Sumitomo Heavy Industries, Ltd.
CONSOLIDATED FINANCIAL REPORTFor the Full Year Ended March 31, 2011

All financial information has been prepared in accordance with generally accepted accounting principles in Japan. This document
has been translated from the Japanese original as a guide to non-Japanese investors, and contains forward-looking statementsthat are based on management’s estimates, assumptions, and projections at the time of publication. A number of factors could
cause actual results to differ materially from expectations. Amounts shown in this financial statement have been rounded to thenearest million yen.

Consolidated Results for the Full Year
Ended March 31, 2011

Summary of Consolidated Financial Results
For the Full Year Ended March 31, 2011
Presented May 9, 2011

Sumitomo Heavy Industries, Ltd.
Listed exchanges

Tokyo Stock Exchange, Osaka Securities Exchange

Stock code

6302

Head officeTokyo

President

Yoshinobu Nakamura

URL

www.shi.co.jp

Inquiries

Hideo Oshima
General Manager, Corporate Communications Dept.

Telephone+81 3 6737 2333

Scheduled date of ordinary shareholders’meeting
Scheduled date of payment of cash
dividends
Scheduled date of securities report filing
Availability of supplementary explanatory
materials for financial statement
Holding of meeting to explain financial
statement

June 29, 2011
June 30, 2011
June 29, 2011
None
Yes

1. FY 2010 Consolidated Results (April 1, 2010 to March 31, 2011)(1) Business Results(Units: millions of yen)
Current Full Term
April 1, 2010
to March 31, 2011

Previous Full Term
April 1, 2009
to March 31, 2010

% change% change

Net sales

548,015

6.2

516,165(19.7)

Operating income

45,80362.1

28,254(50.4)

Ordinary income

44,25368.1

26,333(47.6)Net income

27,926110.3

13,280

(2.7)

45.87

22.01

Fully diluted net income per share----

Return on equity (ROE, %)

10.9

5.6

Return on assets (%)

7.2

4.2

Ordinary income to net sales (%)

8.4

5.5

Net income per share (yen)Note: Comprehensive Income
Fiscal year ended March 31, 2011: 21,601 million yen (--%)
Fiscal year ended March 31, 2010: -- million yen (--%)
Reference: Equity method investment profit and loss:
Fiscal year ended March 31, 2011: (447 million yen)
Fiscal year ended March 31, 2010: (22 million yen)1Consolidated Results for the Full Year
Ended March 31, 2011

(2) Financial Position(Units: millions of yen)
End of Current
Full YearAs of March 31, 2011

End of Previous
Full YearAs of March 31, 2010

Total assets

626,829

610,087

Net assets

269,380

254,153

42.6

40.0

435.10404.73Equity ratio (%)
Net assets per share (yen)Reference: Equity:
Fiscal year ended March 31, 2011: 267,326 million yen
Fiscal year ended March 31, 2010: 244,221 million yen(3) Cash Flows(Units: millions of yen)
Current Full Year
April 1, 2010 toMarch 31, 2011

Previous Full Year
April 1, 2009 to
March 31, 2010

Cash flows from operating activities

36,521

57,513

Cash flows from investing activities(23,513)(13,954)

Cash flows from financing activities(22,020)(26,686)

Cash and cash equivalents at end of period

51,70061,452

2. Dividends(Units: yen)
Year Ended March 31,
2010

Year Ended March 31,
2011

Year Ending March 31,
2012 (forecast)

Annual dividends per share
--

--

--

Second quarter

0.00

0.00

4.00

Third quarter

--

--

--

End of term

4.00

8.00

6.00

Annual dividends

4.00

8.00

10.00

Total dividends (millions of yen)

2,414

4,915

Payout ratio (consolidated, %)

18.2

17.4

Net assets dividend yield (consolidated, %)

1.0

1.9

First quarter

2

20.5

Consolidated Results for the Full Year
Ended March 31, 2011

3. FY 2011 Consolidated Forecasts (April 1, 2011 to March 31, 2012)(Units: millions of yen)
Second Quarter (Cumulative)
April 1, 2010 to Sept. 31, 2011

Full Year
April 1, 2011 to March 31, 2012

Net sales

294,000% change
16.7

630,000% change
15.0

Operating income

18,50013.5

54,00017.9

Ordinary income

16,50011.4

50,50014.1

Net income

9,000

13.6

30,000

7.4

Projected net income per share (yen)

14.65

48.83

4. Additional Notes(1) Transfers of important subsidiaries during the fiscal period (moves of specific subsidiaries due to change in scope of
consolidation):
None
Newly consolidated: -Excluded from consolidation: -(2) Changes in principles, procedures, and presentation of accounting treatment(i) Changes resulting from revisions to accounting standards, etc.:

Yes(ii) Changes other than (i):None(3) Number of shares issued (common shares)(i) Number of shares issued at end of fiscal period (including treasury stock):
As of March 31, 2011
As of March 31, 2010

614,527,405 shares
605,726,394 shares(ii) Number of treasury shares at end of fiscal period:
As of March 31, 2011
As of March 31, 2010

122,181 shares
2,315,778 shares(iii) Average number of shares during fiscal period:
As of March 31, 2011
As of March 31, 2010

608,820,423 shares
603,438,552 shares

3

Consolidated Results for the Full Year
Ended March 31, 2011

Supplementary Materials – Table of Contents

I.

Results of Operations.............................................................................................................................. 5
1. Analysis of Operating Results ................................................................................................................. 5
2. Analysis of Financial Condition................................................................................................................ 8
3. Basic Policy on Earnings Appropriation and Dividend for the Consolidated Fiscal Year Under Review
as well as the Current Fiscal Year Ending March 31, 2012..................................................................... 9

II. Status of the Business Group............................................................................................................... 10
III. Management Policies............................................................................................................................. 12
1. Basic Management Policy ..................................................................................................................... 12
2. Target Management Benchmarks.......................................................................................................... 12
3. Medium- to Long-Term Management Strategy ...................................................................................... 12
4. Action Items for the Group..................................................................................................................... 12
IV. Consolidated Financial Statements ........................................................................................................ 15
1. Consolidated Balance Sheets ................................................................................................................. 15
2. Consolidated Income Statements and Consolidated Statement of Comprehensive Income.................. 17
3. Consolidated Statements of Changes to Stockholders' Equity ............................................................... 20
4. Consolidated Cash Flows Statement ...................................................................................................... 24
5. Significant Events or Conditions that Question the Premise of a Going Concern................................. 25
6. Significant Items Forming the Basis for the Preparation of the Consolidated Financial Statements .... 25
7. Revisions to Significant Items Forming the Basis for the Preparation of the Consolidated Financial
Statements ............................................................................................................................................. 26
8. Additional Information ............................................................................................................................ 26
9. Items of Special Note Concerning the Consolidated Financial Statements .......................................... 26(Information Regarding Business Combinations) .................................................................................... 27(Segment Information) ............................................................................................................................. 32(Per Share Information)............................................................................................................................ 35(Subsequent Events of Significant Importance)....................................................................................... 35
10. Orders Received, Sales, and Balance of Orders Received, by Segment ............................................ 364

Consolidated Results for the Full Year
Ended March 31, 2011

I. Results of Operations
1. Analysis of Operating Results(1) Summary of Economic Climate during the Consolidated Fiscal Year
During the consolidated fiscal year under review, tough conditions in the overall Japanese economy continued despite apick-up in certain areas such as the economic boost provided by the impact of government measures and the increase inexports to emerging markets. In addition, concerns regarding the future impact of the Tohoku Region Earthquake that
occurred in March 2011 are weighing down the domestic economy. On the other hand, overseas markets as a whole areseen to be on a recovering trend with the continued strengths of emerging markets, most notably in China, as well as thegentle uptick in the economic forecast of other developed markets such as Europe and the United States that havestruggled with financial instability and historic unemployment rates, respectively.
With this business environment as a backdrop, the Sumitomo Heavy Industries Group (hereinafter, “the Group”) actively
operated a business model that responded to changes in the economic environment and took measures to not only
aggressively cut costs, but also accelerate its global expansion with a focus on emerging markets such as China. As aresult, for the full consolidated fiscal year under review, the Group was able to record growth over the prior fiscal year in
all metrics including orders, net sales, operating income, ordinary income and net income. Moreover, all segments of theGroup posted a profit for the full fiscal year.
With the outlook calling for sustained economic growth in emerging markets, the Group pulled back on making
non-essential capital investments in Japan and made focused investments and expanded its footprint in emerging areas
such as China, Indonesia and Brazil. Several of the major strategies in this initiative that were introduced during theconsolidated fiscal year under review are outlined below:(i)

