Hitachi Construction Machinery

Global

Explanatory Meeting for the First Quarter Ended June 30, 2014Outline of Answers to Main Questions

Q: Net sales forecast for FY2014 is downwardly revised for ¥60 billion. What are the main factors?

A: Demand for construction machinery in China has been much lower than the previous year during the first quarter under review, and we predict that this trend will continue. Additionally, due to economic decline in resource-rich countries and the political uncertainty in Thailand, we anticipate the demand in the Asia-Pacific region will be lower than the original forecast. We also revised the mining machinery demand forecast downwardly to a decrease of 20% or more on a year-on-year basis. Affected by such business environment degradation, we revised the net sales forecast downwardly to ¥740 billion, which is ¥60 billion lower than the original forecast.

Q: Regarding profit and loss fluctuation analysis for the first quarter result of FY2014, selling price is a plus of ¥500 million. How does the result compare to the plan?

A: The result fell slightly short of the plan because the timing of price increase was delayed in North America.

Q: The FY2014 forecast of demand for mining machinery seems to anticipate a decrease of approximately 20% or more on a year-on-year basis. Please tell us about the sales and order situation of Hitachi Construction Machinery. In addition, have you received any cancellation?

A: The market remains adverse due to cutbacks in capital investment of resource companies affected by downturn in resource prices. Moreover, the current pace of receiving new orders fall below the pace of sales growth generated by past orders; therefore, we revised the net sales forecast downwardly. As for both ultra-large hydraulic excavators and dump trucks, we have confirmed orders for approximately 40% against the net sales forecast for the rest of FY2014 from the second quarter. In the first quarter, we had not received any cancellations.

Q: Do you see a recovery trend in the sales of parts and service for mining machinery?

A: The rate of non-operational mining machineries continues to be high if not worse. The operational status of the machineries vary, depending on each region due to suspended mines and mines with high operating rates; however, we do not see a recovery trend in general, and we estimate the net sales of parts and service for mining machinery to remain at the same level as the previous fiscal year.

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