Annual Report 2009
For the Year Ended March 31, 2009

All About SmartContents
This is SHI
1 At a Glance
2 Financial Highlights
4 To Our Shareholders, Customers and Employees
6 Interview With the President

12 Proton
Special Feature:

Therapy System
Review of Operations

14MMass-Produced Machinery
Environmental Protection Facilities,
Plants & Others
P

16

18

Ship, Steel Structure& Other Specialized Equipment

20

Industrial Machineryryy

22

Construction Machinery

24 Research and Development
26 Intellectual Property
27 Corporate Governance
30 Management
31 Measures for Environmental Preservation
33 Financial Section
66 Glossary
68 Network
70 Corporate Data

This is

SHI
Mass-Produced Machinery

Construction Machinery

Major Units
Sumitomo Heavy Industries Mechatronics, Ltd.

Major UnitsSEN Corporation

Sumitomo (S.H.I.) Construction Machinery Co., Ltd.
Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd.
Sumitomo (S.H.I.) Construction Machinery (Tangshan) Co., Ltd.
Link-Belt Construction Equipment Company

SHI Examination & Inspection, Ltd.
Sumitomo Machinery Corporation of America
Sumitomo (SHI) Cyclo Drive Germany GmbH
Sumitomo Heavy Industries (Tangshan), Ltd.

LBX Company, LLC

SHI Plastics Machinery, Inc. of America
Sumitomo (SHI) Demag Plastics Machinery GmbH
Sumitomo (SHI) Cryogenics of America, Inc.

Business Domain
Industrial Machinery
Major Units
Sumitomo Heavy Industries Engineering

Environmental
Protection Facilities,
Plants & Others& Services Co., Ltd.
Sumitomo Heavy Industries Techno-Fort Co., Ltd.
Shin Nippon Machinery Co., Ltd.
SHI Machinery Service Hong Kong Ltd.

Major Units

Ship, Steel Structure& Other Specialized
Equipment
Major Units

Sumitomo Heavy Industries Environment Co., Ltd.
Sumiju Environmental Engineering, Inc.
Sumiju Plant Engineering Co., Ltd.
Nihon Spindle Mfg. Co., Ltd.
Izumi Food Machinery Co., Ltd.
Lightwell Co., Ltd.

Sumitomo Heavy Industries Marine& Engineering Co., Ltd.
SHI Mechanical & Equipment Inc.

Basic Management Policy
The SHI Group is committed to garnering the trust of customers over many years by creating value forthem. This trust underpins the SHI Group’s sustained growth and development, and leads to greater
corporate value, which in turn will help the SHI Group meet the expectations of its shareholders,
employees and the public at large.
Our aim is to ensure a consistently high level of growth on the world stage. To this end, we aredetermined to continuously and systematically provide customers with first-class products as aknowledge-intensive company. Through stronger marketing, development and productivity, we aspire
to reach the pinnacle of workmanship in manufacturing.

Sumitomo Heavy Industries, Ltd.

At a Glance

Segment/Main Products

Mass-Produced Machinery
Orders

23.1%

33.4%

Power Transmission Equipment

Cryogenic Equipment

Plastic Injection Molding Machines

XY Stages

Cyclotrons for Medical Use

Transfer Molding Press Machines

Ion Accelerators

Precision Forgings

Plasma Coating System for FPDs

Defense Equipment

Laser Processing Systems¥600.7
BillionEnvironmental Protection Facilities,
Plants & Others

16.5%
14.0%

13.0%

Power Generation Systems

Air Pollution Control Plants

Industrial Wastewater Treatment Systems

Chemical Process Equipment & Plants

Water and Sewage Treatment Systems

Food Machinery

Landfill Leachate Treatment System

Software

Sales

24.8%

35.3%

¥642.9Billion

13.1%
12.4%

Ship, Steel Structure& Other Specialized Equipment
Pressure Vessels

Bridge & Steel Structures

Mixing Vessels

Ships

Mixing Reactors

Marine Structures

Coke Oven Machines

Marine Equipment

14.4%

Industrial Machinery
Logistics & Handling Systems
Automated Parking Systems

Operating Income

Forging Machines

13.3%

21.7%

Material Handling Systems
Turbines
Pumps

24.0%

¥56.9
Billion

18.9%

Construction Machinery
Hydraulic Excavators

22.1%

Mobile Cranes
Road MachineryAnnual Report 2009

Net Sales

Operating Income

Advantages(¥ Billion)(¥ Billion)

250

40

200

30

SHI power transmission and control equipment is
known for performance and durability, a reputation thathas earned it the top domestic and second-largest
global market share. The Company’s injection molding
machines, meanwhile, excel at high-precision molding
and boast the world’s leading market share. LCD andsemiconductor production equipment and cyclotrons
are among the other sophisticated, cutting-edge technologies possessed by SHI.

150

20

100

10

50
0

FY04 05

06

07

08

0

(¥ Billion)(¥ Billion)

100

12
10
8
6
4
2
0

80
60
40
20
0

FY04 05

06

07

08

(¥ Billion)(¥ Billion)

80

16

60

12

07

08

Biomass boilers for private power generation from SHI
have captured the top market share in Japan, reflecting a reputation for performance and the Company’s
installation track record. In water treatment, SHI possesses products designated for adoption by the public
sector, and is a top manufacturer of anaerobic wastewater treatment systems for the private sector.
FY04 05

06

07

08

SHI boasts the world’s No. 1 share of coke drums foroil refining plants. In shipping, the Company specializes
in medium-sized oil tankers, concentrating development resources and improving production line efficiency to substantially reduce costs.

4

20

0

0

–4

FY04 05

06

07

08

(¥ Billion)(¥ Billion)

100

15.0
12.5
10.0
7.5
5.0
2.5
0

80
60
40
20

FY04 05

06

07

08

(¥ Billion)(¥ Billion)

200

20

160

15

120

FY04 05

06

07

08

The reputation for performance and installation historyof steam turbines for private power generation has
garnered SHI the leading share among domestic manufacturers of these products. The Company has similar
top shares in Japan in goliath cranes for shipyards,
continuous ship unloaders for power plants, and jib
cranes and other large cranes.
FY04 05

06

07

08

SHI hydraulic excavators boast superior economic
performance derived from outstanding control technologies, along with high performance born from thepursuit of easy operability. The excellent performanceand quality of SHI cranes, meanwhile, are solidifying
the Link-Belt brand in North America.

10

80

5

40
0

06

8

40

0

FY04 05

FY04 05

06

07

08

0

FY04 05

06

07

08

1

Sumitomo Heavy Industries, Ltd.

2

Financial Highlights

Thousands of
U.S. dollars(Note 1)Millions of yen

For the Fiscal Year:Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mass-produced machinery . . . . . . . . . . . . . . . .
Environmental protection facilities, plants & others
Ship, steel structure & other specialized equipment
Industrial machinery . . . . . . . . . . . . . . . . . . . . . .
Construction machinery . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Mass-produced machinery . . . . . . . . . . . . . . . .
Environmental protection facilities, plants & others
Ship, steel structure & other specialized equipment
Industrial machinery . . . . . . . . . . . . . . . . . . . . . .
Construction machinery . . . . . . . . . . . . . . . . . .
Elimination . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . .
R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . .
Cash flows from operating activities . . . . . . . . . . . .
Cash flows from investing activities . . . . . . . . . . . .
Free cash flows (Note 3) . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities . . . . . . . . . . . .

FY2004

FY2005

FY2006

FY2007

FY2008FY2008¥521,310
205,091
87,93765,28854,008108,985
48,77330,415
7,094
478
4,834
5,961
(9)
58,055
22,792
8,175
6,317
9,282
45,451(6,087)39,364(46,490)¥551,339
218,798
82,74067,372
56,054
126,375
47,50529,338
4,277
(479)
5,847
8,533
(10)
56,57729,742
10,285
7,434
9,072
50,023(7,024)42,999(48,812)¥600,256
222,906
79,397
69,491
68,286160,177
64,224
28,844
4,494
6,714
9,527
14,396250
74,87337,352
17,257
8,581
10,64956,789(12,461)
44,328(41,193)¥660,769
232,593
91,25076,393
81,163
179,370
77,79028,208
6,903
14,094
12,11816,286
181
91,57842,97428,1809,908
13,78829,096(41,250)(12,154)(5,238)¥642,918
227,226
92,62579,602
84,310159,154
56,94012,334
10,71912,562
13,5857,543
197
75,26013,64931,753
10,04718,32034,676(35,924)(1,248)15,625$6,560,389
2,318,634
945,154812,268
860,311
1,624,023
581,018
125,862
109,380
128,181
138,620
76,9692,006
767,957
139,277
324,008
102,523
186,939
353,841(366,571)(12,729)
159,442

Notes: 1. The U.S. dollar amounts have been translated, for convenience only, at ¥98=$1, the prevailing exchange rate on the Tokyo Foreign Exchange Market
as of March 31, 2009.
2. EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) = Operating income + Depreciation and amortization
3. Free cash flows = Cash flows from operating activities + Cash flows from investing activities

Net Sales

Operating Income andOperating Income Margin

EBITDA and ROICNet Income and ROE(¥ Billion)(¥ Billion)(%)(¥ Billion)(%)(¥ Billion)

(%)

700

80

20.0

100

16.0

50

25.0

40

20.0

60

15.0

75

12.0

30

15.0

20

10.0

10

5.0

600

500

400
40

10.0

50

8.0

300

200
20

5.0

25

4.0

100

0

0

FY04 05

06

07

08

0

FY04 05

06

07

08

■■ Operating Income (Left scale)Operating Income Margin (Right scale)

00

FY04 05

06■■ EBITDA (Left scale)
ROIC (Right scale)

07

08

0

0

FY04 05

06

07■■ Net Income (Left scale)ROE (Right scale)08

Annual Report 2009

Thousands of
U.S. dollars(Note 1)Millions of yen

FY2004

FY2005

FY2006

FY2007

FY2008FY2008¥569,771
169,228
137,157—¥579,233
125,504
167,740—¥600,890
88,045—
206,010¥678,634
89,567—
246,371¥657,436
110,339—
238,697$6,708,529
1,125,904—
2,435,687

Financial Position (Year-end):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing debt . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . .
Total net assets (Note 4) . . . . . . . . . . . . . . . . . .

U.S. dollars(Note 1)

Yen
Amounts per Share:
Net income (Note 5) . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . .

¥ 37.80
227.903.00¥ 49.45279.02
5.00¥ 61.99338.95
7.00¥ 71.19392.8010.00¥ 22.62378.78
6.00

$0.23
3.87
0.06

%
Financial Indexes:
ROIC (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income Margin . . . . . . . . . . . . . . . . .
EBITDA margin . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity ratio . . . . . . . . . . . . . . . . .
ROA (Return on assets) . . . . . . . . . . . . . . . . . .
ROE (Return on equity) . . . . . . . . . . . . . . . . . . .
Interest-bearing debt ratio . . . . . . . . . . . . . . . . .

8.5
9.4
11.1
24.1
4.0
16.6
29.7

8.8
8.6
10.3
29.0
5.1
17.7
21.7

12.2
10.7
12.5
34.1
6.2
24.0
14.7

14.0
11.8
13.9
34.9
6.3
22.4
13.2

9.6
8.9
11.7
34.8
2.1
5.9
16.8

Average Exchange Rate . . . . . . . . . . . . . . . . . .