Responding to Changes in the Business Environment

Emerging markets continue to exhibit strong sustainable growth of their economies while even developed markets suchas Europe, the United States and Japan are showing signs of recovery. Nevertheless, the unpredictable future outlook of
the global economy means that the Group needs to be able to respond to any type of change in the external market
environment. With this in mind, the Group has continued to focus on controlling fixed costs, reducing expenses andrealigning business units, while at the same time, aggressively and steadily introducing measures that will lead to future
growth. One example of these measures is the focused investments that the Group has made into geographical areasand products where growth is anticipated.
(ii) Achieve Global Growth
The Group has been working to strengthen its overseas network over the past years with the goal to continue expanding
its business globally. During the consolidated fiscal year under review, the Group worked to improve and enhance its
global manufacturing platform through such efforts as increasing the capacity of the Tangshan plant that manufactures
gearboxes and hydraulic excavators, and commencing construction on new plants for hydraulic excavators andgearboxes in Indonesia and Brazil, respectively. Further, the Group has been working to integrate the local operations in
China into an area management company format, with the aim to establish a framework to strengthen overallmanagement capabilities and increase the speed of decision-making in the country. The Group also decided to establish
Sumitomo Heavy Industries (China) Limited as an Investment Firm in China to unify fund management activities of local
Group companies and to support the funding needs of capital investments that are made in the country.
Also in the consolidated fiscal year under review, the Group delisted Nihon Spindle Manufacturing Co., Ltd. from theTokyo and Osaka stock exchanges and converted the company into a wholly-owned subsidiary. Further, the Group
worked to maximize internal synergies by engaging its overseas offices and global network.
Finally, in the Group’s core business area of power transmission products, the acquisition of Belgium-based gear box
maker, Hansen Industrial Transmissions NV allowed it to expand its footprint in the areas of Europe, South Africa andAustralasia which were designated as priority regions in recent times.

5

Consolidated Results for the Full Year
Ended March 31, 2011(iii) Growth Through Innovation
While creating new products through innovation-based development, efforts to strengthen internal development, design,
manufacturing, and sales functions continued to be implemented during the consolidated fiscal year under review. These
activities were carried with the purpose to promote the development of first-class products, a fundamental strategy of theGroup.
From the standpoint of product innovation to create first-class products, the Group’s proton therapy system received highpraise from customers in the field of advanced medical devices. In addition, with respect to introducing innovation intobusiness processes, a new organizational structure that integrates the overseeing role of human resources,
administration, finance, and information system functions was established to increase the efficiency and advance theperformance of the Group’s head office functions and optimize the overall organization.
(iv) Formulation of the New Medium-Term Management Plan Entitled “Innovation 21”
The financial objectives outlined in the previous medium-term management entitled “Global 21” were not attained mainly
due to the impact of the global financial crisis. However, the focus on the fundamental policies of “Globalization” and“Innovation” in the plan was viewed to be appropriate at the time. In the new medium-term management plan entitled“Innovation 21”, the Group plans to continue focusing on the fundamental policies of the “Global 21” Medium-Term
Management Plan while also working to advance them into the future. In the new plan, the Group has formulated threemanagement measures, which are 1. Enhance and Effectively Utilize the Group’s Global Network, 2. Develop andMarket Innovative Products (Product Innovation), and 3. Introduce Innovation into Manufacturing and Sales Functions toIncrease Productivity as well as into Business Execution Functions (Process Innovation). Execution of the plan hascommenced based on these three key measures.
(v) Thorough Implementation of Compliance Measures
At the onset of the consolidated fiscal year under review, the President and CEO himself sent a strong message to all
employees stating that, “compliance comes before everything”. This re-emphasized the importance of this topic for theGroup.
The Group acted on this message and worked to globalize its compliance efforts during the consolidated fiscal year
under review. For example, to strengthen compliance in overseas business activities where the Group is expanding, newtraining programs were introduced for employees posted to overseas positions. Moreover, training on anti-monopoly laws
was carried out by the management teams of Group companies located in the United States and Germany.
Through the efforts outlined above, the fiscal year under review saw orders increase 33% from the previous fiscal year tofinish at JPY534.9 billion and net sales increase by 6% from the previous fiscal year to finish at JPY548.0 billion on aconsolidated basis.
From the standpoint of profit and loss, the fiscal year under review saw operating income increase by 62% from theprevious fiscal year to finish at JPY45.8 billion on a consolidated basis, primarily through benefits gained from anincrease in net sales as well as cost-cutting measures. Ordinary income also increased by 68% from the previous fiscal
year to finish at JPY44.3 billion on a consolidated basis while net income increased by 110% from the previous fiscal
year to finish at JPY27.9 billion on a consolidated basis. Finally, after-tax ROIC* was 7.8%.
On a non-consolidated basis, the fiscal year under review saw orders finish at JPY173.9 billion and sales finish at
JPY213.2 billion. Further, the Group posted a non-consolidated operating income of JPY1.6 billion, a non-consolidated
ordinary income of JPY8.0 billion and a non-consolidated net income of JPY8.7 billion for the fiscal year under review.
*The ROIC (Return on Invested Capital) for the Group is calculated based on the following numerical formula:(Operating Income + Interest Income / Dividend Income) x 55% (1 – Effective Tax Rate)
ROIC=(Average Shareholder Equity for the Fiscal Year) + (Average Interest-Bearing Liabilities for the Fiscal Year)

6

Consolidated Results for the Full Year
Ended March 31, 2011

(2) Group Results by Segment(i)

Machinery Components

In this segment, there was marked recovery in emerging markets, most notably in China. Furthermore, the demand forfactory automation equipment such as machine tools and industrial robots was strong. As a result, orders and sales bothincreased compared to the previous fiscal year.
As a result, the segment as a whole saw orders increase by 23% from the previous fiscal year to finish at JPY75.8 billion,
and sales increase by 8% from the previous fiscal year to finish at JPY74.6 billion. In addition, the segment posted an
operating income of JPY4.9 billion, an increase of 466% from the previous fiscal year.
(ii) Precision Machinery
In the plastics machinery business, the recovery of the markets in East Asia, most notably in China, resulted in an
increase in both orders and sales as compared to the previous fiscal year.
With respect to other businesses in this segment, medical devices performed strongly while the performance of devices
designed for both the semiconductor and electronics industries showed signs of recovery. Consequently the segment, as
a whole, achieved growth in both orders and sales as compared to the previous fiscal year.
More specifically, the segment saw orders increase by 42% from the previous fiscal year to finish at JPY150.5 billion,
and sales increase by 25% from the previous fiscal year to finish at JPY131.9 billion. In addition, the segment posted an
operating income of JPY8.3 billion as compared to an operating loss of JPY2.6 billion in the previous fiscal year.
(iii) Construction Machinery
The hydraulic excavator business saw an increase in both orders and sales as the scale of the business expanded in
China where the market for the product line remained strong while portions of the European markets, where inventory
adjustment efforts are taking shape, recovered.
However, the crane business saw a decline in both orders and sales as the economic recovery in the North American
market did not materialize as quickly as expected and demand continued to trend negatively.
As a result, the segment as a whole saw orders increase by 41% from the previous fiscal year to finish at JPY141.2
billion and sales increase by 27% from the previous fiscal year to finish at JPY130.8 billion. Further, the segment posted
an operating income of JPY5.3 billion, an increase of 827% from the previous fiscal year.
(iv) Industrial Machinery
The turbine and pump business saw an increase in orders, namely in biomass-fueled power generating turbines, as
capital investments in the resources and energy sectors in Asia showed signs of recovery. Unfortunately, sales fell
mainly due to the low number of orders received in the previous fiscal year.
The material handling machinery business saw strong performance from products designed for the electricity generating
industry. On the other hand, sales in this sector fell mainly due to the low number of orders received in the previous fiscal
year.
As a result, the segment as a whole saw orders increase by 22% from the previous fiscal year to finish at JPY73.2 billion,
and sales fall by 22% to JPY66.5 billion. Further, the segment posted an operating income of JPY10.3 billion, a decreaseof 28% from the previous fiscal year.
(v) Ships
The ship business has been slow to recover compared to other industries. Amid this type of business environment, thesegment received two new ship orders compared to no new orders received in the previous fiscal year, while eightvessels were handed over as compared to nine in the previous fiscal year.
As a result, the segment as a whole saw orders increase by 240% from the previous fiscal year to finish at JPY14.6
billion, and sales decrease by 5% to JPY59.5 billion. Further, the segment posted an operating income of JPY9.9 billion,
an increase of 49% from the previous fiscal year.

