Investors Meeting for Fiscal 2006
(for the year ended March 31, 2007)

Apr. 27, 2007
Kawasaki Heavy Industries, Ltd.

Contents
・ Summary of FY2006 Results (Consolidated)
・ Breakdown of Increases/Decreases
in Profit for FY2006 Compared to FY2005
・ Interest-Bearing Debt and Cash Flows・ Business Results and Outlook by Segment
Shipbuilding
Rolling Stock
Aerospace
Gas Turbines & Machinery
Plant & Infrastructure Engineering
Consumer Products & Machinery
・ R&D/Capital Expenditures/Number of Employees
・ Outlook for FY2007 by Segment
・ Outlook of Orders Received for FY2007
・ Business Portfolio (FY2006)

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Summary of FY2006 Results (Consolidated)
Orders Received & Net Sales

Profits(Billion \)(Billion \)1,592.6

1,500

1,438.6

1,351.6 1,322.4

1,440.0 1,480.0

80

69.1
62.0

60
1,000

41.7
40500

200

29.7

33.0

16.4

0
FY2005

FY2006

FY2007

FY2005

FY2006

FY2007

Projection

Orders Received

Projection

Operating Income

Net Sales（Billion￥）

Exchange Rates
ActualUSD/￥
EUR/￥Net Income

FY2005112.00139.00FY2006117.00152.00FY2005（Actual）

FY2006（Actual）

FY2007（Projection）

Operating Income

４１.７６９．１６２.０Net Income

１６.４

２９．７

３３.０Assumption
FY2007110.00150.00

1Breakdown of Increases/Decreases in Profitfor FY2006 compared to FY2005
yOperating income(＋２7.３billion yen)

Effects of the fluctuation of foreign exchange rate
Increase in selling, general and administrative expenses *Adverse impact of a rise in material priceEffects of increase in sales
Effects of cost reduction including fixed cost, etc+１８.３- ５.９-１１.０
+１２.７
+１３.２

*Change of accounting method for development cost
From the beginning of FY2006 development cost for new models in the Consumer Product and Machinery business wasaccounted into selling and general administrative expenses, but until FY2005 otherwise into cost of sales.
To this effect selling and general administrative expenses in FY2006 increased by 18.0 billion yen.
However we eliminated this effect from the figure above for your convenience to grasp the substantial difference
between FY2006 and FY2005.

yNon-operating income(-９.１billion yen）

Increase in net interest expenses
Gain on sales of marketable securities (FY2005 ￥4.3 billion →FY2006 ￥0.9 billion)
Increase in equity in income of non-consolidated subsidiaries and affiliates(FY2005 ￥-0.2 billion →FY2006 ￥2.6 billion)
Loss of foreign exchange (FY2005 ￥8.9 billion →FY2006 ￥13.3 billion)- ４.４+ ３.５Others

yOther income- ０.６- ３.４+ ２.８(＋３.８billion yen)

Gain on contribution of securities to employee’s retirement benefit trust-１２.９(FY2005 ￥12.9 billion →FY2006 ￥0 )Loss on restructuring reforms (FY2005 ￥15.8 billion →FY2006 ￥0 )Others+１５.８+ ０.９2

Interest-Bearing Debt and Cash Flows
Ｂ／Ｓ(Billion \)801,500

1,357.9

1,284.0

1,194.4

1,156.9

150%

399.4

43.0

353.8
44.6

319.8
37.6

304.2

100%

45.7

42.8

45.8

402016.9
9.2

FY200350%

Total assets

53.7

2.5039.3

0FY2003
FY2004
Cash on hand and in banks

71.4

200%
60

1,000

500

Cash Flows(Billion \)FY2005
FY2006
Interest-Bearing Debt
Net D/E Ratio (right scale)-20-25.8

FY2004

FY2005

FY2006-17.7-40-36.5-43.3

Net debt
Shareholders' equity
Net D/E ratio

FY2003
356.4
190.1
187%

FY2004
309.2
201.4
154%

FY2005282.1
237.5119%(Billion \)FY2006
264.8
290.4
91%

＊About ￥180 billion of interest-bearing debt has been reduced in the last five years
due to profit increase and conversion of some convertible bonds to the stocks
in addition to implementation of some measures to reduce receivables and inventories.

-60

C/F from operating activities
Free Cashflows

C/F from investing activities＊ We have consecutively made positive free cash flows for the last six years,
generating about ￥140 billion.

