Summary of the Q&A Session at the Financial Results Briefing
for the First Half of the Fiscal Year Ending March 31, 2018
Date and Time: November 1, 2017 (Wed.) 10:00-11:00
Location: Belle Salle Tokyo Nihonbashi
Notice: This summary is a reference designed for the convenience of those who could notattend the financial results briefing stated above. Please note that this is not a word-for-wordtranscript of all remarks made at that session, but is a summary prepared by Kurita Water
Industries Ltd.
Q. With regard to the improved cost of sales ratio for hardware, is this a reflection of
an improvement in overall profitability rather than the contribution of specificprojects? Is this sustainable into 2H?
A. For the overseas business, the foundations for the EPC business at our China
group companies and other overseas group subsidiaries are now in place. Thisshould allow us to reduce the cost of sales ratio steadily. For the domestic
business, we had undertaken initiatives to improve design efficiency and are
now seeing the cost of sales ratio decline. Near-term orders are strong, soexcluding the risk of tight production capacity, we believe this trend should besustainable.
Q. Recently we have seen an increase in commodity prices. Does this not affect yourraw materials prices?
A. It is having an impact but it is not significant at this stage. We have been able tomore than offset the impact through improved production efficiency and themodularization of water treatment facilities.
Q. What drove the significant overshoot in 1H overseas water treatment facilities
orders?
A. There are several factors but the biggest is the shortening investment cycle atsemiconductor and FPD customers. To date, the typical cycle had been twoyears, but the pace accelerated with investment waves happening on a 6-monthcycle.
Q. If that is true, should the implied increase in repeat orders be positive for
profitability?
A. There are some orders where competition is fierce, so the profitability on someprojects is suboptimal.
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Q. How were hardware orders for the electric power industry in 1H? Are you being
affected by the changes in the electric power industry’s operating environment?
A. 1H orders were down slightly. So far we have not seen significant changes.
Q. Are tighter wastewater regulations in China starting to have a positive impact on
your business?
A. For now, we are not seeing a sharp increase in systems for wastewater treatment.
We do see the tighter regulations as a tailwind but we are not targeting allindustries. Our targets would be industries that either use large volumes ofwater or require a high technical level of wastewater treatment.
Q. How much of your Asia sales are from China? How much of your China sales comefrom electronics?
A. Combined Water Treatment Chemicals and Water Treatment Facilities sales for 1H
was approximately \9 billion and our full year plan is for more than \22 billion.
Almost all of our Water Treatment Facilities' sales for China are from theelectronics industry.
Q. Please tell me the soil remediation orders and sales for 1H and your forecasts forthe full year.
A. 1H sales were approximately \3 billion. We project \8 billion for the full year. 1Horders were approximately \6.5 billion and we project approximately \10 billion
for the full year.
Q. You have indicated that the key for growth is the overseas business. Are you
happy with the progress you have made with Kurita Europe GmbH (KEG) andFremont Industries, LLC following the acquisitions?
A. The alumina and pulp and paper chemicals business at KEG has fallen short of ourexpectations but the Water Treatment Chemicals business is growing. We areseeing particularly strong regional growth in areas such as the Middle East. We
have now put a business foundation in Europe and expect to aim for growth inthe next medium-term management plan. For Fremont, we are expecting to beprofitable this fiscal year, even after the amortization of goodwill. We have seenorder flow for both water treatment chemicals but standardized watertreatment facilities.

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Q. Why is the capex for the Ultra-Pure Water Supply (UPWS) business running aheadof plan?
A. Semiconductor customers decided to proceed with investments earlier thanexpected, leading to the additional investments. I believe this reflects anacceleration of investment decisions.
Q. How much of the \17.3 billion in UPWS capex is for overseas, and which countries
are impacted?
A. Roughly \4 billion is for overseas, only for Korea.
Q. How should we think about the potential for UPWS capex in FY ending March
2019?
A. We expect that the current investment environment for semiconductors and FPD
will continue for another 2 years. We believe the scale of capex for next fiscal
year will be flat YoY.
Q. What is the outlook for new services in China?
A. We are currently developing a model for wastewater reclamation. It will improvecustomer wastewater recovery rates across a wide range of industries. We arelooking at developing services that are appropriately tailored for specificindustries.
Q. Should we be expecting to see investments for new services in China be of theorder of several billions of yen?
A. We think hitting those sort of levels is a few more years away, so we don't expect
to be at the several billion yen stage in the next fiscal year.
Q. 1H OP for the Water Treatment Facilities segment was \2.7 billion higher thaninitial forecasts. How much of this was due to a contribution from higher
margins on the hardware business?
A. The contribution from the improved cost of sales ratio (not limited to hardware)
for the overall Water Treatment Facilities segment was a positive \0.7 billion
YoY.

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Q. You have not changed your 2H earnings plan from your initial forecasts, but if thecost of sales ratio continues to improve, should we expect the magnitude of theimprovement to the cost of sales ratio will be larger in 2H than it was in 1H?
A. We are taking a conservative view of 2H as we anticipate that there will be a few
projects in 2H where profitability will be challenging. However, we expect theoverall positive trend to continue given the production base is in place.
Q. Has we seen an inflection point for the UPWS business on the back of an improved
operating environment?
A. If we factor in the strength of near-term capex, we believe that sales for thisbusiness should increase. For contracts on the verge of maturing, we expect tosee customers renew.
Q. Please describe the benefits you get from moving to a single organization for thedomestic Water Treatment Chemicals and maintenance businesses.
A. Historically, there had been three sales people per customer, each separately
responsible for Water Treatment Chemicals, Water Treatment Facilities andmaintenance respectively. This led to sales people being focused narrowly on
their existing businesses. However, we have now selected a single person to be
the initial point of contact for each customer. This person is responsible formaking all proposals. As we develop a better understanding of our customers’
manufacturing processes, it is leading to the development of new solutions.
Q. Does the integration of the organization ultimately lead to a more efficient use of
the work force?
A. Our customers’ perception of added value is different depending on the scale oftheir operations. We are not taking a cookie cutter approach in allocating humanresources, but will provide solutions in response to customer demand.
Results forecasts presented and other statements relating to the future made in thisdocument are based on information currently available and certain assumptions theCompany considers reasonable. A variety of factors may cause actual financial results andother forward-looking statements to differ materially from the forecasts.

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