www.kurita.co.jp

Kurita Water Industries Ltd.
Results Presentation for Six Months Ended September 30, 2005

November 8, 2005

Table of Contents

www.kurita.co.jp

Consolidated Financial Results for Six Months Ended September 30, 2005
Topics ------------------------------------------------------------------------------------------------------------------------------------------1

Financial Highlights ------------------------------------------------------------------------------------------------------------------------2

Orders by Segment ------------------------------------------------------------------------------------------------------------------------3

Sales by Segment --------------------------------------------------------------------------------------------------------------------------4

Overseas Businesses --------------------------------------------------------------------------------------------------------------------Operating Income --------------------------------------------------------------------------------------------------------------------------Capital Expenditures/Depreciation/R&D Expenses -------------------------------------------------------------------------------

567

Consolidated Business Plan for Fiscal Year Ending March 31, 2006
Assumptions of the Business Plan -----------------------------------------------------------------------------------------------------

8

Overview of the Business Plan ----------------------------------------------------------------------------------------------------------

9

Orders by Segment -------------------------------------------------------------------------------------------------------------------------

10

Sales by Segment --------------------------------------------------------------------------------------------------------------------------11

Operating Income ---------------------------------------------------------------------------------------------------------------------------

12

Operating Income Margin by Segment -----------------------------------------------------------------------------------------------

13

Comprehensive Solution Provision ----------------------------------------------------------------------------------------------------

14

Eco-Solution Group Services ------------------------------------------------------------------------------------------------------------15

Comprehensive Service Provision in China -----------------------------------------------------------------------------------------

16

Overseas Business ------------------------------------------------------------------------------------------------------------------------17

Ultrapure Water Supply Business Trends --------------------------------------------------------------------------------------------

18

Services in Facilities Segment Sales Trends ----------------------------------------------------------------------------------------

19

Capital Expenditures/Depreciation/R&D Expenses -------------------------------------------------------------------------------

20

Integration of R&D Operations ----------------------------------------------------------------------------------------------------------21

Dividend Policy ------------------------------------------------------------------------------------------------------------------------------22

www.kurita.co.jp

Consolidated Financial Resultsfor Six Months Ended September 30, 2005

Topics

www.kurita.co.jp

Salesz Continuous efforts made to establish a network ofsales agents

Productionz Yamaguchi Plant converted to equipment manufacture(production begun in August)Developmentz Integration of research and development operations into
Kurita Global Technology Center(the center was inaugurated on October 1)1

Financial Highlights

www.kurita.co.jp（Six Months Ended September 30）（Billions of yen）

2004
(Actual)2005(Projected)

2005(Actual)Change versus
projected
AmountYear-on-year change

Percentage

AmountPercentage

Orders¥ 84.7¥ 93.4¥ 90.4

-3.0

-3.2%

+5.8

+6.8%

Net sales

71.2

73.0

72.5

-0.5

-0.7%

+1.3

+1.9%

Gross profit

23.1

23.8

22.0

-1.8

-7.4%

-1.1-4.7%

SG&A
expenses

16.7

17.6

17.2

-0.4

-2.1%

+0.5

+3.2%

Operating income

6.4

6.2

4.8

-1.4

-22.5%-1.6-25.3%

Non-operating
income andexpenses

0.3

0.3

0.7

+0.4

+120%

+0.3

+106%

Ordinary income

6.8

6.5

5.5

-1.0-15.9%-1.3-19.1%

Extraordinary
gains and losses---0.2

-0.2

-+0.2

-3.8

3.7

2.9

-0.8

-22.8%-0.1-25.5%Net income2Orders by Segment

www.kurita.co.jp（Six Months Ended September 30）
Water treatment chemicals

Water treatment facilities
for the electronics industry
for general industries
for the public sector

Factors behind increase in orders
z Liquid crystal display (LCD)
components manufacturers(Billions of yen)

100

93.4

90.4

84.7
80

27.5

26.2

27.2

60

28.3
40

58.4

20

29.9

28.1
15.8

65.9

22.5

63.2

20.9

14.5

15.1

12.4

2004
(Actual)2005(Projected)

2005(Actual)0Factors behind decrease in orders
z Increase in demand for
ultrapure water supply

Factors behind increase in orders
z Bulk orders from steel industries
z Steady growth in the foodindustry
z Growth in the soil remediation
business

Factors behind decrease in orders
z Contraction of markets
z Severe competition

3

Sales by Segment

www.kurita.co.jp（Six Months Ended September 30）
Water treatment chemicals

Water treatment facilities
for the electronics industry
for general industries
for the public sector