¥107

¥117

Yen
¥118

¥100

¥98

4. Net assets are presented following enforcement of the new Japanese Corporate Law in 2006. Net assets comprise stockholders’ equity as previously
defined, plus minority interests and share subscription rights.
5. Net income per share of common stock is based on the weighted average number of shares outstanding in each year.
(Operating income + Interest and dividend received) x 55% (= 1 – Effective tax rate)
6. ROIC (Return on Invested Capital) =(Average of stockholders’ equity + Average of interest-bearing debt)

Capital Expenditure
and R&D

Total Assets andStockholders’ Equity Ratio

Interest-bearing Debt andInterest-bearing Debt Ratio

Free Cash Flows(¥ Billion)(¥ Billion)(%)(¥ Billion)(%)(¥ Billion)

35

800

40.0

200

40.0

50

30

40

600

30.0

150

30.0

25

30

20

20
400

20.0

100

20.0

15

10

10

0
200

10.0

50

10.0

5

–10

0

0

FY04 05

06

07

08

■■ Capital expenditure (Left scale)■■ R&D (Right scale)0

FY04 05

06

07

08

■■ Total assets (Left scale)
Stockholders’ equity ratio (Right scale)

00

FY04 05

06

07

08

■■ Interest-bearing debt (Left scale)Interest-bearing debt ratio (Right scale)–20

FY04 05

06

07

08

3

4

Sumitomo Heavy Industries, Ltd.

To Our Shareholders, Customers and Employees

Our Vision for SHI
Is for All Businesses to Continually Provide

First-Class Products
and Services
Acclaimed in
Global Markets

ChairmanPresident and CEO

Yoshio Hinoh

Yoshinobu Nakamura

Annual Report 2009

The global financial crisis that erupted in September

component businesses, and develop new products and2008 led to a sharp downturn in the real economy, and apioneer markets by consolidating businesses, whileworldwide recession. Under these conditions, while thestriving to improve quality and reduce costs through

SHI Group managed strong sales growth in heavy

production innovation. Creating products that make ourmachinery businesses during fiscal 2008 (ended Marchcustomers happy leads to sales and earnings growth.

31, 2009) due to an ample backlog of existing orders,

Even though Japan’s markets may have matured, first-

sales were down considerably in the Mass-Produced

class products are still in demand somewhere in the

Machinery and Construction Machinery segments.

world. Our growth strategy is to provide first-class prod-

With the economic slowdown expected to continue

ucts where they are needed in markets worldwide.

for some time, we have determined that it will be

The basic policy for the SHI Group is “creation of

extremely difficult for us to achieve the performancevalue for customers,” a philosophy of considering things

targets of our current medium-term management planfrom the customer’s perspective. We believe that our“Global 21,” which was launched in fiscal 2008 and iscommitment to this principle to win the long-term trust

set to conclude in fiscal 2010. We have therefore imple-of customers is the basis for sustainable development

mented measures to ensure financial soundness thatand enhanced enterprise value for the SHI Group, andprioritize securing earnings and are cutting back on

enables us to meet the expectations of shareholders,large-scale capital expenditures. However, we have not

employees and local communities. The trust gained byabandoned our policy of generating world-class tech-providing high-quality, competitive products is key to our

nologies, establishing a robust cost structure, andfuture growth. Our vision for the SHI Group is for all

aggressively pursuing business development focused on

businesses to continually provide first-class products

promising overseas markets. We will continue to moveand services acclaimed in global markets.

ahead with our program of globalization and pursue
innovation to make SHI a world-leading brand. We will
also continue with the measures to reinforce the crossdivisional value chain developed under the previous

Chairmanmedium-term management plan “Leap to Excellence’07,” as we aim to enhance our corporate value.
The SHI Group’s corporate mission is to contribute to
the development of society by providing customers with
first-class products and services. We believe that if anyof our businesses cannot gain a competitive edge, it isbecause the products and services are unattractive anddo not fulfill our customers’ requirements. We will therefore work hard to strengthen the SHI Group’s key

President and CEO

5

6

Sumitomo Heavy Industries, Ltd.

Interview With the President

Establishing Strategies
for a Flexible Response
to Shifts in the Business Environment
and a Robust Structure Leads
to Sustainable GrowthPresident and CEO

Yoshinobu Nakamura

Annual Report 2009

Fiscal 2008

Results

Q uestion

Machinery segments. Earnings were also down sharply

SHI posted declines in both sales and earnings
amid the global recession. What were the reasons for this?

due to the decline in sales, along with the impact fromexchange rates, the rising cost of materials, and losses
from write-downs of investment securities following thedecline in stock prices.

A nswerQ uestion

Oil and raw material prices rose steeply during fiscal
2008, but we performed steadily during the first half, andrecorded historically high orders and sales. However, theglobal financial crisis that erupted in September 2008

How are SHI’s core businesses, the MassProduced Machinery and Construction Machinery
segments, performing?

resulted in a sharp drop-off in capital expenditures insuch industries as automobiles, electronics and semiconductors. At the same time, the Japanese economy

A nswer

deteriorated rapidly, with a considerable decline in earn-

Power transmission and control equipment, the main-

ings among exporters stemming from the acute appre-

stay products of the Mass-Produced Machinery seg-ciation of the yen. Global markets overall faced extremely

ment, is usually resilient to fluctuations in market

tough conditions, with the pace of growth slowing evenconditions, because this equipment is used in a wide-in emerging countries such as China and India. Under

range of sectors. However, due to the sudden softening

these conditions, while the SHI Group managed firmof the market overall during this latest downturn, evensales growth year on year in the Environmental Protec-

these products were not immune. Plastic injection mold-tion Facilities, Plants & Others segment, the Ship, Steeling machine sales also suffered from the stagnation in

Structure & Other Specialized Equipment segment, andthe IT and electronic components, and automotive mar-the Industrial Machinery segment due to an ample back-kets. In other areas of the Mass-Produced Machinerylog of existing orders, sales were down considerably insegment, precision control components faced difficulties

the Mass-Produced Machinery and Construction

due to the sluggish LCD and semiconductor markets,

Quarterly Results by Segment
OrdersNet Sales(¥ Billion)(¥ Billion)

250

200

200

50.8

55.2

150
46.7
150

20.7

19.8
29.3

100

37.8

45.5

32.9

38.7

100

31.8

44.4

15.6

29.0

19.8

20.5

18.0
3.7

50

19.0
63.4

0

08/2Q

08/3Q

19.5
21.9

18.8
19.3
23.6

50

29.7
21.1
29.1

12.3
16.1

69.0
40.5

08/1Q

16.1

71.0

3.9

54.1

5.2
27.9

08/4Q

55.3

46.8

08/3Q

08/4Q

0

08/1Q

08/2Q

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

7

8

Sumitomo Heavy Industries, Ltd.

Fiscal 2008

Results

but sales of products for the medical treatment marketrose on the back of a stable market.
The global market for construction machinery shrank,
and SHI was forced to adjust production to maintain aproper supply-demand balance. Conditions remain slow

1. Scaling back the production structure
SHI has scaled back the production structure forinjection molding machines, construction machineryand other products, lowering the break-even point.
2. Structural reforms

in the United States and Europe, but there are signs of a

The sales company for injection molding machines,

gradual recovery in China and other regions.

and the manufacturing company for construction
machinery have been integrated into the parent company in order to strengthen the organizational structure.

Q uestion

3. Optimization of human resources

What measures has SHI employed in response to
the current weakening of the market?

Personnel have been shifted to busy and priority divisions in an effort to efficiently utilize human resources.
Outsourced operations have been brought in-house inorder to control cost outflows.

A nswer

4. Reductions in fixed expenses

The heavy machinery businesses have an extensive

SHI has introduced such measures as curtailing capitalbacklog of existing orders that are allowing us to main-

expenditures, and lowering executive compensation.

tain a high capacity utilization rate, but for products with

Along with these measures, in November 2008 I

short delivery times such as those in the Mass-Produced

declared a state of emergency for the entire company

Machinery segment, we have had to adjust operations

in response to the rapid deterioration in the market. I

and adopt other strategies to secure earnings. Specificpersonally went around each business division in an

measures have included:

effort to assess the current conditions in each workplace, and direct that measures be implemented to thefullest extent possible.

Breakdown of Variation in Operating Income (Fiscal 2007–Fiscal 2008)(¥ Billion)

77.8
Sales decline
-4.9

2007

Highermaterial costs-5.8
Exchange
rate loss-7.5

Inventory Other reforms
write-down
+4.7
-2.0

56.9

SG&A
expenses-5.4
2008

Annual Report 2009

Strategies

for Fiscal 2009

Q uestion

Q uestion

What are your market forecasts?

What actions will you take to secure profits
while market conditions remain challenging?

A nswer
The Japanese economy weakened rapidly due to the

A nswerworldwide financial crisis, with a sharp fall-off in capital

The basic principle for the SHI Group’s management

expenditures, violent fluctuations in exchange rates, andis “autonomy and collaboration.” Individual businessdeep declines in earnings among exporters. Overseas asdivisions and affiliated companies are responsible forwell, the economic downturn triggered by turmoil in thetheir own profitability, but the value chain is strength-

financial markets of the United States and Europe has

ened through lateral ties. We do not cover the losses

led to a serious situation. The pace of growth in emerg-from unprofitable businesses with earnings from prof-

ing countries has also slowed as a result, producing

itable ones.

extremely difficult conditions in markets worldwide.

As noted in the previous section, during fiscal 2008

There is widespread concern that the current global

SHI implemented a business restructuring program

recession will continue for some time.

and other measures to counter the decline in market

Certain regions now seem to have reached bottom,

conditions. Businesses that saw capacity utilization

and are beginning to show signs of recovery. We do

fall due to market contractions have revamped their

not anticipate a swift upturn, however, and plan toproduction structures in line with demand, in order tocontinue with management measures that assume thelower the break-even point, or actively utilized over-recession will continue.

seas factories to reduce costs and strengthen international competitiveness. We also increased the
proportion of in-house production, and placed curbs
on capital expenditures.

Fiscal 2009 Forecasts(¥ Billion)

FY09 1H (Est.)

FY09 2H (Est.)

FY09 (Est.)

FY08

Orders

200.0

250.0

450.0

600.7

Net sales

250.0

280.0

530.0

642.9

Operating income

0

14.0

14.0

56.9

Operating income margin

0%

5.0%

2.6%

8.9%

Ordinary income

–2.5

12.5

10.0

50.3

Ordinary income margin

–

4.5%

1.9%

7.8%

Extraordinary gains or losses

0

0

0

–16.5

Net income

–3.0

6.5

3.5

13.6

Profit margin

–

2.3%

0.7%

2.1%

Dividends undetermined (¥)

0

TBD

TBD

6

–

26.5%

2.4%

9.6%

90

103

Payout ratio undetermined
ROIC (after tax)
Exchange rate (¥/US$)

–

–

9

10

Sumitomo Heavy Industries, Ltd.

“Global 21”

Medium-term management plan
During fiscal 2009, SHI will establish a more robust

The SHI Group also has competitive advantages asorganizational structure able to generate earnings evenan integrated machinery manufacturer. Along with ourduring periods of declining sales. At the same time, cuts

extensive lineup of products for a wide range of markets,

in R&D expenditures will be kept to a minimum, with total

we handle products with both short- and long-term

spending planned at about the same level as fiscal 2008.

delivery periods. Currently, the ample backlog of existing

Technology is the foundation of a machinery manufac-

orders for heavy machinery with long lead times is sup-turer, and ongoing development is necessary for providing

porting our underlying sales and earnings. Many of SHI’s

first-class products that anticipate customer needs.

business divisions have outstanding, distinctive productsthat boast a leading market share in their industries. I
believe that difficult times such as this enhance the needQ uestionfor our products because of their outstanding perfor-

What are the bright spots in your recovery
measures?

mance and competitiveness.

