Sumitomo Heavy Industries, Ltd.
1Q CONSOLIDATED FINANCIAL REPORTFor the First Quarter ended June 30, 2006

Note: 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 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 this financial statement have been rounded down to the nearest million yen.

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

SUMMARY OF CONSOLIDATED FINANCIAL STATEMENTS
For the First Quarter ended June 30, 2006
Presented July 28, 2006

Sumitomo Heavy Industries, Ltd.
Listed Exchanges

Tokyo Stock Exchange, Osaka Securities Exchange

Stock Code6302

Head OfficeTokyo

President

Yoshio Hinoh

URL

www.shi.co.jp

Inquiries

Hideo Ohshima,
General Manager, Corporate Communications Dept.

Telephone+81 3 5488 8219

1. Matters related to preparation of quarterly financial information(1) Adoption of simple accounting treatment methods
Based on standards for preparation of interim term consolidated financial statements, the Company uses fixed simple
procedures to the extent that they do not cause substantial errors in the judgment of investors and other interested
persons.
(2) Changes in accounting policy since the most recent consolidated accounting period
None(3) Changes in the scope of consolidation and application of equity method:
Consolidated subsidiaries:

New

2

Removed1

Equity method:New

0Removed01

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

2. FY 2006 - 1Q Consolidated Results (April 1, 2006 to June 30, 2006)(1) Business Results(Units: millions of yen)Three Months

Previous Three Months

Previous Full Term

April 1 to June 30, 2006 April 1 to June 30, 2005

April 1, 2005
to March 31, 2006

% change

Net Sales% change

125,82721.1

103,867(5.1)

551,339

Operating Income

9,583

54.5

6,202

(20.8)

47,505

Ordinary Income

9,831

53.0

6,425

(19.7)

47,585Net Income

6,597

48.6

4,441

5.2

29,742Net Income per Share (yen)Fully Diluted Net Income per Share

10.97

7.38

49.45

--

--

--

*Note: Percentages for net sales, operating income, ordinary income and net income represent year-on -yearchanges.
(2) Financial Position(Units: millions of yen)
End of First QuarterEnd of Previous
First QuarterEnd of Previous
Full YearAs of June 30, 2006

As of June 30, 2005

As of March 31, 2006

Total Assets

561,526

555,129579,233

Net Assets

174,406

137,771

167,740

30.5

24.8

29.0

290.14229.01279.02Equity Ratio (%)
Net Assets per Share (yen)*Note: Net assets in the previous first quarter ended June 30 2005 and the fiscal year ended March 2006 do notinclude profit/loss on deferred hedge and minority interests.

3. FY 2006 Consolidated Forecasts (April 1, 2006 to March 31, 2007)
Half Year
April 1, 2006 to Sept. 30, 2006

(Units: millions of yen)
Full Year
April 1, 2006 to March 31, 2007

Net Sales

260,000

570,000

Ordinary Income

19,50053,000Net Income

12,50031,000*Note: (1) Projected net income per share for FY2006 (ending March 31, 2007): .....................................51.57 yen

Consolidated Forecasts for the Full Year
There is no change in the forecasts announced May 10, 2006
*Note: Forecasts of future operating results represent the Company's rational judgment based on information
available as of the release date. Consequently, actual results may differ from the forecasts because ofchanges in various factors, such as variations in the economic environment of the principal markets andproduct demand, currency exchange rate variations and domestic and overseas regulation.

2

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

Consolidated Business Results
Japan’s economy continued to expand steadily during the first quarter, despite concerns over the sustained high levelof crude oil and raw material prices. The trend of economic expansion overseas also remained firm without any
significant change, particularly for the U.S. and China.

The Company is targeting sustained growth in “Leap to Excellence ’07”, the Company’s medium-term plan launchedlast fiscal year, based on this economic environment. The Company has achieved operating results virtuallyaccording to plan this quarter and were able to sustain the steady business operations of last period.

Although orders for the ship, steel structure and other specialized equipment businesses were sluggish, growth inorders for material handling systems, turbines, and pumps in the industrial machinery segment and strong exports forthe construction machinery segment, primarily to North America, resulted in an 18% year-on-year increase to 169.6
billion yen.

Sales rose for all segments, rising 21% overall compared with the same period last year to 125.8 billion yen, due inpart to strong growth in orders for the industrial machinery segment, which increased 55% year-on-year.

