Kurita Water Industries Ltd.

Presentation on
Financial Results for the Fiscal Year Ended March 31, 2004
May 14, 2004

Contents
Business Performance for the Year Ended March 31, 2004
Business Developments
Operating Performance Highlights
OrdersNet Sales
Analysis of Change in Operating Income
Analysis of Change in Ordinary and Net Income
Financial Position
Cash Flow
Summary of Business Performance
Business Plan for the Year Ending March 31, 2005
Assumptions of the Business Plan
Summary of the Business Plan
Main Points of the Business Plan (1)Main Points of the Business Plan (2)Main Points of the Business Plan (3)Main Points of the Business Plan (4)Analysis of Change in Operating Income Projected in the Business Plan
Capital Expenditures and R&D Expenses
Progress of the Medium-Term Management Plan Powerful Advance 2005 (PA-5)
Strategy for Achieving the Goals of PA-5
Sales by Segment
Operating Income by Segment

123
4
5
6
7
8
910
1112
13
14
15
16
17
18
19
20
21
22
23

Business Performance for the Year Ended March 31, 2004

1

Business Developments
Expanding the scope of Kurita’s business through the development ofa new business model
T Established the Eco-Solution Group to strengthen our solutions business
T Commenced the ultrapure water supply business in the Japanese market
T Established two new subsidiaries: Kurita Analysis Service Co. Ltd. and Kuritec
Service Co. Ltd.

Overseas business expansion
T Acquired the petroleum processing chemicals business from PITCO of Belgium
T Established the China Project Team with the aim of expanding our water treatment
chemicals business in China

T Established a water treatment facilities manufacturing plant in China and a sales
office in Taiwan

Entry into new business
T Participation in Japan’s government-mandated fuel cell project2

Operating Performance Highlights
Fiscal years ended March 312003(Actual)(Billions of yen)2004(Projected)

2004(Actual)Change versus projected

Change versus previousyear

AmountAmountPercentage

Percentage

Orders

128.4

149.8

149.7

－0.1－0.0%+21.3+16.6%Net sales

141.6

147.5

146.8

－0.7

－0.5%

+5.2

+3.7%

Operating income

12.3

13.0

13.5

+0.5

+3.8%

+1.2

+9.6%

Ordinary income(keijo rieki)

12.4

13.3

13.9

+0.6

+4.8%

+1.5

+12.4%Net income

5.5

7.7

8.4

+0.7

+9.7%

+3.0

+54.2%TT
T

Growth in water treatment facilities for the electronics industry helped to offset falls inother sectors, leading to orders and net sales on par with projected levels
Gross profit margin exceeded projections and selling, general and administrative (SG&A)
expenses fell, leading to higher operating income than projected
A gain on sale of marketable securities led to higher net income than projected
3Orders
T Orders of water treatment facilities for the electronics industry were ahead of projections,mainly owing to robust plant and equipment investment activity in JapanT Orders of water treatment facilities for general industry were lower compared with theprevious period, largely as a result of sluggish plant and equipment investment in Japan
T Within water treatment facilities for the public sector, orders of human waste treatment
facilities were strong
Fiscal years ended March 31(Billions of yen)

160

128.4
Water treatment chemicals

Wate
Waterr tre
atmen t fac
ilities:treatment
facilities:
For the electronics industry
Wate
Waterr tre
atmen t fac
ilities:treatment
facilities:
For general industry

120

80

40

Wate
Waterr tre
atmen t fac
ilities:treatment
facilities:
For the public sector

0149.7

149.8

47.5

48.3
46.4102.2

45.5 101.5

49.4

28.9

31.6

27.8

21.7

24.4

25

2003 (actual)

2004 (projected)

2004 (actual)31.4 82.0

4

Net Sales
T In the water treatment chemicals business, management services related to water treatment
and incinerator chemicals grew; however, the segment’s overall results fell short of projections

T Water treatment facilities for the electronics industry grew strongly in the Japanese market,
offsetting falls in other sectors

Fiscal years ended March 31 (Billions of yen)
160

Water treatment chemicals

Water treatment facilities: For
the electronics industry

147.5141.6

120

47.1

146.8

48.3

47.4

99.2

45.1 99.4

80

36.7

40

33.1

31.6

30.2

24.7

24.8

24.1

2003 (actual)

2004 (projected)

2004 (actual)

Water treatment facilities: For
general industry

94.5

42.8

Water treatment facilities: For
the public sector

05

Analysis of Change in Operating Income
Fiscal years ended March 31(Billions of yen)
2003 (Actual)

2004 (Actual)

12.3

Operating income

Amount change

13.5

Percentagechange+1.2+9.6%(Billions of yen)

2
2.0

1.2
1.6

10-0.4-1-1.9-2
Changes in price and Reduced costgross profit marginof sales

Volume-based and other Change in SG&A
increases in net sales
expenses

Net change inoperating
income6

Analysis of Change in Ordinary and Net Income(Billions of yen)

Fiscal years ended March 31
2004 (Actual)

2003 (Actual)

Ordinary income (keijo rieki)

