������������������������������

(The Company has no dilutive shares.)

52 Kurita Water Industries Ltd. Annual Report 2011

2011

2010

2011

¥17,138
17,138
127,874,054¥17,288
17,288
128,653,126$206,483
206,483

Report of Independent Certified Public Accountants

Kurita Water Industries Ltd. Annual Report 2011 53

Corporate Data
As of March 31, 2011

Kurita Global Technology Center:
1-1, Gochoyama, Kawada,
Nogi-machi, Shimotsuga-gun,Tochigi 329-0105
Tel.: 81 (280) 54-1511
Offices:
Tohoku, Nagoya,
Hiroshima and Kyushu

Company Name
Address

Kurita Water Industries Ltd.
4-7, Nishi-Shinjuku 3-chome,
Shinjuku-ku, Tokyo 160-8383, Japan
Paid-in Capital¥13,450,751,434
Date of Establishment July 13, 1949
Stock ExchangeFirst Section of the Tokyo Stock Exchange
Listings
First Section of the Osaka Securities
Exchange
Number of Employees 4,490 (on a consolidated basis);
1,523 (parent company)
Domestic Offices

Overseas Offices

Head Office:4-7, Nishi-Shinjuku
3-chome, Shinjuku-ku, Tokyo
160-8383
Tel.: 81 (3) 3347-3111
Osaka Branch:
2-22, Kitahama 2-chome, Chuo-ku, Osaka
541-0041
Tel.: 81 (6) 6228-4800

Taiwan Branch:
5F-3, No. 295, Section 2,
Kuang-Fu Road,(Empire Commercial Bldg.)
Shinchu, Taiwan, R.O.C.
Tel.: 886 (3) 575-1157

Major Consolidated Subsidiaries and Affiliated Companies
Company Name

Paid-in Capital(Millions)

EquityOwnership (%) Main Business

OVERSEASn North America & South America
Kurita America Inc.
Kurita do Brasil LTDA.

US$3.0
R$6.986

100.0
100.0

Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals

n Europe
Kurita Europe GmbH

EUR2.301

95.0

Manufacture & sale of water treatment chemicals

n AsiaKurita Water Industries (Dalian) Co., Ltd.
Kuritec (Shanghai) Co., Ltd.
Kurita Water Industries (Suzhou) Ltd.
Kurita (Taiwan) Co., Ltd.
Hansu Ltd.
Hansu Technical Service Ltd.
Kurita-GK Chemical Co., Ltd.
Kurita (Singapore) Pte. Ltd.

¥550
¥30
¥100
NT$20
W2,500W400
BAHT92
S$4.0

90.1
100.0
100.0
100.0
33.2
59.4
85.0
100.0

Kuritec Singapore Pte. Ltd.
Kurita Water (Malaysia) Sdn. Bhd.
P.T. Kurita Indonesia

S$1.49
RM$0.6
US$2.0

100.0
83.3
92.5

Manufacture & sale of water treatment chemicals
Sale & maintenance of water treatment facilities
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals and water
treatment facilities
Ultrapure water supply for a specified customer
Sale of water treatment chemicals and water treatment facilities
Manufacture & sale of water treatment chemicals

DOMESTIC
Kurita Creation Co., Ltd.
Kuritec Service Co. Ltd.
Kuritaz Co., Ltd.
Kurita Engineering Co., Ltd.
Land Solution Inc.
Kurita Chemical Manufacturing Ltd.

¥160
¥50
¥220
¥160
¥450
¥50

100.0
100.0
100.0
100.0
53.0
100.0

Manufacture & sale of water purifiers
Tool cleaning
Operation & maintenance of water treatment facilities
Chemical cleaning
Soil remediation
Manufacture of water treatment chemicals

54 Kurita Water Industries Ltd. Annual Report 2011

INVESTOR INFORMATIONAs of March 31, 2011

Stock Exchange Listings

PROFILEFirst Section of the Tokyo Stock ExchangeFirst Section of the Osaka Securities Exchange
Authorized: 531,000,000 shares
Issued: 132,800,256 shares(Stock trading unit: 100 shares)
36,089Grant Thornton Taiyo ASG
Akasaka DS Bldg. 9F, 8-5-26, Akasaka, Minato-ku, Tokyo 107-0052, JapanThe Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Common Stock

