Sumitomo Heavy Industries, Ltd.
CONSOLIDATED FINANCIAL RESULTS
For the Full Year Ended March 31, 2006

Note: All financial information has been prepared in accordance with generally accepted accounting principles inJapan. This document has been translated from the Japanese original as a guide to non-Japanese investors and contains
forward-looking statements that are based on managements’ 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 thisfinancial statement have been rounded down to the nearest million yen.

Consolidated Financial Results for the Full Year Ended March 31, 2006

May 10, 2006

CONSOLIDATED FINANCIAL RESULTS
For the Full Year Ended March 31, 2006
Sumitomo Heavy Industries, Ltd.
Listed Exchanges
Stock CodeHead Office
President
URL
Inquiries
Telephone
Date of the Board of Directors meeting
concerning consolidated accounts
U.S. GAAP accounting principles

Tokyo Stock Exchange, Osaka Securities Exchange
6302
Tokyo
Yoshio Hinoh
www.shi.co.jp
Hideo Oshima
General Manager, Corporate Communications Dept.
+81 3 5488 8219
May 10, 2006
Not adopted

1. Consolidated Results for FY 2005 (April 1, 2005 to March 31, 2006)(1) Business Results(Units: millions of yen)

Net Sales
Operating Income
Ordinary Income
Net Income
Net Income per Share (yen)Fully Diluted Net Income per Share
Return on Equity (ROE, %)Return on Assets (ROA, %)Ordinary Income to Net Sales (%)*Notes:Current Fiscal Year

Previous Fiscal Year

April 1, 2005
to March 31, 2006

April 1, 2004
to March 31, 2005

% change551,339
5.8
47,505(2.6)
47,585(0.6)
29,742
30.5
49.45
-19.5
8.3
8.6

% change521,3108.0
48,77321.2
47,85349.8
22,792
40.2
37.80
-18.1
8.3
9.2

(1) Equity in earnings of unconsolidated subsidiaries and affiliated companies:
March 2006:
4,303 million yen
March 2005:
4,080 million yen(2) Average number of outstanding shares for the term (consolidated):
As of March 2006:
601,406,863 shares
As of March 2005:
601,826,660 shares(3) Changes to accounting procedures: Yes(4) Percentages for net sales, operating income, ordinary income and net income represent year-on-year changes.

Consolidated Results1Consolidated Financial Results for the Full Year Ended March 31, 2006

(2) Financial Position(Units: millions of yen)
End of Current
Fiscal YearEnd of Previous
Fiscal YearAs of March 31, 2006

As of March 31, 2005

Total Assets
579,233
569,771
Stockholders’ Equity
167,740
137,156
Equity Ratio (%)
29.0
24.1
Stockholders’ Equity per Share (yen)279.02227.90*Notes: Number of shares outstanding at the end of the period (consolidated):
As of March 31, 2006:
601,185,726 shares
As of March 31, 2005:
601,644,571 shares(3) Cash Flows(Units: millions of yen)
Current Fiscal Year
April 1, 2005
to March 31, 2006

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Cash and Cash Equivalents at the end of year

Previous Fiscal Year
April 1, 2004
to March 31, 2005

50,023(7,024)(48,812)
43,64445,451(6,087)(46,490)
49,108(4) Scope of Consolidation and Application of equity method:
Number of consolidated subsidiaries:
Number of non-consolidated subsidiaries accounted for by the equity method:
Number of affiliates accounted for by the equity method:(5) Changes in the scope of consolidation and Application of equity method:
Consolidated subsidiaries:(New) 1Equity method:(New) 088
27

(Removed) 4(Removed) 1

2. Consolidated Forecasts for FY 2006 (April 1, 2006 to March 31, 2007)(Units: millions of yen)Interim
April 1, 2006
to September 30, 2006

Net Sales
Ordinary Income
Net Income

260,000
19,50012,500

Full Year
April 1, 2006 to March 31, 2007

570,000
53,00031,000Notes: (1) Projected net income per share for FY2006 (ending March 31, 2007): .................................... 51.56 yen(2) Please consult page 7 of 2. Outlook for the Next Fiscal Year in III. Business Results section for further
information concerning the projections.

Consolidated Results2

Consolidated Financial Results for the Full Year Ended March 31, 2006

I. State of the Group

Nihon Spindle
Co., Ltd.

Mfg.

Izumi Food
Machinery Co. Ltd.
Lightwell Co., Ltd.

Sumitomo (SHI) Cyclo Drive Germany, GmbH

Sumitomo (SHI) Cyclo Drive Asia Pacific PTE. Ltd.

Mass-Produced Machinery

Sumitomo (SHI) Cyclo Drive China, Ltd.

Sumitomo Heavy Industries PTC Sales Co., LTD.

SHI Plastics Machinery

SHI Plastics Machinery, Inc. of America

Sumitomo Eaton Nova Corporation

Sumitomo NACCO Materials Handling Co., Ltd.
Sumitomo Heavy Industries Himatex Co., Ltd.

Sumitomo Heavy Industries Construction
Crane Co., Ltd.

Construction Machinery

Sumiju Environmental
Engineering, Inc.

Environmental Protection Facilities, Plants & Others

Sumitomo Heavy
Industries Marine &Engineering Co., Ltd.

Ship, Steel Structure & Other specialized Equipment

Sumitomo Heavy
Industries TechnoFort Co., Ltd.

Sumitomo Machinery Corporation of America

Sumitomo Heavy Industries (Parent Company)

Shin Nippon
Machinery Co., Ltd.

Seisa Gear, Ltd.

Industrial Machinery

Sumitomo Heavy
Industries Engineering &Services Co., Ltd.

Hitachi Sumitomo Heavy Industries
Construction Crane Co., Ltd.

Link-Belt Construction Equipment Company

Sumitomo (S.H.I.) Construction Machinery Co.,
Ltd.
Sumitomo (S.H.I.) Construction Machinery
Manufacturing Co., Ltd.
Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd.

Consolidated Results3Consolidated Financial Results for the Full Year Ended March 31, 2006

II. Management Policies
1. Basic Management Policies
The Group believes that securing long term customer trust through continuously "building value for consumer" isinterconnected with the Group's efforts to maintain sustained development and increase business worth, andreflects the desires of stockholders, employees, and the local community.
In order to realize high, stable growth on a global level, the Group intends to be an "organized, knowledge-buildingtype company" that provides quality products to customers. Then, the Group will strengthen marketing, researchand development, and production, and focus even more closely on the product itself.

2. Basic Policies Relating to Profit Distribution
The Company's basic policy is to pay shareholder dividends according to periodic income and to continue toincrease these dividends, while replenishing internal reserves necessary for stable, long-term businessdevelopment.

3. Rationale behind lowering minimum share purchase and basic policy
The Company feels that lowering the minimum number of shares that must be purchased will encourage a broad
range of investors to participate in the buying and selling of stock, and thus would be effective in raising the liquidityof shares. The Company will continue to review the effect that lowering the minimum unit has on the liquidity of thecompany’s stock and keep a watchful eye on market trends, but at this point the specific measures and the timing
for implementing them have not been determined.

4. Medium- and long-term business strategy and target management indicators
Under “Leap to Excellence ’07,” the medium-term, three-year management plan that began in FY2005, thecompany is aiming for sustainable growth and development built on the three core features outlined below.
(1) The Group will strive to become an organized knowledge-creating company launching first-class productsin the market.
(2) The Group’s businesses will be vertically integrated to pursue synergy.
(3) The Key Component business will be expanded and reinforced.
“Leap to Excellence ’07” calls for the following quantitative indicators to be met by the end of FY2007:
Operating income: Over 60 billion yen
Interest-bearing debt: Less than 100 billion yen
The plan further calls for keeping ROIC* (Return on Invested Capital), a Group management indicator, above
WACC (Weighted Average Cost of Capital) and above 10%.
* The Group uses the equation below to calculate ROIC after taxes.
ROIC=(Operating income + Interest earned, dividends) x 55% (= 1 – Effective tax rate)(Average stockholders’ equity at start and end of fiscal period +average interest-bearing debt at start and end of fiscal period)

