Review of Operations

Steel Products Segment
Steel Castings and Forgings Sector

Monoblock Low Pressure Turbine Rotor
Shaft

Shell Flange Used for Pressure Chamber for
Nuclear Power Plant

70.2

60

40

54.2

50.3

Orders Received

Performance in fiscal 2008

¥ billion
80

39.8

35.6
2002005 2006 2007 2008 2009Sales

¥ billion
80

Demand for thermal power plant components remained strong, with the global
financial crisis having a minimal impact thanks to a high level of orders from
China, the country with the strongest demand in the world in this field. Inaddition, nuclear power plant components are benefiting from a new surge inthe revival of nuclear energy in European countries. In particular, the French
company AREVA has made aggressive efforts to expand its nuclear powerbusiness, and we have received several orders for nuclear power companies inChina. At JSW, customers reserve production slots, and we are seeing signs thatdemand will continue to grow.
Supported by a large order backlog, sales for steel castings and forgings
sector rose ¥5.4 billion year-on-year to ¥46.5 billion (US$473 million), while
total orders increased ¥16.0 billion to ¥70.2 billion (US$715 million).

60

Forecast for fiscal 2009
41.1

40.2

31.3

28.5

20

46.5

4002005 2006 2007 2008 2009

8Against the backdrop of a substantial backlog of orders for power plants (boththermal and nuclear) and a continuing steady inflow of new orders, sales areprojected to post a year-on-year increase, and despite an expected increase indepreciation expenses on capital equipment, this should be offset by the growthin sales and production as well as successful measures to lower the cost of sales.
Consequently, earnings are forecast to maintain their upward trend. With newplant projects are being undertaken in Japan and China, orders will likely
remain at a high level for nuclear power plant components, but there will be anincrease in the downward pressure on prices for components for thermal power
plants accompanying the decline in materials prices. We expect this to have anegative impact on orders that have been front-loaded in fiscal 2008. Thanks to
our competitive superiority in large rotors, we expect demand for this productto remain brisk.
In the Steel Castings and Forgings Sector, we forecast sales of ¥54 billion(US$550 million) and orders of ¥68.5 billion (US$697 million).

Steel Plates and Structures Sector

Clad Steel Pipe

Clad Steel Plate

45.5

49.4

4558.6

61.7

Orders Received

Performance in fiscal 2008

¥ billion
60

30

25.9

150

2005 2006 2007 2008 2009Sales

¥ billion
60

57.0

45

46.3

29.3

33.2

30

21.0

15

Orders for pressure vessels from oil refineries decreased due to such factors as the
mid-term decline in crude oil prices, which remained at a low level through to theterm-end, and intensified competition with European companies as a result of theyen’s appreciation against the euro, leading to the deterioration in the business
operating environment. However, sales increased, supported by a substantial
backlog of orders. Although demand for clad pipe for use in natural gas fields
remained firm, orders declined for clad steel plates for use in desalination and oil
refinery plants etc. as a result of the postponement of a project and the impact of
the yen’s rapid appreciation in the second half of fiscal 2008.
Consequently, sales for the steel plates and structures sector came to ¥57billion (US$580 million), up ¥10.7 billion, while orders fell by ¥13.1 billion to¥45.5 million (US$463 million).

02005 2006 2007 2008 2009

Forecast for fiscal 2009
Our balance of orders for pressure vessels for oil refineries comes works for twoyears (fiscal 2009 and 2010). Regarding orders, largescale projects are getting
underway in South America and the Middle East, but we must take into accountthe intensifying severe competition and remember that we should not be too
optimistic profitability will be a concern from fiscal 2011 onward.
In clad steel plates, in addition to the limited order backlog, orders are expected
to be low in terms of both volume and value. Accordingly, we expect that profitability
will also remain low. In contrast, we have backlog of orders for clad pipes for thefiscal 2009 full year. We expect increase of order in 2009 compared with 2008.
As a result, we forecast sales of ¥49.5 billion (US$504 million), and ordersof ¥41 billion (US$417 million).

