Hitachi Metals, Ltd. (Oct. 31, 2001) Code: Shibaura 1-chome, Minato-ku, Tokyo

Transcription

1 Hitachi Metals, Ltd. (Oct. 31, 2001) Code: Shibaura 1-chome, Minato-ku, Tokyo Consolidated Financial Report for the 6-month period ended September 30, 2001 Contact: Shigeru Ishigay, General Manager Corporate Communications Department Tel: Stock Exchange where listed (section): Tokyo(First), Osaka(First) 1. Performance over the year, April 1, 2001 to September 30, 2001 (Figures are rounded to the nearest million yen) (1) Consolidated Operating results 9/01(interim) 9/00(interim) (Change) 3/01 Net Sales ( million) 204, ,301 (13.8%) 479,480 Operating income ( million) (2,259) 14,917 -% 25,371 Ordinary income ( million) (6,585) 14,716 -% 30,410 Net income ( million) (7,823) 2,411-9,663 Net income per share ( ) (21.91) Diluted net income per share ( ) Notes: 1. Profit (loss) on equity method investment: 9/01 43 million 9/ million 3/ million 2. Average number of shares outstanding (9/01:357,121,930 9/00:357,026,652 3/01: 357,074,379) 3. Accounting policy have been made Change. (2) Consolidated Financial Standing 9/01(interim) 9/00(interim) 3/01 Total assets ( million) 502, , ,969 Shareholders equity ( million) 174, , ,524 Shareholders equity ratio(%) Shareholders equity per share ( ) Average number of shares outstanding at the end of year (9/01:357,122,292 9/00:357,122,816 3/01: 357,123,946) (3) Consolidated cash flows ( million) 9/01(interim) 9/00(interim) 3/01 Cash flows from operating activities 14,371 23,255 37,804 Cash flows from investment activities (2,081) (4,805) (8,719) Cash flows from financing activities 2,564 (22,383) (31,914) Cash and cash equivalents at yearend 64,572 48,051 50,046 Notes: Consolidated subsidiaries and application of the equity method Number of consolidated subsidiaries : 72 Equity method applied non-consolidated subsidiaries : None Equity method applied affiliates : 14 (4) Consolidated scope and changes to the application of the equity method Consolidation : New companies 4 Companies removed 5 Equity method : New companies coming under equity method None Companies removed 1 2. Forecasts of results for the term, April 1, 2001 to March 31, 2002 At yearend Net sales ( million) 418,500 Ordinary income ( million) (13,600) Net income ( million ) (20,000) Reference: Expected net income per share (full-year basis) consolidated: ( 56.00)

2 Consolidated subsidiaries: 72 companies 37 domestic companies Hitachi Tool Engineering, Ltd. Hitachi Metals Techno, Ltd. Hitachi Kinzoku Shoji,Ltd. HMY, Ltd. Seitan Inc. Hitachi Valve, Ltd. Hitachi Metals Estate, Ltd. Tokyo Seimitsu Kogyou, Ltd. HMW, Ltd. Hitachi Metals Kiko Co., Ltd. Hitachi Metals Kumagaya, Ltd. Hitachi Ferrite Electronics, Ltd. 35 overseas companies Hitachi Metals America, Ltd. Hitachi Magnetics Corporation Central Coating & Assembly, Inc. Ward Manufacturing Inc. AAP St. Marys Corporation Hitachi Metals North Carolina, Ltd. Newport Precision Inc. ACP Manufacturing Company LLC. SinterMet, LLC. Denshi Tech, Ltd. Kuwana Create Co., Ltd. Hitachi Metals Construction Co., Ltd Nikki Plantech, Ltd. Moka Technos Co., Ltd. Auto-tech, Ltd. Kusunoki, Ltd. Hiyoshi Kouzai, Ltd. Nichiei Corporation Nichiwa, Co., Ltd. Hitachi Metals Intec, Ltd. etc. Hitachi Metals Europe GmbH Hitachi Metals Singapore Pte. Ltd. Hitachi Metals Hong Kong, Ltd. Hitachi Metals Australia, Pty. Ltd. Hitachi Metals Electronics (Malaysia) Sdn.Bhd. Hitachi Ferrite (Thailand), Ltd. Luzon Electronics Technology, Inc. Luzon Magnetics, Inc. P.T.Bukaka Forging Industries etc. 2

