2003

Semiannual Report
For the six months ended September 30, 2003

Consolidated Financial Highlights
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2003 and 2002

Thousands of
U.S. dollars

Millions of yen
2003

For the period:
Net sales.................................................................................................................................................. ¥0,523,270
Operating income (loss) .......................................................................................................................
1,616
Net loss ...................................................................................................................................................
3,396
Research and development expenses.................................................................................................
6,100
Depreciation and amortization ............................................................................................................
15,796
Net cash provided by operating activities .........................................................................................
11,0002002

2003¥ 539,691(2,234)
3,488
6,400
15,34821,068$04,703,551
14,52630,526
54,831
141,987
98,876Per share (in yen and U.S. dollars):
Net loss ...................................................................................................................................................
Cash dividends.......................................................................................................................................

2.40
—

2.50
—

0.02
—

At period-end:
Total assets ............................................................................................................................................
Total shareholders’ equity ...................................................................................................................

1,160,291
180,880

1,172,682
159,451

10,429,581
1,625,887

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

521,255
1,154,122

523,025
1,190,754

4,685,438
10,374,130

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

29,651

29,009Notes: 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 ¥111.25 to $1.00, the approximate rate of exchange at
September 30, 2003.

Net Sales

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

Apr. 2003–Mar. 2004
523.3
Apr. 2002–Mar. 2003
539.7

699.9

Apr. 2001–Mar. 2002
492.1

652.4

Apr. 2000–Mar. 2001
454.3
0

200

400

600

800

(3.4)

Apr. 2002–Mar. 2003

(3.5)

Apr. 2001–Mar. 2002

(2.3)

Apr. 2000–Mar. 2001

606.2

First half

Apr. 2003–Mar. 2004

1,000

1,200

Second half

1,400

-15

-10

-5

16.5

(12.4)

8.6
2.1

0First half

510Second half

15

20

To Our Shareholders
Transforming Our Earnings Structure

Shipbuilding segment. As a result of the absence of aand Targeting Sustainable Growthdeferral of tax expenses under tax-effect accounting

Although signs of recovery emerged in the Japaneseguidelines, the net loss for the interim period was ¥3.4 bil-

economy during the six-month interim period ended

lion, an improvement of ¥0.1 billion, or 2.6%, from theSeptember 30, 2003, overall economic conditions

same period of the previous year.

remained weak, along with the continuation of cuts in

Although our basic policy regarding allocation of earn-government public works investment and lackluster per-ings is to pay stable dividends to our shareholders, insonal consumption.

view of the loss for the interim period and in considera-

In this operating environment, the Kawasaki Heavytion of the need to expand retained earnings to enhance

Industries (KHI) Group conducted proactive marketing

our capabilities for future growth, we regret that we haveactivities and reported total orders received on a consoli-

decided to suspend the payment of cash dividends fordated basis of ¥521.3 billion, a decline of ¥1.8 billion, or

the interim period under review.

0.3%, compared to the interim period of the previous fis-

The corporate philosophy of the KHI Group is to draw

cal year. Orders for the Rolling Stock, Construction

on its broad base of advanced technologies to create new

Machinery & Crushing Plant and Aerospace segments

value in product offerings that work modern-day wonders

rose, while those for the Shipbuilding and Plant &on land, at sea, and in the air and contribute to economic

Infrastructure Engineering segments declined.

and social development around the world. To attain the

Net sales for the interim period decreased ¥16.4 billion,

goals of its corporate philosophy, the fundamental man-or 3.0%, relative to the interim period of the previous fis-agement policy of the KHI Group is to work to increase

cal year, to ¥523.3 billion, despite increases in thecustomer satisfaction by providing superior products

Aerospace and certain other segments, as sales of theand services—differentiated by technology and thePlant & Infrastructure Engineering, Rolling Stock,strength of the Kawasaki brand—that increase its enter-

Construction Machinery & Crushing Plant, and other seg-prise value and respond to the expectations of its share-

ments declined.

holders, customers, and employees and the communities

From an earnings perspective, we reported operating

it serves.

income of ¥1.6 billion, compared with an operating loss of

Based on this fundamental guiding principle, we are¥2.2 billion for the interim period of the previous year,

working to build a strong earnings base by evolving

mainly because of an improvement in margins in our

toward a business portfolio that can adapt successfully to1changes in the business environment and achieve sus-

subsidiary and took additional steps to reform our earn-

tainable growth. Our target is to reach a before-tax returnings structure in the steel structures business throughon invested capital (ROIC) of 9% or higher by the end of

the closure of the Noda Works and the consolidation of

the fiscal year ending March 31, 2007.

its operations into the Harima Works.

