2004

Semiannual Report
For the six months ended September 30, 2004

Consolidated Financial Highlights
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2004 and 2003
Thousands of
U.S. dollars

Millions of yen
2004

For the period:
Net sales.................................................................................................................................................. ¥0,537,715
Operating income ..................................................................................................................................
6,945
Net income (loss)...................................................................................................................................
3,365
Research and development expenses.................................................................................................
5,300
Depreciation and amortization ............................................................................................................
15,130Net cash provided by operating activities .........................................................................................
19,816Per share (in yen and U.S. dollars):
Net income (loss)................................................................................................................................... ¥Cash dividends.......................................................................................................................................

2.30
—

2003

2004

¥0,523,270
1,616(3,396)
6,100
15,796
11,000$04,842,098
62,53930,30247,726136,245
178,442¥$(2.40)—

0.02—

At end of the period:
Total assets ............................................................................................................................................ ¥1,114,029
Total shareholders’ equity ...................................................................................................................
194,127¥1,160,291
180,880$10,031,778
1,748,104

Orders received and outstanding:
Orders received during the period......................................................................................................
Order backlog at end of the period .....................................................................................................

503,090
1,173,053

521,255
1,154,122

4,530,302
10,563,287

Number of employees ..........................................................................................................................

29,12629,651

Notes: 1. This semiannual report has been prepared in conformity with generally accepted accounting principles and practices in Japan.
2. All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at ¥111.05 to $1.00, the approximate rate of exchange at
September 30, 2004.

Net Sales

Net Income (Loss)(Billions of yen)(Billions of yen)

Apr. 2004–Mar. 2005
537.7
Apr. 2003–Mar. 2004
523.3
Apr. 2002–Mar. 2003
539.7
Apr. 2001–Mar. 2002
492.1
Apr. 2000–Mar. 2001
454.3
0

200

400

3.4

Apr. 2004–Mar. 2005
637.0
699.9
652.4
606.2
600

First half

800

Apr. 2003–Mar. 2004

(3.4)

Apr. 2002–Mar. 2003

(3.5)

Apr. 2001–Mar. 2002

(2.3)

Second half

1,200

1,400

-15

-10

16.5

(12.4)

Apr. 2000–Mar. 2001
1,000

9.7

-5

8.6
2.1

0

First half

510Second half

15

20

To Our Shareholders
Steadily Implementing Business Reforms andKHI’s basic policy regarding the allocation of earnings

Creating a High-Margin Earnings Structure

is to pay stable dividends to shareholders. However, in

The Japanese economy continued on a recovery trend

consideration of the importance of expanding retained

during the interim period under review as a result of firm

earnings, we regret that we have decided to suspend theconsumer spending, expansion in exports, and growth inpayment of cash dividends for the interim period under

private-sector capital investment supported by improve-

review.

ment in corporate profitability. For Kawasaki Heavy

The KHI Group defines its corporate mission as draw-

Industries, Ltd. (KHI), however, the operating environ-ing fully on its broad base of advanced technologies toment was generally made difficult mainly by cutbacks increate new value through products that work modern-day

government public works investment and higher prices ofwonders on land, at sea, and in the air, while endeavoring

steel and other raw materials.

to contribute to the development of societies around theIn this operating environment, the KHI Group reported

world. To fulfill this mission, KHI strives to increase cus-

total orders received of ¥503.1 billion, a fall of ¥18.2 bil-

tomer satisfaction by providing products and services

lion, or 3.5% from the interim period of the previous fiscalthat are differentiated from those of competitors throughyear. This was chiefly due to a decline in orders secured

technology and brand equity. By pursuing these activi-

by the Rolling Stock, Construction Machinery & Crushingties, we of the KHI Group work to increase our enterprise

Plant segment, which had experienced a surge of over-value and respond to the expectations of shareholders,seas orders in the previous interim period. Net sales forcustomers, employees, and the communities we serve.

the interim period rose ¥14.4 billion, or 2.8%, to ¥537.7

In implementing these basic policies, we have set a spe-billion, supported by increases in sales of the Rollingcific target of attaining a 9% or higher before-tax return

