Kawasaki Heavy Industries, Ltd.

I am Yamamoto. Thank you for joining our meeting today.

As announced in our website at 11:30 we had a strong results of the first quarter of FY 2021. Although some risks including logistics disruption and the surging price of materials are remaining, assuming that the robust performance of motorcycle among others would continue this time, we revise that the three year forecast at the time of the first quarter I'd like to present the contents.

Page 2 shows the table of our contents. I explained the following this order.

Page 3 shows consolidated results summary. In the first quarter net sales worth 355.6 billion operating profit was 15.1 billion and recurring profit was 13.1 billion.

Net income is 9.8 billion, almost equivalent to the one in FY 2013 one of the best net income in the last decade. As for weighted average exchange rate as shown here, yen depreciated by 4.4 yen to $1 year-on-year and the U.S.

dollar based transaction was $0.4 billion. Page 4 shows consolidated the results by segment.

Orders received net sales and operating profit by segment are as shown here. Aerospace systems loss continued despite significant recovery in the travel demand.

On the other hand, in motorcycle and engine, sales and profit increased significantly due to strong demand for outdoor leisure mainly in developed countries where sales decreased in the corresponding quarter in the previous year due to COVID-19. Improvement in these two segments were notable and in total, sales increased 55 billion yen and operating profit increased 35.8 billion yen year-on-year.

Page 5 shows income statement from net sales to recurring profit. Specifics are as shown here.

Along with a significant sales growth in motorcycle and engine sales cost also increased as shown in number one. As for no operating income and expenses, loss on foreign exchange was posted due to year end translation of foreign bond and as a Yen appreciate this slightly since the end of the last fiscal year.

As for the equity income of unconsolidated subsidiaries and affiliates loss of 1 billion yen was posted due to profit to deterioration in ship JV in China by appreciation of Yuan and rising steel prices. Page 6.

Let me explain the profit item below recurring income. In this quarter as shown in number four extraordinary income was posted due to sales of land in Yokkaichi.

As for tax, due to the absence of reversal of expenses on deferred tax assets in the previous year, this year, expenses of 4.3 billion were posted. As a result net income was plus 9.8 billion.

Page 7 shows the details of change in profit. Operating profit increased 35.8 billion year-on-year and motorcycle and the engine accounted for 60% of the growth.

By variance motorcycle accounted for 80% of the changing sales showing the strong momentum of the business which drives their profit growth. In aerospace systems, jet engine maintenance cost which was a heavy burden in the corresponding period of previous year decreased and that contributed greatly to change in product mix and other factors.

Details by segment are shown on page eight for your reference. Page 9 shows balance sheet up to the total assets.

As for the changes in total assets, as shown by number one and two, due to changes in accounting standard for revenue recognition some adjustment was recorded between accounting items. For the reduction in trade receivables besides the accounting procedural change, as mentioned, progress of receivable collection in plant engineering and motorcycle also contributed.

Page 10 shows a balance sheet of liabilities and net assets. As for variance for liabilities and net asset as shown in number one, trade payables in aerospace and motorcycle decreased as a result as shown in number two interest bearing debt increased, but we assume it as a normal for the first quarter.

With this net debt ratio turned to 119% and it is the improvement of about 7 point year-on-year that set to fill the gap with that targeted 7% to 80% while the effort is required in the collection of receivables, reduction in inventories and improvement in capital efficiency. Number three shows impact by the abrogation of the accounting standard for revenue recognition.

But please note that this has no impact on cash flow. Page 11 shows cash flow statement.

Operating cash flow improved substantially compared to the previous year, which was affected by the COVID-19 this year in addition to the posting of profit, working capital improved substantially year-on-year as showing number one, as a retail strong series continued in North America in motorcycle segment and a collection of receivables and inventory adjustment proceeded. Investing cash flow worsened compared to the previous year when gain on fixed asset series were posted.

But excluding these special factors it was almost flat year-on-year. As a result, free cash flow improved by 43.1 billion yen year-on-year to the deficit 55.2 billion yen in the rest of the fiscal year we improved capital efficiency farther to ensure the positive free cash flow.