Income rose in line with sales. Operating income rose 55% year-on-year to 9.6 billion yen, ordinary income rose 53%
year-on-year to 9.8 billion yen, and net income rose 49% year-on-year to 6.6 billion yen.

Results for each segment are as follows.
Mass - Produced Machinery
The power transmission and controls business posted strong results, primarily for overseas markets. The precisioncontrol equipment and component business was strong both domestically and overseas, recording year-on-year
growth in both orders and sales.

This resulted in 13% year-on-year growth in orders for the entire division to 58.8 billion yen and sales of 50.1 billion
yen, a 6% year-on-year increase. Operating income was 5.5 billion yen.
Environmental Protection Facilities, Plants, and Others
Business for environmental protection facilities and plants remained solid with orders for two CFB boiler generatorsdeveloped by the Company. Overall orders for the division consequently rose 20% year-on-year to 30.2 billion yen
and sales rose 19% year-on-year to 14.1 billion. An operating loss of 0.4 billion yen was posted due to the impact ofrising prices for raw materials, among other factors.
Ship, Steel Structure and Other Specialized Equipment
Orders for the shipbuilding business declined with orders for two Aframax tankers, a decrease of one tanker from thesame period last year. Sales likewise recorded a year-on-year decline with the transfer of one tanker.

Further cost reductions achieved for steel structures and other specialized equipment contributed to improved income.

3

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

Orders for the entire division consequently declined 10% year-on-year to 22.6 billion yen, sales rose by 33% year-onyear to 11.0 billion yen, and an operating income of 0.1 billion yen was posted.
Industrial Machinery
This period launched with a strong start as the Company secured higher than expected orders for both the material
handing systems and turbine and pump businesses. The Company also improved profitability as the Company
continued to enhance the Company’s cost competitiveness.

Orders for the entire division consequently rose 63% year-on-year to 20.9 billion yen, sales rose 55% year-on-year to
15.1 billion yen, and operating income was 1.7 billion yen.

Construction Machinery
Overseas sales continued to record strong growth in addition to strong growth in the Company’s domestic market
share for the hydraulic excavator business. Both sales and income for construction cranes recorded robust growthover the same period last year as the North American market remained strong.

Orders for the entire division consequently rose 31% year-on-year to 37.1 billion yen, sales rose 33% year-on-year to35.5 billion yen and operating income was 2.6 billion yen.

Consolidated Financial Position
Total assets were 561.5 billion yen, representing a decline of 17.7 billion yen over the end of last period. This resulted
from a 12.6 billion yen increase in inventory and declines of 25.5 billion yen for notes and accounts receivable, and4.6 billion yen in cash and deposits. The balance of interest-bearing debt declined by 20.7 billion yen over the end oflast period to 104.8 billion yen, representing a 3.0% improvement in the debt-to-asset ratio over the end of last period
to 18.7%. Shareholders’ equity to total assets was 30.5%.

4Consolidated Results for the First Quarter
Fiscal Year ending March 2007

I.

Quarterly Consolidated Income Statements (Summary)(Units: Millions of Yen)
Previous
Three Months

Three Months

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

ChangeApril 1, 2006 toJune 30, 2006
AmountApril 1, 2005 toJune 30, 2005%

Amount%AmountAmount%Net sales

125,827100.0

103,867

100.0

21,960551,339

100.0

Cost of Sales

98,514

78.3

81,34778.3

17,167434,904

78.9

Gross profit

27,31321.7

22,520

21.7

4,793

116,435

21.1

1,412

68,9303,381

47,505

Selling, general &administrative
expenses
Operating income

17,7309,583

16,318

7.6

6,202

6.0

8.6

Non-operating
Income:Interest income anddividend income

299

214

85

587

Other

1,353

1,438

(85)

7,608

Total non-operating
Income

1,652

1,652

(0)

8,195

Non-operating
expenses:
Interest expenses

438

652

(215)

2,384

Other

967

777

190

5,730

1,404

1,429

(25)

8,114

Non-operating
income/loss

247

223

24

81

Ordinary income

9,831

3,406

47,585Extraordinary gains

294

--

294

906

--

227

(227)

2,425

3,927

46,066

Total Non-operating
expenses

Extraordinary
lossesIncome before tax
and adjustments
Corporate income
taxes
Loss (Gain) of
minority shareholders
Net income

