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Questions and Answers at the Conference on Results for Three Months ended June 30, 2007.
(Click the questions for the corresponding answers.)

Q1: Could you give us further breakdowns of growth rates in sales by region of your construction and mining equipment business for the first quarter under review (April through June 2007)?

Q2: Please tell us about the segment profit ratio of your construction and mining equipment business by region for the first quarter (April through June 2007).

Q3: Could you elaborate on the factors of change in the segment profit ratio of the construction and mining equipment business for the first quarter? Could you also discuss the factors of change for the revisions that you have just made in the projection of full-year business results?

Q4:Please share your projections of interim sales and segment profits by operation.

Q5:Based on my calculation of profit ratios (both segment profit and operating income ratios), I think that profit ratios for the second quarter (July through September 2007) will decline from those for the first quarter. What are the reasons, do you think? I would also expect that full-year profit ratios will decline from those for the first quarter. What are the reasons?

Q6:Please tell us about the foreign exchange sensitivity on profits for the second and following quarters.

Q7: Could you tell us about your projection of full-year demand in major markets of construction and mining equipment after taking the revisions into account?

Q8: You are projecting that sales of construction and mining equipment will reach 1,830 billion yen for the current fiscal year ending March 31, 2008, up 80 billion yen from your initial projection at the start of the year. Please elaborate on growth rates of sales by region.

Q9: Would you discuss some risk factors for the future, which you are already aware of?

Q10:Please explain the inventory conditions of your North American distributors.

Q11:Could you discuss some adverse effects of slowdown of the US market on other markets?

Q12:Please discuss regional market demand in Southeast Asia.

back to top Q1
Could you give us further breakdowns of growth rates in sales by region of your construction and mining equipment business for the first quarter under review (April through June 2007)?

A1
Further breakdowns of growth rates in sales by region are as follows.

back to top Q2
Please tell us about the segment profit ratio of your construction and mining equipment business by region for the first quarter (April through June 2007).

A2
The segment profit ratio of our construction and mining equipment business is 16.2% for the first quarter, which is roughly divided into 6% for domestic and 18% for overseas operations. Among overseas markets, we recorded higher than 18%, the average overseas profit ratio, in China and Asia.

back to top Q3
Could you elaborate on the factors of change in the segment profit ratio of the construction and mining equipment business for the first quarter? Could you also discuss the factors of change for the revisions that you have just made in the projection of full-year business results?

A3
Compared to the first quarter a year ago, the segment profit shows an increase of 26.1 billion yen. Concerning this increase, we have broken it down to about 17 billion yen resulting from the increase in sales volume, about 9 billion yen in foreign exchange gains (USD and EUR), about 8 billion yen from price realization, and negative factors of about 6 billion-yen increase in fixed costs and about 2 billion-yen increase in materials and other costs.

With respect to our revised full-year projection, we are expecting an increase of 63.3 billion yen in the segment profit of our construction and mining equipment business over the fiscal year ended March 31, 2007. While we had initially anticipated a foreign exchange loss resulting from the Japanese yen's appreciation, we are now expecting foreign exchange gains of about 7 billion yen, as the Japanese yen is set to depreciate against major currencies. There will be about 55 billion yen resulting from an increase in the sales volume, about a 20 billion-yen increase in fixed costs, and about 21 billion yen from price realization and an increase in materials and other costs.

back to top Q4
Please share your projections of interim sales and segment profits by operation.

A4

back to top Q5
Based on my calculation of profit ratios (both segment profit and operating income ratios), I think that profit ratios for the second quarter (July through September 2007) will decline from those for the first quarter. What are the reasons, do you think? I would also expect that full-year profit ratios will decline from those for the first quarter. What are the reasons?

A5
We have two major reasons for profit ratios for the second quarter being lower than the first quarter. First, we are expecting the Japanese yen's appreciation, that is, 1 USD for 117 yen and 1EUR for 158 yen for the second quarter compared with 1 USD for 122 yen and 1 EUR for 164 yen for the first quarter. Second, the volume of sales in China, where profits are higher than other regions, usually declines in the second quarter over the first quarter.

Concerning our full-year projection, we are anticipating negative effects of foreign exchange and some expenses which might be carried forward into the second half period.

back to top Q6
Please tell us about the foreign exchange sensitivity on profits for the second and following quarters.

A6
In terms of our operating income, one-yen change in the foreign exchange market would translate into 3 billion USD and 800 million EUR.

back to top Q7
Could you tell us about your projection of full-year demand in major markets of construction and mining equipment after taking the revisions into account?

A7
Our projections of demand change in major markets for the full year ending March 31, 2008 are as follow.

back to top Q8
You are projecting that sales of construction and mining equipment will reach 1,830 billion yen for the current fiscal year ending March 31, 2008, up 80 billion yen from your initial projection at the start of the year. Please elaborate on growth rates of sales by region.

A8
Growth rates of projected sales of construction and mining equipment by region over the last fiscal year are as follow.

back to top Q9
Would you discuss some risk factors for the future, which you are already aware of?

A9
In terms of sales, we are concerned about future developments in the North American market, but we have already incorporated them in our current projection. With respect to China, where a high rate of growth in demand is continuing today, we believe in the possibility that the current high rate of growth will not continue for the full year. With respect to the concerns over excessive capacity, when production cutback becomes necessary in response to demand decline, we are going to stop the operation of old production facilities, which we are operating now with new ones, and operate only the new ones which feature higher productivity.

back to top Q10
Please explain the inventory conditions of your North American distributors.

A10
We have paid close attention to their inventories for some time now. Their inventory was 2.8 months at June 30, 2007, which is smaller than the industry average.

back to top Q11
Could you discuss some adverse effects of slowdown of the US market on other markets?

A11
At present, we haven�ft seen any related signs.

back to top Q12
Please discuss regional market demand in Southeast Asia.

A12
By looking at the structure of Southeast Asian demand, we know that Indonesia accounts for about half of the total demand, and Indonesian demand shows an increase of over 40% over the first quarter a year ago. In Indonesia, demand for equipment is very strong in not only mines but also general construction, agriculture and forestry. Demand has also increased about 40% in Malaysia over the previous first quarter. In Thailand, on the other hand, demand has dropped by over 20% from the first quarter a year ago, due to several reasons, including delayed public investments resulting from unstable political factors.

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