7Consolidated Results for the Full Year
Ended March 31, 2011(vi) Environmental Facilities & Plants
The energy plant business saw a decline in both orders and sales as compared to the previous fiscal year as theindustrial power boiler market remained weak.
In the water treatment plant business, the recovery of the water treatment facilities sector resulted in an increase in bothorders and sales as compared to the previous fiscal year.
As a result, the segment as a whole saw orders increase by 13% from the previous fiscal year to finish at JPY70.6 billion,
and sales decrease by 7% from the previous fiscal year to JPY76.1 billion. Further, the segment posted an operating
income of JPY5.6 billion, a decrease of 22% from the previous fiscal year.
(3) Outlook for the Upcoming Fiscal Year (Ending March 31, 2012)
The economic environment that forms the backdrop of the Group’s business remains uncertain. On one hand, theeconomies of emerging markets such as China are anticipated to maintain its positive momentum while at the same time
the overall global economy is on a gentle path to recovery. On the other hand, the potential impact of the Tohoku Region
Earthquake that occurred in March of this year is a cause for concern for the economy.
In this type of environment, the Group plans to focus on implementing the principal strategies set forth in the new
Innovation 21 Medium-Term Management Plan to ensure that global expansion efforts are accelerated and innovation is
introduced on both the product and process level.
As of the date this document is published, the outlook for the upcoming fiscal year ending March 31, 2012 is as follows:
Consolidated Results

AmountAs Compared to 2010 Fiscal Year

Sales

JPY630.0 billion+15.0%

Operating income

JPY54.0 billion+17.9%

Ordinary income

JPY50.5 billion+14.1%Net income

JPY30.0 billion+7.4%(The above figures are calculated at an exchange rate of JPY85 against the dollar.)* The above forecast concerning future financial results is believed to be reasonable based on information available atthe time of publication. Actual financial results may vary from the above forecast due to a variety of factors.

2. Analysis of Financial Condition(i)

Condition of Assets, Liabilities, and Net Assets

Total assets at the end of the consolidated fiscal year under review stood at JPY626.8 billion, an increase of JPY16.7
billion from the end of previous fiscal year. This was mainly due to increases of JPY23.4 billion in accounts and notes
receivables, and JPY7.6 billion in inventory assets offsetting decreases of JPY10.0 billion in cash and deposits, JPY2.3
billion in tangible fixed assets, and JPY6.1 billion in investments and other assets.
Total liabilities at the end of the consolidated fiscal year under review stood at JPY357.4 billion, an increase of JPY1.5
billion from the end of the previous fiscal year. This was mainly due to a decrease of JPY19.8 billion in outstanding
interest-bearing liabilities being outweighed by an increase of JPY23.9 billion in accounts and notes payable. The ratio ofoutstanding interest-bearing debt to total assets improved by 3.5 points to end at 10.8% for the consolidated fiscal year
as short-term borrowings were repaid.
Net assets at the end of the consolidated fiscal year under review stood at JPY269.4 billion, an increase of JPY15.2
billion from the end of the previous fiscal year. As a result of converting Nihon Spindle Manufacturing Co., Ltd. into awholly-owned subsidiary as well as other changes, minority shareholders’ interest fell by JPY7.9 billion, while additional
paid-in capital increased by JPY3.3 billion. In addition, decreases of JPY1.0 billion in other marketable securities and
JPY5.8 billion in the foreign currency translation adjustment were offset by a JPY26.1 billion increase in retained
earnings.
As a result, the shareholders’ equity ratio for the consolidated fiscal year under review improved by 2.6 points from theend of the previous fiscal year to finish at 42.6%.

8

Consolidated Results for the Full Year
Ended March 31, 2011(ii) Cash Flow Conditions
The cash and cash equivalent balance at the end of the consolidated fiscal year under review stood at JPY51.7 billion, adecrease of JPY9.8 billion from the previous fiscal year. The cash flow conditions in each area as well as the factors
behind any changes are outlined below:(Cash Flow from Operating Activities)
Cash flow from operating activities was JPY36.5 billion for the consolidated fiscal year under review, a decrease of
JPY21.0 billion from the previous fiscal year. The reason for this was although accounts payable increased, tradereceivables, inventory assets and the amount paid for corporate taxes also increased.
(Cash Flow from Investing Activities)
Cash flow used for investing activities totaled JPY23.5 billion for the consolidated fiscal year under review, a decrease of
JPY9.6 billion from the previous fiscal year. The main outflow was related to an increase in cash used to acquire theshares of subsidiary companies that resulted in a change in their consolidated status.
(Cash Flow from Financing Activities)
Cash flow used for financing activities was JPY22.0 billion for the consolidated fiscal year under review, a decrease of
JPY4.7 billion from the previous fiscal year. The main purpose of using the funds was to repay interest-bearing debt.
The following table summarizes trends in the cash-flow index of the Group:
FY2006

FY2007

FY2008FY2009FY2010Shareholders’ equity ratio

34.1

34.9

34.8

40.0

42.6

Shareholders’ equity ratio on amarket price basis

118.0

57.3

29.8

55.7

53.2

Redemption period (years)

1.6

3.1

3.2

1.5

1.9

Interest coverage ratio (multiples)

34.1

22.3

21.5

30.8

24.2

Shareholders’ equity ratio = Shareholders’ equity ÷ Total assets
Shareholders’ equity ratio on market price basis = Total market value of shares ÷ Total assets
Redemption period = Outstanding interest-bearing debt ÷ Operating cash flow
Interest coverage ratio = Operating cash flow ÷ Interest expense

3. Basic Policy on Earnings Appropriation and Dividend for the Consolidated Fiscal
Year Under Review as well as the Current Fiscal Year Ending March 31, 2012
The Group’s basic stance on profit sharing is to pay a dividend amount commensurate to the income earned during theperiod, and to keep that amount as high as possible. However, the decision on the actual amount of the dividend is madeafter taking into consideration the sufficient level of retained earnings needed to ensure that the Group is able to sustaina stable business model in the long term.
In regards to dividends for the consolidated fiscal year under review, after considering the aforementioned policy and theGroup’s financial performance, a decision was made to increase the dividend by JPY4 from the previous year to makethe dividend amount JPY8 per share.
For the fiscal year ending March 2012, the Group is forecasting a dividend of JPY10 per share.

9Consolidated Results for the Full Year
Ended March 31, 2011

II. Status of the Business GroupThe main business areas of the Group and the positioning of major Group companies in such areas are outlined below.
A total of 12 companies including Sumitomo Industrias Pesadas do Brasil Ltda., PT. Sumitomo S.H.I. Construction
Machinery Indonesia, and Hansen Industrial Transmissions NV, have been included within the scope of consolidation
during the fiscal year under review. These companies were either newly established or their shares were acquired by theGroup. In addition, one company was excluded from consolidation due to the completion of a merger.

1. Machinery Components
In the area of transmission power equipment, both Sumitomo Heavy Industries and Seisa Gear, Ltd. are responsible forthe overall manufacturing and distribution of such products. On a global basis, the responsibility for manufacturing anddistribution of these products falls to Sumitomo Machinery Corporation of America in North America; Sumitomo (SHI)
Cyclo Drive Germany GmbH in Europe; and Sumitomo (SHI) Cyclo Drive Asia Pacific Pte., Ltd. in Southeast Asia. In
China, Sumitomo Heavy Industries (Tangshan) Ltd. carries out manufacturing activities while Sumitomo (SHI) Cyclo
Drive China, Ltd. carries out manufacturing activities and is also responsible for the overall distribution of products in the
country. Distribution of the products in the Japan market is the responsibility of Sumitomo Heavy Industries PTC Sales
Co., Ltd.

2. Precision Machinery
In the area of plastics machinery equipment, Sumitomo Heavy Industries is responsible for the overall manufacturing,
distribution and after-sale service functions of the product line. Globally, SHI Plastics Machinery Inc. of America is
responsible for the overall manufacturing and distribution of these products in North America, and Sumitomo (SHI)
Demag Plastics Machinery GmbH, is responsible for overall operations in Europe.
Sumitomo Heavy Industries is responsible for overall manufacturing and distribution functions in the areas of laser
processing systems, cryocoolers, precision positioning equipment, ion accelerators, Plasma coating system for FPDs,
precision forgings, control components, and defense equipment.
In the area of semiconductor production equipment, both Sumitomo Heavy Industries and SEN Corporation are
responsible for overall manufacturing and distribution.
Finally, Sumitomo NACCO Materials Handling Co., Ltd. is responsible for the overall manufacturing and distribution of
forklift equipment in this segment.

3. Construction Machinery
In the area of hydraulic excavators and road construction machinery, Sumitomo (S.H.I.) Construction Machinery Co., Ltd.
is responsible for the manufacturing and distribution of such products to overseas markets, Sumitomo (S.H.I.)
Construction Machinery (Tangshan) Co., Ltd. is responsible for the manufacturing of such products in China, while
Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd. is responsible for the distribution for such products to thedomestic Japanese market.
In the area of mobile cranes, Hitachi Sumitomo Heavy Industries Construction Crane Co., Ltd. is responsible for overall
development and distribution along with the manufacturing of such products for the Japanese market, while Link-Belt
Construction Equipment Company, L.P., LLLP mainly oversees the overall manufacturing and sales functions of suchproducts in North America.

4. Industrial Machinery
In this segment, Sumitomo Heavy Industries is responsible for the manufacturing and distribution of logistics andhandling systems as well as automated parking systems.
Sumitomo Heavy Industries Techno-Fort Co., Ltd. is responsible for the overall manufacturing and distribution of forging
machines.

10

Consolidated Results for the Full Year
Ended March 31, 2011

Sumitomo Heavy Industries Engineering and Services Co., Ltd. is responsible for the overall manufacturing anddistribution of material handling systems. Further, the same company is also responsible for after-sales service ofmaterial handling systems along with logistics and handling systems.
Finally in this segment, Shin Nippon Machinery Co., Ltd. is responsible for the overall manufacturing and distribution ofindustrial turbines and pumps.

