FOR IMMEDIATE RELEASE
Kurita Water Industries Reports Earnings for the First Half Ended September, 2004
Tokyo Japan November 4, 2004—Kurita Water Industries Ltd. (TSE Security Code 6370) announced
revenue for the first half ended September 2004 of 71,170 million yen and net income of 3,834 million yen,or 29.82 yen per share.

Summary of Operating Results
Total consolidated orders for the Kurita Group increased 8.3% over the same period a year earlier to84,651 million yen, while net sales increased 10.2% to 71,170 million yen. As a result, operating income
increased 52.5% over the previous first half to 6,438 million, while ordinary income increased 52.7% to
6,759 million yen. Net income for the period grew 58.8% to 3,834 million yen.
The operating environment as a whole during the period was characterized by strong water treatment
facilities demand from the electronics industry centering on Japan, Taiwan and South Korea. Outside theelectronics industry, overall factory operating ratios and capital investment also improved, but the
improvement was not sufficient enough to have a significant impact on Group financial performance. Thus
the major external factors contributing to first-half results were the general economic recovery, water
treatment-related customer demand, ongoing cost reduction efforts, and competition with other companies.
By segment, recovering production volumes and factory operating ratios among the Japanese corporations
supported revenue growth and improved profitability in the water treatment chemicals business, while
there was a noticeable recovery in revenues and particularly profitability for the water treatment facilities
business, supported by strong demand from the electronics industry.
Reflecting business performance for the period, the outlook for the full fiscal year, and the Group’s policyof maintaining a stable dividend payout, the Company has decided to reward its shareholders for theirsupport by raising its dividend by ¥1 to ¥9 per share.

Segment Information
Water Treatment Chemicals
Total Group orders for the segment increased by 8.4% in the first half to 26,246 million yen. Sales grew
4.7% over the first half of the previous year to 24,760 million yen, resulting in a 20.7% increase inoperating profits to 3,951 million yen.
Overall business conditions improved on a general recovery in industrial production and higher factory
operating ratios, while an unusually hot summer boosted consumption of water treatment chemicals.
However, there was little room for optimism as customers continued their efforts to achieve further cost
reductions, and competition continued to intensify. Given the circumstances, the company worked to fully
leverage its client relationships and to provide direct solutions to customer problems such as enhancing
productivity, while actively working to develop Kurita’s unique business model, which provides integrated
water processing management.
Orders for the Group’s mainstay boiler water treatment chemicals and waste water treatment chemicals
were basically flat from the previous year, while orders for cooling water treatment chemical increased. On
the other hand, growth was seen in orders for other products such as process chemicals used in the paper
and pulp industry, agents for solidifying heavy metal contained in waste incineration fly ash, and related
maintenance and services.

Water Treatment Facilities
Total Group orders for the segment were 8.2% higher than the first half of the previous fiscal year at
58,404 million yen, while sales increased 13.4% to 46,409 million yen, and operating profits
increased195.7% to 2,493 million yen.
Private sector demand continued strong during the period, driven by ongoing large- scale capital
expenditures in the electronics industries for the production of semiconductors, liquid crystal displays andrelated components in Japan, Taiwan and South Korea. In addition, a recovery was also seen outside theelectronics industry as growth in corporate profits supported a recovery in capital expenditures. In order tofully leverage the improved operating environment, the Group worked to strengthen its solutions-based
marketing and to concentrate on order growth through focused marketing to key customers. The Groupalso focused on sales of ready-made facilities to enhance Group productivity and further reduce costs inorder to maximize profitability.
On the other hand, public sector demand remained depressed because of continued declines in public
works

expenditures.

Given

the

severebusinessconditions,

the

Group

switched

fromaproduct-differentiated marketing strategy to a regionally-based marketing strategy, and endeavored tofurther strengthen its regionally-focused customer relationships, while further strengthening internal
collaboration between Group companies in order to ensure order flow.

Public sector orders as a whole were also negatively affected by the absence of large orders seen in theprevious year for human waste treatment facilities, while orders for sewage treatment facilities were flatfrom the first half of last year.