Q uestion

A nswer
We have completed a new factory in Tangshan, China,
and will produce large-scale gear boxes and hydraulicMarket conditions have changed considerably
since the plan was initially formulated. How
will you adapt going forward?

excavators. The Chinese economy is already showing
signs of recovery, and we anticipate rising demand. By
producing equipment locally we are able to enhance

A nswer

our market competitiveness. This new plant will

The “Global 21” medium-term management plan set

undoubtedly be one of the SHI Group’s most importanthigh growth targets, and as a result of the global reces-

overseas factories.

sion we have determined that it will be extremely difficult

View of the Current Situation for the Medium-Term Management Plan
Global 21

Fiscal 2010 target
Keywords
Investment policy (3 years)

View of Current Situation

Net sales¥850 billion
Operating income ¥100 billion

Achieving the numerical targets for Global 21
will be extremely difficult

Globalization
Innovation

Ongoing globalization and innovation efforts willremain unchanged

Capital expenditure ¥100 billion
R&D Spending¥50 billion

Maintain financial discipline and curb large-scale capital
expenditures

Fiscal 2008 Results

Business Environment

Results Fell Far Short of Plan
(May Forecast)(Actual)Orders¥770.0 billion¥600.7 billion

Net sales¥740.0 billion¥642.9 billion

Operating income ¥ 75.0 billion¥ 56.9 billion

Prolonged global recession
Long-term prospects for growth in BRICs andother emerging countries

Annual Report 2009

“Global 21”

Medium-term management planfor us to achieve our final-year fiscal 2010 targets. However, the long-term growth potential for the BRICs andmarkets.
In terms of innovation, SHI continues to expand andother emerging countries is unchanged, and we remain

upgrade the structures that generate first-class prod-

firm in our conviction that the SHI Group’s opportunities

ucts. We are also revising and strengthening the devel-for growth lie in overseas markets. Rather than a hin-opment, design, production and sales processes, anddrance, the SHI Group is looking at the current recession

pursuing reforms that will secure our competitive advan-

and radical changes in the business environment as an

tage. The manufacturing division’s adoption of theopportunity. We will redouble our ongoing management

Toyota Production System is a representative example.

efforts to establish a more robust organizational structureable to generate earnings even during periods of declining sales through the successful conclusion of the measures in the management plan.
We are also continuing to pursue efforts built aroundour keywords for growth, “globalization” and “innova-

Q uestion
SHI has had an active program for capital expenditures. Will this be continued? Also, what isyour plan for M&As?

tion.” In terms of globalization, we are reinforcing ouroverseas production, sales and service networks. Alongwith the new factory in Tangshan, China, we have

A nsweracquired all shares in SEN Corporation, which manufac-

The SHI Group made aggressive capital expenditures intures and markets ion-implementation devices (a type offiscal 2007 and the first half of fiscal 2008 to reinforce

semiconductor production system), and are developing

the production structure at plants in Japan and over-

our own sales network around the world. The acquisitionseas, and build new factories overseas. Since the latterin fiscal 2007 of Demag Ergotech GmbH, a German

half of fiscal 2008, however, these expenditures have

manufacturer of plastics machinery, provided us with abeen kept to a minimum as part of the program to con-structure able to cover all regions’ markets of injection

trol fixed costs.

molding machines throughout the world. We are steadily
moving forward with strategies focused on world

Regarding M&As, we maintain our stance that it is aneffective means of enhancing quality or realizing synergies with an existing business, or developing new businesses. However, it is just one of the options available,

Net Sales, Invested Capital &Interest-bearing Debt

and we will not focus solely on M&As.

(¥ Billion)
700

600

500

400

300

200

100

0
(FY)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Forecast

Net sales

Invested CapitalInterest-bearing debt

11

12

Sumitomo Heavy Industries, Ltd.

Special Feature:

Proton Therapy System
Proton therapy is a completely non-invasive treatment procedure. Today, attention in Japan and elsewhere has turned to this therapeutic treatment, which has
a minimal physical burden on patients, yet is highly effective. By applying its
long history of accomplishments in cyclotron technology, SHI is offering state-ofthe-art therapeutic systems in the ever-growing field of cancer treatment.

What Is Proton Therapy?
As the name suggests, proton therapy is a type of radiation therapy that destroys cancer cells by bombarding
affected areas with a proton beam.
Since no surgery is required, this treatment places amuch lighter burden on the human body.

Features of Proton Therapy• Minimizes damage to normal tissue• Capable of irradiating cancer cells close to vital organs• Outpatient treatment enables patients to continue withwork and daily life
Irradiation system with rotating gantry (National Cancer Center
Hospital East, Japan)• The therapy is gentle enough for elderly patients• Minimal side effects, speeding patients’ return tosocial life following treatment

Relative dose

Proton beams

X-RaysBragg Peak

（%）
100

X-rays90

Irradiation damages

Irradiation damages

Proton beams

80
70
60
50
40

X-RaysCancerCancerProton
beams

30
20
10
0

X-rays go through the nidus.

Proton beams stop at the nidus.

05

10 Depth （cm）

Comparison With X-ray Radiotherapy

energy to be released at a specified depth. Compared to

In contrast to the X-rays used in conventional radiation

X-rays, which damage all cells exposed to them, thistherapy, proton beams can be used in a pinpoint mannerfeature enables the proton beam to be concentrated

to target only cancer cells. This breakthrough is possible

only on the area where needed.

through a special quality of proton radiation known as
the Bragg peak, which allows the beam’s maximum

Annual Report 2009Markets
Although surgical procedures are still the primary mode of

Global Proton Therapy Facilities

cancer treatment in Japan, radiation therapy is the normin Europe and the United States, suggesting substantial
market growth is likely going forward. Accordingly, thepace of adoption of these systems by medical facilities,
Sumitomo
Projects

which had been about 1 or 2 per year, has in recent years
increased to around 5 or 6 per year, with numerous facilities planned for North America, Europe and Asia in the

USA

Asia

coming years. Going forward, SHI is committed to developing products tailored to client needs and breaking into

In operation

EuropeUnder construction/planningnew markets in a bid to encourage the widespread use ofminimally invasive and effective treatment therapies.
World’s largest-scale proton therapy system
for Taiwan’s Chang-Gung Memorial Hospital,
equipped with four treatment rooms

Gantry Treatment System
These systems enable the 360° firing of proton beams to affected areas of thepatient’s body. The rotating structure located at the rear of the treatment room
has a diameter of roughly 10 meters and weighs nearly 150 tons.

Beam Transport System
These systems adjust the necessary energy levels of
the accelerated protons for each patient and deliver
these particles to each treatment room.

Strengths
SHI possesses some of the world’s best cyclotron technology. The Company boasts Japan’s leading share in cyclotrons for positron emission tomography (PET), an inspection
method used in cancer diagnosis. In terms of cancer treatment, SHI was first in Japan to deliver a stationary proton
therapy system for hospitals in 1997. In 2008, SHI received
an order from Taiwan for what will be the largest proton therapy system in the world.
Today, SHI is busy developing irradiation technologies
that realize even greater treatment precision, with thegoal of commercializing these technologies in the earliest
possible timeframe.

Cyclotron
This refers to a type of circular accelerator used to produce protons. These devices accelerate protons in hydrogen nuclei to nearly
70% of the speed of light.

13

14

Sumitomo Heavy Industries, Ltd.

Review of Operations

Mass-Produced Machinery
Main Products
Power Transmission Equipment
Plastic Injection Molding Machines
Cyclotrons for Medical Use
Ion Accelerators
Plasma Coating System for FPDs
(Flat Panel Displays)
Laser Processing Systems

Cryogenic Equipment
XY Stages
Transfer Molding Press Machines
Precision Forgings
Defense Equipment

Major Units
Sumitomo Heavy Industries Mechatronics, Ltd.
SEN Corporation
Seisa Gear, Ltd.
SHI Examination & Inspection, Ltd.
Sumitomo Machinery Corporation of America
Sumitomo (SHI) Cyclo Drive Germany GmbH
Sumitomo Heavy Industries (Tangshan), Ltd.

SHI Plastics Machinery, Inc. of America
Sumitomo (SHI) Demag Plastics
Machinery GmbH
Sumitomo (SHI) Cryogenics ofAmerica, Inc.

Business Environment

Orders(¥ Billion)
300

Power transmission and controls claims customers in a wide range of industry sectors,
making it relatively resistant to abrupt market changes. This strength notwithstanding, the200

current deterioration in overall market conditions has led to a rapid cooling of demand forthis equipment to unprecedented levels. Regarding plastic injection molding machines,

100

while these products face adverse conditions due to stagnation in IT, electronics-related,
and automotive markets, gradual signs of recovery have started to emerge, particularly in

0

FY06

07

08

09

China and other parts of Asia. Sluggishness persists, however, in the liquid crystal and

Forecast■■ Power transmission and controls■■ Plastics machinery■■ Others

semiconductor markets. Amid this climate, sales of products to markets such as food andmedical equipment, which remain stable, continue to be robust.

Review and Analysis of Results for Fiscal 2008

Sales(¥ Billion)
300

With the exception of large-scale gear boxes, both orders and sales for nearly all othermachines in power transmission and controls were lower for the year. Sales in plastics

200

machinery, however, were higher despite a sharp decline in orders due to deteriorating
market conditions for electronic devices and other products. This outcome reflected the100

contribution of Sumitomo (SHI) Demag Plastics Machinery GmbH, which we acquired in theprevious fiscal year. Results for other businesses in this segment trended lower than usual

0

FY06

07

08

09

due to rapid and drastic deterioration in the electronic device and semiconductor markets.

Forecast■■ Power transmission and controls■■ Plastics machinery■■ Others

This came despite large-scale orders received for proton therapy system used in cancer
treatment. As a result, total segment orders declined 19% year on year to ¥200.8 billion,
and sales dipped 2% to ¥227.2 billion. Operating income declined 56% to ¥12.3 billion.

Operating Income(¥ Billion)
30

(%)
15.0

20

10.0

10

5.0

0

0

Outlook for Fiscal 2009
Economic weakness appears likely to bottom out, with modest recovery undertones
expected from the second half of the fiscal year. In power transmission and controls,
which covers a broad range of markets, a focus on the first markets to recover is

–10

–5.0

FY06

07

08

09
Forecast■ ■ Operating Income (Left scale)Operating Income Margin(Right scale)

expected to yield growth. In plastic injection molding machines, efforts to improve thebusiness structure of Sumitomo (SHI) Demag Plastics Machinery GmbH are moving
apace, as we work to enhance the overall earnings power of this business. In medical
equipment, demand is likely to grow in the emerging economies of Asia.

Annual Report 2009

Power Transmission and Controls
Business Environment and Topics in Fiscal 2008
In contrast to lackluster market conditions in Japansurrounding small- to medium-sized gear motors andprecision speed reducer units, performance in steel andGear box for conveyer

crane-related products was robust for the year. Similarly,
gearboxes for resource-related applications turned in amarket. Outside of Japan, the Company will bolster its

healthy performance overseas, contrasting with weak-sales capabilities particularly in emerging economies andness in small- to medium-sized gear motors.

resource-rich countries, where environment and infra-

Strategies and Initiatives in Fiscal 2009

structure investment remains relatively firm. In parallel,

In Japan, SHI will expand sales of speed reducers, which

SHI will upgrade the production capabilities at its plants

are highly effective in terms of energy efficiency, andin Hanoi (Vietnam), Tangshan (China), and other sites forrespond more dynamically to the after-sales service

the creation of value for customers on a global scale.

Plastic Injection Molding Machines
Business Environment and Topics in Fiscal 2008
Orders increased year on year as the contribution of aforeign subsidiary acquired in 2008 and other factors
outweighed a decline in orders from deteriorating automobile and electronic device markets. In addition tomodel changes for small and medium-sized full-electric
injection molding machine series, including the SE-DUZ,

Full-electric injection molding machine “SE75DUZ”

SE-HDZ, and SE-HSZ models, SHI launched thesuited to customer needs in each product sector. The

CL7000, a large full-electric injection molding machine.

Company will also pursue global market development,

Strategies and Initiatives in Fiscal 2009

with the goal of becoming the world’s top manufacturer

Underpinned by full-electric injection molding machines,

in the plastics machinery industry in terms of product

SHI will look to enhance its lineup of products optimallyand sales capabilities.

Precision Positioning Equipment and Others
Business Environment and Topics in Fiscal 2008
In medical equipment, SHI received an order from
Taiwan for the world’s largest-scale proton therapy
system for cancer treatment. In semiconductor production equipment, the Company laid the groundwork for
global advancement, converting an ion-implantation
device manufacturer in which it previously held a 50%

Ion-implantation devices “SHX-II”

stake into a wholly owned subsidiary, and establishing acapability in photovoltaic products and other promisingsales base for cryocoolers in South Korea.

areas, in a bid to sharpen its competitiveness in growth

Strategies and Initiatives in Fiscal 2009

markets. In tandem, the Company will review its pro-

SHI will focus on medical equipment and other strong

duction framework with the goals of lowering productmarkets, while raising its product development

costs and raising production efficiency.

