2007

Semiannual Report
For the six months ended September 30, 2007

Consolidated Financial Highlights
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2007 and 2006

Thousands of
U.S. dollars

Millions of yen
2007

For the period:
Net sales ......................................................................................................................................... ¥0,699,540
Operating income ...........................................................................................................................
39,050Net income .....................................................................................................................................
19,878
Research and development expenses...............................................................................................
16,400Depreciation and amortization ........................................................................................................
17,642
Net cash provided by (used for) operating activities .........................................................................
24,010Per share (in yen and U.S. dollars):
Net income ..................................................................................................................................... ¥Cash dividends ................................................................................................................................

11.91
—

2006

2007

¥0,645,852
25,562
11,41414,30014,879(10,767)$06,060,296
338,300
172,208
142,077
152,837
208,005

¥

$

7.33
—

0.10
—

At end of the period:
Total assets ..................................................................................................................................... ¥1,322,779
Total net assets ...............................................................................................................................
317,627¥1,319,100
244,170$11,459,577
2,751,685

Orders received and outstanding:
Orders received during the period ................................................................................................... ¥1,724,836
Order backlog at end of the period ................................................................................................. 1,492,433¥0,763,844
1,424,960$06,279,442
12,929,334

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

30,382

29,461

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 ¥115.43 to $1.00, the approximate rate ofexchange at September 30, 2007.

Net Sales

Net Income (Loss)(Billions of yen)
699.5

Apr. 2007—Mar. 2008

792.7

593.6

Apr. 2005—Mar. 2006
Apr. 2004—Mar. 2005

537.7

Apr. 2003—Mar. 2004

523.3
0

500
First half

19.9

Apr. 2007—Mar. 2008

645.9

Apr. 2006—Mar. 2007

(Billions of yen)

728.9

637.0
1,000

3.4

Apr. 2004—Mar. 2005
Apr. 2003—Mar. 2004
1,500

–10

(3.4)

18.4
11.3

5.2

Apr. 2005—Mar. 2006

703.9

Second half

11.4

Apr. 2006—Mar. 2007

8.1
9.7

0
First half

1020
Second half30

To Our Shareholders

Performance during the Interim Period
The Japanese economy remained on an expansionary trend
during the interim period under review, despite a slowdown
in domestic personal consumption and other signs of deterioration in economic conditions, as exports and private-sector
capital investment expanded. Outside Japan, conditions continued to be generally strong, especially in Europe, China,
and the rest of Asia. However, as the fluctuations in foreignexchange rates and stock prices set off by the subprime mortgage loan issues in the United States suggested, concern
about a deterioration in economic conditions increased andmade it necessary for the Kawasaki Heavy Industries (KHI)Group to give careful attention to the business environment
for its operations.
Amid these conditions, the KHI Group maintained its policyof aggressively pursuing market opportunities, and, as a consequence, obtained new orders for rolling stock in the North
American market and other products; however, the totalorders received for the interim period amounted to ¥724.8
billion, which was ¥39.0 billion, or 5.1%, lower than for theinterim period of the previous fiscal year.

fiscal year ending March 31, 2008, we have decided not to
pay a cash dividend for the interim period under review.

Medium-Term Business Plan “Global K”
We passed the middle of the second fiscal year under KHI
Group’s medium-term business plan “Global K,” which weannounced in September last year, and the Group is moving
steadily toward the attainment of its objectives. However, on
the other hand, as mentioned previously, there are conditionsin the world economy and destabilizing factors in the environments for our individual businesses. During the coming fiscal
year, we will move into the middle year since the announcement of the “Global K” plan and are planning to make thenecessary mid-course corrections. At present, in view of thesecircumstances, we are in the process of analyzing and identifying issues to be addressed, aimed at reviewing and revising
the plan next year. Going forward, we are looking at our
vision for the Group 10 years from the starting date of Global
K, and moving steadily toward attaining our objectives byimplementing measures and action plans under our strategies
that respond to changes in the social environment.

