Report of Earnings and Financial Statements for the
Six Months Ended September 30, 2018 (Consolidated)(Prepared pursuant to Japanese GAAP)
October 30, 2018
Listed company’s name:

Kawasaki Heavy Industries, Ltd.

Listed on:
Stock code:
URL:
Representative:
Contact:
Tel:

1st sections of the TSE, and NSE
7012
https://www.khi.co.jp/
Yoshinori Kanehana, President
Tatsuo Hoshino, Senior Manager, Accounting Department+81 3-3435-2130

Scheduled dates:
Submission of quarterly securities filing:
Commencement of dividend payments:
Supplementary materials to quarterly earnings:
Quarterly earnings presentation:

November 7, 2018
December 3, 2018
Available
Conducted (for institutional investors, analysts and thepress)

1. Consolidated Financial Results for the Six Months ended September 30, 2018
(April 1, 2018 – September 30, 2018)(Amounts in millions of yen rounded down to the nearest million yen)

(1) Operating Results
Net sales(Percentage figures represent changes versus the year-ago period)
Net income attributable
Operating income
Recurring profit
to owners of parent
million yen%
million yen%
million yen%

million yen%
Six Months Ended
688,107(3.0)
8,454 (47.5)
September 30, 2018
Six Months Ended
709,721
1.7
16,11589.7
September 30, 2017
Note: Comprehensive income: Six months ended September 30, 2018:
Six months ended September 30, 2017:
Earnings per share

Earnings per share– diluted
yen

207(98.6)(3,592)-

15,116-

10,853-(3,628) million yen
13,893 million yen

-%
-%

yen
Six Months Ended(21.50)
September 30, 2018
Six Months Ended
64.97
September 30, 2017
Note: As the Company carried out a share consolidation with a 10:1 ratio of common shares with an effective
date of October 1, 2017, earnings per share have been calculated assuming this share consolidation was
carried out at the beginning of the fiscal year ended March 31, 2017.

1

(2) Financial Condition
Total assets

Net assets

million yen

million yen%

September 30, 2018

1,900,544

472,569

24.0

March 31, 2018

1,785,028

481,38626.1

Note: Shareholders’ equity:

Equity ratio

September 30, 2018: 456,913 million yen
March 31, 2018
: 466,061 million yen

2. Dividends

Record date or term

End of firstquarteryen

End of second
quarteryen

Dividend per share
End of third
End of fiscal
quarter
year
yen
yen

Year ended
3.00
March 31, 2018Year ending
35.00
March 31, 2019Year ending March
31, 2019 (forecast)
Notes: 1.Revisions to the most recently announced dividend forecast: None

Full year
yen

30.00

-

35.00

70.00

2.The Company conducted a share consolidation with a 10:1 ratio of common shares, with an effective
date of October 1, 2017. The dividend per share for the fiscal year ended March 31, 2018 factoring in
the impact of the share consolidation is shown. The total annual dividend for the fiscal year ended
March 31, 2018 is denoted with the “-“ mark. Without the impact of the share consolidation factored in,
the dividend per share for the fiscal year ended March 31, 2018 would be ¥3 per share, and the total
annual dividend would be ¥6 per share.

3. Forecast of Consolidated Earnings for the Year Ending March 31, 2019
(April 1, 2018 – March 31, 2019)

Net sales

Full year

million yen%

1,645,000

4.4(Percentage figures represent changes versus the year-ago period)
Net income
Earnings per
Operating income
Recurring profit
attributable to owners
shareof parent
million yen%
million yen%
million yen%
yen
66,00018.0