5. Issues to Be Addressed
Since FY 2006 is the midway point in the Company’s medium-term management plan, “Leap to Excellence ’07,”
the Company will address the following issues to ensure its objectives are achieved.
(1) Enhancing competitive edge of products
The Group believes that continuing to create first-class products boasting global competitiveness is essential inensuring its sustainable growth. Accordingly, the Company plans to strengthen products’ competitive edge throughaggressive marketing and investment in product development.
(2) Strengthening collaboration between businesses and expanding component business
Building on the lateral links between the components, equipment, systems and other businesses, the Group will
clarify the roles of each of its businesses and reinforce collaborations between them. In particular, it will give priority
to the components business in allocating resources. Expanding and strengthening the components business andConsolidated Results4Consolidated Financial Results for the Full Year Ended March 31, 2006

stepping up collaboration with the machinery business will bolster the competitiveness of both the components andthe machinery businesses. These measures will include the launch of a new organization consolidating themechatronics business and the power transmission and control business from FY2006 and efforts to reinforce themotion control drive business.
(3) Sustaining strong performance of Industrial Machinery segment
Businesses in the Industrial Machinery segment with true competitive strength will overcome changes in theindustrial structure and prop up the Group’s strong performance. These businesses will ensure the continuity ofstable revenue, and the Company will continue to invest in accordance with customer needs.
(4) Making structural transition from public demand to private demand
In FY2006, the Company will move forward more aggressively in adjusting the structure of its Environmental
Protection Facilities, Plants & Others segment and the Ship, Steel Structure & Other Specialized Equipment
segment to one geared for private demand.
(5) Stepping up overseas sales expansion
The Group aims to be a company that continues to grow on the world stage. It will step up the expansion of its
business in growth markets, particularly in China and other regions in Asia. Accordingly, the Company will
aggressively invest in building and expanding sales bases and channels as well as building up networks between
bases and creating a human resource management system.
(6) Production innovations
The Company will maintain the competitive edge of its products with production innovations based on the conceptsof unsurpassed quality and the creation of a healthy cost structure. To achieve this, the system for promoting suchproduction innovations will be reinforced across the entire Group, and production will be optimized by spreading
examples of success into other businesses and developing a global supply chain with a network of internationaland domestic production centers.
(7) Augmenting human resource training
The Company has adopted an innovative human resource management style to raise the organizational capabilityof the entire Group. In addition to its previous program for management and future leaders and aimed atstrengthening strategic thinking, the Company is starting an educational program to develop personnel with a highdegree of expertise and, in particular, personnel capable of making significant contributions to the creation of firstclass products.
(8) Efforts to prevent global warming
The Company is working to prevent global warming by targeting a 10% reduction in electricity use in all offices. In
addition, all employees are working together to promote an electricity reduction campaign.
(9) Developing internal control system
The Group has been involved in internal control activities for some time now, but these efforts are being given newenergy in FY2006 with the appointment of an executive officer whose role is focused exclusively on internal control
and the upgrading of the division responsible for promoting internal control, from the Internal Control Dept. to theInternal Control Group. The entire Group will work to set up an internal control system and to ensure thoroughcompliance.
The Company faces criminal prosecution on charges of violating the antitrust law in its steel bridge construction. It
consequently received an injunction from the Japan Fair Trade Commission (JFTC) to desist and was ordered to
pay a fine. Additionally, the JFTC carried out an on-site inspection to investigate alleged bid rigging in water
treatment facility and floodgate construction. The Company views this situation very seriously, and intends torestore its credibility by practicing absolute compliance.

6. Items Relating the Parent Company, etc.
Not applicable as the company has no parent company.

Consolidated Results
5Consolidated Financial Results for the Full Year Ended March 31, 2006

III. Business Results
1. Overview
Japan’s economy has continued to expand during the current period as growth in private capital investment
continues on the back of improvements in corporate income and consumer spending increases. This has caused
expansion in domestic demand, despite the impact suffered from sustained high prices for raw materials such as
crude oil and other resources. Overseas, the U.S. economy is expanding and the Chinese market continues tosustain high growth. Promising markets such as S.E. Asia and India are also growing, and the world economy isshowing signs of expansion in general, as the European economy gradually recovers as well.
The Company made steady progress toward achieving its goals this year, the initial year of its Leap to Excellence‘07 medium-term plan; this progress resulted from management focusing on the following five key measures:
The first measure is to further strengthen promising key businesses. The Company continues to maintain its highshare domestically in both its power transmission and control business and plastics machinery business as it works
to strengthen ties with customers through the introduction of new products that meet customer needs and othermeasures. Operating results for Group companies also showed steady growth in construction equipment andindustrial machinery with differentiating technology. The Company will continue to develop measures directed atsustaining growth in the future as well.
The second measure is to restructure its businesses. The Company has re-organized its businesses into three
categories: Key Components, Appliances and Total Systems. It has put a structure into place that promotes mutual
growth among these divisions while simultaneously manifesting the strengths of each. The Company has also
accelerated efforts to achieve further growth in its environmental and plant business and steel structure andprocess equipment business by adapting these businesses to meet private sector demand rather than maintaining
their previously high degree of dependence on demand from the public sector, and undertaking such measures as
the reallocation of management resources from these divisions to growth business areas in order to addresschanges in the market structure.
The third measure is to enhance the infrastructure for the Company’s internal controls system. The Company has
improved the organizational structure, enabling internal controls to function efficiently by redoubling its efforts incompliance education while working simultaneously to lateralize the headquarter business system.
The fourth measure is improving financial condition. The Company has continued its efforts of last period todiligently control cash flow across the Group and has worked hard to reduce interest-bearing debt.
The fifth measure is to improve human resources development. The Company continues to offer training in suchareas as management strategy and Six Sigma to improve employee skills, and has worked to strengthen Group
integrative capabilities and competitiveness.
These measures enabled it to achieve growth in Group orders for the current period of 8% over the previous period
to a historical high of 603 billion yen, and sales of 551.3 billion yen, a 6% increase year-on-year.
On the profit front, net income for the current period rose 30% compared with last period, to 29.7 billion yen, due toa decrease in extraordinary losses as the Company finished processing a retirement benefit reserve shortage andwriting off significant affiliate losses. This marks an historical high for the third consecutive year.
The Company has set dividends for the current period at 5.0 yen per share, including an interim dividend of 2.5 yen
per share, an increase of 2.0 yen per share year-on-year.
Results for each division are as follows.
Mass-Produced Machinery Segment
The Company achieved steady growth in operating results for the power transmission and control business both
domestically and overseas due to its efforts to expand the business by introducing new products and strengtheningof sales channels and marketing divisions for each country.
The plastics machinery business showed steady growth domestically as a robust automotive industry sustained it,
but declined overall under the influence of slack demand from the overseas IT sector, which was robust last year.
Consolidated Results
6

Consolidated Financial Results for the Full Year Ended March 31, 2006

The Company expanded orders for cryocoolers and precision forged components in the precision control
machinery and components business by improving product quality and productivity, thereby increasing the value tocustomers.
As a result, orders for the division as a whole rose 2% year-on-year to 217.0 billion yen, and sales rose 7% to218.8 billion yen. Operating income decreased by 4% year-on-year to 29.3 billion yen due to increased materials
expenses.

Environmental Protection Facilities, Plants, and Others Segment
The Company was able to sustain its energy plant business at nearly the same level as the last period byimproving its ability to address increasingly stricter client specifications and by increasing sales activities.
The water treatment plant business sustained declines in orders and sales in conjunction with the progressive
switch from primarily public demand to primarily private demand.
As a result, orders for the division as a whole declined 16% year-on-year to 84.3 billion yen, and sales declined 6%
to 82.7 billion yen. Operating income declined 40% year-on-year to 4.3 billion yen.

Ship, Steel Structure and Other Specialized Equipment Segment
Improved marketing through promotion of sales proposals integrating sales and technology led to orders for 11
Aframax tankers for its shipbuilding business, an increase of 3 tankers over last period. The Company booked
sales on 9 tankers delivered.
The steel structure and other process equipment business sustained declines in orders and sales in conjunction
with the progressive switch from primarily public demand to primarily private demand.
As a result, orders for the division as a whole rose 28% year-on-year to 96.7 billion yen, and sales rose 3% to 67.4
billion yen. Operating income was 500 million yen in the red due to price hikes for steel stock.

Industrial Machinery Segment
The initiation of a marketing strategy of researching the market in depth and initiating proposal-based sales thatencompass client needs resulted in an increase in orders for the material handling system.
The Company increased sales for the turbine and pump business, both domestically and overseas, by upgrading
its marketing strategy by client segment, market segment and machinery type, and by stepping up its ability topropose solutions for client concerns.
As a result, orders for the division as a whole rose 14% year-on-year to 68.7 billion yen, and sales rose 4% to 56.1
billion yen. Operating income rose 21% year-on-year to 5.8 billion yen.

Construction Machinery Segment
Both orders and sales for the North American market rose substantially for the Company’s hydraulic excavatorbusiness. This resulted from strengthening its marketing power through technological differentiation and progressin concluding tie-ups with partner companies and Group companies in the U.S.
The Company’s sales efforts unearthed demand for its mobile crane business through successive introductions of
new models that met customers needs, resulting in increases in both orders and sales, primarily to the U.S.
As a result, orders for the division as a whole rose 22% year-on-year to 136.4 billion yen and sales rose 16% to126.4 billion yen. Operating income rose 43% year-on-year to 8.5 billion yen.

