Kobelco Cranes' Half-Year Financial Results For
Fiscal 2005 (April 1, 2005 - September 30, 2005)

Kobelco Cranes Co., Ltd. announces its financial results for the first half of fiscal 2005, ended September 30, 2005.

General Market Conditions

The overseas crane market continued to be strong in the first half of fiscal 2005. Demand grew in North America and Southeast Asia, while remaining firm in Europe and China. With world shortfalls in raw materials, the Middle East, India, Australia and other countries saw increased market growth for cranes owing to the higher production of coal, iron ore, crude oil and natural gas.

Domestic demand continued on an expansion trend. Strong world demand for cranes increased exports of used equipment, reducing stock in Japan, and in turn stimulated new crane sales. Tighter emission regulations to meet environmental standards also contributed to steady recovery in demand.

Kobelco Cranes' Operations

Owing to these favorable conditions, Kobelco Cranes was able to considerably increase the number of units sold in major world markets. As well, it further strengthened its business foundation by growing globally and improving profitability. Notable developments were:

Kobelco Cranes' Results

Through these activities, Kobelco Cranes sold approximately 230 cranes in the first-half of the fiscal 2005, up 35% or 60 units, in comparison to the 170 units sold in the same period last year. In addition to Japan, sales volume of Kobelco branded cranes increased in North America, Southeast Asia, the Middle East, India and Australia. Higher unit sales also contributed largely to higher profits. Kobelco achieved roughly 70% of its overseas sales target (in terms of units sold) for fiscal 2005 in the first half of the year.

Although higher material costs placed a downward pressure on profits, pretax ordinary income (also called pretax recurring profit) nearly doubled in the first half of fiscal 2005, in comparison to the same period last year.

Consolidated Financial Results in First-Half FY2005

(* Also known as pretax recurring profit, consisting of pretax income before extraordinary gains and losses.)

Consolidated domestic sales amounted to 9 billion yen and overseas sales reached 7.8 billion yen, for a total of 16.8 billion yen. Debt in the Kobelco Crane Group went down, improving financial performance.

Overseas

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

In the North American market, Kobelco Cranes sharply increased the number of units sold by increasing its own distribution channels. 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 Central Europe, Southern Europe and other regions. Although actual sales are expected to shift to the second half of fiscal 2005, Kobelco was able to substantially increase orders for new machines in the first half.

In addition, in Southeast Asia, where growth continues to rise sharply, the shortage of used machines boosted demand for new machines. The Singapore office, which opened in fiscal 2004, undertook vigorous marketing, resulting in a doubling of sales volume in comparison to the same period last year.

Along with expanding world economic growth especially in China, increased production of coal, iron ore, crude oil, natural gas in the Middle East, India, Australia and other natural resource countries contributed to higher numbers of units sold.

In China, which had previously registered sharp growth due to power plant construction and other infrastructure projects, the number of units sold in the first half of fiscal 2005 was less than the number in the same period last year. The effects of governmental controls to tighten its financial policies, high taxes for imported construction equipment, and a fall off in demand for large crawler cranes used in power plant construction led to the decline. 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, as well as expand its service locations.

Alliance with Manitowoc

In April 2004, Kobelco Cranes began the OEM supply of crawler cranes to the Manitowoc Crane Group, supplying more units than originally anticipated for the North American market. For crawler cranes for the European market, preparations have nearly been completed. From January 2006, Kobelco plans to supply three models that meet Tier 3 exhaust emission standards.

To enter the 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, a Manitowoc Crane Group Company.

Japan

Demand for new crawler cranes rose 8%, in comparison to the same period last year. For Kobelco Cranes, the number of units sold was higher than the growth rate of new machines.

The rough terrain market continued to be strong, with demand rising 27% in the first half of fiscal 2005, in comparison to the same period last year. Sales volume at Kobelco Cranes rose owing to demand for new machines and the introduction of two models in the 12-ton class and 16-ton class.

With regard to production, firm demand for both domestic and overseas models and increased orders enabled Kobelco's assembly lines to operate at a high pitch. Kobelco made strong efforts to raise production efficiency.

Profitability also increased in the stock business, owing to improved parts supply and services to a wider customer base.

To cope with higher material costs, Kobelco adjusted domestic and overseas crane prices. Reducing costs by overseas procurement and other measures contributed to a substantial improvement in profitability.

In the second half of fiscal 2005, world demand for cranes is anticipated to continue being firm. However, the higher cost of steel and other materials placing a downward pressure on profit is cause for concern.

For fiscal 2005, Kobelco Cranes is carrying out the following points with the aim to double profits.

Main Points for Fiscal 2005

Full-Year Consolidated Forecast for FY2005