To attain our objectives, we are sharpening the focus

Along with these measures, we are taking urgent coun-of our business portfolio through the exercise of selectivi-

termeasures to cope with the adverse affects caused byty and concentration in allocating our corporate

the recent appreciation of the yen against the dollar.

resources. We are directing our resources especially

Furthermore, we are taking steps to increase the propor-

toward core and developing businesses, namely

tion of dollar-denominated costs and introduce greater

Aerospace, Consumer Products & Machinery, Rolling

flexibility in our labor costs in order to deal more flexibly

Stock, and Gas Turbines & Machinery, and working toand effectively with medium- to long-term changes in thestrengthen the contribution of these activities to KHI’s

operating environment, including exchange rate fluctua-

earnings.

tions.

Also, under our policy of “Quality followed by

As these comments suggest, KHI is moving forward

Quantity,” we are making every effort to offer products

steadily with the implementation of its K21 Medium-Termand services that are differentiated by technology andBusiness Plan, which is intended to improve KHI’s capa-

brand equity and further sharpening our business model

bilities for adapting to change in the business environ-

aimed at strengthening profitability and creating a stable,

ment. We would like to take this opportunity to thank our

high-margin earnings foundation.

shareholders for their support and look forward to their

For the foreseeable future, we must assume that thecontinuing advice and understanding.

operating environment in Japan and overseas will remainchallenging. To enhance KHI’s enterprise value throughDecember 2003

the attainment of sustainable growth, we plan to move
forward with realignments in our portfolio of businesses
and steadily implement a range of initiatives to improve
profitability. As an integral part of these activities, we

Masamoto Tazaki

strengthened our base of operations in the aerospace

President and CEO

field by welcoming NIPPI Corporation as a wholly owned

2

Review of Operations

Shipbuilding
Net sales rose ¥1.9 billion, or 3.7%, to ¥51.7 billion,
due mainly to increased sales of newbuildings.
Operating income totaled ¥3.9 billion, a substantial
improvement from the same period of the previous fiscal year when the segment posted an operating loss of¥1.5 billion, owing to the sale of higher-margin vessels.
A total of six vessels were delivered in the interim
period: two LNG carriers, two LPG carriers, and two
bulk carriers.

For the interim period under review, this segment
received orders amounting to ¥46.7 billion. Althoughorders for 10 new vessels—one LNG carrier, eight bulk
carriers, and one VLCC (Very Large Crudeoil Carrier)—
were secured during the period, total orders declined¥28.5 billion, or 37.9%, from the same period of the previous fiscal year, when the segment received orders forthree LNG carriers and other vessels.

Rolling Stock, Construction Machinery & Crushing Plant
sales compared to the interim period of the previous fiscal year, which benefited from sales of subway cars to
the NYCT and electric trains for Hong Kong.
Operating income rose to ¥1.5 billion, an increase of¥0.5 billion, or 49.4%, in tandem with the improvementin the profitability of domestic orders.

This segment reported a ¥27.0 billion, or 35.6%, increase
in total orders received for the interim period, to ¥102.7
billion, including orders for subway cars to be delivered
to the New York City Transit Authority (NYCT) andTaiwan.
Net sales declined ¥21.5 billion, or 27.1%, to ¥57.9 billion, due mainly to the reduction of large-scale overseas

Aerospacenext-generation aircraft for the JDA: the P-X, Next
Maritime Aircraft, and the C-X, Next Transport Aircraft,as well as the inclusion of NIPPI within the scope of
consolidation beginning with the interim period underreview.
Operating income increased ¥0.7 billion, or 54.6%, to¥2.1 billion.