Page 12, for your reference cash flow development in that last 13 year is presented. Page 13 shows earnings forecast for FY 2021 given the progress in motorcycle and the engine and exchange rates, orders received and net sales were revised up by 30 billion Yen respectively, and the operating profit was revised up by 10 billion yen.

As a result orders forecast for FY 2021 is 1,510 billion Yen net sales of 1,530 billion yen and operating profit is 40 billion yen through the upward revision. As no operating profit and tax expenses will be higher than the initial forecast recurring profit is revised at 8 billion yen to 28 billion yen and net income is revised up to 2 billion yen to 19 billion yen.

For this forecast exchange rate is assumed as 109 yen to $1 with yen's appreciation of 3 yen from the previous forecast. Let me explain in detail by segment.

Page 14 shows forecast by segment. Segment breakdowns are shown in the table.

Motorcycle and engine profit growth is 8 billion yen, which accounts for 80% of the total gross. Other details will be provided by segment.

Page 15 shows aerospace systems. The results of the first quarter of FY 2021 are shown on the slide.

Both of orders and net sales decreased year-on-year due to the new accounting standard for revenue recognition. But profit improved substantially due to increased tariffs for Boeing and an improvement in profitability of components parts for commercial aircraft jet engines.

As for the three year forecast orders and sales decrease year-on-year also due to the new accounting standard for revenue recognition, but we assumed that the market environment almost remained unchanged from the previous announcement. In this time, only improvement by the FX rate assumption was incorporated.

As for Boeing 787 as presented in the company's results announcement on July 28. In this year, temporary [indiscernible] production will be below 5, but gradually it will be recovering to the level of 5 per month.

Therefore the impact on the present forecast to be limited. Page 16.

This page shows orders and series of aero based and the aero engine number of aircraft component parts soared to Boeing and the number of jet engine component parts soared for your reference. Page 17 shows the quarter in sales and operating profit the development for your reference.

Page 18 shows market overview of the company and the specific efforts to achieve the guidance. It has no major change from the previous announcement and we regard the key issue is to improve earnings in aero engine business among others and the various drive to reduce production costs and ensure to review the fixed cost structure to be in line with the business market changes.

Page 19 shows rolling stock. The results of the first quarter FY 2021 as shown on the slide.

Though sales decreased slightly year-on-year, profit improved due to improved profitability of overseas projects debt recovered from the impact of COVID-19. The full year forecast is also kept unchanged.

Page 20 shows orders and tariffs in domestic and Asia and North America. And appendix shows profitable sales in components overhaul and after sales service and the progress of M9 project for Long Island railroad in the U.S.

for your reference. Page 21 shows quarterly sales and operating profit development for your reference.

Page 22 shows market overview of rolling stock as well as aerospace there also is no major change from the previous announcement. As for the North America M9 project which incurred the losses in recent years that delivery of 92 trains on base contract was completed.

The production of the final train on the option contract has been launched. And the delivery is scheduled to be completed in the first quarter in the next fiscal year.

And we received an order and started the remote track monitoring service for the United States which we have been long working on in the first quarter of FY 2021 as such, by expanding rail to be profitable businesses such as components after sales service and the maintenance service, we will improve the profitability of the entire business. Page 23 shows energy solution and marine engineering, the results of the first quarter in FY 2021 as shown on this slide.

Profit decreased with less profitable project compared to the previous year as for the three year forecast, like in the first quarter, less profitable project and the gradual expansion of operating loss with commercial ship business are expected. As of the previous announcement, we had expected a substantial profit decline year-on-year but this time as we incorporated increased steel, material pricing, ship business three year operating profit was revised down by 1 billion yen to 2.5 billion yen.

Page 24, breakdown of orders and series of Energy System and Plant Engineering and shipment of offshore structure are provided for your reference. Page 25 shows quarterly sales and operating profit development for your reference.

Page 26 shows market overview of the segment. In this year we received the order for Spice unmanned autonomous underwater vehicle equipped with inspection robot arm for subsea pipelines first of this kind in the world, increased inspection, operational efficiency and reduced working load are expected and we'd like to expand the series for inspections of aging subsea pipelines in North Sea and other regions.