Main areas with increasing sales
z Customized servicez Equipmentz Overseas subsidiaries(Billions of yen)

80

73.0

71.2
24.8

60

72.5
26.8

26.5
Main areas with increasing sales
z Ultrapure Water Supply Businessz Tool cleaning

40

22.8

23.4
200

46.2

46.4

14.5

16.1

Main areas with decreasing salesz Equipment for overseas

23.3
46.0

15.4

8.5

7.3

7.3

2004
(Actual)2005(Projected)

2005(Actual)Main areas with increasing salesz Automobilez Maintenancez Soil remediation4

www.kurita.co.jp

Overseas Businesses（Six Months Ended September 30）

Overseas
Overseas Orders
OrdersOverseas
Overseas Sales
Sales

Water treatment chemicals

Water treatment chemicals
Water treatment facilities(Billions of yen)

Water treatment facilities

1210.5
9.1

8(Billions of yen)

1210.3
2.7

3.0
8

2.7

8.1
3.0

4

6.5

7.5

4

7.7
5.100
2004
(Actual)2005(Actual)2004(Actual)2005(Actual)5

www.kurita.co.jp

Operating Income（Six Months Ended September 30）
Water treatment chemicals

Water treatment facilities
for the electronics industry
for general industries
for the public sector

Factors behind plan shortfall
z Increase in cost of raw
materials and distribution
pricesz Non-performance of the sales
plan(Billions of yen)

86.2

6.4

4.8

6
4.0

4.3
4.0

4
20

2.4

2.5

Factors behind plan shortfall
z Deterioration of profit margins
due to severe competitionz Additional costs

2.2

1.9
0.7

2.0

0.5
-0.4

-1.0

0.1
-1.3

2004
(Actual)2005(Projected)

2005(Actual)0.8-26

Capital Expenditures/Depreciation/R&D Expenses

www.kurita.co.jp（Six Months Ended September 30）

Investment of ¥2.7 billion in assets forUltrapure Water Supply Business(Billions of yen)

Capital expenditures

6Depreciation

5.3(Billions of yen)

R&D Expenses

2.5

2.1

5

2.1

2.04
32

1.5

2.8
1.7

1.9

0.5

10

1.0

2004
(Actual)0.0
2005(Actual)2004(Actual)2005(Actual)Note: Capital expenditures and depreciation relate to tangible fixed assets.
7www.kurita.co.jp

Consolidated Business Planfor the Fiscal Year Ending March 31, 2006

Assumptions of the Business Plan

www.kurita.co.jp

MarketMarketOutlook
Outlook
Water Treatment Chemicals
z Continuous high operating rates for domestic petroleum and petrochemical plants
z Strong demand from clients for improving productivity and decreasing costs

Water Treatment Facilities
z Stable small- and medium-sized investments from the domestic semiconductor industry

and continuous investment by flat-panel display (FPD) components manufacturersz Increased demand from the domestic steel and petrochemical industries for enhancing

and replacing water treatment facilities
z Actualization of large projects in the soil remediation market
z Trend towards decline in the human waste treatment facilities and sewerage treatment

facilities markets

Both Chemicals and Facilities
z Increase in costs for raw materials and distribution due to dramatic increases in crude oilprices
8Overview of the Business Plan

www.kurita.co.jp（Fiscal Years Ended or Ending March 31）
2005(Actual)(Billions of yen)

2006
(InitialProjection)

2006(RevisedProjection)

Change versus
projected
AmountYear-on-year change

Percentage

AmountPercentage

Orders¥ 171.3¥ 185.0¥ 186.5

+1.5

+0.8%

+15.2

+8.9%

Net sales

160.9

175.0

175.0

0

0.0%

+14.1

+8.8%

Gross profit

48.8

54.7

52.2

-2.5

-4.6%

+3.4

+6.9%

SG&A
expenses

32.9

34.7

34.2

-0.5

-1.4%

+1.3

+4.1%

Operating income

16.0

20.0

18.0

-2.0

-10.0%+2.0+12.8%

Non-operating
income andexpenses

0.8

0.5

1.0

+0.5

+100%

+0.2+29.4%

Ordinary income

16.7

20.5

19.0-1.5-7.3%+2.3+13.6%

Extraordinary
gains and losses-0.3--0.2-0.2--0.1-

Net income

9.4

11.5

10.8

-0.7

-6.1%

+1.4

+15.1%
9

Business Plan: Orders by Segment

www.kurita.co.jp（Fiscal Years Ended or Ending March 31）
Water treatment chemicals