Kawasaki Group Mission Statement
Net sales amounted to ¥699.5 billion, ¥53.7 billion, or 8.3%,
higher year on year, principally because of increased revenues
in the Shipbuilding and Consumer Products & Machinery
segments. Profitability showed further improvement, as the
KHI Group continued to implement aggressive measures toenhance profitability in all aspects of its operations. Operating
income rose ¥13.5 billion, or 52.8%, from the same periodof the previous year, to ¥39.1 billion. In addition, net income
for the interim period expanded ¥8.5 billion, or 74.2%, to¥19.9 billion.
Our basic policy is to pay stable dividends appropriate toearnings performance, while giving careful attention toincreasing retained earnings. After giving due consideration
to the uncertainties in the operating environment for the full

The KHI Group has adopted a vision of becoming “a leading
global enterprise that enriches lifestyles and helps safeguard
the natural environment through drawing on its sophisticatedtechnological capabilities” by the 10th year following thecommencement of the Global K plan. Amid today’s fastchanging social and economic environment, the Groupprepared its Kawasaki Group Mission Statement in May
this year to provide a compass for the Group as a whole torealize the potential of its technological capabilities to the
maximum extent possible.
This mission statement positions the Group’s social perspective and mission in society as its highest-priority missions,followed by the Kawasaki Group Core Values, which are1the values that the Group will emphasize. These will become
the starting point when formulating and making decisions
on management strategy and product development policies.
They will also form the basis for the Group Management
Principles and the Group Code of Conduct.
The Kawasaki Group Mission Statement aims to create ahigher-level corporate culture in the Group and enhance corporate and brand value through the revitalization of the corporate organization by encouraging each and every memberof the Group to share the missions and values advocated in
the mission statement and conduct daily business activities
based on the guidelines for action.

Members of the Group will share the Kawasaki Group
Mission Statement in common, and, by putting it into action,
work to create new value for all KHI’s stakeholder groups,
including shareholders, customers, and the communities weserve. Accordingly, we would like to request your renewedsupport and cooperation going forward.
December 2007

Tadaharu Ohashi
President

Kawasaki Group Mission Statement

Group Mission:
Kawasaki, working as one for the good of
the planet•We are the Kawasaki Group, a global technology leader with diverse integrated strengths.
•We create new value—for a better environment
and a brighter future for generations to come.

The Kawasaki Group Core Values
Value creation
We are globally driven to create new value—both for our customers and for the benefit ofsociety as a whole.
Originality
We thrive on originality, innovation andleadership.
Excellence
What we produce is of exceptionally highquality and functionality, as we constantly
strive to be at the global cutting edge.

2

The Kawasaki GroupManagement Principles
1. Trust
As an integrated technology leader, theKawasaki Group is committed to providing
high-performance products and services of superior safety and quality. By doing so, we will win
the trust of our customers and the community.
2. Harmonious coexistence
The importance of corporate social responsibility(CSR) permeates all aspects of our business. This
stance reflects the Kawasaki Group’s corporate
ideal of harmonious coexistence with the environment, society as a whole, local communities
and individuals.
3. People
The Kawasaki Group’s corporate culture is built
on integrity, vitality, organizational strengthand mutual respect for people through alllevels of the Group. We nurture a global teamfor a global era.
4. Strategy
The Kawasaki Group pursues continuous
enhancement of profitability and corporate value
based on three guiding principles—selectively
focusing resources on strategic businesses;
emphasizing quality over quantity; and employing
prudent risk management.

The Kawasaki Group Code of Conduct
1. Always look at the bigger picture. Think andact from a long-term, global perspective.
2. Meet difficult challenges head-on. Aim highand never be afraid to try something new.
3. Be driven by your aspirations and goals.
Work toward success by always dedicating
yourself to your tasks.
4. Earn the trust of the community throughhigh ethical standards and the example you
set for others.
5. Keep striving for self-improvement. Act on
your own initiative as a confident professional.
6. Be a part of Team Kawasaki. Share yourpride and sense of fulfillment in a job welldone.

