2005

Semiannual Report
For the six months ended September 30, 2005

Consolidated Financial Highlights
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2005 and 2004

Thousands of
U.S. dollars

Millions of yen
2005

For the period:
Net sales......................................................................................................................................... ¥0,593,579
Operating income ...........................................................................................................................
12,577
Net income .....................................................................................................................................
5,233
Research and development expenses.............................................................................................
11,200Depreciation and amortization.........................................................................................................
14,384
Net cash provided by operating activities ........................................................................................
11,216Per share (in yen and U.S. dollars):
Net income ..................................................................................................................................... ¥Cash dividends ...............................................................................................................................

3.63
—

2004

2005

¥0,537,715
6,945
3,365
5,300
15,13019,816$05,243,168
111,095
46,224
98,931
127,056
99,073

¥

$

2.30
—

0.03
—

At end of the period:
Total assets .................................................................................................................................... ¥1,193,901
Total shareholders’ equity ...............................................................................................................
207,499¥1,114,029
194,127$10,545,897
1,832,868

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

516,694
1,191,717

503,090
1,173,053

4,564,031
10,526,605

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

29,024

29,126

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 ¥113.21 to $1.00, the approximate rate ofexchange at September 30, 2005.

Net Sales (Billions of yen)
Apr. 2005—Mar. 2006

Net Income (Loss) (Billions of yen)
Apr. 2005—Mar. 2006

593.6

Apr. 2004—Mar. 2005

537.7

Apr. 2003—Mar. 2004

523.3

Apr. 2002—Mar. 2003

539.7

Apr. 2001—Mar. 2002

492.1
500

0
First half

Apr. 2004—Mar. 2005

703.9
637.0
699.9

Second half

3.4

Apr. 2003—Mar. 2004

(3.4)

Apr. 2002—Mar. 2003

(3.5)

Apr. 2001—Mar. 2002

652.4
1,000

5.2

1,500

8.1
9.7
16.5

(2.3)
–5

8.6
0

First half

510Second half

15

20

To Our Shareholders

Boosting Corporate Value andEstablishing Trust in the Kawasaki Brand
Operating Income Rises Substantially
The Japanese economy continued to recover during the interim
period under review, mainly supported by increases in private
capital investment stemming from improved corporate earnings.
However, the overall operating environment for Kawasaki Heavy
Industries, Ltd. (KHI), was challenging as a result of cutbacks ingovernment public works investment and higher raw material
prices.
Amid this operating environment, the KHI Group continued
aggressive marketing activities. As a consequence, total orders
rose ¥13.6 billion, or 2.7%, from the interim period of the previous year, to ¥516.7 billion, due mainly to the receipt of major
orders in the Rolling Stock, Construction Machinery & Crushing
Plant segment.
Net sales for the interim period climbed 10.4%, or ¥55.9 billion
year on year, to ¥593.6 billion, as revenues rose in all businesssegments, led especially by the Aerospace and Rolling Stock,
Construction Machinery & Crushing Plant segments.
Profitability showed a marked improvement over a year earlier,with operating income increasing 81.1%, or ¥5.6 billion, to¥12.6 billion, and net income increasing 55.5%, or ¥1.9 billion, to¥5.2 billion. Developments boosting profits included a weakening
in the value of the yen, advances in the Aerospace segment,
improvement in the Gas Turbines & Machinery segment, a firm
performance in the Consumer Products & Machinery segment,
and other factors.
KHI’s fundamental stance is to pay our shareholders stable cash
dividends appropriate to our earnings performance. However,after giving due consideration to the importance of expanding
retained earnings and the uncertainties in the operating environment for the full fiscal year ending March 31, 2006, we havedecided to suspend the payment of cash dividends for the interim period under review.

