Kurita Water Industries Ltd.
Results Presentation for the First Halfof the Year Ending March 31, 2016
(Stock code: 6370)

October 30, 2015

Table of Contents

I

Consolidated Financial Results for the First Half of the YearEnding March 31, 2016

II

Consolidated Business Plan for the Fiscal YearEnding March 31, 2016

III

Outlook for Businesses
Reference Material

I. Consolidated Financial Results for the First
Half of the Year Ending March 31, 2015
1.

Financial Highlights

2.

Orders, Sales, Operating Income, and Operating Income Margin

3.

Water Treatment Chemicals

4.

Water Treatment Facilities (for the electronics industry)

5.

Water Treatment Facilities (for general industries)

6.

Service Business Revenue

7.

Overseas Business Sales

8.

Capital Expenditures, Depreciation, and R&D Expenses

9.

Financial Condition

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016
(Billions of Yen)
Fiscal Year to
March 2015
First Half Actual

Fiscal Year to
March 2016
First Half Initial
Projections

Fiscal Year to
March 2016
First Half Actual

Orders

97.0

111.2

110.0

+13.4%Net Sales

89.0

101.4

97.9

+10.1%

8.6

8.7

9.1

+5.8%

9.2

8.9

9.5

+3.3%

5.9

5.5

5.8

-2.1%

Operating
IncomeOrdinary
IncomeProfit attributable toowners of parent

Year-on-Year
Change Orders increased in the Water Treatment Chemicals business due to the acquisition effect, and also rose in
the Water Treatment Facilities business, particularly overseas.
 Net sales declined in the Water Treatment Facilities business, but increased in the Water Treatment
Chemicals business due to the acquisition effect.
 Operating income fell in the Water Treatment Chemicals business, but rose in the Water Treatment
Facilities business. Overall, operating income for the entire Group increased.
1

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016

Water treatment chemicals

Water treatment facilities

Total

*

Orders(Billions of Yen)
120

97.0
29.7

Sales
110.0

111.2

41.3

42.6

60

0

(Billions of Yen)
100

67.2

68.7

9/20149/2015

8.6
4.1

101.4

29.3

40.6

42.6

59.6

57.3

58.8

9/20149/201568.6
0Operating Income Margin
9.1

8.7

3.6

4.2

5

0

97.9

89.0

50

Operating Income(Billions of Yen)
10

denotes initial projections

(%)
16

14.0
10

4.5

5.5

9/20149/2015

4.5
4

9.7
7.6
9/2014

9.7
9.3
8.9

7.7
8.6
9.9

9/20152

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016

(Billions of Yen)

Orders and Sales40

 Our main products saw sluggish growth in Japan due to a slow
recovery in customers’ capacity utilization.

41.3

20

42.6

 Domestic sales remained roughly flat from a year ago.

29.7
09/2014

 Overseas orders and sales rose significantly due to theacquisition effect in Europe.
9/2015

 Orders and sales expanded smoothly also in China andSoutheast Asia.

(Billions of Yen)40

 Orders and sales in January at KEAG (Kurita Europe APWGmbH), which has been acquired, have not been consolidated.

20

29.3
0

9/2014(Billions of Yen)
5.0

2.5

0.0

40.6

42.6

9/2015

(%)
18

14.0

4.1

9/2014
Operating income margin *

8.9

9.9

3.6

4.2

9

9/2015

Operating Income
 Despite the effect of higher sales, operating income declined due
to an increase in SG&A expenses and deterioration in the cost
rate in association with the acquisition.
 Operating income except for KEAG rose slightly.

0 The main reason why operating income fell short of the initialprojection is the effect of PPA (Purchase Price Allocation).

denotes initial projections

3

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016
(Billions of Yen)

Orders40

 Orders for maintenance services in Japan grew due to arecovery in demand.
20

36.3

0

9/2014(Billions of Yen)

38.4

37.5

 Orders in the ultrapure water supply business rose.
 For hardware overseas, large contracts were won in China
and Taiwan, but orders in Southeast Asia, which were at ahigh level a year ago, declined.