Review of Operations

Shipbuilding
The Shipbuilding segment secured orders
amounting to ¥85.6 billion, up ¥16.1 billion, or 23.2% from the interim period of
the previous year. Orders were received
for two LPG carriers and 11 bulk carriers.
Sales rose ¥35.4 billion, or 84.0% year
on year, to ¥77.5 billion, mainly due tothe fact that the segment delivered one

LPG carrier, one VLCC, and two bulk carriers, for a total of four vessels. Operating
income amounted to ¥2.3 billion compared with an operating loss of ¥2.1 billion in the same period of the previous
year. This major improvement in profitability was due to higher sales andimprovement in margins.

Rolling Stock & Construction Machinery
Orders received during the interim period
included those for Shinkansen trains forJapan Railways companies and additional
orders for subway cars from North
American customers. However, the total
value of orders declined ¥34.5 billion, or
22.1% from the interim period of theprevious fiscal year, to ¥121.6 billion,
reflecting the large orders for commuter

trains from North America during thesame period of the previous fiscal year.
Sales were down ¥16.7 billion, or 19.2%
year on year, to ¥70.2 billion, despite anincrease in domestic sales, as sales tooverseas customers declined. Operating
income fell ¥5.0 billion, or 81.1% fromthe same period of the previous year, to¥1.2 billion, reflecting the decline in sales.

Aerospace
Orders received increased ¥3.6 billion,
or 5.1% year on year, to ¥73.7 billion,
because of new orders from the Boeing
Company for component parts for Boeing
777 and 787 passenger aircraft.
Sales rose ¥3.8 billion, or 3.3% from thesame period a year earlier, to ¥118.2

billion, because of an increase in salesof component parts for the Boeing 777
passenger aircraft and other factors.
Operating income leapt ¥5.6 billion, or
109.7% year on year, to ¥10.7 billion,
because of an improvement in margins
due to a weaker yen against the U.S.
dollar and other developments.

3

Gas Turbines & Machinery
Compared with the interim period of theprevious fiscal year, orders obtained bythis segment declined ¥5.8 billion, or
5.8%, to ¥93.5 billion. Although orders
were received for components for commercial aircraft engines, including theV2500 and Trent, diesel engines for ships,
gas turbine power generation systems,
and natural gas compression modules,
orders for certain other products, including

marine steam turbines, declined.
Sales, however, were up ¥3.8 billion, or4.7% over a year earlier, to ¥84.3 billion,
as revenues from the sale of components
for commercial aircraft engines expanded.
Operating income rose ¥0.9 billion, or
18.1%, to ¥5.7 billion, as segment sales
expanded.

Plant & Infrastructure Engineering
Orders for the interim period underreview fell ¥53.5 billion, or 56.3% fromthe previous year, to ¥41.6 billion,
reflecting the absence of major orders for
cement plants, ferronickel refining plants,
and other project orders that werereceived during the interim period of theprevious fiscal year.
Sales declined ¥2.5 billion, or 4.7% froma year earlier, to ¥49.6 billion, because oflower sales from municipal refuse incineration plants. Profitwise, operating income
for the interim period amounted to ¥1.4
billion, a major improvement from an
operating loss of ¥3.7 billion a year earlier. This improvement was due to theimprovements in efficiency resulting fromthe merger of the Group’s plant andenvironmental engineering companies
and the reduction in the number of lossmaking projects.

Consumer Products & Machinery
Sales increased ¥22.6 billion, or 11.9%
year on year, to ¥212.5 billion. Althoughsales of motorcycles in North America
decreased, sales of motorcycles in Europe
expanded, and sales of industrial robots

to automotive-related and semiconductorrelated manufacturers rose. Operating
income climbed ¥1.4 billion, or 13.0%,
to ¥12.3 billion, accompanying the
growth in sales.

