May 10, 2007

Kobelco Cranes’ Financial Results For Fiscal 2006 (April 1, 2006 – March 31, 2007)

Kobelco Cranes Co., Ltd. announces its financial results for fiscal 2006, ended March 31, 2007.

General Market Conditions

The overseas crane market continued to be strong in fiscal 2006. In the Middle East, infrastructure continued to be rapidly developed owing to the availability of abundant funds on the back of energy related demand. In South Korea, the demand for cranes continued to increase with the boom in shipbuilding. In Southeast Asia, the demand for new cranes continued to expand due to the shortage of used cranes. North American demand continued to increase in spite of a slight decline seen in housing investment, while demand was also strong in Europe.

Domestic demand continued on an expansion trend with the economic upturn boosting civil demand. Strong world demand for cranes continued to increase exports of used equipment, reducing stock in Japan, which in turn stimulated new crane sales. Tighter emission regulations to meet environmental standards also contributed to recovery in demand.

Kobelco Cranes’ Operations

Owing to these favorable conditions, Kobelco Cranes was able to continue increasing the number of units sold in domestic as well as major world markets.

As well, it further strengthened its business foundation focusing on future growth. Notable developments were:

•  Launched global models of crawler cranes complying with Tier 3 emissions regulation.
• Focused marketing on natural resource regions and countries such as the Middle East, India and Australia.
• Increased product prices to minimize high material costs.
• Increased production capacity to meet expanding global demand.

Kobelco Cranes’ Results

Through these activities, Kobelco Cranes sold approximately 730 cranes in fiscal 2006, up 38% or 200 units, in comparison to the 530 units sold in fiscal 2005, fulfilling the targets for consolidated ordinary income and net income under the new medium-term 3-year business plan in its first year. Higher sales volume of Kobelco branded cranes in North America, Europe, Asia including Japan, and the Middle East also contributed largely to higher profits. Kobelco achieved roughly 80% of its sales of crawler cranes through overseas sales.

With these results, consolidated net sales for fiscal 2006 (April, 2006 – March 2007) was 1.4 times in comparison to fiscal 2005, and pretax ordinary income (also called pretax recurring profit) was nearly 2.3 times, on a consolidated basis.

Consolidated Financial Results in Fiscal Year 2006

(in millions of yen)	FY2006	FY2005	% change
Net sales	56,407	39,684	42.1%
Operating income	5,172	2,332	121.8%
Ordinary income *	4,957	2,199	125.4%
Net income	2,971	1,277	132.7%

(* Also known as pretax recurring profit, consisting of pretax income before extraordinary gains and losses.)
Consolidated domestic sales amounted to 21.2 billion yen and overseas sales reached 35.2 billion yen, for a total of 56.4 billion yen. Debt in the Kobelco Crane Group went down, further improving financial performance.

Review by Geographical Area

Overseas

Overseas demand is anticipated to continue growing. Looking to future global development, Kobelco Cranes undertook the following activities:

In the Middle East with its economic boom based on increase in crude oil prices, Kobelco Cranes established an overseas subsidiary in Europe in order to improve service in sales and product support. As a result, Kobelco Cranes was able to increase the number of direct sales to the region. Kobelco Cranes was also able to strengthen ties and utilize sales network in other regions such as Europe, Southeast Asia and South Korea to meetsales demand in the Middle East region.

In North America, housing investment slightly slackened, whereas investment in infrastructure for highways, refineries and environment related facilities continued to be strong, steadily increasing demand for construction equipment. Kobelco Cranes sharply increased the number of units sold by increasing its own distribution channels through strengthened dealer network.

In Europe, Kobelco Cranes considerably increased its crane orders owing to active marketing to major building contractors and equipment rental companies and expanding the marketing territory in the Middle East and Europe. In South Korea where shipbuilding continues to boom, the sales volume of cranes continued to increase considerably.

In addition, infrastructure construction and increased production in energy projects boosted sales in India and Australia. Demand for new cranes due to the shortage of used cranes boosted sales in Southeast Asia. Thus, sales volume increased in all main parts of the world, excluding China.

In China, the effects of high taxes for imported construction equipment and the rising presence of Chinese manufacturers led to a decline in sales compared to the previous year. However, infrastructure work, which continues to be strong, is anticipated to bolster crane demand. Kobelco will continue its marketing efforts to mineral and metal industries and local rental companies.

Alliance with Manitowoc

Kobelco Cranes began the OEM supply of crawler cranes to the Manitowoc Crane
Kobelco introduced a 265-ton all-terrain crane made under OEM by the Manitowoc Crane Group in Germany (Grove Brand) to the Japanese market in February 2005, and a 120-ton model was introduced at an exhibition for construction machinery in July 2006, marking the full-scale launch of these OEM cranes in Japan. In total, four OEM models are planned to be introduced to the Japanese market.

Japan

Demand for new crawler cranes rose 19%, in comparison to fiscal 2005. Kobelco Cranes was also able to increase its number of units sold and obtained the top share of the crawler crane market.

The rough terrain market also continued to be strong, with demand rising 20% in fiscal 2006, in comparison to fiscal 2005. Here too, Kobelco Cranes was able to increase the numbers of units sold at a rate exceeding the growth rate.

With regard to production, to cope with firm demand for both domestic and overseas models and increased orders, with the cooperation from vendors, Kobelco Cranes introduced the just-in-time production system and succeeded in enhancing manufacturing efficiency in order to actively increase production.

In the stock business, the business structure was strengthened owing to improved parts supply and services to a wider customer base.

Alliance with Tadano Ltd.

Regarding the alliance with Tadano Ltd., Kobelco Cranes was able to receive a steady OEM supply of small rough terrain cranes and carriers of larger models from Tadano Ltd., in spite of the demand environment being extremely tight. Kobelco looks forward to continuing its close collaborative relationship.

Outlook for Fiscal 2007

In fiscal 2007, world demand for cranes is anticipated to continue being firm. Although the high demand in North America seems to have slackened slightly, investment in energy related infrastructure will continue to be strong in the Middle East. However, the higher cost of materials, due to higher steel costs and crude oil placing a downward pressure on profits, continues to be a cause for concern.

For fiscal 2007, Kobelco Cranes is carrying out the following points with the aim to construct a base for “rebuilding the crane business,” which is the theme of our medium-term business plan, and exceed profits in comparison to fiscal 2006.

Main Points for Fiscal 2007

• Continue to maximize production and strengthen the production system.
• Reduce procurement costs by increasing sources of procurement and carrying out other cost reduction activities.
• Strengthen the collaboration with alliance partners.
• With fiscal 2008 in view, promote stable sales volume by strengthening the Middle Eastern and Indian markets and increase new customers in Europe and the Americas.
• Strengthen the wheel crane business in Japan, as well as strengthen sales and service of all-terrain cranes.
• Strengthen the life-cycle business and distribution networks.

Full-Year Consolidated Forecast for FY2007

(in millions of yen)	FY2007 (estimates)	FY2006 (actual)	% change
Net sales	66,000	56,407	17.0%
Operating income	5,400	5,172	4.4%
Ordinary income *	5,300	4,957	6.9%
Net income	3,300	2,971	11.1%

Notes:
Figures in brackets [ ] show the percentage change as compared with the same period last year.
The currency exchange rates set for FY2007:1US$=¥110, 1Euro=¥140.

*The above forecast is based on the data available as of the date of this announcement. The actual results may significantly differ according to various factors in the future