And the audit to establish the leading position in the decarbonisation field. Kawasaki Green Energy Limited as a subsidiary started operation on April 1.

Through this company, we will work to expand Co2 free energy. Page 27 shows precision machinery and robot.

The quarterly results of the first quarter of FY 2021 as shown on this slide. Sales and profit increased due to robust robots business in hydraulic equipment for construction machinery industry and for semiconductors.

As for the three year forecast, profit is revised up by 1 billion yen from the previous announcement due to an improvement in profitability of robot. Page 28.

This slide shows orders and sales of hydraulic components and the robot. Sales of hydraulic components in China and the sales of robots by segment for your reference.

Page 29. This slide shows quarterly sales and profit development for your reference.

Page 30 as for market overviews, it was reported that some construction equipment manufacturers have started inventory adjustment in Chinese construction equipment market and we have been closely monitoring the situation but business in ex-China has been strong and we assume that overall condition will stay unchanged. In robots demand for semiconductor has been strong.

As for specific majors, they remain unchanged from the previous announcement and we will continue to secure a solid revenue through electrification and automation of construction equipment, leveraging our technology and we compete against the following companies which are trying to catch up in hydraulic equipment and systems. In robots we explore market and expand business through our three phase market oriented approach by capturing market needs and collaboration with academia, government and the startup companies in addition to the industry peers.

Page 31 shows motorcycle and engine. The quarter results of the first quarter of FY 2021 is shown on the slide.

Not only the off road motorcycles and four wheelers for North America, demand in Southeast Asia was also a strong year-on-year and they led to the substantial growth both in sales and profit. As for the three year forecast, we revised tariffs and the profit substantially reflecting robust demand in developing countries.

Increase in logistics cost and raw material costs are incorporated to some extent and we assumed that they may change in the future. Page 32 shows orders and series of motorcycles in developed countries emerging market, vehicles, PWC and the general purpose engines.

For your reference motorcycle sales by country are shown in appendix. Page 33.

This page shows quarterly sales and operating profit development for your reference. Page 34.

As for the market overview of motorcycle and engine, this time we added the comments on supply chain risks as for specific efforts even with those risks firstly we present the product supply to meet the market demand to the maximum. In the three year forecast as mentioned before profit declined risk by supply shortage due to semiconductor shortage and others are incorporated.

But by taking various measures we'd like to achieve the production in line with the guidance and aim to improve profit farther. Page 35 shows shareholder return.

In the previous announcement, I said that the full year dividend of 30 yen was planned for this year but the interim dividend was undecided. This time based on the first quarter results.

Let me announce that we decided the interim dividend as 20 yen. Although future business environment remains uncertain we take measures through all our effort in the strive to improve profit, and we aim to achieve the upside of the dividend on the currently planned 10 yen for the second half.

Page 36 and onward show project topics. This time I present three project topics.

First, let me introduce the issuance of our first sustainability bond. This focuses on hydrogen business and it is a first sustainability bond in Japan with hydrogen business as a major application.

It was sold out on the day of offering and ultimately we had a severe time sub application for the offering receiving the high acclaim. [We’d] achieve the group of vision 2030 to achieve SDGs we accelerate our initiative on sustainability management and through fundraising via sustainable finance [indiscernible] engagement with stakeholders farther.

Page 37. This slide shows the progress of PCL via our testing service which is increasingly highlighted.

As the progress from the previous announcement testing system was installed in Kansai International Airport and we are aim to launch the testing services in future for the departing passengers for international flight. We started sampling test for employees at Akashi works and Kobe works and we are aim to launch the screening testing service in the neighboring areas as well.

They are described on this slide for your reference. For these businesses it is hard to predict the size of annual revenue at this moment and the forecast we presented today does not incorporate these factors.

At the timing they can be reflected in the forecast we will let you know and we'd like to have your understanding. Page 38 describes joint venture with Sony Group Corporation, which was announced in May for your reference.

Page 39 and onward as appendix, CapEx depreciation, R&D expenses and the number of employees at the end of the fiscal year are shown for your reference.