Other
Sales of this segment rose ¥7.3 billion, or
9.2%, to ¥87.1 billion, as sales of thehydraulics products for construction

4

machinery continued at a high level.
Operating income rose ¥0.8 billion, or
17.4%, to ¥5.2 billion.

Review by Geographic Segment
Sales in Japan rose ¥31.3 billion, or 6.8% compared with
the interim period of the previous fiscal year, to ¥491.0 billion, mainly owing to an increase in sales of the parent
company. Operating income climbed ¥18.4 billion, or
89.4%, to ¥38.9 billion.
In North America, sales decreased ¥1.4 billion, or 1.2%, to¥118.2 billion, as a result of lower sales of motorcycles andother factors. The segment showed an operating loss of¥3.5 billion, compared with operating income of ¥1.1 billion
for the interim period of the previous fiscal year.

Sales in Europe expanded ¥21.0 billion, or 41.2%, to ¥72.0
billion, because of strong sales of motorcycles. Operating
income posted a gain of ¥1.2 billion, or 65.3%, to ¥2.9 billion.
In Asia, sales jumped ¥4.7 billion, or 51.2%, to ¥13.9 billion. Operating income increased ¥0.4 billion, or 101.0%,
to ¥0.8 billion.
In other areas, sales dropped ¥1.8 billion, or 28.9%, to¥4.5 billion, while operating income amounted to ¥0.1 billion, approximately the same as for the interim period of
the prior year.

Financial Position
Total assets at the end of the interim period were ¥1,322.8
billion, 2.6% lower than at the end of the previous fiscal
year (March 31, 2007). Although inventories rose ¥16.6
billion accompanying the rise in the order backlog andactive capital investment resulted in an increase in net
property, plant and equipment of ¥4.7 billion, receivables,
less allowance declined ¥52.8 billion as progress was madein the recovery of operating receivables.
Total liabilities declined 5.4%, to ¥1,005.2 billion. Althoughadvances from customers increased ¥14.2 billion, notes
payable and accounts payable declined ¥40.3 billion, andinterest-bearing debt dropped ¥13.0 billion.
Net assets rose 7.5%, to ¥317.6 billion, mainly because of
the interim net income.
Among cash flows, cash and cash equivalents (hereinafter,cash) declined ¥16.4 billion compared with the end of theprevious fiscal year (March 31, 2007), to ¥22.8 billion. The
condition of cash flows and the principal factors influencing

their movements were as follows.
Net cash provided by operating activities amounted ¥24.0
billion, ¥34.8 billion higher than for the interim period of
the previous fiscal year. Principal operating cash inflows
were income before income taxes and minority interests
amounting to ¥31.8 billion, depreciation and amortizationof ¥17.6 billion, and a decrease in trade receivables of¥58.5 billion. A major operating cash outflow was a decreasein accounts payable of ¥41.9 billion.
Net cash used for investing activities amounted to ¥20.2
billion, ¥6.5 billion lower than for the interim period of theprevious year. The principal investment outflow was for theacquisition of property, plant and equipment.
Net cash used for financing activities was ¥20.8 billion. The
principal outflow items were the repayment of long-term
debt and cash dividends paid.

5Condensed Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
As of September 30 and March 31, 2007 and September 30, 2006

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 net assets:
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.........................................
Net assets:
Common stock ...........................................................
Capital surplus............................................................
Retained earnings .......................................................
Net unrealized gains on securities ...............................
Gains/losses on hedging items ....................................
Foreign currency translation adjustments ....................
Treasury stock.............................................................
Minority interests........................................................
Total net assets.......................................................
Total liabilities and net assets ..............................