Orders received by this segment—including orders
from The Boeing Company mainly for component partsfor its 777 and 767 passenger aircraft and from theJapan Defense Agency (JDA) for spare parts for aircraft—rose ¥5.9 billion, or 23.4%, from the same periodof the previous fiscal year, to ¥31.3 billion.
Net sales rose a substantial ¥24.2 billion, or 52.9%, to¥69.8 billion, owing to sales related to developing the3

Gas Turbines & Machinery
Net sales decreased ¥1.9 billion, or 2.8%, to ¥65.8 billion, mainly because of lower turnover of turbines/
boilers for vessels and industrial gas turbine power
generators.
Operating income was down ¥1.3 billion, or 64.4%, to¥0.7 billion.

Orders received rose ¥3.3 billion, or 6.5%, from thesame period of the previous fiscal year, to ¥53.4 billion,
reflecting increases in orders for component parts for
the V2500, Trent, and other jet engines for commercial
aircraft.

Plant & Infrastructure Engineering¥50.5 billion. This result was because of the relatively
high level of sales reported in the interim period of theprevious year for a fertilizer plant in China and large
municipal refuse incineration plants.
This segment reported an operating loss of ¥5.0 billion, an increase of ¥0.4 billion, or 8.7%, from the same
period of the previous year as a result of the decline insales.

This segment reported a decline of ¥24.6 billion, or
30.1%, in orders received, to ¥57.3 billion, despite anorder for a ferro-nickel production plant from Indonesia
and certain other facilities, due to a smaller number ofmajor orders for the interim period.
Despite sales of municipal refuse incineration plants
to local governments and a combined cycle power plant
to Brazil, net sales were down ¥29.6 billion, or 36.9%,
from the same period of the previous fiscal year, toConsumer Products & Machinery
As a consequence of higher sales promotion expenses
and other factors, the segment reported an operating
loss of ¥2.6 billion, an increase of ¥2.5 billion.

Net sales of this segment exceeded those of the interim
period of the previous year by ¥3.3 billion, or 2.1%, rising to ¥165.7 billion as a result of higher sales of motorcycles in U.S. and European markets.

Otheroverseas sales of industrial hydraulic equipment toChina. Operating income amounted to ¥1.2 billion, representing an improvement of ¥1.7 billion.

Orders received in this segment rose ¥11.9 billion, or
22.7%, from the same period of the previous fiscal year,to ¥64.2 billion. Net sales were also up ¥7.3 billion,or 13.3%, to ¥61.9 billion, principally due to higher

Note: The industrial hydraulic equipment business, which was formerly included in the Gas Turbines & Machinery segment, has been included in the Other segment beginning with the interim period under review. Data for the interim period of the previous fiscal year have been reclassified to reflect this change.

4

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

Sales in Europe increased ¥6.8 billion, or 18.1%, to ¥44.1

amounted to ¥366.4 billion, a slight increase of ¥2.6 bil-billion, because of higher revenues of the motorcycle

lion, or 0.7%, from the same period of the previous fiscal

sales subsidiary in the region. Operating income declined

year. Operating loss dropped ¥5.6 billion, or 91.8%, to¥0.4 billion, or 33.0%, to ¥0.7 billion.

¥0.5 billion, supported by a recovery in the shipbuilding

In Asia, sales declined ¥1.8 billion, or 17.7%, from thebusiness.

interim period of the previous fiscal year, to ¥8.4 billion,

In North America, sales were down ¥24.2 billion, orand this geographic segment reported an operating loss

19.2%, to ¥101.9 billion, because of reduced deliveries toof ¥0.3 billion compared to operating income of ¥0.2 bil-customers from the rolling stock subsidiary. This geo-

lion in the interim period of the previous fiscal year.

graphic segment reported an operating loss of ¥0.9 bil-In other areas, sales increased ¥0.3 billion, or 13.7%, tolion, compared with an operating income of ¥0.4 billion¥2.5 billion, and operating performance achieved break-for the same period of the previous fiscal year.

even—approximately the same level as for the interim
period of the previous fiscal year.

