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Questions and Answers at the Conference on Results for Three months ended June 30, 2009
(Click the questions for the corresponding answers.)

Q1: Can we assume the production volume of your construction and mining equipment will slowly increase in the second quarter [July through September 2009] as projected at the beginning of the current fiscal year? Are there any changes in your view that your production will go back to the previous conditions based on real market demand after you complete inventory adjustments in and after the third quarter [October through December 2009]?

Q2: Please tell us the current level of backlog orders for mining equipment compared to three months ago. Do I understand correctly that order cancellations are already behind your immediate concern and that orders you have at hand correspond to the volume of shipment as planned?

Q3: How much was the currency impact on first-quarter sales of the construction, mining and utility equipment business from the Japanese yen's appreciation?

Q4:Based on your analyses of first-quarter segment profit of the construction, mining and utility equipment business, the price difference shows an increase from both the first quarter a year ago and the preceding fourth quarter this year. Could you tell us your future plan regarding pricing?

Q5:I have the impression that the industrial machinery business generated a larger profit relative to the level of sales. Could you elaborate on that?

Q6:You have changed your projection of annual demand for seven major products of construction and mining equipment in the current fiscal year from an earlier 26% to 30 to 35%. However, you are keeping the earlier projection for business results. Can you explain this?

Q7:You have projected that sales and segment profit of the industrial machinery and others business for the first half period of the current fiscal year would come to 90 billion yen and 500 million yen, respectively. By considering first-quarter results, I believe you have been making excellent progress toward achieving the projection. Are you going to change the current projection for the full year?

Q8: You have planned to reduce fixed costs by 25 billion yen for the current fiscal year, and you cut about 10 billion yen just in the first quarter. Based on this progress you've already made, I wonder how much more fixed costs you will be able to cut down.

Q9:Following the structural reform expenses of 32.3 billion yen recorded for the previous fiscal year, you are planning to record an addition of 10 billion yen for the current fiscal year. What is the time frame in which you are planning to incur this additional expense?

Q10:Your projection in April this year states that other operating expenses will be 14 billion yen for the current fiscal year. Is there any change in this amount?

back to top Q1
Can we assume the production volume of your construction and mining equipment will slowly increase in the second quarter [July through September 2009] as projected at the beginning of the current fiscal year? Are there any changes in your view that your production will go back to the previous conditions based on real market demand after you complete inventory adjustments in and after the third quarter [October through December 2009]?

A1
We are still placed in a challenging environment with respect to production. By defining the production volume in the first quarter of fiscal 2008 ended March 31, 2009 as 100, it was about 57 in the third quarter, and 33 in the fourth quarter. In the first quarter of the current fiscal year, it remained virtually flat from the preceding fourth quarter. We are projecting that it will start to grow slowly in the second quarter and go back to around 50 in the third quarter. Therefore, we believe that we will go back to production based on real market demand.

back to top Q2
Please tell us the current level of backlog orders for mining equipment compared to three months ago. Do I understand correctly that order cancellations are already behind your immediate concern and that orders you have at hand correspond to the volume of shipment as planned?

A2
The level of backlog orders we have today is staying at about the same level as three months ago. Cancellations peaked out in January through February this year, and we have had virtually no more cancellations.

back to top Q3
How much was the currency impact on first-quarter sales of the construction, mining and utility equipment business from the Japanese yen's appreciation?

A3
Compared to the previous first quarter a year ago, the Japanese yen appreciated against most currencies, which gave a negative impact of reducing sales by about 30 billion yen.

back to top Q4
Based on your analyses of first-quarter segment profit of the construction, mining and utility equipment business, the price difference shows an increase from both the first quarter a year ago and the preceding fourth quarter this year. Could you tell us your future plan regarding pricing?

A4
We have a basic policy of increasing the selling prices of not only equipment but also parts on a regular basis. There are some regions of the world, where it is difficult for us raise the prices now compared to earlier days, but we are realizing our prices as much as possible. As a result, compared to either the first quarter a year ago or the preceding fourth quarter, we generated some growth in the price difference for the first quarter under review. We believe that this trend will continue into the future.

back to top Q5
I have the impression that the industrial machinery business generated a larger profit relative to the level of sales. Could you elaborate on that?

A5
We generated segment profit of 2.1 billion yen in the industrial machinery business, which included 1.7 billion yen for a gain on reversal of allowance for doubtful receivables. By removing this amount, we can see that segment profit should be 400 million yen on a real business basis. More specifically, although we registered a segment loss of 3.3 billion yen for the preceding fourth quarter, we also recorded 3.6 billion yen for an allowance for doubtful receivables. Therefore, it would be a segment profit of 300 million yen for the fourth quarter on a real business basis. Like in the construction, mining and utility equipment business, we have focused efforts on fixed and production cost reductions, and thus we were able to generate a segment profit.

back to top Q6
You have changed your projection of annual demand for seven major products of construction and mining equipment in the current fiscal year from an earlier 26% to 30 to 35%. However, you are keeping the earlier projection for business results. Can you explain this?

A6
While we are predicting that demand in China will be stronger than projected earlier, demand in Japan, North America and Europe is falling more drastically than we had anticipated. In this light, we have made a slight downward revision in our projection of full-year global demand. With respect to our projection for business results for the year, we believe that it would be premature to determine the prospect at this time of the year.

back to top Q7
You have projected that sales and segment profit of the industrial machinery and others business for the first half period of the current fiscal year would come to 90 billion yen and 500 million yen, respectively. By considering first-quarter results, I believe you have been making excellent progress toward achieving the projection. Are you going to change the current projection for the full year?

A7
First-quarter sales were just about what we had anticipated, because we had corresponding backlog orders through the first quarter. With respect to first-quarter segment profit, what we had not counted on was a gain on reversal of allowance for doubtful receivables. In view of the fact that backlog orders will become fewer steadily into the future and new orders are sluggish, we are anticipating a more challenging business environment than that for the construction equipment business.

back to top Q8
You have planned to reduce fixed costs by 25 billion yen for the current fiscal year, and you cut about 10 billion yen just in the first quarter. Based on this progress you've already made, I wonder how much more fixed costs you will be able to cut down.

A8
As you know, it's not as simple as first-quarter results times four. However, we should be able to accomplish the target planned for the full year.

back to top Q9
Following the structural reform expenses of 32.3 billion yen recorded for the previous fiscal year, you are planning to record an addition of 10 billion yen for the current fiscal year. What is the time frame in which you are planning to incur this additional expense?

A9
As the structural reform expenses for the current fiscal year are mostly related to transfer of facilities and equipment as part of the ongoing reorganization of plants and consolidation and elimination of sales bases in Japan, we are estimating that we will record them mainly in the third and fourth quarters.

back to top Q10
Your projection in April this year states that other operating expenses will be 14 billion yen for the current fiscal year. Is there any change in this amount?

A10
Of 14 billion yen, 10 billion yen will be spent for structural reforms and the remaining 4 billion largely for a loss from the sales of fixed assets. So, things are going as we have planned.

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