Strategies Aimed at Creating New Value
The KHI Group defines its corporate mission as drawing fully on
its broad base of advanced technologies to create new value byoffering products that almost literally work modern-day wonders
on land, at sea, and in the air while remaining true to its corporate philosophy of contributing to the development of societies
around the world. Through these activities, we work to enhancecustomer satisfaction by offering our customers superior products and services that are differentiated by their technology andbrand power. Our ultimate goal is to meet the expectations, firstand foremost, of our shareholders as well as our customers,
employees, and the communities we serve by implementing
management policies that increase KHI’s corporate value.
As we implement these core strategies under our Medium-TermBusiness Plan, we are changing our business structure to adapt
to become aligned with the operating environment and create astronger earnings base, with the objective of attaining sustainable growth. We are focusing our resources especially on the
Aerospace and Consumer Products & Machinery segments,
which we have positioned as our core businesses, as well as on
our Rolling Stock business and Gas Turbines & Machinery segment, which we have positioned as “developing businesses.”
Our aim is to grow and develop these businesses to become
mainstay earnings generators. In our Aerospace segment, weare proceeding with new projects to develop the P-X next maritime patrol aircraft and the C-X next transport aircraft for theJapan Defense Agency (JDA), and the Boeing 787 aircraft withThe Boeing Company. Accordingly, we are devoting capital
investment to these projects on a priority basis. In the Consumer
Products & Machinery segment, we are working to enhance1the value of the Kawasaki brand and substantially improve thecompetitiveness of our products. In the Rolling Stock business,
we are strengthening our operating systems, principally overseas,
to respond to strong demand, especially in China and North
America. In addition, in the Gas Turbines & Machinery segment
we are expanding our industrial gas turbine business operations
and making capital investments for the development and production of the Rolls Royce TRENT 1000 jet engine, which has
been selected for the Boeing 787 aircraft.
On the other hand, in our Shipbuilding and Plant & Infrastructure
Engineering segments, where operating conditions have become
tough because of increased international competition and cutbacks in government public works investment in Japan, we arecarrying out structural reforms and are working to improve theirearnings performance. In these two segments, we have set up
two fully owned subsidiaries—namely, Kawasaki Shipbuilding
Corporation and Kawasaki Plant Systems, Ltd., which are
working to create a stronger earnings base with greater
independence and flexibility in management.
In the steel structures business within the Plant & Infrastructure
Engineering segment, we have been adopting various restructuring measures, including consolidation of factories, but the market
outlook for steel bridges, one of the main products in this business, has become uncertain as a consequence of our alleged
violation of Japan’s Antimonopoly Act in bidding for certain projects. Accordingly, while we intend to keep our advanced technology for steel bridges, we are moving forward with measures
to restructure this business to enable it to continue without
depending on sales of steel bridges.
For all our activities, we have set a management policy of“Quality Followed by Quantity.” We are working to differentiate
our products and services on the bases of technology and brandpower and to reform our business model to expand the scope of
our services to cover the full life cycle of our products.

Strengthening Compliance Systems
To promote compliance with all relevant laws and regulations,
we have reviewed and upgraded our internal rules and regulations regarding corporate ethics and are implementing measures
to improve the awareness of the importance of complianceamong all personnel. The KHI Corporate Ethics Committee,
which is chaired by the president of KHI and includes all representative directors as members, is responsible for formulatingthese various compliance measures and for giving guidance on
and following up on their implementation. Beginning in October
2005, we formed committees within each of the operating
units in the KHI Group to take the initiative in promoting theself-assessment and verification of compliance, and are taking
steps to ensure a proper understanding of the importance ofcompliance among all management and staff.
Moreover, we have made a strong appeal to all employees tokeep in mind at all times that “ethical behavior on the part ofeach and every employee is key to protecting and building thevalue of the Kawasaki brand” and are concentrating our efforts
on making everyone aware of the importance of compliance in
our activities.
We of the KHI Group are committed to carrying out structuralreforms and increasing corporate value by creating a stronger,higher-margin earnings base. In addition, to all employees weare emphasizing the importance of thoroughgoing compliancefor maintaining and increasing the trust that customers place inthe Kawasaki brand. As we move forward with these initiatives,
we request the even greater understanding and support of ourshareholders.