6

September 30, 2007
(unaudited)

March 31, 2007

September 30, 2006
(unaudited)

September 30, 2007
(unaudited)¥0,023,177
389,823444,517
61,236
918,753
103,417
258,527
42,082¥1,322,779¥0,039,351
442,577
427,934
52,056
961,918
96,994
253,819
45,249¥1,357,980¥0,025,006
429,542425,754
57,832
938,134
86,015249,200
45,751¥1,319,100

200,788
3,377,138
3,850,966
530,5037,959,395
895,928
2,239,686
364,568$11,459,577¥0,147,888
372,216
138,683
110,133
768,920¥0,138,463
412,501
124,445
131,097
806,506¥0,182,746
404,909111,846
122,631
822,132$ 1,281,192
3,224,604
1,201,447
954,110
6,661,353

143,356
92,876236,232

165,754
90,342
256,096

167,00385,795
252,798

1,241,930
804,609
2,046,539

104,265
54,252
137,454
23,148(150)(7,041)(55)
5,754
317,627¥1,322,779

103,188
53,179125,799
19,342(1,608)(9,417)(55)
4,950
295,378¥1,357,980

92,106
42,110107,457
12,720(3,698)(11,620)(43)
5,138
244,170¥1,319,100

903,275
469,999
1,190,800
200,537(1,299)(60,998)(476)
49,8472,751,685$11,459,577$

Condensed Consolidated Statements of Income
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2007 and 2006 (unaudited)

Millions of yen
2007

Net sales ............................................................................................................................................... ¥699,540
Cost of sales ......................................................................................................................................... 582,117
Gross profit................................................................................................................................... 117,423
Selling, general and administrative expenses .........................................................................................
78,373Operating income .........................................................................................................................
39,050
Other income (expenses):
Interest and dividend income ............................................................................................................
2,468
Equity in income of unconsolidated subsidiaries and affiliates............................................................
2,331
Interest expense ................................................................................................................................
(3,859)Other, net .........................................................................................................................................
(8,153)
Income before income taxes and minority interests .......................................................................
31,837
Income taxes.........................................................................................................................................
(11,470)
Minority interests in net income of consolidated subsidiaries .................................................................
(489)
Net income ................................................................................................................................... ¥019,878

Thousands of
U.S. dollars

2006

2007

¥645,852
555,715
90,13764,57525,562$6,060,296
5,043,030
1,017,266
678,966
338,300

1,891
855(2,912)(5,156)
20,240(8,577)(249)¥ 11,414

21,381
20,195(33,432)(70,632)
275,812(99,368)(4,236)$ 172,208

7

Condensed Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2007 and 2006 (unaudited)Thousands of
U.S. dollars

Millions of yen
2007

2006

2007

¥31,837¥20,240$ 275,812

17,64233,312(30,659)(28,122)
24,01014,879(34,449)
12,935(24,372)(10,767)

152,837
288,590(265,607)(243,627)
208,005

Cash flows from investing activities:
Acquisition of tangible and intangible assets ....................................................................................
Acquisition of investments in securities ............................................................................................
Other...............................................................................................................................................
Net cash used for investing activities..........................................................................................

(23,964)(1,111)
4,885(20,190)(15,909)(11,850)
1,024(26,735)(207,606)(9,625)42,320(174,911)

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

(5,369)3,220(10,108)(8,544)(20,801)

39,51318,355(28,289)(4,807)
24,772(46,513)27,896(87,568)(74,019)(180,204)

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

413

118

3,577

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

(16,568)(12,612)(143,533)

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

39,22937,506

339,851

Increase in cash and cash equivalents due to changes in fiscal periodof consolidated subsidiaries.............................................................................................................

158

—

1,369

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

¥22,819¥24,894$ 197,687

Cash flows from operating activities:
Income 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 .....................................................................................................
Increase (decrease) in assets .........................................................................................................
Increase (decrease) in liabilities .....................................................................................................
Other...........................................................................................................................................
Net cash provided by (used for) operating activities.................................................................

