Results Presentation for the Six Months Ended September 30, 2007

Kurita Water Industries Ltd.
( TSE Security Code 6370 )November 7, 2007

Table of Contents
I. Consolidated Financial Results for the Six Months
Ended September 30, 2007

II. Consolidated Business Plan for the Fiscal YearEnding March 31, 2008112

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
1. Strategic Focuses for the Six Months Ended September 30, 2007
Basic themes of the G-8 plan

GrowthGlobal

Growth andInnovationGroup

Key Strategies for the Current Year

Accelerate Expansion of Service BusinessExpand Overseas Businesses
Strengthen Kurita’s Technology Fundamentals
1

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
2. Financial Highlights(Billions of yen)Mar. 2007 Mar. 2008 Mar. 2008
H1H1
H1(Actual) (Projected) (Actual)

Change versus
projections
Amount%Year-on-yearchangeAmount%Orders

101.6

105.0

108.8

+3.8+3.6%

+7.2

+7.1%

Net sales

86.4

95.0

94.1

-0.9

-0.9%

+7.7+8.9%

Gross profit

28.0

29.9

31.7+1.8+5.9%+3.7 +13.2%

SG&A expenses

17.4

18.4

18.2-0.2-1.3%+0.8

Operating income

10.6

11.5

13.5+2.0+17.4%+2.9 +27.2%

Ordinary Income

10.9

11.6

14.1+2.5+21.2%+3.1 +28.8%

Net income

6.1

6.5

7.5+1.0+15.7%+1.4 +22.4%

+4.6%

2

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
3. Overview

Water
Water Treatment
Treatment Chemicals
Chemicals BusinessBusiness
Improved domestic product mix
Overseas growth contributing to higher sales and profit
Increase in costs of raw materials for water treatment chemicals exceeding
initial expectations

WaterWater Treatment
Treatment Facilities
Facilities BusinessBusiness
Active capital expenditure in the domestic electronics industry
Steady expansion in service businesses
Sluggish capital expenditure in overseas LCD industries
Sharp decline in demand for soil remediation

3

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
4. Orders
WaterTreatment
Chemicals

Water Treatment Facilities
For the electronics industry
For general industries(Billions of yen)

120

101.6

105.0

28.4

29.3

Major growth areas• Cooling water treatment
chemicals (Japanese market)• Process treatment chemicals(Japanese market)• Overseas subsidiaries

108.8

1008060

20

79.1

75.7

73.2

32.1

44.5

39.3

41.1
40

29.7

36.4

34.6

0
Mar. 2007
H1(Actual)Mar. 2008
H1(Projected)

Mar. 2008
H1(Actual)

Major growth areas• Wafers• Ultrapure water supply• Tool cleaning
Major growth areas• Iron and steel
Areas of decline• Electric power• Soil remediation

4

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
5. Sales
Water
Treatment
Chemicals

Water Treatment Facilities
For the electronics industry
For general industries(Billions of yen)

27.7

Major areas of sales growth• Cooling water treatment
chemicals (Japanese market)• Process treatment chemicals(Japanese market)• Overseas subsidiaries

33.9

Major areas of sales growth• Wafers / Semiconductors• Ultrapure water supply• Tool cleaning

100

95.0

94.1

29.0

28.9

86.4
80

60
40

40.8

40.2
66.0

58.7

65.2

20

24.8

25.2

25.1

0
Mar. 2007
H1(Actual)Mar. 2008
H1(Projected)

Mar. 2008
H1(Actual)

Major areas of sales growth• FoodMajor areas of decline• Soil remediation

5I. Consolidated Financial Results for the Six Months Ended September 30, 2007
6. Operating Income
WaterTreatment
Chemicals

Water Treatment Facilities
For the electronics industry
For general industries(Billions of yen)

