November 12 ,2004

Kobelco Crane’s Half-Year Financial Results for Fiscal 2004 (April 1, 2004 – September 30, 2004)

Kobelco Cranes Co., Ltd. announces its financial results for the first half of fiscal 2004, ended September 30, 2004.

General Market Conditions

The overseas crane markets continued to be strong in the first-half period. Demand was robust in Europe and North America, while in Southeast Asia the market recovered sharply. Demand also expanded in the Middle East. The crane market in China, which has been rising sharply in recent years, continued to be strong owing to active construction of power plants and other projects.

In Japan, demand has been on a recovery path owing to higher sales of new cranes as exports of used equipment reduced the number of machines in Japan. Replacement sales were one of the other factors that powered the upswing in demand. Furthermore, the global crane market in general has been on an expansion trend.

In April 2004, the crane business became independent from Kobelco Construction Machinery Co., Ltd. and was launched as Kobelco Cranes Co., Ltd. Owing to favorable growth in the world crane market, Kobelco was able to achieve a large increase in sales volume from all major domestic and overseas markets. As well, it worked to further promote global growth and strengthen its business base by increasing profitability.

Kobelco Crane’s Results

In the first-half of the fiscal year ended September 30, 2004, Kobelco Cranes sold a total of 170 new machines, up about 30% from the 130 units sold in the same period last year. North America, Europe and China in particular showed a strong upswing in sales volume, largely contributing to profits. Overseas sales of crawler cranes as a percentage of total sales rose 70%, up from 30% in the first half of fiscal 2003.

As a result, the crane business made its first profit as Kobelco Crane in the half-year period, despite higher material costs, mainly steel, and other factors that decreased profitability.

Consolidated net sales reached 17.6 billion yen, with domestic sales comprising 8.1 billion yen and overseas sales 9.5 billion yen. Operating income was 422 million yen, pretax ordinary income was 370 million yen, and net income was 148 million yen.

Consolidated Financial Results in First-Half FY2004

(in millions of yen)	FY2004 First Half
Net sales	17,590
Operating income	422
Ordinary income*	370
Net income	148

Notes:
Sales of the crane business in first-half FY2003 were 11.2 billion yen.
* Ordinary income, also known as pretax recurring profit, is pretax income before extraordinary gains and losses.

First-Half FY2004: Review by Geographical Area

Overseas (excluding China)

In the growing overseas market, Kobelco Cranes expanded its marketing areas and sales channels in Europe and North America; began supplying Manitowoc with OEM cranes; and opened offices in anticipation of further global growth. In Europe, the sales volume of new cranes went up considerably, owing to orders received after aggressively marketing at Germany’s BAUMA exhibition and expanding the marketing regions to Central and Southern Europe. Securing steady sales volume enabled Kobelco Crane to maximize the benefits of its alliance through improved productivity and more efficient product development. In addition, Kobelco opened an office in Dubai, United Arab Emirates, to strengthen marketing and services and in anticipation of rising future demand. Demand increased in the Middle East with the reconstruction of Iraq and rise in oil projects. The market for used cranes was also strong in Southeast Asia. In the North American market, crane shipments rose sharply. In addition to Kobelco’s own distribution network, the OEM supply to Manitowoc contributed to higher sales volume.

China

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

* Opened the Shanghai Office in August to strengthen marketing and services.
* Marketed to local rental companies, in addition to the power generation industry.
* Conducted periodic surveys to better determine user needs.
* Expand service centers to further improve customer services.

Japan

In the new crawler crane market, total crane demand climbed to over 100 units, the first time in five years and up 12% from the same period last year. Overall demand for rough terrain cranes steadily increased, up 13% from a year earlier. To strengthen its wheel crane business, Kobelco is planning to sell all terrain cranes in the Japanese market under OEM manufacture by Grove of Germany.

With regard to production, Kobelco made strong efforts to combine production lines and raise production efficiency in response to the strong 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.

In response to higher material costs, Kobelco increased the sales prices of its cranes in the domestic and overseas markets to further raise profits.

Outlook for Fiscal 2004

World crane demand is expected to be firm in the second half of the fiscal year. However, a cause of concern is the stronger downward pressure on profits due to higher steel and other material costs.

In this difficult environment, Kobelco Cranes is implementing a number of steps to improve profitability:

* Further expand sales of rough terrain cranes in Japan and overseas. Actively develop overseas markets.
* Promote the development of global models and introduce all terrain cranes into the Japanese market.
* Further strengthen the business base in China.
* Increase profits through collaboration with Manitowoc
* Improve services and distribution in the stock business
* Reduce costs and increase product prices to offset higher material costs.

As a result of these measures, Kobelco anticipates turning a profit in fiscal 2004, the first year of operation as Kobelco Cranes.

Consolidated Financial Results for FY2004

(in millions of yen)	FY2004
Net sales	33,500
Operating income	1000
Ordinary income*	900
Net income	500

Note: Sales of the crane business in FY2003 ere 24.8 billion yen.