Kurita Water Industries Ltd.

Presentation on
Financial Results for the Six Months Ended September 30, 2003

November 12, 2003

Financial Results for the Six Months Ended
September 30, 2003

1

Financial Highlights
For the Six Months Ended September 30
2002(Billions of Yen)

Change inA m ount

2003

Orders

68.0

78.2

10.2

Net sales

61.7

64.6

2.9

Operating incom e

4.3

4.2

-0.1

Ordinary income

4.6

4.4

-0.2

Net incom e

2.2

2.4

0.2

Orders and net sales rose, mainly owing to an increase in ultrapure water production
systems for the domestic electronics industry and the inclusion of newly consolidatedsubsidiaries.
Operating income and ordinary income declined, mainly owing to higher selling, general andadministrative (SG&A) expenses, including personnel expenses.
2Orders
For the Six Months Ended September 30(Billions of Yen)

80
Water Treatment Chemicals

70

78.2

68.0
24.2

60
Water Treatment Facilities
for the Electronics Industry

40
Water Treatment Facilities
for General Industry

23.0
15.2

30
20

Water Treatment Facilities
for the Public Sector

23.8

50

100

14.7

54.0
44.2

12.8

14.3

18.2

2002

2003

Growth in orders from the domestic electronics industry for ultrapure water production
systems
Weak orders from the electric power industry and general industry for water treatment
facilities
Strong orders from the public sector for human waste treatment facilities3

Net Sales
For the Six Months Ended September 30
70
Water Treatment Chemicals

Water Treatment Facilities
for the Electronics Industry

60(Billions of Yen)

64.6

61.7

23.7

23.2

50
40

Water Treatment Facilities
for General Industry

30

Water Treatment Facilities
for the Public Sector

1040.9

38.5

200

18.6

16.5
14.3

15.3

7.7

7.0

2002

2003

Growth in sales to the pulp and paper industry, sales of incinerator chemicals and contractbased services contributed to an increase in sales of water treatment chemicals.
Water treatment facilities, maintenance services and tool cleaning services for the domestic
electronics industry all recorded sales increases.
Sales to general industry rose mainly as a result of the inclusion of a newly consolidated
subsidiary, Land Solution Inc.
4Operating Income
For the Six Months Ended September 30
5.0
Water Treatment Chemicals(Billions of Yen)

4.3

4.2

4.0

3.6
Water Treatment Facilities
for the Electronics Industry3.3

3.0
2.0

Water Treatment Facilities
for General Industry
Water Treatment Facilities
for the Public Sector

1.0
0.0-1.0

1.1
0.2-0.6
2002

1.3

0.7

0.4

0.9-0.8
2003

Operating income for water treatment chemicals fell, mainly owing to (1) an unusually coolsummer over most of Japan, which led to lower sales of cooling water treatment chemicals,and (2) a rise in operating expenses.
The rise in sales of water treatment facilities to the electronics industry outweighed anincrease in expenses, leading to higher operating income in this category.
In water treatment facilities for general industry, the extent of operating income
increase―based on higher sales―was less than the rise initially projected.
5

Actual Results versus Projections
For the Six Months Ended September 30, 2003
A c tual Result(Billions of Yen)

D iffe r e n c eb e t w e e n R e s u lts
and P rojection

P rojection

O rders

7 8 .27 6 .4

1 .8

N e t sales

6 4 .6

6 4 .30 .3

O p e rating incom e

4 .2

4 .5

- 0 .3O rdinary incom e

4 .4

4 .6

- 0 .2N e t incom e2 .4

2 .7- 0 .3

Owing mainly to a cool summer in Japan and higher operating expenses, results in water
treatment chemicals were lower than our projections.
Both orders and sales of water treatment facilities to the electronics industry exceeded
projections, and operating income was at the level projected.
Although results for water treatment facilities for general industry were lower than thoseprojected, orders for water treatment facilities from the public sector were strong.
6Outlook for the Full Year Ending March 31, 2004

7

Summary of Business Performance
during the Six Months Ended September 30, 2003

A recovery in plant and equipment investment in thedomestic semiconductor industry bolstered performance.
Efforts by water treatment chemicals to closely cater tocustomer needs, as well as the integrated approach of our
new Eco-Solution Group, yielded positive results.
There was a recovery in orders from the public sector.