Stock, Construction Machinery & Crushing Plant, Plant

on invested capital (ROIC) under our medium-term busi-& Infrastructure Engineering, and other segments, which

ness plan. To reach this target of creating a high-margin

more than offset declines, mainly in the Shipbuilding andearnings structure, we are carrying out structural reforms

Consumer Products & Machinery segments.

in keeping with our policy of “Quality followed by

Profitability improved, with operating income rising a

Quantity” and are exercising selectivity and concentra-

sharp ¥5.3 billion, or 329.8%, to ¥6.9 billion, as a resulttion in the allocation of our resources while working toof recovery in the Consumer Products & Machinery andimprove our business model.

other segments. Net income also rebounded, to ¥3.4 billion for the interim period, versus a net loss of ¥3.4 billion
for the interim period of the previous fiscal year.

1Under our policy of selectivity and concentration, weAlong with these activities, all of KHI’s operating

have positioned Consumer Products & Machinery anddivisions are continuing to improve their earnings power

Aerospace as core businesses and classified Rolling Stockby taking the initiatives needed to lower their break-evenand Gas Turbines & Machinery as developing businesses

points through continued cost-cutting and other mea-

for further investment. We are allocating our resources

sures. In addition, we are focusing on substantially improv-

to these businesses on a priority basis to strengthen our

ing our non-price related competitiveness by offering

earnings structure.

high-value-added products and services backed by ourOn the other hand, we have positioned Shipbuilding

sophisticated technology and brand reliability. We are

and Plant & Infrastructure Engineering as segments tar-also taking steps to minimize the impact of foreign

geted for structural reform. These reforms have been

exchange rate fluctuations through the flexible use ofwide-ranging and included the establishment of Kawasaki

hedging schemes and, from a cost perspective, signifi-

Shipbuilding Corporation as a wholly owned subsidiarycantly diversifying currencies.

and consolidating our four plants for the fabrication ofWithin today’s fast-changing business environment,

steel structures into a single facility. Nevertheless, theKHI is steadily implementing structural reforms in line

operating environment, especially for our industrial plantwith its medium-term plan to create a stronger, higher-business in the Plant & Infrastructure Engineering seg-margin earnings base. As we proceed with these initia-

ment, remains challenging because of the cutbacks intives to make KHI a stronger and more profitable

government public works investment and price competi-

enterprise, we look forward to the continuing support

tion. These circumstances have made it difficult for theand advice of our shareholders.

business to return to profitability. We therefore plan toimplement major structural reforms by setting up our

December 2004

industrial plant division as a wholly owned subsidiaryin April 2005. Operating as a subsidiary, this business is
expected to strengthen its performance and create a stable operating base by managing its activities more flexi-

Masamoto Tazaki

bly and efficiently and focusing on products and areas

President and CEO

where it has a competitive advantage.

2

Review of Operations

Shipbuilding
During the interim period under review, this segment
received orders amounting to ¥73.0 billion, ¥26.4 billion, or
56.5%, higher than for the interim period of the previous
year. In total, orders were won for six new vessels: two LNG
carriers, one LPG carrier, one bulk carrier, and two VLCCs(Very Large Crude Carriers).
Segment sales declined ¥7.2 billion, or 14.0%, to ¥44.5 billion, due mainly to decreased sales of newbuildings.

Operating income totaled ¥2.9 billion, ¥1.0 billion, or
25.2%, lower than for the interim period of the previous
year, owing mainly to the decline in sales and adverse
impact of foreign exchange rate movements.
Four vessels were delivered during the interim period:
one LNG carrier, one LPG carrier, and two bulk carriers.

Rolling Stock, Construction Machinery & Crushing Plant
both for the Taiwan high-speed train project, and firm salesof the segment’s construction machinery and crushingplant divisions.
Operating income rose ¥1.7 billion, or 116.8%, to ¥3.2 billion, boosted by the increase in sales.

