FOR IMMEDIATE RELEASE
Kurita Water Industries Reports Earnings for the Three Months Ended June 30,
2018Tokyo, Japan, August 10, 2018—Kurita Water Industries Ltd. (TSE Securities Code6370) announced net sales of 64,349 million yen and profit attributable to owners ofparent of 915 million yen, or 8.16 yen per share, for the three months ended June 30,2018 (April 1, 2018 – June 30, 2018).
Results of Operations
Total consolidated orders for the Kurita Group (Kurita Water Industries Ltd. and its
consolidated subsidiaries and equity method affiliates) in the three months ended June30, 2018 rose 3.5% from the level of the year-ago period, to 70,460 million yen, and net
sales increased 33.2%, to 64,349 million yen.
Operating income was 4,247 million yen, up 20.7% versus the same the year-ago
period, and ordinary income was 4,263 million yen, up 18.5%. Profit attributable toowners of parent amounted to 915 million yen, down 63.1%. The Group has expanded
the scope of application of the percentage-of-completion method, mainly in the Water
Treatment Facilities business from the first quarter under review, and this has resulted
in an increase in net sales by 6,009 million yen and rises in operating income andordinary income by 1,391 million yen, respectively.
Looking at the market environment surrounding the Kurita Group, in Japan,
production in the manufacturing industry continued to see an upward trend, and capital
expenditure also remained firm on the back of a high level of corporate earnings.
Overseas, the U.S. economy remained solid. The European economy and emerging
economies, particularly the Chinese economy, also recovered moderately.
In this environment, the Group sought to develop and market competitive products
and services using IT and sensing technologies. It also proposed solutions to customers’
challenges including the reduction of environmental footprints, energy saving andimprovements in productivity.
In addition, the Group passed a resolution at a meeting of its Board of Directors heldon July 31, 2018 to transfer the aluminum compound business of Kurita Europe GmbH
to Blitz 17-630 AG, a subsidiary of LIVIA Corporate Development SE, and entered intoa business transfer agreement on August 3, 2018. The Group posted an estimated loss of
2,869 million yen associated with this transfer in extraordinary losses (provision for loss
on transfer of business).
Segment Information
The Group consists of two reportable segments in its segment information: Water
Treatment Chemicals and Water Treatment Facilities
Water Treatment Chemicals
Total Group orders for the Water Treatment Chemicals segment were 26,860 million
yen, up 21.2% versus the same period of the fiscal year ended March 31, 2018, whilesales rose 20.7%, to 25,429 million yen.
Operating income climbed 42.2%, to 2,187 million yen mainly due to the increase inoverseas sales.
In Japan, orders and sales remained flat partly due to the absence of the posting of1