3Shipbuilding
Operating Income & Operating Income to Sales

Orders Received & Net Sales(Billion \)150(Billion \)140.0 140.0

135.6

128.3
109.6

3.03

108.8

2100

12%
FY2005

FY20060500%
FY2007-1-20FY2005

FY2006

Projection-1.7-3

FY20074%-2.2-2%-4%

Projection

Orders Received

Operating Income

Net Sales

Operating Income to Sales(vessel)

LNG carriers
Small-sized LNG carriers
LPG carriers
VLCCs
Bulk carriers
Submarines
Total

Orders Received
FY2005
FY 2 0 0 6
132
12
1
108
116
13

FY20054(3)1272(1)
16(4)

Sales
FY 2 0 0 66 (3 )282 (2 )
1 8 (5 )Note: ( ) = Sales units based on percentage-of -completion method

Business results for FY2006＊Increase in orders received of LNG carriers and LPG carriers＊Adverse impact of a rise in steel price
Outlook for FY2007＊Keeping a high-level orders received due to strong shipping market＊Increase in sales of LNG carriers and LPG carriers＊Return to profitability due to sales decrease of unprofitable vessels andsales increase of LNG carriers and LPG carriers

4Rolling Stock
Operating Income & Operating Income to Sales

Orders Received & Net Sales(Billion \)(Billion \)269.1

15250200

203.1
168.3

184.2

180.0 170.0

108%

13.1

6%

8.8

8.0

1504%
51002%

500%

00

FY2005
FY2005

FY2006
Orders Received

FY2007
Net Sales Projection

FY2006

FY2007
Projection

Operating Income

Operating Income to Sales

Business results for FY2006
Outlook for FY2007＊Large increase in orders received of large-scale projects for overseas＊Increase in sales for JR and other domestic businesses－Passenger cars for New York Metropolitan Transportation Authority’s＊Decrease in sales and profit of large-scale projects for overseas such as
Metro-North Railroad (300 cars/ US$700mil)
high-speed trains for China－Subway System for Taipei City by the consortium of Kawasaki, Marubeni Co and CTCI
(About ￥57.0bil)＊Increase in profit due to･･･ large increase in sales of large-scale projects for overseas such as high-speed trainsfor China･･･ increase in sales of wheel loaders for U.S. market

5

Aerospace
Operating Income & Operating Income to Sales

Orders Received & Net Sales(Billion \)(Billion \)300229.2 218.5

255.6

269.1

250.0
190.0

200

9.7

500
FY2006

FY2007

Net Sales

10.04%2%0%FY2005

Projection

Orders Received

6%10100

FY2005

13.4

15

Operating IncomeFY2006

FY2007

Projection

Operating Income to Sales

Sales units for commercial aircraft and components(unit)Sales
FY2005
FY 2 0 0 6B777
B767
Embraer170/175
Embraer190/195

4911393773
133779Business results for FY2006＊Increase in orders received for commercial aircraft business such as B777 for BOEING＊Increase in profit due to sales increase of･･･BOEING business･･･development of the P-X(Patrol plane) and C-X(Container plane) for JDA
Outlook for FY2007＊Decrease in orders received, sales and profit owing to closing stage for development ofthe P-X(Patrol plane) and C-X(Container plane) for JDA

6Gas Turbines & MachineryOperating Income & Operating Income to Sales

Orders Received & Net Sales(Billion \)(Billion \)

10250
200

9.8

204.8

188.0
161.4

210.0
183.3

180.0

86%
8.0

6.8

4%

6150

4

1002%

250

0

00%
FY2005

FY2005

FY2006

Orders Received

Net Sales

Projection

Business results for FY2006＊Increase in orders received of commercial aircraft jet engines andindustrial gas turbines＊Increase in sales and profit of commercial aircraft jet engines andindustrial gas turbines

FY2006

FY2007
ProjectionFY2007
Operating Income

Operating Income to Sales

Outlook for FY2007＊Projection of net sales at even level with FY2006：(+) Increase in sales of industrial gas turbines and aero-dynamic machinery(-) Decrease in sales of marine steam turbine engines for LNG carriers andmarine diesel engines＊Adverse impact of a rise in material price7

Plant & Infrastructure Engineering
Operating Income & Operating Income to Sales

Orders Received & Net Sales(Billion \)(Billion \)

200
164.5
150
100

4.0

150.2
122.0

97.3

130.0
110.0

32%00%FY2005

FY2006

FY2007
Projection-3-2.4

50FY2005

FY2006

FY2007
Projection

Orders Received<Large-scale orders received and sales of FY2006>
Orders Received
・Ferronickel plant/ Korea
・Urea production facility/ Pakistan
・Cement plant/ Vietnam

Net Sales

Sales
・Refuse incineration plant/ Tokyo city・Refuse incineration plant/ Kishiwada & Kaizuka city