Outlook for the Year Ending March 2005
For the full fiscal year to March 2005, the Group has not changed its forecasts of 161,800 million yen insales and 10,000 million yen in net income, which were released on July 29, 2004. The 17,400 million yen
forecast for ordinary income however has been revised upward by 300 million yen to 17,700 million yen.
While the Group believes that Japan’s economy will continue to grow supported by strong capital
expenditures and factory operating ratios, the impact on corporate profits from sharp rises in crude oil andother basic material prices is a concern.

Outlook by Segment
Water Treatment Chemicals
In water treatment chemicals, the trend in factory operating ratios has a direct impact on orders and sales.
While a major decline in factory operating ratios is unlikely for the foreseeable future, the Group’s
customers will pursue further cost cuts. In response, the Group aims to ensure order growth with; a) the
development of new products that meet customer needs for reduced utility cost, a lower burden fromenvironmental countermeasures, and increased productivity, and b) expansion of its contract businesses
such as management services related to water treatment. At the same time, the Group will review andpursue further cost rationalization of its own in basic materials, distribution and production processes inorder to ensure profitability.

Water Treatment Facilities
In water treatment facilities, the strong private sector demand seen to date in electronics-related industries
is expected to continue, while we do not expect to see a significant recovery in the food, pharmaceuticaland basic material industries, or in the electric power segment. Consequently, the Group will focus on
applying its proprietary technologies and products in further developing and strengthening its “solutions”
and “outsourcing” business models to ensure order and profit growth.
Public sector-related demand continues to be plagued by shrinking national and prefectural budgets andpublic works investment, and we expect no improvement in the currently severe operating environment for
the foreseeable future. In response, the Group will exert every effort to ensure order flow through focusedsales efforts to gain orders for the upgrading and renewal of human waste treatment facilities and resource
recycling, leveraging its proprietary technology and solutions-based marketing.

Medium- and Long-Term Management Strategies
As the Group is now midway through its “PA-5” medium-term management plan, every employee in the
Kurita Group is pulling together as the Company exerts every effort to achieve the goals outlined in thisplan. Specifically, the Group is focusing on the following strategies.
1) The Group is accelerating its “offensive” business development both in Japan and overseas, including
a solutions-based model for its water treatment business and an outsourcing model for businesses suchas ultra pure water supply. During the first half of the current fiscal year, the Group’s offensive
business development efforts included the conversion of sales agencies in Oita Prefecture andHokkaido into fully-owned subsidiaries. In China, Kurita continues to expand its presence, following
the establishment of Kurita Water Industries (Dalian) Co., Ltd. for the local manufacture of water
treatment chemicals, and Kuritec (Shanghai) Co., Ltd. for sales and maintenance of water treatment
facilities. In September 2004, Kurita Water Industries (Suzhou) Ltd. began operations to locallymanufacture water treatment facilities. With the third company, the Group now has a fully integrated
business in China, including the manufacture, sales and maintenance of both water treatment
chemicals and facilities, meaning it can now more aggressively pursue business development,leveraging its collective strengths with a solutions-based focus.
2) The Group is also working to strengthen its ability to improve profitability, develop new products andestablish new businesses under the “solutions” and “outsourcing”

business models. The foundations

for the Group’s unique business models continue to broaden and strengthen amidst tighter cost
controls and ongoing efforts to improve profitability in the ultra pure water supply business, in annual
maintenance and service contracts, and in solutions-based contract businesses. In addition, the Groupis also focusing on developing new water treatment chemicals as well as water treatment facilities andsystems that will drive future growth. For example, development of water treatment systems for fuelcell and hydrogen fueling station has reached the experimental stage. To accelerate productcommercialization efforts, the “Corporate Research & Development Center” has been combined withanother research group into the “Business & Technology Development Center” that will cover thewhole R&D spectrum, from basic research to new product development and commercialization.
3) Finally, the Group will continue its pursuit of overall cost reductions and enhanced profitability. The
Group continues to restructure and rationalize its water treatment chemical production processes anddistribution network in response to changes in the marketplace by converting to lower cost basic
materials and by consolidating production facilities to achieve greater economies of scale and reduce
costs. In addition, the Group continues to pursue lower costs through standardized production of water
treatment facilities that will also result in better product quality, as well as more efficient design,
production and installation.