5. Ships
In this segment, shipbuilding activities are carried out by Sumitomo Heavy Industries Marine & Engineering Co., Ltd.
while Sumitomo Heavy Industries is responsible for the distribution of the finished product.

6. Environmental Facilities & Plants
In the areas of boiler systems, industrial waste treatment systems, pulp and paper machinery, and air pollution
prevention equipment, both Sumitomo Heavy Industries and Nihon Spindle Manufacturing Co., Ltd. are responsible foroverall manufacturing and distribution functions.
Sumitomo Heavy Industries Environment Co., Ltd. is responsible for the overall manufacturing and distribution of water
treatment systems.
Further, the manufacturing and distribution of reactor vessels is handled by Sumitomo Heavy Industries and Sumitomo
Heavy Industries Process Equipment Co., Ltd.
Finally, Izumi Food Machinery Co., Ltd. is responsible for the overall manufacturing and distribution of food machinery.

11

Consolidated Results for the Full Year
Ended March 31, 2011

III. Management Policies
1. Basic Management Policy
The Group is guided by the Sumitomo Group corporate philosophy. The two components of the philosophy, namely“the placing of prime importance on conducting business with integrity and sound management” and “not pursuing easy
gains or acting imprudently under any circumstance” forms the basis of the Group’s vision in any environment,
regardless of the era or the state of the economy. The Group rigorously complies with the spirit of the philosophy, andactively pursues structural reforms to the business organization to ensure that it is able to build a strong corporate
culture.
The Group also believes that by focusing on “creating customer value” and thereby earning their long-term trust, it canachieve sustainable growth and increase overall corporate value. Further, succeeding in this task will also lead to theGroup meeting its corporate citizenship responsibilities to its shareholders and employees, and to the surrounding
community.
In order to ensure a highly stable growth trajectory on the global stage, the Group is committed to becoming a“Systematic Knowledge-Creating Company” that is able to sustainably supply customers with first-class products.
Moreover, the Group is actively strengthening its functional efficiencies in the areas of marketing, development, andproduction in pursuit of the ultimate level of workmanship.

2. Target Management Benchmarks
ROIC has been set forth as an important management benchmark for the Sumitomo Heavy Industries Group. The
Group’s goal is to achieve ROIC figures that exceed WACC and maintain levels at 10% or greater on an annual basis.

3. Medium- to Long-Term Management Strategy
The next fiscal year (2011) will mark the beginning of the next medium-term management plan. Unfortunately, the goals
set forth in the current Global 21 Medium-Term Management Plan were not achieved, mainly due to the global economiccrisis that occurred after the plan was formulated. Nevertheless, the Group believes that it correctly featured“Globalization” and “Innovation” in the plan, and as such, it plans to formulate a new plan based on the general principlesof the current plan, while at the same time taking into consideration the various changes in the business environment.

4. Action Items for the GroupThe economic environment that forms the backdrop of the Group’s business remains uncertain. On one hand, exports toemerging markets such as China that are exhibiting sustained economic growth is driving positive performance, while thegentle recovery trend that is being seen in developed markets such as the United States and Europe bodes well for theGroup. On the other hand, the potential for long-term increases in crude oil prices due to political instability in the Middle
East and Africa, rising food and commodity prices, and the resurgence of the European credit crisis are risks that put
downward pressure on performance. On top of all this, the potential slowdown of the Japanese economy as a result of
the impact of the Tohoku Region Earthquake that occurred in March of this year is a cause for concern.
Moreover, global competition among companies attempting to capture the rise in demand from emerging markets is
becoming fiercer as companies based in developed countries that are used to battling each other for market share are
now faced with having to compete with competitors from emerging markets that are advancing rapidly.
In this type of environment, the Group commenced the implementation of its new medium-term management plan
entitled “Innovation 21” as of the beginning of the fiscal year ending March 2012. The plan was formulated with the goalof achieving sales in excess of JPY1 trillion in the long-term. In addition, the plan continues to focus on making the Groupa “Global Sumitomo Heavy Industries”, which was one of the tenets of the previous Global 21 Medium-Term
Management Plan, while at the same time calling for innovation in product development and business processes. By
doing so, the Group is aiming to increase competitiveness and become a “Strong and Powerful Sumitomo Heavy
Industries” that is able to achieve sustainable growth and increase profitability in any type of external environment.

12Consolidated Results for the Full Year
Ended March 31, 2011

(1) The New “Innovation 21” Medium-Term Management Plan
The financial objectives of the new “Innovation 21” Medium-Term Management Plan are to achieve net sales of JPY730
billion and operating income of JPY73 billion by the end of fiscal 2013 (ending March 31, 2014). In order to achieve thesefigures, the Group has formulated three management measures which are as follows:1.

Enhance and Effectively Utilize the Group’s Global Network

2.

Develop and Market Innovative Products (Product Innovation)

3.

Introduce Innovation into Manufacturing and Sales Functions to Increase Productivity as well as into Business
Execution Functions (Process Innovation).

These measures will be implemented by the Group with adjustments being made if and when the market environmentchanges from when the plan was originally formulated. Further, the Group will continue to maintain financial discipline
during the implementation process, while at the same time effectively utilizing the stronger financial strength of the Groupto actively make investments into growth areas. More specifically, the Company plans to make capital and development
investments worth JPY150 billion during the three-year implementation period of the plan.
(2) Key Areas of Focus for the Fiscal Year Ending March 31, 2012
As mentioned before, the economic forecast for the fiscal year ending March 31, 2012, which also coincides with the firstyear of implementing the new Innovation 21 Medium-Term Management Plan, remains complex and unclear.
Nevertheless, the Group will be focusing on implementing the following measures in order to achieve the goals set forthin the plan.
(i)Enhance and Effectively Utilize the Group’s Global Network

SHI will work to enhance its global network of manufacturing, sales and service locations in recognition of the fact that
this remains the most important issue that the Group faces to ensure that it achieves future growth. During theimplementation period of the previous Global 21 Medium-Term Management Plan, the Group focused on developing new
global locations through such efforts as the construction of a hydraulic excavator and gearbox manufacturing plant inTangshan City (China), and commenced work on the construction of a new hydraulic excavator manufacturing plant inIndonesia, and a gearbox manufacturing plant in Brazil. In addition, the Group acquired Belgium-based gearbox maker,
Hansen Industrial Transmissions NV. In the new Innovation 21 Medium-Term Management Plan, the Group will work tostrengthen existing overseas locations while at the same time establishing regional head offices in various parts of the
globe to ensure that the organization is able to make management decisions quickly, a trait that is necessary in thisever-changing market. These efforts have already started in China where a management company structure has been
formed for its local operations.
Moreover, the Group will aim to build a global network that allows its member companies around the world to organicallyleverage the competitive edge that each boasts.
(ii) Develop and Introduce Innovative Products to Focused Markets (Promotion of Product Innovation)
The Group plans to focus its efforts on the following markets and products. The demand for hydraulic excavators is
showing significant growth in emerging markets as internal needs grow. In this field, the Group will aim to achieve sales
growth that exceeds the rate of market expansion by introducing hydraulic excavators that are more energy efficient than
the industry standard. In the field of medical devices, the Group will launch and aim to popularize globally a compact andeconomical proton therapy system that works to treat malignant tumors in the human body. With respect to powertransmission products that are essential in all kinds of industrial and infrastructure settings, the Group will aim to increase
the efficiency of its product line-up, and achieve sales growth through the introduction of energy efficient products. Alsoin other product areas, the Group plans to accelerate the development of “Green Products” that focus on the concepts ofenergy efficiency and the use of sustainable energy.

13Consolidated Results for the Full Year
Ended March 31, 2011

In order to enhance and promote this level of product innovation, the Group has decided to reorganize its Corporate
Technology Operations Group into two distinctively separate areas as of the beginning of the consolidated fiscal year
ending March 31, 2012. Under the new structure, the Technology Research Center will oversee the development of
medium to long-term basic and fundamental technologies, while the Product Planning & Technology Management Group
that will now be unified with the business units will oversee innovation-based product development. Through this move,
the Group has clearly delineated the roles and responsibilities of each working area.
(iii) Introduce Innovation into Manufacturing and Sales Functions to Increase Productivity as well as into
Business Execution Functions (Process Innovation)
Over the years, the Group has introduced a multitude of process innovation ideas into all stages of the businessincluding product planning, design and development, manufacturing, sales and after-sales service. In the future, theaccumulated experience and expertise gained from these efforts will be applied on a global scale. This is anticipated toresult in significant cost savings and an increased market share in emerging economies.
(iv) Thorough Implementation of Compliance Measures
The Group firmly believes that it has a social responsibility to conduct its business in a proper manner, and that ensuring
compliance across all of its business activities is one of, if not the most, important aspect of this principle. With this inmind, compliance-related activities have been ongoing for some time. In the future, as the Group becomes more global,
compliance-related activities will be thoroughly implemented throughout the organization to ensure that a level ofcompliance that befits a “Global Excellent Company” is maintained.