49,500Note: Revisions to the most recently announced earnings forecast: None

2

14.5

31,0007.2

185.57

Notes1) Changes affecting the status of material subsidiaries (scope of consolidation): None2) Accounting procedures specific to preparation of quarterly consolidated financial statements: Yes*For further details, see “2. Consolidated Financial Statements (4) Notes on financial statements” onpage 15 in the Accompanying Materials.
3) Changes in accounting policies, changes in accounting estimates, and correction of errors(1) Changes in accounting policies in accord with revisions to accounting standards: None
(2) Changes in accounting policies other than (1): None
(3) Changes in accounting estimates: None
(4) Correction of errors: None
4) Number of shares issued and outstanding (common stock)(1) Number of shares issued as of period-end (including treasury stock)
September 30, 2018:
167,080,532 shares
March 31, 2018:
167,080,532 shares(2) Number of shares held in treasury as of period-end
September 30, 2018:
33,962 shares
March 31, 2018:
33,049 shares(3) Average number of shares during respective periods
Six months ended September 30, 2018:
167, 046,946 share
Six months ended September 30, 2017:
167, 054,136 share*As the company carried out a share consolidation with a 10:1 ratio of common shares with an effective date ofOctober 1, 2017, the average number of shares during respective periods has been calculated assuming that
this share consolidation was carried out at the beginning of the fiscal year ended March 31, 2017.

The quarterly report of earnings and financial statements is exempted from quarterly review
procedures based on the Financial Instruments and Exchange act.
Appropriate Use of Financial Forecasts and Other Important Matters
Forward-Looking Statements
These materials contain various forward-looking statements and other forecasts regarding performanceand other matters. Such statements are based on information available at the time of their preparation, anddo not mean that the Company promises to achieve these figures. Actual results may differ from thoseexpressed or implied by forward-looking statements due to a range of factors. For assumptions underlying
earnings forecasts and other information regarding the use of such forecasts, refer to “1. Qualitative
Information and Financial Statements (3) Consolidated earnings outlook” on page 10 in the
Accompanying Materials.
How to Obtain Supplementary Briefing Material on Quarterly Financial Results and Details of theQuarterly Financial Results Briefing
The Company plans to conduct a briefing for institutional investors ,analysts and the press by conference
call on Tuesday October 30, 2018, and to post the briefing material on quarterly financial results to be
used for the briefing on TDnet and the Company’s website simultaneously with the announcement offinancial results.

3

Accompanying Materials – Contents
1. Qualitative Information and Financial Statements

5(1) Consolidated operating results

5(2) Consolidated financial position

10(3) Consolidated earnings outlook

10

2. Consolidated Financial Statements

11(1) Consolidated balance sheets

11(2) Consolidated statements of income and comprehensive income13(3) Consolidated cash flow statements

14(4) Notes on financial statements

15(Notes on the going-concern assumption)

15(Notes on significant changes in the amount of shareholders’ equity)

15(Accounting procedures specific to preparation of quarterly consolidated financial statements)

15(Related to consolidated balance sheets)

15(Related to consolidated statements of income)15(Segment information)

16

3. Other18(1) Claim for damages in overseas LNG tank construction work
4. Supplementary information on consolidated earnings forecasts for the fiscal year ending March
31, 201941818

1. Qualitative Information and Financial Statements(1) Consolidated operating results
In the first six months of the fiscal year ending March 31, 2019, the global economy is relatively
lacking in vigor overall due to the economic slowdown in emerging countries and resource-richcountries, along with other factors, despite the ongoing modest growth centered on the U.S., where
the real economy remains strong. In addition, uncertainty about future prospects for the real
economy persists, including concerns about economic downturn caused by the trade friction between
the U.S. and China, influences to corporate activities due to Brexit and other factors. Going forward,these risks with the potential to drag down the global economy must continue to be watched.
The Japanese economy has been recovering modestly, due to the modest increasing of capital
investment, the improvement in corporate earnings, and other factors. Although overall modest
growth is expected to continue, it is necessary to continue to closely watch foreign exchange rates
since the economic policies of the U.S. and other countries or other factors may trigger a swing to
yen appreciation.
Amid such an operating environment, the Group’s orders received in the first six months of the
fiscal year ending March 31, 2019, increased versus the previous fiscal year, mainly in the Energy
System & Plant Engineering. Net sales decreased overall, due to decreases in the Aerospace Systemand the Rolling Stock segments, despite increase in the Precision Machinery & Robot segment.
Operating income decreased overall, due to the deterioration in the Rolling Stock and the Aerospace
Systems and other segments, despite improvement in the Ship & Offshore Structure segment.
Recurring profit decreased due to the decrease of operating income, the payments for the in-service
issues of commercial aircraft jet engines and other factors. Net income attributable to owners ofparent decreased as a result of the decrease of recurring profit.
As a result, the Group’s consolidated orders received increased ¥52.9 billion versus the same
period of the previous fiscal year to ¥719.8 billion, consolidated net sales decreased ¥21.6 billion
year on year to ¥688.1 billion, consolidated operating income decreased ¥7.6 billion year on year to¥8.4 billion, consolidated recurring profit fell by ¥14.9 billion year on year to ¥0.2 billion, and net
income attributable to owners of parent decreased ¥14.4 billion year on year to a loss of ¥3.5 billion.

