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Questions and Answers at the Conference on Results for Three months ended June 30, 2008
(Click the questions for the corresponding answers.)

Q1: You have told us that you had unrealized sales of equipment worth about 13 billion yen for the first quarter period due to a shortage of cargo vessels. Do you think you can record the sales in the second quarter period (July through September)? This 13 billion yen should translate into about 3.5 billion yen less for operating income for the first quarter period. Am I right?

Q2: Can you tell us how successfully you have been increasing your prices in Europe and Japan, for example, where demand has slowed down?

Q3: While you have changed your projection of demand for construction and mining equipment, you haven't revised your projection for the full-year business results announced in April. Can you tell us your projection by region?

Q4:When I look at your profitability in relation to a product-mix change and assume that you can maintain the same amount of sales with declining sales of small and medium-sized models and increasing sales of large ones, is it correct to think that your profitability will improve with respect to your product mix?

Q5:Concerning the factors which affect your profits, such as fixed and production costs and price differences, are there any changes for the full year based on the results of the first quarter period (April through June)? According to your projection of April, you expect to benefit 17 billion yen as a net of the differences in prices of your products and costs and prices of purchase items. Can I assume that you should be able to secure the number even when the steel price will further increase?

Q6:Concerning the segment profit of the Construction, Mining and Utility Equipment business, the operating profit ratio worsened by 1.5 percentage points to 14.6% for the first quarter period under review from 16.1% for the fourth quarter of the previous fiscal year. Can you tell us the factors?

Q7:Can you compare the operating income of 83.2 billion yen for the first quarter period with your initial projection?

Q8: Since sales of large equipment are expanding, are there any bottleneck or other problems in manufacturing?

Q9:Can you tell us about the conditions in Europe in June? Is demand slowing especially in Southern Europe, such as Spain? How about France and Germany?

Q10:You assumed at the start of the current fiscal year that demand in CIS would expand by 50 to 70%, but your first-quarter sales grew by 47% over the corresponding first quarter period a year ago. Can you tell us if the market environment has changed in a way that you didn't anticipate?

back to top Q1
You have told us that you had unrealized sales of equipment worth about 13 billion yen for the first quarter period due to a shortage of cargo vessels. Do you think you can record the sales in the second quarter period (July through September)? This 13 billion yen should translate into about 3.5 billion yen less for operating income for the first quarter period. Am I right?

A1
As you know, March is a rush month for Japanese exporters, as it's the fiscal year-end month for many of them. Especially last March was extraordinary, leaving virtually no ships at Japanese ports. As a result, we experienced a shortage of available ocean-going vessels in April and May, leaving our equipment at the ports or our plants, worth about 13 billion yen, at the end of June. We have been advancing our shipping arrangements steadily since July. In view of the fact that September is usually a month with bigger sales for us, it is still uncertain that we will be able to ship all 13 billon-yen worth equipment by the end of September and thus it's possible that a small number of them might be left behind. With regard to your second question, yes, you are right about the number.

back to top Q2
Can you tell us how successfully you have been increasing your prices in Europe and Japan, for example, where demand has slowed down?

A2
We have been able to increase our prices as planned both in Europe and Japan. In Europe, where steel prices are even higher than in Japan, another price increase for steel is being projected. So, we believe that European customers would understand our situation even if we have to make additional price hikes.

back to top Q3
While you have changed your projection of demand for construction and mining equipment, you haven't revised your projection for the full-year business results announced in April. Can you tell us your projection by region?

A3
We expect that sales of small and medium-sized construction equipment will be adversely affected by declining demand in Europe and Japan. Coupled with expanding sales of parts, sales of large equipment have been growing steadily, in China and other countries. Although we will have changes regionally and product-mix-wise, we believe we should be able to achieve our projection of April for total sales.

back to top Q4
When I look at your profitability in relation to a product-mix change and assume that you can maintain the same amount of sales with declining sales of small and medium-sized models and increasing sales of large ones, is it correct to think that your profitability will improve with respect to your product mix?