Cash Flows
During the interim period under review, net cash provid-

the same period of the previous year, as the Company

ed by operating activities amounted to ¥11.0 billion, com-

reduced the amount of debt outstanding. Free cash flow,

pared with ¥21.1 billion for the same period of thewhich is the sum of net cash provided by operating activ-

previous year. Net cash used in investing activities wasities and net cash used in investing activities, was nega-¥14.3 billion, versus ¥18.9 billion for the same period oftive ¥3.3 billion. As a result of these factors, cash andthe previous year. Acquisition of property, plant andcash equivalents at the end of the interim period were

equipment accounted for the largest portion of these¥7.2 billion lower than at the end of March 2003, amount-cash outlays. Net cash used in financing activities

ing to ¥52.6 billion.

amounted to ¥4.6 billion, compared with ¥38.3 billion in5

Condensed Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
As of September 30 and March 31, 2003 and September 30, 2002
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 portionof 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, 2003
(unaudited)

March 31, 2003

¥0,054,111
313,103392,741
46,907
806,862
72,783261,884
18,762¥1,160,291¥0,061,185
393,067
342,387
31,323827,962
65,744
234,352
21,103¥1,149,161¥

55,463321,214415,451
50,510842,638
74,068240,552
15,424¥1,172,682$00,486,391
2,814,409
3,530,257
421,636
7,252,693
654,228
2,354,013
168,647$10,429,581¥0,229,708
241,502140,441
79,680691,331¥0,201,248
294,769
100,829
93,345690,191¥ 221,919
272,351
155,872
66,667
716,809$02,064,791
2,170,804
1,262,391
716,225
6,214,211

205,178
79,155284,333
3,747

226,936
51,858
278,794
5,591

226,92264,177
291,099
5,323

1,844,297
711,505
2,555,802
33,681

81,427
31,38870,742
9,326(11,918)(85)
180,880¥1,160,291

81,427
24,68377,0693,671(12,225)(40)
174,585¥1,149,161

81,427
24,68360,5594,836(12,029)(25)
159,451¥1,172,682

731,928
282,139
635,883
83,829(107,128)(764)
1,625,887$10,429,581

6

September 30, 2002
(unaudited)

September 30, 2003
(unaudited)

Condensed Consolidated Statements of Operations
and Retained Earnings
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2003 and 2002 (unaudited)
Millions of yen

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

7

Thousands of
U.S. dollars

2003

2002

2003

¥523,270
452,81570,45568,8391,616¥539,691
474,106
65,58567,819(2,234)$4,703,551
4,070,247
633,304
618,778
14,526

1,106
326(3,941)(55)
948(2,511)
63¥003,396

2,221
61(5,157)(3,400)
8,509
5,109
(88)
¥ 3,488

9,942
2,930
(35,425)
(494)
8,521
(22,571)566$0,030,526¥077,069
3,396(2,781)(71)(79)¥070,742¥ 64,110
3,488
(—)
(63)
(—)
¥ 60,559$0,692,755
30,526(24,998)
(638)
(710)
$0,635,883

Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2003 and 2002 (unaudited)

Millions of yen

Cash flows from operating activities:
Loss before income taxes and minority interests ..............................................................................
Depreciation and amortization .............................................................................................................
Provision for retirement and severance benefits ...............................................................................
Accrued bonuses ....................................................................................................................................
Provision for (reversal of) allowance for doubtful accounts ............................................................
Loss on sales of investments in subsidiaries ......................................................................................
Gain (loss) on sale of securities............................................................................................................
Gain (loss) on sale of fixed assets ........................................................................................................
Gain on contribution of securities to employees’ retirement benefit trust ....................................
Provision for restructuring charges .....................................................................................................
Interest and dividend income ...............................................................................................................
Interest expense......................................................................................................................................
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables ...................................................................................................................
Inventories ...............................................................................................................................
Other current assets...............................................................................................................
Increase (decrease) in:
Trade payables........................................................................................................................
Advances received..................................................................................................................
Other current liabilities .........................................................................................................
Other, net .................................................................................................................................................
Subtotal ................................................................................................................................................
Cash received for interest and dividends............................................................................................
Cash paid for interest.............................................................................................................................
Cash paid for income taxes ...................................................................................................................
Net cash provided by operating activities.........................................................................................