Cash Flow Trends
For the first half ended September 2004, cash and cash equivalents were 41,437 million yen, and 6,300
million yen or 17.9% higher than the end of March 2004.
Operating cash inflows were 9,172 million yen, compared to a cash inflow of 1,794 million yen in the firsthalf of the previous fiscal year, and 5,574 million yen for the previous fiscal year to March 2004. The cash
inflow was largely attributable to pretax profits of 6,759 million yen, depreciation expenses of 2,019
million yen, and a 11,910 million yen decline in notes and accounts receivable. The major items
representing cash outflows were a 3,872 million yen increase in inventories, a 4,763 million yen decline innotes and accounts payable, and a income tax payment of 3,591 million yen.
The cash outflow from investing activities was 1,820 million, compared to 573 million yen outflow the
first half of the previous year, and an outflow of 146 million yen for the previous fiscal year. While theredemption of marketable securities represented a cash inflow of 3,320 million yen, this was offset bypurchases of fixed assets of 2,984 million yen, additions to time deposits of 1,312 million yen and 999
million yen of new purchases of marketable securities.
Cash outflows from financing activities were 1,050 million yen, compared to a cash outflow of 1,039
million yen in the first half of the previous fiscal year, and an outflow of 1,720 million yen in the previous
fiscal year. The main source of the cash outflow was dividend payments of 1,027 million yen.

About the Kurita GroupThe Kurita Group provides a wide range of products, technologies and maintenance services related towater treatment. The two core lines of the Group’s business consist of; 1) water treatment chemicals used
for boiler water, cooling water, waste water and in manufacturing processes; and 2) water treatment
facilities such as ultra-pure water systems, waste water treatment facilities and sewage water treatment
facilities. The business scope of both lines includes production, sales and maintenance services. For
additional information about the Kurita Group, please visit the Company’s web page at www.kurita.co.jp.

Except for the historical information contained herein, matters discussed in this news release may containforward-looking statements that involve risks and uncertainties, including but not limited to factory
operating ratios in major client industries such as steel, petroleum and paper/pulp; capital expenditure
trends in the electronics, food, pharmaceuticals, basic materials and automobile industries; and thefinancial condition and budgeting actions of national and local governments in Japan.

KURITA WATER INDUSTRIES, LTD.
CONSOLIDATED STATEMENTS OF INCOME(in million yen)First half ended
September 30, 2004

71,17048,04023,130

% of
Net
sales
100.0
67.5
32.5

16,692
6,438
567
245
6,759
-

AmountNet sales
Cost of sales
Gross profit
Selling, general andadministrative expenses
Operating Income
Non-operating income
Non-operating expense
Ordinary income
Special gains
Gain on sale of fixed Assets
Gain on sale of investment
securities
Special Losses
Loss on revaluation of fixed
assetsIncome before income taxes
Income taxes
Minority interests in earningsof consolidated subsidiaries
Net income

64,581
43,637
20,943

% of
Net
sales
100.0
67.6
32.4

23.5

16,720

9.0
0.8
0.3
9.5
-

4,223
465
262
4,426
-

-

First half ended
September 30, 2003

Amount--Increase/
Decrease overpreviousinterim period

146,819
101,433
45,386

% of
Net
sales
100.0
69.1
30.9

25.9

31,895

21.7

(28)

6.5
0.7
0.4
6.8
-

13,4901,034
586
13,938
1,479
64

9.2
0.7
0.4
9.5
1.0

2,215
102
(17)
2,333
-

-

Fiscal year ended
March 31, 2004

Amount

1,414
-

-

499

Amount
6,589
4,403
2,187

0.3

499

-

6,759
2,849

9.5
4.0

4,426
1,932

6.8
3.0

14,918
6,347

10.2
4.3

2,333
917

76

0.1

79

0.1

126

0.1

(3)

3,834

5.4

2,414

3.7

8,444

5.8

1,420

CONSOLIDATED STATEMENTS OF ADDITIONAL PAID-IN CAPITAL AND RETAINED EARNINGS(unit: Millions of yen)