Although this segment succeeded in winning orders for
Shinkansen train cars from the JR companies, subway cars
to be delivered to Sapporo City, and other products, neworders dropped ¥65.7 billion, or 63.9%, to ¥37.1 billion,
reflecting the receipt of large-scale overseas orders during
the interim period of the previous year.
Segment sales rose ¥9.7 billion, or 16.8%, to ¥67.6 billion.
This increase was due to the commencement of train car
deliveries and the expansion of railway construction work,

Aerospace
Orders received were up ¥3.0 billion, or 9.5%, to ¥34.2 billion. Although orders from the Japan Defense Agency (JDA)
for spare parts for aircraft declined slightly, orders from
customers in the commercial aircraft sector advanced, led
mainly by orders from The Boeing Company that were principally for component parts for its 767 and 777 passenger
aircraft.

Segment sales rose ¥3.6 billion, or 5.2%, to ¥73.5 billion.
Operating income was down ¥1.0 billion, or 48.4%, to¥1.1 billion, reflecting a decline in sales of higher-margin items
and the effect of unfavorable foreign currency fluctuations.

3Gas Turbines & Machinery
Orders won were up ¥31.2 billion, or 58.4%, to ¥84.5 billion,
owing to higher demand for component parts manufactured by the gas turbine division for the V2500, Trent, andother jet engines for commercial aircraft. Other contributing factors were new orders for turbines/boilers for vessels
secured by the machinery division of this segment.

Segment sales were up ¥2.4 billion, or 3.6%, to ¥68.2 billion, as a result of gains in revenues from aerodynamic
equipment manufactured by the machinery division andother items.
This segment reported an operating loss of ¥0.4 billion,
reflecting a decline of ¥1.1 billion in operating income. Thiswas primarily due to increased development expenses forcommercial aircraft engines.

Plant & Infrastructure Engineering
Orders received amounted to ¥57.4 billion, approximately
the same as for the interim period of the previous fiscal
year. Although new orders for the industrial plant divisionwere down because of a surge in large projects in the previous year, new orders were obtained by the environmental
plant division for municipal refuse incineration plants,
while new orders for the steel structures division held firm.
Segment sales expanded ¥16.9 billion, or 33.5%, to ¥67.5
billion. Principal components of segment sales included afertilizer and urea plant to Iran by the industrial plant division, municipal refuse incineration plants by the environmental plant division, and LPG tanks by the steel structures
division.
The segment reported an operating loss of ¥7.1 billion,
an increase of ¥2.1 billion, or 42.8%, from the same periodof the previous fiscal year. Factors accounting for thisincluded major cost overruns as a result of delays in construction work and additional construction work.

Consumer Products & Machinery
Sales of motorcycles in the U.S. and European markets aswell as sales of industrial robots were robust, but segment
sales were down ¥9.2 billion, or 5.5%, to ¥156.5 billion,
because of a change in the accounting period of subsidiaries to match that of the parent company.

Operating income amounted to ¥4.8 billion, an improvement from the operating loss of ¥2.6 billion reported for theinterim period a year earlier. Factors contributing to better
profitability included lower promotional expenses.

Other
Orders received by this segment decreased 6.2%, or ¥4.0
billion, to ¥60.3 billion. Sales declined ¥1.8 billion, or 3.0%,
to ¥60.1 billion, principally due to the fact that Kawasaki
Safety Services Industries, Ltd. (KSSI), was excluded fromamong consolidated subsidiaries as a result of the sale by

KHI of a portion of its interest in KSSI. Operating income
rose ¥1.3 billion, or 105.5%, to ¥2.6 billion, owing to strong
shipments by the hydraulic equipment division to customers in China.

4

Review by Geographic Segment
Sales in Japan for the interim period under review rose

Sales in Europe declined ¥3.3 billion, or 7.5%, to¥34.9 billion, or 9.5% in comparison with the interim period¥40.8 billion, owing to the effect of a change in accountingof the previous year, to ¥401.3 billion, primarily because

policy for KHI’s regional sales subsidiary in the consumerof an increase in sales recorded by the parent company.

products business that aligned that company’s account-

Operating income was ¥3.6 billion, compared with an oper-

ing period with that of the parent company. Operating

ating loss of ¥0.5 billion in the previous interim period.

income amounted to ¥0.9 billion, up from the interim

In North America, sales were down ¥20.9 billion, or

period of the previous year.