3 Consolidated Management Policies 1. Fundamental Management Policy Hitachi Metals, Ltd., and its subsidiaries, (collectively, the Company ) aims to contribute to the betterment of society by providing environment-friendly superior-quality products that are made possible through cuttingedge materials and proprietary technologies. Using these proprietary technologies and by developing new ones, the Company endeavors to fulfill its corporate responsibility to create higher value-added products and capabilities in a timely manner. Hitachi Metals is determined to continue satisfying the stockholders, investors, customers, and employees that support its existence as well as society as a whole in a judicious manner by delivering top-level solutions achieved through outstanding creative insight and enterprising action. 2. Dividend Policy The current business condition is characterized by changing customer needs and technologies and advancing globalization. Under these circumstances, Hitachi Metals considers the appropriate and long-term return to its stockholders through the strengthening of its international competitiveness, the expansion of dividendenabling profit, and the maximization of corporate value to be its responsibility as a corporation. To this end, the Company has adopted a policy of paying stable dividends to stockholders while maintaining and expanding its financial strength to make possible investments for the future. The Company sets aside earnings with the future development of operations in mind, investing in new materials development and offering new products to market. It is also simultaneously developing new businesses and streamlining its facilities to expand the production of highly competitive products to create a global network. 3. Target Business Indicators In line with its dividend policy, the Company will strive to achieve a consolidated ROE (return on equity) of 10% to maintain the income level required to increase corporate value while providing stockholders with longterm returns on their investments. 4. Medium-to-Long-Term Strategy and Issues To Be Addressed (1) Medium-Term Management Strategy Due to the transition to a global economy, the evolution of mega-competition, the introduction of IT within the industry, and the greater emphasis being placed on the environment and safety, the needs of the Hitachi Metals Group s markets and clients are changing rapidly. The Company maintains the top market share in materials for molding and cutting tools, high-grade ductile cast-iron products, rolling-mill rolls, and pipe fittings. However, business operations related to these products, which have previously contributed significantly to profitability, are now facing the maturing of their markets. Furthermore, demand is declining and prices are falling rapidly due to the rationalization of domestic industry as a consequence of lower-priced products from China and other Asian countries. Owing to these factors, increasingly severe competition and deteriorating earnings are becoming an inherent feature of the economic landscape. In response to these severe business conditions, Hitachi Metals will pursue a product strategy aimed at striking a balance between securing its revenue base in the traditional product segments in which it maintains a competitive advantage and achieving growth in new segments based on the needs of its customers and society at large. In terms of selectivity in businesses and products and the concentration of managerial resources, we will make specific revisions to the scope of our business, including withdrawal from unprofitable products and businesses to achieve secure earnings. We will also place stronger emphasis on capital investment aimed at streamlining and specializing in our traditional business areas and, furthermore, revise the structure of our business, including enterprise combining. Through these efforts, we will strive to maximize profits. As for those products that contribute significantly to profitability, the maturing of markets and competition are expected to intensify further. 3

4 (2) Structural Reforms The Company s product strategy targets sectors that have scale and growth potential and products that are optimized for use in the information, electronics, environment, and energy conservation fields. Until now, the Company has made efforts to expand electronics and environment-related operations. In the years to come, the Company will make further efforts to respond to the needs of society and industry, selecting businesses and products and concentrating management resources to create an organization that emphasizes profitability and targets growing market segments in its business operations. Therefore, the Company is reviewing its overall business structure. Regarding business investments, the Company will reevaluate the distribution of its investments so as to curtail investments in production capacity expansion and concentrate its investments in the reinforcement of its revenue foundation and the development and commercialization of new products and businesses. Specifically, we will place stronger emphasis on capital investment aimed at streamlining and specializing in our traditional business areas, in which we retain a substantial competitive advantage. We will also strive to maximize profits through initiatives that include a revision of the structure of our business, including enterprise combining. Using the funds resulting from these efforts, the Company will work to create, nurture, and strengthen businesses and products in the fields of information and electronics and the environment and energy conservation, and apply a business configuration that strikes the balance required to achieve lasting growth and stability. Regarding new businesses and products, the Company will accelerate its efforts to capitalize on products that make use of FINEMET, a metallic soft magnetic material achieved through the use of nanocrystal technology, multi-layer compound circuit board materials based on unique ceramics, passive components for fiber-optic communications using sub-micron processing technologies, all types of advanced IT-compatible sensors, and other cutting edge products. The Company s overseas strategy gives priority to being close to local markets, maintaining cost-competitive capabilities, adapting technologies to the targeted areas of use, and other strategic issues. Based on these considerations, the Company is striving to create optimal production systems on a global scale. Specifically, to enhance cost competitiveness and achieve prices commensurate with Asian markets, during the interim term under review, the Company commenced the processing of sputtering target materials in Taiwan and established a new subsidiary in China to enable the partial transfer of production processes for mobile phone components. As for its financial strategy and efforts to enhance profitability, the Company will work to improve its capital Turnover ratio through such measures as the implementation of IT based TSCM (Total Supply Chain Management) and the rationalization of retained fixed assets, conduct efficient capital management, and reduce its interest bearing debt ratio. Specifically, we are currently working to improve cash flows by shortening lead times and reducing accounts receivable. We are also planning comprehensive reductions to personnel costs, including a reduction of 2,200 in the number of employees by March To expedite this target, we introduced a voluntary early retirement system during the interim term under review. (3) Environmental Countermeasures The Company is striving to improve its recycling rate, reduce the per-sales rate of energy consumption, and implement strict controls over the handling of chemical substances. Also, the Company is increasing its efforts to create environment-friendly products as a priority in reducing the burden on the environment. In August 2001, the Company issued an environmental accounting report for fiscal 2000 based on Ministry of the Environment s guidelines and in line with the Hitachi Group s standard practices. The Company will continue to expand the disclosure of information regarding its environmental activities. 4