15129

Growth factors• Improved domestic productstructure• Higher overseas revenue

13.5
11.5
10.6

5.0
Growth factors• Growth in service businesses• Growth in hardware andimproved profitability

5.0

4.7

6

7.2
6.0

6.3

6.5

3

5.8

0

0.1

0.2

1.3

Mar. 2007
H1(Actual)Mar. 2008
H1(Projected)

Mar. 2008
H1(Actual)

8.4
Growth factors• Improved profitability ingeneral industries• Higher profits in services
businesses

6I. Consolidated Financial Results for the Six Months Ended September 30, 2007
7. Analysis of Changes in Operating Income(Billions of yen)
1510

10.6

- 0.2

Mar. 2007
H1(Actual)

Higher costof raw
materials

+2.3

13.5

Effect ofhigher
income*Mar. 2008
H1(Actual)+1.6- 0. 850Higher
SG&A
expenses

Effect ofimproved
cost ratio** Effects of improved cost ratio and higher income are calculated using the gross profit margin.
“Cost ratio” refers to the sales-to-cost ratio.

7I. Consolidated Financial Results for the Six Months Ended September 30, 2007
8. Operating Income Margin
OperatingOperating income
income margin
margininin thethe Water
Water Treatment
Treatment Facilities
Facilities businessbusiness

OperatingOperating income
income margin
marginbyby segment
segment
Operating income margin: Water Treatment Chemicals

Water Treatment Facilities: Electronics industry

Operating income: Total

Water Treatment Facilities

Operating income margin: Water Treatment Facilities

Water Treatment Facilities: General industries

denotes initial projections

(%)

1820

16.8

17.3 17.2

1617.117.8 15.4

15

14.3 12.1

1413.012denotes initial projections

(%)

100

Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)

5.3

0.8

9.8

10.1
109.8

10.1

5

12.3

13.0

0.6
Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)8

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
9. Revenues from Service Businesses
ServiceService businessbusiness revenue
revenue inin thethe Water
Water
Treatment
Treatment Facilities
Facilities businessbusiness

Water Treatment Chemicals
Water Treatment Facilities (services)
Water Treatment Facilities (hardware)(Billions of yen)50

43.9(+4.3)(Billions of yen)

94.1100

86.4

40

4.5
28.9

80

27.7

30

60

40

39.6

39.6

43.9

19.1

21.3

Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)

6.4

7.0

5.4

4.8

Ultrapurewater supply
business
Tool cleaning
Soil remediation

201020

7.4

23.3

24.7

Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)

Maintenance,
etc.

009

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
10. Overseas Business
Sales by Overseas Business Segment

Sales by Region

Water Treatment Chemicals(Billions of yen)(Billions of yen)

1515

12.7

10

Water Treatment Facilities0.9
0.6
1.4

13.2

12.7

1.1
0.9

Other

2.0Europe

3.8
10

13.2
5.1

N. America

Asia59.8

9.2

05

8.9

8.1

0
Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)10

I. Consolidated Financial Results for the Six Months Ended September 30, 2007
11. Capital Expenditures, Depreciation and R&D Expenses
CapitalCapital Expenditures
Expenditures andand Depreciation
Depreciation

R&D
R&D Expenses
Expenses(Billions of yen)

R&D expenses

18

15.915(Billions of yen)

137

8.1

665

2.2

2.22.5%

2.4%

Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)2

Capital expenditures(excl. ultrapurewater supply)

3.8

Depreciation

2.6

30

Percentage of net sales

3129

Capital expenditures(ultrapure watersupply)

1.6

2.2

Mar. 2007
H1(Actual)Mar. 2008
H1(Actual)

Note: Capital expenditures and depreciation relate to tangible
fixed assets.