20.5%, to ¥81.0 billion. This was because of a decline in

In Asia, sales rose ¥3.6 billion, or 43.0%, to ¥12.0 billion,

rolling stock deliveries that followed a relatively high vol-mainly because of higher motorcycle business revenues.

ume of deliveries in the interim period of the previous

Also, compared with an operating loss of ¥0.3 billion inyear and a change in accounting policy for KHI’s regional

the interim period of the previous fiscal year, KHI record-sales subsidiaries in the consumer products business to

ed operating income in Asia of ¥1.0 billion.

align those companies’ accounting periods with that ofIn other areas, sales increased ¥0.1 billion, or 5.0%, tothe parent company. A decrease in sales in the rolling¥2.6 billion. In comparison with operating income of ¥0.1

stock business adversely affected the segment’s results;billion for the interim period of the previous year, thehowever, this was partly offset by a decline in sales pro-

operating loss for the interim period under review was

motion expenses in the consumer products business. As¥0.1 billion.

a result, the segment’s operating loss increased ¥0.2 billion, or 21.0%, to ¥1.1 billion.

Financial Position
As a result of the efficient management of assets, totalof property, plant and equipment accounted for theassets at the end of the interim period amounted tolargest portion of these cash outlays. Free cash flow was¥1,114.0 billion, ¥46.3 billion lower than at the end of the¥8.5 billion. Net cash used in financing activities during

interim period of the previous year, and interest-bearing

the interim period amounted to ¥14.8 billion, compareddebt was down ¥43.0 billion.

with ¥4.6 billion in the same period of the previous year,

Among cash flows, net cash provided by operating

as the Company made two bond issues in June andactivities during the interim period under review amount-

September but repaid borrowings and redeemed out-

ed to ¥19.8 billion, compared with ¥11.0 billion for the

standing bonds. As a result of these factors, cash andsame period of the previous year. Net cash used in invest-

cash equivalents at the end of the interim period were

ing activities was ¥11.3 billion, compared with ¥14.3 bil-

¥36.1 billion, ¥6.2 billion lower than at the end of thelion in the same period of the previous year. Acquisitions

previous fiscal year on March 31, 2004.
5

Condensed Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
As of September 30 and March 31, 2004 and September 30, 2003
Thousands of
U.S. dollars

Millions of yen

Assets:Current assets:
Cash on hand and in banks .........................................
Receivables, less allowance ........................................
Inventories.....................................................................
Other current assets ....................................................
Total current assets .................................................
Investments and long-term loans, less allowance ........
Net property, plant and equipment................................
Intangible and other assets .............................................
Total assets............................................................

Liabilities and shareholders’ equity:
Current liabilities:
Short-term borrowings and current
portion of long-term debt ..........................................
Payables .........................................................................
Advances from customers...........................................
Other current liabilities ...............................................
Total current liabilities ............................................
Long-term liabilities:
Long-term debt, less current portion.........................
Others.............................................................................
Total long-term liabilities.........................................
Minority interests .............................................................
Shareholders’ equity:
Common stock ..............................................................
Capital surplus ..............................................................
Retained earnings .........................................................
Net unrealized gains on securities .............................
Foreign currency translation adjustments ................
Treasury stock ..............................................................
Total shareholders’ equity ......................................
Total liabilities and shareholders’ equity..........

September 30, 2004
(unaudited)

March 31, 2004

¥0,036,520
313,005
358,127
47,824755,476
82,777
246,763
29,013¥1,114,029¥0,043,064
376,807335,064
44,545
799,480
77,839248,922
30,663¥1,156,904¥

54,111
313,103392,741
46,907
806,862
72,783261,884
18,762¥1,160,291$¥0,167,793
269,656
103,097
73,011
613,557¥0,188,652
286,117
110,900
91,870677,539¥0,229,708
241,502140,441
79,680691,331$ 1,510,968
2,428,240
928,384
657,460
5,525,052

224,095
78,319302,414
3,931

210,819
74,516285,335
3,855

205,178
79,155284,333
3,747

2,017,965
705,259
2,723,224
35,39881,427
31,38980,591
16,565(15,747)

81,427
31,38880,46913,266(16,283)

81,427
31,38870,742
9,326(11,918)