14

Consolidated Results for the Full Year
Ended March 31, 2011

IV. Consolidated Financial Statements
1. Consolidated Balance Sheets(Units: millions of yen)
End of Full YearAs of March 31, 2010

End of Full YearAs of March 31, 2011

AmountAmountAssetsCash and deposits

62,511

52,486

Notes and accounts receivable

131,893

155,267

Products

34,40841,827Works in progress

70,07170,802

Raw materials and stock

18,937

18,406

Deferred income taxes

8,632

9,648

Other

14,40017,898

Allowance for doubtful accounts(1,073)(991)

339,780

365,342

Buildings and structures (net)53,07250,799Machinery and transportation tools(net)

38,16637,003

Land

115,971

117,157

Construction in progress

1,450

1,938

Other (net)

7,818

7,259

Tangible assets

216,477

214,156

Intangible assets

7,308

6,936

30,39826,281

79

67

Deferred income taxes

9,886

8,319

Other

7,733

7,199

Allowance for doubtful accounts(1,574)(1,472)

46,52340,395

Fixed assets

270,308

261,487

Total assets

610,087

626,829

Current assets

Investment securities
Long-term loans

Investments and other assets

15

Consolidated Results for the Full Year
Ended March 31, 2011

(Units: millions of yen)
End of Full YearAs of March 31, 2010

End of Full YearAs of March 31, 2011

AmountAmountLiabilities
Notes and accounts payable

108,018

131,951

Short-term bank loans

30,52421,504Long-term loans due within one year

10,438

4,411

Income tax payable

6,759

11,574

Advance payments received oncontracts

40,97133,295

Allowance for guaranteed construction

5,218

5,196

Other allowances

2,589

1,804

Other

30,43832,773234,954242,507

Bonds

10,00010,000Long-term debt due after one year

36,69831,918

Employees’ severance and retirement
benefits

32,426

31,380

235

208

Deferred income taxes on revaluation

32,211

31,836

Other

9,411

9,600

Long-term liabilities

120,981

114,943

Total liabilities

355,935

357,450

Common stock

30,87230,872

Capital surplus

20,50323,789Retained earnings

161,951

188,047

Treasury stock(1,494)(67)

Stockholders’ equity

211,831242,641

Unrealized gains on securities

2,003

981

Loss on deferred hedge

1,125

960

Current liabilities

Other allowances

Net assets

Adjustment regarding pension
obligations of consolidated overseas
subsidiaries(1,753)(1,978)

Revaluation reserve for land

40,38639,851

Foreign currency translation adjustments(9,370)(15,129)16

Consolidated Results for the Full Year
Ended March 31, 2011

End of Full YearAs of March 31, 2010

End of Full YearAs of March 31, 2011

AmountAmountTotal accumulated other comprehensive
income32,39024,686

Minority interests

9,931

2,053

Total net assets

254,153

269,380

Liabilities and net assets

610,087

626,829

2. Consolidated Income Statements and Consolidated Statement of Comprehensive
IncomeConsolidated Income Statements(Units: millions of yen)Previous Full Year
April 1, 2009 to
March 31, 2010

Current Full Year
April 1, 2010 toMarch 31, 2011

AmountAmountNet sales

516,165

548,015

Cost of sales

412,751

426,479

Gross income

103,414

121,537

Selling, general & administrative expenses

75,16075,733Operating income

28,25445,803

Interest income

183

136

Dividend income

1,039

1,380

Other

3,328

2,474

4,550

3,989

Interest expenses

1,940

1,489

Other

4,530

4,050

Total non-operating expenses

6,471

5,539

Ordinary income

26,33344,253--

3,437

Gain on sale of securities

1,581

－

Income from subsidies

863－

Total extraordinary gains

2,444

3,437

Non-operating income

Total non-operating income
Non-operating expenses

Extraordinary gains
Gain from negative goodwill

Extraordinary losses

17Consolidated Results for the Full Year
Ended March 31, 2011

Previous Full Year
April 1, 2009 to
March 31, 2010

Current Full Year
April 1, 2010 toMarch 31, 2011

AmountAmountLoss on impaired assets

--

1,396

Amount accrued as a result of a change
in a subsidiary’s retirement pension plan

--

503

Financial impact due to the application of
the accounting standard for asset
retirement obligations

--

480

Loss on contracts

1,000

220

Loss on devaluation of marketablesecurities

1,000

--

Environmental protection expenses

503

--

Total extraordinary losses

2,503

2,598

Income before income taxes

26,27445,091

Corporate income tax current

11,502

16,555

Corporate income tax deferred

382

(468)

Total corporate income taxes

11,88416,087--29,004

Minority interests

1,109

1,078

Net income

13,28027,926

Net income before adjusting for profit (loss)
from minority interests

18Consolidated Results for the Full Year
Ended March 31, 2011

Consolidated Statement of Comprehensive Income(Units: millions of yen)Previous Full Year
April 1, 2009 to March 31, 2010

Current Full Year
April 1, 2010 to March 31, 2011

AmountAmount

Net income before adjusting for profit (loss)
from minority interests－

29,004

Unrealized gains on securities－(1,046)

Profit (loss) on deferred hedge

－

(120)

Adjustment regarding pension
obligations of consolidated overseas
subsidiaries

－

(224)

Foreign currency translation adjustments－(5,970)

Amount applied for equity method
accounting of affiliates

－

(43)

Total other comprehensive income－(7,403)－

21,601

Comprehensive income relating to parent
company shareholdings－

20,756Comprehensive income relating tominority interests－

845

Other comprehensive income

Comprehensive income(Breakdown)

19Consolidated Results for the Full Year
Ended March 31, 2011

3. Consolidated Statements of Changes to Stockholders' Equity(Units: millions of yen)Previous Full Year
April 1, 2009 to March 31, 2010

Current Full Year
April 1, 2010 to March 31, 2011

Stockholders’ equity
Capital stock
Balance at end of previous period

30,87230,872----30,87230,872

20,50320,503

Disposal of treasury stock--

5

Changes as a result of astock-swap

--

3,281

Total fluctuation in the period

--

3,286

20,50323,789148,725

161,951

Dividends--(2,414)

Net income

13,28027,926

Disposal of treasury stock

(2)

(1)

Difference from transfer ofrevaluation reserve for land

(26)

535

Increase from addition of
consolidated subsidiaries
accompanying changes in scopeof consolidation

578

50

Decrease from addition of
consolidated subsidiaries
accompanying changes in scopeof consolidation

(605)

--

13,22526,097

161,951

188,047

Fluctuation in the period
Total fluctuation in the period
Balance at end of period
Capital surplus
Balance at end of previous period
Fluctuation in the period

Balance at end of period
Earned surplus
Balance at end of previous period
Fluctuation in the period

Total fluctuation in the period
Balance at end of period

20Consolidated Results for the Full Year
Ended March 31, 2011

Previous Full Year
April 1, 2009 to March 31, 2010

Current Full Year
April 1, 2010 to March 31, 2011

Treasury stock
Balance at end of previous period(1,471)(1,494)

Acquisition of treasury stock

(28)

(164)

Disposal of treasury stock48Fluctuation in the period

Changes as a result of astock-swap

--

1,583

Total fluctuation in the period

(24)

1,427

(1,494)(67)

198,629

211,831

Dividends--(2,414)

Net income

13,28027,926

Acquisition of treasury stock

(28)

(164)

Disposal of treasury stock3

12

Difference from transfer ofrevaluation reserve for land

(26)

535

Changes as a result of astock-swap

--

4,864

Increase from addition of
consolidated subsidiaries
accompanying changes in scopeof consolidation

578

50

Decrease from addition of
consolidated subsidiaries
accompanying changes in scopeof consolidation

(605)

--

13,20230,810211,831242,641

(547)

2,003

Fluctuations other thanstockholders' equity in the period
(net)

2,549

(1,022)

Total fluctuation in the period

2,549(1,022)

2,003

981

Balance at end of period
Stockholders' equity
Balance at end of previous period
Fluctuation in the period

Total fluctuation in the period
Balance at end of period
Accumulated other comprehensive income
Unrealized holding gains on othersecurities
Balance at end of previous period
Fluctuation in the period

Balance at end of period

21Consolidated Results for the Full Year
Ended March 31, 2011

Previous Full Year
April 1, 2009 to March 31, 2010

Current Full Year
April 1, 2010 to March 31, 2011

Loss on deferred hedge
Balance at end of previous period

1,945

1,125

Fluctuations other thanstockholders' equity in the period
(net)

(820)

(165)

Total fluctuation in the period

(820)

(165)

1,125

960

(3,008)(1,753)

Fluctuations other thanstockholders' equity in the period
(net)

1,255

(224)

Total fluctuation in the period

1,255

(224)

(1,753)(1,978)40,36040,386

Fluctuations other thanstockholders' equity in the period
(net)

26

(535)

Total fluctuation in the period

26

(535)

40,38639,851(8,798)(9,370)Fluctuations other thanstockholders' equity in the period
(net)

(572)

(5,759)Total fluctuation in the period(572)(5,759)(9,370)(15,129)