9/2015Sales

40

 Sales of hardware overseas fell as the posting of sales fromlarge contracts was completed.
20

35.6

33.2

9/2014(Billions of Yen)

9/20150

 Sales of maintenance services in Japan and in the ultrapure
water supply business increased.
(%)

16.4

6

 Sales of tool cleaning declined due to a withdrawal from
unprofitable businesses.

34.2

12.6

20

12.0
3

4.3
0

9/2014
Operating income margin *5.5

9/2015

4.3

10Operating Income Operating income increased with an improvement in the cost of
sales ratio, despite the decline in sales and an increase in SG&A
expenses.

0

denotes initial projections

4

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016
(Billions of Yen)

Orders

30

30.9

30.3

9/2014(Billions of Yen)

9/2015150 Orders for soil remediation, which were at a high level ayear ago, declined.
31.1

 Orders for general industries hardware and electric
power industries hardware remained roughly flat.

Sales

26

13

 Sales of general industries hardware declined due todelayed progress in construction.
24.1

24.1

9/2014(Billions of Yen)

9/20150

24.6

 Sales of electric power industries hardware increased
due to progress in construction.
(%)

0.4

2

0.3

Operating Income Operating income declined due to a deterioration in thecost of sales ratio and an increase in SG&A expenses.

1.1
0.2

1

0.1
0.2
0.3 0.8
0.09/2014
Operating income margin

9/2015*0

denotes initial projections

5

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016
Service Business Revenue
in the Water Treatment Facilities Segment

Water treatment chemicals
Water treatment facilities (services)(Billions of Yen)

Water treatment facilities (hardware)

50(Billions of Yen)

100

97.9

44.8

15.9

16.1

Ultrapure watersupply business

4.3

3.3

Tool cleaning

23.8

25.4

9/20149/2015

89.0
40.6

29.3

85.4
854

73.3
733

50

44.0

0

44.0

44.8

15.6

12.5

9/20149/201525

Servicebusiness
revenue0

Maintenance, etc.

 Sales of water treatment chemicals increased significantly due to the acquisition effect.

 Revenue from tool cleaning declined, but revenues from maintenance and in the ultrapure watersupply business increased.

6

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016

Sales by Region
Asia

North America

Sales by Overseas Business Segment

EuropeOther

Water treatment chemicals

Water treatment facilities(Unit: billions of yen)

(Unit: billions of yen)

1.5
0.7
0.8

1.6

7.3
9.2

26.5

17.1

14.9

9.1

17.1

8.0

26.5
19.2

13.9

9/20141.0

9/20159/20149/2015

 Sales in the Water Treatment Chemicals business rose significantly in Europe
due to the acquisition effect. Sales also increased in Asia.
 Sales in the Water Treatment Facilities business declined with the completion of the posting ofsales from large contracts.

7

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016

Capital Expenditures and Depreciation
Capital expenditures(ultrapure watersupply business)

Capital expenditures(excl. ultrapure watersupply business)(Billions of Yen)
9.0

R&D Expenses

Depreciation

R&D expenses(Billions of Yen)
2.8

8.3

Percentage of net sales

2.7

(%)
3

2.4

7.1

4.5

3.1

7.1

1.4

2.6

1.5

2.1

6.5

1.8
0.0

1.3

1.2

9/20149/2015

 Capital expenditures in the ultrapure watersupply business rose significantly.

0.0

09/20149/2015

 R&D expenses increased, driven by thedevelopment of competitive products andtechnologies.
8

I.Consolidated Financial Results for the First Half of the YearEnding March 31, 2016

Assets

294.5

67.5

Liabilities and Net Assets

289.3(Billions of Yen)

66.6(-0.9)

81.5

79.5(-1.9)

75.0

76.6

Cash, deposits
andmarketablesecurities

294.5

289.3

71.0

66.0

(Billions of Yen)

Liabilities(-5.1)

Other current
assetsProperty, plantand equipment

223.5

223.3

Net assets(+1.6)

70.5

66.5(-4.0)

Mar. 31, 2015

Othernoncurrent
assetsSep. 30, 2015(-0.2)

Mar. 31, 2015

Sep. 30, 2015

 In other current assets, trade accounts receivable declined.
 In property, plant and equipment, construction in progress in new ultrapure water supply projects rose.
 In other noncurrent assets, investments and other assets fell due to a decrease in unrealized gains on
investment securities.