spot projects of facilities and services that was made in the year-ago period, while sales
and orders in process treatment chemicals for petroleum refining and petrochemicals
and iron and steel increased thanks to segment efforts to develop new customers byproposing problem solutions using new products and services.
Overseas, both orders and sales increased, reflecting an increase in the consolidation
period for operating results of Hansu Co., Ltd. in South Korea, which became aconsolidated subsidiary in the fourth quarter of the previous fiscal year, by three months,
in addition to a rise in demand for water treatment, particularly in Asia.
Water Treatment Facilities
Total Group orders for the Water Treatment Facilities segment were 43,599 million yen,down 5.0% versus the same period of the previous fiscal year. Partly thanks to the
expansion of the scope of application of the percentage-of-completion method, salesrose 42.9%, to 38,920 million yen.
Operating income rose 7.8%, to 2,138 million yen due to the increase in sales.
In Japan, in the electronics industry, both orders and sales increased in water
treatment facilities. Orders and sales in maintenance services rose, thanks to orders for
expansion and remodeling projects against a backdrop of a rise in capacity utilization atcustomers’ plants.
In general industries, orders for water treatment facilities increased, but sales declined.
Orders and sales in maintenance services increased mainly for remodeling andexpansion projects at customers’ plants for the purpose of expanding production
capacity. While orders for water treatment facilities for electric power and soil
remediation declined in the absence of the posting of orders for large projects in the
year-ago period, sales increased significantly thanks to progress in construction work
for large projects.
Overseas, while orders declined with the fall in the posting of orders for large
projects from the year-ago period, sales increased with progress in construction for large
projects in China and South Korea.
Sales in the ultrapure water supply business in Japan and overseas increased due tothe posting of sales from expansion projects.
Financial Condition
1) Total assets: 336,197 million yen (increased 13,151 million yen from the end of theprevious fiscal year)
Current assets totaled 169,443 million yen at the end of the first quarter (June 30, 2018),
an increase of 9,034 million yen from the end of the previous fiscal year (March 31,2018). This was mainly a result of an increase of 10,467 million yen in cash anddeposits due to the steady collection of receivables and the receipt of long-term
advances received, despite a decrease of 1,940 million yen in work in progress due tothe absence of posting of the relevant projects chiefly associated with the expansion of
the scope of application of the percentage-of-completion method.
Non-current assets totaled 166,753 million yen at the end of the three-month period(June 30, 2018), an increase of 4,116 million yen from the end of the previous fiscal
year. This increase mainly reflected capital expenditure in the ultrapure water supply
business (Water Treatment Facilities business), which outweighed the deprecation ofexisting facilities.
22) Liabilities: 101,377 million yen (increased 19,184 million yen from the end of theprevious fiscal year)
Current liabilities totaled 58,861 million yen at the end of the period, an increase of
2,712 million yen from the end of the previous fiscal year. The increase mainly reflecteda rise of 7,579 million yen in Other due to an increase in advances received and theposting of 2,869 million yen provision for loss on transfer of business associated withthe sale of the aluminum compound business (Water Treatment Chemicals business) inEurope, while trade accounts payable and income taxes payable deceased 3,400 million
yen and 3,479 million yen, respectively.
Non-current liabilities totaled 42,516 million yen at the end of the period, an increaseof 16,472 million yen from the end of the previous fiscal year. This increase mainlyreflected a rise of 16,297 million yen in Other due to the receipt of long-term advances
received.
3) Net assets: 234,820 million yen (decreased 6,033 million yen from the end of theprevious fiscal year)
Net assets totaled 234,820 million yen at the end of the period, a decrease of 6,033
million yen from the end of the previous fiscal year primarily due to falls of 2,069
million yen in shareholders’ equity and 4,188 million yen in accumulated othercomprehensive income. The decline in shareholders’ equity was caused by a decrease of
1,948 million yen in retained earnings due to the posting of year-end dividends, which
outweighed profit attributable to owners of parent. The fall in accumulated othercomprehensive income was chiefly due to a decline of 3,834 million yen in foreign
currency translation adjustments associated with the appreciation of the yen against
foreign currencies and a decrease of 506 million yen in unrealized gains onavailable-for-sale securities as a result of falling unrealized gains on investment
securities held.
Outlook for the Fiscal Year Ending March 31, 2019
The Group’s current outlook for the six months ending September 30, 2018, and the fullyear ending March 31, 2019 is consistent with the earnings forecast disclosed in“Earnings Report for the Full Year Ended March 31, 2018,” which was announced on
April 27, 2018. While the Group has posted a 2,869 million yen provision for loss ontransfer of business in extraordinary losses in the first quarter under review, the Groupkeeps its consolidated earnings forecasts for the fiscal year ending March 31, 2019
unchanged because a gain on sales of investment securities is expected to be posted
from the second quarter of the current fiscal year as the Group is currently proceedingwith the review of its shareholdings of other listed companies.