29,95232,390Fluctuation in the period

Balance at end of period
Adjustment regarding pension obligationsof consolidated overseas subsidiaries
Balance at end of previous period
Fluctuation in the period

Balance at end of period
Difference from transfer of revaluation
reserve for land
Balance at end of previous period
Fluctuation in the period

Balance at end of period
Foreign exchange translation
adjustments
Balance at end of previous period
Fluctuation in the period

Balance at end of period
Total accumulated other comprehensive
incomeBalance at end of previous period
Fluctuation in the period

22Consolidated Results for the Full Year
Ended March 31, 2011

Previous Full Year
April 1, 2009 to March 31, 2010

Current Full Year
April 1, 2010 to March 31, 2011

Fluctuations other thanstockholders' equity in the period
(net)

2,438

(7,705)

Total fluctuation in the period

2,438(7,705)32,39024,686

10,116

9,931

Fluctuations other than stockholders'equity in the period (net)(185)(7,878)

Total fluctuation in the period(185)(7,878)

9,931

2,053

238,697

254,153

Dividends--(2,414)

Net income

13,28027,926

Acquisition of treasury stock

(28)

(164)

Disposal of treasury stock3

12

Difference from transfer ofrevaluation reserve for land

(26)

535

Changes as a result of a stock-swap

--

4,864

Increase from addition of
consolidated subsidiaries
accompanying changes in scope of
consolidation

578

50

Decrease from addition of
consolidated subsidiaries
accompanying changes in scope of
consolidation

(605)

--

Fluctuations other than stockholders'equity in the period (net)

2,254(15,583)

Total fluctuation in the period

15,455

15,227254,153

269,380

Balance at end of period
Minority interests
Balance at end of previous period
Fluctuation in the period

Balance at end of period
Total net assets
Balance at end of previous period
Fluctuation in the period

Balance at end of period

23Consolidated Results for the Full Year
Ended March 31, 2011

4. Consolidated Cash Flows Statement(Units: millions of yen)Previous
Full Year
April 1, 2009 to
March 31, 2010

Current
Full Year
April 1, 2010 toMarch 31, 2011

Cash flows from operating activities
Income before income taxes

26,27445,091

Depreciation

19,725

17,941Gain from negative goodwill--(3,437)

Loss on impaired assets

--

1,396

Interest and dividend income(1,222)(1,515)Interest expenses

1,940

1,489

(Increase) decrease in notes and accounts receivable

15,652(30,224)(Increase) decrease in inventories

27,977(6,280)

Increase (decrease) in notes and accounts payable(29,282)

26,420

Other

5,948

(1,587)

Subtotal

67,012

49,295Interest and dividend received

1,785

1,014

Interest expenses(1,869)(1,508)

Payments for income taxes(9,415)(12,280)

57,51336,521(Increase) decrease in time deposits

1,713

(368)

(Increase) decrease in securities

1,500

--

(20,004)(14,393)--(10,607)

Proceeds from sale of securities

1,485

457

Other

1,353

1,398

(13,954)(23,513)

Net cash provided by operating activities
Cash flows from investing activities

Acquisition costs associated with fixed assets
Payments for acquisition of subsidiaries’ stock
accompanying changes in scope of consolidation

Net cash used in investing activities

24Consolidated Results for the Full Year
Ended March 31, 2011

Previous
Full Year
April 1, 2009 to
March 31, 2010

Current
Full Year
April 1, 2010 toMarch 31, 2011

Cash flows from financing activities
Net increase (decrease) in short-term loans(5,754)(7,260)Net increase (decrease) in commercial paper(24,000)--

Proceeds from long-term debt

6,099

--

Repayments for long-term debt

(1,137)(10,697)

Income from the issuance of bonds

10,000--Costs associated with the redemption of bonds(10,000)--(22)(2,423)(1,004)

(347)

(868)

(1,294)(26,686)(22,020)

Effect of exchange rate changes on cash and cash
equivalents

205

(977)

Net increase (decrease) in cash and cash equivalents

17,079(9,989)Cash and cash equivalents at beginning of year

42,41461,452

Increase due to new consolidated companies

1,942

236

17

--

61,45251,700Cash dividends paid
Payment of dividends to minority stockholders
Other
Net cash used in financing activities

Increase due to mergers and acquisitions
Cash and cash equivalents at end of year

5. Significant Events or Conditions that Question the Premise of a Going Concern
No events or conditions are noted.

6. Significant Items Forming the Basis for the Preparation of the Consolidated
Financial Statements
With the exception of the items specified in “7. Revisions to Significant Items Forming the Basis for the Preparation of theConsolidated Financial Statements” below, there have been no material changes from the “Significant Items Forming theBasis for the Preparation of the Consolidated Financial Statements” included in the Marketable Securities Report(submitted June 29, 2010). Disclosure of such items has therefore been deemed unnecessary for the purposes of thisreport.

25

Consolidated Results for the Full Year
Ended March 31, 2011

7. Revisions to Significant Items Forming the Basis for the Preparation of theConsolidated Financial Statements(1) Application of the “Accounting Standard for the Equity Method of Accounting for Investments”
As of the consolidated fiscal year under review, the “Accounting Standard for the Equity Method of Accounting forInvestments” (Accounting Standard – ASBJ Statement No. 16 dated March 10, 2008) and the “Practical Solution on the
Unification of Accounting Policies Applied to Affiliated Companies Accounted for Using the Equity Method” (Practical
Issues Task Force - PITF No. 24 dated March 10, 2008) have been applied. There is no impact to ordinary income andnet income before taxes and other adjustments as a result of this change.
(2) Application of “Accounting Standard for Asset Retirement Obligations”
As of the consolidated fiscal year under review, the “Accounting Standard for Asset Retirement Obligations” (AccountingStandard – ASBJ Statement No. 18 dated March 31, 2008) and the “Guidance on the Accounting Standard for Asset
Retirement Obligations” (Guidance Document – ASBJ Guidance No. 21 dated March 31, 2008) have been applied. The
impact to operating income, ordinary income and segment information as a result of this change is minimal. However, an
extraordinary loss of JPY480 million has been included in the financial statements for the consolidated fiscal year underreview as a result of this change in accounting standards.
(3) Application of “Accounting Standard for Business Combinations”
As of the consolidated fiscal year under review, the “Accounting Standard for Business Combinations” (AccountingStandard – ASBJ Statement No. 21 dated December 26, 2008), the “Accounting Standard for Consolidated Financial
Statements” (Accounting Standard – ASBJ Statement No. 22 dated December 26, 2008), the “Partial Amendments to the
Accounting Standard for Research and Development Costs” (Accounting Standard – ASBJ Statement No. 23 dated
December 26, 2008), the “Revised Accounting Standard for Business Divestitures” (Accounting Standard – ASBJ
Statement No. 7 revised December 26, 2008), the “Revised Accounting Standard for the Equity Method of Accounting forInvestments” (Accounting Standard – ASBJ Statement No. 16 revised December 26, 2008), and the “Revised Guidanceon the Accounting Standard for Business Combinations and the Accounting Standard for Business Divestitures”(Guidance Document – ASBJ Guidance No. 10 revised December 26, 2008) has been applied.

8. Additional Information
As of the consolidated fiscal year under review, the “Accounting Standard for the Presentation of Comprehensive
Income” (Accounting Standard – ASBJ Statement No. 25 dated June 30, 2010) has been applied. However, please notethat the figures for “Valuation and Translation Adjustments” and “Total Valuation and Translation Adjustments” from theprevious fiscal years has been used for “Other Accumulated Comprehensive Income” and the “Total Other Accumulated
Comprehensive Income” in the consolidated financial statement for the period ended March 31, 2011.

9. Items of Special Note Concerning the Consolidated Financial Statements
Special notes concerning lease transactions, transactions with interested parties, tax effect accounting, marketablesecurities, derivative transactions, retirement benefits, and others have been omitted as the disclosure of such notes is
considered to have no material significance to the financial statements.

26

Consolidated Results for the Full Year
Ended March 31, 2011

(Information Regarding Business Combinations)
Current Full Year (April 1, 2010 to March 31, 2011)(Stock Swap Agreement between the Group and Nihon Spindle Manufacturing Co., Ltd.)At a board meeting held on May 10, 2010, the Group’s board of directors passed a resolution to make Sumitomo Heavy
Industries, Ltd. (hereinafter referred to as “SHI”) the sole parent company of Nihon Spindle Manufacturing Co., Ltd.
(hereinafter referred to as “Nihon Spindle”), previously a consolidated subsidiary, through a stock swap agreement(hereinafter referred to as the “Agreement”).
As per the Agreement, the stock swap was completed on October 1, 2010 and as a result, Nihon Spindle became awholly owned subsidiary of SHI. Further, shares of Nihon Spindle were delisted from the respective stock exchanges asof September 28, 2010 (with the final trading day being set as September 27, 2010).
1.

