FOR IMMEDIATE RELEASE

Kurita Water Industries Reports Earnings for the First Six Months Ended
September 2006
Tokyo, Japan October 31, 2006—Kurita Water Industries Ltd. (TSE Security Code 6370) announced net
sales of 86,381 million yen for the first six months (April 1 – September 30, 2006) of the fiscal year
ending March 31, 2007 and net income of 6,145 million yen, or 47.76 yen per share.

Results of Operations
Total consolidated orders for the Kurita Group increased 12.3% from the same period a year earlier to
101,555 million yen, while net sales grew 19.1% year-on-year to 86,381 million yen. Operating income
surged 120.7% to 10,608 million yen and ordinary income also jumped 99.7% to 10,916 million yen,resulting in net income of 6,145 million yen, an increase of 115.2% year-on-year. By segment, water
treatment chemicals sales grew 4.4% year-on-year to 27,694 million yen, while water treatment facilities
sales rose 27.6% to 58,686 million yen.
During the period, capital expenditures in the electronics industry continued to be solid in Japan, Taiwan
and South Korea on the back of buoyant demand for liquid crystal display (LCD) TVs and plasma display
panel (PDP) TVs, etc. In the general industry, both factory operating rates and capital expenditures
remained robust mainly in basic materials sectors such as steel, oil refining and petrochemical.
Taking into consideration the Group’s business performance for the year and the Group’s policy of
rewarding its shareholders for their support, the Company has decided to raise its interim dividend by ¥2
to ¥13 per share.

Segment Information
Water Treatment Chemicals
Total Group orders for the segment increased 4.2% year-on-year to 28,359 million yen, while sales grew
4.4% to 27,694 million yen and operating income rose 16.1% to 4,655 million yen.
During the period, the Group concentrated its efforts on securing stable order flows by focusing on“solution business” aimed at solving clients’ issues such as reduction of environmental burdens andproductivity improvement, promotion of packaged water treatment management contracts, and sales
expansion of mainstay products. Also, the Group worked to ensure revenue and earnings by shifting its
focus to high margin products, responding to surging raw materials prices, and reducing production andlogistics costs.
In the domestic market, orders for the Group’s mainstay boiler water treatment chemicals, cooling water
treatment chemicals and wastewater treatment chemicals were largely flat compared with a year earlier. In
other products, orders for process treatment chemicals used in the oil refining and petrochemical industry
were largely flat, while orders for packaged water treatment management contracts grew slightly andthose for process treatment chemicals used in the paper/pulp industry increased.
Water Treatment Facilities
Total Group orders for the segment increased 15.8% year-on-year to 73,196 million yen, while sales grew
27.6% to 58,686 million yen and operating income jumped 643.9% to 5,951 million yen.
During the period, the Group further accelerated its drive to expand its proprietary businesses, including
the ultra-pure water supply business, and aggressively expanded business in the Asian markets, primarily
in China, Taiwan and South Korea, in a bid to secure stable order flows. Also, to ensure revenue andearnings, the Group continued its efforts to reduce the cost to sales ratio by improving quality and1

productivity.
Orders for the Group’s mainline ultra-pure water production systems, including the ultra-pure watersupply business, primarily for the electronics industry surged both in Japan and abroad. Orders for related
maintenance services also showed growth and those for tool cleaning for semiconductor and LCD
production equipment increased significantly. In other areas, orders for water treatment facilities for the
raw materials industry fell sharply compared with the high level seen in the previous year, whereas orders
for related maintenance services were flat. Orders for soil remediation surged on the back of robust
demand in land trading.
Net Sales
Business segment
Water treatment chemicals
Water treatment facilities
Total

Six months ended
September 30, 2006
Amount%27,69432.1
58,68667.9
86,381
100.0

Six months ended
September 30, 2005
Amount%26,521
36.6
45,97863.4
72,499100.0(in million yen)
Year ended
March 31, 2006
Amount%54,54931.4
119,133
68.6
173,683
100.0

Order Intake(in million yen)
Business segment
Water treatment chemicals
Water treatment facilities
Total

Six months ended
September 30, 2006

Six months ended
September 30, 2005

Amount28,35973,196
101,555

Amount27,21363,19490,407

%
27.9
72.1
100.0

%
30.1
69.9
100.0

Year ended
March 31, 2006
Amount53,903130,007
183,910

%
29.3
70.7
100.0

Order Backlog(in million yen)
Business segment
Water treatment chemicals
Water treatment facilities
Total