1011

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
1. Key Assumptions
Water
Water Treatment
Treatment Chemicals
Chemicals BusinessBusinessContinuing high operating rates at domestic steel, oil refining, petrochemical,
and pulp and paper plants
Continuing strong demands from customers for higher productivity, lower
cost, and lower environmental burdens
Expansion of Chinese, Southeast Asian and European economies
Continuing increases in raw materials costs
Water
Water Treatment
Treatment Facilities
Facilities BusinessBusiness
Continued capital expenditure in the domestic electronics industry
Capital expenditure in the Taiwanese electronics industry expected to recover
Facilities renewals and continued environmental investment in the domestic
basic materials sector
Stagnant demand and intensified competition in soil remediation
12

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
2. Full-Year Projections(Billions of yen)

Year-on-year changeMar. 2007(Actual)Mar. 2008
Initialprojections

Mar. 2008
Revisedprojections

Orders

192.5

211.0

211.0

+18.5+9.6%

Net sales

197.1

207.0

207.0

+9.9

+5.0%

Gross profit

59.3

64.0

64.6

+5.3+8.9%

SG&A expense

35.1

36.5

37.1

+2.1

+5.8%

Operating income

24.3

27.5

27.5

+3.2+13.3%

Ordinary Income

25.2

28.0

28.0+2.8+11.0%

Net income

14.215.715.7+1.5+10.5%

Amount%13

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
3. Orders
WaterTreatment
Chemicals

Water Treatment Facilities
For the electronics industry
For general industries(Billions of yen)

211.0

211.0

59.1

59.1

Major growth areas• Cooling water treatment
chemicals (Japanese market)• Process treatment chemicals(Japanese market)• Overseas subsidiaries

91.1

Major growth areas• Ultrapure water supply• Tool cleaning

250

200
150

100

192.5
56.6

86.5

77.9

151.9

136.0

151.9
Major growth areas• Iron and steel

50

58.165.4

60.8

Mar. 2007(Actual)Mar. 2008(Initial projection)

Mar. 2008(Revisedprojection)0

Areas of decline• Soil remediation

14

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
4. SalesWaterTreatment
Chemicals

Water Treatment Facilities
For the electronics industry
For general industries(Billions of yen)

250

200

197.1

56.7

207.0

207.0

59.2

58.7

87.4

93.2

Major areas of sales growth• Cooling water treatment
chemicals (Japanese market)• Process treatment chemicals(Japanese market)• Overseas subsidiaries

150

100

77.0

147.8

140.5

148.3

Major areas of sales growth• Ultrapure water supply• Tool cleaning

50

63.5

60.4

55.1

Mar. 2007(Actual)Mar. 2008(Initial projection)

Mar. 2008(Revisedprojection)

Major areas of decline• Soil remediation

015

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
5. Operating Income
WaterTreatment
Chemicals

Water Treatment Facilities
For the electronics industry
For general industries

Factors behind changes
from initial projections(Billions of yen)

30
25

27.5

27.5
9.7

20

• Increased cost of rawmaterials• Higher SG&A expenses

24.3
9.4

8.8

15
10

13.1

14.515.5

17.8

15.0

50

2.3

3.3

3.1

Mar. 2007(Actual)Mar. 2008(Initial projection)

Mar. 2008(Revisedprojection)• Growth in income fromhardware

18.1• Reduced sales from soil
remediation

16II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
6. Analysis of Changes in Operating Income(Billions of yen)30

+2.9- 0.6- 2.1+3.0

Higher costof raw
materials

Higher
SG&A
expenses

Effect ofimproved
cost ratio*

27.5

20

24.3

100
Mar. 2007(Actual)Effect ofhigher
income*Mar. 2008(Projected)* Effects of improved cost ratio and higher income are calculated using the gross profit margin.
“Cost ratio” refers to the sales-to-cost ratio.