Consolidated Results
7

Consolidated Financial Results for the Full Year Ended March 31, 2006

2. Outlook for the Next Fiscal Year
The Company expects the favorable environment for the Group to continue in the next period despite concerns
over a deceleration in the U.S. economy, which has been heretofore expanding. The Company expects domestic
capital spending to remain firm and expects stable growth in the world economy, led by China and Asia. The Groupsees this favorable business environment as a perfect opportunity and will continue management efforts to makegreat strides in achieving the goals of its medium-term management plan, “Leap to Excellence '07”.
(Units: billions of yen)
Consolidated

AmountNon-consolidated

AmountNet sales

570.0

Net sales

265.0

Operating income

53.0

Operating income

20.0

Ordinary income

53.0

Ordinary income

20.0

Net income

31.0

Net income

10.0* The assumed exchange rate is 1 dollar = 110 yen.
Note: Expectations and outlooks for future performance are rational judgments made based on the information
currently available. Therefore, actual results may vary from written expectations and outlooks due to changes invarious factors. Please see Business Risks section for detailed information about those factors.

Consolidated Results8Consolidated Financial Results for the Full Year Ended March 31, 2006

IV. Financial Position
Total assets rose by 9.5 billion yen year-on-year to 579.2 billion yen, with growth in notes receivable and tradeaccounts receivable resulting from steady growth in sales and an increase in market valuation for securities held forlong-term investment. Interest-bearing debt decreased by 43.7 billion yen year-on-year to 125.5 billion yen, due todiligent efforts to repay loans. The shareholder’s equity-to-total assets ratio also showed improvement at 21.7%.
Shareholder’s equity rose 30.6 billion yen year-on-year to 167.7 billion yen, due to strong operating results for thecurrent period.
Cash inflows from operating activities increased by 4.6 billion yen year-on-year to 50.0 billion yen. This increase
was mainly due to an increase in net income before taxes and other adjustments for the current period and to a
decline in trade receivables.
Cash outflows from investment activities increased by 900 million yen year-on-year to 7.0 billion yen, due to factors
such as increased capital spending.
Cash outflows from financing activities increased by 2.3 billion yen year-on-year to 48.8 billion yen, due to loan
repayment efforts.

Cash Flows Indicators
2005

2004

2003

2002

2001

Stockholders’ equity ratio

29.0

24.1

19.7

15.2

13.8

Stockholders’ equity ratio at market value

117.4

44.6

30.7

7.6

8.4

Years to debt redemption

2.5

3.7

2.8

9.3

7.6

Interest coverage ratio

21.0

15.0

19.5

6.3

7.8

Notes:
1.

2.
3.

Indicators calculated using the following formulae.
Stockholders' equity ratio: Stockholders' equity/ Total assets
Stockholders’ equity ratio at market value: Market capitalization/ Total assets
Years to debt redemption: Interest-bearing debt/ Operating cash flow
Interest coverage ratio: Operating cash flows/ Interest payments
All are calculated based on consolidated financial figures.
Interest-bearing debt indicates all liabilities posted in the balance sheets on which the Company pays
interest.

Consolidated Results
9Consolidated Financial Results for the Full Year Ended March 31, 2006

V. Business Risks
The Group's operating results and financial position could be influenced by any of items enumerated below.
Items from the text that concern the future are based on the Group's judgments made at the end of the current
consolidated fiscal year.

(1) Economic conditions
Demand for the capital goods, which comprise the majority of the Group's net sales, is influenced by economic
conditions of the areas within Japan and overseas where the Group conducts its sales.
Therefore, recessions in Japan, Asia, North America, Europe, and other major markets, and the subsequent
reduction in demand for the Group's products, may affect the Group's performance and financial position.

(2) Exchange rate fluctuation
The Group's business activities include production and sales of its products in many countries around the world.
Transactions, including sales, expenses, assets, and liabilities, that are carried out in the local currency of eachcountry are converted to yen in order to prepare consolidated financial statements.
Values of these items in the local currency may not change, however it is possible that the value after conversion to
yen will be affected by the exchange rate at the time of conversion.
Moreover, as of March 31, 2006, dollar denominated back orders, centered on the shipbuilding business, wereabout 1.2 billion dollars.
To minimize the affects of fluctuations in the exchange rate on results, risk hedges such as forward exchange
contracts are used, but it is difficult to remove risk entirely in this way.
As a result, the Group's performance results may be influenced by fluctuations in the exchange rate.

(3) Rise in raw materials prices
Increases in prices of raw materials such as iron, copper, and petroleum that accompanied worldwide businessrecovery have become pronounced, and the Company is concerned about the subsequent rise in the costs of raw
materials necessary for its products.
The Group has endeavored to reduce costs through VE and similar activities, and has attempted to capture rising
raw materials prices in the estimated costs of its products, but it is possible that not all cost increases can beabsorbed, and results may be affected.

(4) Overseas business
The Group works to develop global businesses, particularly in the Mass-Produced Machinery segment and theConstruction Machinery segment, and focuses on markets in North America, Asia, and Europe. In order to increase
overseas demand, it must enhance overseas sales networks, services and production facilities.
However, depending on the country, there are times when political changes and unforeseeable changes in laws
and regulations may influence the market for a particular product. Especially in China, where the market canoverheat due to sudden economic growth, financial regulation may be imposed as part of the application of
investment control measures.
As a result, it is possible that the results of the Group's overseas business activities may be affected.

Consolidated Results
10Consolidated Financial Results for the Full Year Ended March 31, 2006

(5) Product quality
All of the Group's products are manufactured according to an exacting quality standard. None the less, not every
product produced by the Group can be free of defects, and there is no guarantee that situations will not arise inwhich the Group will have to bear the burden of guarantee construction.
In addition, the Group carries product liability compensation insurance, but there is no guarantee that this insurance
will cover all compensation amounts.
If the sums involved in guarantee construction and product liability compensation obligations borne by the Group asa result of problems with product quality are large, then they could have an adverse influence on the Group's
performance results and financial position.

(6) Effects of impairment accounting
On March 31, 2002, the Company revaluated its land used for business purposes in accordance with Japan's Law
Concerning Land Revaluation (Law No. 34, dated March 31, 1998) and Law Amending the Law Concerning Land
Revaluation (Law No. 19, dated March 31, 2001) on the basis.
The difference between the book value of land at the end of the current fiscal year and its value after therevaluation was 21.7 billion yen, a decrease of 21%. If the value of the land further depreciates in the future, there
is a possibility it will register as a depreciation of fixed assets.
When the decrease is registered, it may be reflected in the Group's performance results.

(7) Environmental protection
The Group, in accordance with its Group Environmental Policy, devotes itself to the reduction of environmental
impact, such as by avoiding environmental risks and minimizing waste.
Although the group has an exhaustive system in place to prevent environmental pollution, there is always thepossibility that environmental pollution could occur due to unexpected circumstances.
If environmental pollution were to occur, the large costs involved might affect the Group's performance results.

(8) Disasters
In order to prevent or reduce to the smallest extent possible damages arising from disasters such as fire,
earthquake, typhoon, and storms and flooding, the Group carries out inspections and training and has installed acommunications system.
Nonetheless, physical damages and injuries resulting from disasters may impact the Group's activities.
Moreover, there is no insurance that can provide complete coverage of damages from disasters.

Consolidated Results
11Consolidated Financial Results for the Full Year Ended March 31, 2006

VI. Consolidated Income Statements(Units: millions of yen)
Current Fiscal Year
April 1, 2005 to
March 31, 2006

Amount%Previous Fiscal Year
April 1, 2004 to
March 31, 2005

Amount%Y/Y
ChangeAmountNet sales

551,339

521,31030,029

Cost of sales

434,904

78.9

407,51278.2

27,392Gross profit

116,435

21.1

113,798

21.8

2,636

Selling, general & administrative expenses

68,930Operating income

47,50565,025
8.6

48,773

3,905
9.4(1,269)Non-operating income
Interest income

220

172

48

Dividend income

367

289

78

Equity in earnings of unconsolidated
subsidiaries and affiliated companies

4,303

4,080

223

Other-net

3,305

3,361

(56)

Total Non-operating income

8,195

7,903

292

2,384

2,995

(611)

836

1,074

(238)

Other

4,894

4,753

141

Total Non-operating expenses

8,114

8,823

(708)

81

(920)

1,001

Non-operating expenses
Interest expense
Loss on disposal of property, plant,
equipment and other assets

Non-operating income/loss
Ordinary income

47,585

8.6

47,853

9.2(268)

Extraordinary gains
Gain on sale of securities - net

906

506

400

Amortization of prior service cost

--

2,515

(2,515)Gain on sale of property, plant and equipment net

--

1,575

(1,575)

906

4,597

(3,691)

Extraordinary gains(Units: millions of yen)
Consolidated Results
12Consolidated Financial Results for the Full Year Ended March 31, 2006

Current Fiscal Year
April 1, 2005 to
March 31, 2006

Amount%Previous Fiscal Year
April 1, 2004 to
March 31, 2005

Amount%Y/Y
ChangeAmountExtraordinary losses
Loss on breach of antitrust law

705

--

705

Loss on sale of property, plant and equipment net

686

--

686

Loss on valuation of investment securities

471

--

471

Provision for retirement benefits to directors,
corporate auditors and executive officers

257

488

(232)

Impairment losses

229

--

229

Loss on liquidation of subsidiaries

70

3,053

(2,983)

7

--

7

--

5,584

(5,584)