5 5. Policies for Strengthening Corporate Governance The Company continues to implement structural reforms to achieve qualitative improvements to its operations and establish a foundation that will enable profit-generating growth continuing into the future. In April 2001, Hitachi Metals launched an Internal Company System and an Executive Director System, thereby delegating authority to seven internal companies, the Automotive Components Company, the Piping Components Company, the Roll Company, the Specialty Steel Company, the Magnetics Company, the Information System Components Company, and the Environmental Systems Company. It is the role of the executive directors to respond to their respective business environments and autonomously manage their individual businesses. Meanwhile, we have designated a small board of directors with the task of specializing in overall decision making with the good of the entire Company in mind, for which we have established a Management Committee. The aim of these reforms to the Company s management structure is to separate overall strategic decision-making functions from the operational executive functions of each individual business in consideration of the unique characteristics of Hitachi Metals. The Company is active in a wide range of differing markets and product segments, and these reforms are intended to produce rational and speedy business management. In the days and months ahead, we will augment the managerial frameworks of each internal company so as to enhance competitive strength with respect to the unique characteristics of each business as well as the generation of cash flows. Furthermore, through the reorganization and improvement of human resource systems and the outsourcing of indirect operations, the Company will create a dynamic and efficient managerial structure. From the perspective of corporate governance and as part of its responsibilities as a publicly listed enterprise, the Company will continue to rationalize its management and ensure transparency as it strives to expand corporate value through the above-mentioned medium-term management policies. To this end, the Company will disclose not only annual earnings statements but also periodically announce the results of individual business segments as well as its medium-term management plan. The Company will continue to provide timely, high-quality disclosure of information regarding its activities. The Company, as part of the basic policy launched this year, included in its corporate statement those promises that it is making to society and its stockholders, and how it intends to fulfill those promises. From now on, executives and employees will endeavor to act in accordance with the corporate statement and the behavioral code. 6. Basic Policies for Relationships with Interested Parties (Parent Company and Others) Hitachi, Ltd., as the Company s leading stockholder, holds 55.0% of the Company s outstanding shares. In order to gain appropriate views for the management of the Group, one board member of Hitachi, Ltd., will be appointed to the board of directors of Hitachi Metals, and another Hitachi board member will serve as an auditor for the Company. As for the relationship with Hitachi, Ltd., and the Hitachi Group of companies, the Company maintains autonomy in its business operations and transactions. Regarding the Hitachi Group s execution of its business activities, the Company, as a member of the Hitachi Group of companies, will maintain close cooperative relationships with Hitachi, Ltd., and other companies in the Hitachi Group while using the Group s management resources to meet both market and customer needs as well as providing products and services of the highest quality. 5

6 Financial Performance 1. Financial Results During the first half of fiscal 2001, ending September 30, 2001, the effects of deceleration in the U.S. economy caused by the collapse of the IT bubble reached Europe and Asia, and economic conditions in Japan worsened amid declines in capital investment and exports. Regarding the industries in which Hitachi Metals operates, PC demand plummeted in the United States, the world s largest market for PCs, and demand for mobile phones declined due to market saturation, causing continual production adjustments on a worldwide basis and a trend toward units with increasingly advanced features. Owing to these factors, the semiconductor industry also continued to suffer weak market conditions and declining production. The construction industry was also beset by declining housing starts in addition to weakness in the non-housing and public works markets. The automotive industry was also adversely affected by declines in domestic production due to slumping exports, in addition to a slowdown in the U.S. auto market. In steel, although declines in both domestic demand and exports persisted, production remained strong. Owing to the severe economic environment surrounding Hitachi Metals, demand has declined and selling prices have deteriorated in all industry sectors, most notably IT, resulting in a substantial reduction in net sales. In response, the Company has cut compensation and bonuses for directors and upper-level managers and made strenuous efforts to reduce costs through comprehensive initiatives aimed at the effective use of assets and the curtailment of overall expenditures. However, net sales declined 14% compared with the same half of the previous fiscal year, to 204,472 million. On the profit side, the Company unavoidably recorded a recurring loss of 6,585 million. Furthermore, to ensure a swift recovery in earnings in fiscal 2002, the Company took steps to streamline its organizational structure, including encouraging employees to take up different employment so as to reduce total human resource expenses, and a revision of retained assets to accommodate changes in the demand structure. As a result of the Company s recording of extraordinary losses pertaining to these measures, net income for the interim term came to a loss of 7,823 million. The Company recorded a net cash inflow of 14,371 million from operating activities and a net cash outflow of 2,081 million from investing activities. Free cash flow net operating cash flow less net investment cash flow amounted to 12,290 million. Financial cash flows, due to a 4,041 million increase in bonds and debts payable, showed a net inflow of 2,564 million. As a consequence, cash and cash equivalents amounted to 64,572 million. The proportion of interest-bearing liabilities was 38.4%, increase by 3.2points in the previous fiscal year, totaling 193,273 million. As the deterioration in business results has proven to be a persisting phenomenon rather than a temporary one, the Company is currently not in a financial position to maintain annual stockholders dividends of 10 per share as it did in the previous term. Hence, with regret, we have chosen to forgo the payment of interim stockholders dividends. Sales by business segment are discussed below and include sales to and from other business segments. 6

