May 12 ,2005

Kobelco Cranes’ financial results for fiscal 2004
(April 1, 2004 – March 31, 2005)

TOKYO – Kobelco Cranes Co., Ltd. announces its financial results for fiscal 2004, ended March 31, 2005.

General Market Conditions

The overseas crane market continued to be strong in fiscal 2004, with steady growth in Europe and America. Market recovery was clearly seen in Southeast Asia. Demand also grew in the Middle East, India and other natural resource countries. The crane market in China, which had been rising sharply in recent years, continued to be strong owing to power plant construction due to electricity shortages.

Domestic demand increased in comparison to the previous fiscal year. New crane sales rose as exports of used equipment reduced the number of machines in Japan. Replacement sales and strengthened emission regulations were also factors that powered the upswing in demand. The global crane market, too, in general saw an expansion trend.

Review of Kobelco Cranes’ Operations

In April 2004, the crane business became independent from Kobelco Construction Machinery Co., Ltd. and was launched as Kobelco Cranes Co., Ltd. (Both companies are subsidiaries of Kobe Steel, Ltd.) Owing to favorable growth in world demand, Kobelco achieved higher sales volume in all major domestic and overseas markets. As well, it worked to promote further growth worldwide and strengthen its business foundation by increasing its profitability. Notable achievements include:

• Higher profitability through OEM supply of crawler cranes to the Manitowoc Crane Group in North America.
• Formed an OEM agreement with Manitowoc for the supply of crawler cranes to the European market.
• Expanded sales of large crawler cranes in China for power plant construction.
• Promoted marketing in emerging countries and natural resource countries, where high growth is anticipated.
• Began importing all-terrain cranes under OEM with Deutsche Grove GmbH.
• Increased product prices and reduced costs to minimize high material costs.

Kobelco Cranes’ Results

In fiscal 2004, Kobelco Cranes sold 370 units, up 32% from the 280 units sold in fiscal 2003. North America, Europe and China in particular showed a strong upswing in sales volume, contributing largely to profits. The number of crawler cranes exported, as a percentage of the total number of units, rose to 70%, up from 50% in fiscal 2003.

Despite higher material costs crimping income, Kobelco Crane turned a profit in fiscal 2004, its first full year of operation.

Consolidated net sales reached 34.8 billion yen, with domestic sales comprising 16.9 billion yen and overseas sales 17.9 billion yen. Operating income was 876 million yen, pretax ordinary income was 794 million yen, and net income was 420 million yen.

Consolidated results for fiscal 2004

(in millions of yen)	FY2004 (ended Mar.’05)
Net sales	34,813
Operating income	876
Ordinary income *	794
Net income	420

 Notes:
Consolidated crane sales in fiscal 2003 were 24.8 billion yen.
* Ordinary income, or pretax recurring profit, is pretax income before extraordinary gains and losses.

Fiscal 2004 Review by Geographical Area

Overseas (excluding China)

In the North American market, Kobelco Cranes expanded its distribution channels, leading to a sharp increase in the number of units sold. In Europe, the sales volume of new cranes increased considerably owing to strong marketing to major equipment rental companies and expanding the marketing territory in Central Europe, Southern Europe and Russia.

In the Middle East, where projects and oil demand are anticipated to grow, and in Southeast Asia, where demand for used machines is strong and demand for new machines is expected to continue, Kobelco Cranes opened local offices. In addition, strong marketing activities in emerging countries and natural resource countries contributed to higher sales volume.

China

Although China’s governmental controls to tighten its financial policies led to changes, crane demand was firm owing to active infrastructure investments for power generation projects. As a result, Kobelco was able to increase its sales volume. Aiming to further strengthen its business foundation in the future, Kobelco carried out the following activities:

• Opened the Shanghai Office in August 2004 to strengthen marketing and services.
• In addition to the power industry, promoted sales in the mineral and metal industries and local rental companies.
• Expanded service centers to further improve customer services.

Alliance with Manitowoc

In April 2004, Kobelco Cranes began the OEM supply of crawler cranes to the Manitowoc Crane Group, shipping more than twice the number of units than originally anticipated. Maintaining a steady supply to Manitowoc, Kobelco benefited from increased productivity and development efficiencies.

In March 2005, the two companies signed a further agreement for Kobelco Cranes to provide crawler cranes to Manitowoc on an OEM basis in the European market. In autumn 2005, Kobelco intends to begin supplying four models under 110 tons.

Furthermore, to build up its wheel crane business, Kobelco introduced to the Japanese market in February 2005 a 265-ton all-terrain crane made under OEM by Deutsche Grove GmbH, the world’s biggest wheel crane maker and a group company of Manitowoc.

Japan

In the new crawler crane market, total demand climbed to over 200 units, a 12% increase over the previous fiscal year and the first time in three years since fiscal 2001. Demand for new cranes led to higher sales volume.

In the rough terrain crane market, for the first time in four years demand rose to 1,200 units, up 20% from the previous fiscal year. Kobelco Cranes launched two models in the 12-ton and 16-ton classes, resulting in higher sales volume.

With regard to production, Kobelco combined production lines, making strong efforts to raise production efficiency to meet the high demand for cranes in the domestic and overseas markets and increased orders.

In the stock business, profitability also increased, owing to improving parts supply and services to a wider customer base.

Coping with higher material costs, Kobelco increased crane prices in the domestic and overseas markets and also reduced overseas and domestic procurement costs in order to further improve profitability.

Outlook for Fiscal 2005

World crane demand in fiscal 2005 is anticipated to be firm. However, a cause of concern is the stronger downward pressure on profits due to the higher cost of steel and other materials.

Despite the difficult environment, Kobelco Cranes forecasts higher profits in fiscal 2005, in comparison to fiscal 2004. By geographical area, Japan is anticipated to comprise 30% of sales, North America 25%, Europe 20%, and 25% for China and other areas.

Plans for fiscal 2005

• Reduce expenses by improving productivity and decreasing procurement costs.
• Raise product prices in Japan and overseas to offset higher material costs.
• Increase profits through collaboration with Manitowoc.
• Further strengthen services and distribution in China, emerging countries and natural resource countries.
• Develop world crane models that meet Tier 3 exhaust emission regulations.
• Strengthen the wheel crane business in Japan by further promoting all-terrain cranes.
• Build optimum manufacturing systems to meet higher production.

Consolidated Forecast for FY2005

(in millions of yen)	FY2005 (ending Mar. ’06)	Percentage of change
Net sales	36,000	3.4%
Operating income	1,700	94.1%
Ordinary income	1,550	95.2%
Net income	800	90.5%