-9-2%-4%-604%-6%-8%-8.4
Operating Income

Operating Income to Sales

Business results for FY2006＊Increase in orders received of large-scale projects for overseas ofplant engineering business unit
＊Decrease in sales of industrial plants for overseas due to strengthening of
selective order-taking＊Decrease in losses due to return to profitability of plant engineeringbusiness unit
Outlook for FY2007＊Strengthening of selective order-taking＊Increase in sales of industrial plants for overseas even under selectiveorder-taking policy＊Return to profitability due to sales decrease of unprofitable projects forenvironmental plant business8

Consumer Products & MachineryOperating Income & Operating Income to Sales

Net Sales(Billion \)(Billion \)

500
400

366.9

403.7

440.0

27.5

308%

19.8

20.0

203006%4%

102002%

1000%0FY2005

0FY2005

FY2006

FY2007
Projection

FY2007

Projection

FY2006

Operating Income

Operating Income to Sales

Sales by Region for Consumer Products（Thousands of Unit / Billion \)RegionDomestic
NorthAmerica
EuropeOthersTotal

FY2005
FY2006
Unit
AmountUnit
Amount26
17.1
21
15.9240(120)159.5 254(140)
183.7
88
68.0
97
80.9
174
33.4
130
32.6
528
278.0
502
313.1

Note
1. Sales units consist of Motorcycle, All-Terrain Vehicles (ATV), Utility Vehicles (MULE),
Personal Water Craft (Jet Ski) and parts for these products.
2. Domestic sales include OEM supply.
3. ( ) represents Motorcycle sales unit.

Business results for FY2006＊Increase in sales and profit of motorcycles for U.S. market and industrial robots
Outlook for FY2007＊Increase in sales of motorcycles for European market＊Decrease in profit due to adverse impact of a rise in material price and assumed
appreciation of yen against US dollar ( Exchange rate assumption US＄=￥110 )9

R&D/Capital Expenditures/Number of Employees(Billion￥/ Persons)

FY２００５
Actual

FY２００６
Actual

FY２００７
Projection

R&D

27.0

33.8

38.0

Capital Expenditures

41.7

39.3

56.0

Depreciation andAmortization

30.5

30.3

Domestic

22,66322,872

23,300Overseas

6,259

6,339

6,700

Number of Employees

28,922

29,211

30,000Note*)

39.0

Note*) This figure is affected by Tax Reform regarding Depreciation Methodology.

10Outlook for FY2007 by Segment(Billion￥）

Net Sales
FY２００６
ActualOperating Income

FY２００７
Projection

FY２００６
Actual

FY２００７
Projection

Shipbuilding

108.8

140.0

-2.2

3.0

Rolling Stock

184.2

170.0

13.1

8.0

Aerospace

269.1

250.0

13.4

10.0

Gas Turbines & Machinery

183.3

180.0

9.88.0

Plant & Infrastructure Engineering

122.0

130.0

-2.4

4.0

Consumer Products & Machinery

403.7

440.0

27.5

20.0

Others

167.3

170.0

9.8

9.0

Total

1,438.6

1,480.0

69.1

62.0

Exchange Rate Assumptions
US＄=￥１１０/EUR=￥１５０
11Outlook of Orders Received for FY2007（Billion￥）

Orders Received
FY２００５
Actual

FY２００６
Actual

FY２００７
Projection

Shipbuilding

128.3

135.6

140.0

Rolling Stock

203.1

269.1

180.0

Aerospace

229.2

255.6

190.0

Gas Turbines & Machinery

188.0

204.8

210.0

Plant & Infrastructure Engineering

97.3

150.2

110.0

Consumer Products & Machinery

366.9

403.7

440.0

Others

138.5

173.5

170.0

Total

1,351.6

1,592.6

1,440.012

Business Portfolio (FY2006)

Orders Received

Others11%

Net Sales

Shipbuilding
9%

Others11%

Rolling Stock
13%

Rolling Stock17%
Consumer
Products &Machinery
25%

Consumer
Products &Machinery
28%￥1,592.6billion

Shipbuilding
8%￥1,438.6billion
Aerospace
19%

Aerospace
16%
Plant &
Infrastructure
Engineering
9%

Gas Turbines &Machinery
13%

Plant &
Infrastructure
Engineering Gas Turbines &Machinery
8%
13%

13Kawasaki, let the good times roll !

Cautionary Statement
The performance outlook and the forecasts stated in this material were prepared by Kawasaki Heavy Industries, Ltd.
(hereinafter, KHI) based on the circumstances at the release point, and include potential risks and uncertain factorsthat relate to economic conditions, foreign currency exchange rates, tax rules, regulations and other factors.
Accordingly, please note that the actual operating results, financial position, and business deployment of KHI
may sometimes differ considerably from the descriptions in the present projections.