A4
Generally speaking, large equipment is more profitable than small or medium-sized equipment. Also, in view of the fact that sales of spare parts -- which are more profitable than equipment -- are expanding, we believe that our profitability will improve in relation to the ongoing change in our product mix in sales.

back to top Q5
Concerning the factors which affect your profits, such as fixed and production costs and price differences, are there any changes for the full year based on the results of the first quarter period (April through June)? According to your projection of April, you expect to benefit 17 billion yen as a net of the differences in prices of your products and costs and prices of purchase items. Can I assume that you should be able to secure the number even when the steel price will further increase?

A5
As the steel price increased in the course of our first quarter period, its effects will be larger in the second quarter period. A further increase in the steel price is also possible. In response, we will make additional price hikes of our equipment and hope to secure a net of 17 billion on the positive side. In addition, if foreign exchange rates stay on the current level, we believe that the largest negative impact from foreign exchange rates will have taken place in the first quarter period and that the negative impact will become smaller. With respect to fixed costs, we have been controlling them as planned.

back to top Q6
Concerning the segment profit of the Construction, Mining and Utility Equipment business, the operating profit ratio worsened by 1.5 percentage points to 14.6% for the first quarter period under review from 16.1% for the fourth quarter of the previous fiscal year. Can you tell us the factors?

A6
We lost about 1.2 percentage points with declined volume of transactions. With respect to the net of price and cost differences and increased prices of purchase items, we had virtually no change from a year ago. Concerning the foreign exchange rates, there was not a big difference between the first quarter period of the current fiscal year (105 yen per US dollar and 165 yen per Euro) and the fourth quarter of the previous fiscal year (104 yen per US dollar and 158 yen per Euro). Concerning the products which we exported from Japan to our overseas subsidiaries in the third quarter period of the previous fiscal year (113 yen per US dollar and 165 yen per Euro), they were sold in the fourth quarter, pushing the segment profit ratio by 0.3 percentage points for the fourth quarter period. (Unrealized profit became profit in the fourth quarter period.)

back to top Q7
Can you compare the operating income of 83.2 billion yen for the first quarter period with your initial projection?

A7
Since we don't disclose our quarterly projections, let me make a comparison with one half of the projected interim operating income. While 13 billion yen of unrealized sales due to a shortage of ocean-going vessels give a negative effect, there is no big difference overall. When those sales are realized for the second quarter period, operating income should come out as initially planned.

back to top Q8
Since sales of large equipment are expanding, are there any bottleneck or other problems in manufacturing?

A8
For the last few years, we've had a problem of procuring tires for our mining equipment. The tight situation remains today. We have no bottleneck problems as far as our operation is concerned. However, there are cases in which we make modifications, particularly to mining equipment, locally, according to our customers'Especifications. When such a modification takes some extra time, sales are recognized later than planned.

back to top Q9
Can you tell us about the conditions in Europe in June? Is demand slowing especially in Southern Europe, such as Spain? How about France and Germany?

A9
European demand in June is not available yet. As demand made a big decline in Western Europe in May, we have reduced our sales to distributors and dealers and have been working to reduce their inventories. Therefore, our shipments are less in June than in the same month a year ago on a unit basis.

In terms of demand in Western Europe by country, demand in Spain and the UK is declining sharply. In Germany, demand was up through April over the corresponding months a year ago, but it decreased in May. In France and Italy, demand in May declined from the corresponding months a year ago. Therefore, we are taking the stance that demand in Western Europe is slowing down.

back to top Q10
You assumed at the start of the current fiscal year that demand in CIS would expand by 50 to 70%, but your first-quarter sales grew by 47% over the corresponding first quarter period a year ago. Can you tell us if the market environment has changed in a way that you didn't anticipate?

A10
We see no significant change in the CIS market and it remains very good. The reason our first-quarter sales didn't expand at a rate higher than that of demand is the fact that the Japanese yen appreciated slightly against the Russian ruble from the corresponding period a year ago.

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