3

Financial Statements — Consolidated
Balance Sheet — Consolidated(Million yen)

AssetsCurrent assets
Cash and deposits
Notes receivable – trade
Accounts receivable – tradeFinished products
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings (net)
Machinery and equipment (net)Other (net)Total property, plant and equipment
Intangible fixed assets
Goodwill
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

As ofMarch 31, 2018
Amount

As ofJune 30, 2018
Amount61,086
7,870
78,994
3,968
3,621
2,800
2,531
(464)
160,40971,553
7,944
78,547
4,147
1,681
2,952
3,083
(466)
169,443

11,132
42,84332,051
86,028

12,21642,27834,582
89,077

20,362
10,641
31,003

21,26010,05131,31135,683
10,099(176)
45,605
162,637
323,046

34,692
11,848(175)
46,365
166,753
336,197

4

(Million yen)

As ofMarch 31, 2018
Amount

As ofJune 30, 2018
Amount2,073
26,801
4,806
3,436
19,03156,1492,230
23,401
1,327
2,869
2,422
26,61058,861

16,610191
9,242
26,04482,193

16,801
175
25,53942,516
101,377

13,45010,959209,149(10,943)
222,615

13,45010,839207,201(10,944)
220,546

16,55816,052

(1)
(380)
6
3
16,1872,049
240,853
323,046151(380)(3,828)
4
11,9992,273
234,820
336,197

Liabilities
Current liabilities
Notes payable – trade
Accounts payable – trade
Income taxes payable
Provision for loss on transfer of business
Other provision
Other
Total current liabilities
Non-current liabilities
Net defined benefit liability
Provision
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Unrealized gains (losses) on available-for-salesecurities
Deferred gains (losses) on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

5Statements of Income and Comprehensive Income — Consolidated
Statement of Income(Million yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Equity in earnings of unconsolidated subsidiaries
and affiliates
Other
Total non-operating income
Non-operating expenses
Interest expense
Foreign exchange losses
Loss on valuation of investments in capital
Acquisition expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary losses
Provision for loss on transfer of businessTotal extraordinary losses
Income before income taxes
Income taxes
Net income
Profit attributable to non-controlling interests
Profit attributable to owners of parent

Three months ended
June 30, 2017
Amount48,30031,597
16,702
13,181
3,520

Three months ended
June 30, 2018
Amount64,34945,66918,67914,432
4,247

48
267
-

61
276
95

31

9

134
482

263
707

119
158
21
106
405
3,598

83
251
218
138
691
4,263

3,598
1,072
2,525
42
2,483

*

2,869
2,869
1,394
462
931
15
915

6

Statement of Comprehensive Income(Million yen)

Net income
Other comprehensive income
Unrealized gains (losses) on available-for-salesecurities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income
Components:
Comprehensive income attributable to owners ofparentComprehensive income attributable tonon-controlling interests

Three months ended
June 30, 2017
Amount2,525

Three months ended
June 30, 2018
Amount
931

1,202

(505)

(477)
(805)
0

152
(1,480)
0

34

(24)

(45)
2,480

(1,858)
(927)

2,460

(863)

20

(63)

7

Notes to Consolidated Financial Statements(Notes on the Going-concern Assumption)
Three months ended June 30, 2018 (April 1, 2018 – June 30, 2018)
Not applicable(Changes in the scope of consolidation or the scope of application of the equity method)(Changes in matters related to the fiscal year of consolidated subsidiaries)
In the past, the Group used the financial statements of all overseas consolidated subsidiaries whose
closing date was December 31 as of this day and made necessary adjustments for consolidation forimportant transactions that had occurred during the period between their closing date and theconsolidated closing date. However, the Group has changed the closing date of all overseas
consolidated subsidiaries but Kurita Water Industries (Dalian) Co., Ltd., Kurita Water Industries(Jiangyin) Co., Ltd., Kurita Water Industries (Suzhou) Ltd., Kuritec (Shanghai) Co., Ltd. and Kurita do
Brasil Ltda. to March 31. For the five companies above, the Group has changed their account settlement
method to one in which a provisional closing equivalent to the full-year account settlement is made on
the consolidated closing date. In association with this change, the Group has made an adjustment for
profits and losses for three months from January 1, 2018 to March 31, 2018 using retained earnings andconsolidated them in the first quarter under review.
(Changes in accounting policies)(Changes to accounting policies that are difficult differentiating from changes to accounting estimates)(Changes to the depreciation method of property, plant and equipment)
In the past, the Company adopted the declining-balance method for the deprecation of buildings(excluding facilities attached to buildings) acquired on or after April 1, 1998, facilities attached tobuildings and structures acquired on or after April 1, 2016 and property, plant and equipment(excluding leased assets) except for facilities of ultrapure water supply business which the Company
had installed at customers. However, the Company has changed the depreciation method for them tothe straight-line method from the first quarter under review.
The Company has made this change because the pattern of consumption of the economic benefits ofproperty, plant and equipment has changed as the expansion of the global business and a transition tothe optimum production system have become clear. Given that actual production on a consolidated
basis generally stays at a certain level and that the operation of facilities is also stable, the Company
has determined that the straight-line method is more suitable for the consumption pattern of economic
benefits of property, plant and equipment.
The impact of this change on profits and losses in the first quarter under review is minor.
(Application of accounting unique to the creation of quarterly consolidated financial statements)
Calculation of tax expense
The Company reasonably estimates an effective tax rate after the application of tax effect accounting fornet income before income taxes for the consolidated fiscal year and multiplies the net income before
income taxes by the estimated effective tax rate.

