Management Overview
0April 26, 2017

Progress of Medium-Term Business Plan “MTBP2016”[Billion Yen]

Orders Received

Net Sales

2,000.0[Billion Yen]

Operating Income

120.0

95.9

1,608.0

1,693.6(9.4%)

1,590.0

1,500.0(税前ROIC)1,348.7

75.0(8.0%)

80.0

45.9

1,000.0

55.9(3.9%)(5.0%)
40.0
500.0

0.0
Assumedexchange
rates
(USD)

0.0
FY2015FY2016FY2017FY2018FY2015FY2016FY2017

Forecast

Forecast

118.99108.98110.62

107

MTBP2016© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2018118.99108.98110.62

107

MTBP20162Business Portfolio Strategy
Four business sectors

Aerospace Systems

Energy System& Plant Engineering

Precision Machinery& Robot

Key products & services
that drive growth• Commercial aircraft• Commercial jetengines• Distributed power
generation• Oil & Gas• Industrial robots• Medical robots

Transportation※• Rolling stock foroverseas markets※Ship & Offshore Structure, Rolling Stock, Motorcycle & Engine

FY2018Net Sales developmentby business sector

FY2020
FY20250Operating Income
development bybusiness sector

500

1,000

1,500

2,0002,500[Billion Yen]FY2018FY2020

FY2025Operating Margin

Operating Margin

Operating Margin

4.5%

5.3%

For the time being, Precision
Machinery & Robot will be a coreprofit center.
© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

9% or higher

From FY2021, Aerospace
System will significantly
expand.
3

Organizational Restructuring(Structure・Rename)【 Former structure 】
Ship &Offshore
Structure

Rolling Stock

Aerospace

Gas Turbine &Machinery

Aircraft JetEngine

Ship &Offshore
Structure

Rolling Stock

No Change

No Change

Aerospace Systems

Plant &Infrastructure

Motorcycle &EnginePrecision
Machinery

Motorcycle &EnginePrecisionMachinery &Robot

No ChangeRename

Energysystem

Energy System & PlantEngineering【 New structure (as of 1st April, 2018) 】© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved4

Organizational Restructuring(Aerospace Systems Company 1/2)
Business Direction and Synergies
Aerospace Systems Company
Strengthen
global cost competitivenessBusiness Expansion/ Enhancement
through Cooperation

Sharing of production bases
and supply chain

Cooperative Businessbetween
Aircraft and Engine/Transmission

Sharing of outcome ofKPS improvement activity andadvanced manufacturing technology

MRO Business（Maintenance, Repair and Overhaul）

Creation of New Business
Linkage between
Aircraft related Technologies
andEngine related Technologies

Past efforts in collaboration between Aircraft and Engine/Transmission

P-1 / C-2

Generator

Aircraft Co-Development© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

BK117

Transmission

Helicopter Co-Development

5

Organizational Restructuring(Aerospace Systems Company 2/2)

 Aerospace systems Company’s sales target in 2025 is ¥700bil .
−Fusing fundamental tech as Aircraft System integration tech to create new business.
−Aiming business expansion through cooperation.
Sales（¥100mil.）Engine related Technologies

8,000

Synergies

7,000• Small Engine tech

6,000

• Engine related equipment tech(such as electrical power system)

5,000
4,000Engine
Business

3,000
2,000
1,0000• Engine module tech(Compressor, Combustor, Gear)• Transmission techAerospace Systems
Business

Aerospace
Business

Aerospace Technologies• Aircraft system integration tech
• Composite material application tech
• Aerodynamic design tech
• Advanced manufacturing tech(such as IoT)

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

6Organizational Restructuring(Energy System & Plant Engineering Company 1/2)
Business Direction and Synergies
Energy System & Plant Engineering Company
Enhance core hardware and develop business by proposal of system combined core hardware
Enhancement of core hardware andconstruction of optimal system bycombination of core hardware

Gas turbine

Proposal of distributed energy supply systemEPC


BoilerUse ofcryogenic energy(LNG・Hydrogen)

LNG terminal

Hydrogen terminal

Waste treatment facility Fertilizer plant

Gas engine• Construction of optimal system combined Steam turbine
core hardware• Respond flexibly to customer requests by useof IoT and ICT© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

Formation of system
contributing to CO2-free society

Develop CCPP standard package(Combined Cycle Power Plant ※)− Manage projects more efficiently by standardization,
increase the accuracy of the estimate and promote cost
reduction− Provide optimum plants which meet customer needs by
combination of KHI’s high-efficiency hardware and optimal
control− Roll out 100MW class power generation equipment acrossthe Southeast Asia, and further, global market※ Combined Cycle Power Plant consists of
two-stage power generation system thata gas turbine and a steam turbine are usedin combination.
Gas turbine CCPP recovers high temperatureand high pressure exhaust emissions’ energy
generated by gas turbine power generation
as steam by using heat recovery steam
generator and generates power throughsteam turbine. It is a power generation
system of low energy loss.

Bird's-eye view of
CCPP standard package

7Organizational Restructuring(Energy System & Plant Engineering Company 2/2)
 Aim to achieve annual sales of 300 billion yen in 2025

 Global trend in demand for electricity
Demand for electricity(Twh)− Sales growth through expansion overseas and promotion of EPC
ordersRegion / Demand growth(2014-2015)■Africa43%− Expanded sales in Southeast Asia market■Middle East

39%

■Southeast Asia

39%

■China39%

2020
Forecast Customer needs
Want to implement ahigh-efficiency system■Far East

7%■Europe10%■Russia, Eastern
Europe12%■Latin American

23%■North America

8%

2025
Forecast
Source: 2016 IEA energy outlook
Want to switch energy
source from heavy oil toutility gas to reduce CO2emissions

Want to cope withfluctuating theamount of electricity
and steam required© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

8Companywide Quality Control System
related defects during manufacturing process of the bogie frame
Composition of Companywide Quality Control Committee
Companywide Quality Control Committee• Consist of authorities on quality control engineering, externallawyers, directors, and others• Receive findings from Survey Team, clarify the problems, anddiscuss and decide on measures to correct themReport

Survey Team• Consist of external consultants, internal experts in qualitycontrol, and others• First, Investigate the cause of the production defect occurred atRolling Stock Company• Going forward, investigate the state of other internal companies’
quality control system in detail, and report findings to thecommittee© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

9Change of ROIC Rating[Number of BU]

ROIC rating

As of April 2017

As of April 2018※

AMarket leader

56

B

Stable contributor

1111C

Reduced variation inperformance required63

D efficiency required

46E

42Year covered

Actual :FY2015-2016
Forecast:FY2017-2019

Actual :FY2016-2017
Forecast:FY2018-2020

Actual & assumed
exchange rate(\/$)

FY2015:118.99円
FY2016:108.98円
FY2017-2019 :105.00円

FY2016:108.98円
FY2017:110.62円
FY2018-2020 :111.00円

Improved investment

Restructuring required※ROIC rating of each BU as of April, 2018 is complied with reclassification of some BUs after April, 2017.

© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

10Figures recorded in the business forecasts are forecasts that reflect the judgment of the Company based on theinformation available at the time of release and include risks and uncertainties. Accordingly, the Company cautions
investors not to make investment decisions solely on the basis of these forecasts.
Actual business results may differ materially from these business forecasts due to various important factors resulting
from changes in the external environment and internal environment. Important factors that may affect actual
business results include, but are not limited to, economic conditions, the yen exchange rate against the U.S. dollar
and other currencies, the tax system, and laws and regulations.

© 2018 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

11