December 2005

Tadaharu Ohashi
President

2

Review of Operations

SHIPBUILDINGThis segment secured orders amounting to ¥38.5 billion,
47.3%, or ¥34.6 billion, lower than in the same period of theprevious year. In total, orders were obtained for three newvessels: two LNG carriers and one LPG carrier. This compared with six LNG carriers, VLCCs (very large crude carriers),
and other vessels for the interim period of the previous year.

because of the effects of higher steel and other raw material
prices as well as other factors.

Sales rose 20.8%, or ¥9.3 billion, to ¥53.7 billion, due toincreased sales of newbuildings. Operating income totaled¥0.8 billion, 73.5%, or ¥2.1 billion, lower than a year earlier

ROLLING STOCK, CONSTRUCTION MACHINERY & CRUSHING PLANT
This segment succeeded in winning a large order for commuter train cars from North America. This resulted in an
increase in orders of 109.5%, or ¥40.6 billion, to ¥77.7 billion.
Sales rose 24.8%, or ¥16.7 billion, to ¥84.3 billion, as deliveries for the Taiwan High Speed Rail Corporation rose to a peak
and the segment’s construction machinery sales held firm.
Operating income, however, declined 29.1%, or ¥0.9 billion,to ¥2.3 billion, due mainly to an increase in development costs
for a new type of rolling stock.

AEROSPACE
Orders received increased 44.2%, or ¥15.1 billion, to ¥49.4
billion, because of higher demand from the commercial aircraft
sector, principally orders from Boeing for component parts forits 767 and 777 passenger aircraft.

jumped 423.9%, or ¥4.5 billion, to ¥5.6 billion, boosted by
the combination of higher sales and favorable movements inforeign exchange rates.

Sales were up 24.3%, or ¥17.8 billion, to ¥91.3 billion, owing
to increased sales for the development of the P-X next maritime patrol aircraft and C-X next transport aircraft for the JDA,
an increase in sales of component parts for the Boeing 777
passenger aircraft, and other factors. Operating income

3Review of OperationsSHGA ISP BTUR
I LBDI INNEGS & M A C H I N E R Y
Orders theDuringwoninterim
climbedperiod
14.9%,
underor ¥12.6
review,billion
this segment
above thewoninterimorders ofperiodamountingthe previous
to ¥38.5
fiscalbillion,
year, to47.3%,¥97.2 orbillion,¥34.6duebillionto anlower thanincreasein fordemandthe interim
for component
period of theparts
previousfor jet engines
year. In total,fororders were aircraft,commercial
obtainedincluding
for threethe
new
TRENT.
vessels: two LNG carriers
and one LPG carrier. This compared with six LNG carriers,
VLCCsedged
Sales(very large
up 1.4%,
crude
orcarriers),¥0.9 billion,
andtoother¥69.1
vesselsbillion.for theinterim period
Operatingincomeof theamountedprevious toyear.
¥1.3 billion, compared with

an operating loss of ¥0.4 billion in the same period of theprevious
Segment
fiscalsales
year.rose
This20.1%,
improvement
or ¥9.3inbillion,
profitability
to ¥53.7
wasbillion,due
tocompareda decline within initial
the interim
costs incurred
period ofinthe
connection
previous year.
with theintroduction
Operating incomeof a newtotaledgas turbine¥700 million,
model.73.5%, or ¥2.1 billion
lower than a year earlier because of the effects of higher steel
and other raw material prices as well as other factors.

SHPLAI PNBTU&I LIDNIFNRGA S T R U C T U R E E N G I N E E R I N GThis segment reported a decline of 54.2%, or ¥31.2 billion, toDuring the interim period under review, this segment won¥26.3 billion, in orders because of a drop in large-scale orders
orders amounting to ¥38.5 billion, 47.3%, or ¥34.6 billion
in the environmental plant business and an adverse impact
lower than for the interim period of the previous year. In total,
caused by the fact that public organizations in Japan excluded
orders were obtained for three new vessels: two LNG carriers
KHI from the bidding process for their steel bridge construction
and one LPG carrier. This compared with six LNG carriers,
projects for a certain period as a consequence of the alleged
VLCCs (very large crude carriers), and other vessels for theviolation of the Antimonopoly Act.
interim period of the previous year.