733,246
282,656
725,718
149,167(141,801)(98)
194,127¥1,114,029(92)
190,175¥1,156,904(85)
180,880¥1,160,291(882)
1,748,104$10,031,778

6

September 30, 2003
(unaudited)

September 30, 2004
(unaudited)

328,8612,818,595
3,224,917
430,653
6,803,026
745,4032,222,089
261,260$10,031,778

Condensed Consolidated Statements of Operations
and Retained Earnings
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2004 and 2003 (unaudited)
Millions of yen

Net sales ........................................................................................................................................................
Cost of sales..................................................................................................................................................
Gross profit...........................................................................................................................................
Selling, general and administrative expenses ..........................................................................................
Operating income ................................................................................................................................
Other income (expenses):
Interest and dividend income ................................................................................................................
Equity in income of unconsolidated subsidiaries and affiliates ........................................................
Interest expense.......................................................................................................................................
Other, net ..................................................................................................................................................
Income (loss) before income taxes and minority interests ...........................................................
Income taxes.................................................................................................................................................
Minority interests in net income of consolidated subsidiaries .............................................................
Net income (loss).................................................................................................................................
Retained earnings:
Balance at beginning of the period........................................................................................................
Net income (loss) for the period ...........................................................................................................
Cash dividends.........................................................................................................................................
Bonuses to directors and statutory auditors.......................................................................................
Reduction due to change of consolidation period of subsidiaries....................................................
Other..........................................................................................................................................................
Balance at end of the period ......................................................................................................................

7

Thousands of
U.S. dollars

2004

2003

2004

¥537,715
467,661
70,054
63,1096,945¥523,270
452,81570,45568,8391,616$4,842,098
4,211,265
630,833
568,294
62,5391,790
452(3,138)894
6,943(3,391)(187)¥ 3,365

1,106
326(3,941)(55)(948)(2,511)63¥ (3,396)$

16,1194,070(28,258)
8,051
62,521(30,536)(1,683)30,302¥ 80,469
3,365(2,885)
(39)
(222)
(97)
¥ 80,591¥ 77,069(3,396)(2,781)(71)—(79)¥ 70,742$ 724,620
30,302(25,979)(351)(1,999)(873)$ 725,718

Condensed Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2004 and 2003 (unaudited)Thousands of
U.S. dollars

Millions of yen
2004

Cash flows from operating activities:
Income (loss) before income taxes and minority interests ..............................................................
Adjustments to reconcile net income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation and amortization .........................................................................................................
Decrease in assets ..............................................................................................................................
Decrease in liabilities .........................................................................................................................
Other.....................................................................................................................................................
Net cash provided by operating activities.........................................................................................
Cash flows from investing activities:
Acquisition of tangible and intangible assets .................................................................................
Acquisition of investments in securities..........................................................................................
Other.....................................................................................................................................................
Net cash used for investing activities.................................................................................................

2004

2003

¥ 6,943¥(948)$ 62,521

15,13050,229(38,645)(13,841)
19,816

15,796
31,470(27,312)(8,006)
11,000136,245452,310(347,996)(124,638)
178,442(14,437)(1,006)
4,133(11,310)(17,146)
(406)
3,237
(14,315)(130,005)(9,059)37,218(101,846)

Cash flows from financing activities:
Increase (decrease) in short-term borrowings ...............................................................................
Proceeds from long-term debt ..........................................................................................................
Repayment of long-term debt............................................................................................................
Other.....................................................................................................................................................
Net cash used for financing activities ................................................................................................

(18,503)49,563(42,920)(2,958)(14,818)

13,682
15,675(31,007)(2,937)(4,587)(166,619)
446,313(386,493)(26,636)(133,435)

Effect of exchange rate changes..................................................................................................................

105

366

945

Net decrease in cash and cash equivalents...............................................................................................

(6,207)(7,536)(55,894)

Cash and cash equivalents at beginning of the period...........................................................................

42,37559,837

381,585

Decrease in cash and cash equivalents by change of consolidation period of subsidiaries ...........

(39)

—

(351)

Increase in cash and cash equivalents arising from newly consolidated subsidiaries ....................

