November 6, 2009

Kobelco Cranes’ Annual Financial Results
for Semiannual Fiscal 2009 (April 1, 2009 – September 30, 2009)

General Market Conditions

Demand in overseas crane markets has dropped severely since the global financial crisis last fall, and the market remained depressed in the first half of fiscal 2009. The trend was especially severe in the Middle East, where big projects were postponed or cancelled one after another due to the difficulty in raising funds, and in Europe, where demand for new cranes largely decreased, because of credit shrink and the uncertain future trend. In addition, the market for new cranes was also weak in North America, although it had been comparatively steady, because construction of new buildings and plants was down. As a whole, demand for cranes was poor worldwide.
Also in the domestic crane market, demand for new crawler cranes and wheel cranes drastically declined, because users took a wait-and-see attitude and refrained from buying, as a result of reviewing their equipment investment plans and considering the downturn of residential investment.

Under these severe circumstances, Kobelco Cranes returned to the basics and made every effort to maximize sales and profits, by shipping backlog orders and by performing steady marketing activities to gain orders. In addition, it implemented company-wide cost-cutting in order to improve earnings. Activities in this term included:

Solid sales from the backlog of orders and flexible response to customers
Accelerating development of new models aimed at further enhancing the product line-up
Further promote cost reductions to increase profitability
Improving the business foundation and company quality for the future

Reflecting the worldwide drop in demand, Kobelco Cranes sold about 270 new machines (the total number over the entire crane line-up) during the first half of fiscal 2009, showing a 45% decrease over the 490 units sold in the first half of fiscal 2008. By taking the above-mentioned measures, it could control the drop to a minimum, in terms of the profit.

Consequently, Kobelco Cranes’ consolidated net sales decreased 38.4% in the first half of fiscal 2009, and consolidated ordinary income decreased 74.8% in comparison to the first half of fiscal 2008. Nevertheless, all group companies were in the black, and Kobelco Cranes, as a whole, achieved higher ordinary income than planned in the beginning.

Semiannual Financial Results for Fiscal Year 2009

(In millions of yen)

		Net sales	Operating Income	Ordinary Income	Net Income
Consolidated	FY2009 First half	28,489 (38.4%)	1,348 (75.8%)	1,371 (74.8%)	813 (77.2%)
Consolidated	FY2008 First half	46,234	5,561	5,449	3,559
Non-consolidated	FY2009 First half	27,554 (36.5%)	616 (85.3%)	1,939 (52.2%)	1,584 (39.2%)
Non-consolidated	FY2008 First half	43,397	4,188	4,055	2,606

Notes: Percentages show change as compared with the same period last year.
Figures in parentheses show decreases.

Domestic consolidated sales dropped 30.4% over the same period of the previous fiscal year to 10.3 billion yen, and overseas sales decreased 42.1% to 18.2 billion yen. Total sales dropped 38.4% to 28.5 billion yen.

First half of Fiscal Year 2009: Review by Geographical Area

Overseas

Due to the severe situation in the overseas markets, such as the worldwide drop in demand, customers’ difficulty in raising funds, and the strong yen, Kobelco Cranes put efforts not only into maximizing new machine sales but also into enhancing its business foundation, including strengthening the stock business for the future. Demand by region and approaches taken by the Company for each area are as follows:

  In North America, where demand had been comparatively steady, the market started to show signs of decline. Demand for cranes began to decrease due to the cancellation of large-scale plant construction projects and a decline in large-scale road construction orders. Under such conditions, Kobelco Cranes made efforts to further expand distributor and service networks as well as strengthen sales and service capabilities of the existing distributors. Moreover, it promoted the reinforcement of its foundation by expanding sales of parts and strengthening service systems.
  In the European market, where demand for new cranes was extremely low due to the credit crisis and the uncertainty of future trends, Kobelco Cranes made efforts to cultivate new markets including Africa, and to strengthen business fields, including parts, service and engineering, in addition to new crane sales.
  In the Middle East market, where demand decreased sharply, deliveries of orders tended to be postponed or cancelled one after another, but in some areas, projects began to restart as oil prices increased. Under such situations, Kobelco Cranes made efforts to strengthen its selling capabilities by marketing together with distributors in priority areas, as well as its parts and service distribution system including on-site sale of parts stocks.
  In the Southeast Asian market, where demand was slightly in a recovery trend as exchange rates stabilized, Kobelco Cranes made it a priority to secure sales volume and conduct marketing activities. Additionally, it also made efforts to enhance its service capabilities such as offering training to distributors.
  In India, where the expectation for economic recovery is increasing although the situation is still as severe as in other areas, Kobelco Cranes made efforts to vitalize distributors to enhance their selling and service capabilities, considering that some markets, particularly the electricity-related infrastructure construction market, are expected to expand.

Japan

  The domestic market for new cranes has declined more dramatically than expected, because machine operating rates went down due to fewer construction projects, and then users took a wait-and-see attitude and refrained from buying machines considering the uncertain future trend.
  In the crawler crane market, demand decreased around 30% over the same period last year. However, Kobelco Cranes could minimize the drop by providing solid shipments of backlog orders and by conducting steady marketing activities to gain orders.
  In the rough terrain crane market, demand decreased around 70% over the same period last year, followed by a dramatic decrease in the number of units sold by the Company. Under these severe conditions, the concept of a new city-conscious crane with a lifting capacity of 70 metric tons for the Japanese market was generally favorables, and the Company started to sell this new model at the end of September. The Company continues to conduct activities to penetrate the market early on.
  To ensure steady shipments of backlog orders for the Japanese and overseas markets, Kobelco Cranes worked on forming a system to flexibly respond to changes in the number of units produced through the cooperation of its suppliers. On the production side, Kobelco Cranes worked on shortening production lead-time and improved production efficiency under the just-in-time production system, as well as making efforts to meet customer’s needs.
  In the area of service, it continues to utilize the Kobelco Cranes Remote Observation System, in order to further improve customer satisfaction. We also worked on the task of reorganizing customer services.

Alliance with Tadano

For rough terrain cranes, Tadano supplies complete machines of small models on an OEM basis. Kobelco Cranes has maintained a favorable relationship with Tadano.

Outlook for Fiscal Year 2009

Worldwide demand for cranes in the second half of fiscal 2009 is expected to continue being slow with some strong and weak areas. Marketing conditions are forecast to continue being severe both at home and overseas. Moreover, the business environment is highly uncertain due to unstable currency market conditions and the financial crisis that may seriously affect profitability.
Under the aforementioned business environment, Kobelco Cranes intends to further reinforce its business foundation by pursuing the following activities below in FY2009, as well as steadily implement policies to lead to a better future, including a new medium-term business plan from 2010 to 2012. We will also secure profits by returning to the basics: solid sales from backlog orders, steady activities to gain orders, and cost reduction activities.

Major Activities

Focus on emerging markets and high-demand markets, and improve the distribution networks
Continuously take measures to shorten production lead-time and reduce inventory stock
Promote cost reductions by raising purchasing power and strengthening cooperation with suppliers
Strengthen the wheel crane business by using city-conscious cranes as the core product
Build the foundation of the used machine sales network to strengthen the product life-cycle business
Promote thorough streamlining and reduce cost in all business activities

Forecast for Fiscal Year 2009