15

16

Sumitomo Heavy Industries, Ltd.

Environmental Protection Facilities,
Plants & Others
Main Products
Power Generation Systems
Industrial Wastewater
Treatment Systems
Water and Sewage
Treatment Systems
Landfill Leachate Treatment System
Air Pollution Control Plants

Chemical Process Equipment& Plants
Food Machinery
Software

Major Units
Sumitomo Heavy Industries Environment Co., Ltd.
Sumiju Environmental Engineering, Inc.
Sumiju Plant Engineering Co., Ltd.
Nihon Spindle Mfg. Co., Ltd.
Izumi Food Machinery Co., Ltd.
Lightwell Co., Ltd.

Business Environment

Orders(¥ Billion)
100

This segment serves customers in both the public and private sectors. As public-sector
demand continues to contract, we are transforming the structure of this business to75

focus on the private sector. Biomass boilers are sparking keen interest in Japan and50

overseas as environmental conservation activities gain momentum. Accordingly, a25

market recovery is widely anticipated despite subdued investment in large-scale projects. In the water-treatment business, while the private-sector market has stagnated,

0

FY06

07

08

09

capital investment is expected to increase in food and other strong markets. Demand in

Forecast■■ Environmental protection facilities,
plants■■ Others

the public sector, specifically for water and sewage treatment systems, remains stable.

Sales

Review and Analysis of Results for Fiscal 2008(¥ Billion)
100

Orders received in the energy plant business were relatively unchanged from the previ75

ous fiscal year, with orders primarily for biomass boilers and air pollution control equipment. Sales, however, declined for the year. In water-treatment business, while orders

50

were lower mainly due to a decline in private-sector demand, sales rose on the back of25

brisk orders received in the previous fiscal year. As a result, orders received by this segment as a whole decreased 8% year on year to ¥84.2 billion, while sales rose 2% to

0

FY06

07

08

09

¥92.6 billion. Operating income climbed 55% to ¥10.7 billion.

Forecast■■ Environmental protection facilities,
plants■■ Others

Operating Income(¥ Billion)
12

(%)
12.0

9

9.0

6

6.0

3

3.0

Outlook for Fiscal 2009
Rising concern over the need to protect the global environment is causing constant
growth in the market for biomass-related products, with interest in biomass boilers
surging most notably in Southeast Asia. If recovery undertones indeed emerge in the

0

0

FY06

07

08

09
Forecast■ ■ Operating Income (Left scale)Operating Income Margin(Right scale)second half of the fiscal year, this trend is expected to prompt customers to finalize
project plans. In the water-related environmental sector, we are steadily advancing business restructuring to enhance our focus on the private sector, with the aim of stabilizing
and reinforcing our earnings power.

Annual Report 2009

Energy-Related Plants
Business Environment and Topics in Fiscal 2008
In fiscal 2008, SHI received an order from an Independent Power Producer in Japan for a Circulating
Fluidized-Bed (CFB) boiler-based power plant thatuses biomass for 100% of its fuel. Overseas, theCompany won an order from a steel manufacturer in
China for a dry-desulphurization plant. Meanwhile inSoutheast Asia, inquiries regarding CFB boilers fueledby biomass derived from agricultural waste or lowgrade coal are increasing. In response, SHI worked to
CFB boiler

identify new projects, and aggressively promoted
reforming technologies targeting low-grade fuels, asseeking to increase the number of projects for extend-

well as the development of modularized boilers suit-ing facility useful life through more robust support

able for small-scale applications.

activities, as well as repairs and modifications. Over-

Strategies and Initiatives for Fiscal 2009

seas, in addition to anticipated latent demand for elec-

The market environment is expected to be adverse

tric power infrastructure, SHI will take aggressive steps

again in fiscal 2009. In this climate, SHI will focus in

to expand sales of CFB boilers particularly in South-

Japan on those segments most resilient to this eco-east Asia, where the need for small-scale biomass

nomic impact. At the same time, the Company will

power generation facilities that utilize agricultural waste

take vigorous steps to expand its services business byfor fuel is growing.

Water Treatment Plants

Sumitomo Heavy Industries Environment Co., Ltd.

Business Environment and Topics in Fiscal 2008
Despite an adverse market climate, orders from newcustomers in the private sector increased steadily.
Order growth was also apparent in the public sector,
where SHI accurately met market needs through sales
activities centered on component equipment, one of
the Company’s unique strengths, amid growing
remodeling and renovation demand in recent years.

Strategies and Initiatives in Fiscal 2009
SHI will continue to pursue a range of initiatives that
promote the development of a highly profitable earnings structure prefaced on business stability. For theprivate sector, the Company will promote sales activities particularly in the food industry, a sector where

Coagulation Sedimentation System Smi-thickener

SHI now enjoys advantages, to offer high-value-energy-saving equipment gains momentum, theadded products. Amid increased investment related

Company will move forward with application develop-

to facility aging and renovation, as well as measures

ment and sales activities for the Sumirator verticalto enhance energy efficiency, SHI will step up its ser-aerator, MICRUS® superfine-bubble membrane tube

vices business to help improve the functionality ofdiffuser and other products created with market dif-existing facilities. In the public sector, as the uptake offerentiation specifically in mind.

17

18

Sumitomo Heavy Industries, Ltd.

Ship, Steel Structure &Other Specialized Equipment
Major Units
Sumitomo Heavy Industries Marine& Engineering Co., Ltd.
SHI Mechanical & Equipment Inc.

Main Products
Pressure Vessels
Mixing Vessels
Mixing Reactors
Coke Oven Machines
Bridge & Steel Structures
Ships
Marine Structures
Marine Equipment

Business Environment

Orders(¥ Billion)
150

Although plans to build new refineries have diminished as the escalation in demand foroil has receded, there is a vigorous push to enhance profitability by making existing100

facilities more efficient. Meanwhile, the market for new shipbuilding is undergoing
adjustment, with market performance lackluster since the second half of 2008. This

50

period of adjustment, which preceded the construction of new shipbuilding yards thathave sprung up in China and elsewhere, was well timed in terms of the supply-demand

0

FY06

07

08

09

balance in this sector going forward.

Forecast■■ Ship & marine■■ Steel structure &other specialized equipment

Review and Analysis of Results for Fiscal 2008

Sales(¥ Billion)90

We recorded 7 ship orders in the first half of the past fiscal year. With respect to sales,
however, we strove to boost productivity, delivering 8 medium-sized tankers, or 1 more

60

than in the previous fiscal year. In steel structure and other specialized equipment, salesrose atop ample orders received in the previous fiscal year, which offset the effects of30

lower orders in the fiscal year under review due to adverse conditions in petrochemicalrelated markets. As a result, total orders for this segment declined 14% year on year to

0

FY06

07

08

09

¥78.1 billion, while sales increased 4% to ¥79.6 billion. Operating income was down

Forecast■■ Ship & marine■■ Steel structure &other specialized equipment

11% to ¥12.6 billion.

Operating Income(¥ Billion)
16

(%)
20.0

12

15.0

8

10.0

4

5.0

Outlook for Fiscal 2009
Despite the challenging conditions at hand, the SHI Group retains a healthy order backlog that should minimize the impact of these conditions on business performance.
Where oil refining facilities are concerned, we anticipate demand for coke drums, equip-

0

0

FY06

07

08

09
Forecast■ ■ Operating Income (Left scale)Operating Income Margin(Right scale)ment for extracting high-value-added light oil from heavy oil, since these products will
make refining facilities more profitable. In ships, we are already seeing signs of a recovery in bulker and certain other ship types, with overall market conditions set to gradually
improve going forward.

Annual Report 2009

Reactor Vessels
Business Environment and Topics in Fiscal 2008
Orders were robust at the outset of fiscal 2008, buttressed by a favorable market environment that
included the continuation of high crude oil prices fromthe previous fiscal year. Furthermore, an order from
Saudi Arabia for the Company’s largest-ever coke
drum, with an internal diameter of 9.8m, was an
Coke drums

acknowledgement of the Company’s outstanding quality, backed by its world-leading track record in the

expected to be somewhat subdued in fiscal 2009. At

delivery of this equipment. In contrast, the second half

the same time, some customers have begun announc-of the year brought with it a global economic crisis anding facility augmentation plans to forward efforts tofalling crude oil prices, which led to plans being can-bring greater selectivity and focus to their operations.

celled or postponed. The yen’s appreciation, moreover,

SHI, for its part, is enacting more extensive reforms ofexacerbated this adverse order environment. This

its sales and manufacturing processes to offer prod-

climate prompted SHI to take action aimed at identify-

ucts and services better matched to customer require-ing replacement demand and raising its name recogni-

ments. In tandem, the Company will raise QCDtion among new customers.

(Quality, Cost, Delivery) to a higher level than before. In

Strategies and Initiatives in Fiscal 2009

this way, SHI will build an overwhelming degree ofPreviously vigorous investment particularly in newcompetitiveness that will enable it to definitively cap-

facilities and facility expansion at oil refineries isture orders for the limited projects available.

Ships

Sumitomo Heavy Industries Marine & Engineering Co., Ltd.

Business Environment and Topics in Fiscal 2008
SHI received orders for 6 Aframax tankers and 1 of its
newly developed Suezmax tankers, for a total order of
7 ships in fiscal 2008. These orders resulted frompromotion of a strategy focused on achieving greater
differentiation for medium-sized tankers. SHI also won
plaudits from customers for its delivery of 8 Aframax
tankers during the year.

Strategies and Initiatives in Fiscal 2009
While challenging conditions in the shipbuilding market
will likely persist, SHI currently has adequate construction volume on hand. In advance of a market recovery,
the Company will continue to develop and improve thequality of distinctive products with an emphasis on
customer value, including improved fuel efficiency.
Production reforms will complement these efforts in adrive to achieve ongoing improvements in businessperformance.

105,000MTDW oil tanker

19

20

Sumitomo Heavy Industries, Ltd.

Industrial Machinery
Major Units
Sumitomo Heavy Industries Engineering& Services Co., Ltd.
Sumitomo Heavy Industries Techno-Fort Co., Ltd.
Shin Nippon Machinery Co., Ltd.
SHI Machinery Service Hong Kong Ltd.

Main Products
Logistics & Handling Systems
Automated Parking Systems
Forging Machines
Material Handling Systems
Turbines
Pumps

Business Environment

Orders(¥ Billion)
100

Infrastructure-related investment overseas remains firm, especially in emerging economies. In Japan, although new large-scale capital investment has been somewhat cur-75

tailed, investments designed to enhance productivity remain robust. Furthermore, the50

increased attention being given to energy-efficient facilities is raising expectations with25

respect to products with low running costs.

0

FY06

07

08

09
Forecast

Review and Analysis of Results for Fiscal 2008

Sales(¥ Billion)
100

While orders of material handling systems for steel mills increased, overall orders were75

lower year on year due to a drop in orders of large-scale cranes for shipbuilding companies. In contrast, sales increased thanks to our healthy order backlog. In steam turbines

50

and pumps, orders were on a par with the previous fiscal year and sales increased. This25

outcome came as favorable sales of turbines for biomass power generation facilities foraddressing tight supply and demand for electric power in emerging economies offset a

0

FY06

07

08

09

slowdown in the second half of the fiscal year. As a result, orders for this segment

Forecast

totaled ¥98.8 billion, virtually unchanged from the previous fiscal year, while sales rose
4% to ¥84.3 billion. Operating income increased 12% to ¥13.6 billion.

Operating Income(¥ Billion)
15

(%)
18.0

10

12.0

Outlook for Fiscal 2009
Despite the difficult underlying conditions, the SHI Group retains a healthy order bookthat should minimize the impact of these conditions on business performance. In Japan,

5

6.0

investments to boost productivity are likely to remain vigorous, with movement expected
in markets pertaining to maintenance services and energy-efficient equipment. Over-

0

0

FY06

07

08

09
Forecast■ ■ Operating Income (Left scale)Operating Income Margin(Right scale)seas, the willingness of emerging economies to invest remains high and if funds can beraised, a market recovery should follow.