8

(Additional information)(Adoption of the “Partial Amendments to Accounting Standard for Tax Effect Accounting”)
The Company has adopted the “Partial Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28 on February 16, 2018), among others, from the beginning of the first quarter ofthe current fiscal year. As a result, deferred tax assets are presented in investments and other assets, anddeferred tax liabilities are presented in non-current liabilities.
(Expansion the scope of application of the percentage-of-completion method)
In the past, the Company applied the percentage-of-completion method to construction works for
progress of which the certainty of outcome can be recognized and applied the completed-contract
method to other construction works. However, the Company has applied the percentage-of-completion
method to the other construction works from the first quarter under review because a reliable estimate
has become possible for most of them due to the development and strengthening of the costmanagement system.
As a result, net sales have increased 6,009 million yen, and operating income, ordinary income andincome before income taxes have increased 1,391 million yen, respectively.
(Statement of income)* Provision for loss on transfer of business
Three months ended June 30, 2018 (April 1, 2018 – June 30, 2018)
This is an estimated amount of loss associated with the planned sale of the aluminum compoundbusiness of Kurita Europe GmbH.
(Business Combination)(Business combination through acquisition)
1. Overview of business combination(1) Name and business of the acquired company
Name:

Fracta,Inc.

Business: Holding company of Fracta
The Company has also acquired Fracta, a wholly owned subsidiary of Fracta, Inc., throughthe investment in Fracta, Inc.
Name:

FractaBusiness: Software services to predict the deterioration of water pipes utilizing artificial intelligence(AI) and machine learning (ML)(2) Reason of business combination
Fracta, Inc. has developed software services to predict the deterioration of water pipes utilizing AI and
ML at its wholly owned subsidiary Fracta. The Company will create and expand new digitalbusinesses utilizing IoT and AI in the areas of water and the environment by acquiring thestate-of-the-art technologies and know-how of Fracta, Inc. in AI and ML and applying them to theCompany’s water treatment technologies and services.
(3) Date of business combination
May 31, 2018(4) Legal form of business combination
Acquisition of shares with cash as consideration(5) Name after business combination
The name will not change.

9(6) Percentage of voting rights acquired
60.63% (fully diluted basis: 50.1%)(7) Main reason for determining the acquiring company
Because the Company acquired shares with cash as consideration.
2. Period for financial results of the acquired company included in the quarterly consolidated statementof income for the first quarter
From June 1, 2018 to June 30, 2018
3. Breakdown of the acquisition cost of acquired business and consideration by type
Consideration for acquisition

Cash and deposits

Acquisition cost

3,968 million yen
3,968 million yen

4. Major expenses related to the acquisition
Compensation, fees, etc. paid to the advisor: 177 million yen
5. Amount of goodwill, reason of the occurrence of goodwill, amortization method, and amortization
period(1) Amount of goodwill