8

Consolidated Statements of Changes in Net Assets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2007 and 2006 (unaudited)Thousands

Millions of yen
2007

Number ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Net unrealized
gains onsecurities

Gain (loss) on
hedging items

Foreign currencytranslation
adjustments

Treasurystock

Minority
interests

Balance at March 31, 2007 ..................... 1,659,626
Net income for the interim period .......
—
Conversion of convertible bonds .........
9,286
Cash dividends ....................................
—
Treasury stock purchased, net .............
—
Other .................................................
—
Balance at September 30, 2007............... 1,668,912¥103,188
—
1,077
—
—
—
¥104,265¥53,179
—
1,052
—
20
—
¥54,251¥125,799
19,878—(8,298)—75¥137,454¥19,342
—
—
—
—
3,806
¥23,148¥(1,608)
—
—
—
—
1,458
¥ (150)¥(9,417)
—
—
—
—
2,376
¥(7,041)

¥(55)
—
—
—
0
—
¥(55)

¥4,950————805¥5,755

Thousands
Number ofshares ofcommon stock

Balance at March 31, 2006 ..................... 1,557,715
Net income for the interim period .......
—
Conversion of convertible bonds .........
224
Cash dividends ....................................
—
Treasury stock purchased, net ............
—
Bonuses to directors andstatutory auditors ............................
—
Other .................................................
—
Balance at September 30, 2006............... 1,557,939

Millions of yen
2006
Foreign currencytranslation
adjustments

Treasurystock

Minority
interests

—
—
—
—
—

¥(11,426)
—
—
—
—

¥(38)
—
—
—
(5)

¥5,508—————(3,698)¥(3,698)—(194)¥(11,620)

—
—
¥(43)

—
(370)
¥5,138

Commonstock

CapitalsurplusRetainedearnings

Net unrealized
gains onsecurities¥92,085—21——¥42,094—15—
1¥100,776
11,414—(4,673)—¥14,097
—
—
—
—

¥

—
—
¥92,106——¥42,110(14)(46)¥107,457—(1,377)¥12,720

Gain (loss) on
hedging items

Thousands of U.S. dollars
2007
Commonstock

Balance at March 31, 2007 ............................................ $893,941
Net income for the interim period ..............................
—
Conversion of convertible bonds ................................
9,334
Cash dividends ...........................................................
—
Treasury stock purchased, net ....................................
—
Other ........................................................................
—
Balance at September 30, 2007 ..................................... $903,275

Net unrealized
gains onsecurities

Gain (loss) on
hedging items

Foreign currencytranslation
adjustments

Treasurystock

Minority
interests$460,704 $1,089,828 $167,567—
172,205
—
9,120
—
—
—
(71,884)
—
175
—
—
—
651
32,970$469,999 $1,190,800 $200,537$(13,927)————
12,628$ (1,299)$(81,583)————
20,585$(60,998)$(478)———
2—$(476)$42,882
—
—
—
—
6,965
$49,847

CapitalsurplusRetainedearnings

9

Segment Information
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2007 and 2006 (unaudited)(a) Information by industry segment
Millions of yen
2007

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

External
sales

Intersegment
sales¥ 77,480
70,244
118,247
84,28949,647
212,51287,121
699,540—¥699,540

¥

932
591
868
6,322
6,802
2,577
18,48636,578(36,578)¥ 000—

Total
sales

Operatingexpenses

Operatingincome¥ 78,412
70,835
119,115
90,611
56,449215,089
105,607736,118(36,578)¥699,540¥ 76,111
69,674
108,422
84,91755,043
202,769
100,407697,343(36,853)¥660,490¥ 2,301
1,161
10,693
5,694
1,406
12,3205,200
38,775275¥39,050

Millions of yen
2006

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

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥ 42,107
86,925
114,452
80,50952,114
189,928
79,817645,852—¥645,852¥ 1,296
260
614
7,941
9,068
4,318
20,22443,721(43,721)¥ 000—¥ 43,403
87,185
115,066
88,45061,182
194,246
100,041
689,573(43,721)¥645,852¥ 45,456
81,040109,968
83,62964,910183,342
95,611
663,956(43,666)¥620,290¥ (2,053)
6,145
5,098
4,821
(3,728)
10,9044,430
25,617(55)¥25,562