Loss from business reorganization

--

2,810

(2,810)Loss on sales of property, plant and equipment

--

1,925

(1,925)Extraordinary losses

2,425

13,862

7,478

Income before income taxes

46,066

Corporate income tax current

15,735

13,4152,320

Corporate income tax deferred

135

2,406

(2,271)

Minority interests in consolidated subsidiaries

(454)

26

(479)

Loss on valuation of shares of affiliatedcompanies
Amortization of discrepancies from change instandards for retirement allowanceaccounting

Net income

29,742

8.4

5.4

Consolidated Results
13

38,58822,792

7.4

4.4

7,478

6,949

Consolidated Financial Results for the Full Year Ended March 31, 2006

VII. Consolidated Statements of Stockholders’ Equity(Units: millions of yen)
Term

Current Fiscal Year
April 1, 2005 to
March 31, 2006

Previous Fiscal Year
April 1, 2004 to
March 31, 2005

16,803

16,80052

52

16,80816,803Retained earnings at the beginning of term

42,677

19,848

Increase in retained earnings

30,41923,02729,742

22,792

Increase owing to merger

278

--

Increase from transfer from revaluation reserve forland, net of income taxes to retained earnings

399

235

Decrease in retained earnings

4,248

198

Dividends

3,308

--

42

13

839

--

12

--

--

149

--

35

43

--

4

--

68,84842,677

Item
Capital Surplus
Capital surplus at the beginning of term
Increase in capital surplus
Gain on disposition of treasury stock
Capital surplus at the end of term
Retained earnings

Net income

Bonuses for directors
Decrease attributable to application of UK
subsidiary’s standards for retirement allowanceaccounting
Decrease due to increase in numbers ofconsolidated subsidiaries
Decrease due to decrease in numbers ofconsolidated subsidiaries
Decrease due to increase in numbers ofconsolidated subsidiaries and companies
accounted for by the equity method
Decrease due to decrease in numbers ofconsolidated subsidiaries and companies
accounted for by the equity method
Other
Retained earnings at the end of term

Consolidated Results
14Consolidated Financial Results for the Full Year Ended March 31, 2006

VIII. Consolidated Balance Sheets for the Full Year FY 2006
(Units: millions of yen)
End of Fiscal YearAs of March 31, 2006

End of Fiscal YearAs of March 31, 2005

Y/Y Change

AmountAmountAmountAssetsCash and deposits

43,917

49,636(5,719)Notes and account receivable

158,893

151,618

7,275

Inventories

92,981

88,8594,122

Deferred income taxes

7,844

7,838

6

Other

14,971

20,151(5,180)(794)(1,937)1,143

317,813

316,166

1,647

Buildings and yards

40,91842,046(1,128)

Machinery and equipment

18,881

18,362519

Land114,115

115,536(1,421)

Construction in progress

3,525

1,462

2,063

Other

4,041

3,583

458

Tangible assets

181,480

180,990491

Intangible assets

4,789

3,995

794

Rights to facilities, etc.

4,789

3,995

794

Investment securities

54,972

41,544

13,428

97

391

(294)

Deferred income taxes

7,400

11,498(4,098)Other

14,98520,052(5,066)

Allowance for doubtful accounts(2,302)(4,864)2,562

Investments, long-term loans and otherassets75,152

68,621

6,531

Fixed assets

261,421

253,605

7,816

Total assets

579,233

569,771

9,463

Allowance for doubtful accounts

Current assets

Long-term loans receivable

Consolidated Results
15

Consolidated Financial Results for the Full Year Ended March 31, 2006

(Units: millions of yen)
End of Fiscal YearAs of March 31, 2006

End of Fiscal YearAs of March 31, 2005

Y/Y change

AmountChangeAmountLiabilities
Notes and accounts payable

142,778

134,4398,339

Bank loans

28,18844,883(16,696)

Commercial paper

20,00011,5008,500

Long-term debt within one year

30,52952,471(21,943)

--

1,000

(1.000)Accrued income taxes

9,129

10,720(1,591)

Advance payments received oncontracts

31,976

27,417

4,558

Allowance for guaranteed construction

3,410

2,940

470

45

--

45

33,49324,984

8,509

299,547

310,356(10,809)

Bond

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

36,78749,373(12,587)

22,57820,049

2,529

921

629

292

--

1,881

(1,881)33,50531,055

2,450

4,405

5,444

(1,039)Long-term liabilities

108,195

118,430(10,236)

Total liabilities

407,742428,786(21,044)

Minority interests

3,752

3,829

(77)

Paid in capital

30,87230,872--

Capital surplus

16,80816,803

5

Retained earnings

68,84842,677

26,17142,14245,265(3,123)

10,269

4,476

5,794

Foreign currency translation adjustments(654)(2,741)

2,087

Treasury stock

(544)

(195)

(349)

Total stockholders’ equity

167,740

137,156

30,584

Liabilities, minority interest, andstockholders’ equity

579,233

569,771

9,463

Bond redemption within one year

Allowance for loss on ordered
construction
Other

Current liabilities

Employees’ severance and retirement
benefits
Allowance for retirement benefits todirectors, corporate auditors andexecutive officers
Allowance for loss on liquidation ofsubsidiaries
Deferred income taxes on revaluation
reserve for land
Other

Stockholders’ equity
Common stock:

Revaluation reserve for land, net income
taxes
Unrealized gains on securities, net income
taxes

Consolidated Results
16Consolidated Financial Results for the Full Year Ended March 31, 2006

IX. Consolidated Cash Flow Statements(Units: millions of yen)
Current
Fiscal Year

Previous
Fiscal Year

April 1, 2005 toApril 1, 2004 to

March 31, 2006

March 31, 2005

Income before income taxes

46,066

38,588Depreciation

9,072

9,282

Impairment losses

229

--

Gain on sale of property, plant and equipment - net(89)(1,575)

Loss on sale of property, plant and equipment - net

686

214

Loss on disposal of property, plant and equipment

836

1,074

Cash flows from operating activities

Loss on disposal of property, plant, equipment and other assets

--

1,925

Gain on sale of securities

(906)

(506)

Loss on sale of securities

1

4

Loss on valuation of securities

471

85

Loss from liquidation of subsidiaries

70

3,053

Loss on valuation of subsidiaries’ securities

7--

Loss from reorganization of business

--

2,810

1,315

3,826

292

629

Equity in earnings of unconsolidated subsidiaries and affiliated companies(4,303)(4,080)Decrease in allowances(5,227)(790)

Interest and dividend income

(587)

(461)

Interest expense

2,384

2,995

(Increase) decrease in notes and accounts receivable

3,028(9,483)(Increase) decrease in accrued revenue

6,941(3,497)(1,634)

4,126

Increase in notes and accounts payable

6,533

4,421

Other-net

3,263

3,279

68,451

55,921

Increase in employees’ severance and retirement benefits
Increase in provision for retirement benefits to directors, corporate auditorsand executive officers(Increase) decrease in inventories

Sub-totalInterest and dividend received

679

481

Payments for interest(2,258)(3,023)

Payments for income taxes(16,848)(7,928)50,02345,451

Net cash provided by operating activities

Consolidated Results
17Consolidated Financial Results for the Full Year Ended March 31, 2006

(Units: millions of yen)
Current
Fiscal Year

Previous
Fiscal Year

April 1, 2005 toApril 1, 2004 to

March 31, 2006

March 31, 2005

278

256

(1,295)(2,338)

1,280

2,758

Disbursements for investment in affiliates(1,080)(494)

Proceeds from liquidation of subsidiaries

1,528

65

(11,497)(10,178)

Proceeds from sale of property, plant and equipment

2,202

3,257

Proceeds from refund of investment

1,462

--

Payments for long-term loans receivables

(44)

(344)

Collection of long-term loans receivables

332

936

(190)

(5)

(7,024)(6,087)

Decrease in short-term loans(18,074)(25,355)

Increase in commercial paper

8,500

1,500

Proceeds from long-term debt

17,990

2,930

Repayments for long-term debt

(52,540)(31,916)

Proceeds from issue of bonds--

10,000(1,000)(3,521)

8

4

(352)

(124)

(3,308)

--

(36)

(8)

(48,812)(46,490)343

1

Decrease in cash and cash equivalents(5,470)(7,125)

Cash and cash equivalents at beginning of year

49,10857,678

3

--

215

--

(212)

(1,446)

43,644

49,108Cash flows from investing activities
Decrease in time deposits
Purchase of securities
Proceeds from sale of securities

Payments for purchases of property, plant and equipment

Other-net
Net cash used in investing activities

Cash flows from financing activities

Payment for redemption of bonds
Proceeds from sale of treasury stock
Disbursement for acquisition of treasury stock
Dividends paid
Payment of dividends for minority stockholders
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents

Increase due to new consolidation
Increase due to merger and acquisition
Net decrease from the change in consolidated companies
Cash and cash equivalents at the end of year

Consolidated Results
18Consolidated Financial Results for the Full Year Ended March 31, 2006

Significant Items Forming the Basis for Preparation ofConsolidated Financial Statements
1. Items concerning scope of consolidation
Number of subsidiaries: 88 companies
Names of major consolidated subsidiaries
Sumitomo (S.H.I.) Construction Machinery Co., Ltd., Shin Nippon Machinery Co., Ltd., Seisa Gear, Ltd.,
Sumitomo Heavy Industries Marine & Engineering Co., Ltd., Sumitomo Heavy Industries PTC Sales Co., Ltd.
Sumiju Environmental Engineering, Inc., Link-Belt Construction Equipment Company, Sumitomo Machinery
Corporation of America, and Sumitomo (SHI) Cyclo Drive Germany, GmbH
Non-consolidated subsidiaries (Shin Nichizo Engineering Co., Ltd. etc.) are small companies, and their combined
total assets, sales, net income (amount corresponding to equity holding) and retained earnings (amountcorresponding to equity holding) all have no important impact on consolidated financial statements.