10,125

7.8

8.0

6,425

6,198

6.2

6.0

3,368

1,664

1,704

15,871

(160)

(93)

(67)

(454)

2,156

29,742

6,597

5.2

4,441

5

4.3

8.6

8.4

5.4

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

II. Quarterly Consolidated Balance Sheets (Summary)
End of First Quarterc

As ofJune 30, 2006

End of Previous
Fiscal Year
As of
March 31, 2006

Y/Y change(Units: Millions of Yen)
End of Previous
First Quarter
As ofJune 30, 2005

AssetsCash and deposits
Notes and accountreceivable
Inventories
Other
Allowance for doubtful
accounts

39,30943,917(4,608)44,835

133,383

158,893(25,510)124,248

105,564

92,981

12,583

105,738

22,531

22,815(284)

29,831

(820)

(794)

(26)

(1,822)Current assets

299,968

317,813(17,844)302,830

Tangible assets

184,065

181,480

2,584

180,951

5,042

4,789

253

3,825

72,45175,152(2,701)

67,523Fixed assets

261,558

261,421137

252,299

Total assets

561,526

579,233(17,707)555,129

Notes and accounts payable

140,155

142,778(2,623)

127,825

Short-term debt payable

22,10028,188(6,087)44,901

Commercial paper
Long-term debt within one
year
Bond redemption within
one year
Other

8,000

20,000(12,000)--

28,78430,529(1,745)52,380Intangible assets
Investments and otherassetsLiabilities

Current liabilities
Bond
Long-term debt due after one
year
Other

--

--

--

1,000

80,66978,052

2,616

73,261

279,708

299,547(19,839)

299,367

10,00010,000--10,00035,91736,787(870)

43,714

61,49561,40887

60,977Long-term liabilities

107,412108,195(783)

114,691

Total liabilities

387,120

407,742(20,622)414,058

--

3,752

--

3,300

Paid in capital--

30,872--30,872

Capital surplus--

16,808--16,803Retained earnings--

68,848--45,511

Revaluation reserve for land--

42,142--42,329Unrealized gains on securities
Foreign currency translation
adjustments
Treasury stock--

10,269--

4,682

Total shareholders’ equity
Liabilities, minority interests,
and shareholders’ equity

Minority interests
Shareholders’ equity

--

(654)

--

(2,199)

--

(544)

--

(227)

--

167,740--

137,771--579,233--

555,1296

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

End of First Quarterc

As ofJune 30, 2006

End of Previous
Fiscal Year
As of
March 31, 2006

Y/Y change

End of Previous
First Quarter
As ofJune 30, 2005

Net Assets
Common stock

30,872------

Capital surplus

16,817------Retained earnings

74,815

--

--

--

(625)

--

--

--

--

--

--

Treasury stock
Shareholders’ equity
Unrealized gains on securities

121,879
8,461

Profit/loss on deferred hedge

(650)

--

--

--

Revaluation reserve for land

41,898

--

--

--

(499)

--

--

--

3,316

--

--

--

Total net assets

174,406

--

--

--

Liabilities and net assets

561,526

--

--

--

Foreign currency translation
adjustments
Appraisal and Translation
Differences
Minority interests

49,211

7

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

II.

Segment Information

1. Segment Information by BusinessCurrent Three Months (April 1, 2006 to June 30, 2006)(Units: millions of yen)Segment

Consolidation

A

B

C

D

E

Total

50,13814,127

10,963

15,12735,472

125,827--

125,827

529

643

55

68

7

1,303

(1,303)--50,667

14,77011,01815,19535,480127,130(1,303)125,827

45,171

15,177

10,933

13,491

32,861

117,633(1,389)116,244

5,496

(407)

85

1,704

2,618

9,497

86

9,583

F

Item
Net sales(1) Sales toexternal customers(2) Internal sales
between segments
or exchanges
Total
Operatingexpenses
Operatingincome/loss

Segments:
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

Previous Three Months (April 1, 2005 to June 30, 2005)(Units: millions of yen)Segment

Consolidation

A

B

C

D

E

Total

46,89012,036

8,546

9,757

26,638103,867--

103,867

313

565

144

56

18

1,096

(1,096)--47,203

12,601

8,690

9,814

26,656104,963(1,096)

103,867

41,72912,985

9,935

8,890

25,194

98,734(1,069)97,665

5,473

(384)

