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Questions and Answers at the Conference on Results for Six months ended September 30, 2010
(Click the questions for the corresponding answers.)

Q1: While sales of the construction, mining and utility equipment business for the second quarter [July through September 2010] declined from the first quarter [April through June], you were able to maintain the same segment profit ratio of 13.4% from the first quarter to the second quarter. Please explain.

Q2: In the second quarter, I believe your unit-based sales of hydraulic excavators in China increased by about 30% from the second quarter a year ago. However, the total amount of sales in China increased by 10.7% only. Please explain.

Q3: Have you lost sales chances because you weren't able to keep up your production with expanding demand?

Q4:When I compare the results for the first half period [April through September 2010] and your projections of the second half period [October through March 2011], I find that you are projecting larger sales of the construction, mining and utility equipment business but a decline of about 9 billion yen in segment profit in the second half. Please explain.

Q5:At the start of the year, you assumed that fiscal 2010 sales of the mining equipment business would improve by 6% from fiscal 2009. Now you have made a substantial upward revision to 25%. Please explain.

back to top Q1
While sales of the construction, mining and utility equipment business for the second quarter [July through September 2010] declined from the first quarter [April through June], you were able to maintain the same segment profit ratio of 13.4% from the first quarter to the second quarter. Please explain.

A1
Compared to the first quarter, sales for the second quarter declined by 46.6 billion yen due mainly to a seasonal factor in China. Concerning segment profit for the second quarter, we had negative factors of a little more than 10 billion yen of reduced unit-based sales and 5 billion yen in foreign exchange translation. However, we realized prices, reduced production costs and kept fixed costs low, in addition to increasing the percentage of high-margin parts sales in total sales of this segment. As a result, we were able to keep the decline of segment profit to about 6 billion yen, thus maintaining the same profit ratio as the first quarter.

back to top Q2
In the second quarter, I believe your unit-based sales of hydraulic excavators in China increased by about 30% from the second quarter a year ago. However, the total amount of sales in China increased by 10.7% only. Please explain.

A2
By and large there are four reasons. One is the foreign exchange translation effect. Second is a difference in the models we sold between the two quarters. Specifically, in the second quarter of the current fiscal year, we had better sales of smaller models compared to larger models. Third, sales of models imported from Japan and the United States did not increase as much as those of hydraulic excavators. And fourth, the number of used equipment imported from Japan was also lower in the second quarter this year compared to the second quarter a year ago. For these reasons, second-quarter sales in China did not increase as much as unit-based sales of hydraulic excavators from the second quarter a year ago.

back to top Q3
Have you lost sales chances because you weren't able to keep up your production with expanding demand?

A3
At present, we have not experienced any problem in relation to production. As you might know, we manufacture all key components, like engines and hydraulics, in house, so we have not experienced any problem in procurement either.

back to top Q4
When I compare the results for the first half period [April through September 2010] and your projections of the second half period [October through March 2011], I find that you are projecting larger sales of the construction, mining and utility equipment business but a decline of about 9 billion yen in segment profit in the second half. Please explain.

A4
Concerning segment profit for the second half, we are expecting an increase of about 10 billion yen resulting from a larger volume, but we are also projecting that we will experience a loss of about 15 billion yen from foreign exchange translation and an increase of about 3 to 4 billion yen in fixed costs, as we commonly have more fixed costs in the second half than the first half. For these factors, we are projecting a decline of some 9 billion yen in the second half from the first half. In addition, we are also assuming an increase in the price of steel materials, but we believe that we should be able to absorb this increase by increasing our selling prices and reducing production costs.

back to top Q5
At the start of the year, you assumed that fiscal 2010 sales of the mining equipment business would improve by 6% from fiscal 2009. Now you have made a substantial upward revision to 25%. Please explain.

A5
In addition to strong sales in the first half, we have had brisk inquiries and orders, especially in Asia and Latin America. This is why we have made this upward revision for fiscal 2010 sales.

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