Six months ended
September 30, 2006

Six months ended
September 30, 2005

Amount4,272
70,85075,122

Amount4,944
62,68367,628

%
5.7
94.3
100.0

%
7.3
92.7
100.0

Year ended
March 31, 2006
Amount3,607
56,34059,947

%
6.0
94.0
100.0

Significant Events That Occurred during the Period
The Company was investigated by the Fair Trade Commission on suspicion of a violation of theanti-monopoly law concerning the construction of sludge treatment (human waste treatment) facilities.
Due to this and other reasons, the Company withdrew from business activities involving new construction
projects for sludge treatment (human waste treatment) facilities. In June 2006, the Company was indictedby the Osaka District Public Prosecutor’s Office on suspicion of a violation of the anti-monopoly law.
For existing facilities, the Company’s subsidiary, Kuritaz Co., Ltd., will continue to provide maintenanceand operation management services.
In order to meet increasing demand for the tool cleaning from the electronics industries, Kuritec Service
Co. Ltd., the Company’s subsidiary engaging in the business, relocated and expanded its former Akoh
Factory (in Hyogo prefecture). The new factory was named Harima Factory (located in Hyogo prefecture)and started operation in July 2006.

Outlook for the Fiscal Year Ending March 31, 2007
The Group forecasts 190,000 million yen in net sales, 21,000 million yen in ordinary income, and 11,500
million yen in net income for the full year ending March 31, 2007.

2

While the Group expects the market to remain firm supported by strong factory operating rates andcapital expenditures, possible impact of U.S. and Chinese economic trends, movements in crude oil prices
and foreign exchange movements on corporate profits remains a concern.
Against this background, the Group will continue its focus on business expansion and stable earnings
growth by accelerating the shift towards the service business, namely the ultra-pure water supply business,and expanding its operations on a global scale in a bid to achieve the targets set in the new medium-term
management plan “G-8 (Growth 2008).”

Outlook by Segment
Water Treatment Chemicals
In water treatment chemicals, factory-operating rates at clients, which have a large impact on the Group’s
order intake, are expected to remain solid. However, there are concerns that cost-cutting efforts by clientsand cost increases in this segment stemming from rising raw materials prices may adversely affect thesegment’s profitability. Under such circumstances, the Group will strive to secure orders by focusing on
strategically important markets and pursuing closer ties with clients to strengthen marketing of “solution
business” that offers clients solutions for their problems. The Group will also continue its efforts to reduce
manufacturing and logistics costs of water treatment chemicals in order to maintain profitability.
Water Treatment Facilities
Capital expenditures in water treatment facilities are generally expected to remain strong in the overall
manufacturing sector, although there are concerns that downsizing of capital expenditure projects in theelectronics-related industries may adversely affect the performance of the segment. Against this background, the Group aims to secure order flows through the following measures: 1) strengthening of its
unique businesses, such as the ultra-pure water supply business; 2) expansion of tool cleaning and other“solution business” that carefully responds to clients’ needs; and 3) concentration of its marketing efforts
in Asian markets centering on China, Taiwan and South Korea and on strategic clients. Also, the Groupwill continue to work on quality improvement, cost reduction and shortening of delivery period to secure
earnings growth.
Profit Distribution
In consideration of the business performance for the year, future growth prospects and the Group’s policyof rewarding its shareholders for their support, the Company plans to raise its year-end dividend by ¥2 to¥13 per share. As the Company also raised its interim dividend by ¥2 to ¥13 per share, the annual
dividend for the year is expected to be ¥26 per share. Going forward, the Company will continue its
commitment to its basic policy of maintaining stable dividend payouts.

Financial Condition (Cash Flow Trends)
Consolidated net cash and cash equivalents at the end of the period were 32,184 million yen, representing
an increase of 2,313 million yen, or 7.7%, from the end of the previous fiscal year.
Net cash provided by operating activities amounted to 14,148 million yen, an increase of 5,906 million
yen from a year earlier. This is primarily due to the cash inflows from income before income taxes which
totaled 10,847 million yen, a decrease in trades receivable by 9,431 million yen, and depreciation andamortization totaling 3,083 million yen, which were partly offset by an increase in inventories by 7,283
million yen and payment of income taxes of 4,201 million yen, etc.
Net cash used in investing activities was 10,385 million yen, an increase of 2,660 million yen from a year
earlier, primarily reflecting the payment of 10,061 million yen associated with acquisition of tangible
fixed assets for business purposes.
Net cash used in financing activities was 1,637 million yen, an increase of 416 million yen from a year
earlier period, mainly reflecting dividend payment of 1,419 million yen.