Water treatment facilities
for the electronics industry
for general industries
for the public sector(Billions of yen)

200

171.3

100

59.3

56.4

Areas with increasing orders
z FPD components
z Semiconductors(small and medium-sizedinvestments)
z Ultrapure Water Supply Businessz Tool cleaning

62.5
131.7

130.5

119.2
50

54.8

54.5

52.1

150

186.5

185.0

37.1

43.7

44.0

25.7

27.5

25.2

2005

2006

2006

(Actual)(InitialProjection)(RevisedProjection)

Areas with increasing orders
z Petrochemical industries
z Foodsz Soil remediation

010

Business Plan: Sales by Segment

www.kurita.co.jp（Fiscal Years Ended or Ending March 31）
Water treatment chemicals

Water treatment facilities
for the electronics industry
for general industries
for the public sector

Main areas for increasing salesz Boiler water treatmentz Wastewater treatmentz Process treatment
z Customized services
z Overseas subsidiaries(Billions of yen)

200

175.0

160.9
150

54.5

54.5

50.6

100

57.1

54.9
50

175.0

59.4

120.5

120.5

110.3

Main areas for increasing sales
z Ultrapure Water Supply Businessz FPD componentsz Tool cleaning

32.0

37.6

37.0

23.4

25.8

24.1

2005

2006

2006

(Actual)(InitialProjection)(RevisedProjection)

Main areas for increasing salesz Steelz Soil remediation

011

Business Plan: Operating Income

www.kurita.co.jp（Fiscal Years Ended or Ending March 31）
Water treatment chemicals

Water treatment facilities
for the electronics industry
for general industries
for the public sector(Billions of yen)

Factors behind plan revisionz Increase in costs for raw materials
and distributionz Non-performance during first halfof the business plan

20.0

20

18.0

16.0
8.9

15

8.5

7.4
10

7.2
6.0

5

7.6

8.5

1.0

2.7
1.2

2005

2006

2006

(Actual)(InitialProjection)(RevisedProjection)

1.5
0

11.1
1.7

9.5

Factors behind plan revisionz Severe pressure for decreased
pricesz Additional costs in the first halfof the fiscal year
z Deterioration of profit margin in
public sector

0.112

Business Plan: Operating Income Margin by Segment

www.kurita.co.jp（Fiscal Years Ended or Ending March 31）

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

OperatingOperating Income
Income Margin
Margin byby Segment
Segment

Water treatment facilities for the electronics industry

Operating income margin for water treatment chemicals

Water treatment facilities

Operating income margin

Water treatment facilities for general industry
Operating income margin for water treatment facilities

Water treatment facilities for the public sector(%)(%)

201515(16.4)
15.7
14.7(11.4)

10

9.9
7.7

10.9
10

10.3
7.8 (9.2)

7.8 (9.2)

7.7
550

12.8
(12.6)

4.7

4.3

0.4 (4.5)

0
2005(Actual)2006( Projected)

4.7 (7.1)

2005(Actual)Note: Figures in parentheses are for the initial plan before revision.

2006( Projected)

13

Business Plan: Comprehensive Solution Provisionwww.kurita.co.jp

Recycling

Raw water

Ultrapure waterproduction systems

Process
water

Steam
Pre-treatment
facilities

Boiler

Cooling
tower

Wastewater

Production
process

Wastewater treatment
facilities

Coolingwater

Discharge oftreated waterWe
We areare involved
involved inin comprehensive
comprehensive solutions
solutions toto water
water usage
usage inin ourourclients’clients’ plants
plants andand provide
provide aa variety
variety ofof advantages,advantages, such
such asas thethereduction
reduction ofof costs
costs andand environmental
environmental impact.
impact.
14

Business Plan: Eco-Solution Group Services

OrdersOrders andand Sales
Sales forfor thethe
Eco-Solution
Eco-Solution GroupGroup(Billions of yen)OrdersServices
Services provided
provided byby thethe Eco-Solution
Eco-Solution GroupGroup
Productivity improvement
Environmental impact reduction

Sales108.0864

www.kurita.co.jp

 Highly efficient wastewater treatment

5.4

5.4

5.0

 Reduction of running costs for water
treatment chemicals
 Reduction of sludge

3.1

 Recycling of wastewater

2.6

20
Fiscal year
ended March
31, 2005

Six months
ended
September 30,
2005

Fiscal year
ending March
31, 2006(Projected)

Wastewater treatment facility
15

Business Plan: Comprehensive Service Provision in China

www.kurita.co.jp

Provision
Provision ofof total
total solutions
solutions related
related toto water
water treatment
treatment inin thetheChinese
Chinese market
market using
using our
our comprehensive
comprehensive capabilities,
capabilities, including
includingchemicals,
chemicals, facilities
facilities andand maintenancemaintenance
Kurita Water Industries (Dalian) Co., Ltd.
Manufacture andsales of water
treatmentchemicals

Beijing

Kuritec (Shanghai) Co., Ltd.