2. Application of equity method
Number of non-consolidated subsidiaries accounted for by equity method: 2 companies
Number of affiliated companies accounted for by the equity method: 7 companies
Names of major companies accounted for by equity method.
Sumitomo Eaton Nova Corporation (Changed its name to SEN Corporation, an SHI and Axcelis Company), andNihon Spindle Mfg. Co., Ltd.
Subsidiaries (Shin Nichizo Engineering Co., Ltd. etc.) and affiliated companies (Toa Koki Co., Ltd. etc.) that are
not accounted for by the equity method have been excluded from the application of the equity method because
they have minimal impact on consolidated net income and consolidated retained earnings, and have little
importance in terms of overall group.

3. Changes in scope of consolidation and application of equity method
During this consolidated fiscal year, in addition to adding SM-Cyclo De Argentina S.A., a company that increased
in importance, to the scope of consolidation, Ohtsuka Machinery Works, Ltd., which was completely liquidated,
and two other companies were removed from the scope of consolidation.
Tatung SM-Cyclo Co., Ltd. was excluded from the application of the equity method because it became a nonaffiliated company after partly selling its shares in this fiscal year.

4. Fiscal years of consolidated subsidiaries
The consolidated overseas companies, Sumitomo Machinery Corporation of America, Link-Belt Construction
Equipment Company, Sumitomo (SHI) Cyclo Drive Germany, GmbH, etc. have a full year consolidated accountsettlement date of December 31. In the case of important transactions, necessary adjustments were made on aconsolidated basis.

5. Accounting standards(1) Valuation criteria and valuation methods for major assets
1) Securities
Bonds held to maturity
Amortized cost method
Other marketable securities
With fair market value ･･･Market value method based on quoted market price on full year consolidated
account settlement date
(Appraisal differences are dealt with by means of the direct capital influx method, with cost of securities
sold calculated with the moving average method.)
Without fair market value ･･･Stated at cost determined by the moving average method
Consolidated Results
19Consolidated Financial Results for the Full Year Ended March 31, 2006

2) Derivatives
Market value method
3) Inventories
Work in process: Principally stated at cost based on specific cost method
Finished products, semi-finished products, raw materials and supplies: Principally stated at cost based on the
total average method
As for products in Construction Machinery segment are principally stated at cost or market, whichever is lower
based on specific cost method.

(2) Methods of depreciation for major depreciable assets
1) Property, plant and equipment
The Company computes depreciation by the declining balance method. Furthermore, as for useful life andresidual value, the standard used is principally the same as the method stipulated in the income tax code.
However, the Company and some consolidated subsidiaries apply the straight-line method to buildings acquired
after April 1, 1998 (excluding equipment belonging to buildings).
2) Intangible fixed assets
Depreciation is computed by the straight-line method. Furthermore, as for useful life and residual value, thestandard used is principally the same as the method stipulated in the income tax code.
However, in the case of software used by the Company itself, the straight-line method based on the period of
possible use within the Company (5 years) is adopted.

(3) Criteria for appropriation of important allowance1) Allowance for doubtful accounts
To prepare s against credit losses, the Company makes additions to this allowance on the basis of loan loss
ratios for standard loans, and on an individual basis for loans considered unlikely to be repaid in full, recording anamount equivalent to that thought to be irretrievable.
2) Allowance for guaranteed construction
In preparation for disbursements for expenses for gratuitous repair made after product delivery, allowances forguarantee construction are recorded based on historical results and the like.
3) Allowance for losses on ordered construction
As for undelivered construction orders for which it is estimated, at the end of the consolidated fiscal year, that
extensive losses are likely to occur after the consolidated fiscal year, and for which a rational estimate of theamount of said losses is possible, the estimated amount of losses that are expected to occur after this full year
are recorded.
4) Employees’ severance and retirement benefits
To provide for employees’ accrued retirement benefits, the Company charged to income the amount recognized
as having been incurred at the end of the consolidated financial period based on the projected amounts of theliability for accrued retirement benefit liabilities and pension assets at the end of the consolidated fiscal year.
Additionally, the Company accounts for past service liability as expenses in the consolidated fiscal year in which
they occurred. Consolidated subsidiaries account for past service liability as expenses calculated by the straightline method, based on a fixed number of years (mainly 12 years) within the average remaining employee service
time when they occurred.
Actuarial differences are amortized on a straight-line basis over a period which falls within the average estimatedremaining years of service (12 years) of the participants commencing the year following.
Consolidated Results
20Consolidated Financial Results for the Full Year Ended March 31, 2006

5) Allowance for retirement benefits to directors, corporate auditors and executive officers
As for accrued retirement benefits to directors and executive officers, the retirement benefits system has beenabolished within the Company and some of its consolidated subsidiaries: the amount recorded as an allowance
for retirement benefits is determined on the basis of compensation commensurate with work performance during
the term of duty.

(4) Procedure of important lease transaction
For financial lease where ownership of leased properties is not recognized to transfer to borrower, an accounting
procedure pursuant to common methods for lease transaction is adopted.

(5) Derivatives and hedging activities
1) Hedge accounting methods
The Company uses deferral hedge accounting. In the case of Interest-rate swaps, if conditions for a special
application are met, the special application is adopted. In addition, as for foreign currency futures contract, if
conditions for appropriation are fulfilled, appropriation treatment is adopted.
2) Hedging measures and hedged items
Hedging instruments

Hedged items

Forward foreign exchange contracts
Interest-rate swaps

Foreign currency-denominated liabilities and planned transactions
Loans3) Hedging policy
Based on the “Market Risk Management Rule” provided for by the board of directors, the Company aims todecrease risks stemming from exchange rate and interest rate fluctuations, and therefore does not engage in any
speculative transactions.
4) Method of evaluating effectiveness of hedging
The fluctuations in the total sum and the quotation for fair value hedging and the fluctuation in the total sum andquotation for cash flows hedging are compared every 6 months, and hedge effectiveness is evaluated based on
the amount of the fluctuation for each.
The Company does not evaluate the effectiveness of hedging interest-rate swaps by special applications.

(6) Other important items forming the basis for preparation of consolidated financial
statements
1) Method of accounting for consumption tax, etc.
The Company adopts the tax exclusion method for consumption and regional consumption tax.
2) Adoption of a consolidated tax payment system
The Company and some of its consolidated subsidiaries have adopted a consolidated tax payment system.

Consolidated Results
21Consolidated Financial Results for the Full Year Ended March 31, 2006

6. Items related to asset and liability valuation of consolidated subsidiaries
The Company uses market value accounting to assess the value of its consolidated subsidiaries’ assets andliabilities.

7. Items related to amortization of consolidation adjustment
Consolidation adjustment is amortized in proportional amounts over a five-year period.
However, smaller amounts are amortized in full when incurred.

8. Items related to treatment of profit appropriation
Consolidated statements of stockholders’ equity are prepared based on the consolidated company’s profit
appropriation determined during the consolidated fiscal year.

9. Fund range in the consolidated statement of cash flows
Cash (cash and cash equivalents) comprise cash in hand, deposits withdrawable at any time, and easily
cashable short -term investment with little risk and maturity date coming within three months from the acquisition
date.