Sales rose 1.7%, or ¥1.1 billion, to ¥68.6 billion. This reflected
the sale of a thermal electric power generation plant in the
Segmentrose 20.1%,¥9.3 billion,to ¥53.7
billion,Philippines
bysalesthe industrial
plantorbusiness,
municipal
refusecomparedwiththeinterimperiodofthepreviousyear.
incineration plants for local government entities by the environOperating
totaled¥700 projects.
million, 73.5%,or ¥2.1reported
billionmentalplantincome
business,and other
The segment
lower
than
a
year
earlier
becauseoftheeffectsofhighersteel
an operating loss of ¥5.7 billion, which was ¥1.5 billion lower
and inother
raw material
as well asyear,
otherfactors.
than
the same
period pricesof the previous
owing
to a decline
in the operating loss of the industrial plant business.

SHCO INPSBUUM
I LEDRI NPG
RODUCTS & MACHINERYSales rose
Duringthe interim
6.3%, orperiod¥9.8 underbillion,review,to ¥166.3
thisbillion,
segment
supportedwonordersbyhigheramountingsales in Northto ¥38.5
Americabillion,and
47.3%,
robustor revenues¥34.6 billion
fromlower thanrobots
industrial
for theininterim
Japan.period
Operatingof theincomeprevious
climbedyear. In
7.1%,
total,
ordersor¥0.3werebillion,obtainedto ¥5.1 forbillion.
three new vessels: two LNG carriers
and one LPG carrier. This compared with six LNG carriers,
VLCCs (very large crude carriers), and other vessels for theinterim period of the previous year.

Segment sales rose 20.1%, or ¥9.3 billion, to ¥53.7 billion,
compared with the interim period of the previous year.
Operating income totaled ¥700 million, 73.5%, or ¥2.1 billion
lower than a year earlier because of the effects of higher steel
and other raw material prices as well as other factors.

SHOTH
I PEBRU I L D I N GSales amounted
Duringthe interimtoperiod¥60.2underbillion,review,
approximately
this segment
the same
won asordersforthe interim
amountingperiodto ¥38.5of the billion,
previous
47.3%,
fiscal or
year.
¥34.6
Operatingbillionlower thanincomerose
for17.4%,
the interimor ¥0.4
periodbillion,of theto ¥3.0
previousbillion,year.
as salesIn total,ordersofthe hydraulicwere obtainedmachinery
for three
to customers
new vessels:in China
two LNGremainedcarriers
and one LPG carrier. This compared with six LNG carriers,
strong.
VLCCs (very large crude carriers), and other vessels for theinterim period of the previous year.

4

Segment sales rose 20.1%, or ¥9.3 billion, to ¥53.7 billion,
compared with the interim period of the previous year.
Operating income totaled ¥700 million, 73.5%, or ¥2.1 billion
lower than a year earlier because of the effects of higher steel
and other raw material prices as well as other factors.

REVIEW BY GEOGRAPHIC SEGMENT
Sales in Japan for the interim period under review rose

Sales in Europe dropped ¥4.2 billion, or 10.2%,¥43.8 billion, or 10.9% in comparison with the interim

to ¥36.6 billion, owing to a decline in sales of theperiod of the previous year, to ¥445.1 billion, mainly

Consumer Products & Machinery segment. Operating

because of an increase in sales of the parent company.

income in Europe declined ¥0.2 billion, or 22.0%, toOperating income leaped ¥7.0 billion, or 192.7%, to¥0.7 billion.

¥10.7 billion.
In Asia, sales decreased ¥0.7 billion, or 5.7%, toIn North America, sales jumped ¥16.2 billion, or¥11.3 billion, while operating income fell ¥0.3 billion,

20.1%, to ¥97.2 billion, because of robust sales in theor 28.2%, to ¥0.7 billion.

Consumer Products & Machinery segment and otherfactors. Operating income was ¥0.2 billion, comparedIn other areas, sales rose ¥0.6 billion, or 24.9%, towith an operating loss of ¥1.1 billion during the interim¥3.3 billion, and an operating loss amounting to ¥0.2

period of the previous fiscal year.

billion was reported, approximately the same as for theprevious year.

