Komatsu Expects to Boost Net Income by 70% for the FY Ending March 31, 2006.

Komatsu announced today its consolidated interim business results and outlook for the fiscal year ending March 31, 2006 (U.S.GAAP).

For the interim period ended September 30, 2005, Komatsu Ltd. improved both consolidated sales and profit for the fourth consecutive interim period, centering on excellent performance of the construction and mining equipment business. The improvement also represents the record-high figures for six-month sales and profit.
Consolidated net sales for the interim period under review expanded 18.4%, over the corresponding period a year ago, to ¥809.7 billion (US$7,166 million, at US$1=¥113). In the construction and mining equipment business, Komatsu boosted sales in all major regions of the world, as global demand expanded. In the industrial machinery, vehicles and others business, Komatsu advanced sales centering on forklift trucks and industrial machinery against the backdrop of strong market demand in Japan and overseas. Sales of the electronics business also increased over the last corresponding period, as the semiconductor market recovered.
Operating profit* reached ¥79.6 billion (US$705 million) for the interim period, registering an increase of 72.6% over the corresponding period a year ago. While costs increased due mainly to price hikes of steel materials, Komatsu made the handsome gain in operating profit because it worked to cut down production costs and increase its sales prices in Japan and overseas, coupled with expanded sales in the construction and mining equipment business and the industrial machinery, vehicles and others business. Operating profit ratio for the interim period also improved to 9.8% from 6.8% for the last corresponding period.
Income before income taxes for the interim period also made a sizable gain of 76.6% over the previous interim period, to ¥85.1 billion (US$753 million), reflecting income from the sale of Advanced Silicon Materials LLC, a U.S. subsidiary engaging in production and sales of polycrystalline silicon, in addition to the substantial increase in operating profit. As a result, net income for the interim period reached ¥59.7 billion (US$529 million), registering an increase of 2.3 times over the corresponding period a year ago.

Note: Operating profit stated hereafter is the sum of segment profit (net sales less cost of sales and selling, general and administrative expenses). It conforms to Japanese accounting principles, and does not represent consolidated operating profit under U.S.GAAP.

Notes:
1) Consolidated financial information is prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America.
2) The translation of Japanese yen amounts into US dollar amounts is included solely for convenience and has been made for the first half ended September 30, 2005, at the rate of \113 to $1, the approximate rate of exchange at September 30, 2005.
3) Equity in earnings of affiliated companies:
September 30, 2005: 536 million yen
September 30, 2004: 684 million yen
March 31, 2005: 939 million yen
4) The numbers of average common shares outstanding were as follows:
September 30, 2005: 992,145,951
September 30, 2004: 992,006,036
March 31, 2005: 991,662,555
5) Accounting policies were not changed.
6) Net income per share above is based on the provisions of Statements of Financial Accounting Standards No.128, "Earnings per share."

(millions of yen)

Notes:
1) Forecast of net income per share (basic): 101.75 yen
2) Refer to "Management Performance and Financial Conditions" for preconditions of the projections above and other related issues. (Attached PDF file)

Komatsu has set the interim dividends per share at ¥8 by increasing ¥3 from ¥5 paid for the corresponding period last year, based on its basic policy concerning redistribution of profits.
Furthermore, the Company plans to increase the annual dividends per share by ¥5, to ¥16 (i.e., ¥8 for the interim and ¥8 for the fiscal year-end dividends per share).

*For further information, please refer to the attached PDF file.