Continues to next page

8

Thousands of
U.S. dollars

2003

2002

2003

¥00(948)
15,7962,256(2,801)
277
(118)
(413)
(311)
—
(1,047)(1,106)
3,941¥0(8,509)
15,348
4,484
709(1,403)—38
648(1,312)—(2,221)5,157$00(8,521)
141,987
20,279(25,178)
2,490(1,061)(3,712)(2,796)—(9,411)(9,942)35,42580,614(40,904)(8,240)74,404(49,120)(5,661)

724,620(367,676)(74,067)(51,844)
39,964(12,631)(810)
21,675
1,726(3,986)(8,415)
11,000(48,634)
44,454(3,289)1,071
26,1642,266(4,761)(2,601)21,068(466,013)
359,227(113,537)(7,283)
194,831
15,514(35,829)(75,640)
98,876

Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Cash flows from investing activities:
Increase in time deposits due more than three months....................................................................
Acquisition of property, plant and equipment ...................................................................................
Proceeds from property, plant and equipment ..................................................................................
Acquisition of intangible assets ............................................................................................................
Proceeds from intangible assets...........................................................................................................
Acquisition of investments in securities..............................................................................................
Proceeds from investments in securities ............................................................................................
Increase (decrease) in short-term loans..............................................................................................
Payment received on long-term loans receivable ..............................................................................
Proceeds from collection of long-term loans receivable ...................................................................
Proceeds from purchase of newly consolidated subsidiaries’ stock...............................................
Decrease in other investments .............................................................................................................
Net cash used for investing activities.................................................................................................

¥00(132)(14,669)1,584(2,478)
12
(406)
819
235
(34)
123
—
631
(14,315)¥00(174)(17,276)
489
(741)
22
(876)
139
(871)
(459)
408
162
245
(18,932)$ 0(1,187)(131,856)
14,238(22,274)
108(3,649)
7,362
2,112
(306)
1,106
—
5,672
(128,674)

Cash flows from financing activities:
Increase (decrease) in short-term borrowings ...................................................................................
Proceeds from long-term debt ..............................................................................................................
Repayment of long-term debt................................................................................................................
Acquisition of treasury stock ................................................................................................................
Cash dividends paid ...............................................................................................................................
Cash dividends paid to minority interests ..........................................................................................
Net cash used for financing activities ................................................................................................

13,682
15,675(31,007)(62)(2,747)(128)(4,587)(27,537)
14,434(25,105)
(15)
(1)
(100)
(38,324)

122,984
140,899(278,714)(557)(24,692)(1,151)(41,231)

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

366

481

3,290

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

(7,536)(35,707)(67,739)

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

59,837

89,777537,861

Increase due to inclusion in consolidation ...............................................................................................

1,330

—

11,955Decrease due to exclusion from consolidation ........................................................................................

(999)

—

(8,980)Cash and cash equivalents at end of the period ......................................................................................

¥52,632¥54,070$473,097

Continued from previous page9

Segment Information
Note: The industrial hydraulic equipment business, which was formerly included in
the Gas Turbines & Machinery segment, has been included in the Other segment beginning with the interim period under review. Data for the interim period of the previous fiscal year have been reclassified to reflect this change.

Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2003 and 2002 (unaudited)(a) Information by industry segment
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

Millions of yen
2002

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)¥ 49,823¥00,711¥ 50,534¥ 52,066¥(1,532)

79,42345,657
67,69480,128
162,316
54,650539,691—¥539,691

1,197
829
5,441
10,713
2,291
18,26939,451(39,451)¥0000—

80,62046,486
73,13590,841
164,607
72,919579,142(39,451)¥539,691

79,63345,146
71,07095,439164,768
73,355
581,477(39,522)¥541,925

987
1,340
2,065
(4,598)(161)(436)(2,335)101¥(2,234)

Thousands of U.S. dollars
2003
External
sales

Shipbuilding ............................................................................................... $0,464,566
Rolling Stock, Construction Machinery& Crushing Plant .....................................................................................
520,315
Aerospace ..................................................................................................
627,551
Gas Turbines & Machinery ......................................................................
591,452
Plant & Infrastructure Engineering .........................................................
454,202
Consumer Products & Machinery........................................................... 1,488,998
Other...........................................................................................................
556,467
Total.................................................................................................... 4,703,551
Eliminations ...............................................................................................
—
Consolidated total............................................................................. $4,703,551

10Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)$007,011$0,471,577$0,436,908$34,669

14,247
8,836
47,36250,031
14,930176,225
318,642(318,642)$0,000—534,562
636,387
638,814504,233
1,503,928
732,692
5,022,193(318,642)$4,703,551

521,303617,771
632,207549,178
1,527,640
721,501
5,006,508(317,483)$4,689,025

13,25918,616
6,607(44,945)(23,712)
11,191
15,685(1,159)$14,526

(b) Information by geographic area
Millions of yen
2003

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

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥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¥0(499)
(879)
730
(310)
51
(907)
2,523
¥1,616