12.4

Amount change

13.9

+1.5

Percentagechange+12.4%

Main items included in ¥450 million in non-operating income:T Interest and dividend income of ¥400 million and equity in earnings of unconsolidated

subsidiaries and affiliates of ¥200 million
T Foreign exchange losses of ¥150 million
2003 (Actual)

Net income(Billions of yen)
2004 (Actual)

5.5

Amount change

8.4+3.0

Percentagechange+54.2%

Main items included in ¥1.0 billion in special income, net:
T Gain on sale of investment in securities of ¥1.5 billion
T Loss on write-down of fixed assets of ¥0.5 billion
Note: In the fiscal year ended March 31, 2003, special loss principally comprised amortization of unrecognized effect ofchange in accounting for employees’ retirement benefit of ¥1.2 billion and loss on write-down of investment in securities of¥800 million

7

Financial Position(Billions of yen)

As of March 312003

2004

Amount change

Total current assets

107.2

118.9+11.7

Total fixed assets

66.5

64.7

－1.8

Total assets

173.7

183.6

+9.9

Total liabilities

51.8

53.9

+2.1

Total shareholders’ equity

121.0

128.7

+7.7

T The increase in total current assets was mainly attributable to a ¥7.0 billion rise in tradereceivables, owing to robust sales toward the end of the period and the redemption ofmarketable securities
T Investments and long-term receivables fell as a result of the shift of ¥6.7 billion in
investment in securities to marketable securities, which is part of current assets
T Assets related to the ultrapure water supply business increased despite a decline in total
fixed assets

8Cash Flow
(Billions of yen)

Fiscal years ended March 31
2003

Amountchange

2004

Net cash provided by operating activities

10.4

5.6－4.8

Net cash used in investing activities

－7.0

－0.1

+6.9

Net cash used in financing activities－6.3－1.7+4.6

Change in cash and cash equivalents－2.9

3.6+6.5

Cash and cash equivalents at beginning of year

33.0

31.5

－1.5

Cash and cash equivalents at end of year

31.5

35.1

+3.6

T Net income rose, but this was offset by an increase in trade receivables and an increase inincome tax paid, leading to lower net cash provided by operations
T Despite higher payments for property, plant and equipment related to the ultrapure watersupply business, net proceeds from sales of marketable securities and investment insecurities led to significantly reduced net cash used in investing activities
T Net cash used in financing activities fell, mainly owing to the absence of payments forpurchase of treasury stock, net, which had been present in the previous period
9Summary of Business Performance
T The water treatment chemicals business only achieved modest growth in a challenging
business environment. Results were bolstered, however, by a shift to high-margin products
and growth in incinerator chemicals. We also strengthened our solutions business

T In the area of water treatment facilities for the electronics industry, growth was underpinnedby brisk plant and equipment investment activity and high capacity utilization among ourcustomers. Facilities, maintenance services and tool cleaning services all grew

T In the area of water treatment facilities for general industry, sluggish domestic plant andequipment investment activity constrained our performance, but our new Eco-Solution
Group actively promoted solutions-based businesses

T In the area of water treatment facilities for the public sector, orders were steady
T The development of overseas business is expected to contribute to results from the next period
10Business Plan for the Year Ending March 31, 2005

11

Assumptions of the Business PlanMarket Outlook
Water treatment chemicals
T Continuing strong demand for incinerator chemicals
T Japanese firms’ investments in China are expected to continue
T Downward pressure on prices from domestic customers and intense competition are expected
to continue

Water treatment facilities
T In the domestic electronics industry, we expect plant and equipment investment to remainrobust overall, particularly in such areas as semiconductors and flat panel displays
T Continuing liquid crystal display (LCD)-related investment in South Korea and Taiwan, andincreased semiconductor and electronic component-related investment in China
T In domestic general industry, needs are expected to grow in such areas as augmentation ofcapacity, reduction of running costs and reduction of environmental impact
T In soil remediation, needs are expected to increase in such areas as in situ remediation at plants
in current operation
T Shrinking budgets in the public sector
12Summary of the Business Plan
(Billions of yen)

Fiscal years ended/ending March 31
2004 (Actual)

2005 (Projected)

Amount change

Percentagechange

Orders

149.7

168.0

+18.3

+12.2%Net sales

146.8

161.8

+15.0+10.2%

Operating income

13.5

17.1+3.6+26.8%

Ordinary income (keijo rieki)

13.9

17.4

+3.5

+24.8%

8.4

10.0+1.6+18.9%Net income

Main strategies:
T Accelerate the pace of development of solutions-based businesses and other high-valueadded businesses
T Raise the profitability of the new business model and bolster new product development andthe launch of new businesses
T Enhance profitability through cost reductions
13

Main Points of the Business Plan (1)Water treatment chemicals
T Expansion of contract-based services and growth in incinerator chemicals and paper pulp
process chemicals
T Bolster the Kurita Group marketing network
T Growth in the Chinese and European markets
T Enhance profitability by shifting to high-margin products
Orders and Sales