17II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
7. Operating Profit Margin
OperatingOperating income
income margin
marginbyby segment
segment

OperatingOperating income
income margin
margininin thethe Water
Water Treatment
Treatment Facilities
Facilities businessbusiness

Operating income margin: Water Treatment Chemicals

Water Treatment Facilities: Electronics industry

Operating income: Total

Water Treatment Facilities

Operating income margin: Water Treatment Facilities

Water Treatment Facilities: General industries

denotes initial projections

(%)

18

denotes initial projections

(%)

20

17.1
16

16.0 16.4
15.5

1510

14

11.0

16.1 16.6

12.2 12.0

13.3 13.3
1212.312.2 12.0

5

11.0

5.6

5.5

3.70

10

Mar. 2007(Actual)Mar. 2008(Projected)

Mar. 2007(Actual)Mar. 2008(Projected)

18

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
8. Revenue from Service Businesses
ServiceService businessbusiness revenue
revenue inin thethe Water
Water
Treatment
Treatment Facilities
Facilities businessbusiness

Water Treatment Chemicals
Water Treatment Facilities (services)
Water Treatment Facilities (hardware)denotes initial projections(Billions of yen)
200

197.1
56.7

denotes initial projections(Billions of yen)

100

85.2

[207.0] 207.0

80[59.2]

58.7

150

94.8 (+9.6)[16.0]

16.5[14.4]

14.4

9.8
13.1

60

[98.7]

12.4

Ultrapurewater supply
business
Tool cleaning[14.5]

9.8
Soil remediation

100

85.2

[98.7]

94.8

40

49.9

[53.8]

54.1

Maintenance,
etc.

20

50

55.3

[49.1]

53.5

00

Mar. 2007(Actual)Mar. 2008(Projected)

Mar. 2007(Actual)Mar. 2008(Projected)

19II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
9. Overseas Businesses
Sales by Overseas Business Segment

Sales by Region

Water Treatment Chemicals(Billions of yen)(Billions of yen)

35
30
25

29.5
2.2
1.3
3.4

31.5
2.3
1.7
3.0

33.0
2.4
1.7
3.2

20
15
10

Water Treatment Facilities

35
OtherEurope

30

N. America

25

Asia

20

29.5
8.9

31.5
10.2

33.0
11.2

15
22.6

24.5

25.7

105

20.6

21.3

21.8

Mar. 2007(Actual)Mar. 2008(Initialprojection)

Mar. 2008(Revisedprojection)

50
Mar. 2007(Actual)Mar. 2008(Initialprojection)

Mar. 2008(Revisedprojection)020

II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
10. Expansion of the Ultrapure Water Supply Business
CapitalCapital Expenditure
Expenditure andand Total
Total
Cumulative
Cumulative Investment
Investment

Sales
Sales

[ ] denotes initial projections(Billions of yen)70

Total cumulative
investment

69.6[ ] denotes initial projections[56.6](Billions of yen)20

16.5 [16.0]

60
Capital expenditure

30.0[17.0]

50

39.6

40

15.7

30

9.8

10

23.8

20

11.9
1015

11.9

5.7
5

3.9

3.0

00
Mar. 2005 Mar. 2006 Mar. 2007 Mar. 2008
(Actual)(Actual)(Actual) (Projected)

Mar. 2005 Mar. 2006 Mar. 2007 Mar. 2008
(Actual)(Actual)(Actual) (Projected)

21II. Consolidated Business Plan for the Fiscal Year Ending March 31, 2008
11. Capital Expenditures, Depreciation and R&D Expenses
CapitalCapital Expenditures
Expenditures andand Depreciation
Depreciation

R&D
R&D Expenses
Expenses[ ] denotes initial projections
R&D expenses(Billions of yen)40

[23.0] 36.0

Capital expenditures(ultrapure watersupply)

Percentage of net sales(Billions of yen)

532

4.4
[17.0] 30.0

24

4.7

419.0
316
15.7

80

Capital expenditures(excl. ultrapure
water supply)

8.0 [8.0]

2.2%

2.3%

Mar. 2007(Actual)Mar. 2008(Projected)

2

5.6
3.2
Mar. 2007(Actual)[6.0] 6.0

Depreciation

Mar. 2008(Projected)

Note: Capital expenditures and depreciation relate to tangible
fixed assets.

1022

Kurita Water Industries Ltd.
Website: http://www.kurita. jp/
E-mail: 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 anduncertainties, actual results may differ from those specified or implied by these forward-looking statements andprojections.