Millions of yen
2002Japan...........................................................................................................
North America ...........................................................................................
Europe ........................................................................................................
Asia .............................................................................................................
Other areas ................................................................................................
Total....................................................................................................
Eliminations ...............................................................................................
Consolidated total.............................................................................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥363,783
126,182
37,360
10,1842,182
539,691—¥539,691¥78,793
7,984
1,891
3,540
62
92,270(92,270)¥0,00—¥442,576
134,166
39,251
13,724
2,244
631,961(92,270)¥539,691¥448,631
133,803
38,162
13,4882,161
636,245(94,320)¥541,925¥(6,055)
363
1,089
236
83
(4,284)2,050¥(2,234)

Thousands of U.S. dollars
2003
External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)

Japan........................................................................................................... $3,293,034
North America ...........................................................................................
916,261
Europe ........................................................................................................
396,575
Asia .............................................................................................................
75,371$618,535
72,422
20,34243,317$3,911,569
988,683
416,917
118,688$3,916,054
996,584
410,355
121,474$ (4,485)(7,901)
6,562(2,786)

Other areas ................................................................................................
22,310Total.................................................................................................... 4,703,551
Eliminations ...............................................................................................
—
Consolidated total............................................................................. $4,703,551

369
754,985(754,985)$00000—22,6795,458,536(754,985)$4,703,551

22,221
5,466,688(777,663)$4,689,025

458(8,152)
22,678$14,52611

(c) Overseas sales
Millions of yen

Thousands of
U.S. dollars

Overseassales% against
net sales

Overseassales¥152,803
51,751
40,56436,310¥281,428

28.3%
9.6
7.5
6.7
52.1%

$1,107,622
632,027
266,283
308,234$2,314,166

Millions of yen

Overseassales% against
net sales¥123,223
70,31329,62434,291¥257,451

23.5%
13.4
5.7
6.6
49.2%

2003

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

%

%

12

2003

2002

Net Sales, Orders and Order Backlog by Industry Segment
For the six months ended September 30, 2003 and 2002 (unaudited)Thousands of
U.S. dollars

Millions of yen
2003

2002

2003

Net sales:
Shipbuilding................................................................................................................................................ ¥051,683
Rolling Stock, Construction Machinery & Crushing Plant....................................................................
57,885
Aerospace ...................................................................................................................................................
69,815
Gas Turbines & Machinery .......................................................................................................................
65,799Plant & Infrastructure Engineering..........................................................................................................
50,530Consumer Products & Machinery ........................................................................................................... 165,651
Other............................................................................................................................................................
61,907
Total......................................................................................................................................................... ¥523,270¥ 49,823
79,42345,657
67,69480,128
162,316
54,650¥539,691$0,464,566
520,315
627,551
591,452454,202
1,488,998
556,467$4,703,551

Orders received:
Shipbuilding................................................................................................................................................ ¥046,676
Rolling Stock, Construction Machinery & Crushing Plant.................................................................... 102,748
Aerospace ...................................................................................................................................................
31,277
Gas Turbines & Machinery .......................................................................................................................
53,364
Plant & Infrastructure Engineering..........................................................................................................
57,318Consumer Products & Machinery ........................................................................................................... 165,651
Other............................................................................................................................................................
64,221
Total......................................................................................................................................................... ¥521,255¥ 75,166
75,76425,34850,106
81,967
162,316
52,358¥523,025$0,419,560
923,578
281,142479,676515,218
1,488,997
577,267$4,685,438

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, 2003

As ofMarch 31, 2003

As of
September 30, 2002

As of
September 30, 2003

¥0,162,497¥0,173,304¥ 212,559$01,460,647

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

273,563
208,410
160,874
327,911—31,501¥1,175,563

260,050
172,649
168,398
340,621—36,477¥1,190,754

2,856,270
1,621,240
1,225,879
2,982,732—
227,362$10,374,130

Note: The industrial hydraulic equipment business, which was formerly included in the Gas Turbines & Machinery segment, has been included in the Other segment beginning with the interim period under review. Data for the interim period of the previous fiscal year have been reclassified to reflect this change.

13

Kawasaki Corporate Data
(As of September 30, 2003)
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: 134,672
Number of Employees: 29,651

Independent Auditors:
Asahi & 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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