5

Consolidated operating performance in the first half of fiscal year is summarized by segment
below.
Segment Information
Segment net sales, operating income, and orders received (billion yen)Six months ended September 30

Orders received

2018 (B)Six months ended

2017 (A)Change (B – A)

September 30
Net

OperatingNet

OperatingNet

Operating

2017

2018

Changesales

incomesales

incomesales

income(A)(B)(B – A)

Aerospace Systems

232.5

15.6

210.2

9.4

(22.3)

(6.2)

197.7

201.1

3.4

Energy System & Plant Engineering

105.9

0.1

103.9

2.2

(1.9)

2.0

116.6

146.7

30.0

Precision Machinery & Robot

86.9

9.0

102.1

9.6

15.2

0.5

92.4

104.8

12.3

Ship & Offshore Structure

45.0

(5.1)

39.7

1.2

(5.3)

6.4

16.3

16.5

0.1

Rolling Stock

63.6

(0.9)

45.4

(8.8)

(18.2)

(7.9)

68.4

60.5

(7.8)

Motorcycle & Engine

136.9

(2.0)

144.4

(4.6)

7.4

(2.5)

136.9

144.4

7.4

Other

38.5

1.4

42.1

1.0

3.6

(0.4)

38.2

45.6

7.3

-

(2.1)

-

(1.6)

-

0.4

-

-

-

709.7

16.1

688.1

8.4

(21.6)

(7.6)

666.9

719.8

52.9

Adjustments
Total

Notes: 1. Net sales include only sales to external customers.
2. The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainlyon estimated demand.
3. The Company has reviewed the method of business segment classification from the first three months of the
fiscal year ending March 31, 2019 and has changed its reportable segments from the previous Ship &Offshore Structure, Rolling Stock, Aerospace, Gas Turbine & Machinery, Plant & Infrastructure, Motorcycle& Engine, Precision Machinery, and Other Operations to Aerospace Systems, Energy System & Plant
Engineering, Precision Machinery & Robot, Ship & Offshore Structure, Rolling Stock, Motorcycle &Engine, and Other Operations .
Consolidated segment information for the first six months of the fiscal year ended March 31, 2018 has been
prepared using the revised segment classification method.

6

Aerospace Systems
Concerning the business environment surrounding the Aerospace Systems segment, there is acertain level of demand from the Ministry of Defense in Japan amid the tight defense budget, while
demand for commercial aircraft airframes and jet engines is increasing in conjunction with the rise in
the number of air passengers.
Amid such an operating environment, consolidated orders increased ¥3.4 billion year on year to¥201.1 billion thanks to continued strong demand for component parts for commercial aircraft andincreased demand for component parts for commercial aircraft jet engines, despite a reduction inorders from the Ministry of Defense.
Consolidated net sales decreased ¥22.3 billion year on year to ¥210.2 billion due to decrease of
demand of component parts for the Ministry of Defense and commercial aircraft, despite increase of
demand of component parts for commercial aircraft jet engines.
Consolidated operating income fell by ¥6.2 billion year on year to ¥9.4 billion due to factors
including an increase in amortization of new program development costs of component parts forcommercial aircraft jet engines.
Energy System & Plant Engineering
Regarding the business environment surrounding the Energy System & Plant Engineering
segment, in addition to the recovery in resources development and oil and natural gas-related
investment overseas due to the rise in crude oil prices, there is still demand for energy infrastructure
maintenance in Asia. Besides, demand for distributed power sources is increasing due to stronger
interest in investment to the environment and energy conservation, among other factors. In Japan,
there is ongoing demand for replacing aging facilities for refuse incineration plants and industrial
machinery. Meanwhile, in the energy and environmental field, although there is large potential
demand for distributed power sources in Japan, investment plans are slightly delayed in light of theliberalization of electricity.
Amid such an operating environment, consolidated orders received increased ¥30.0 billion year on
year to ¥146.7 billion, due to the order received of a LNG tank and Combined Cycle Power Plant(CCPP) for the Japanese market among other factors.
Consolidated net sales were ¥103.9 billion on par with the same period of the previous fiscal year
ended March 31, 2018 due to increase in construction work volume in the Energy System segment
and the other factors, despite the decline in construction work volume on a chemical plant foroverseas market.
Consolidated operating income was ¥2.2 billion, a ¥2.0 billion increase compared to the previous
year, due to the profitability improvement in the Energy System segment and the other factors.