7 High-Grade Metal Products and Materials In molds and cutting tools and materials, in addition to the shift in production activities to other parts of Asia, declining demand was also witnessed in the IT and automotive segments, resulting in protracted inventory adjustments. Automobile engine and component materials also suffered from falling domestic automobile production. IC lead frame materials declined as a result of lower production of PCs and mobile phones, and shadow mask materials suffered due to both a decline in PC demand and the shift toward the use of liquid crystal displays. Demand was also weak for injection molding machinery components, owing to plummeting production of molding machines. Exports of rolls to Asia, on the other hand, increased. As a result, net sales for the segment declined 13% compared with the same half of the previous fiscal year, to 78,811 million, and operating income amounted to 1,155 million. Electronics and IT Devices Although sales of ferrite magnets in Japan remained virtually unchanged, ferrite magnets for use in automobiles proceeded at a weak pace owing to the economic slowdown in the United States and the resultant decline in demand. Demand for rare-earth magnets from the CDs for PC use, and mobile phone segments declined both domestically and overseas. Sales of wound ferrite cores and wire-wound components suffered the effects of declining production in IT components. In IT equipment, sales of insulators and antenna switch modules weakened as a result of plummeting production stemming from mobile phone inventory adjustments. Consequently, net sales for the segment declined 35% compared with the same half of the previous fiscal year, to 28,860 million, and operating loss amounted to 3,628 million. High-Grade Casting Components for Automobiles Sales of heat-resistant cast steel products for the exhaust systems of environmentally clean engines continued to decline as a result of inventory adjustments on the part of principal U.S. customers. Meanwhile, sales of aluminum products suffered the adverse effects of declining demand for exports to the United States. In aluminum wheels for automobiles, the Company screened out unprofitable products to adapt to the falling prices of products sold to its principal customers both in Japan and the United States. Consequently, net sales for the segment declined 15% compared with the same half of the previous fiscal year, to 40,684 million, and operating loss amounted to 866 million. Construction Components, Plant and Equipment Demand for steel frame joints and corrosion-resistant joints declined as the trend toward the utilization of plastic and stainless steel materials continued. However, the decrease was slight, thanks to proactive sales efforts targeting individual construction projects. Sales of stainless steel flexible pipe and plastic pipe fitting systems were hit hard by the decline in construction projects as well as seasonal factors in the structure of gas piping demand. Demand declined for both interior systems and structural systems due to declines in semiconductor-related capital investment and private-sector investment in facilities. Sales of wastewater treatment equipment and waste disposal equipment declined due to the seasonal nature of public works. However, purchase orders increased compared with the same half of the previous term due to orders for wide area recycling equipment and plasma direct fusion furnaces. As a result, net sales for the segment declined 4% compared with the same half of the previous fiscal year, to 50,003 million, and operating income amounted to 285 million. Services & Other Activities This business segment saw weak sales, both domestically and overseas. As a result, net sales for the segment declined 16% compared with the same half of the previous fiscal year, to 34,293 million, and operating income amounted to 795 million. 7

8 2. Outlook As the economic slowdown in the United States continues to affect markets worldwide, anxiety caused by the multiple terrorist attacks on the U.S. has further eroded market conditions. The Japanese market is also in a severe condition. Exacerbated by a substantial decline in corporate productivity, the worsening employment situation leaves little hope for recovery in consumer spending, and capital investment is also in decline. Corporate failures also persist in the face of mounting efforts to dispose of bad debts. Stock markets have weakened, and deflation continues unabated. As for the industries in which the Company operates, demand has plummeted, rendering declines in net sales unavoidable in all segments. The Company will continue to implement all-encompassing efforts to enhance business efficiency and reduce costs. The Company will continue to implement all-encompassing efforts to enhance business efficiency. At the same time, we will strive to secure revenues by reducing assets and curtailing human resource expenditures by supporting changes in employment conditions and implementing an early retirement system. Hence, Hitachi Metals is revising its business forecasts for the term, which were initially announced on April 26, Forecasts of Consolidated Financial Report for the term, April 1, 2001 to March 31, 2002 Net sales 418,500 million Operating income ( 13,600 million) Net income ( 20,000 million) Forecasts of Non-consolidated Financial Report for the term, April 1, 2001 to March 31, 2002 Net sales 245,000 million Operating income ( 15,300 million) Net income ( 18,600 million) Following the statement regarding year-end stockholders dividends made on August 28, 2001, when the Company announced that it would forgo interim term dividends, it has now scheduled the payment of cash dividends of 5 per share, the same amount as in the previous fiscal year. Note: The outlooks for performance presented in this document are statements regarding future plans, not historical facts, and represent the judgments of the management of the Company based on current conditions as well as certain premises and assumptions. In fact, changes in assumptions and prevailing conditions as well as other developments, along with a wide range of other factors may lead to outcomes that differ substantially from those presented in this document. For these reasons, the Company requests that all parties concerned refrain from relying exclusively on these outlooks when making investment and other decisions. 8

9 Consolidated Balance Sheets End of 9/01 End of 3/01 (difference) (A) (B) (A)-(B) ASSETS Current assets: Cash and deposits in banks 32,844 28,844 4,000 Notes receivable and accounts receivable 82, ,783 (27,713) Receivable for completed construction work 17,630 19,021 (1,391) Negotiable securities 44,607 35,757 8,850 Inventories 80,753 89,612 (8,859) Deferred tax assets 7,336 7, Other current assets 6,202 6, Total current assets 271, ,211 (24,769) Fixed assets: Tangible fixed assets 186, ,427 (10,954) Intangible fixed assets 2,675 2,903 (228) Other 42,226 40,428 1,798 Total fixed assets 231, ,758 (9,384) Total assets 502, ,969 (34,153) LIABILITIES, MINORITY INTERESTS and SHAREHOLDERS EQUITY Liabilities: Current Liabilities Accounts payable 37,636 57,141 (19,505) Short-term debt 64,955 55,569 9,386 Bonds redeemable within a year 43,945 43, Accrued income tax 1,553 4,185 (2,632) Deferred tax liabilities Others 40,591 45,403 (4,812) Total current liabilities 188, ,986 (17,050) Fixed liabilities Bonds and long-term debt 80,366 86,222 (5,856) Reserve for retirement benefits 33,020 32, Reserve for directors retirement bonuses 943 1,789 (846) Deferred tax liabilities 1,817 1,958 (141) Others 11,537 11,612 (75) Total fixed liabilities 127, ,024 (6,341) Total Liabilities 316, ,010 (23,391) Minority interests 11,501 11, Shareholders equity: Paid-in capital 26,283 26,283 Capital surplus 36,699 36,699 Appraisal gain(loss) for other marketable securities (180) Consolidated Surplus 114, ,162 (9,987) Other (3,263) (2,602) (661) Total shareholders' equity 174, ,524 (10,828) Total Liabilities, Minority interests and Shareholders' equity 502, ,969 (34,153) 9

