Management Overview
0April 25, 2019

Trend of Financial results[Billion yen][Billion yen]Orders Received
Net Sales

2,000.0
1,693.6
1,500.0

1,608.0
1,585.9
1,541.0 1,518.8 1,574.2

959

1,700.0
1,700.0(9.4%)FY2018
Forecast in April
Operating Income:75.0
ROIC:8.0%

90.0

1,594.7

1,348.7

Operating120.0

559

60.0

1,000.0459

640(4.5%)

Income72.0(6.7%)(3.9%)(5.0%)

500.0

30.0

0.00.0Assumedexchangerates（USD）

FY2015FY2016FY2017FY2018118.99108.98110.62110.77FY2019Forecast110.00

MTBP2016© 2019 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

FY2015FY2016FY2017FY2018118.99108.98110.62110.77FY2019Forecast
110.00

MTBP2016
2Rolling Stock Business Restructuring Committee– Discussion Results

Reasons for recording losses in Rolling Stock BusinessInadequate risk recognition at bidding and insufficient cost, design, and quality
management are the main factors• Planned cost reduction cannot be achieved based on a decrease in the final amount of delivered traincars.

M9• Increase in material costs due to unachieved cost reduction target and rising prices of procuredproducts.
• Excessive time to agree on the specification interpretation with the customer, causing process delays.

Projectsin Japan

Other Projectsin U.S.

• Unachieved cost reduction target.
• Higher material costs than expected.
• Difference in specification interpretation with customers.

• Wiring installation defects found in project for WMATA*, and required repairs of the delivered cars.
(Due to work procedures and training)*Washington Metropolitan Area Transit Authority© 2019 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved4

Rolling Stock Business Restructuring Committee– Discussion Results
Restructuring business voluntarily by executing the following policies:
Policy①

Strengthen Project Management

Policy②

Reform Quality Management SystemEmphasis on quality over quantity
JapanNorth
Policy③ America• While maintaining an strong competitive environment among rolling stock manufacturers, we will
receive orders at the appropriate price by maintaining and strengthening non-pricecompetitiveness utilizing technology.
• Supply high-value-added key components.
• Develop business focused on customers whom we can demonstrate our superiority based on pastdelivery results. (NY subway etc.)• Promotion of new business such as track monitoring business utilizing IoT technology.

Asia• While a large number of Asian yen loan projects are expected based on the promotion of railway
infrastructure exports by Japanese government, dealing mainly with low risk yen loan projects andsecuring profitability.

Comprehensive• Expansion of stock-type business with strength in increasing number of delivered cars.

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5Status of Projects in North America
R211

M9<Status><Status>Regarding 78 production cars, 40 of the cars are undermanufacture at KMM, Lincoln, Nebraska, and an additional 20
have been sent to KRC, Yonkers, New York, and 18 cars are
not yet under manufacture.

Production of the car body shells for the Pilot Cars has been
started at Hyogo Works from January, 2019, and its
fitting/final assembly will be started in 2019 at KMM, Lincoln,Nebraska.

As of March 2019, 14 pilot cars are under function test atKRC, Yonkers, New York and customer site.

We received option order on January 2019.

<Schedule>
9/2013

Base NTP（92 cars）

1/2019Option NTP（110 cars）

5/2019Delivery of 1st Car

12/2020

Delivery of Last Car<Project Summary>PJ：

M-9 Passenger Cars for Long Island Rail Road

Q’ty ：

Base 92 Cars ＋ Option 110 Cars

Dimension : 25.9ｍ（length）×3.2ｍ（width）×4.0ｍ（height）
Stainless Steel© 2019 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved

As of March 2019, we are in the design stage andmanufacturing the mock-up car at Hyogo Works.

<Schedule>
2/2018Base NTP (535 cars)

8/2021

Delivery of 1st Car

10/2021Begin Delivery of Production Cars

8/2023

Delivery of Base Last Car<Project Summary>PJ：

New Subway Cars for New York City Transit

Q’ty ：

Base 535 Cars ＋ Option up to 1,077 Cars

Dimension： 18.4ｍ（length）×3.0ｍ（width）×3.7ｍ（height）
Stainless Steel6

Progress of Restructuring of theShip & Offshore Structure Segment

1. Progress of restructuring
Basicpolicy :Keymeasures：

Shifting merchant ship's construction (mainly gas carriers)
from Japan to China
Reduction of construction
capacity in Japan（2docks→1dock)New-build orders(Reduction in manufacturingcosts and fixed costs)(3-4 ships orders per year for
LNG carrier, LPG carrier andgas related vessels etc.)○○×

4th Dock in China started its
operation since March 2019

Periodical target achieved
successfully as of FY 2018

Expansion of construction
capacity in China（3docks→4docks）
Progress：Productivity improvement

In FY2017-2018 orders of 3 LPG
carriers and a LNG bunkering vessel
but no order of LNG carrier received

Summary： Two of three key measures have been implemented successfully, but no order of LNG carrier has
been received due to sluggish new-build market , the delay of expected large LNG development
projects and led by aggressive price strategy by Korean shipyards. Therefore we received ordersof two bulk carriers to cope with factory fixed cost.

Ship & Offshore Structure segment has made profits since the second half of FY 2017.
However, in FY 2019, it is expected to be in the red due to temporary shortage ofoperations and increase of low profitable projects.
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2. Business policy
 Demand for new-build LNG carriers is expectedto increase largely based on the expanding LNG
demand mainly in Asia.

Recognitionof currentsituation

 Some of large-scaled LNG development projects,
such as Mozambique LNG project and Qatar’s
LNG Expansion project, will get move forwardfrom this year, and activities for new-build LNG
carriers are expected to brisk.
 Demand for gas-related vessels is definitely
increasing due to strengthening of environmentalregulations.

Businesspolicy

Demand forecast of new-build LNG carriers※In-house survey As it may take time but the new-build market
will recover steady, we will deepen ourintegrated management with our joint venture
shipyards in China, such as jointly receiving aseries of order by both parties and sharing theconstruction each other.
 We shall continue to carry out restructuring
program in order to achieve surplus in FY2020
and furthermore get to a pre-tax ROIC of over
8% thereafter.

Source: Mizuho Bank, Industry Research Dept.

© 2019 KAWASAKI HEAVY INDUSTRIES, LTD. All Rights Reserved9（reference） DACKS second dock completed
In March 2019, the second dock of our China joint venture,
Dalian Cosco KHI Ship Engineering Co., Ltd. (DACKS) was completed.
We will enhance our competitiveness by strengthening our technology transfer andcooperation, and aim to expand earnings as a Ship & Offshore Structure Segment.
【DACKS Company Profile 】
company
nameDalian Cosco KHI Ship Engineering Co., Ltd.

location

Dalian City, Liaoning Province, China

Founding

July 2007

Beginning ofoperation

January 2010

number ofemployees

Approximately 1600 people

DACKS factory panoramic view. Right dock is the second dock.

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ご注意

本資料のうち、業務見通し等に記載されている将来の数値は、現時点で把握可能な情報に基づき当社が判断した見通しであり、リスクや不確実性を含んでおります。従いまして、これらの業績見通しのみに依拠して投資判断を下すことはお控え下さるようお願い致します。実際の業績は、外部環境及び内部環境の変化によるさまざまな重要な要素により、これらの見通しとは大きく異なる結果となり得ることを御承知おき下さい。実際の業績に影響を与える重要な要素には、当社の事業領域をとりまく経済情勢、対米ドルをはじめとする円の為替レート、税制や諸制度などがあります。

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