Tiangin

Sales andmaintenance ofwater treatment
facilities

Nantong

Kurita Water Industries (Suzhou) Ltd.

Guangzhou

Manufacture andsales of water
treatment
facilities16Business Plan: Overseas Businesswww.kurita.co.jp（Fiscal Years Ended or Ending March 31）

5%OrdersOrders(Billions of yen)

6%

30

11%

25
Asia
North America
Europe

25.6
20.1

6.8

20
Water treatment
chemicals

5.6
15

Other areas

10

18.8

14.5

Water treatment
facilities

5078%

2006

2005

(Projected)

6%7%(Billions of yen)

25

22.4

20

5.7

11%
Asia
North America
EuropeOther areas

Sales
Sales

21.2
6.8

15
10

Water treatment
chemicals
Water treatment
facilities

16.7

14.4

576%
02005

2006
(Projected)

17Business Plan: Ultrapure Water Supply Business Trends（Fiscal Years Ended or Ending March 31）

www.kurita.co.jp

To domestic large-scale plasma
display panel (PDP) plants

To domestic largescale LCD plants
To domestic
semiconductor plants
To domestic
semiconductor plants
To domestic largescale LCD plants
To LCD plants
in Singapore

2001

2002

2003

2004

Over ¥10 billion in capital expenditures

2005
Approximately¥12 billion incapital
expenditures

2006 (Projected)18

www.kurita.co.jp

Business Plan: Services in Facilities Segment Sales Trends（Fiscal Years Ended or Ending March 31）

Ultrapure Water
Supply Business

Soil remediation

Tool cleaning

Maintenance/operation
management etc.

(Billions of yen)

90

76.8

80

5.5

70

65.5

60

54.1

3.9
8.4

50

6.3
7.1

54.5

9.5

7.6

75%
44%

30
40.7

45.6

10

Water
Water treatment
treatmentchemicals
chemicals

9.5

40

20

175.0

76.8

Water
Water treatment
treatment
facilities
facilities(service)(service)

52.3

43.7

Water
Water treatment
treatment
facilities
facilities(hardware)(hardware)

02004

2005

2006 (Projected)

Note: Sales of the Ultrapure Water Supply Business have been disclosed since the fiscal year ended March 31, 2005.

19

www.kurita.co.jp

Business Plan: Capital Expenditures/Depreciation/R&D Expenses（Fiscal Years Ended or Ending March 31）

Investment of ¥12 billion in assets for
Ultrapure Water Supply Business

Capital expenditures(Billions of yen)

Depreciation

20
18
16
14
1210
86
4
20

R&D expenses(Billions of yen)

5

17.5

4.3

4.2

4.3

2004

2005

2006
(Projected)

43

8.3
2

6.1
3.3

3.6

4.4
10

2004

2005

2006
(Projected)

Note: Capital expenditures and depreciation relate to tangible fixed assets.
20

Business Plan: Integration of R&D Operations

Purposeswww.kurita.co.jp

z Quick development of new products and newbusinessesz Avoidance of duplicated investmentsz Reduction of operating costs
Kurita Global Technology Center Corporate Research and Development Center in Atsugi in Kanagawa Prefecture closed, andresearch and development operations integrated in Nogi-machi in Tochigi Prefecture.
 Approximately 260 employees including fulltime and part-time employees.
21Business Plan: Dividend Policy

www.kurita.co.jp（Fiscal Years Ended or Ending March 31）
（Yen）

22

25
20

16

18

15
10
50

2004

2005

2006
(Projected)

Basic Dividend Policy:
In line with our basic policy of the continued stable payment ofdividends, we aim to increase dividends in consideration oftrends in business results and effective use of internal reserves.
22www.kurita.co.jp

Kurita Water Industries Ltd.
Web site: http://kurita.co.jp/english/index.html
E-mail: ir@kurita.co.jp

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