9II.Consolidated Business Plan for the Fiscal
Year Ending March 31, 2016
1. Key Assumptions
2. Overview
3. Orders, Sales, Operating Income, and Operating Income Margin
4. Water Treatment Chemicals
5. Water Treatment Facilities (for the electronics industry)
6. Water Treatment Facilities (for general industries)
7. Service Business Revenue
8. Overseas Business Sales
9. Capital Expenditures, Depreciation, and R&D Expenses
10. Dividend Policy

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016

Water treatment chemicals
 Domestic customers’ capacity utilization will not
likely recover sharply.
 There is concern about the effect of a slowdown
in the Chinese economy.

Water treatment facilities Capital investment in water treatment facilities in thedomestic manufacturing industry will remain weak.
 Internationally competitive companies, both domestic
and overseas, will continue to make capital
investment.

10II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
(Billions of Yen)
Fiscal Year to
March 2015
ActualFiscal Year to
March 2016
Initial Projection

Fiscal Year to
March 2016
Projection

Year-on-Year
ChangeOrders

181.3

217.0

215.0

+18.6%Net Sales

189.4

216.0

214.0

+13.0%

Operating
Income

19.4

19.5

19.5

+0.3%

Ordinary Income

18.9

20.0

20.0

+5.6%

Profit attributable toowners of parent

10.4

12.3

12.3

+17.9%

 Orders for water treatment chemicals will rise significantly due to the acquisition effect, and orders forwater treatment facilities will also increase, especially overseas. The initial projection has been revised
downward.
 Net sales will rise from a year ago, but the initial projection has been revised downward.
 Despite an increase in SG&A expenses, operating income is expected to remain flat due to an
improvement in the cost of sales ratio and the increase in sales.
11II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016

Water treatment chemicals

Water treatment facilities

Total

*

Orders(Billions of Yen)
240

Sales
215.0

217.0

84.2

86.2

(Billions of Yen)
240

181.3
59.4
120

0

20

121.9

130.8

3/20153/2016

130.8
0

216.0

60.0

84.2

86.2

129.4

129.8

129.8

3/20153/2016

Operating Income Margin

19.4

19.5

19.5

7.9

7.0

7.7

(%)
14

13.1
10

10

0

214.0

189.4

120

Operating Income(Billions of Yen)

denotes initial projections

11.6

12.5

3/20153/2016

11.8
6

10.3
8.9

3/2015

9.6
9.1
8.3

9.1
9.0
8.9

3/201612

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
(Billions of Yen)

Orders and Sales

90

 Orders and sales will remain flat from a year ago in Japan as
customers’ capacity utilization is not likely to recover.
45

84.2

86.2

 Orders and sales will rise significantly in Europe due to theacquisition effect.

59.4
03/2015(Billions of Yen)

 Sales will continue to expand in China and Southeast Asia as
well.

3/2016

 Orders and sales in January at KEAG have not been
consolidated, and this was a main reason for the downward
revision of orders and sales.

90

45

84.2

86.2

60.0
0

3/2015(Billions of Yen)

3/2016

(%)

12

14

8.3

13.1

8.9

6

0

7

7.9

7.0

3/20153/2016

Operating income margin*

Operating Income
 Despite a rise in revenue, operating income is expected to
decline due to an increase in SG&A expenses and deteriorationin the cost of sales ratio.
 Operating income excluding that at KEAG is expected to remainroughly flat.

7.7
0 The main reason for the downward revision in the initialprojection is the effect of PPA.

denotes initial projections

13

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
(Billions of Yen)

Orders80

 Orders for hardware overseas will increase, primarily in China andSouth Korea.
40

75.0

69.3

0

3/2015(Billions of Yen)

72.2

 Of domestic orders for hardware, orders for facilities from
customers in the ultrapure water supply business will increase.
 Orders for maintenance in Japan will rise due to recovery indemand.

3/2016

Sales

80

 Sales from maintenance will rise both in Japan and overseas.
40

76.1

75.4

 Sales in the ultrapure water supply business will fall slightly as
the terms of one project will expire in the second half.

73.9

 Sales in the tool cleaning business will decline due to awithdrawal from unprofitable businesses.