10 Comparative Statement of profit and loss 1 st half fiscal 2001 (Sep. 30,01) (A) Ratio to Sales (%) 1 st half Ratio to fiscal 2000 Sales (Sep. 30,00) (%) (B) (A)/(B) (%) Fiscal 2000 (Mar. 31,01) Net sales 204, , ,480 Cost of sales 169, , ,296 Gross profit 35, , ,184 Sales, general and administrative expenses 37, , ,813 Operating Profit and loss (2,259) (1.1) 14, ,371 Other income: Interest and dividends ,735 Investment income based on equity method Other 2,025 5, ,288 Total 2, , ,444 Other deductions: Interest and discount charges 2,034 2, ,334 Other 5,031 4, ,071 Total 7, , ,405 Ordinary profit (loss) (6,585) (3.2) 14, ,410 Extraordinary profit (loss) Retirement benefit trust gain(loss) - (6,548) - (6,548) Gain from the disposal of stocks of affiliated Companies Gains from sale of fixed Write-off Discrepancies as a Result of Changes in Accounting (1,829) (1,979) 92 (3,939) Loss on structural reform (2,965) (392) 756 (392) Expenses for patent lawsuit (491) Total (4,630) (2.3) (8,903) (3.8) - (10,482) Income before income tax (11,215) (5.5) 5, ,928 Corporation and inhabitant taxes 1, , ,348 Adjustment account for corporate tax (4,835) (2.4) (907) (0.4) - 2,914 Minority shareholders income, etc ,003 Net Income (7,823) (3.8) 2, ,663 Statement of Consolidated Surplus 1 st half fiscal 2001 (Sep. 30,01) (A) 1 st half fiscal 2000 (Sep. 30,00) (B) (A)/(B) (%) Fiscal 2000 (Mar.31,01) Consolidated surplus brought forward 124, , ,372 Decrease of other surplus 2,164 2, ,873 Cash dividends 1,786 1, ,572 Directors bonuses Net income of the year under review (7,823) 2,411-9,663 Consolidated surplus carried forward 114, , ,162 10

11 Consolidated Statements of Cash Flows End of 9/01 End of 9/00 End of 3/01 Cash flows from operating activities Net income before income tax (11,215) 5,813 19,928 Depreciation and amortization 11,880 12,336 24,880 Extra ordinary loss on structural reform 2, Retirement benefit trust loss 6,547 6,547 Loss on retirement of fixed assets ,808 Gain on sale of securities (128) (1,357) (5,976) Loss on sale of securities Interest earned and dividends received (671) (943) (1,735) Interest paid 2,034 2,217 4,334 Exchange loss (Increase)decrease in receivables 27,360 7,215 8,693 (Increase)decrease in receivables for completed construction work 1,391 (2,588) (4,866) (Increase)decrease in inventories 8,420 (7,814) (7,149) Increase(decrease)in payables (19,423) 369 (1,317) Other (3,609) 3,372 (897) Sub total 19,598 27,509 45,471 Earnings on interest and dividends 917 1,140 2,011 Interest paid (2,183) (2,303) (4,367) Income tax and other tax paid (3,961) (3,091) (5,311) Net cash provided by operating activities 14,371 23,255 37,804 Cash flows from investment activities Expenditures for acquisition of securities (312) (280) (1,310) Proceeds from sale of securities 3,257 2,192 7,194 Expenditures for acquisition of investment securities (144) (468) (212) Proceeds from sale of investment securities 188 4,926 8,312 Expenditures for acquisition of tangible fixed assets (9,915) (12,654) (25,107) Proceeds from sale of tangible fixed assets 5,255 1,694 3,974 Expenditures for acquisition of intangible fixed assets (379) (293) (741) Loan on long-term debt (133) (122) (298) Withdrawal of long-term debt (Increase) decrease in short-term borrowings (379) Other investment 316 (28) (1,440) Net cash used in investing activities (2,081) (4,805) (8,719) Cash flows from financing activities Increase (decrease) in short-term borrowings 9,566 (453) (6,766) Proceeds from long-term debt 10,734 2,221 2,488 Payments on long-term debt (13,546) (6,283) (9,819) Proceeds from issue of bonds 1,222 2,028 5,256 Expenditures for issue of bonds (3,535) (18,078) (19,386) Dividends paid by parent company Dividends paid to minority stock holders (1,786) (1,786) (3,571) Other financial (91) (79) (163) Net cash provided by (used in) financing activities 2,564 (22,383) (31,914) Effect of exchange rate changes on cash and cash equivalents (328) (210) 681 Net increase (decrease) in cash and cash equivalents 14,526 (4,143) (2,148) Cash and cash equivalents at beginning of year 50,046 52,194 52,194 Cash and cash equivalents at end of year 64,572 48,051 50,046 Listed cash and deposits to consolidated balance sheet at end of year and relation of listed cash and cash equivalents to consolidated statements of cash flows Cash and deposits 32,844 31,040 28,844 Securities (Money Market Fund, etc.) 31,728 17,011 21,202 Cash and cash equivalents at end of year 64,572 48,051 50,046 11