Changes in Accounting Method
Allowances for losses on ordered construction
The recording method has changed: from this consolidated financial period, if there are undelivered construction
orders for which it is estimated, at the end of the consolidated financial period, that extensive losses are likely tooccur after the consolidated financial period, and for which a rational estimate of the amount of the losses ispossible, then the estimated amount of the losses which are expected to occur in the next consolidated fiscal year
and beyond will be recorded under allowances for losses on construction orders.
This change is believed to firmly establish said allowances as accounting practices. It was made in order toimprove financial reporting and to further improve the balancing of period profits and losses.
As a result, in comparison with previous methods, the cost of sales increased by 45 million yen, while operating
income, ordinary income, and net income before taxes and other adjustments were all decreased by the sameamount.
Allowance for retirement benefits to directors, corporate auditors and executive officers
The recording method has changed: previously, retirement benefits for directors at some domestic consolidated
subsidiaries were recorded at the time of retirement. However, this consolidated financial period, the retirement
benefit system is abolished, and the amount recorded for directors’ retirement benefit allowances is determined on
the basis of compensation commensurate with work performance during the term of duty, in the hopes of further
improving financial health.
The sum of 29 million yen incurred this consolidated financial period as a result of this change is recorded under
selling, general, and administrative expenses, and the corresponding sum of 257 million yen from previous fiscal
year is recorded under extraordinary losses.
As a result of the above, in comparison with former methods, operating income and ordinary income eachdecreased by 29 million yen, and net income before taxes decreased by 286 million yen.
Accounting standard for losses on fixed assets
Starting this consolidated financial period, the "Accounting Standards for Losses on Fixed Assets" ("Opinion
Concerning the Establishment of Accounting Standards for Losses on Fixed Assets" (Business Accounting Council,
August 9, 2002) and "Guidelines for Adopting Accounting Standards for Losses on Fixed Assets" (Guidelines for
Adopting Business Accounting Standards No. 6, October 31, 2003)) was adopted.
As a result of the above, net income before taxes and other adjustments posted a decrease of 229 million yen.

Consolidated Results
22Consolidated Financial Results for the Full Year Ended March 31, 2006

Notes to the Consolidated Balance Sheet(Units: millions of yen)Previous Fiscal Year

Current Fiscal Year
1. Total depreciation on
tangible fixed assets
2. Pledged assets andsecured obligations
Pledged assets

166,854

1. Total depreciation on
tangible fixed assets

164,541

39,742

2. Pledged assets andsecured obligations
Pledged assets

40,101

Secured obligations

5,364

Secured obligations

7,940

3. Discount on notes
receivable90

3. Discount on notes
receivable338

4. Notes on revaluation of land
The Company revaluated its land for business use on March 31, 2002, in accordance with the Law on
Land Revaluation (Public Law No. 34; March 31, 1998) and the law revising part of the Law on Land
Revaluation (Public Law No. 19; March 31, 2001).
The taxable amount on the difference arising from revaluation is recorded under liabilities as “deferred tax
liability for revaluation” in accordance with law partially revising the Law on Land Revaluation (Public Law
No. 24; March 31, 1999). The amount netting this out is recorded under capital as “discrepancy from land
revaluation.”
Revaluation method:
Land values are calculated by rationally adjusting the tax valuation on fixed assets as stipulated in Clause
2, No. 3 of the Law on Land Revaluation (Public Law No. 119; March 31, 1998). However, some land
values are calculated in accordance with an appraisal performed by a real estate appraiser as stipulated
in No. 5 of the same law.
Revaluation carried out on March 31, 2002
Difference between market value of reassessed land at end of current fiscal year and book value after
revaluation.
Current Fiscal Year
(21,692) million yen

Previous Fiscal Year
(19,152) million yen

5. Guaranteed obligations
Current Fiscal Year
Guaranteed obligations

Previous Fiscal Year5,922 million yen

6,970 million yen-- million yen

194 million yen

Total

5,922 million yen

7,164 million yen(of which, Group’s obligation)

5,822 million yen

7,042 million yen

Commitment to guarantee

Consolidated Results
23Consolidated Financial Results for the Full Year Ended March 31, 2006

6. Consolidation adjustments included in other fixed liabilities
Current Fiscal Year

Previous Fiscal Year

1,120 million yen

1,615 million yen

Notes to the Consolidated Statement of Income
R&D costs included in SG&A and net manufacturing costs
Current Fiscal Year

Previous Fiscal Year7,441 million yen

6,317 million yen

The Company recorded the following impairment loss in the current consolidated period.
Application
Idle

Category
Land

Location
Kurashiki-shi,
Okayama prefecture

Amount229 million yen

The above-mentioned land was previously held as company housing for employees, but the housing has since
been dismantled, and it has become an idle asset.
There was no utilization plan, and, due to depreciation of the value of the land, it has been recorded as an
impairment loss.
To make the impairment loss decision, business segments are as the basis, and, as idle property for which future
use is not anticipated, it is grouped as an individual real estate unit.
Furthermore, the collectable amount is calculated using the net sales worth, while the value of idle assets is
calculated based on the real estate appraisal report.

Consolidated Results24Consolidated Financial Results for the Full Year Ended March 31, 2006

X. Marketable Securities
Current Fiscal Year
1) Other marketable securities with market value(As of March 31, 2006)(Units: millions of yen)
Acquisition
Price

Value on the
Balance Sheets

Difference

8,500

25,674

17,174

203

191

(11)

8,703

25,865

17,162Items on the consolidatedbalance sheet that exceed theacquisition cost
Stock
Items on the consolidatedbalance sheet that do not
exceed the acquisition cost
Stock
Total

2) Other marketable securities that were sold in the fiscal year
(April 1, 2005 to March 31, 2006)(Units: millions of yen)Amount soldTotal proceeds from sale of securities

Total loss on sale of securities

1,251

906

1

3) Other marketable securities without market value (As of March 31, 2006)(Units: millions of yen)
Value on the Consolidated Balance Sheets
Bonds held to maturity
Unlisted bond

10
10

Total
Other marketable securities
Unlisted stock
Other

4,266
1,011
5,277

Total

4) Redemption schedule for other marketable securities held to maturity(As of March 31, 2006)(Units: millions of yen)
Category

Within one year

Over one year
within five years

Over five years
within ten years

Over ten years

Bonds
Corporate bonds

--

10

--

--

Total

--

10

--

--

Consolidated Results
25Consolidated Financial Results for the Full Year Ended March 31, 2006

Previous Fiscal Year
1) Other marketable securities with market value (As of March 31, 2005)(Units: millions of yen)
Acquisition
Price

Value on the
Balance Sheets

Difference

8,218

15,705

7,487

14

13

(2)

8,232

15,717

7,486

Items on the consolidatedbalance sheet that exceed theacquisition cost
Stock
Items on the consolidatedbalance sheet that do not
exceed the acquisition cost
Stock
Total

2) Other marketable securities that was sold in the fiscal year (As of March 31, 2005)(Units: millions of yen)Amount soldTotal proceeds from sale of securities

Total loss on sale of securities

2,059

506

4

3) Other Marketable Securities without market value (As of March 31, 2005)(Units: millions of yen)
Value on the Consolidated Balance Sheets
Bonds held to maturity
Unlisted bond

10
10

Total
Other marketable securities
Unlisted stock
Other

4,775
1,024
5,800

Total

4) Redemption schedule for other marketable securities held to maturity(As of March 31, 2005)(Units: millions of yen)
Category

Over one year
within five years

Within one year

Over five years
within ten years

Over ten years

Bonds
Corporate bonds

--

10

--

--

Total

--

10

--

--

Consolidated Results
26Consolidated Financial Results for the Full Year Ended March 31, 2006

XI. Items Related to Retirement Benefits
1. Outline of Retirement Benefit Accounting System
The Company uses concurrently a one-time severance pay system and a defined benefit pension system.
Domestic consolidated subsidiaries and some overseas consolidated subsidiaries have established qualified
pension systems and one-time severance pay systems as their defined benefit systems.

2. Retirement Benefit Liabilities(Unit: millions of yen)
Current Fiscal Year(Ended March 31, 2006)

Previous Fiscal Year(Ended March 31, 2005)(66,830)
50,352(16,478)(6,051)
4(22,525)53(22,578)(61,494)
32,167(29,327)
9,187
161(19,979)70(20,049)(1) Retirement benefit liabilities(2) Pension assets(3) Subtotal (1+2)(4) Variances due to unrecognized calculations(5) Unrecognized past service liabilities(6) Total (3+4+5)(7) Prepaid pension expenses(8) Accrued retirement benefits (6-7)

3. Retirement Benefit Expenses(Unit: millions of yen)
Current Fiscal Year(Ended March 31, 2006)

Previous Fiscal Year(Ended March 31, 2005)

3,152
1,439
(410)

3,898
1,412
(316)

--

5,584

1,558

1,364

8

(2,444)

5,747

9,499

(1) Work-related expenses*(2) Interest expenses(3) Expected return on investments(4) Expenses incurred through change inaccounting standards(5) Expenses incurred through actuarial
differences(6) Expenses incurred through past service
liabilities(7) Retirement benefit expenses(1+2+3+4+5+6)* Note: The retirement benefit expenses of consolidated subsidiaries using the simplified method are included in(1) Work-related expenses.