—

1,330

—

Decrease in cash and cash equivalents arising from exclusion of consolidated subsidiaries ........

—

(999)

—

Cash and cash equivalents at end of the period ......................................................................................

¥36,129¥52,632$325,3408

Changes in Accounting Policies

1. Previously, the Company applied the percentage ofEngineering segment are ¥8,959 million higher andcompletion accounting method to projects requiring

the operating loss is ¥1,270 million smaller.

more than one year for completion and with a contract(b) Information by geographic area: Compared with theamount of ¥5,000 million or more. Beginning with theprevious method of reporting, sales in Japan areinterim period under review, the Company has begun¥31,360 million higher and operating income is up

to apply this method to projects requiring more than

¥3,394 million.

one year for completion and with a contract amount of

2. The closing dates for the interim accounting periods¥3,000 million or more. The Company made this changeof 32 consolidated subsidiaries of the KHI Group differ

because of the seasonality of its business performance,from the closing date of the Company’s financial state-

which is characterized by a higher percentage of com-ments (September 30). Previously, the Company used

pletions in the second half of the fiscal year than in thethe interim financial statements of these companies

first half. By expanding the scope of projects where theto prepare its consolidated financial statements.

percentage of completion method is applied, the finan-

Beginning with the interim period under review, thecial statements now present a significantly more accu-

Company has prepared a provisional settlement ofrate view of Company performance. As a result of thisaccounts for the five consolidated subsidiaries thatchange in accounting policy, net sales for the interim

close their interim accounting periods on June 30,

period under review were ¥31,360 million higher andincluding Kawasaki Motors Corporation Japan,

operating income was ¥3,394 million higher than they

Kawasaki Motors Corp., U.S.A., and Kawasaki Motors

would have been without this change.

Europe N.V., and other two subsidiaries, and used
these provisional accounts in preparing the Company’s

As a result of this change, the segment information on

consolidated financial statements. Retained earnings

pages 10 to 12 for the interim period under review has

were adjusted for profits (losses) for the three-month

been altered as follows:

period. The Company made this change, along with the(a) Information by industry segment: Compared withcommencement of quarterly financial reporting, withthe previous method of reporting, sales of thethe aim of presenting its earnings more accurately andAerospace segment are ¥18,637 million higher andthereby increasing the transparency of its disclosure.

operating income is up ¥1,852 million. Sales of the

As a result, retained earnings at the beginning of theGas Turbines & Machinery segment are ¥3,764 mil-period were reduced by ¥222 million.

lion higher and the operating loss is ¥272 million
lower. Sales of the Plant & Infrastructure9Segment Information
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2004 and 2003 (unaudited)(a) Information by industry segment
Millions of yen
2004
External
sales

Shipbuilding ...............................................................................................
Rolling Stock, Construction Machinery& Crushing Plant .....................................................................................
Aerospace ..................................................................................................
Gas Turbines & Machinery ......................................................................
Plant & Infrastructure Engineering .........................................................
Consumer Products & Machinery...........................................................
Other...........................................................................................................
Total....................................................................................................
Eliminations ...............................................................................................
Consolidated total.............................................................................

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥ 44,471¥

507¥ 44,978¥ 42,092¥2,886

67,60073,46068,17067,463
156,490
60,061
537,715—¥537,715

715
831
8,803
5,655
2,531
19,73038,772(38,772)¥0000—

68,31574,291
76,973
73,118159,02179,791
576,487(38,772)¥537,715

65,11773,222
77,34580,259154,219
77,232569,486(38,716)¥530,770

3,198
1,069
(372)
(7,141)
4,802
2,559
7,001
(56)
¥6,945

Millions of yen
2003

Shipbuilding ...............................................................................................
Rolling Stock, Construction Machinery& Crushing Plant .....................................................................................
Aerospace ..................................................................................................
Gas Turbines & Machinery ......................................................................
Plant & Infrastructure Engineering .........................................................
Consumer Products & Machinery...........................................................
Other...........................................................................................................
Total....................................................................................................
Eliminations ...............................................................................................
Consolidated total.............................................................................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥051,683¥00,780¥052,463¥048,606¥3,85757,88569,81565,79950,530165,651
61,907523,270—¥523,270