12 Segment Information Year under review (Apr. 1, Sep. 30, 2001) High-Grade Metal Products and Materials Electronics and IT Devices High-Grade Construction Casting Components, Components Plant and for Equipment Automobiles Services and Other Activities Total Eliminated (Net Sales) or Others (Assets) Consolidated Ⅰ.Net sales Sales to customers 68,009 22,101 39,250 42,414 32, , ,472 In-house sales 10,802 6,759 1,434 7,589 1,595 28,179 (28,179) - Total net sales 78,811 28,860 40,684 50,003 34, ,651 (28,179) 204,472 Operating expenses 77,656 32,488 41,550 49,718 33, ,910 (28,179) 206,731 Operating income 1,155 (3,628) (866) (2,259) - (2,259) Ⅱ.Assets Total assets 161,101 57,165 69,801 79,763 57, ,360 77, ,816 Depreciation 4,724 2,301 2,257 1,451 1,049 11, ,880 Capital expenditure 2,286 2,194 1,421 1,612 1,061 8, ,706 (Apr.1, Sep. 30, 2000) Ⅰ.Net sales Sales to customers 76,347 34,531 45,397 42,707 38, , ,301 In-house sales 14,751 9,549 2,635 9,198 2,664 38,797 (38,797) - Total net sales 91,098 44,080 48,032 51,905 40, ,098 (38,797) 237,301 Operating expenses 82,844 42,512 45,037 50,883 39, ,181 (38,797) 222,384 Operating income 8,254 1,568 2,995 1,022 1,078 14,917-14,917 Ⅱ.Assets Total assets 183,163 68,001 73,813 85,108 61, ,429 61, ,329 Depreciation 4,732 2,600 2,433 1,459 1,010 12, ,336 Capital expenditure 5,953 3,101 1,740 1, , ,726 (Apr.1, Mar. 31, 2001) Ⅰ.Net sales Sales to customers 155,024 59,811 87,515 98,640 78, , ,480 In-house sales 27,386 17,190 5,309 19,669 4,726 74,280 (74,280) - Total net sales 182,410 77,001 92, ,309 83, ,760 (74,280) 479,480 Operating expenses 169,261 76,282 88, ,805 80, ,389 (74,280) 454,109 Operating income 13, ,188 4,504 2,811 25,371-25,371 Ⅱ.Assets Total assets 180,697 66,530 76,890 92,342 62, ,791 58, ,969 Depreciation 9,763 5,473 4,832 2,798 1,772 24, ,880 Capital expenditure 11,111 6,218 3,261 2,613 1,484 24, ,893 12

13 Notes: Major Products : High-Grade Metal Products and Materials Electronics and IT Devices High-Grade Casting Components for Automobiles Construction Components, Plant and Equipment High-grade Specialty Steels for: Molds, Dies, Cutting Tool; Automotive parts; Aerospace parts; Nuclear Equipment Parts and Components for: Copying Machines; Office Automation Devices High-grade Electronic Materials for: IC Lead Frames; Shadow Masks; Sputtering Targets Nanocrystalline Soft Magnetic Materials(FINEMET TM ) Mill Rolls for: Steel, Nonferrous, Nonmetal Rolling Injection Molding Machine parts, Fine Ceramics, Structural and Functional Steel Frame Joints for Construction Equipment, Cutting Tool(Hitachi Tool Engineering, Ltd.) Ferrite and Rare Earth Magnets Magnetic Appliances: Electrophotographic Copying Machine Parts; Linear Motors; Dental Attachments Information and Communication Devices:Isolators; Multilayered Devices for Communication Systems; Piezoelectric Ceramics, Ferrite Cores, EMC Components, Magnetic Recording Heads for: High-Capacity FDDs Magnetic Encoders, Ceramic Scintillators, Optical Switches Ductile and Malleable Iron Castings, Heat-Resistant Castings and Iron Castings(HERCUNITE TM ) Aluminum wheels, Dies, Forging(Seitan Inc.) Malleable Iron Pipe Fittings, Polyethylene Electrofusion Fitting Systems Stainless Steel Piping Components: Flexible Connectors(SOFLEX TM ) Water-Cooling Equipment for Factory Facilities(Chilled Towers) Precision Mass Flow Control Devices for Semiconductor Manufacturing Equipment: Mass Flow Controllers; Metal Diaphragm Valves Enviromental Protection Equipment:Wastewater Treatment,; Sludge Treatment; Incineration; Soil Remediation Industrial Equipment: Silo Plants; Feed Plants Floor Tile Systems and Chains(Hitachi Metals Techno, Ltd.) Sales results by location Year under review (Apr. 1, Sep. 30, 2001) Japan North America Asia Other Total 13 Eliminated or Others Consolidated Ⅰ. Net sales and operating income Sales to customers 156,661 32,996 9,374 5, , ,472 In-house sales 13, , ,622 (17,622) - Total net sales 170,158 33,980 11,551 6, ,094 (17,622) 204,472 Operating expenses 173,929 32,688 11,611 6, ,353 (17,622) 206,731 Operating income (3,771) 1,292 (60) 280 (2,259) - (2,259) Ⅱ.Assets 349,471 48,571 20,234 5, ,674 79, ,816 (Apr.1, Sep. 30, 2000) Ⅰ. Net sales and operating income Sales to customers 185,345 35,991 10,217 5, , ,301 In-house sales 22,996 1,113 4,385 1,443 29,937 (29,937) - Total net sales 208,341 37,104 14,602 7, ,238 (29,937) 237,301 Operating expenses 196,862 34,726 13,758 6, ,321 (29,937) 222,384 Operating income 11,479 2, ,917-14,917 Ⅱ.Assets 398,275 49,095 16,425 5, ,461 63, ,329 (Apr.1, Mar. 31, 2001) Ⅰ. Net sales and operating income Sales to customers 374,607 73,984 19,577 11, , ,480 In-house sales 41,490 2,022 7,800 2,617 53,929 (53,929) - Total net sales 416,097 76,006 27,377 13, ,409 (53,929) 479,480 Operating expenses 397,052 71,340 26,051 13, ,038 (53,929) 454,109 Operating income 19,045 4,666 1, ,371-25,371 Ⅱ.Assets 392,355 56,851 22,231 5, ,959 60, ,969

