Hitachi Construction Machinery

Global

Explanatory Meeting for the First Quarter Ended June 30, 2013 Outline of Answers to Main Questions

Q: Because the mining market remains in a difficult situation, the demand forecast for the mining machinery market was further revised down by 10%. What are the grounds for the revision? And have you received any order cancellations and requests for delivery date extension? Also, in the current backlog of orders, what are the ratios of each mineral?

A: At the beginning of the fiscal year, we expected the mining machinery demand to fall short of that of last year, especially in Indonesia, Australia, and the Americas; however, we further decreased the forecast since the coal market is showing signs of long-term stagnation, as well as considering the slow progress of order intake. We have not had any cancellation of orders yet in this fiscal year; however, we have received some requests from customers to extend the delivery date. The ratios of each mineral in the current backlog of orders are: Coal: about 30%, Iron-ore: about 30%, and Gold & Copper: about 10%, respectively. The ratio of Coal has decreased from 60% at the beginning of the fiscal year to 30%.

Q: For the Japanese market, how do you see the future demand trend of hydraulic excavators?

A: In 1Q, the demand for rental companies increased as the number of construction works increased, and it resulted in about a 30% increase of hydraulic excavator demand on a year-on-year basis. Since emission regulations will be applied to 20t and 12t class hydraulic excavators from Nov. 2013 and Apr. 2014 respectively, we expect the demand for 20t class and 12t class of the current model to surge in the first half of this year and in the second half of this year, respectively. And on a full year basis, it will retain the same increase ratio as that of1Q. Also, for the next year, we will see the reaction from the rush demand in this year.

Q: How about the demand trend of hydraulic excavators in mixed product classes in the Chinese market?

A: Since the end of the last fiscal year, demand for small-sized hydraulic excavators in China has been recovering antecedently, and in 1Q, the demand for middle-sized hydraulic excavators (20t and 30t class) is also in a recovery trend. In our sales result in China, in addition to an increase in the sales of small-sized hydraulic excavators, sales of middle-sized hydraulic excavators exceeded the forecast at the beginning of 1Q. Also, we are promoting the cultivation of demand for quarry through our marketing efforts.

Q: Please tell us about the foreign exchange sensitivity of this fiscal year.

A: For the foreign exchange sensitivity of the remaining 9 months of FY2013 (2Q-4Q), we expect fluctuation of 1 yen in USD to have a 1.2 billion yen impact, a 0.25 billion yen impact for EUR, and fluctuation of 0.1 yen in RMB to have a 0.25 billion yen impact.

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