8

Projections for the Full Year Ending March 31, 2004

(Billions of Yen)

For the Year Ended
March 31, 2003

Projection for the YearEnding March 31, 2004

For the Six Months Ended
September 30, 2003

Orders

128.4

149.8

78.2

Net sales

141.6

147.5

64.6

Operating income

12.3

13.0

4.2

Ordinary income

12.4

13.3

4.4

Net income

5.5

7.7

2.4

9

Projections by Segment for the Full YearEnding March 31, 2004
160
140
120
10080
60
40
200

Orders by Segment

Sales by Segment

For the Years Ended or Ending March 31(Billions of Yen)
149.8

For the Years Ended or Ending March 31(Billions of Yen)
147.5

128.4
48.3
46.4
45.5

31.4
28.9

82.0

101.5

31.6

21.7

24.4

2003

2004

160
140
120
100
80
60
40
200

141.6

48.3
47.1
42.8

36.7

94.5

33.1

99.2

31.6

24.7

24.8

2003

2004

Operating Income by SegmentFor the Years Ended or Ending March 31(Billions of Yen)
1412

Water Treatment Chemicals

13.0

12.3
6.5

10

6.5

8- 0 . 8
1 .3- 0 . 6

64

2.82

1.4
1.6

0

Water Treatment Facilities
for the Electronics Industry

2003

3.6

5.8

1.2
1.7

2004

6.5

0.4

Water Treatment Facilities
for General Industry
Water Treatment Facilities
for the Public Sector

10Measures to Ensure Projections for the Full Year
to March 31, 2004, are Reached (1)Water Treatment Chemicals

Plant A

Plant B
Plant C

Meeting customers’ cost-reduction needs through multiple-plant supply contractsProviding new systems to meet needs in the areas of energy conservation and CO2 reduction
Promoting the switch to higher value-added products
11Measures to Ensure Projections for the Full Year
to March 31, 2004, are Reached (2)Water Treatment Facilities

Facilities used in the electronics industry
Functional water production equipment

Orders are expected to remain strong from the domestic semiconductor industry and theoverseas liquid crystal display (LCD) industry.
In the ultrapure water supply business, we expect to have a total of one overseas contract
and two domestic contracts by the end of the current fiscal year.
Overseas maintenance services are growing.
12Measures to Ensure Projections for the Full Year
to March 31, 2004, are Reached (3)Soil remediation (assessment)

Water treatment facilities (for general industry)

Membrane filtration system (for the public sector)

Bolstering our ability to meet customer needs in the areas of cost reduction and lower
environmental impact
Expanding the soil remediation business
Securing orders from the public sector through expanded sales of our own distinctive
systems and products
13Realizing Our Goals under the PA-5
Medium-Term Management Plan

14

Medium-Term Management Plan
Powerful Advance 2005 (PA-5)
Performance Goals of Three-Year Plan
Kurita Group Consolidated Performance(Projections for the Year Ending March 31, 2006)(Billions of Yen)

Net sales

175.0 （7.3% CAGR*)

Operating income

20.0 （17.6% CAGR)

Net income

11.5 （27.9% CAGR)* CAGR = Compound Average Growth Rate
15

Medium-Term Management Plan
Powerful Advance 2005 (PA-5)
Sales by Segment(For the Years Ended or Ending March 31)(Billions of Yen)
200

175.0180160

141.6147.5140120
Water Treatment Chemicals

47.1

55.0

48.310080

Water Treatment Facilities

6040

94.5

99.2

120.0

200
2003 (Actual)

2004 (Projected) 2005 (Projected) 2006 (Projected)

16

Medium-Term Management Plan
Powerful Advance 2005 (PA-5)
Operating Income by Segment(For the Years Ended or Ending March 31)(Billions of Yen)

(%)
2025

17.3

20.0

20

Water Treatment Chemicals

13.8

13.5

12.3

13.0

8.7

8.8

10
Operating Income Ratio :Water Treatment Chemicals
Operating Income Ratio :Total
Operating Income Ratio :Water Treatment Facilities

1614

11.4

15

Water Treatment Facilities

189.5

108.8

8

6.5

6.5

66.6

6.1

10.5

5

5.8

126.54200
2003 (Actual)

2004 (Projected)

2005 (Projected)

2006 (Projected)

17Strategies for Realizing Our Goals under the PA-5
Medium-Term Management Plan (1)Implementing Strategies That Utilize Synergies Among Our Businesses
Kurita Group
Water Treatment
Chemicals

Water Treatment
Facilities

New Business Model
Business Solutions
Cost
Reductions

Maintenance
Services

Reducing
Environmental
ImpactExpanding Business Scope and Acquiring New Customers
18Strategies for Realizing Our Goals under the PA-5
Medium-Term Management Plan (2)Overseas Expansion

Increasing our competitive advantage by applying
new business models
Expanding our business, mainly focusing on Asia
Where appropriate, strategies may include
localizing management and merger & acquisition(M&A) transactions.

19Strategies for Realizing Our Goals under the PA-5
Medium-Term Management Plan (Summary)

Bolster our domestic market position by utilizing strategies
based on the synergies among Kurita’s various businesses
Apply the business models developed in Japan to overseas
markets to expand our businesses
Enter new businesses by leveraging our accumulated knowhow in the water and environmental management field

20