14 Overseas sales Year under review (Apr. 1, Sep. 30, 2001) North America Asia Other Total Overseas sales 30,614 21,330 9,291 61,235 Consolidated sales 204,472 Overseas sales as a share of consolidated sales 15.0% 10.4% 4.5% 29.9% (Apr.1, Sep.30, 2000) Overseas sales 31,613 28,619 11,277 71,509 Consolidated sales 237,301 Overseas sales as a share of consolidated sales 13.3% 12.1% 4.7% 30.1% (Apr.1, Mar. 31, 2001) Overseas sales 66,646 53,525 20, ,003 Consolidated sales 479,480 Overseas sales as a share of consolidated sales 13.9% 11.2% 4.3% 29.4% Note: Overseas sales represent sales made by the parent company and its consolidated subsidiaries in countries or regions other than Japan. 14

15 The Situation of Marketable securities and Derivatives Transactions 1.Securities Balance sheet value End of 9/01 End of 3/01 Market Valuation Balance price profit/loss sheet value Market price Valuation profit/loss Bond for maturity: Government bonds Municipal bonds Corporate Bonds 5,204 5,204 5,400 5,400 Other Total 5,204 5,204 5,400 5,400 Other securities: Stocks 2,021 3,321 1,300 2,077 3,717 1,640 Bonds Government bonds Municipal bonds Corporate Bonds 1,765 1, ,612 4, Other Other 33,672 33,654 (18) 23,539 23,525 (14) Total 37,458 38,740 1,282 30,228 31,872 1, Difference between market price and contract value of derivatives transactions End of 9/01 End of 3/01 Contract Market Appraisal Contract Market value price gain/loss value price Appraisal gain/loss Exchange contract transactions: Exchange contracts U.S. dollars (buy) U.S. dollars (sell) 1,783 1,783 0 Currency swap transactions: Coupon swap 5, , Interest-rate swaps Receipts fixed payments variable 32, , Receipts variable payments fixed 43,585 (618) (618) 43,697 (807) (807) Total 82,899 2, ,

16 Hitachi Metals, Ltd. (Oct. 31, 2001) Code: Shibaura 1 chome, Minato-ku, Tokyo Non-consolidated Financial Report for the 6-month period ended September 30, 2001 Contact: Shigeru Ishigay, General Manager Corporate Communications Department Tel: Stock Exchange where listed (section): Tokyo(First), Osaka(First) 1. Performance over the year, April 1, 2001 to September 30,2001 (Figures are rounded off to the nearest million yen) (1) Operating results 9/01(interim) 9/00(interim) (Change) 3/01 Net Sales ( million) 116, ,654 (22.9%) 297,733 Operating income ( million) (6,232) 6,627-7,213 Ordinary income ( million) (7,751) 9,048-15,490 Net income ( million) (6,614) 558-3,605 Net income per share ( ) (18.52) Diluted net income per share ( ) Notes: 1. Average number of shares outstanding (9/01: 357,168,687 9/00: 357,168,687 3/01: 357,168,687) 2. Changes have been made in accounting policy. (2) Dividend 9/01(interim) 3/01 9/00(interim) Interim dividend per share ( ) Annual dividend per share ( ) (3) Financial standing 9/01(interim) 9/00(interim) 3/01 Total assets ( million) 324, , ,001 Shareholders equity ( million) 134, , ,149 Shareholders equity ratio(%) 41.5% 41.4% 41.5% Shareholders equity per share ( ) Notes: Number of shares outstanding at end of year (9/01: 357,168,687 9/00: 357,168,687 3/01: 357,168,687) 2. Forecasts of results for the term, April 1, 2001 to March 31, 2002 At yearend Net sales ( million) 245,000 Ordinary income ( million) (15,300) Net income ( million ) (18,600) Interim dividends per share ( ) - (Dividends at end of period per share) ( ) 5.00 Annual dividends per share ( ) 5.00 Reference: Expected net income per share (full-year basis) ( 52.08) 16