Annual Report 2009Material Handling Systems
Sumitomo Heavy Industries Engineering & Services Co., Ltd.
Business Environment and Topics in Fiscal 2008
SHI secured orders during the year from a variety ofsources, including from its services targeting the partial
upgrade of continuous ship unloaders for the electric
power industry, and the sale of new products thatenhance energy efficiency and hybrid power supply
equipment for transfer cranes.

Overhead traveling crane

Strategies and Initiatives in Fiscal 2009services, SHI will take steps to conduct sales activities

While focusing on sales expansion for new overheadthat create value for customers throughout East Asia,

traveling crane models, as well as renovation of aging

particularly in Japan, as it moves to steadily win productfactory facilities, preventive maintenance, and otherand service orders.

Turbines and Pumps

Shin Nippon Machinery Co., Ltd.

Business Environment and Topics in Fiscal 2008
SHI recorded steady growth in orders for both turbinesand pumps in the first half of the year, reflecting expansionin power generation businesses based on renewableenergy sources, coupled with robust market conditions forMultistage steam turbine rotor assembly

heavy oil upgrades in line with rising oil prices. However,orders slowed in the second half of the year as investment

enhancing cost competitiveness and caravan customer

plans were postponed due to the global financial crisis.

support for maintenance services. These efforts will

Strategies and Initiatives in Fiscal 2009

target the sugar market in India and Southeast Asia andWhile customer investment plans, as in the previous

the power generation market in North America withfiscal year, continue to stay on hold, inquiries remain

respect to turbines, and the market for heavy oil

unchanged. SHI will maintain order volume by

upgraders in the Middle East for pumps.

Forging Presses and Industrial Machinery
Sumitomo Heavy Industries Techno-Fort Co., Ltd.
Business Environment and Topics in Fiscal 2008
Orders for major projects, including large forging
presses to be used in the energy industry abroad andmodifications to continuous casters, remained healthy incertain respects. Nevertheless, business operations
Forging press

were impacted by a slump in the automotive industry,
STF’s main customer base in this sector, during thepresses. In industrial machinery, the Company will lever-second half of the fiscal year.

age its engineering and technological capabilities to meet

Strategies and Initiatives in Fiscal 2009

customer requests for large-scale modification andIn forging presses, STF will aggressively promote ser-expansion of existing facilities. STF’s goal in this adverse

vices, among them the modification, repair, and upgrade

economic climate will be to offer the best solutions inof existing facilities, alongside its distinctive large forging

response to market needs.

21

22

Sumitomo Heavy Industries, Ltd.

Construction Machinery
Major Units
Sumitomo (S.H.I.) Construction MachineryCo., Ltd.
Sumitomo (S.H.I.) Construction Machinery Sales
Co., Ltd.
Sumitomo (S.H.I.) Construction Machinery(Tangshan) Co., Ltd.
Link-Belt Construction Equipment Company
LBX Company, LLC

Main Products
Hydraulic Excavators
Mobile Cranes
Road Machinery

Business Environment

Orders(¥ Billion)
200

Global demand for construction machinery has contracted since the second half of2008. Despite a slight recovery in the Chinese market, this situation suggests that some150

adjustment in the supply-demand balance is necessary for the market as a whole. Simi-

100

larly, the mobile crane market in North America has grown weaker due to restrained50

infrastructure investment.

0

FY06

07

08

09
Forecast■■ Excavator, road
construction machinery■■ Mobile crane

Review and Analysis of Results for Fiscal 2008

Sales(¥ Billion)
200

In hydraulic excavators, firm performance in the first half of the fiscal year was countered150

by sharply lower demand in the second half, causing orders to decline. Tracking thedecline in orders, sales fell substantially in the second half of the fiscal year, leading to100

decreased sales for the full year. In mobile cranes for construction, we held sales on a
50

par with the previous fiscal year despite decreased orders caused mainly by a drop in
infrastructure demand in the North American market. As a result, orders for this seg-

0

FY06

07

08

09

ment totaled ¥138.8 billion, down 26% year on year, with sales declining 11% to ¥159.2

Forecast■■ Excavator, road
construction machinery■■ Mobile cranebillion. Operating income decreased 54% to ¥7.5 billion.

Operating Income(¥ Billion)
20

(%)
12.0

15

9.0

10

6.0

5

3.0

0

0

Outlook for Fiscal 2009
A recovery in the overall market for hydraulic excavators is unlikely for the foreseeable

–5

–3.0

FY06

07

08

09
Forecast■ ■ Operating Income (Left scale)Operating Income Margin(Right scale)

future. With that said, a localized increase in demand has begun to appear in the
Chinese market and other emerging economies. In the North American mobile cranemarket, stable demand is expected despite subdued infrastructure investment anddecreased volume.

Annual Report 2009

Hydraulic Excavators and Road Machinery
Sumitomo (S.H.I.) Construction Machinery Co., Ltd.
Business Environment and Topics in Fiscal 2008
Global demand for hydraulic excavators reachedrecord levels in the first half of the fiscal year, spurredby increased demand from China and other emerging
economies. The global recession in the second half,
however, caused demand to plummet, resulting in amore than 20% decline in demand for the full year. In
this climate, SHI cut production in a bid to reduceinventories and fixed costs, with a focus on building a
structure able to cope with declining demand.
In terms of products, SHI launched a large asphalt
LEGEST® HIBRID

paver that can pave a road 9 meters wide in a single
pass in the world’s largest market, China. In Japan, theCompany drew wide attention when it announced

SHI commenced operations at its first overseas pro-development of the world’s first hybrid powered

duction plant for hydraulic excavators in June 2009 inhydraulic excavator magnetic specification.

Tangshan, China. Going forward, the Company will

Strategies and Initiatives in Fiscal 2009

develop a structure for the timely production of high-In April 2009, Sumitomo (S.H.I.) Construction Machinery

quality products close to the site of demand. AnotherCo., Ltd. absorbed Sumitomo (S.H.I.) Construction

focus for SHI is the development of new markets.

Machinery Manufacturing Co., Ltd. via merger, integrat-

Among other efforts, this will include development of theing the management planning functions of both compa-

market for asphalt pavers in China and Europe, and thenies and creating a system for responding swiftly tostart of sales in Japan of the Company’s hybrid poweredchanges in the business environment.

hydraulic excavator magnetic specification.

Crane Business

Link-Belt Construction Equipment Company

Business Environment and Topics in Fiscal 2008

Strategies and Initiatives in Fiscal 2009

The North American mobile telescopic and crawler

Given prevailing market conditions, Link-Belt hascrane markets continued to grow at a double-digit rate

implemented strategic initiatives to align production

in fiscal 2008, although demand weakened during thewith demand and reduce inventory. In this challeng-second half. The mobile crane business benefited froming economic environment, Link-Belt will pursue

this strong demand, achieving record sales and earn-cost-reduction activities, while retaining its focus onings for fiscal 2008. The Link-Belt Construction

long-term strategic objectives: new product devel-

Equipment Company (“Link-Belt”) also had success

opment, continued elevation of its presence in theraising its presence in the global marketplace by

global market, and improving manufacturing throughstepping up sales promotion outside North America;

Lean Sigma®.

strengthening its North American distributor network;
and improving production efficiency through its Lean
Sigma® program.

Truck Terrain Crane HTT-8675

23

24

Sumitomo Heavy Industries, Ltd.

Research and Development

R&D Strategy

R&D Expenses

The SHI Group adheres to a basic R&D policy of developing first-class products that provide value to its cus-

Proportion of New
Products in Total Sales(¥ Billion)

(%)

(%)

12

2.0

40

9

1.5

30

6

1.0

20

3

0.5

10

0

0

tomers and delivering them to markets. The Group isconcentrating investments in growth business fields, andstrengthening R&D activities in the environment andenergy fields to realize a low-carbon society.
Our leading-edge R&D Center is focused on transforming all products into first-class products, developing
basic technologies for maintaining the Group’s competitive edge, and constituent technologies required for future
innovative products. We are committed to a verticallyintegrated style of development that creates synergistic
value chains by taking full advantage of the strengths ofboth the R&D Center and our business divisions.
The Group plans to invest approximately ¥35.0 billion

0

FY04 05 06 07 08
R&D expenses (Left scale)
Ratio of R&D expenses to
net sales (Right scale)

FY04 05

06

07

08

in R&D over the 3-year period from fiscal 2008 throughfiscal 2010. Sales of new products accounted for

In plastics machinery, we conducted model changes

approximately 30% of total sales on a non-consolidated

for all small and medium-sized electric injection molding

basis, and we will continue to create new products tomachines, incorporating new functions that include

further improve efficiency.

natural filling controls, controls for avoiding excessive
clamping force on molds, and easy operation. We also

Major R&D Results by
Business Segment

developed the “CL7000” large-sized electric injection

Mass-Produced Machinery

matically reduced total machine length and expanded

In power transmission equipment, we launched theclearance between tie bars enabled to set larger molds.

molding machine. A new plasticizing system has dra-

“F1C-E” series of CYCLO speed reducers which allow®

In quantum equipment, we enacted a model change

slimmer robot joint components, in the area of precision

for the “HM-18” positron emission tomography (PET)

gear reducers. In speed reducers for wind power gen-system for cancer diagnosis, striving for higher through-erators, we developed a new product series well suited

put and a more space-saving footprint. In coating

for pitch and yaw drive control.

machines, we launched the high-performance ZnO (ZincOxide) coating system for the photovoltaic cell market.

Cyclo® Drive “F1C-E”

ZnO Coating System

Annual Report 2009

In precision positioning equipment, we launched aShip, Steel Structure &stack type model with a linear motor drive for small-sized

Other Specialized Equipment

stages, and also for large-sized stages, unveiled gantry

In ships, we conducted ongoing basic research into

moving-type and table moving-type models for 10thenergy-saving technologies and continue to develop andgeneration glass substrates.

build ships offering outstanding customer value, making
these vessels compliant with anticipated environmental
regulations. We also focused on developing production
technologies, adopting the very latest in data processing
and measurement technologies to enhance productquality and shorten shipbuilding lead times.

Industrial Machinery
Linear ball guided gantry moving type stage

In material handling systems, we brought to market newmodels of small and medium-sized (5 to 50 t) overhead

Environmental Protection Facilities,

traveling cranes. Along with improved inverter controls,

Plants & Others

these new models allow users to select the optimal

In water treatment plants, we developed new products

operation pattern for the usage environment. In additionin the water treatment business compliant with stricter

to being lighter and more compact, these products areenvironmental regulations, and in the water and sewer-

structurally designed to dramatically reduce production

age business developed readily upgradable unit typelead times.

products that can help saving energy.
In energy and environmental plants, we successively

In turbines, we worked to develop constituent technologies for optimizing medium- and high-pressure

initiated the operation of circulating fluidized-bed (CFB)

blade configurations, and reducing output loss, throughboilers that use biomass and recycled fuels, helping

the use of three-dimensional heat flow analysis, tocustomers to reduce CO2 emissions and aiding in theirimprove internal efficiency.

shift away from the use of heavy oil for fuel. In Southeast

In forging presses, we expanded our lineup of new

Asia, we got a lot of inquiries regarding our CFB boilers,presses developed in collaboration with customers, withwhich allow the use of widely available biomass

an emphasis on making more compact products.

resources and low-grade coal. We also developed themodular type boiler exclusively for small-sized biomass

Construction Machinery

power generation.

In hydraulic excavators, we worked to develop a modelwith an engine compliant with interim Tier 4 emissions
requirements, in what is set to become a core machinein our lineup. We also began selling new additions to ourexisting LEGEST® series of hydraulic excavators, which
are equipped with engines that meet Tier 3 emissions
requirements. And also we developed the LEGEST®
HYBRID, the world’s first hybrid excavator with anattached magnet lifting device.

Modular type CFB boiler

25

26

Sumitomo Heavy Industries, Ltd.