7Precision Machinery & Robot
With respect to the business environment surrounding the Precision Machinery & Robot segment,
the construction machinery market is brisk, centered on robust demand for vigorous excavators in
China, and the construction machinery manufacturers, which are our customers, are competing toincrease production each other. Robot market demand remained solid in China and other emerging
markets, as well as in developed markets. There are, however, some negative factors, including
market contraction caused by semiconductor manufacturers’ efforts to restrain capital investment aswell as the trade war between the U.S. and China, and the outlook has therefore started to take on acertain amount of uncertainty.
Amid such an operating environment, consolidated orders received increased ¥12.3 billion year on
year to ¥104.8 billion, due to the increase in hydraulic components for construction machinery andvarious industrial robots.
Consolidated net sales increased ¥15.2 billion year on year to ¥102.1 billion, due to an increase insales of hydraulic components for construction machinery and various industrial robots.
Consolidated operating income was ¥9.6 billion, a ¥0.5 billion increase compared to the same
period of the previous fiscal year ended March 31, 2018, due to increase of sales.
Ship & Offshore StructureWith respect to the business environment surrounding the Ship & Offshore Structure segment,
while new-build vessel prices are recovering after bottoming out and demand for gas-fueled vessels
has been increasing in conjunction with the tightening of environmental regulations, competition
remains intense due to factors including the pushing back of demand for LNG carriers because of thedelay in LNG development projects and the continuation of policies by the Chinese and South
Korean governments to support their domestic shipbuilding industries.
Amid such an operating environment, consolidated orders received were ¥16.5 billion on par withthe same period of the previous fiscal year ended March 31, 2018, due to an order received for a
LNG bunkering vessel and other factors.
Consolidated net sales fell ¥5.3 billion year on year to ¥39.7 billion, due to a change in the sales
mix between LNG carriers and LPG carriers, and other factors.
Consolidated operating income was ¥1.2 billion, a ¥6.4 billion improvement from the same periodof the previous fiscal year due to improvement of shipbuilding cost and other factors, despite
decrease of sales.

8Rolling Stock
With respect to the business environment surrounding the Rolling Stock segment, there continues
to be stable demand in Japan for the replacement of aging railcars. In North America, demand for
new and replacement railcars have been increasing in the New York area, which is our core market,
and the other areas. Meanwhile, in Asia, demand in emerging markets is increasing in tandem with
the Japanese government’s efforts to promote infrastructure-related exports.
In this business environment, consolidated orders received was ¥60.5 billion, a ¥7.8 billion
decrease compared to the same period of the previous fiscal year ended March 31, 2018 when theorder for the rolling stocks for high-speed railway (MRT) in Bangladesh was received, despite thereceived order for new and replacement railcars for the U.S.
Consolidated net sales decreased ¥18.2 billion year on year to ¥45.4 billion, due to the decrease ofsales for overseas market, the U.S. and other countries.
Consolidated operating income decreased ¥7.9 billion year on year to ¥8.8 billion of the operating
loss due to a deterioration of profitability in orders for the U.S.
Motorcycle & Engine
Regarding the business environment surrounding the Motorcycle & Engine segment, the modest
growth in motorcycle markets mainly in Europe is continuing, and the decline in demand for
motorcycles in emerging countries is signaling a bottoming out. With respect to utility vehicles, themarket continues to grow stably mainly in North America, and the general-purpose engine market isalso growing steadily.
Amid such an operating environment, consolidated net sales increased ¥7.4 billion year on year to¥144.4 billion, due to the increase in motorcycles and vehicles for developed countries.
Consolidated operating income deteriorated ¥2.5 billion year on year, resulting in an operating
loss of ¥4.6 billion, as, despite the increase in sales, there was a temporary increase in SG&A andsales promotion expenses, a rise in prices of steel and other materials in the U.S., and other factors.
Other Operations
Consolidated net sales increased ¥3.6 billion year on year to ¥42.1 billion.
Consolidated net operating income was ¥1.0 billion on per with the same period in the previous
fiscal year.