Consolidated Results27Consolidated Financial Results for the Full Year Ended March 31, 2006

4. Basis of Calculations Pertaining to Retirement Benefit Liabilities
Current Fiscal Year(Ended March 31, 2006)

Previous Fiscal Year(Ended March 31, 2005)(1) Retirement benefit predictions made withthe allocation method

Term fixed amount basis

Term fixed amount basis(2) Discount ratio

Approximately 2.0%

Approximately 2.0%

(3) Expected rate of return on investments

Approximately 1.5%

Approximately 1.5%

(4) Number of years to amortize accounting
standards

Approximately 5 years

Approximately 5 years(5) Number of years to amortize actuarial
differences

Approximately 12 years

Approximately 12 years(6) Amortized period of past service liabilities

Approximately 12 years

SHI: Approximately 1 year

Consolidated Results
28

Consolidated subsidiaries:
Approximately 12 years

Consolidated Financial Results for the Full Year Ended March 31, 2006

XII. Items Related to Tax Effective Accounting(Unit: millions of yen)
Current period(Ended March 31, 2006)

Previous period(Ended March 31, 2005)

1. Breakdown of deferred tax assets and deferred
tax liabilities by principal cause of accrual

1. Breakdown of deferred tax assets and deferred
tax liabilities by principal cause of accrual

Deferred tax assets

Deferred tax assets

756

Excess over provision limit forbonus allowance
Excess over provision limit for
default allowance
Excess over provision limit forguaranteed construction allowance
Disapproved retirement benefit
allowances
Disapproved inventory asset
valuation losses

Unrealized inventory asset profit

1,077

Unrealized inventory asset profit

961

Disapproved valuation losses oninvestment securities and stock ofaffiliates

2,880

Disapproved valuation losses oninvestment securities and stock ofaffiliates

2,660

Disapproved depreciation excess

676

Disapproved depreciation excess

658

Excess over provision limit forbonus allowance
Excess over provision limit for
default allowance
Excess over provision limit forguaranteed construction allowance
Disapproved retirement benefit
allowances
Disapproved inventory asset
valuation losses

3,058
1,442
1,339
14,041

2,895
3,763
1,199
13,323771

Loss carried forward

3,532

Loss carried forward

3,746

Other

3,396

Other

3,146

Deferred tax assets subtotal

32,196

Deferred tax assets subtotal

33,123

Valuation allowance(6,930)

Valuation allowance(9,621)

Total deferred tax assets

25,266

Total deferred tax assets

23,502

Deferred tax liabilities
Condensed book entry reserve
funds
Other securities valuationdifferential
Valuation differential on market
price valuation of all consolidated
subsidiaries
Retained earnings of overseas
subsidiaries
Overseas subsidiary premium
amortization expense
Other

Deferred tax liabilities(527)

Condensed book entry reserve
funds
Other securities valuationdifferential
Valuation differential on market
price valuation of all consolidated
subsidiaries
Retained earnings of overseas
subsidiaries
Overseas subsidiary premium
amortization expense

(38)

Other

(147)
(6,980)(1,849)(1,851)(206)(2,926)(1,391)
(508)
(415)
(97)

Total deferred tax liabilities(11,392)

Total deferred tax liabilities(5,544)

Net deferred tax assets

13,874

Net deferred tax assets

17,958

Consolidated Results
29Consolidated Financial Results for the Full Year Ended March 31, 2006

2. Breakdown of principal causes of corporate tax
and other liabilities ratio after application of legal
effective tax rate and tax effect accounting
Legal effective tax rate
(adjusted)

40.69%

Entertainment expenses andother items not included inlosses1.56%

Per capital inhabitance tax

0.46%

Dividends received and otheritems not included underpermanent revenue(1.64)%

Consolidated eliminations ofdividends received

0.47%

Equity method investment
profit/ loss

(2.69)%

Amortization of consolidated
adjustment accounts(0.51)%

Retained earnings of overseas
subsidiaries

2.92%

Decrease of valuation
allowance(5.82)%

Other(0.97)%

Corporate tax and other liability
ratio after application of tax effectaccounting

2. Breakdown of principal causes of corporate
tax and other liabilities ratio after applicationof legal effective tax rate and tax effectaccounting
Because the difference between the corporate tax
and other liability ratio (after application of thelegal effective tax rate and tax effect accounting)and the legal effective tax rate is less than 5% of
the latter, the entry has been omitted.

34.45%

Consolidated Results
30Consolidated Financial Results for the Full Year Ended March 31, 2006

XIII. Segment Information
1. Segment Information by BusinessCurrent Fiscal Year (April 1, 2005 to March 31, 2006)(Units: millions of yen)Segment

Consolidation

A

B

C

D

E

Total

218,798

82,74067,372

56,054

126,375

551,339--551,339

2,059

2,902

421

335

56

5,774

(5,774)--

220,857

85,642

67,79456,389126,431557,113(5,774)551,339

191,519

81,36568,27350,542

117,898

509,598(5,763)503,834

29,338

4,277

(479)

5,847

8,533

47,515(10)

47,505217,048

78,41789,54944,328106,618535,961

43,273579,233

Depreciation

4,722

975

1,355

609

1,411

9,072

--

9,072

Capitalexpenditure

5,316

1,458

1,206

1,010

1,295

10,285--

10,285F

Item
I. Net sales andoperatingincome/loss
Net sales(1) Sales toexternalcustomers(2) Internal sales
betweensegments or
exchanges
Total
Operatingexpenses
Operatingincome/loss
II. Assets,
depreciation andcapitalexpenditure
AssetsSegments:
A: Mass-Produced Machinery
B: Environmental Protection Facilities, Plants & Others
C: Ship, Steel Structure & Other Specialized Equipment
D: Industrial Machinery
E: Construction Machinery
F: Cancellation or general

Consolidated Results
31Consolidated Financial Results for the Full Year Ended March 31, 2006

Previous Fiscal Year (April 1, 2004 to March 31, 2005)(Units: millions of yen)Segment

Consolidation

A

B

C

D

E

Total

205,091

87,93765,28854,008108,985

521,310--

521,310

1,253

2,653

553

397

69

4,926

(4,926)--206,345

90,591

65,84254,405

109,054526,236(4,926)521,310

175,930

83,49765,36449,571103,093

477,454(4,917)472,537

30,415

7,094

478

4,834

5,961

48,782(9)

48,773

220,286

83,42891,635

48,134

100,585

544,067

25,704

569,771

Depreciation

4,896

935

1,397

597

1,458

9,282

--

9,282

Capitalexpenditure

4,126

842

1,174

375

1,658

8,175

--

8,175

F

Item
I. Net sales andoperatingincome/loss
Net sales(1) Sales toexternalcustomers(2) Internal sales
betweensegments or
exchanges
Total
Operatingexpenses
Operatingincome/loss
II. Assets,
depreciation andcapitalexpenditure
AssetsSegments:
A: Mass-Produced Machinery
B: Environmental Protection Facilities, Plants & Others
C: Ship, Steel Structure & Other Specialized Equipment
D: Industrial Machinery
E: Construction Machinery
F: Cancellation or general
Notes:
1. Business segment depends on sales total segment
2. Main products of each business segment
Businesses
Mass-Produced Machinery

Environmental Protection Facilities,
Plants & Others
Ship, Steel Structure & Other Specialized
Equipment
Industrial Machinery
Construction Machinery

Main Products
Power Transmission Equipment, Plastic Injection Molding Machines,
Laser Processing Systems, Defense Equipment, Cryogenic
Equipment, Precision XY Stages, Cyclotrons for Medical Use
Water and Sewage Treatment Systems, Industrial Waste Treatment
Facilities, Chemical Process Equipment & Plants, Software, Real
EstateShips, Bridge & Steel Structures
Forging Machines, Material Handling Systems, Turbines, Pumps
Hydraulic Excavators, Mobile Cranes

3. The amount of total assets included in “Cancellation or general” was 63,785 million yen for the current
consolidated fiscal year and 65,355 million yen for the previous consolidated fiscal year. Principal items are thoserelated to operating funds (cash and deposits) and long-term investment funds (investment securities).
Consolidated Results
32Consolidated Financial Results for the Full Year Ended March 31, 2006

4. Changes in Accounting Method
Allowances for losses on ordered construction
The recording method has changed: from this consolidated fiscal year, if there are undelivered construction orders
for which it is estimated, at the end of the consolidated fiscal year, that extensive losses are likely to occur after the
consolidated financial period, and for which a rational estimate of the amount of the losses is possible, then theestimated amount of the losses which are expected to occur in the next consolidated fiscal year and beyond will berecorded under allowances for losses on construction orders.
As a result, in comparison with former method, “Industrial Machinery segment” operating expenses and operating
losses each increased by 45 million yen.
Accrued retirement benefits to directors and executive officers
The recording method has changed: previously, retirement benefits for company officers at some domestic
consolidated subsidiaries were recorded at the time of retirement. However, this consolidated financial period, theretirement benefit system is abolished, and the amount recorded for company officer retirement benefit allowances
is determined on the basis of compensation commensurate with work performance during the term of duty, in thehopes of further improving financial health.
As a result of the above, in comparison with former method, operating expenses increased by 29 million yen, andoperating income decreased by the same amount.
Effect by segment is as follows.
(Units: millions of yen)Segment
Item

Increase inoperating income or
Decrease inoperating loss

MassProduced
Machinery

Environmen
talProtection
Facilities,
Plants &Others

Ship, Steel
Structure &OtherSpecialized
Equipment

Industrial
Machinery

9

5

3

3

9

29

9

5

3

3

9

29

Consolidated Results
33

Construction
Machinery
Total

Consolidated Financial Results for the Full Year Ended March 31, 2006

2. Segment Information by Geographical Area
Current Fiscal Year (April 1, 2005 to March 31, 2006)(Units: millions of yen)Segment
Japan
Item