Summary of the Business Combination(1) Name of Company Being Combined
Nihon Spindle Manufacturing Co., Ltd.
(2) Description of Business of the Company Being Combined
Manufacturing and sale of environmental equipment, air-conditioning equipment, industrial equipment, andconstruction materials(3) Purpose of the Stock-Swap Agreement
Since October 2007, when the Group made Nihon Spindle a consolidated subsidiary and became its parent
company, both companies have worked to create business synergies. However, the significant changes to thebusiness environment in recent years and the more intensified market competition as a result of the global
economic downturn that began at the end of 2008 have led to the need for Nihon Spindle to further expand its
global presence and strengthen its product capabilities. With this in mind, Nihon Spindle determined that thebest way to actively utilize the Group’s technical development capabilities and global business network, and toachieve growth was through the execution of a stock swap agreement with its parent company.
(4) Effective Day of Stock Swap
October 1, 2010
(5) Legal Form of Business Combination
Through the stock-swap agreement, SHI became the wholly-owning parent company of Nihon Spindle, while
Nihon Spindle became a wholly-owned subsidiary of SHI.
Please note that SHI performed this stock swap through the use of a simplified stock swap arrangement as per
the stipulations stated in Article 796, Item 3 of the Companies Act.
(6) Ratio of Voting Rights Acquired
59.1% (of which 0.4% are indirect holdings)

2.

Summary of Accounting Standards Implemented
As per stipulations of the “Accounting Standard for Business Combinations” (Accounting Standard – ASBJ
Statement No. 21 dated December 26, 2008), and the “Revised Guidance on the Accounting Standard for Business
Combinations and the Accounting Standard for Business Divestitures” (Guidance Document – ASBJ Guidance No.
10 revised December 26, 2008), this agreement has been treated as a business combination involving entities oroperations of entities under common control.

3.

Breakdown of Acquisition Costs Relating to the Acquired Company
JPY4,864 million

Consideration for acquisition

JPY41 million

Expenses directly attributable to the acquisition

JPY4,905 million

Total acquisition cost27

Consolidated Results for the Full Year
Ended March 31, 20114.

Type of Shares Used, Share Allocation Ratio, Method of Calculation, Number of Shares Issued, and Value of the
Shares(1) Share Allocation Ratio and Type of Shares Used
For every one share of Nihon Spindle stock, 0.38 shares of SHI common stock will be allocated and issued.
(2) Method of Calculating the Share Allocation Ratio
SHI employed the services of Daiwa Securities Capital Markets Co., Ltd. and Nihon Spindle employed theservices of Nomura Securities Co., Ltd. to act as independent third parties to perform the calculation. The
results of the calculation were discussed between SHI and Nihon Spindle, and an ultimate figure was decidedupon.
(3) Number of Shares Issued and Value of the Shares
Number of shares issued: 11,311,011 shares of common stock(Please note that SHI appropriated treasury stock already held by the Group for the
purposes of this agreement)
Value of shares:

5.

JPY4,864 million

Negative Goodwill and Other Amounts Generated as a Result of the Agreement
Gain on negative goodwill

JPY3,437 million

Reason for the generation of negative goodwill
The reduction in the amount of minority interest as a result of the Agreement exceeded the costs to additionallyacquire the common stock of Nihon Spindle, generating negative goodwill.

28

Consolidated Results for the Full Year
Ended March 31, 2011

(Acquisition of Shares of Hansen Industrial Transmissions NV)
On October 15 2010, SHI announced that it had submitted an offer to Hansen Transmissions International (hereinafterreferred to as “Hansen Transmissions”) to acquire all outstanding shares of Hansen Industrial Transmissions NV(hereinafter referred to as “HIT”), a subsidiary of Hansen Transmissions and a manufacturer and distributor of industrial
gear boxes based in Belgium. On December 20, 2010, SHI and Hansen Transmissions finalized a share transfer
agreement regarding the acquisition. Finally, on March 4, 2011 (local time), the transfer of shares from Hansen
Transmissions to SHI was completed.
1.

Name of Company being Combined, Description of Business of Company being Combined, Purpose of theAcquisition, Effective Date of the Business Combination, Legal Form of the Business Combination, Name ofCompany after being Combined, and the Ratio of Voting Rights Acquired(1) Name of Company being Combined, and Description of Business
Hansen Industrial Transmissions NV
Manufacturer and distributor of industrial gearboxes(2) Purpose of the Acquisition
SHI has positioned power transmission products as one of its core business areas and has worked, over theyears, to enhance its capabilities in this sector. Presently, industrial gearboxes account for 25% of the overallsales of the power transmission business. With economic growth in emerging markets expected to remain
steady, demand for power transmission-related products is anticipated to grow. Moreover, significant capital
investment activity in resource-driven economies such as China, South America, South Africa, Australia andIndia are also expected to drive the expansion of the market for industrial gearboxes.
International customers account for more than 50% of the overall sales figure for the Group’s industrial gear box
business. However, on a geographical basis, international orders are dominated by customers in North Americaand Asia. In order to grow this area of business, SHI recognized the need to expand its footprint and increase
sales in areas such as Europe, South Africa and Australasia.
Hansen Transmissions, which was established in Belgium in 1923, is a manufacturer of gearboxes with asignificant brand presence in the market. Its subsidiary, HIT, has a manufacturing base outside of Antwerp andalso operates assembly plants in six countries around the world. In addition, HIT has an established sales
network in not only its home base of Europe, but also in resource-driven markets such as South Africa andAustralia which are set to drive future demand in this sector.
Beginning in 1973, SHI had a licensing agreement in place with Hansen Transmissions for approximately 20
years. As a result, the Group expects to be able to generate product synergies with HIT in the near term.
Further, the acquisition of HIT shares and making the firm a wholly-owned subsidiary, will allow SHI to expand
its distribution channels, and increase sales of industrial gearboxes on a global basis.
(3) Effective Date of the Business Combination
March 4, 2011(4) Legal Form of the Business Combination
Acquisition of shares through cash and other consideration(5) Name of the Company after being Combined
No change(6) Ratio of Voting Rights Acquired
100%

29

Consolidated Results for the Full Year
Ended March 31, 20112.

Summary of Accounting Standards Implemented
As per stipulations of the “Accounting Standard for Business Combinations” (Accounting Standard – ASBJ
Statement No. 21 dated December 26, 2008), and the “Revised Guidance on the Accounting Standard for Business
Combinations and the Accounting Standard for Business Divestitures” (Guidance Document – ASBJ Guidance No.
10 revised December 26, 2008), this acquisition has been treated using purchase accounting.

3.

Period in which the Financial Performance of the Acquired Company has been Included in the Consolidated
Financial Statement
As the date of acquisition was March 31, 2011, the financial performance of the acquired company prior to this date
has not been included in the Consolidated Financial Statement for current consolidated fiscal year under review.

4.

Breakdown of Acquisition Costs relating to the Acquired Company
JPY10,097 million

Consideration for acquisition

JPY436 million

Expenses directly attributable to the acquisition

JPY10,533 million

Total acquisition cost
5.

Amount of Goodwill Generated, Reason for the Generation of Goodwill, Method of Amortization, and Amortization
Period(1) Amount of Goodwill
JPY1,070 million(2) Reason for the Generation of Goodwill
The acquisition cost for this transaction was determined by an independent third-party calculation of the cost ofsale of the acquired company. Since this amount exceeded the market value of net assets at the time theacquired company was combined, goodwill was generated.
(3) Method of Amortization and Amortization Period
5 years using the straight line method of amortization

6.

Breakdown of Asset and Liability Amounts Assumed at the Time of Business Combination
Current assets

JPY8,806 million

Fixed assets

JPY5,278 million

Total assets

JPY14,084 million

Current liabilities

JPY3,833 million

Long-term liabilities

JPY788 million
JPY4,621 million

Total liabilities
7.

Accounting Method Changes to be Applied from the Current Consolidated Fiscal Year (Ending March 31, 2012)
No changes are anticipated

8.

Amount of Acquisition Cost Treated as an Expense (e.g. Research and Development Costs) and the Specific Item
Not applicable30

Consolidated Results for the Full Year
Ended March 31, 20119.

Estimated Impact of the Business Combination on the Consolidated Income Statement if the Acquisition Date was at
the Start of the Consolidated Fiscal Year Under Review
JPY9,997 million

Sales
Operating income

JPY92 million

Ordinary income

JPY104 million

Income before income taxes

JPY104 million

Net income

JPY126 million(Method Used to Calculate the Estimated Amount and Major Assumptions)
The estimated amounts are calculated using the net sales and profit or loss figures for the period beginning
April 1, 2010 and ending March 31, 2011. Amounts such as estimated amortization of goodwill have not been
included in the calculation.
10. Allocation of Acquisition Costs
As the real market value of a portion of the Combined Business’ assets is yet to be determined, only a provisional
accounting using reasonable information available at the time was carried out for the consolidated fiscal year underreview. For this reason, an allocation of acquisition costs has not been completed. Please note that any differential
amount up until the time of settlement has been accounted for under the category of goodwill.