9(2) Consolidated financial position(i) Assets
Total assets at September 30, 2018, were ¥1,900.5 billion, ¥115.5 billion increase from March 31,
2018. Current assets increased ¥117.7 billion year on year to ¥1,233.5 billion, due to increasing ofworks in process and so on. Fixed assets decreased ¥2.2 billion year on year to ¥667.0 billion, due
to decrease of deferred tax assets and other factors.
(ii) Liabilities
Liabilities increased ¥124.3 billion year on year to ¥1,427.9 billion due to the increasing ofinterest bearing liabilities and other factors.
Interest bearing liabilities increased ¥155.2 billion year on year to ¥601.8 billion.
(iii) Net assets
Consolidated net assets decreased ¥8.8 billion year on year to ¥472.5 billion due to the decreaseof dividends and other factors.
(3) Consolidated earnings outlook
Regarding the earnings forecasts for the fiscal year ending March 31, 2019, the Company has
made no changes to the figures announced on October 19 for consolidated net sales, consolidated
operating income, consolidated recurring profit, and net income attributable to owners of parent.
The outlook for orders received was increased by ¥20.0 billion from the previously announced(July 31) figure to ¥1.61 trillion. This upward revision was based on expectations for higher orders
in both the Aerospace Systems segment and the Motorcycle & Engine segment, despite a projected
decline in orders in the Energy System & Plant Engineering segment. ROIC is forecasted to be 5.9%,
while ROE is expected to be 6.5%.
The Company’s earnings forecasts assume exchange rates of ¥110 to the U.S. dollar and ¥130 to theeuro.

Note regarding consolidated earnings outlook
The above earnings outlook is based on information available at the time of preparation, andincludes risks and uncertainties. We therefore discourage making investment decisions depending
solely on this outlook. Please note that actual earnings may differ materially from this outlook, due
to a variety of important factors stemming from changes the external environment and/or theCompany’s internal environment. Important factors that impact actual operating performance include,
but are not limited to, the economic situation surrounding the Company’s scope of business, foreignexchange rates, in particular the yen/dollar exchange rate, tax codes and other regulatory
system-related issues.

102. Consolidated Financial Statements(1) Consolidated balance sheets
Million yen
As of
As of
March 31, 2018
September 30, 2018
AssetsCurrent assets
Cash on hand and in banks
Trade receivables
Merchandise and finished products
Work in process
Raw materials and supplies
Other
Allowance for doubtful receivables
Total current assets
Fixed assets
Net property, plant and equipment
Buildings and structures
Other
Total property, plant and equipment
Intangible assets
Investments and other assets
Other
Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets
Liabilities
Current liabilities
Trade payables
Electronically recorded obligations - operating
Short-term debt
Income taxes payable
Accrued bonuses
Provision for product warranties
Provision for losses on construction contracts
Advances from customers
Other
Total current liabilities
Long-term liabilities
Bonds payable
Long-term debt
Net defined benefit liability
Provision for the in-service issues of commercial aircraft jet engines

Other
Total long-term liabilities
Total liabilities

11

70,632
470,11062,385
326,459
115,893
72,542(2,247)
1,115,776

57,414
491,50274,609412,644
119,331
81,948(3,906)
1,233,543

186,623
293,173
479,797
16,178

195,701
287,661
483,362
16,124

176,961(3,685)173,276
669,252
1,785,028

171,031(3,519)167,512
667,000
1,900,544

245,398
117,772
108,978
6,042
19,90313,00018,258194,306
145,737
869,398

216,735
118,720
136,094
4,372
16,96911,651
20,690185,802
264,657
975,694130,000
185,685
86,836
31,721
434,244
1,303,642