03/2015(Billions of Yen)

3/2016

(%)

16

16

15.8

13.5

12.1

10.0

 Operating income is expected to rise due to an improvement in
the cost of sales ratio.

12.9
8

8

9.7
0

Operating Income

3/2015
Operating income

3/2016*0

denotes initial projections

14

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
(Billions of Yen)

Orders60

 Orders for general industries hardware will rise from a year ago,
when there were cancellations.
30

52.6

55.8

3/2015(Billions of Yen)

3/2016058.6

 Orders for general industries maintenance will increase due tothe promotion of proposals.

Sales

60

 Sales of general industries hardware will decline due to a delay inprogress in construction.
30

54.0

53.7

0

3/2015(Billions of Yen)
2.4

 Sales from general industries maintenance are expected to risedue to an increase in orders.

55.9

 Sales from soil remediation will increase, reflecting progress inconstruction.

3/2016

(%)

3.4

4

Operating Income Operating income is expected to decline due to a deterioration in
the cost of sales ratio and an increase in SG&A expenses.

1.2

2

1.8
0.0

3/2015
Operating income

*

0.8

3.2

0.4

1.8

0

3/2016denotes initial projections

15

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
Service Business Revenue
in the Water Treatment Facilities Segment

Water treatment chemicals
Water treatment facilities (services)
Water treatment facilities (hardware)*(Billions of Yen) 100.5

denotes initial projections

100(Billions of Yen)

193.8
180.1

189.4

178.1

56.1

34.8
32.4

60.0

58.8

86.2

146.4

90.3

8.5

50

8.1

94.9

96.6
96.4

32.2

8.3

31.6
31.6

Ultrapurewater supply
businessToolcleaning

6.9
6.9

154.9

150.4

91.5

31.6

9.3
180.8

157.0

100.5

0

216.0

84.2

56.4

110

90.3

214.0

220

91.5

94.9

96.6
96.4

36.7

33.6

27.7

34.5

3/20123/20133/20143/2015Servicebusiness
revenue

56.4

49.4

51.8

54.4

3/20133/20143/2015

58.1
57.9

Maintenance,
etc.

33.1
33.4

3/2016
Projection

0

3/20123/2016
Projection

 In the fiscal year ending March 31, 2016, service business revenue is expected to account for 84.5%
of total sales, reflecting increases in revenue in water treatment chemicals and maintenance.
16II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016

Sales by Region
Asia

North America

Europe*Sales by Overseas Business Segment
Other

Water treatment chemicals*

denotes initial projections(Billions of Yen)

Water treatment facilities
denotes initial projections(Billions of Yen)

66.0 66.9
4.0 3.770

66.0 66.9

70

20.3 22.3

35

0

29.3
3.0
1.4
2.3

30.5
3.0
1.2
2.3

33.6
3.3
1.3
1.8

22.5

23.9

27.2

3/20123/20133/2014

39.1
3.5
1.5
2.0

32.1

3/2015

2.6

39.1

3.2
35

42.1 43.8

33.6

29.3

30.5

11.5

12.0

15.9

17.8

18.5

17.7

21.8

3/20123/20133/20143/201517.3

39.1 37.8

3/2016
Projection

0

23.9 23.1

3/2016
Projection

 In the fiscal year ending March 31, 2016, European sales and water treatment chemicals sales are
expected to increase considerably due to the contribution of business acquisitions.
 The overseas sales ratio will climb to 31%.
17

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
Capital Expenditures and Depreciation
Capital expenditures Capital expenditures(ultrapure water(excl. ultrapure watersupply business)
supply business)*

R&D Expenses

Depreciation

R&D expenses*

denotes initial projections(Billions of Yen)

6.0

16.5

2.5

0

10

0
5.3 14.3

03/2014

2.6

2.5

5.5

5.3

(%)
3

2.3

16.5
8.5

3.0

13.0

14.4
6.0

2.8
2.5

denotes initial projections(Billions of Yen)

20.0

20

Percentage of net sales

2.5
3/201513.7 13.7

4.5

4.4

3/20143/2015

1.5

3.5

3.5
3/2016
Projection

 In the fiscal year ending March 31, 2016, capital
expenditures will exceed depreciation due to asignificant increase in capital expenditure in theultrapure water supply business.