Thousands of U.S. dollars
2007
External
sales

Shipbuilding .......................................................................................... $ 671,229
Rolling Stock & Construction Machinery ................................................
608,542
Aerospace ............................................................................................. 1,024,404
Gas Turbines & Machinery .....................................................................
730,217
Plant & Infrastructure Engineering .........................................................
430,105
Consumer Products & Machinery ........................................................... 1,841,047
Other ....................................................................................................
754,752
Total.............................................................................................. 6,060,296
Eliminations ...........................................................................................
—
Consolidated total ......................................................................... $6,060,296

10Intersegment
sales

$

8,074
5,120
7,520
54,76958,92722,325160,150
316,885(316,885)$ 0,000—

Total
sales

Operatingexpenses

Operatingincome$ 679,303
613,662
1,031,924
784,986
489,032
1,863,372
914,9026,377,181(316,885)$6,060,296$ 659,369
603,604
939,288735,658
476,852
1,756,640
869,852
6,041,263(319,267)$5,721,996$ 19,934
10,05892,63649,32812,180106,732
45,050335,918
2,382$338,300

(b) Information by geographic area
Millions of yen
2007Japan ....................................................................................................
North America .......................................................................................
Europe ..................................................................................................
Asia .......................................................................................................
Other areas ...........................................................................................
Total..............................................................................................
Eliminations ...........................................................................................
Consolidated total .........................................................................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥491,024
118,166
72,01013,863
4,477
699,540—¥699,540¥143,302
12,691
2,334
11,683
118
170,128(170,128)¥ 000—¥634,326
130,857
74,34425,546
4,595
869,668(170,128)¥699,540¥595,440
134,404
71,41324,7244,493
830,474(169,984)¥660,490¥38,886(3,547)
2,931
822
102
39,194(144)¥39,050

Millions of yen
2006Japan ....................................................................................................
North America .......................................................................................
Europe ..................................................................................................
Asia .......................................................................................................
Other areas ...........................................................................................
Total..............................................................................................
Eliminations ...........................................................................................
Consolidated total .........................................................................

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome¥459,768
119,598
51,0159,171
6,300
645,852—¥645,852¥ 120,560
8,130
2,049
8,685
77
139,501(139,501)¥ 000—¥580,328
127,728
53,064
17,856
6,377
785,353(139,501)¥645,852¥559,793
126,669
51,291
17,447
6,254
761,454(141,164)¥620,290¥20,535
1,059
1,773
409
123
23,8991,663¥25,562

Thousands of U.S. dollars
2007
External
sales

Intersegment
sales

Japan .................................................................................................... $4,253,868 $1,241,462
North America ....................................................................................... 1,023,703
109,945
Europe ..................................................................................................
623,841
20,220Asia .......................................................................................................
120,099
101,213
Other areas ...........................................................................................
38,785
1,023
Total.............................................................................................. 6,060,296
1,473,863
Eliminations ...........................................................................................
— (1,473,863)
Consolidated total ......................................................................... $6,060,296 $ 0000—

Total
sales

Operatingexpenses

Operatingincome (loss)$5,495,330
1,133,648
644,061
221,31239,8087,534,159(1,473,863)$6,060,296$5,158,451
1,164,377
618,669
214,190
38,924
7,194,611(1,472,615)$5,721,996$336,879(30,729)
25,392
7,122
884
339,548(1,248)$338,30011

(c) Overseas sales
Millions of yen

12

Thousands of
U.S. dollars

Overseas
sales

% of
net sales

Overseassales¥155,019
57,932
96,35460,221¥369,526

24.0%
8.9%
15.0%
9.3%
57.2%

$1,404,011
707,736
560,877
672,477$3,345,101

Millions of yen

Overseas
sales

% of
net sales¥162,065
81,69464,742
77,624¥386,125

23.1%
11.6%
9.3%
11.1%
55.1%

2007

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

%

%

2006

2007

Net Sales, Orders and Order Backlog by Industry Segment
For the six months ended September 30, 2007 and 2006 (unaudited)Thousands of
U.S. dollars