140,000
165,807
89,699(*1) 9,745
47,028452,279
1,427,974

Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity

104,484
54,573308,010(124)
466,944

104,484
54,542
299,406(127)
458,306

Accumulated other comprehensive income
Net unrealized gains on securities, net of tax
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total net assets and liabilities

3,526
403
719
(5,532)(883)
15,324
481,386
1,785,028

4,064(1,715)
221(3,963)(1,393)
15,656
472,569
1,900,54412

(2) Consolidated statements of income and comprehensive income
Consolidated statements of income
Million yen
Six months ended
September 30, 2017
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Salaries and benefits
R&D expenses
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Equity in income of non-consolidated subsidiaries and affiliates
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expense
payments for the in-service issues of commercial aircraft jet engines

Other
Total non-operating expenses
Recurring profit
Income before income taxes
Income taxes
Net income (loss)
Net income attributable to non-controlling interests
Net income (loss) attributable to owners of parent

Six months ended
September 30, 2018709,721599,529
110,191

688,107581,972
106,135

25,542
20,65947,874
94,076
16,11526,537
21,24049,903
97,680
8,454

358
185
2,553
1,442
1,376
5,916

239
180
802
3,102
1,398
5,724

1,338
5,577
6,915
15,11615,116
3,250
11,865
1,011
10,853

1,546(*1) 9,745
2,680
13,971
207
207
2,940
(2,733)859(3,592)

Consolidated statements of comprehensive income
Million yen
Six months ended
September 30, 2017
Net income (loss)
Other comprehensive income
Net unrealized gains on securities
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income
Comprehensive Income attributable to:
Owners of parent
Non-controlling interests

13

Six months ended
September 30, 2018

11,865(2,733)

576
(272)
831
2,009

572
(2,148)
1,723
1,572

(1,116)(2,615)

2,028
13,893
12,855
1,038(895)(3,628)(4,102)473

(3) Consolidated cash flow statements
Million yen
Six months ended
September 30, 2017
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in accrued bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for losses on construction contracts
Increase (decrease) in net defined benefit liability
payments for the in-service issues of commercial aircraft jet engines
Interest and dividend income
Interest expense
Share of (profit) loss of entities accounted for using equity method(Increase) decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payables
Increase (decrease) in advance payments
Increase (decrease) in advances received from customers(Increase) decrease in other current assets
Increase (decrease) in other current liabilities
Other
Subtotal
Cash received for interest and dividends
Cash paid for interest
Cash paid for income taxes
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of property, plant, equipment and intangible assets
Proceeds from sales of property, plant, equipment and intangible
assetsAcquisition of investments in securities
Proceeds from sales of investments in securities
Acquisition of investments in subsidiaries and affiliate
Net decrease (increase) in short-term loans receivable
Payments of long-term loans receivable
Proceeds from collection of long-term loans receivable
Other
Net cash used for investing activities
Cash flows from financing activities
Net increase (decrease) in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of bonds
Redemption of bonds
Cash dividends paid
Cash dividends paid to non-controlling interests
Other
Net cash used for financing activities
Effect of exchange rate changes
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

14

Six months ended
September 30, 201815,11627,442(115)(3,491)
(933)
(727)
7,197
(543)
1,338
(2,553)(43,312)(31,518)(11,014)(4,386)(40,403)(19,133)(12,149)
1,203(117,983)
524(1,338)(4,536)(123,333)

207
29,342
1,465(2,968)(1,367)
2,409
4,868
9,745
(420)
1,546
(802)
(9,526)(78,347)(28,770)(1,939)(12,247)(7,059)(17,295)
3,434(107,727)
477(1,541)(4,630)(113,421)(38,595)(43,587)

566

334

(222)
54
(1,791)
25
(57)
45
(309)
(40,285)(557)
136(2,081)
(51)
(91)
82
(1,717)(47,533)

110,375
56,355(16,599)
20,000(10,000)(3,375)(662)(462)
155,631(2,457)(10,445)
50,72240,277

144,642
7,779(7,617)20,000(10,000)(5,032)(679)
218
149,311(2,250)(13,893)
64,36250,468

(4) Notes on financial statements

Notes on the going-concern assumption
Not applicable
Notes on significant changes in the amount of shareholders’ equity
Not applicable
Accounting procedures specific to preparation of quarterly consolidated financial statements(Calculation of tax expense)
The Company calculates tax expense by rationally estimating its effective tax rate after
application of tax effect accounting to pretax net income for the fiscal year which includes thesecond quarter under review, and multiplying quarterly pretax net income by said estimated effective
tax rate. If unable to use the estimated effective tax rate, the Company calculates tax expense bymultiplying the statutory effective tax rate by quarterly pretax net income adjusted to reflect material
differences other than temporary differences.
Income taxes are reported inclusive of income tax adjustments.