Intellectual Property

The Sumitomo Heavy Industries Group is oriented towards growth driven by distinctive technologies. As such,intellectual property is an issue of the utmost importance and the wellspring of the Group’s competitive
advantage. The principal focus of our efforts is directed at the three elements of intellectual property activity,
namely: ensuring that rights to intellectual property are secured; utilizing exclusive rights; and respecting
other companies’ rights. In this way, we devote our energies throughout Sumitomo Heavy Industries to theactive creation, management, and protection of this Group’s “property.”

Promotion Structure

Strength of Intellectual Property Evaluation Activities

To link the senior management of SHI divisions directly

At present, we are evaluating the strength of patents

with intellectual property activity, the Company has

held by SHI and the processes for improving thisappointed chief intellectual property officers (CIPO) withstrength. In addition to enhancing its quality, this reas-

the same rank as the general managers of technology

sessment will enable the products derived from intellec-

and development divisions, ranking immediately below

tual property to secure a competitive advantage.

and reporting directly to the officers in charge of group orEmphasis on Overseas Patent Applications

divisional business. The CIPOs prepare optimal intellectual

In tandem with the internationalization of the businessproperty strategies for each division, make all members ofactivities of the SHI Group, we have been calling on all

those divisions thoroughly acquainted with them andoperating divisions and other relevant divisions to takecreate the mechanisms to translate those strategies into

active steps to file patent applications overseas. As areality. In addition, the Intellectual Property Division, which

result, as of April 2009 as many as 1,231, or 35.3%, ofreports directly to the President, participates fully in reformthe total of 3,483 patents held by the Group were held

activities implemented by the CIPOs.

overseas. Notably during the past five years, we haveincreased the number of overseas patent applications

Main Activities and Results

under the Patent Cooperation Treaty (PCT). We haveIntellectual Property Inspection Activities

been stepping up the use of these PCT applications

We have formed an Inspection Committee composed prin-because of the advantages they offer. For example, they

cipally of CIPOs and use mechanisms for the regular evalua-eliminate certain duplications in the examination proce-tion of inventive proposals. In this way, we foster the efficientdures that are conducted by each individual country.

and systematic filing of patent applications ultimately

Further, the date of filing within Japan is also deemed tointended for commercialization. Furthermore, by incorporat-be the date of filing in other designated countries if certain

ing intellectual property evaluation in design review (DR), we

conditions are satisfied.

are striving to make our product capabilities more robust.

Overseas Patent Applications by SHICIPO System(Number)

250

President

Sumitomo
Mechatronics
Construction

Precision
Equipment

Quantum
Equipment

Plastics
Machinery

Power Transmission Research and& Controls
Development

Intellectual
Property

200
150

CIPO

CIPO

CIPO

CIPO

CIPO

CIPO

CIPO

100

PL

PL

PL

PL

PL

PL

PL

50

CIPO: Chief Intellectual Property Officer
PL : Patent Leader
SPL : Sub-Patent Leader

SPL (Several) SPL (Several) SPL (Several)

0
China

FY04 05

06

Taiwan

Korea

07

08
PCT

OthersAnnual Report 2009

Corporate Governance

The SHI Group believes that the essence of corporate governance lies in the establishment of a system thatenables efficient and transparent management. Sound corporate governance helps the Company achieve
higher enterprise value and win the trust of all its stakeholders, including shareholders, customers, employees
and the community as a whole.

Corporate Governance Systemcomprising executive officers assigned to the Company’s

The SHI Group has adopted the corporate auditor system

Head Office, as an advisory body to the president. The

and, within this framework, has introduced an executive

Board of Corporate Auditors comprises four corporate

officer system to separate the business execution andauditors, including two external corporate auditors. The

supervision functions of corporate management.

Board audits the execution of duties by the Company’s

The Company has a small Board of Directors

directors and executive officers and reinforces the audit-

comprising 10 directors, including one external direc-

ing function by periodically convening meetings of thetor, to ensure full deliberation and reinforce manage-

corporate auditors of the Company and its subsidiaries

ment transparency and management supervision.

and affiliates. The Company appoints lawyers and certi-

The Executive Officers Committee comprises 15

fied public accountants as external corporate auditors to

executive officers, who execute the Company’s busi-

reinforce the overall system for checking compliance andness, including 7 who concurrently serve as directors

corporate accounting.

of the Company. The Committee manages consolidated business results and ensures the implementation of management policies. The Company has alsoestablished the Management Strategy Committee,

SHI’s Corporate Governance System
General Meeting of Shareholders

Ethics Committee

Board of Directors

Directors Recommendation
Committee

Audit

Corporate Auditors/
Board of Corporate Auditors
Corporate Auditor’s Dept.

Supervision

Audit

President andChief Executive Officer
Audit

Internal Control GroupInternal Control

Internal Audit Dept.

Internal Auditing

Operational Divisions

Management Strategy
Committee
Executive Officers
Committee

Subsidiaries/Affiliates

Audit
Corporate Auditors/Boards ofCorporate Auditors at Subsidiaries and Affiliates

Independent Auditor

Compensation Committee

27

28

Sumitomo Heavy Industries, Ltd.

Internal Auditing, Auditing by Corporate
Auditors, Independent Audits

cooperate to enable the corporate auditors to perform

Current State of Corporate Audits

nizations, the Internal Control Group, the corporate audi-

The Company has established the Internal Audit Depart-

tors of Group companies, and the independent auditor.

ment (having a full-time staff of 10) as an internal auditing

The board of corporate auditors of a Group company

organization that reports directly to the president. The

immediately reports to the Company’s corporate auditors

Internal Audit Department periodically conducts audits of

if it has discovered any matter that violates or may violate

business execution at the Company’s internal organiza-

laws, ordinances, or the Articles of Incorporation, anytions and at subsidiaries and affiliates in Japan and over-matter that causes or may cause significant damage to aseas, provides advice on operational improvements, andGroup company or the Group as a whole, or any materi-follows up on the implementation of improvements. The

ally improper matter.

effective audits in coordination with internal auditing orga-

Department undertakes the reinforcement of the internal
control functions in coordination with self-audits by theInternal Control System

operational divisions. The Company has appointed

The SHI Group considers the internal control system to

KMPG AZSA & Co. as its independent auditor, hasbe an important management foundation for increasing

entered into an audit contract, and undergoes rigorous

the enterprise value and ensuring the sustained devel-

audits. The corporate auditors, internal auditing organi-opment of the Group. The Board of Directors decides

zation, and independent auditor closely collaborate fromthe basic policy for the development of the internal

the audit planning stage and exchange information

control system, which is the foundation of corporate

about audit results, to develop and implement an effi-

governance. The Board appropriately verifies the effec-

cient audit system.

tiveness of the internal control system and undertakes
constant enhancement and improvement. The Com-

The Corporate Auditor Audit Systempany appoints external directors to bring an outside

The Company has established the Corporate Auditor’s

perspective to the decisions of the Board of Directors.

Department as a staff organization to support the Board

The corporate auditors conduct audits to ensure theof Corporate Auditors. The corporate auditors discuss inappropriate execution of duties by the Company’s

advance with the directors and executive officers person-

directors with respect to the development and opera-

nel transfers and performance evaluation of members oftion of the internal control system.

the Corporate Auditor’s Department. To audit the execution of duties by the Company’s directors and executive

Risk Management

officers, the corporate auditors attend meetings of the

The Company engages in risk management using theBoard of Directors and the Executive Officers Committeegroup-wide internal control system. The Company takes aas well as other important meetings and can examine

specialized approach to risk management under which

important approval requests and other important docu-

regulations governing individual risks, such as environ-ments concerning the conduct of business. The directors

mental, legal, disaster, IT, and export control risk, areand executive officers promptly report to the corporate

prepared and education and guidance are provided byauditors any matter within the Company or Group compa-

the business units in charge. In the event of emergency, innies that violates or may violate laws, ordinances, or theaccordance with the Company’s Emergency Reporting

Articles of Incorporation, any matter that causes or may

Procedures, the involved employees immediately report tocause significant damage to the Company, or any materi-executive management and take appropriate measures.

ally improper matter. The directors and executive officers

Annual Report 2009

Takeover Defense Measuresappointment of external directors since 2002, and the

The SHI Group believes that, from the standpoint of

reduction of the term of office of directors from two years

increasing enterprise value and ensuring the common

to one year in 2007.

interests of the shareholders, the nature of the persons
who control decisions on the Company’s financial andCompliance Activities

business policies should be ultimately decided by the

The Ethics Committee, chaired by the president, formu-shareholders. Some large-scale purchases of shares, inlates the Company’s basic compliance policy. The

light of their purpose or post-purchase management

Company undertakes the rigorous implementation ofpolicy, pose the risk of clear impairment of enterprisethe policy through a group-wide internal control system

value or the common interests of the shareholders.

established by the Internal Control Group. The Company

Some large-scale purchases, such as those conducted

distributes the Ethics Regulations and Compliancewithout the sufficient provision of information reasonably

Manual to all directors, executive officers, and employ-necessary for the shareholders to judge the purchaseees and undertakes regular ethics and compliance edu-

details, can be expected to have a major impact on

cation. When necessary, the Company requires written

enterprise value or the common interests of the share-agreements from directors, executive officers, and all

holders. The Company considers persons who seek tomanagers concerning individual compliance items. The

make such purchases of the Company’s shares to beCompany maintains a resolute stance against organiza-

inappropriate as persons who control decisions on thetions or individuals that pose a threat to public order andCompany’s financial and business policies and has asafety and engages in no relations whatsoever with suchbasic policy on large-scale share purchases of devisingorganizations or individuals. The Company has estab-measures, as far as is necessary and reasonable, tolished an ethics hotline (an in-house whistleblower

secure and increase the Company’s enterprise value andsystem) as a point of contact to report matters that vio-

the common interests of the shareholders.

late or may violate laws, ordinances, or corporate ethics,
promotes use of the hotline, and endeavors to discover

Reinforcement of Corporate Governanceproblems at an early stage. The Company conducts

The SHI Group has long undertaken reinforcement ofaudits of the execution of duties by the Company’s

corporate governance. Specifically, the Company has

executive officers through the organization in charge andundertaken to vitalize the Board of Directors and ensure

ensures that the execution of duties complies with laws,

transparency in management by means that include theordinances, and the Articles of Incorporation.

introduction of the executive officer system in 1999, theMessage From an External Director
Toshiaki Kakimoto
For more than half of my forty years as a businessman I have been involved withmacroeconomic studies. In my capacity as a member of the Japan Associationof Corporate Executives and the Kansai Association of Corporate Executives, I
have continuously engaged in research into and made proposals on various
corporate management issues. I intend to utilize this experience and apply abroad perspective and objective point of view to increase the enterprise value of
Sumitomo Heavy Industries, Ltd.

29

30

Sumitomo Heavy Industries, Ltd.

Management
As of June 26, 2009

Board of Directors

Yoshio Hinoh*

Yoshinobu Nakamura*

Yukio Kinoshita*

Shinji Nishimura*

Katsuhiko Taniguchi

ChairmanPresident and CEO

Senior Executive Vice President
and CFO

Senior Executive Vice President

Executive Vice President

Yuji Takaishi

Shunsuke Betsukawa

Kensuke Shimizu

Mikio Ide

Toshiaki Kakimoto

Senior Vice President

Senior Vice President

Director

Vice President

Director

Corporate Auditors
Eiichi Fujita
Standing Auditor

Nobuo Kadota

Katsuhiko Taniguchi

Akihiko Yoshii

Executive Vice President
General Manager, Plastics Machinery Div.

Executive Vice President
General Manager, Corporate Technology
Operation Group
General Manager, Intellectual Property Dept.

Yuji Takaishi
Senior Vice President
General Manager, Personnel Group

Standing Auditor

Yoshio Kohra
AuditorSeishiro Tsukada
AuditorShunsuke Betsukawa
Senior Vice President
General Manager, Corporate Finance, Accounting &Administration Group
General Manager, Corporate Planning &Development Dept.