FINANCIAL POSITION
Total assets at the end of the interim period amounted

compared with ¥11.3 billion in the same period of theto ¥1,193.9 billion, approximately the same level as at

previous fiscal year. Acquisitions of property, plant andthe end of the previous fiscal year on March 31, 2005,

equipment accounted for the largest portion of these

and, as a consequence of the continued efficient man-

cash outlays. As a result, free cash flow was ¥3.5 bil-agement of assets, interest-bearing debt was downlion. Net cash used for financing activities during the¥14.0 billion, to ¥339.9 billion.

interim period amounted to ¥15.5 billion, comparedwith ¥14.8 billion in the same period of the previous

Among cash flows, net cash provided by operating

year, as the Company repaid a portion of its borrow-activities during the interim period under review

ings and redeemed outstanding bonds. As a conse-amounted to ¥11.2 billion, compared with ¥19.8 billion

quence of these factors, cash and cash equivalents at

for the same period of the previous fiscal year. Net

the end of the interim period were ¥32.5 billion, ¥11.9

cash used for investing activities was ¥7.7 billion,

billion lower than at the end of the previous fiscal year.

5Condensed Consolidated Balance Sheets
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
As of September 30 and March 31, 2005 and September 30, 2004
Thousands of
U.S. dollars

Millions of yen

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

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

6

September 30, 2005
(unaudited)

March 31, 2005

September 30, 2004
(unaudited)

September 30, 2005
(unaudited)¥0,032,685
375,420375,367
53,533
837,005
84,250239,731
32,915¥1,193,901¥0,044,629
413,619332,333
46,424
837,005
79,569243,166
34,733¥1,194,473¥0,036,520
313,005
358,127
47,824755,476
82,777
246,763
29,013¥1,114,029

288,7113,316,138
3,315,670
472,865
7,393,384
744,192
2,117,578
290,743$10,545,897¥0,145,614
331,495
132,533
91,006700,648¥0,146,605
348,389
106,574
96,914
698,482¥0,167,793
269,656
103,097
73,011
613,557$ 1,286,229
2,928,142
1,170,683
803,869
6,188,923

194,296
86,601
280,897
4,857

207,279
82,556
289,835
4,691

224,095
78,319302,414
3,931

1,716,244
764,959
2,481,203
42,90381,42731,39090,135
19,155(14,467)(141)
207,499¥1,193,901

81,42731,39088,704
16,910(16,843)(123)
201,465¥1,194,473

81,427
31,38980,591
16,565(15,747)(98)
194,127¥1,114,029

719,256
277,272
796,175
169,199(127,789)(1,245)
1,832,868$10,545,897$

Condensed Consolidated Statements of Operations and Retained Earnings
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2005 and 2004 (unaudited)

Millions of yen

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

Thousands of
U.S. dollars

2005

2004

2005

¥593,579
518,619
74,96062,383
12,577¥537,715
467,661
70,054
63,1096,945$5,243,168
4,581,035
662,133
551,038
111,095

2,014
(103)
(2,678)(3,617)
8,193(2,832)(128)¥ 5,233

1,790
452(3,138)894
6,943(3,391)(187)¥ 3,365$

17,790(910)(23,655)(31,950)
72,370(25,015)(1,131)
46,224¥ 88,704
5,233(3,606)
(84)
—
(112)
¥ 90,135¥ 80,469
3,365(2,885)
(39)
(222)
(97)
¥ 80,591$ 783,535
46,224(31,853)
(742)
—
(989)
$ 796,175

7

Condensed Consolidated Statements of Cash Flows
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2005 and 2004 (unaudited)Thousands of
U.S. dollars

Millions of yen
2005

2004

2005

¥ 8,193¥ 6,943$ 72,370

14,384(6,771)
2,150(6,740)11,21615,13050,229(38,645)(13,841)
19,816

127,056(59,809)
18,991(59,535)
99,073(15,305)
(425)
8,038
(7,692)(14,437)(1,006)
4,133(11,310)(135,191)(3,754)71,000(67,945)