9

Review of Operations

Machinery Products Segment
Plastics Machinery Sector

Blow Molding Machine

Polyolefin Extruder/Pelletizer74.1

60

44.0

44.1

40

57.7

57.7

Orders Received

Performance in fiscal 2008

¥ billion
80

2002005 2006 2007 2008 2009Sales

¥ billion
80

54.7

40.4

47.6

40

64.1

64.8

60

2002005 2006 2007 2008 2009

10A significant backlog in orders for plastics production and processing
machinery contributed to an increase in profits. Orders fell short of target as aresult of the large earthquake in Sichuan, China, in May 2008, and the impactof the global financial credit crunch in the second half of fiscal 2008, whichcaused companies to postpone, cancel or delay projects and equipment
investments. In the injection molding machinery market, the expansionary
trend in the market during the past few years — by equipment investment in
the auto industry — has been halted in the wake of the global financial crisis,and demand remains sluggish.
As a result, sales in the plastics machinery sector declined ¥700 million to¥64.1 billion (US$653 million), while orders fell by a substantial ¥30.1 billion
to ¥44.0 billion (US$448 million).

Forecast for fiscal 2009
We expect to see the impact of the decline in orders for plastics production andprocessing machinery received in fiscal 2008. We saw a rapid growth in orders
from China after the Chinese government implemented large-scale economic
stimulus measures. Thus, we expect orders to show a pick-up from the second
half onward. However, the lead-time is long, and the contribution to sales infiscal 2009 is expected to be limited.
In addition, measures taken by Beijing to stimulate domestic demand areexpected to have a limited spillover effect on the country’s export industries. For
this reason, we expect that a rapid recovery in Japan’s plastics machinery isunlikely. The future of Japan’s auto industry is unclear, and orders and sales forplastics machinery are expected to remain low in fiscal 2009, unchanged fromthe second half of the previous fiscal year.
Consequently, we expect orders for plastics machinery of ¥45.5 billion(US$463 million), and sales of ¥35.5 billion (US$361 million).

Other Machinery Sector

Die-casting Machine

Wind Turbine System

45

45.5

44.4

30

42.9

38.5

Orders Received

Performance in fiscal 2008

¥ billion60

31.6
1502005 2006 2007 2008 2009

Sales¥ billion
604546.6
35.5

35.8

26.8

1537.330

In IT equipment and laser annealing systems, in the first half of fiscal 2008
several influential Korean customers froze its capital investment. Then, in thesecond half of fiscal 2008, Japanese, Taiwanese and Korean flat panel makers
postponed projects or cancelled orders due to bad business situation caused by
the global financial crisis. Both orders and sales declined for magnesium alloy
injection molding machines, with applications limited to notebook PCs. Incontrast, wind turbine system equipment, which benefits from a significant
backlog of orders, saw a slight decline in sales due to customers’ schedule delays
affected by a changing the applying rule of building construction standards.
Orders for wind turbine system equipment benefited from increase of themaximum limit of electricity produced by wind turbine by some electric powercompanies in Japan to increase their wind turbine system businesses.
As a result, sales in the other machinery sector declined ¥8.7 billion to¥26.8 billion (US$273 million), while orders increased ¥1.1 billion to ¥45.5billion (US$463 million).

02005 2006 2007 2008 2009

Forecast for fiscal 2009
Regarding IT equipment and laser annealing systems, we anticipate thewidespread adoption of low temperature polysilicon (LTPS) for small andmedium-sized flat panel displays. The LTPS technology enables manufacturers
to make these panels high-definition slimmer and more lightweight. Moreover,the business environment is showing signs of a gradual recovery, as evidenced
by the rising plant operation rates of Korean and Taiwanese LCD panel makers.
We are also expecting a rise in orders of magnesium alloy injection molding
machines and die-casting machines for applications in the automobile industry.
We have a substantial backlog in wind turbine system equipment, and sales andorders are expected to rise.
As a result, in the Other Machinery sector we forecast sales of ¥51.5 billion(US$524 million) and orders of ¥63.5 billion (US$646 million).