Noboru Mimoto
Executive Vice President
General Manager, Energy & Environment Group

Osamu Sekiya
Senior Vice President
General Manager, Precision Equipment Group

Shigeru Toyosumi

Executive Officers

Kensuke Shimizu
President and CEO, Sumitomo (S.H.I) Construction
Machinery Co., Ltd.

Yoshio Hinoh
Chairman

Senior Vice President
General Manager, Internal Control Group

Shigeharu Yasunaga
Mikio Ide
Vice President

Vice President
President and CEO, Shin Nippon Machinery Co., Ltd.

Toshiaki Kakimoto

Hitoshi Kashimoto

Yukio Kinoshita

Yasuhiko Seike

Senior Executive Vice President
and CFO

Executive Vice President
Regional General Manager, Kansai Office
General Manager, Corporate Marketing Dept.

Vice President
President and CEO, Sumitomo Heavy Industries Marine& Engineering Co., Ltd.

Yoshinobu Nakamura
President and CEO

Shinji Nishimura
Senior Executive Vice President
General Manager, Power Transmission &Controls Group* Director with Representative Rights

Chuck Martz
Vice President
Chairman and CEO, Link-Belt Construction Equipment
CompanyAnnual Report 2009

Measures for Environmental Preservation

In 1997, SHI established the “SHI Environmental Policy” to guide activities that are social responsibilitiesof the SHI Group for protecting the global environment, for preserving the local environment, and forengaging in recycling-based economic activities. In addition, in 1999, the SHI Group established“Sumitomo Heavy Industries Group Environmental Policy.” All of the SHI Group Companies have beenpromoting environmental activities and environmental management.

SHI Group Environmental Policy
쎲 Consider the impact on the environment around the facilities.
쎲 Prevent environmental pollution
쎲 Reduce waste쎲 Save energy, Save resources, Promote recycling

Reducing Environmental Loadmanagement by Ministry of Economy, Trade and Industry,

The SHI Group is working to mitigate the environmental

ultimately receiving the “Shikoku Bureau of Economy,load from its products and production activities, and is

Trade and Industry Award.” Similarly, the Yokosuka

contributing to environmental preservation efforts by

Works was presented by Kanagawa Prefecture with themaking its products lighter, more compact, and more

“Kanagawa New Energy Award.” Among products, theenergy efficient. In tandem, the SHI Group is seeking

Group’s hybrid power supply unit for transfer cranes usedgreater energy savings through production innovations.

in harbor container yards was awarded “The Japan

In fiscal 2008, the Niihama Factory within SHI Ehime
Works was recognized for its outstanding energy

Machinery Federation President’s Award” for excellence inenergy efficiency.

“SYBRID SYSTEM” hybrid power supply unit
Transfer cranes are self-propelled cranes used to load
and unload containers at container terminals located at
harbors and elsewhere. SHI’s system supports thecrane’s engine-generator, enabling electricity generated
during lowering and deceleration to be stored andused again for hoisting. This process reduces fuel consumption versus conventional cranes by nearly 60%,
while also curbing exhaust and black smoke emissions.
The end-result is a major contribution to environmental
measures for container terminals.

31

32

Sumitomo Heavy Industries, Ltd.

Efforts to Prevent Global Warming

gives greatest emphasis to eliminating wasteful prac-

The SHI Group takes steps to curb CO2 emissions,tices and improving operations by pursuing initiatives in

reduce paper usage, and promote “green logistics”

which every employee can take part and visualize the(reduce CO2 emissions from transportation) as part ofresults. We met our targets in all categories in this area

activities aimed at preventing global warming. The Groupin fiscal 2008.

FY2008 Target

Achievement

Final Target

Reduce CO2 emissions:

11% reduction vs. FY2004

11% reduction

15% reduction vs. FY2004 in FY2010

Reduce paper usage:

30% reduction vs. FY2005

33% reduction

40% reduction vs. FY2005 in FY2010

Green logistics (reduce CO2
emissions transportation ):6% reduction vs. FY2006

6.8% reduction

10% reduction vs. FY2006 in FY2009

Social Contribution Activities

compost made from fallen leaves and vending machines

The SHI Group conducts work experience programs forgoing to the facility for the park’s upkeep.

students, local cleanup activities, disaster prevention

We have installed rainwater infiltration pipes in themeasures, and other social contribution activities in the“Forest of Inspiration.” Utilizing existing drain pipes,

community, with the goal of being a company with anthese infiltration pipes allow rainwater released into local

embedded presence there.

rivers to penetrate deeper into the ground, helping to

For example, since 1995, about 4,600 square meters

replenish groundwater and mitigate the risk of groundplot of factory property at the Tanashi Works has been

subsidence. The pipes also aid in preventing flood

named the “Forest of Inspiration” and opened to thedamage to surrounding areas caused by localized tor-

public. Management of the land is entrusted to a local

rential rains attributed to global warming.

social welfare institution, with proceeds from the sale of
Newlyinstalled
Newly installed drain pipe
infiltration tank

Existing pipe

(Rainfall)

Newly installed
infiltration well

Existing pipe

(Rainwater discharged directly into
underground water veins)

Existing drain ditch anddrain box
(Rainwater enters here)(Rainwater isfiltrated)

Flow of rainwater

GL= –6.5m

Underground water vein

Underground water vein

Forest of Inspiration

Rainwater infiltration pipes

ClosedFlow of rainwater (stopped)

GL= –25m

Sent
outsideAnnual Report 2009

Financial Section

Contents
34 Eleven-Year Summary
36 Management Discussion and Analysis of Financial Conditions andOperating Results
39 Business Risks
40 Consolidated Balance Sheets
42 Consolidated Statements of Income
43 Consolidated Statements of Changes in Net Assets
46 Consolidated Statements of Cash Flows
48 Notes to Consolidated Financial Statements
65 Independent Auditors’ Report

33

34

Sumitomo Heavy Industries, Ltd.

Eleven-Year Summary
Sumitomo Heavy Industries, Ltd. and Consolidated Subsidiaries

FY1998FY1999FY2000FY2001

Summary of Income (for the year):Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . .
Research and development expenses . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥554,488
464,286
80,572
8,983
9,630
23,800(12,298)¥566,668
473,798
80,162
12,206
12,70926,910(6,328)¥513,753
434,544
71,724
8,688
7,485
20,402(28,612)¥517,138
430,399
72,564
6,777
14,17526,078
1,650

Cash Flows (for the year):
Cash flows from operating activities . . . . . . . . . . . . . . .
Cash flows from investing activities . . . . . . . . . . . . . . .
Free cash flows (Note 3) . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities . . . . . . . . . . . . . . .
Cash and cash equivalents at the end of year . . . . . . .

¥ 11,348(9,050)2,298
19,70957,410¥ 39,117(1,969)37,148(48,765)
45,173¥ (16,957)
29,56012,603(21,403)36,496¥ 38,808(3,343)35,465(32,785)
40,846

Financial Position (at year-end):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . .
Interest-bearing debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest-bearing debt . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net assets (Note 4) . . . . . . . . . . . . . . . . . . . . . . . .

¥723,673
542,689
124,757
387,199
329,789
72,975—¥657,149
474,059
128,784
341,912298,61764,829—¥579,772
394,252
119,135
324,324
287,609
30,049—¥634,904
371,049
199,758
294,552
254,40287,494
—

¥

¥

¥

¥

Amounts per Share of Common Stock:
Net income (loss) (Note 5) . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20.88)123.96—(10.74)110.12
3.00(48.60)
51.04
—

2.80
148.63—Financial Indexes:
Operating income margin . . . . . . . . . . . . . . . . . . . . . . .
EBITDA margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
R&D expenses ratio to net sales . . . . . . . . . . . . . . . . . .
Return on assets (ROA) . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity (ROE) . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity ratio . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing debt ratio . . . . . . . . . . . . . . . . . . . . . .
D/E ratio (Times) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ROIC (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.7
4.3
1.6
(1.7)
(16.9)
10.1
53.5
5.3
1.6

2.2
4.7
2.2
(1.0)
(9.8)
9.9
52.0
5.3
1.9

1.5
4.0
1.7
(4.9)
(95.2)
5.2
55.9
10.8
1.3

2.7
5.0
1.3
0.3
1.9
13.8
46.4
3.4
2.3

Investment in Plant and Equipment, and Others:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Number of employees . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 14,763
14,17013,840¥ 12,606
14,201
13,748¥ 14,305
12,916
12,411¥ 15,549
11,902
12,457

Notes: 1. The U.S. dollar amounts have been translated, for convenience only, at ¥98=$1, the prevailing exchange rate on the Tokyo
Foreign Exchange Market as of March 31, 2009.
2. EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) = Operating income + Depreciation and amortization
3. Free cash flows = Cash flows from operating activities + Cash flows from investing activities
4. Net assets are presented following enforcement of the new Japanese Corporate Law in 2006. Net assets comprise
Stockholders’ equity as previously defined, plus minority interests and share subscription rights.
5. Net income per share of common stock is based on the weighted average number of shares outstanding in each year.
(Operating income + Interest and dividend received) x 55% (= 1 – Effective tax rate)
6. ROIC (Return on Invested Capital) =(Average of stockholders’ equity + Average of interest-bearing debt)

Annual Report 2009

Thousands of
U.S. dollars(Note 1)Millions of yen

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2008¥481,289
400,460
63,616
5,800
17,21329,322
2,688¥482,765
378,422
64,112
6,263
40,231
50,344
16,262¥521,310
407,51265,025
6,317
48,77358,055
22,792¥551,339
434,904
68,9307,434
47,50556,57729,742¥600,256
464,071
71,961
8,581
64,22474,87337,352¥660,769
505,366
77,613
9,908
77,79091,57842,974¥642,918
503,072
82,907
10,04756,94075,26013,649$6,560,389
5,133,383
845,987
102,523
581,018
767,957
139,277¥ 29,499(1,074)28,425(22,116)
47,661¥ 75,775(7,929)67,846(56,666)
57,678¥ 45,451(6,087)39,364(46,490)
49,108¥ 50,023(7,024)42,999(48,812)
43,644¥ 56,789(12,461)
44,328(41,193)
47,523¥ 29,096(41,250)(12,154)(5,238)29,879¥ 34,676(35,924)(1,247)
15,62542,414$ 353,841(366,571)(12,730)
159,442432,798¥588,010
329,231
196,104
273,544
225,571
89,331—¥580,291
321,400
258,891
215,807
157,353
114,526—¥569,771
316,166
253,605
169,228
119,592
137,157—¥579,233
317,813
261,421
125,504
81,587
167,740—¥600,890
332,509268,381
88,04539,890—206,010¥678,634
381,946
296,688
89,56759,311—
246,371¥657,436
380,293
277,143
110,339
65,654—
238,697$6,708,529
3,880,542
2,827,987
1,125,904
669,937—
2,435,687
U.S. dollars(Note 1)

Yen

¥

4.57
151.86—¥27.01
190.25—¥37.80
227.90
3.00

¥

49.45
279.02
5.00

¥

61.99
338.95
7.00

¥

71.19
392.80
10.00

¥

22.62
378.78
6.00

$

0.23
3.87
0.06

%

3.6
6.1
1.2
0.5
3.0
15.2
46.5
3.1
2.6

8.3
10.4
1.3
2.8
14.2
19.7
37.2
1.9
6.5

9.4
11.1
1.2
4.0
16.6
24.1
29.7
1.2
8.5

8.6
10.3
1.3
5.1
17.7
29.0
21.7
0.7
8.8

10.7
12.5
1.4
6.2
24.0
34.1
14.7
0.4
12.2

11.8
13.9
1.5
6.3
22.4
34.9
13.2
0.4
14.0

8.9
11.7
1.6
2.1
5.9
34.8
16.8
0.4
9.6
Thousands of
U.S. dollars(Note 1)Millions of yen¥ 14,406
12,118
11,777¥ 10,562
10,112
11,282

¥

8,175
9,282
11,149¥ 10,285
9,072
11,319¥ 17,257
10,64912,561¥ 28,180
13,78814,408¥ 31,753
18,32014,984$ 324,008
186,93935

Sumitomo Heavy Industries, Ltd.