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

(4,055)
15,503(23,189)(3,717)(15,458)(18,503)49,563(42,920)(2,958)(14,818)(35,818)
136,940(204,832)(32,833)(136,543)

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

173

105

1,528

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

(11,761)(6,207)(103,887)

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

44,38542,375392,059

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

—

(39)

—

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

(111)

—

(980)

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

¥32,513¥36,129$287,192

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 .....................................................................................................
Decrease (increase) in assets.......................................................................................................
Increase (decrease) in liabilities ....................................................................................................
Other ...........................................................................................................................................
Net cash provided by operating activities..................................................................................
Cash flows from investing activities:
Acquisition of tangible and intangible assets ................................................................................
Acquisition of investments in securities ........................................................................................
Other ...........................................................................................................................................
Net cash used for investing activities.........................................................................................

8Changes in Accounting Policies

Effective April 1, 2005, Kawasaki Heavy Industries, Ltd., and its consolidated subsidiaries adopted the new accounting
standards for impairment of fixed assets (“Opinion on Establishment of Accounting Standards for Impairment of Fixed
Assets” issued by the Business Accounting Deliberation Council on August 9, 2002) and the guidance on accounting
standards for impairment of fixed assets (the “Financial Accounting Standard Guidance No. 6” issued by the AccountingStandards Board of Japan on October 31, 2003).
As a result of adopting the accounting standards and the guidance, income before income taxes and minority interests
decreased ¥3,008 million. Accumulated impairment losses are deducted from book values of related fixed assets.

9

Segment Information
Kawasaki Heavy Industries, Ltd. and Consolidated Subsidiaries
For the six months ended September 30, 2005 and 2004 (unaudited)(a) Information by industry segment
Millions of yen
2005

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¥ 53,736¥

84,331
91,29369,09368,609166,339
60,178593,579—¥593,579

Operatingincome (loss)

589¥ 54,325¥ 53,561

¥

465
951
7,150
6,121
2,295
21,846
39,417(39,417)¥ 000—

84,79692,24476,24374,730168,634
82,024
632,996(39,417)¥593,579

82,52986,64374,89880,395
163,490
79,021
620,537(39,535)¥581,002

2,267
5,601
1,345
(5,665)
5,144
3,003
12,459118¥12,577

Total
sales

Operatingexpenses

Operatingincome (loss)

764

Millions of yen
2004

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¥ 44,471¥

507¥ 44,978¥ 42,092¥2,886

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

715
831
8,803
5,655
2,531
19,73038,772(38,772)¥ 0 000—

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

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

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

Thousands of U.S. dollars
2005
External
sales

Shipbuilding .......................................................................................... $ 474,658
Rolling Stock, Construction Machinery& Crushing Plant .................................................................................
744,908
Aerospace.............................................................................................
806,404
Gas Turbines & Machinery.....................................................................
610,308
Plant & Infrastructure Engineering..........................................................
606,033
Consumer Products & Machinery .......................................................... 1,469,296
Other.....................................................................................................
531,561
Total.............................................................................................. 5,243,168
Eliminations ...........................................................................................
—
Consolidated total ......................................................................... $5,243,168

10Intersegment
sales

Total
sales

Operatingexpenses

5,203$ 479,861$ 473,112

$

4,107
8,400
63,15754,06820,272
192,969
348,176(348,176)$0,000—749,015
814,804
673,465
660,101
1,489,568
724,530
5,591,344(348,176)$5,243,168

728,990765,330
661,585
710,140
1,444,130
698,004
5,481,291(349,218)$5,132,073

20,02549,474
11,880(50,039)
45,43826,526
110,053
1,042$111,095$

Operatingincome (loss)

6,749

(b) Information by geographic area
Millions of yen
2005

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

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥445,137
97,241
36,63811,307
3,256
593,579—¥593,579¥ 99,957
6,997
1,888
8,708
54
117,604(117,604)¥ 000—¥545,094
104,238
38,52620,015
3,310
711,183(117,604)¥593,579¥534,427
104,000
37,833
19,286
3,479
699,025(118,023)¥581,002¥10,667
238
693
729
(169)
12,158419¥12,577