<Additional Paid-in Capital>
Balance, beginning of period
Increase in additional paid-in capital
Increase in additional paid-in capital
due to stock exchange
Balance, end of period<Retained Earnings>
Balance, beginning of period
Increase in retained earnings
Net income
Effect of increase in affiliates towhich equity method is applicable
Withdrawal of revaluation surplusof landDecrease in Retained Earnings
Dividends
Bonus for directors and corporate
auditors
Other
Balance, end of period

Increase/
Decrease overpreviousinterim period

First half ended
September 30,
2004

First half ended
September 30,
2003

11,398
11

11,398-

11,398
-

11

11

-

-

11

11,40911,398

11,398

11

108,180
3,927
3,834

101,637
2,414
2,414

101,637
8,722
8,444

6,543
1,513
1,420

93

-

-

93

-

-

278

-

1,174
1,028

1,149
1,028

2,179
2,058

25
0

141

118

118

23

4
110,933

3
102,901

3
108,180

1
8,032

Fiscal year ended
March 31, 2004

CONSOLIDATED BALANCE SHEET(in million yen)

<Assets >Current assets
Cash and deposits
Notes receivable - trade
Accounts receivable - tradeMarketable securities
Inventories
Deferred tax assets
Other
Allowance for doubtful
accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings and structures
Machinery, equipment andvehiclesLand
Construction in progress
Other
Intangible fixed assets
Software
Other
Investments and other assets
Investment securities
Shares of unconsolidated,subsidiaries and affiliates
and investment in partnership
Deferred tax assets
Deferred tax assets byrevaluation
Other
Allowance for doubtful
accounts
Total fixed assets
Total assets

As of
September 30,
2004

As of
September 30,
2003

As of
March 31, 2004

41,914
10,03644,907
5,202
10,571
2,104
1,220

32,230
10,576
41,768
7,296
7,978
1,803
1,065

(129)

Increase/decrease over
Sept. 30,
2003

Mar. 31,
2004

35,512
10,60756,074
6,720
6,713
2,070
1,365

9,684
(540)
3,139
(2,094)
2,593
301
155

6,402
(571)
(11,167)(1,518)
3,858
34
(145)

(134)

(140)

5

11

115,827

102,585

118,923

13,242(3,096)

42,835
14,866

41,20815,352

41,671
14,969

1,627
(486)

1,164
(103)

9,974

7,664

9,325

2,310

649

14,376
1,271
2,346
3,298
2,235
1,063
19,691
11,87815,039
659
2,491
2,872
2,345
526
22,357
15,367

14,346
539
2,490
3,347
2,344
1,002
19,67813,253

(663)
612
(145)
426
(110)
537
(2,666)(3,489)

30
732
(144)
(49)
(109)
61
13
(1,375)

2,428

1,901

2,025

527

403

2,273

2,957

2,121

(684)

152

176

-

176

176

-

3,084

2,272

2,242

812

842

(149)

(141)

(141)

(8)

(8)

65,826
181,653

66,437
169,023

64,697
183,620(611)
12,6301,129(1,967)

< Liabilities >Current liabilities
Notes payable - trade
Accounts payable - trade
Short-term borrowings
Outstanding payments/
expenses
Income taxes payable
Advances received
Accrued employees’ bonuses
Allowance for product warranty
Other
Total current liabilities
Fixed liabilities
Long-term debt
Accrued employees’
retirement benefits
Accrued retirement benefits
for directors and corporate
auditors
Deferred tax liabilities byrevaluation
Other
Total fixed liabilities
Total liabilities<Minority Interests >Minority Interests<Shareholders’ Equity >Common Stock
Additional paid-in capital
Retained earnings
Unrealized losses(gains) onrevaluation of land
Unrealized holding gains onother securities
Foreign currency translation
adjustments
Treasury stock
Total shareholders’ equity
Total liabilities, minority
interests and shareholders’equityAs of
September 30,
2004

As of
September 30,
2003

As of
March 31, 2004

2,494
20,52279

1,913
17,182
3

1,371
25,517
48

581
3,340
76

1,123
(4,995)
31

5,290

5,059

7,128

231

(1,838)