0.0

03/2016
Projection

 In the fiscal year ending March 31, 2016,
expenses will be made to generatetechnological synergy with KEAG and toenhance the Group’s overall strength.

18

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2016
(Yen)

50

32
28

25

22
18

+4

34
+2

36
+2

38
+2

40
+2

42
+2

44
+2

46
+2

48
+2

+6

+4

+2

0

3/20053/20063/20073/20083/20093/20103/20113/20123/20133/20143/20153/2016
Projection

Basic Dividend Policy
Kurita Water Industries’ basic policy is to provide shareholders with stable dividends.
Setting a payout ratio of 30 to 50% as our target, we will continuously work to increase dividends,
making decisions based on the payout ratios for the most recent five years.
19III. Outlook for Businesses

1.

Performance at KEAG (Kurita Europe APW GmbH) (FY2015)

2.

3.

Sales Projection in Ultrapure Water Supply Business (Fiscal Year Ending
March 31, 2016)

4.

New ProjectII.Outlook for Businesses(Unit: billions of yen)

Net Sales
Operating Income(Before amortization of goodwill andtechnology-related assets)

Operating Income(After amortization of goodwill andtechnology-related assets)

Results in first half(Feb. through June)

Full-year projection(Feb. through Dec.)

Before PPA*

After PPA

Before PPA

After PPA

9.9

9.9

22.4

22.4

0.8

0.1

1.4

0.6

0.1

-0.5

-0.1

-0.8

* PPA stands for Purchase Price Allocation. It means the fair valuation of the assets and liabilities of the company acquired and the inclusion of them in the consolidated
financial statements.

 Focusing on generating synergy• Cross-selling started in the second half of FY2015• The autonomy and integration of infrastructure, including IT, and the enhancement of the internal
control system being promoted
20

II.Outlook for Businesses

Investment
amount(billions of yen)

Commencement of watersupplyLCD/Semiconductorin Japan

12.5

2nd half of fiscal year
ending March 31, 2016
to

LCD/Semiconductor
overseas

5.0

2nd half of fiscal year
ending March 31, 2017

Total

17.5

 The company will actively make investment in new customers’ projects overseas, assessing risks
involved.

21

II.Outlook for Businesses(Billions of Yen)

40

32.2

+0.7

-1.2

Acquisition of newplant contracts

Expiration ofcontracts

-0.1
Other

31.6

20

0

03/2015
Actual03/2016
Projection
22

II.Outlook for Businesses
An order for a next-generation water recycling demonstration system for Kibo, theJapanese Experiment Module of the International Space Station, received from JAXA Background Features

 Schedule

Since 2011, Kurita has conducted• A water recycling rate of 85% or more

A demonstration system will be sent to theresearch jointly with JAXA* on a water• Small, light (a quarter of the size of thewater recycling system being used in theISS**)

ISS** around FY2016, and demonstration

recycling system that will collect liquid
generated in the ISS** (urine) andgenerate usable water from it. The
company has received an order for the
production of a flight model. (Processing
capacity: 1 liter per day) Treatment process

Urine

Ion
exchange

in Kibo, the Japanese Experiment• Low power consumption (half of thepower consumption of the existing
system)Module.

• Maintenance free (resin replacement is
not needed)

HydrogenCarbon dioxide

Electrolysis

Gas-liquid
separation
membraneElectrodialysis

AlkaliWaste
liquidexperiments will be conducted by JAXA*

Treatedwater

Exterior
appearance

Acid

Concentrated water
Inside* The Japan Aerospace Exploration Agency, a National Research and Development Agency** The International Space Station

23

Reference Material(Unit: billions of yen)

+2.3
+2.9
8.6

Impact ofincrease inrevenue

Effect ofchange incost ofsales ratio

-4.8
+0.2
Increasein SG&A
expenses

Combinedfactors

9/20149.1

9/2015

Note: The effect of change in the cost of sales ratio is calculated using the gross profit margin.
24

■URL■

http://ir.kurita.co.jp/■ M AI L ■ir@kurita.co.jp

Forward-looking Statements
This presentation 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 risk factors
and uncertainties, actual results may differ from those specified or implied by these forward-looking
statements and projections.