Kobelco announces financial results

In favourable market conditions, Kobelco Cranes increased the number of units sold in major world markets, whilst enjoying continued domestic growth.

Kobelco Cranes sold approximately 230 cranes in the first-half of the fiscal 2005, up 35% or 60 units, in comparison to the 170 units sold in the same period last year.

In addition to Japan, sales volumes of Kobelco branded cranes increased in North America, South East Asia, the Middle East, India and Australia.

Higher unit sales also contributed largely to higher profits. Kobelco achieved roughly 70% of its overseas sales target, in terms of units sold, for fiscal 2005 in the first half of the year.

Although higher material costs placed a downward pressure on profits, pre-tax ordinary income nearly doubled in the first half of the year in comparison to the same period last year.

Consolidated domestic sales amounted to 9 billion Yen (€63million) and overseas sales reached 7.8 billion Yen (€54m), for a total of 16.8 billion Yen (€117m). Debt in the Kobelco Crane Group went down, improving financial performance.

Overseas demand is anticipated to continue growing. Looking to future global development, Kobelco Cranes were involved in some interesting activity.

In the North American market, Kobelco Cranes sharply increased the number of units sold by increasing its own distribution channels.

In Europe, Kobelco considerably increased its crane orders owing to active marketing to major building contractors and equipment rental companies and expanding the marketing territory in Central Europe, Southern Europe and other regions.

Although actual sales are expected to shift to the second half of fiscal 2005, Kobelco said it was able to substantially increase orders for new machines in the first half.

In addition, in South East Asia, where growth continues to rise sharply, the shortage of used cranes boosted demand for new lifting equipment.

The Singapore office, which opened in fiscal 2004, undertook a vigorous marketing strategy, resulting in a doubling of sales volume in comparison to the same period last year.

Along with expanding world economic growth especially in China, increased production of coal, iron ore, crude oil, natural gas in the Middle East, India, Australia and other natural resource countries contributed to higher numbers of units sold.

In China, which had previously registered sharp growth due to power plant construction and other infrastructure projects, the number of units sold in the first half of fiscal 2005 was less than the number in the same period last year.

The effects of governmental controls to tighten its financial policies, high taxes for imported construction equipment and a fall off in demand for large crawler cranes used in power plant construction led to the decline.

However, infrastructure work, which continues to be strong, is anticipated to bolster crane demand. Kobelco will continue its marketing efforts to mineral and metal industries and local rental companies, as well as expand its service locations.

In April 2004, Kobelco Cranes began the OEM (original equipment manufacturer) supply of crawler cranes to the Manitowoc Crane Group (MCG), supplying more units than originally anticipated for the North American market.

For crawler cranes for the European market, preparations have nearly been completed. From January 2006, Kobelco plans to supply three models that meet Tier 3 exhaust emission standards.

To enter the wheel crane business, Kobelco introduced to the Japanese market in February 2005, a 265t (297USt) all-terrain crane made under OEM by Deutsche Grove GmbH, an MCG company.

Demand for new crawler cranes rose 8%, in comparison to the same period last year. For Kobelco Cranes, the number of units sold was higher than the growth rate of new machines.

The rough terrain market continued to be strong, with demand rising 27% in the first half of the year, in comparison to the same period last year. Sales volume at Kobelco Cranes rose owing to demand for new machines and the introduction of two models in the 12t (13USt) class and 16t (18USt) class.

With regard to production, firm demand for both domestic and overseas models and increased orders enabled Kobelco's assembly lines to operate at a high pitch. Kobelco said it made strong efforts to raise production efficiency.

Profitability also increased in the stock business, owing to improved parts supply and services to a wider customer base.

To cope with higher material costs, Kobelco adjusted domestic and overseas crane prices. Reducing costs by overseas procurement and other measures contributed to a substantial improvement in profitability.

Kobelco Cranes has outlined the following priorities for the second half of the year:

• Reduce procurement costs by increasing overseas procurement and carrying out other cost reduction activities.
• Adjust product prices in Japan and overseas to offset higher material costs.
• Increase sales through collaboration with MCG.
• Promote stable sales volume by strengthening the Middle Eastern, Indian and Australian markets and gain new customers.
• Develop world crane models that meet Tier 3 exhaust emission regulations.
• Strengthen the wheel crane business in Japan by promoting all-terrain cranes.

Strengthen the stock business and distribution networks.