11

Review of Operations

Regional Development
Regional Development
227,113220,851

¥
50.00

43.19

47.10

37.50

33.71

689
6,586
689

746

1.7

2.0

2.0

93,84812,515

10,00016,034

17,484

12,51516,034

17,48415,0002005 2006 2007 2008 2009

Net Income per Share¥ million
20,0003,2840868

8,000

6,586

5,0000Net Income 1,130

Operating Income

2.9

119,347

124,118

144,461

12,000207,138Net Income

227,113220,851

Orders totaled ¥1,766 million (US$18million) and15,000
sales came to ¥1,767 million(US$18 million). Operating income rose by¥54 million, 10,000
or 8%, to ¥743 million (US$8million). This increase was due largely to
successful cost-cutting measures.

20052008
20062009
2007 2008 20092005 2006 2007

¥ million
16,000173,353

1.7

2.0

1.7

2.0

1.926.8

3.3

2.0

Capital Expenditures

207,138
1.7
173,353
2.0
158,274
2.9

35.5
2.4

99,363100,000

Net Sales3.3

Sales

3.0

46.6

Sales

Operating Income

3.0

150,000

180,0000¥ billion
4.0¥ million
Performancein fiscal 2008
20,00060,0001.0

2005 2006 20072005
20082006
20092007 2008 2009

¥ million
200,000

2005 2006 2007 2008 2009

¥ million
240,000

120,000

2.0

00¥ billion
4.0

3.0

1.0

15

JSW Apartment Building Development(Fuchu,Tokyo)
00

3.0.2.0

60,0002005 2006 2007 2008 2009

¥ billion
4.0

35.8

Orders Received
37.3

Sales30

2.0

1.9Business Office Development(Fuchu Intelligent Park)
2005 2006 2007 2008 2009

45120,000

1.00

180,000

158,274.2.0

31.6
15

¥ billion
60

Net Sales

3.0¥ million
240,000

3.0

45.5

44.4

42.9

30

¥ billion
4.0

2.4

Orders Received

45

38.5

Orders Received¥ billion
60

25.00

17.57

Capital expenditures
for the reporting period totaled ¥25,882
million (US$263 million), with the majority spent on installation,
1.0
5,000
4,000
12.50
improvement and maintenance work on a variety of production facilities at the parent company.
Details of capital expenditure by individual business segment are as follows.
00000
In the steel(US$230million). This expenditureconsisted2005products
2006 2007 business,
2008 2009 capital expenditures totaled ¥22,555
2005 2006million
2007 200820092005 2006 2007 2008 20092005 2004 2007 2008 20092005 2006 2007 2008 2009
largely of investments to enlarge buildings and upgrade equipment at steel-making plants, the installation of new equipment and theupgradingof existing equipment at forging plant facilities, aswell as the expansion of buildings at machinery plants.
¥¥ million
50.00
In16,000
the machinery products business, capital expenditures
came to ¥3,135 million (US$32 million) as a result of theconstruction of a fourth assembly plant at our Hiroshima Plant, and investments to raise machine processing efficiency.
37.50 consisted primarily of the upgrading of facilities on real estate for
In12,000
the regional development business, capital expenditure
rental purposes, totaling ¥43 million (US$0.4 million).
Capitalcame to ¥147 million (US$1 million).
8,000 expenditures unallocable to individual segments
25.00

50,000

43.19

47.10

33.71

17.57

689

689

8.7002005 2004 2007 2008 2009

8.70

3,284

868746

12.50

012Net Income per Share

1,130

Operating Income

4,000

2005 2006 2007 2008 2009