November 6, 2008

Kobelco Cranes’ Semiannual Financial Results for Fiscal 2008
(April 1, 2008 – September 30, 2008)

General Market Conditions

The outlook for the overseas crane markets are increasingly uncertain due to the global financial instability, which started with the sub-prime loan issue. However, overall global demand for cranes is still seen as robust albeit unstable, due to demand in the following areas: the Middle East where energy-related investment, mainly large projects, are ongoing; North America where demand for cranes is still strong despite the region’s severe economic downturn in general due to the financial crisis; Southeast Asia where demand for new machines continues to grow due to infrastructure and industrial foundation development; and India where investment in petrochemical and electric power industries continues to be made according to plan.

In the domestic crane market, demand for crawler cranes still remains high due to the export of used machines and the resultant decrease in the number of units in domestic stock, and to the replacement of aged machines. In the wheel crane market, however, signs of decline have appeared, affected by the real estate slump stemming from decreased private-sector demand and increased material costs, indicating a weakening market.

Under these circumstances, by steadily shipping backlog orders carried over from the previous fiscal year, and by increasing production capacity in order to further increase sales, Kobelco Cranes was able to increase sales volume in major overseas and domestic markets. In addition, we have taken the following measures in order to improve its business foundation for the future.

1. Promoting sales in specifically focused areas such as the Middle East, Southeast Asia and India
2. Accelerating development of new models aimed at further enhancing the product line-up
3. Steady shipment of order backlogs and enhancement of production capabilities for further sales expansion
4. Improving business foundation against recession in future

 

Through these activities, Kobelco Cranes sold about 490 new machines (the total number over the entire crane line-up) during this term ended on September 30, 2008, a nearly 17% increase over the 420 units sold in the same period last year.

Most notably, increased sales volumes in the Middle East, North America and Asia including Japan, have contributed significantly to profitability. Overseas sales account for approximately 70% of total sales on a consolidated basis, and overseas sales of crawler cranes, which are our major products, comprised nearly 80% of the total crawler crane sales in terms of units sold as a result of vigorous global expansion efforts over the past years.

Consequently, Kobelco Cranes consolidated net sales and consolidated ordinary income rose nearly 30% in the first half of fiscal 2008, in comparison to the first half of fiscal 2007.

Semiannual Financial Results for Fiscal Year 2008

In Millions of Yen	Consolidated		Nonconsolidated
	FY2008 First half	FY2007 First half	FY2008 First half	FY2007 First half
Net Sales	46,234 33.6%	34,607	43,397 31.1%	33,091
Operating Income	5,561 27.7%	4,356	4,188 10.7%	3,782
Ordinary Income	5,449 27.8%	4,263	4,055 10.5%	3,671
Net Income	3,559 33.8%	2,660	2,606 21.0%	2,153

Note: Percentages show change as compared with the same period last year.

Domestic consolidated sales rose 19.5% over the same period last year to 14.7 billion yen and oversea sales increased 41.3% to 31.5 billion yen. Total sales went up 33.6% to 46.2 billion yen.

First half of Fiscal Year 2008: Review by Geographical Area

Overseas

In the overseas markets, Kobelco Cranes undertook the following activities to further expand its global reach.

In the Middle East market where a series of mega projects such as the construction of railways, airports, and petrochemical related facilities are being carried out, Kobelco Cranes strengthened its sales and service structure by appointing new distributors and providing distributors with sales and service training and thus managed to maintain strong sales of new machines. Kobelco Cranes is also undertaking activities in preparation for the sale of locally-stocked parts in order to improve local customer satisfaction. We plan to start keeping a stock of parts by the end of this year.

In the U.S. market, while the economy is generally decelerating, the crane market is not yet affected by the financial crisis, and the demand for cranes remains strong albeit unstable, because environmental and energy-related facility construction such as wind power generation and highway maintenance are on-going. In this environment, Kobelco Cranes has expanded its dealer network and distribution channels, and managed to secure sales volume that is comparable to the same period last year. Kobelco Cranes has also taken measures in order to establish a foundation for expanding parts sales and strengthening the service operation.

In the Southeast Asian market where the demand for new machines continues to grow due to infrastructure development and industrial base establishment, Kobelco Cranes enhanced its distribution channel to effectively meet the growing demand and increased sales volume substantially.