(1,245)

923

1,462

6,229

(27)

6,202

F

Item
Net sales(1) Sales toexternal customers(2) Internal sales
between segments
or exchanges
Total
Operatingexpenses
Operatingincome/loss

Segments:
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 general8Consolidated Results for the First Quarter
Fiscal Year ending March 2007

Previous Full 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)

47,505F

Item
Net sales(1) Sales toexternal customers(2) Internal sales
between segments
or exchanges
Total
Operatingexpenses
Operatingincome/loss
Segments:
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

Main Products

Mass-Produced Machinery

Power Transmission Equipment, Plastic Injection Molding Machines,
Laser Processing Systems, Defense Equipment, Cryogenic Equipment,
Precision XY Stages, Cyclotrons for Medical Use

Environmental Protection Facilities,
Plants & Others

Water and Sewage Treatment Systems, Industrial Waste Treatment
Facilities, Chemical Process Equipment & Plants, Software, Real Estate

Ship, Steel Structure &Other Specialized Equipment

Ships, Bridge & Steel Structures

Industrial Machinery

Forging Machines, Material Handling Systems, Turbines, Pumps

Construction Machinery

Hydraulic Excavators, Mobile Cranes

3. Change in the segment during the first quarter:
S. H. I. Examination & Inspection, Ltd. that had been included in the Ship, Steel Structure & Other Specialized
Equipment Segment and Japan Electron Beam Irradiation Service Co., Ltd. that had been included in theEnvironmental Protection Facilities, Plants & Others segment have been included in the Mass-Produced Machinery
segment from this first quarter.
Information on business segments after the change in the previous first quarter and the previous fiscal year has been
omitted.

9

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

III. Orders, Sales and Balance of Orders by Segment
Orders received(Units: millions of yen)

April 1, 2006 toJune 30, 2006

April 1, 2005 toJune 30, 2005

Amount%Amount%%Amount%58,81434.7

52,06636.2

13.0

219,14136.3

30,23917.8

25,27317.6

19.6

83,605

13.9

22,622

13.3

25,15817.5(10.1)

95,171

15.8

Industrial Machinery

20,87712.3

12,8099.0

63.0

68,693

11.4

Construction Machinery

37,08321.9

28,35319.7

30.8

136,385

22.6

Total

169,634

100.0

143,659

100.0

18.1

602,995

100.0

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

Y/Y
Change

Sales(Units: millions of yen)

April 1, 2006 toJune 30, 2006

April 1, 2005 toJune 30, 2005

Amount%Amount%50,13839.9

47,38345.6

14,12711.2

11,868

10,963

8.7

Industrial Machinery

15,127

Construction Machinery
Total

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

Y/Y
Change%%5.8

220,989

40.1

11.4

19.0

82,062

14.9

8,222

7.9

33.3

65,859

11.9

12.0

9,757

9.4

55.0

56,05410.2

35,47228.2

26,63825.7

33.2

126,375

22.9

125,827100.0

103,867

100.0

21.1

551,339

100.0(Units: millions of yen)

As ofJune 30, 2006

As ofMarch 31, 2006

Amount%Amount%75,14318.2

66,36018.0

89,64921.7

73,536

163,566

39.6

Industrial Machinery

61,453

Construction Machinery
Total

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

April 1, 2005 to
March 31, 2006
AmountBalance of Orders received
Businesses

April 1, 2005 to
March 31, 2006

ChangeAmount%13.2

72,731

20.4

19.9

21.9

85,39923.9

151,90741.2

7.7

139,531

39.1

14.9

55,704

15.1

10.3

46,11612.9

23,1295.6

21,5185.8

7.5

13,222

3.7

412,939100.0

369,025

100.0

11.9

357,000

100.0

10

%

As of
June 30, 2005

Consolidated Results for the First Quarter
Fiscal Year ending March 2007

* Change in the segment:
S. H. I. Examination & Inspection, Ltd. that had been included in the Ship, Steel Structure & Other Specialized
Equipment Segment and Japan Electron Beam Irradiation Service Co., Ltd. that had been included in theEnvironmental Protection Facilities, Plants & Others segment have been included in the Mass-Produced Machinery
segment from this first quarter.
Therefore, in the previous first quarter and the previous fiscal year, information pertaining to business segmentation
after the change has been presented.

11