2,941 million yen

The amount above is provisional given that the specification of identifiable assets and liabilities as of
the business combination is unfinished and that the allocation of the acquisition cost has yet to becompleted because the period from the business combination to the closing date is short.
(2) Reason of the occurrence of goodwill
Expected excess earning power(3) Amortization method and amortization period
Goodwill will subject to straight-line amortization over the period when it is effective. The
amortization period will be fixed mainly in light of the result of the allocation of the acquisition cost.
6. Put options granted to non-controlling shareholders and call options held by the Company
The Company will make Fracta, Inc. a wholly owned subsidiary for up to four years from 2020. The
Company has granted written put options for the shares of Fracta, Inc. to the non-controllingshareholders of Fracta, Inc. and holds purchased call options for the shares of Fracta, Inc. for the
purpose of making it a wholly owned subsidiary in the future.

10

(Segment Information)
1. Sales and income by reportable segment
Three months ended June 30, 2017 (April 1, 2017 – June 30, 2017)(Million yen)

Reportable Segments

Amounts
reported on
Adjustments the quarterly
statements of(note 1)income(note 2)Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Sales
Sales to outside customers
Inter-segment sales or transfers

21,061
63

27,23829

48,30093–(93)

48,300–Total

21,12527,267

48,393(93)

48,300

1,538

1,984

3,523

(2)

3,520

Segment income

Notes:
1. Adjustments related to sales represent elimination of inter-segment sales. Resultant adjustment of segment
income is reflected in segment income adjustments.
2. Segment income is shown at the operating income level.

Three months ended June 30, 2018 (April 1, 2018 – June 30, 2018)(Million yen)

Reportable Segment

Sales
Sales to outside customers
Inter-segment sales or transfers
Total
Segment income

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

25,429176
25,6052,187

38,920235
39,1552,138

64,349411
64,7604,326

Amounts
reported on
Adjustments the quarterly
statements of(note 1)income(note 2)
–
(411)
(411)
(78)

64,349–64,3494,247

Notes:
1. Adjustments related to sales represent elimination of inter-segment sales. Resultant adjustment of segment
income is reflected in segment income adjustments.
2. Segment income is shown at the operating income level.

2. Matters related to changes in reportable segments(Changes in the depreciation method of property, plant and equipment)
As stated in changes in accounting policies, the Company has changed the depreciation method forcertain property, plant and equipment from the declining-balance method to the straight-line method fromthe first quarter under review. Associated with this, the Company has changed the depreciation method forproperty, plant and equipment in the relevant reportable segments from the declining-balance method tothe straight-line method.
The impact of this change on segment income in the Water Treatment Chemicals business and the Water
Treatment Facilities business in the first quarter is minor.
(Expansion of the scope of application of the percentage-of-completion method)
As stated in additional information, the Company has expanded the scope of application of thepercentage-of-completion method from the first quarter under review.
As a result, net sales in the Water Treatment Facilities business has increased 6,009 million yen in thefirst quarter under review, and the segment income has risen 1,391 million yen.

11

Supplementary Information — Consolidated(1) Order Intake(Million yen)

Business segment
Water Treatment Chemicals

Three months ended June 30,
2017
2018
Amount%Amount22,157
32.6
26,860%38.1

Water Treatment Facilities

45,891

67.4

43,599

61.9

Total

68,048100.0

70,460100.0(2) Net Sales(Million yen)

Business segment
Water Treatment Chemicals

Three months ended June 30,
2017
2018
Amount%Amount21,06143.6
25,429%39.5

Water Treatment Facilities

27,23856.4

38,920

60.5

Total

48,300100.064,349100.0(3) Capital Expenditures (Property, Plant and Equipment)(Million yen)

Business segment
Water Treatment Chemicals

Three months ended June 30,
2017
2018
Amount%Amount
382
10.5
819

%
13.4

Water Treatment Facilities

3,269

89.5

5,303

86.6

Total

3,651

100.0

6,122

100.0

(4) Depreciation (Property, Plant and Equipment)(Million yen)

Business segment
Water Treatment Chemicals

Three months ended June 30,
2017
2018
Amount%Amount
414
12.7
503

%
13.5

Water Treatment Facilities

2,841

87.3

3,212

86.5

Total

3,255

100.0

3,716

100.0

12