2,853
2,904
2,613
1,058
710
38,526

1,807
1,836
2,739
882
419
31,844

3,593
1,373
2,173
1,028
718
42,954

1,046
1,068
(126)
176
291
6,682

(740)
1,531
440
30
(8)
(4,428)

292

35

349

257

(57)

9,107

10,855

9,149(1,748)

(42)

623

556

658

67

(35)

-

13

-

(13)

-

827
10,85049,376789
12,25044,094800
10,95853,91238(1,400)
5,282

27
(108)
(4,536)

1,066

1,066

1,031

-

35

13,45011,409110,933

13,450
11,398102,901

13,450
11,398108,180

11
8,032

11
2,753

(257)

20

(257)

(277)

-

1,366

1,473

1,625

(107)

(259)

(868)

(494)

(829)

(374)

(39)

(4,823)
131,210(4,888)123,862(4,890)128,676

65
7,348

67
2,534

181,653

169,023

183,620

12,630(1,967)

Increase/decrease over
Sept. 30,
Mar. 31,
2003
2004

CONSOLIDATED STATEMENTS OF CASH FLOWS(in million yen)First half ended
September 30,
2004

First half ended
September 30,
2003

6,759
2,019
0

4,426
1,774
-

14,918
3,872
(2)

(129)

(63)

(208)

(43)

(614)

(2,317)

(4)

66

73

434
(202)
(182)
17
204

362
(232)
(166)
7
188

45
(409)
(402)
27
354

-

-

(1,414)--499

Fiscal year ended
March 31, 2004

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of consolidation goodwill
Equity in earnings of unconsolidated subsidiaries
and affiliates
Decrease in accrued employees’ retirement benefits
Increase(Decrease) in allowance for doubtful
accounts
Increase in other allowanceInterest and dividend income
Other non-operating income
Interest expense
Other non-operating expense and special loss
Gain/Loss on sale/revaluation of investment
securities
Loss on revaluation of tangible fixed assets(Gain)Loss on sale and disposal of tangible fixed
assetsIncrease(Decrease) in accounts receivables, trade
Increase in inventories
Increase(Decrease) in other current assets
Increase(Decrease) in accounts payable, trade
Increase in advances received
Increase(Decrease) in other current liabilities
Bonuses paid to directors and corporate auditors
Other
Sub totalInterest and dividend received
Other non-operating income received
Interest paid
Other non-operating expenses paid
Income taxes paid
Net cash provided by operating activities

0

3

(57)

11,910(3,872)
211(4,763)
1,531(1,258)(80)
22
12,573
261
173
(16)
(227)
(3,591)
9,172

7,270
(1,649)14(6,115)868(1,091)
(62)
(6)
4,981
278
172
(6)
(162)
(3,467)
1,794(7,202)
(442)
(327)
2,995
409
636
(118)
(1)
10,927
482
408
(27)
(388)
(5,829)5,574

Cash flows from investing activities
Increase in time deposits
Decrease in time deposits
Payments for purchase of marketable securities
Proceeds from sale of marketable securities
Payments for purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Payments for purchase of investment securities
Proceeds from sale of investment securities
Other expenses
Other
Net cash used in investing activities(1,312)
218
(999)
3,320
(2,984)
162
(136)
152
(579)
337
(1,820)

(262)
157
3,723
(4,207)
103
(6)
200
(610)
328
(573)

(507)
431
(200)
6,695
(8,364)
1,183(2,212)
3,992(1,642)
476(146)

Cash flows from financing activities
Proceeds from of long-term debt
Repayment of long-term debt
Net amount from purchase and sale of treasury
stock
Dividends paid (including dividends paid tominority stockholders)
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Increase(Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents of newly consolidated
subsidiaries, beginning of period
Cash and cash equivalents, end of period

First half ended
September 30,
2004

First half ended
September 30,
2003

39
(59)

(8)

358
(12)

(2)

(2)

(4)

(1,027)(1,028)(2,089)(1,050)(1,039)28(1,720)

(2)

56

(127)

6,229
35,137239
31,5073,580
31,507-50

50

41,43731,79635,137

Fiscal year ended
March 31, 2004