1,585
983
5,269
5,566
1,661
19,60535,449(35,449)¥0000—

59,47070,79871,06856,096167,31281,512558,719(35,449)¥523,270

57,99568,72770,33361,096
169,950
80,267556,974(35,320)¥521,654

1,475
2,071
735
(5,000)(2,638)
1,245
1,745
(129)
¥1,616

Thousands of U.S. dollars
2004
External
sales

Shipbuilding ............................................................................................... $ 440,459
Rolling Stock, Construction Machinery& Crushing Plant .....................................................................................
608,735
Aerospace ..................................................................................................
661,504
Gas Turbines & Machinery ......................................................................
613,868
Plant & Infrastructure Engineering .........................................................
607,501
Consumer Products & Machinery........................................................... 1,409,185
Other...........................................................................................................
540,846
Total.................................................................................................... 4,842,098
Eliminations ...............................................................................................
—
Consolidated total............................................................................. $4,842,098

10Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)

4,566$ 405,025$ 379,037$25,988

6,438
7,483
79,27050,923
22,792
177,668
349,140(349,140)$0,000—615,173
668,987
693,138
658,424
1,431,977
718,514
5,191,238(349,140)$4,842,098

586,375
659,361
696,488722,728
1,388,735
695,470
5,128,194(348,635)$4,779,559

28,7989,626(3,350)(64,304)
43,242
23,044
63,044(505)$62,539$(b) Information by geographic area
Millions of yen
2004

Japan...........................................................................................................
North America ...........................................................................................
Europe ........................................................................................................
Asia .............................................................................................................
Other areas ................................................................................................
Total....................................................................................................
Eliminations ...............................................................................................
Consolidated total.............................................................................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses¥401,293
81,00040,822
11,993
2,607
537,715—¥537,715¥ 83,699
7,556
2,032
7,729
49
101,065(101,065)¥ 000-—¥484,992
88,55642,854
19,722
2,656
638,780(101,065)¥537,715¥481,348
89,62041,96518,707
2,791
634,431(103,661)¥530,770

Operatingincome (loss)¥3,644(1,064)
889
1,015
(135)
4,349
2,596
¥6,945

Millions of yen
2003

Japan...........................................................................................................
North America ...........................................................................................
Europe ........................................................................................................
Asia .............................................................................................................
Other areas ................................................................................................
Total....................................................................................................
Eliminations ...............................................................................................
Consolidated total.............................................................................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses¥366,350
101,934
44,1198,385
2,482
523,270—¥523,270¥68,812
8,057
2,263
4,819
41
83,992(83,992)¥ 000-—¥435,162
109,991
46,382
13,2042,523
607,262(83,992)¥523,270¥435,661
110,870
45,652
13,514
2,472
608,169(86,515)¥521,654

Operatingincome (loss)¥ (499)
(879)
730
(310)
51
(907)
2,523
¥1,616

Thousands of U.S. dollars
2004
External
sales

Japan........................................................................................................... $3,613,625
North America ...........................................................................................
729,401
Europe ........................................................................................................
367,600
Asia .............................................................................................................
107,996
Other areas ................................................................................................
23,476
Total.................................................................................................... 4,842,098
Eliminations ...............................................................................................
—
Consolidated total............................................................................. $4,842,098

11Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)$753,706
68,042
18,29869,599441
910,086(910,086)$00000—$4,367,331
797,443
385,898
177,595
23,917
5,752,184(910,086)$4,842,098$4,334,516
807,024
377,893
168,455
25,133
5,713,021(933,462)$4,779,559$32,815(9,581)8,005
9,140(1,216)
39,16323,376$62,539

(c) Overseas sales
Millions of yen

%

2004

North America...................................................................................
Europe................................................................................................
Asia .....................................................................................................
Other areas........................................................................................
Total ...........................................................................................