Guided by its corporate philosophy, “study the properties of water, masterthem, and we will create an environment in which nature and man are inharmony,” Kurita Water Industries Ltd. is a leader in the industrial water field.
Kurita provides quality products and high-value-added outsourcing andmaintenance services to customers in a wide range of industries.
Since its establishment in 1949, Kurita has accumulated a high level oftechnical expertise and know-how. Today, Kurita leverages these assets in aunique business portfolio that includes both chemicals and facilities to realize
its corporate vision of becoming an advanced water and environmental
management company. As our customers and society wrestle with improving
productivity and reducing environmental impact, we are working to help
create a sustainable society by recycling the limited resource that is waterand proposing comprehensive water treatment solutions.

WATER TREATMENT CHEMICALS

Number of Shareholders
Independent Auditor
Transfer Agent

Main Shareholders

Distribution of Shares
Shareholdings
Percentage of total(Number of shares) shares issued (%)

ITOCHU Corporation
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)
Kurita Water Industries Ltd.
Pictet and Cie (Europe) S.A.
Tokio Marine & Nichido Fire Insurance Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
NT RE GOVT OF SPORE INVT CORP P. LTD.
Mizuho Trust & Banking Co., Ltd.
Retirement Benefit Trust ITOCHU Corporation
Account Retrustee Trust & Custody Services
Banking Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)

7,448,000
6,644,283
6,264,500
6,139,744
3,770,100
3,472,626
2,936,131
2,823,190
2,820,000

2,767,100

5.60
5.00
4.71
4.62
2.83
2.61
2.21
2.12
2.12

2.08

WATER TREATMENT FACILITIESTreasury Stock

Government andMunicipalities

Individuals
Financial
Institutions
Foreign
Owned

Securities
Firms

Shareholdings(Number of shares)

n
n
n
n
n
n
Total

Other Domestic
Firms
Percentage of total
shares issued (%)

2,000

0.0%

40,584,720

30.6%

1,210,600

0.9%

18,368,313

13.8%

49,263,880

37.1%

17,230,999

13.0%

6,139,744
132,800,256

100.0%

4.6%

Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Stock price (Yen)

CONTENTS
cover 2 PROFILE

07 Feature: Kurita’s New President Talks about Kurita’s Strategy for Growth

01 CONSOLIDATED FINANCIAL HIGHLIGHTS
02 Water Solutions for Industry

09

Leading the Industry in Comprehensive Solutions

11

Stepping up the Global Expansion of the Kurita Group04 BUSINESS REVIEW

13 RESEARCH AND DEVELOPMENT

05 BUSINESS HIGHLIGHTS

14 SUSTAINABLE MANAGEMENT FRAMEWORK

06 TO ALL OUR STAKEHOLDERS

14

Corporate Governance17

Environmental Improvement Activities

19 BOARD OF DIRECTORS AND CORPORATE AUDITORS

Trading volume (Hundreds of shares)

4,000

800,000

3,000

600,000

2,000

400,000

1,000

200,000

Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains forward-looking statements regarding forecasts, plans, strategies and business performance in the future. These forward-looking statements
represent judgments made by the Company based on information currently available to it and involve a variety of risks and uncertainties.
Actual results may be materially different from these forward-looking statements. Such risks and uncertainties include (but are not limited to) changes in the economic
environment, business conditions, market, demand and currency exchange rates.

0

Jan. ’09

June ’09

Jan. ’10

June ’10

Jan. ’11

June ’11

Kurita Water Industries Ltd. Annual Report 2011 55

Kurita Water Industries Ltd. ANNUAL REPORT 2011

4-7, Nishi-Shinjuku 3-chome, Shinjuku-ku, Tokyo 160-8383, Japan
Tel: 81 (3) 3347-3111

URL: http://www.kurita.co.jp/english/

Kurita –Wherever Business Needs Water
ANNUAL REPORT 2011

This report was printed on FSC-approved paper using vegetable oil ink.
Printed in JapanFor the year ended March 31, 2011