3

Trends in Cash Flow Indicators
Six months to
September 30,
2004
Equity ratio(%)
Equity ratio(based onmarketcapitalization)(%)
Debt repayment
period (years)
Interest
coverage ratio(X)

Fiscal year to
March 31, 2005

Six months to
September 30,
2005

Fiscal year to
March 31, 2006

Six months to
September 30,
2006

72.2

70.9

72.1

68.3

68.7

105.8

112.7

137.8

152.3

135.7

0.1

0.1

0.1

0.1

0.1

573.3

230.5

412.1

322.2

832.2

(Notes) The above indicators are calculated based on consolidated financial figures.
1. Market capitalization is calculated by multiplying the closing stock price at the end of the period by the
number of shares outstanding (excl. treasury stock) at the end of the period.
2. Interest-bearing debt is all debt subject to interest payment within liabilities in the consolidated balance
sheet.
3. Cash flows from operating activities and interest payment are those shown in the consolidated
statement of cash flows.

Medium-term Strategies
In April 2006, the Group started the new medium-term management plan “G-8 (Growth 2008)” with“growth and innovation” as its main theme. The Group is making group-wide efforts to achieve thefollowing three objectives set in the plan:a. Accelerate shift to a service-based business model
The Group has decided to shift the direction of its business from “sales of individual products” to“service-based businesses with high added-value,” and is accelerating its efforts to improve profitability.
Also, the Group is working to expand its business by continuing active investment in its unique businessmodels, such as the ultra-pure water supply business.
b. Expand global business operations
The Group is accelerating business expansion in Asia, mainly in the fast growing Chinese market, while
aggressively expanding the new business model, such as “solutions business” in which the Group has
experience in the domestic market, in Europe and North America. Through these efforts, the Group is
working to broaden business areas and raise market share.
c. Reinforce management and business fundamentals
In order to continue its business as a going concern and achieve sustainable growth, the Group is making
group-wide efforts to enhance its compliance activities. Also, the Group is making day-to-day efforts toimprove the safety of its products, technologies and services, and achieve higher quality and value
innovation, by ensuring that employees’ behavior, the business foundation for the Group, is underpinned
by solid theories, data and scientific judgment.

Business Risks
Major risk factors that could affect the Group’s future performance include, but are not limited to,
economic trends, capital expenditure trends in water treatment facilities and factory operating rates atclients, price movements in oil and other basic materials, and competition with peers.

4Factors that may affect the Group’s business performance
The water treatment chemicals business performance is affected by fluctuations in demand levels
reflecting changes in factory operating rates at the Group’s main clients in the steel, petroleum refining
and petrochemical, and pulp/paper industries. The Group’s business performance is also affected by
movements in basic materials prices reflecting trends in crude oil prices.
The water treatment facilities business performance is affected by demand fluctuations caused by trends
in capital expenditures at the Group’s main clients in the electronics-related industries.
The Group considers impact of exchange rate movements on its business performance would be
insignificant as its overseas operations account for only a small proportion of its overall sales.

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 production systems, wastewater 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 website atwww.kurita.co.jp/english

Forward-Looking Statements
This news release contains various forward-looking statements, which are based on current expectations
and assumptions of future events. Except for the historical information contained herein, all figures andstatements with respect to future performance, projections and business plans of the Kurita Group
constitute forward-looking statements. Although Kurita believes that its expectations and assumptions arereasonable, actual results and trends of the Group’s performance could differ materially from thoseexpressed or implied by such figures or statements because of risks and uncertainties, including but notlimited to factory operating rates at major clients in the steel, petroleum and paper/pulp industries; andcapital expenditure trends in the electronics, food processing, pharmaceuticals, basic material andautomobile industries.

5CONDENSED CONSOLIDATED STATEMENTS OF INCOME(in million yen)Six months ended
Sept. 30, 2006 (A)Six months ended
Sept. 30, 2005 (B)(A) – (B)Year ended
March 31, 2006

Amount%Amount%AmountAmount%Net sales
Cost of sales
Gross profit
Selling, general and administrative
expenses

86,381
58,41527,965

100.0
67.6
32.4

72,49950,46422,035

100.0
69.6
30.4

13,882
7,951
5,930

173,683
122,630
51,052

100.0
70.6
29.4

17,35720.1

17,22723.8

13033,741

19.4

Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary gains
Extraordinary losses
Income before income taxes
Income taxes
Minority interests in earnings ofconsolidated subsidiaries