Millions of yen%

Thousands of
U.S. dollars
2004

2003

Overseassales% against
net sales

Overseassales% against
net sales

Overseassales¥ 99,135
51,79469,083
48,835¥268,847

18.4%
9.6
12.8
9.0
49.9%

¥123,223
70,31329,62434,291¥257,451

23.5%
13.4
5.7
6.6
49.2%

$ 892,706
466,403
622,089439,757$2,420,955

12

Net Sales, Orders and Order Backlog by Industry Segment
For the six months ended September 30, 2004 and 2003 (unaudited)Thousands of
U.S. dollars

Millions of yen
2004

2003

2004

Net sales:
Shipbuilding................................................................................................................................................ ¥ 44,471
Rolling Stock, Construction Machinery & Crushing Plant....................................................................
67,600Aerospace ...................................................................................................................................................
73,460Gas Turbines & Machinery .......................................................................................................................
68,170
Plant & Infrastructure Engineering..........................................................................................................
67,463
Consumer Products & Machinery ........................................................................................................... 156,490
Other............................................................................................................................................................
60,061
Total......................................................................................................................................................... ¥537,715¥ 51,683
57,88569,81565,79950,530165,651
61,907¥523,270$ 400,459
608,735
661,504
613,868
607,501
1,409,185
540,846$4,842,098

Orders received:
Shipbuilding................................................................................................................................................ ¥ 73,031
Rolling Stock, Construction Machinery & Crushing Plant....................................................................
37,080Aerospace ...................................................................................................................................................
34,236
Gas Turbines & Machinery .......................................................................................................................
84,548Plant & Infrastructure Engineering..........................................................................................................
57,443
Consumer Products & Machinery ........................................................................................................... 156,490
Other............................................................................................................................................................
60,262
Total......................................................................................................................................................... ¥503,090¥ 46,676
102,748
31,27753,36457,318
165,651
64,221¥521,255$ 657,641
333,904
308,294
761,351
517,271
1,409,185
542,656$4,530,302

Thousands of
U.S. dollars

Millions of yen

Order backlog:
Shipbuilding.......................................................................
Rolling Stock, Construction Machinery& Crushing Plant .............................................................
Aerospace ..........................................................................
Gas Turbines & Machinery ..............................................
Plant & Infrastructure Engineering.................................
Consumer Products & Machinery ..................................
Other ..................................................................................
Total ...............................................................................

As of
September 30, 2004

As ofMarch 31, 2004

As of
September 30, 2003

As of
September 30, 2004

¥ 226,441¥ 193,705¥0,162,497$ 2,038,820

269,932
223,039
160,254
266,059—
27,358¥1,173,053

294,017260,321140,327
273,837—
27,167¥1,189,374

317,760
180,363
136,379
331,829—
25,294¥1,154,122

2,430,725
2,008,456
1,443,080
2,395,849—
246,357$10,563,287

13

Kawasaki Corporate Data
(As of September 30, 2004)
Kawasaki Heavy Industries, Ltd.

Stock Exchange Listings:
Tokyo, Osaka, Nagoya

Kobe Head Office:
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, Japan

Newspapers in Which Public Notices Are Made:
Nihon Keizai Shimbun
Kobe Shimbun

Tokyo Head Office:World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6116, Japan

Transfer Agent:
The Chuo Mitsui Trust and Banking Company, Limited
33-1, Shiba 3-chome,
Minato-ku, Tokyo 105-8574, JapanFounded: 1878

Handling Office:
The Chuo Mitsui Trust and Banking Company, Limited
Osaka Branch Office
2-21, Kitahama 2-chome,
Chuo-ku, Osaka 541-0041, Japan

Incorporated: 1896
Paid-in Capital: ¥81,427,090,720
Number of Shares Issued: 1,443,394,172 shares
Number of Shareholders: 129,841
Number of Employees: 29,126

Independent Auditors:
KPMG AZSA & Co.
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, JapanADR Facility:
KHI has a sponsored American Depository Receipt (ADR) facility.
ADRs are traded on the over-the-counter market in the UnitedStates under CUSIP number 486 359 20 1 with each ADR representing four ordinary shares.
ADR Depository:
The Bank of New York
101 Barclay St., 22 West,
New York, NY 10286, U.S.A.
Phone: 1-212-815-8161
U.S. Toll-Free: 888-269-2377(888-BNY-ADRS)
http://www.bankofny.com/adr
KHI Web Site at: http://www.khi.co.jp

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