Related to consolidated balance sheets(*1) The provision for the in-service issues of commercial aircraft jet engines
We participate as a risk and revenue sharing partner on the Rolls-Royce Trent 1000 engine
program, which has been impacted by the challenge of managing significant in-service issues.
Rolls-Royce continues to work hard to remedy this situation and has made further substantial
progress on the implementation of long-term solutions and mitigation of the near-term impact
on customers.
In the FY2018 2nd quarterly financial results, we have made a provision of the abnormal cost
related to in-service issues which we would cover as a member of this program.

Related to consolidated statements of income(*1) The payments for the in-service issues of commercial aircraft jet engines
We participate as a risk and revenue sharing partner on the Rolls-Royce Trent 1000 engine
program, which has been impacted by the challenge of managing significant in-service issues.
Rolls-Royce continues to work hard to remedy this situation and has made further substantial
progress on the implementation of long-term solutions and mitigation of the near-term impact
on customers.
In the FY2018 2nd quarterly financial results, we have made a provision of the abnormal cost
related to in-service issues which we would cover as a member of this program. The provision
was included within the non-operating expenses.

15

Segment information
1. Six months ended September 30, 2017 (April 1, 2017 – September 30, 2017)(1) Sales and income (loss) by reportable segment
Million yen

Aerospace Systems
Energy System & Plant Engineering
Precision Machinery & Robot
Ship & Offshore structure
Rolling stock
Motorcycle & Engine
Other
Reportable segment total
Adjustments*1
Consolidated total
Notes: 1. Breakdown of adjustments:

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

232,568
105,90286,96745,07563,690136,980
38,537
709,721709,721

2,073
8,825
6,758
1,301
52
305
19,67338,991(38,991)-

234,641
114,728
93,72546,377
63,742
137,286
58,210748,712(38,991)
709,721

15,688186
9,070(5,199)(922)(2,058)
1,458
18,223(2,108)
16,115

Million yen
IncomeAmountIntersegment transactions(77)
Corporate expenses*(2,031)
Total(2,108)*Corporate expenses mainly comprise general and administrative expenses not attributed to reportablesegments.
2. Segment income adjustments are based on operating income reported on the consolidated statements
of income for the corresponding period.

(2) Impairment loss on fixed assets and goodwill by reportable segment
Not applicable16

2. Six months ended September 30, 2018 (April 1, 2018 – September 30, 2018)(1) Sales and income (loss) by reportable segment
Million yen

Aerospace Systems
Energy System & Plant Engineering
Precision Machinery & Robot
Ship & Offshore structure
Rolling stock
Motorcycle & Engine
Other
Reportable segment total
Adjustments*1
Consolidated total
Notes: 1. Breakdown of adjustments:

External sales

Intersegment
sales

Total sales

Operatingincome (loss)

210,222103,926
102,178
39,73945,426
144,425
42,188688,107
688,107

6,105
10,113
7,682
1,685
13
313
19,58845,502(45,502)-

216,327
114,039
109,861
41,42445,440144,739
61,777
733,610(45,502)688,107

9,471
2,203
9,635
1,289
(8,878)(4,656)
1,022
10,086(1,631)
8,454

Million yen
AmountIncomeIntersegment transactions
Corporate expenses*(60)(1,571)

Total(1,631)* Corporate expenses mainly comprise general and administrative expenses not attributed to reportablesegments.
2. Segment income adjustments are based on operating income reported on the consolidated statements
of income for the corresponding period.