10,608460
151
10,91669
10,847
4,536

12.3
0.5
0.2
12.6
12.6
5.3

4,807
746
86
5,466
211
5,254
2,309

6.6
1.0
0.1
7.5
0.3
7.2
3.2

5,801
-286
65
5,450
-142
5,593
2,227

17,3111,334
220
18,4251,205
1,430
18,200
7,496

10.0
0.7
0.1
10.6
0.7
0.8
10.5
4.3

164

0.2

90

0.1

74

184

0.1

Net income

6,145

7.1

2,855

3.9

3,290

10,519

6.1

6

CONDENSED CONSOLIDATED BALANCE SHEETS(in million yen)

As of
As of
As of
Sept. 30, 2006 Sept. 30, 2005 March 31,2006
(C)
(A)
(B)
[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
Intangible fixed assets
Investments and other assets
Total fixed assets
Total assets[Liabilities]
Current liabilities
Notes payable - trade
Accounts payable - trade
Short-term borrowings
Accounts payable - other/Accrued
expenses
Income taxes payable
Advances received
Accrued employees’ bonuses
Allowance for product warranty
Other
Total current liabilities
Fixed liabilities
Long-term borrowings
Deferred tax liabilities related torevaluation
Accrued employees’ retirement
benefits
Accrued retirement benefits for
directors and corporate auditors
Other
Total fixed liabilities
Total liabilities

Change(A) – (B)(A) – (C)32,48810,00958,084
7,831
15,363
2,222
1,659
-132
127,527

30,356
9,135
51,795
3,502
11,795
2,107
2,221
-124
110,790

30,107
10,11566,957
6,162
8,070
2,170
1,773
-125
125,231

2,132
874
6,289
4,329
3,568
115
-562
-8
16,7372,381-106-8,873
1,669
7,293
52
-114
-7
2,296

59,4372,806
27,36489,608217,136

46,4593,034
32,011
81,506
192,297

53,991
2,863
30,68787,542
212,774

12,978-228-4,647
8,102
24,8395,446-57-3,323
2,066
4,362

2,219
29,316296

2,276
22,70180

1,638
28,773
320

-57
6,615
216

581
543
-24

9,669

7,242

13,4932,427-3,824

4,620
4,305
2,689
828
1,407
55,354

2,409
3,180
2,676
901
1,053
42,522

4,376
2,055
2,362
739
1,118
54,877

2,211
1,125
13
-73
354
12,832

244
2,250
327
89
289
477

195

214

180

-19

15

1,526

-

1,526

1,526

-

8,327

8,464

8,261

-137

66

570

389

488

181

82

738
11,35766,712829
9,897
52,420777
11,233
66,111-91
1,460
14,292

-39
124
601

7

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)(in million yen)

As of
As of
As of
Sept. 30, 2006 Sept. 30, 2005 March 31, 2006
(C)
(A)
(B)
[Minority interests]
Minority interests[Shareholders’ equity]
Common stock
Additional paid-in capital
Retained earnings
Unrealized gains (losses) onrevaluation of land
Revaluation surplus of other securities
Foreign currency translation
adjustments
Treasury stock
Total shareholders’ equity
Total liabilities, minority interests andshareholders’ equity[Net assets]
Shareholders’ capital
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Valuation and translation adjustments
Revaluation surplus of other securities
Unrealized gains (losses) onrevaluation of land
Foreign currency translation
adjustments
Minority interests
Total net assets
Total liabilities and net assets

Change(A) – (B)(A) – (C)
-

-

1,197

1,295

-

13,45011,409116,199

13,45011,426
122,350

-

-

379

-740

-

-

-

2,688

3,873

-

-

-

-613

-200

-

-

-

-4,835
138,678-4,793
145,366---

192,297

212,774--

147,153
13,45011,426
127,073-4,797
1,914
2,749

-

-

-

-

-740

-

-

-

-

-94

-

-

-

-

1,356
150,424
217,136

-

-

-

-

8

CONSOLIDATED STATEMENTS OF CASH FLOWS(in million yen)Six months
ended
Sept. 30, 2006

Six months
ended
Sept. 30, 2005

Year ended
March 31, 2006

AmountAmountAmount10,847
3,083
-

5,254
2,268
-31

18,200
4,906
846
-24

57

-116

-266

295

551

238

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment losses
Amortization of consolidation goodwill
Equity in earnings of unconsolidated subsidiaries andaffiliates
Increase in reserve for bonuses
Increase (decrease) in allowance for employees’ retirement
benefits
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in other allowancesInterest and dividend income
Other non-operating income
Interest expense
Other non-operating expenses and extraordinary losses(Gains) losses on sale/revaluation of investment securities(Gains) losses on sale/disposal of tangible fixed assets(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Decrease in other current assets
Increase (decrease) in notes and accounts payable, trade
Increase in advances received
Increase (decrease) in other current liabilities
Bonus paid to directors
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