In India, where the business has continued to grow rapidly due to petrochemical projects, the market is expected to grow still further mainly for the improvement of power-related infrastructure. It is estimated that the market in Fiscal 2008 will be substantially larger than that in Fiscal 2007. In order to effectively capture this demand for cranes, Kobelco Cranes established a local representative office in Delhi on October 1, 2008.

Furthermore, Kobelco Cranes was able to maintain strong sales of new machines in most of the major world markets including Europe, South Korea and Australia, except in China.

Japan

In the Japanese crawler crane market, demand for new machines increased 44% over the same period last year. Kobelco Cranes was able to increase the number of units sold steadily by responding to this growing demand and by shipping backlog orders in a consistent manner.

In the rough terrain crane market, there is a strong feeling of uncertainty for the future affected by the fewer construction projects accompanied by lower operating rates, and by the tighter financing in the construction and real estate industries. Demand increased only 8% over the same period previous year and the market showed signs of slowing down. Under these conditions, Kobelco Cranes started the sale of a new city-conscious crane model with a lifting capacity of 25 metric tons for the Japanese market on June 1. This crane received the Good Design Award 2008. The concept of this new model has been received favorably in the market in general, and sales are growing steadily.

To achieve a steady shipment of backlog orders for Japanese and overseas markets and to further increase sales, Kobelco Cranes strengthened its procurement capabilities through the cooperation of its suppliers. On the production side, Kobelco Cranes took measures to shorten production lead-time and improve production efficiency through the use of the just-in-time production system, resulting in boosting production capacity. These efforts contributed to higher number of units sold.

In the area of service, Kobelco Cranes utilized the Kobelco Cranes Remote Observation System which has been in service for domestic market since April this year, in order to further improve customer satisfaction. In addition, we undertook the task of reorganizing the service operation with this system.

The two specialized subsidiaries established in April this year, namely, Kobelco Cranes Trading, which specializes in used machines, and KC Technoservice, by which Kobelco Cranes aims at increasing its product-customizing capabilities, were profitable in the first half of Fiscal 2008.

Alliances with Tadano

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

Outlook for Fiscal 2008

In the second half of fiscal 2008, while global demand for cranes will be increasingly uncertain, our sales are expected to remain strong owing to large backlog orders. However, in terms of business environment, we are faced with factors that may be detrimental to profitability, such as unstable currency market conditions and the rising cost of materials, especially steel products, which show no signs of stabilizing. In addition, there is a possibility that the worldwide crane market will alter drastically due to the recent financial crisis. Therefore, future outlook for the business environment is highly uncertain.

In the forecasted financial performance for Fiscal 2008 which is the final year of the current Medium-Term Management Plan, Kobelco Cranes expects, under the aforementioned business environment, it will be able to secure a consolidated profit that will exceed the profit made in Fiscal 2007 by challenging the following activities in a consistent manner.

Kobelco Cranes will also take final comprehensive steps to enhance its business structure in order to accomplish the theme of the current Medium-Term Management Plan “rebuilding the crane business”. In addition, in view of a possible recession, Kobelco Cranes will take measures that will further enhance our business foundation, both in terms of forecasting activities and preparative measures, which includes periodic information gathering with navigators and the formulation of concrete action plans.

Major Activities

• Increase stable production, and reduce costs
• Enhance network of domestic/overseas sales and service distribution. Complete sales and service system in new emerging markets
• Strengthen wheel crane business using the city-conscious cranes as the core of the business
• Establish a used machine business system to strengthen the life cycle business
• Reinforce the business foundation in view of a possible future recession and formulate a new management plan for the next term

Forecast for Fiscal Year 2008

In Millions of Yen	Consolidated	Nonconsolidated
Net Sales	100,000 40.4%	91,000 28.5%
Operating Income	9,700 4.4%	7,500 [13.2%]
Ordinary Income	9,500 3.9%	7,600 [15.1%]
Net Income	6,000 13.6%	4,700 10.3%

Notes:

• Percentages show change over the same period last year.
• Figures in brackets show decreases.
• Exchange rates forecast for the second half of Fiscal 2008: US$1 = 105 yen, 1 euro = 155 yen
• The forecast above is based on information current at the time of this announcement.
  The actual results may differ significantly due to various factors in future.