Millions of yen
2007

2006

2007

Net sales:
Shipbuilding........................................................................................................................................ ¥ 77,480
Rolling Stock & Construction Machinery..............................................................................................
70,244
Aerospace........................................................................................................................................... 118,247
Gas Turbines & Machinery ..................................................................................................................
84,289Plant & Infrastructure Engineering .......................................................................................................
49,647
Consumer Products & Machinery ........................................................................................................ 212,512
Other ..................................................................................................................................................
87,121
Total ............................................................................................................................................... ¥699,540¥ 42,107
86,925
114,452
80,50952,114
189,928
79,817¥645,852$ 671,229
608,5421,024,404
730,217430,105
1,841,047
754,752$6,060,296

Orders received:
Shipbuilding........................................................................................................................................ ¥ 85,631
Rolling Stock & Construction Machinery.............................................................................................. 121,605
Aerospace...........................................................................................................................................
73,726
Gas Turbines & Machinery ..................................................................................................................
93,527
Plant & Infrastructure Engineering .......................................................................................................
41,557
Consumer Products & Machinery ........................................................................................................ 212,512
Other ..................................................................................................................................................
96,278
Total ............................................................................................................................................... ¥724,836¥ 69,507
156,10270,17599,31395,093
189,928
83,726¥763,844$ 741,844
1,053,496
638,707810,249
360,019
1,841,047
834,080$6,279,442

Thousands of
U.S. dollars

Millions of yen

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

As of
September 30, 2007

As ofMarch 31, 2007

As of
September 30, 2006

As of
September 30, 2007

¥0,320,643
492,077
241,623
224,028
163,996—
50,066¥1,492,433¥ 313,987
434,419
286,699
216,886
172,255—
40,909
¥1,465,155¥ 315,263
412,985
256,954
214,002
187,030—
38,726¥1,424,960$ 2,777,813
4,262,991
2,093,243
1,940,813
1,420,740—
433,734$12,929,334

13

Kawasaki Corporate Data
(As of September 30, 2007)
Kawasaki Heavy Industries, Ltd.
Kobe Head Office:
Kobe Crystal Tower,
1-3, Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe, Hyogo 650-8680, JapanTokyo Head Office:World Trade Center Bldg.,
4-1, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo 105-6116, JapanFounded: 1878
Incorporated: 1896
Paid-in Capital: ¥104,265,062,978
Number of Shares Issued: 1,668,911,902
Number of Shareholders: 158,330
Number of Employees: 30,382

Stock Exchange Listings:
Tokyo, Osaka, Nagoya
Method of Publication of Notices:
http://www.khi.co.jp
The method of publication of notices of the Corporation shall bemade electronically. Provided, if the Corporation is unable to makean electronic publication of notice due to an accident or otherunavoidable reason, the notice shall be inserted in the Nihon Keizai
Shimbun.
Transfer Agent:
The Chuo Mitsui Trust and Banking Company, Limited
33-1, Shiba 3-chome,
Minato-ku, Tokyo 105-8574, Japan
Handling Office:
The Chuo Mitsui Trust and Banking Company, Limited
Osaka Branch Office
2-21, Kitahama 2-chome,
Chuo-ku, Osaka 541-0041, Japan
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 in the over-the-counter (OTC) market in the UnitedStates under CUSIP number 486 359 20 1 with each ADR
representing four ordinary shares.

This report was printed on 100% recycled paper with a whitenessdegree of 85% using the waterless printing process, which emits noharmful chemicals, and soy-based ink, which is made from plantmaterial that emits only low levels of volatile organic chemicals.
Printed in JapanADR Depository:
The Bank of New York
101 Barclay St., 22 West,
New York, NY 10286, U.S.A.
Phone: 1-212-815-2042
U.S. Toll Free: 888-269-2377(888-BNY-ADRS)
http://adrbny.com
KHI Web Site at: http://www.khi.co.jp