46

-239

-447

187
169
-326
-97
21
77
72
9,431
-7,283
129
-317
2,246
-435
-242
17,963
365
88
-17
-50
-4,20114,148

-36
-443
-260
-230
18
40
199
10,603-3,660351-3,972
2,227
-923
-95
28
11,535
331
186
-20
-67
-3,723
8,242

-56
-510
-452
-328
41
311
-1,205411-5,259
156
175
2,314
1,077
362
-180
-212
20,096
589
374
-43
-179
-6,981
13,856

Cash flows from investing activities
Deposits into time deposits accounts
Withdrawals from time deposits
Payments for purchases of marketable securities
Proceeds from redemption/sale of marketable securities
Payments for purchases of tangible fixed assets
Proceeds from sale of tangible fixed assets
Payments for purchases of investment securities
Proceeds from sale of investment securities
Other expenses
Other income
Net cash used in investing activities-63
34-6,096
6,324-10,061
32
-133
-501
79
-10,385-389
308-5,058
4,249-4,25857-2,939471-527
359-7,725-305
314-10,807
10,239-10,962817-3,914
2,785
-986
500
-12,318

Cash flows from financing activities
Proceeds from and repayment of short-term borrowings
Repayment of long-term borrowings
Payment for acquisition of treasury stock
Dividends paid
Dividends paid to minority shareholders
Proceeds from payment by minority shareholders
Net cash used in financing activities

-127
-64
-3
-1,419-21-1,637-42-4-1,157-55
38-1,221220-84-11-2,572-106
38-2,516

54

74

173

2,180
29,871-629
30,365-804
30,365

132

310

310

32,18430,04629,871

Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents of newly consolidated
subsidiaries at beginning of period
Cash and cash equivalents at end of period

9SEGMENT INFORMATION
By business type for six months ended September 30, 2006 (April 1, 2006 to September 30, 2006)(in million yen)
Water treatment Water treatment
chemicals
facilities

I. Net sales and operating
income(1) External sales(2) Inter-segment sales
Total
Operating expenses
Operating income
II. Assets, depreciation andcapital expenditures
AssetsDepreciation andamortization
Capital expenditures

Total

Eliminationor corporate

Consolidated

27,694122
27,81623,1604,655

58,68629
58,71552,764
5,951

86,381
151
86,53175,925
10,606

-151
-151
-152
1

86,381
86,38175,773
10,60837,395

126,513

163,90953,227217,136

792

2,278

3,070

-

3,070

570

7,906

8,476

-

8,476

By business type for six months ended September 30, 2005 (April 1, 2005 to September 30, 2005)(in million yen)
Water treatment Water treatment
chemicals
facilities

I. Net sales and operating
income(1) External sales(2) Inter-segment sales
Total
Operating expenses
Operating income
II. Assets, depreciationand capital expenditures
AssetsDepreciation andamortization
Capital expenditures

Total

Eliminationor corporate

Consolidated

26,521
170
26,692
22,683
4,008

45,978215
46,19445,393800

72,499386
72,886
68,077
4,809

-386
-386
-384
-1

72,49972,49967,692
4,807

46,684

103,711150,395

41,901

192,297

682

1,585

2,268

-

2,268

1,231

4,362

5,593

-

5,593

10

OVERSEAS SALES
For six months ended September 30, 2006 (April 1, 2006 to September 30, 2006)(in million yen)

I. Overseas sales
II. Consolidated net sales
III. Ratio of overseas sales to total
consolidated sales

Asia

North
America

Europe

Other

Total

9,761
-

1,438
-

609
-

939
-

12,74986,381

11.3

1.7

0.7

1.1

14.8

For six months ended September 30, 2005 (April 1, 2005 to September 30, 2005)(in million yen)

I. Overseas sales
II. Consolidated net sales
III. Ratio of overseas sales to total
consolidated sales

Asia

North
America

Europe

Other

Total

5,704
-

1,004
-

613
-

729
-

8,051
72,499

7.9

1.4

0.8

1.0

11.1

Notes:
1. Geographic segmentation is based on geographic proximity.
2. Major countries or regions in each segment are as follows:(1) Asia:
South Korea, China, Taiwan, Singapore, Indonesia, and Thailand(2) North America:
U.S.A.
(3) Europe:
Germany(4) Other areas:
Brazil3. “Overseas sales” include sales by the Company and its consolidated subsidiaries to the countries orregions other than Japan.

11