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Questions and Answers at the Conference on Results for FY2008 ended March 31, 2009.
(Click the questions for the corresponding answers.)

Q1:Operating income for the fiscal year ended March 31, 2009 was about 48 billion yen short of your projection of January this year. Please tell us the reasons.

Q2:For the current fiscal year, ending March 31, 2010, you are projecting a segment profit of 1 billion yen for the industrial machinery and others business. Please describe your measures to maintain this business segment in the black against the backdrop of challenging market conditions today.

Q3:Concerning sales and operating income for the current fiscal year, would you describe them in terms of six-month periods?

Q4:You have explained that you reduced fixed costs materially by about 60 billion yen. However, your balance sheets show a reduction of a mere 11 billion yen in inventories. Would you explain about this difference?

Q5:Please elaborate on your projection for demand for construction and mining equipment for the current fiscal year.

Q6:Please tell us your projection for demand for mining equipment in the current fiscal year. Please also touch upon your projection in the fiscal year ending March 31, 2011.

back to top Q1
Operating income for the fiscal year ended March 31, 2009 was about 48 billion yen short of your projection of January this year. Please tell us the reasons.

A1
When we announced the projection in January, we had assumed 8 billion yen as structural reform expenses. However, we also recorded additional expenses of about 24 billion mainly for the reorganization of production in Japan and North America. Furthermore, we also incurred a loss at our plants resulting from reduced production, valuation loss on inventories, and increased allowance for doubtful receivables.

back to top Q2
For the current fiscal year, ending March 31, 2010, you are projecting a segment profit of 1 billion yen for the industrial machinery and others business. Please describe your measures to maintain this business segment in the black against the backdrop of challenging market conditions today.

A2
In light of orders received for our industrial machinery, we are anticipating that market conditions for this business will be more challenging than those for the construction equipment business. However, we expect that we should be able to secure a segment profit by making a sizeable reduction in the manufacturing costs of wire saws whose sales are relatively good and by reducing fixed costs of the industrial business segment as a whole.

back to top Q3
Concerning sales and operating income for the current fiscal year, would you describe them in terms of six-month periods?

A3
In the first half period, we need to continue cutting down our distributors' inventories by restraining our shipments to them, and therefore we anticipate that both first six-month sales and profits will stay under the level of demand on the retail market. Concerning the second half period, we are projecting that second six-month sales will increase from the first half period, because we are planning to complete the inventory reduction initiatives by the end of September and are anticipating that demand will improve a little from the first half period thanks to seasonal factors and positive effects from economic stimulus packages. With respect to operating income, we are also expecting an increase by counting on positive outcomes of our structural reform efforts in the form of reduced fixed costs in addition to increased sales.

back to top Q4
You have explained that you reduced fixed costs materially by about 60 billion yen. However, your balance sheets show a reduction of a mere 11 billion yen in inventories. Would you explain about this difference?

A4
When you compare inventories at March 31, 2009 with those at the previous year-end, it's a decline of 11 billion yen. However, when you compare them at March 31, 2009 and those at December 31, 2008, it is a reduction of about 60 billion yen materially, reflecting the full-scale efforts made to reduce inventories in January through March 2009 and the effects of foreign exchange rates taken into account.

back to top Q5
Please elaborate on your projection for demand for construction and mining equipment for the current fiscal year.

A5
While demand for construction and mining equipment had increased by about 15% year-on-year from fiscal 2002 [ended March 31, 2003] through fiscal 2007 [ended March 31, 2008], it nose-dived starting in October 2008. For fiscal 2008 [ended March 31, 2009] it dropped by 21% from fiscal 2007, coming down to the level of fiscal 2005 [ended March 31, 2006]. Looking into the current fiscal year, we are projecting that demand will further drop by about 26% from fiscal 2008, equal to the level of fiscal 2003 [ended March 31, 2004]. In terms of breakdown by region, however, in fiscal 2003 combined demand in Japan, North America and Europe accounted for 65%, whereas projected total demand in these regions should represent 45% in fiscal 2009, with more demand shifting toward emerging economies centering on Greater Asia where we have advantages over competitors.

Looking into quarterly demand, we are anticipating that the size of demand in the fourth quarter of fiscal 2008 [January through March 2009] will continue through the first half period of the current fiscal year but will upturn even slightly in the second half, supported by seasonal factors, especially in North America and China, as well as benefits of economic stimulus measures.

back to top Q6
Please tell us your projection for demand for mining equipment in the current fiscal year. Please also touch upon your projection in the fiscal year ending March 31, 2011.

A6
We are projecting that demand for mining equipment will decline by about 20% in the current fiscal year. However, reflecting the fact that our mining equipment sold to customers is almost constantly in operation, which means production is in progress at mines, we don't expect that sales of parts and services will decline as much as demand for mining equipment. Therefore, we should be able to sustain sales of our mining equipment business, including sales of parts and services, at a little over 10% less than fiscal 2008. Generally speaking, when production at mines is steady and mining equipment stays in operation, renewal demand emerges in a seven-year cycle. In this light, we are looking forward to renewal demand in 2010 and 2011 for most of the new equipment sold in 2004 and 2005. Furthermore, customers need to overhaul engines, transmissions, axles and other components after three to five years of use of their new equipment. Therefore, we are anticipating steady sales of parts and services as well.

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