Millions of yen
2004

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

External
sales

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)¥401,293
81,00040,822
11,993
2,607
537,715—¥537,715¥ 83,699
7,556
2,032
7,729
49
101,065(101,065)¥ 000—¥484,992
88,55642,854
19,722
2,656
638,780(101,065)¥537,715¥481,348
89,62041,96518,707
2,791
634,431(103,661)¥530,770¥3,644(1,064)
889
1,015
(135)
4,349
2,596
¥6,945

Thousands of U.S. dollars
2005
External
sales

Japan.................................................................................................... $3,931,958
North America .......................................................................................
858,944
Europe ..................................................................................................
323,629
Asia.......................................................................................................
99,876
Other areas ...........................................................................................
28,761
Total.............................................................................................. 5,243,168
Eliminations ...........................................................................................
—
Consolidated total ......................................................................... $5,243,168

Intersegment
sales

Total
sales

Operatingexpenses

Operatingincome (loss)$ 882,934
61,805
16,67776,919478
1,038,813(1,038,813)$ 0000—$4,814,892
920,749
340,306
176,795
29,2396,281,981(1,038,813)$5,243,168$4,720,670
918,647
334,184
170,356
30,7306,174,587(1,042,514)$5,132,073$ 94,222
2,102
6,122
6,439
(1,491)
107,394
3,701$111,095

11

(c) Overseas sales
Millions of yen

12

Thousands of
U.S. dollars

Overseas
sales

% of
net sales

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

18.4%
9.6
12.8
9.0
49.9%

$1,110,591
459,244932,727
407,004$2,909,566

Millions of yen

Overseas
sales

% of
net sales¥125,730
51,991
105,594
46,077¥329,392

21.2%
8.8
17.8
7.7
55.5%

2005

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

%

%

2004

2005

Net Sales, Orders and Order Backlog by Industry Segment
For the six months ended September 30, 2005 and 2004 (unaudited)Thousands of
U.S. dollars

Millions of yen
2005

2004

2005

Net sales:
Shipbuilding........................................................................................................................................ ¥ 53,736
Rolling Stock, Construction Machinery & Crushing Plant.....................................................................
84,331
Aerospace ..........................................................................................................................................
91,293
Gas Turbines & Machinery ..................................................................................................................
69,093
Plant & Infrastructure Engineering .......................................................................................................
68,609Consumer Products & Machinery ....................................................................................................... 166,339
Other ..................................................................................................................................................
60,178
Total ............................................................................................................................................... ¥593,579¥ 44,471
67,60073,46068,17067,463
156,490
60,061¥537,715$ 474,658
744,908
806,404
610,308
606,033
1,469,296
531,561$5,243,168

Orders received:
Shipbuilding........................................................................................................................................ ¥ 38,469
Rolling Stock, Construction Machinery & Crushing Plant.....................................................................
77,678Aerospace ..........................................................................................................................................
49,371
Gas Turbines & Machinery ..................................................................................................................
97,161
Plant & Infrastructure Engineering .......................................................................................................
26,285
Consumer Products & Machinery ....................................................................................................... 166,339
Other ..................................................................................................................................................
61,391
Total ............................................................................................................................................... ¥516,694¥ 73,031
37,08034,23684,54857,443
156,490
60,262¥503,090$ 339,802
686,141
436,101
858,237
232,179
1,469,296
542,275$4,564,031

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, 2005

As ofMarch 31, 2005

As of
September 30, 2004

As of
September 30, 2005

¥ 252,825¥ 263,707¥ 226,441$ 2,233,239

297,326
247,671
194,754
169,345—
29,796¥1,191,717

300,837
287,441
163,440
210,160—
28,824¥1,254,409

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

2,626,323
2,187,713
1,720,290
1,495,848—
263,192$10,526,605

13

Kawasaki Corporate Data
(As of September 30, 2005)
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
Number of Shareholders: 117,981
Number of Employees: 29,024

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

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