17 Sales Results and Orders Received by Operating Division 1. Sales results (Ratio by previous term) 1 st half 2001(A) 2 nd half 2000(B) 1 st half 2000(C) (A)/(B) (A)/(C) High-Grade Metal Products and Materials 52,433 62,265 66,938 84% 78% Electronics and IT Devices 16,823 22,198 26,926 76% 62% High-Grade Casting Components for Automobiles 23,968 28,795 33,668 83% 71% Contruction Components, Plant and Equipment 23,630 32,819 24,121 72% 98% Total 116, , ,654 80% 77% 2. Export Sales results (Ratio by previous term) 1 st half 2001(A) 2 nd half 2000(B) 1 st half 2000(C) (A)/(B) (A)/(C) High-Grade Metal Products and Materials 12,918 14,644 18,152 88% 71% Electronics and IT Devices 6,933 9,817 13,497 71% 51% High-Grade Casting Components for Automobiles 1,546 3,518 5,562 44% 28% Contruction Components, Plant and Equipment % 83% Total 21,865 28,479 37,775 77% 58% 3. Orders received (Ratio by previous term) 1 st half 2001(A) 2 nd half 2000(B) 1 st half 2000(C) (A)/(B) (A)/(C) Orders received 117, , ,581 80% 76% of which Export 19,303 26,184 34,851 74% 55% of which Plant & Components for Construction 29,823 36,125 28,382 83% 105% Orders backlogs 61,065 60,700 60, % 100% 17

18 Comparative Balance Sheets ASSETS End of 9/01 (A) End of 3/01 (B) Change (A)-(B) Current assets: Cash and deposits in banks 11,526 8,418 3,107 Notes receivable 4,413 7,276 (2,862) Accounts receivable 32,696 53,702 (21,006) Receivables for completed construction work 17,389 19,195 (1,805) Negotiable securities 36,737 28,794 7,942 Products 6,547 6, Semi-products 1,566 2,112 (546) Materials 12,756 13,546 (790) Work in process 20,146 25,418 (5,271) Deferred tax assets 3,328 3,382 (54) Other current assets 10,121 10,572 (451) Allowance for doubtful accounts (128) (300) 172 Total current assets 157, ,217 (21,116) Fixed assets: Tangible fixed assets Buildings 22,221 22,710 (488) Machinery 43,085 45,994 (2,908) Land 20,748 20,758 (9) Construction in progress 3,505 4,081 (575) Other 4,923 5,030 (107) Total tangible fixed assets 94,484 98,575 (4,090) Intangible fixed assets Investments, etc. Investment securities 1,219 1,571 (352) Stock of affiliated company 31,048 29,985 1,062 Long-term loans 12,946 13,093 (146) Deferred tax assets 15,896 11,208 4,688 Other 11,290 11,790 (500) Allowance for doubtful accounts (171) (151) (20) Total investment, etc 72,230 67,498 4,731 Total fixed assets 167, , Total assets 324, ,001 (20,324) 18

19 Comparative Balance Sheets LIABILITIES and SHAREHOLDERS EQUITY Liabilities: End of 9/01 (A) End of 3/01 (B) Change (A)-(B) Current Liabilities Accounts payable 24,090 32,163 (8,073) Short-term debt 21,693 20, Bonds redeemable within a year 33,859 33,859 - Accrued payables 5,625 7,312 (1,687) Accrued income tax (32) Expenses payable 7,042 7,372 (329) Advances received 5,955 7,130 (1,175) Other 4,020 3, Total current liabilities 102, ,713 (10,394) Fixed liabilities Bonds 49,900 49,900 - Convertible Bonds Long-term debt 10,516 11,578 (1,062) Reserve for retirement benefits 26,564 26, Reserve for directors retirement bonuses (520) Others (229) Total fixed liabilities 87,726 89,138 (1,412) Total Liabilities 190, ,851 (11,806) Shareholders equity: Paid-in capital 26,283 26,283 - Capital surplus 36,699 36,699 - Profit reserve 6,570 6,570 - Special depreciation reserve (32) Special reserve 68,580 68,580 - Retained earnings at end of year (4,535) 3,832 (8,368) (Net income for the year) (6,614) 3,605 (10,219) Appraisal gain(loss) for other marketable securities (117) Total shareholders' equity 134, ,149 (8,517) Total Liabilities and shareholders' equity 324, ,001 (20,324) 19

20 Comparative Statement of profit and loss 1 st half Ratio 1 st half Ratio (A) Ratio fiscal 2000 fiscal 2001 to fiscal 2000 to / to (Mar.31,01) (Sep.30,01) Sales (Sep.30,00) Sales (B) Sales (A) (%) (B) (%) (%) (%) Net sales 116, , , Cost of sales 106, , , Gross profit 10, , , Selling, general and administrative expenses 17, , , Operating Profit and loss (6,232) (5.3) 6, , Other income: Interest and dividends 2,110 1, ,283 Other 1,446 4, ,104 Total other income 3, , , Other deductions: Interest payment 1, ,811 Other 4,028 3, ,300 Total other deductions 5, , , Ordinary profit (loss) (7,751) (6.6) 9, , Extraordinary profit (loss) Gain from the disposal of subsidiaries Gains from sale of fixed assets Retirement benefit trust gain 4,479 4,479 Loss on structural reform (1,980) (392) 505 (392) Write-off Discrepancies as a Result of Changes in Accounting (1,457) (1,457) 100 (2,914) Retirement benefit trust loss (11,027) (11,027) Loss on liquidation of affiliated company (90) Total (3,267) (2.8) (8,370) (5.5) 39 (9,100) (3.1) Income before income tax (11,018) (9.4) , Corporation, inhabitant and enterprise taxes Adjustment account for corporate tax (4,550) (78) 2,509 Net income (Loss) (6,614) (5.7) ,