31

Consolidated Results for the Full Year
Ended March 31, 2011

(Segment Information)
1. Summary of Reporting Segments
The Group’s reporting segments are based on those units within the Group where separate financial information isavailable and where the Board of Directors of the Group periodically deliberates over matters such as the distribution ofmanagement resources and the financial performance of such segments.
The Group formulates a comprehensive international and domestic strategy for individual products and services for thehead office and for each consolidated subsidiary, and executes such strategies at the operating level. Consequently, theGroup comprises segments that are split by categories of products and services offered by the head office andconsolidated subsidiaries. More specifically, the six reporting segments of the Group are “Machinery Components”,“Precision Machinery”, “Construction Machinery”, “Industrial Machinery”, “Ships”, and “Environmental Facilities & Plants”.

Businesses

Main Products

Machinery Components

Power transmission and control

Precision Machinery

Plastic injection molding machines, film forming machines, semiconductor
production equipment, laser processing systems, cryocoolers, precision
positioning equipment, ion accelerators, medical machines and equipment ,plasma coating systems for FPDs, precision forgings, control components,
defense equipment, machining tools

Construction Machinery

Hydraulic excavators, mobile cranes, road machinery

Industrial Machinery

Forging machines, material handling systems, logistics systems,
automated parking systems, turbines, pumps

Ships

Ships

Environmental Facilities & Plants

Private power generation facilities, boilers, industrial waste treatment facilities,
air pollution control equipment, water and sewage treatment systems, processequipment, pressure vessels, agitation tanks, air conditioning equipment, foodprocessing machinery32

Consolidated Results for the Full Year
Ended March 31, 2011

2. Information Regarding Net Sales, Profits, Assets, Liabilities and Other Items by Reporting Segment
Current Full Year (April 1, 2010, to March 31, 2011)(Units: millions of yen)Segment
Item

A

B

C

D

E

F

66,54459,496

Subtotal

Other

1

Total

2

H

G

Net sales(1) Sales to externalcustomers

74,591 131,944 130,811(2) Internal sales
betweensegments or
exchanges

1,810

9

137

74

Total

76,401 133,103 130,821

66,681

59,57076,864 543,440

10,748 554,188

Segment profit

4,874

5,290

10,252

9,897

5,566

1,518

106,365 137,987 121,339

49,921

80,23052,246 548,087

Segment assets

1,158

8,340

76,070 539,458

794

3,983

44,2198,558 548,015

2,190

6,173

45,73739,466 587,553― 548,015(6,173)―(6,173) 548,015
66

45,80339,276 626,829

Other categories
Depreciation expense

3,298

5,304

3,720

1,706

2,422

1,037

17,488453

17,941―

17,941

Increase in tangible
and intangible assets

3,848

2,976

4,442

869

1,106

712

13,953339

14,292―

14,292

Segments:
A: Machinery Components
B: Precision Machinery
C: Construction Machinery
D: Industrial Machinery
E: Ships
F: Environmental Facilities & Plants
G: Adjustments
H: Value included on the consolidated income statement
Notes:
1. The “Other” segment represents those business segments that are not included as part of any other reporting
segment. This includes the Group’s real-estate businesses, software-related business and other businesses.
2. Mainly due to the deletion of intersegment transactions
3. Segment profits have been adjusted with operating income recorded in the consolidated income statement33

Consolidated Results for the Full Year
Ended March 31, 2011

(Information Regarding the Impact of Negative Goodwill on the Group’s Segments)
In the Environmental Facilities and Plants Segment, the Group executed a stock-swap agreement with Nihon Spindle
Manufacturing Co., Ltd. with an effective date of October 1, 2010. As a result, a gain of negative goodwill in the amountof JPY3,437 million was generated during the consolidated fiscal year under review in this segment.

(Additional Information)
As of the consolidated fiscal year under review, the “Revised Accounting Standard for Disclosures about Segments of anEnterprise and Related Information” (Accounting Standard – ASBJ Statement No. 17 revised March 27, 2009), and the“Guidance on the Accounting Standard for Disclosures about Segments of an Enterprise and Related Information”(Guidance Document – ASBJ Guidance No. 20 dated March 21, 2008) have been applied.

(Reference Information)
The table below provides a summary of the values from the previous consolidated fiscal year for all business segments
as if they were displayed using the new reporting segments used during the current consolidated fiscal year underreview.

Previous Full Year (April 1, 2009, to March 31, 2010)(Units: millions of yen)Segment
Item

A

B

C

D

E

85,63762,927

F

Subtotal

Other

1

Total

2

H

G

Net sales(1) Sales to externalcustomers

69,040 105,191 102,650(2) Internal sales
betweensegments or
exchanges

1,842

6

207

129

Total

70,882 106,519 102,656

85,844

63,056

82,625 511,583

11,120 522,703

571

14,167

6,664

7,101

1,376

80,213 134,921 122,098

63,50580,81654,931 536,485

Depreciation expense

3,739

6,065

3,839

1,853

2,695

1,128

19,320405

19,725―

19,725

Increase in tangible
and intangible assets

5,762

3,161

8,480

1,792

2,695

2,197

24,088378

24,465―24,465

Segment profit (loss)
Segment assets

861

1,328

(2,603)81,884 507,330

742

4,253

26,761

8,835 516,165

2,285

6,538

28,137

17,413 553,898― 516,165(6,538)―(6,538) 516,165
117

28,25456,189 610,087

Other categories

Segments:
A: Machinery Components
B: Precision Machinery
C: Construction Machinery
D: Industrial Machinery
E: Ships

34

Consolidated Results for the Full Year
Ended March 31, 2011

F: Environmental Facilities & Plants
G: Adjustments
H: Value included on the consolidated income statement
Notes:
1. The “Other” segment represents those business segments that are not included as part of any other reporting
segment. This includes the Group’s real-estate businesses, software-related business and other businesses.
2. Mainly due to the deletion of intersegment transactions.
3. Segment profits have been adjusted with operating income recorded in the consolidated income statement.

(Per Share Information)
Previous Full Year
April 1, 2009 to
March 31, 2010

Current Full Year
April 1, 2010 toMarch 31, 2011

Net assets per share

404.73 yen

435.10 yen

Net income per share

22.01 yen

45.87 yen

Note that EPS adjusted for full dilution is not presented because there are noresidual shares.
The basis for calculation of net income per share is as follows:
Previous Full Year
April 1, 2009 to
March 31, 2010

Current Full Year
April 1, 2010 toMarch 31, 201113,280 million yen

27,926 million yen----

Net income for common stock

13,280 million yen

27,926 million yen

Average number of outstanding
shares for the term

603, 439,000 shares

608,820,000 shares

Net income for the period
Value not attributable to common
stockholders(Subsequent Events of Significant Importance)
No events are noted.

35

Consolidated Results for the Full Year
Ended March 31, 2011

10. Orders Received, Sales, and Balance of Orders Received, by Segment
Orders Received(Units: millions of yen)Segment

April 1, 2009 to
March 31, 2010
AmountApril 1, 2010 toMarch 31, 2011%

AmountY/Y Change%

Machinery Components

61,421

15.2

75,83914.2

14,41823.5

Precision Machinery

106,08526.3

150,54728.1

44,462

41.9

Construction Machinery

100,53124.9

141,250

26.4

40,71940.5

Industrial Machinery

59,83414.8

73,22813.7

13,394

22.4

Ships

4,290

1.1

14,581

2.7

10,291

239.9

Environmental Facilities & Plants

62,55015.5

70,572

13.2

8,022

12.8

Others

8,726

2.2

8,881

1.7

155

1.8

Total

403,437

100.0

534,897

100.0

131,460

32.6

Sales
(Units: millions of yen)Segment

April 1, 2009 to
March 31, 2010
AmountApril 1, 2010 toMarch 31, 2011%

AmountY/Y Change%

Machinery Components

69,04013.4

74,591

13.6

5,551

8.0

Precision Machinery

105,191

20.4

131,94424.1

26,75425.4

Construction Machinery

102,65019.9

130,81123.9

28,161

27.4

Industrial Machinery

85,637

16.6

66,54412.1(19,093)(22.3)

Ships

62,92712.2

59,49610.8(3,431)(5.5)

Environmental Facilities & Plants

81,884

15.8

76,07013.9(5,813)(7.1)

Others

8,835

1.7

8,558

1.6

(278)

(3.1)

Total

516,165100.0

548,015100.0

31,850

6.2

Balance of Orders Received(Units: millions of yen)Segment

April 1, 2009 to
March 31, 2010
AmountApril 1, 2010 toMarch 31, 2011%

AmountY/Y Change%

Machinery Components

18,0804.8

26,010

7.0

7,929

43.9

Precision Machinery

47,044

12.5

65,64717.8

18,60239.5

Construction Machinery

13,468

3.6

23,906

6.5

10,438

77.5

Industrial Machinery

78,39320.8

85,077

23.0

6,684

8.5

Ships

142,72037.9

97,80426.4(44,916)(31.5)

Environmental Facilities & Plants

75,13020.0

69,631

18.8(5,498)(7.3)

Others

1,619

0.4

1,942

0.5

323

20.0

Total

376,454100.0

370,017100.0(6,437)(1.7)

36