(2) Review of reportable segment
The Company has reviewed the method of business segment classification from the first threemonths of the fiscal year ending March 31, 2019 and has changed its reportable segments from theprevious Ship & Offshore Structure, Rolling Stock, Aerospace, Gas Turbine & Machinery, Plant &Infrastructure, Motorcycle & Engine, Precision Machinery, and Other Operations to Aerospace
Systems, Energy System & Plant Engineering, Precision Machinery & Robot, Ship & Offshore
Structure, Rolling Stock, Motorcycle & Engine, and Other Operations.
Consolidated segment information for the first six months of the fiscal year ended March 31, 2018has been prepared using the revised segment classification method.

(3) Impairment loss on fixed assets and goodwill by reportable segment
Not applicable173. Other(1) Claim for damages in overseas LNG tank construction work
On a certain overseas LNG tanks construction project, overall costs increased from initially
expected due to a breach of contract by the overseas subcontractor. In response, the Company has

claimed compensation for damages (approximately ¥48.0 billion) as of September 30, 2018,with respect to a portion of the damages incurred by the Company as a result of the breach ofcontract by the aforementioned subcontractor, and the Company is proceeding with procedures
to recover the claimed amount.
Part of the claimed amount is recorded as “Other” in current assets, which is deducted fromestimated overall costs.

4. Supplementary information on consolidated earnings forecasts for the fiscal year ending
March 31, 2019(1) Net sales and operating income (loss)
Billion yen

Reportable segment

Outlook for the year ending March 31, 2019 (fiscal 2018)
Revised forecast
Forecast issued
Change(A)
October 19, 2018 (B)(A – B)

490.0

Operatingincome(loss)
35.5

490.0

Operatingincome(loss)
35.5

270.0

8.0

270.0

230.0

24.0

85.0
135.0
345.0
90.0

1.0
(14.0)
16.0
3.0
(7.5)
66.0

Net sales
Aerospace Systems
Energy System & Plant
Engineering
Precision Machinery &RobotShip & Offshore Structure
Rolling Stock
Motorcycle & Engine
Other
Adjustments
Total

1,645.0

Year ended
March 31, 2018
(Fiscal 2017) (actual)-

Operatingincome(loss)
-

8.0

-

230.0

24.0

85.0
135.0
345.0
90.0

1.0
(14.0)
16.0
3.0
(7.5)
66.0

Net sales

1,645.018

469.5

Operatingincome(loss)
30.8

-

251.6

7.6

-

-

198.9

21.6

-

-

95.6
141.7
331.6
85.0

(3.8)
(12.4)
15.2
2.9
(6.2)
55.9

Net sales-

Net sales

1,574.2

(2) Orders received

Reportable segment

Outlook for the year ending March 31, 2019 (fiscal 2018)
Revised forecast
Forecast issued
Change(A)
July 31, 2018 (B)(A – B)
405.0
385.0
20.0

Billion yen
Year ended
March 31, 2018
(Fiscal 2017) (actual)
498.9

Aerospace Systems
Energy System & Plant
300.0
310.0
(10.0)Engineering
Precision Machinery &
245.0
245.0
Robot
Ship & Offshore Structure
100.0
100.0
Rolling Stock
130.0
130.0
Motorcycle & Engine
345.0
335.0
10.0
Adjustments
85.0
85.0
Total
1,610.0
1,590.0
20.0
Note: The Motorcycle & Engine segment’s orders received are equal to its net sales as production is based mainly on
estimated demand.

223.6
207.1
4.7
257.1
331.6
84.8
1,608.0(3) Before-tax ROIC

Reportable segment
Aerospace Systems
Energy System & Plant
Engineering
Precision Machinery &RobotShip & Offshore Structure
Rolling Stock
Motorcycle & Engine
Total

(%)
Year ended
March 31, 2018
(Fiscal 2017) (actual)

Outlook for the year ending March 31, 2019 (fiscal 2018)
Revised forecast
Forecast issued
Change(A)
July 31, 2018 (B)(A – B)

7.4

7.7

(0.3)

7.8

7.6

7.8

(0.2)

8.0

21.1

21.1

-

22.9

2.6
(22.2)
11.3
5.9

2.9
3.4
11.3
8.0

(0.3)
(25.6)(2.1)(21.3)(26.2)
9.4
3.9

Notes: 1. Forecast’s assumed foreign exchange rates: ¥110 = US$1, ¥130= 1 euro
2. Before-tax ROIC = (income before income taxes + interest expense) / invested capital.

19