Operating Income

Fiscal years ended/ending

Fiscal years ended/ending(Billions of yen)60

47.5 47.4
Orders(Billions of yen)50.8 50.2

1 0.0

45

7.5

30

5.0

15

2.5

6.6

7.9

Sales

00.0

20 04 (actual)

20 05(projected)

2 0 04 ( ac tu al)

20 0 5( projec te d)14

Main Points of the Business Plan (2)Water treatment facilities for the electronics industry
T Continued steady domestic demand focusing on flat panel display makers
T Steady demand in Asia from LCD makers
T More stable profitability through growth in the ultrapure water supply business
T Growth in the tool cleaning business
Orders and Sales

Operating Income

Fiscal years ended/ending

Fiscal years ended/ending(Billions of yen)60
45

Orders49.445.1(Billions of yen)

54.4 53.0

6.0

4.9

5.9

200 4 (actual)

200 5(proje cted)

4.5

30

3.0

15

1.5Sales

00.0
20 04 (actual)

20 05(projected)

15Main Points of the Business Plan (3)Water treatment facilities for general industry
T Eco-Solution Group to contribute to business results by providing solutions in such areas
as cost and environmental impact reduction for customers
T Orders from electric power plants to recover and orders from the food processing andpharmaceutical industries to increase
T Soil remediation orders to expand, thanks to an increase in demand for in situ remediation
at plants in current operation
Orders and Sales
Operating Income
Fiscal years ended/ending(Billions of yen)4030

Orders27.8 30.2

Fiscal years ended/ending(Billions of yen)

36.8 33.6

2.0

1.9
1.5

20

1.0

100.5

Sales

00.7

0.0
20 04 (actual)

20 05(projected)

200 4 (actual)

200 5(proje cted)

16

Main Points of the Business Plan (4)Water treatment facilities for the public sector
T Win projects for upgrading and renewal of human waste treatment facilities
T Gain orders for sludge reduction systems using ozone treatment
T Win orders for advanced water treatment systems using membrane filtration

Orders and Sales

Operating Income

Fiscal years ended/ending

Fiscal years ended/ending(Billions of yen)
30

OrdersSales

25.0 24.1(Billions of yen)
2.0

26.0 25.0

1.4

1.5

20

1.3

1.0
100.5

00.0
20 04 (actual)

20 05(projected)

200 4 (actual)

200 5(proje cted)

17

Analysis of Change in Operating Income Projected in the Business Plan
(Billions of yen)

Fiscal years ended/ending March 31
2004 (Actual)

2005 (Projected)

Amount change

17.1

+3.6

13.5

Operating income

Percentagechange+26.8%(Billions of yen)

54

4.6
3.6

32
2.0

10-1.2-1-1.8-2
Changes in price and Reduced costgross profit marginof salesVolume-based and other Change in SG&A
increases in net sales
expenses

Net change inoperating
income18

Capital Expenditures and R&D Expenses
Fiscal years ended/ending March 31(Billions of yen)
2004 (Actual)

2005 (Projected)

Amount change

Capital expenditures

8.3

4.2

－4.1

Depreciation

3.3

3.6+0.3

Research and development (R&D) expenses

4.3

4.4+0.1

T Investment in the ultrapure water supply business, which is included in capital
expenditures, reached a cumulative total of approximately ¥10.0 billion in thefiscal year ended March 31, 2004
T Depreciation is increasing in tandem with rising capital expenditures
T We are striving for greater efficiency in our research and development expenses

19

Progress of the Medium-Term Management Plan
Powerful Advance 2005 (PA-5)

20

Strategy for Achieving the Goals of PA-5
■Domestic: Expand the scope of the businessand strengthen Kurita’s market dominance■Overseas: Expand the scope of the businessand market share■New business/New products/New technologies■Expand Kurita’s service network to remain close to customers■New business model to promote outsourcing and solutions business

Optimal business composition and synergy creation
Water treatment
chemicals

Maintenance

Water treatment
facilities
21

Sales by Segment
Fiscal years ended/ending March 31(Billions of yen)

200

150

146.8

161.8
50.2

175.0
55.0

47.4
Water treatment ch emicals

Water treatment f acilities

10050

99.4

111.6

120.0

2005 (projected)

2006 (projected)

02004 (actual)22

Operating Income by Segment
Fiscal years ended/ending March 31（％）(Billions of yen)

25

20

17.3

Water treatment
chemicals

20

Water treatment
facilities

15

Operating income
margin for watertreatment facilities

14.0

17.1

13.5

10.66.616

11.4

9.5

7.9

9.2
10

Operating income
margin

20.0

15.7

12

8.8
88.3

6.9
5

Operating income
margin for watertreatment chemicals

9.2

6.9

10.5

040
2004 (actual)

2005 (projected)

2006 (projected)

23

Kurita Water Industries Ltd.
http://www.kurita.co.jp/english/
ir@kurita.co.jp

Forward-Looking Statements
This presentation material contains forward-looking statements and business plan projections based on information
available to management at the time of writing and judgments based on that information. Due to the existence of avariety of risk factors and uncertainties, these statements and projections may differ from actual results.