North
America

Others

Total

Cancellati o n o r
generalConsolidation

Net sales(1) Sales to externalcustomers(2) Internal sales
between segments or
exchanges

465,769

56,672

28,898551,339--551,339

28,053856

2,894

31,803(31,803)

--

Total

493,82257,52831,792

583,142(31,803)551,339

Operating expenses

452,275

53,17629,984535,436(31,601)

503,834

Operating income

41,547

4,352

1,808

47,706(202)

47,505

Assets471,752

37,707

21,763531,223

48,011

579,233

Previous Fiscal Year (April 1, 2004 to March 31, 2005)(Units: millions of yen)Segment
Japan
Item

North
America

Others

Total

Cancellati o n o r
generalConsolidation

Net sales(1) Sales to externalcustomers(2) Internal sales
between segments or
exchanges

458,947

39,53522,829521,310--

521,31023,920872

2,894

27,685(27,685)

--

Total

482,867

40,40625,723548,996(27,685)

521,310

Operating expenses

437,675

38,39023,963500,027(27,490)

472,537

Operating income

45,192

2,017

1,760

48,968(195)

48,773

Assets470,361

31,92518,509520,796

48,975569,771

Notes:
1. Countries and regions classified by geographical proximity.
2. Countries and regions belonging to each classification:
North America: USA, and Canada
Others: UK, Germany, Singapore, and China
3. The amount and principal items of ”Cancellation or general” are identical to those in 1. Segment Information by
Business, Note 3.
4. Changes in Accounting Method
Allowances for losses on ordered construction
The recording method has changed: after this consolidated financial period, if there are undelivered construction
orders for which it is estimated, at the end of the consolidated financial period, that extensive losses are likely tooccur after the consolidated financial period, and for which a rational estimate of the amount of the losses is
Consolidated Results
34Consolidated Financial Results for the Full Year Ended March 31, 2006

possible, then the estimated amount of the losses which are expected to occur after the first half will be recorded
under allowances for losses on construction orders.
As a result, in comparison with former method, operating expenses for "Japan" increased by 45 million yen, andoperating income decreased by the same amount.
Accrued retirement benefits to directors and corporate officers
The recording method has changed: previously, retirement benefits for company officers at some domestic
consolidated subsidiaries were recorded at the time of retirement. However, this consolidated financial period, theretirement benefit system is abolished, and the amount recorded for company officer retirement benefit allowances
is determined on the basis of compensation commensurate with work performance during the term of duty, in thehopes of further improving financial health.
As a result of the above, in comparison with former method, operating expenses for "Japan" increased by 29
million yen, and operating income decreased by the same amount.

Consolidated Results
35Consolidated Financial Results for the Full Year Ended March 31, 2006

3. Overseas Sales
Current Fiscal Year (April 1, 2005 to March 31, 2006)(Units: millions of yen)North
AmericaI. Overseas sales

Asia

94,90373,514

Others
61,889II. Consolidated sales
III. Overseas sales ratio（％）

Total
230,306
551,339

17.2

13.3

11.2

41.8

Previous Fiscal Year (April 1, 2004 to March 31, 2005)(Units: millions of yen)North
AmericaI. Overseas sales

Asia

78,471

63,126

Others56,211

II. Consolidated sales
III. Overseas sales ratio（％）

Total
197,807521,310

15.1

12.1

10.8

37.9

Notes:
1. Countries and regions classified by geographical proximity.
2. Countries and regions belonging to each classification:
North America: USA, and Canada
Asia: Singapore, and China
Others: UK, and Germany
3. Sales are from the Company and subsidiaries’ countries and regions other than Japan.

XIV. Transactions with Related Parties
Not applicable as there were no transactions with related parties in either the current or previous fiscal year.

Consolidated Results
36Consolidated Financial Results for the Full Year Ended March 31, 2006

XV. Orders, Sales and Balance of Orders by Segment
Orders received(Units: millions of yen)
April 1, 2005 to
March 31, 2006

April 1, 2004 to
March 31, 2005

Amount%Amount%Amount%216,97436.0

213,123

38.0

3,851

1.8

84,28314.0

100,34317.9(16,060)(16.0)

96,66016.0

75,72513.5

20,935

27.6

Industrial Machinery

68,693

11.4

60,012

10.7

8,681

14.5

Construction Machinery

136,38522.6

111,52919.9

24,857

22.3

Total

602,995

100.0

560,731100.0

42,2647.5

B u s i n e s s e s

Mass-Produced Machinery
Environmental Protection Facilities,
Plants & Others
Ship, Steel Structure & Other
Specialized Equipment

Sales

Y/Y Change(Units: millions of yen)
April 1, 2005 to
March 31, 2006

April 1, 2004 to
March 31, 2005

Amount%Amount%Amount%218,79839.7

205,091

39.3

13,706

6.7

82,74015.0

87,93716.9(5,197)(5.9)

67,372

12.2

65,288

12.5

2,084

3.2

Industrial Machinery

56,05410.2

54,008

10.4

2,045

3.8

Construction Machinery

126,375

22.9

108,985

20.9

17,390

16.0

Total

551,339100.0

521,310100.0

30,0295.8

B u s i n e s s e s

Mass-Produced Machinery
Environmental Protection Facilities,
Plants & Others
Ship, Steel Structure & Other
Specialized Equipment

Balance of orders received

Y/Y Change(Units: millions of yen)
April 1, 2005 to
March 31, 2006

April 1, 2004 to
March 31, 2005

Amount%Amount%Amount

%66,332

18.0

67,78721.4(1,455)(2.1)

73,53619.9

71,994

22.7

1,543

2.1

151,936

41.2

122,648

38.7

29,28823.9

Industrial Machinery

55,70415.1

43,064

13.6

12,63929.4

Construction Machinery

21,5185.8

11,507

3.6

10,010

87.0

Total

369,025100.0

317,000

100.0

52,02516.4

B u s i n e s s e s

Mass-Produced Machinery
Environmental Protection Facilities,
Plants & Others
Ship, Steel Structure & Other
Specialized Equipment

Consolidated Results
37

Y/Y Change

Consolidated Financial Results for the Full Year Ended March 31, 2006

Important Subsequent Events
The Company and its consolidated subsidiary SEISA Gear, Ltd. decided at a board of directors meeting held byboth companies on May 10, 2006, that Seisa would become the Company’s wholly-owned subsidiary. Accordingly,
the two companies agreed on an equity swap contract. This equity swap will be carried out through a simple equity
swap in accordance with Clause 796, No. 3 of the Company Act.
The equity swap can be summarized as follows:

1. Name of company to be acquired(1) Name of company to be acquired
SEISA Gear, Ltd.
(2) Business of company to be acquired
Manufacture and sale of gears, speed change gears, speed reducers and couplings(3) Primary reasons for equity swap
Seisa manufactures and sells gears, speed change gears, worm speed reducers, planetary speed reducers andcouplings. The Company is currently concerned with reinforcing the competitiveness of its products to meet diverse
customer needs, and must invest in capital, develop technology and utilize its global sales network to expand its
sales on a global basis. Accordingly, the Company has determined that it must develop a system that canconstructively use the Group’s technology, personnel and other resources.
(4) Date equity swap takes place: October 1, 2006 (provisional)(5) Legal form of corporate consolidation: Stock swap(6) Company name after consolidation: Sumitomo Heavy Industries, Ltd.
(7) Ratio of voting rights to be acquired: 51.2％ (of which, 4.8% are held indirectly)

2. Swap ratio by type of stock(1) Swap ratio by type of stock and method for calculating
The Company has entrusted calculation of the stock swap ratio to Daiwa Securities SMBC Co., Ltd., and Seisa has
entrusted this role to Nomura Securities Co., Ltd. The two companies have discussed the results of thesecalculations and agreed on the method as shown below.
Sumitomo Heavy
Industries, Ltd.
1

Seisa Gear, Ltd.

Stock swap ratio
0.36
Note:
1) Ratio of stock allocation
For every common share in Seisa, 0.36 common shares in the Company are allocated.
However, the common shares that the company holds in Seisa (8,200,000) will not be allocated.
2) Calculation method and calculation basis by third party
Daiwa Securities SMBC analyzed the Company and Seisa using the market share price method and thediscounted cash flow method and considered the results of both of these methods in calculating the equity
swap ratio.
Nomura Securities used the market share price method to assess the Company and the market share priceaverage method, the analogous corporation comparison method and the discounted cash flow method for
Seisa. Nomura Securities then considered the results of all of these methods to calculate the equity swap ratio.
(2) Number of shares to be granted and valuation amount
Number of shares to be granted: 3,100,809 common shares
The valuation amount will be the issuance price calculated based on the average share price during a logicalperiod prior to the day on which the main requirements agreed on for the equity swap multiplied by the
aforementioned number of shares.
Consolidated Results
38