36

Management Discussion and Analysis of Financial Conditions
and Operating Results(1) Discussion and Analysis of Operating
Results for Fiscal 2008

machinery segment partially offset by lower sales in the

1. Orderssales were up ¥14.0 billion year on year to ¥117.0 billion,

Orders for the year totaled ¥600.7 billion, a decline ofreflecting an increase in new shipbuilding sales in Central¥115.7 billion from the previous fiscal year. This out-

and South America in the ship, steel structure & othercome was the result of lower orders year on year acrossspecialized equipment segment.

mass-produced machinery segment. In other regions,

all business segments. The construction machinery
segment was particularly hard hit, with orders down

3. Cost of sales¥48.9 billion to ¥138.8 billion. Similarly, orders in the

Tracking the decline in sales, cost of sales was ¥503.1

mass-produced machinery segment decreased bybillion, down ¥2.3 billion from the previous fiscal year.

¥46.5 billion year on year to ¥200.8 billion.

The cost of sales ratio was 78.2%, a worsening of 1.8
points from the previous fiscal year due to deterioration

2. Salesin the ratios of construction machinery and mass-

Sales were down ¥17.9 billion year on year to ¥642.9

produced machinery segments.

billion. Sales fell as a result of sharply lower sales in the
mass-produced machinery and construction machinery

4. Selling, general and administrative expenses

segments compared to the previous year.

Selling, general and administrative expenses were

By region, domestic sales declined by ¥15.2 billion to¥82.9 billion, up ¥5.3 billion from the previous fiscal¥313.8 billion on lower sales from the hydraulic excava-

year. The main increases were recorded under thetors business in the construction machinery segment. In

items of labor costs and goodwill amortization.

North America, sales decreased by ¥18.0 billion to ¥102.3
billion due to lower sales in the construction machinery

5. Non-operating profit and loss

and the ship, steel structure & other specialized equip-

Non-operating profit and loss recorded a loss of ¥6.7

ment segments. Sales in Asia increased by ¥1.4 billion tobillion, ¥4.3 billion more than the previous fiscal year.

¥109.8 billion, with sales growth in the industrial

Non-operating income decreased by ¥2.7 billion fromNet Sales

Selling, General and
Administrative Expenses,
SG&A Expenses Ratio

R&D Expenses(¥ Million)(¥ Million)(%)(¥ Million)

800,000

100,000

20

12,000600,000

75,00015

10,0008,000

400,000

50,000

10

6,000

4,000
200,000

25,000

5
2,000

0

0

FY04

05

06

07

08

■ Mass-produced machinery■ Environmental protection facilities, plants & others■ Ship, steel structure & other specialized equipment■ Industrial machinery■ Construction machinery

0

FY04

05

06

07

08

■ Selling, general and administrative expenses (Left scale)
SG&A expenses ratio (Right scale)

0

FY04

05

06

07

08

Annual Report 2009

the previous fiscal year due mainly to a ¥1.7 billion

8. Minority interests

decrease in equity in earnings of unconsolidated sub-Minority interests were ¥1.4 billion, up ¥0.7 billion fromsidiaries and affiliated companies to ¥0.8 billion. On thethe previous fiscal year, reflecting the favorable opera-

other hand, non-operating expenses increased by ¥1.6

tional results of each consolidated company.

37

billion from the previous fiscal year due to an increasein exchange loss and other factors.

9. Net income
Net income was ¥13.6 billion, down ¥29.3 billion from

6. Special gains and losses

the previous fiscal year.

Special gains and losses recorded a loss of ¥16.5
Special gains were down ¥0.7 billion due to the(2) Discussion and Analysis of Financial
Conditions for Fiscal 2008

absence of such items during the year. Special losses

1. Cash flows and interest-bearing debt

were ¥16.5 billion, an increase of ¥12.9 billion from the

The SHI Group has allocated funds through debt andprevious fiscal year due to a loss from write-down ofinternal financing for working capital and capital spending.

billion, ¥13.6 billion more than the previous fiscal year.

investment securities of ¥6.0 billion, and ¥4.9 billion for

Net cash provided by operating activities was ¥34.7

the amortization of goodwill.

billion. Although income before income taxes and minority
interests decreased by ¥38.8 billion year on year, efforts to

7. Income taxes (the total of income tax, local
inhabitant tax, business tax and deferredincome tax)

reduce accounts receivable and large non-cash losses
from write-down of investment securities and amortizationof goodwill led to a ¥5.6 billion increase year on year.

Income taxes were ¥18.7 billion, down ¥10.1 billion from

Net cash used in investing activities was ¥35.9

the previous fiscal year due to a decrease in income

billion, down ¥5.3 billion from the previous year. Cashbefore income taxes of each consolidated company.

outflows increased due to payments for purchases ofproperty, plant and equipment resulting from aggressive
capital spending largely to align overseas bases in the

Operating Income,Operation Income Margin

Net Income,Net Income Margin, ROE

Total Assets,
Total Assets Turnover(¥ Million)(%)(¥ Million)(%)(¥ Million)(Time)

80,00020

50,00025

800,000

2.0

60,00015

40,00020600,000

1.5

400,000

1.0

200,000

0.5

30,00015

1040,00020,00020,00010

10,000550

0–10,000

0

FY04

05

06

07

08

■ Mass-produced machinery■ Environmental protection facilities, plants & others■ Ship, steel structure & other specialized equipment (Left scale)■ Industrial machinery■ Construction machineryOperating income margin (Right scale)

0

FY04

05

06

■ Net income (Left scale)
Net income margin (Right scale)ROE (Right scale)

07

08

0

0

FY04

05

06

■ Total assets (Left scale)
Total assets turnover (Right scale)

07

08

38

Sumitomo Heavy Industries, Ltd.

mass-produced machinery and construction machinery

Notes and accounts payable declined by ¥30.9 billion

segments. Partially offsetting this increase was a decline

year on year to ¥136.1 billion. Interest-bearing debt wasin cash used as payments for securities and as payment¥110.3 billion, up ¥20.8 billion from the previous fiscal

for purchase of consolidated subsidiaries with change inyear, the result of substantial capital spending despite

scope of consolidation.

efforts to repay interest-bearing debt to improve financial

Net cash provided by financing activities was ¥15.6

strength. Advance payments received on contracts werebillion. The Company has entered into commitment line

¥50.0 billion, up ¥1.4 billion from the previous fiscal year

agreements totaling ¥41.5 billion (unused balance) with

due to an increase in such items recorded for the energy

multiple financial institutions, including domestic and over-and environmental plant and ships businesses, amongseas institutions, and thereby has secured very ample

other increases.

liquidity. Cash inflows increased, however, from a ¥25.4

Net assets were ¥238.7 billion, down ¥7.7 billion frombillion net increase in short-term loans taken to ensure athe previous fiscal year-end due mainly to an increase inproper level of liquidity amid concerns that the environ-

foreign currency translation adjustments, which out-ment for raising funds may worsen, particularly the market

weighed an increase in shareholders’ equity reflecting net

for the issue of commercial paper and bonds.

income for the fiscal year under review. As a result, theInterest-bearing debt as of March 31, 2009 totaled

shareholders’ equity ratio as of the end of March 31, 2009¥110.3 billion, an increase of ¥20.8 billion from thewas 34.8%, down 0.2 of a point from the previous fiscal

previous fiscal year-end. Cash and deposits at the end

year-end.

of year increased ¥14.4 billion year on year to ¥44.7
billion. As a result, net interest-bearing debt increased by(3) Group Policy on Distribution of Profits¥6.3 billion year on year to ¥65.7 billion. The ratio of net

The Group policy on the distribution of profits is to pay

interest-bearing debt to total assets deteriorated 1.2

a dividend commensurate to the net income earned

points to 10.0%.

during the period, and to increase this amount ensuringthat sufficient earnings are retained to sustain business

2. Assets, liabilities and net assets

development over the long term.

Total assets were ¥657.4 billion, down ¥21.2 billion

With respect to dividends for the consolidated fiscalfrom the previous fiscal year-end due to declines inyear under review, consideration was given to the fact that

accounts receivable accompanying collections, as wellGroup net income had declined, a loss was recorded on aas losses on write-down of investment securities andnon-consolidated basis, and the business climate for the

goodwill. On the other hand, there was an increase in

fiscal year ending March 31, 2010 is expected to remain

inventories, an increase in property, plant andchallenging. With these considerations in mind, full-year

equipment in line with capital investments, and an

dividends were reduced by ¥4 from the previous year toincrease in assets due to the new consolidation of SEN¥6 per share. This dividend consists solely of an interim

Corporation, among other factors. Cash and deposits

dividend of ¥6 per share, with no distribution of dividends

were ¥44.7 billion, up ¥14.4 billion from the previous

at the end of the consolidated fiscal year.

fiscal year-end, the result of promoting the collection ofreceivables. Reflecting progress in the collection ofreceivables, trade receivables were ¥155.7 billion,
down ¥30.2 billion from the previous fiscal year-end.
Property, plant and equipment rose ¥9.6 billion year on
year to ¥214.0 billion, the result of capital spending.
Investment securities declined by ¥25.7 billion to ¥28.2
billion, reflecting a decrease in the market value ofthese securities.

Annual Report 2009

Business Risks
Risks that could adversely affect the business performance or financial position of the Group are as follows.
All statements below regarding future events represent
judgments made by the management of the Group as ofMarch 31, 2009.

However, wherever we operate, markets are subject topolitical change and unpredictable legal and regulatorychanges. Such changes could have an adverse impact on
the business performance of our overseas units.

5. Product Quality
1. Macroeconomic Factors
Demand for capital equipment, which accounts for morethan half of Group sales, may be influenced by economic
trends in both Japan and various overseas markets where
the Group sells its products. Any contraction in demand
triggered by a slump in the major markets for our products in Japan, the rest of East Asia, North America andEurope could have an adverse impact on the businessperformance or financial position of the Group.

2. Exchange-Rate Fluctuations
The Group’s business includes the production and marketing of products in countries all around the world. Yen
translations are applied in the consolidated financial statements for transactions (involving overseas sales, expenses,
assets and liabilities) undertaken in local currencies. Due toexchange rate effects, the Group may be adversely
impacted by transaction values after yen translation even if
there is no such change in local currency terms. As of
March 31, 2009, the Group had an order backlog, chiefly
in its shipbuilding business, of US$0.8 billion. To minimize
the impact of exchange-rate fluctuations on our businessperformance, the Company uses forward exchange contracts to hedge against risk. However, it is not possible toeliminate all risk using this method. For this reason, theCompany could suffer an adverse impact on its businessperformance from exchange-rate fluctuations.

The Group manufactures a wide range of products in linewith very strict quality control standards. However, total
defect elimination is impossible, and we cannot rule out
having to undertake repair work under guarantee at ourown expense in the event of product flaws. The Group
has taken out insurance to cover product-defect liabilities,
but cannot guarantee that these policies will cover the fullsums of compensation that may become payable in liability settlements.
Repairs performed under guarantee and product compensation payments can generate significant costs for theGroup, and this can adversely affect the business performance and financial position of the Group.

6. Impact of Impairment Accounting
Based on the Law Concerning Revaluation of Land (Ordinance No. 34, issued March 31, 1998) and the Law toPartially Modify the Law Concerning Revaluation of Land
(Ordinance No. 19, March 31, 2001), the Company revalued land used by its businesses on March 31, 2002. The
difference between the market and book values of therevalued land as of March 31, 2009 was ¥19.2 billion, adecline of 19%. If land values continue to fall, we may
have to recognize impairment losses on fixed assets,
which could adversely affect the business performanceand financial position of the Group.

7. Environmental Protection Measures
3. New Influenza Strain
The Group has established a “New Influenza Strain
Countermeasures Committee” to prepare for the possible
spread of infections in Japan and overseas from the latest
influenza strain (A/H1N1), as well as the emergence ofvictims infected with highly virulent forms of this disease.
The Group has also devised measures to prevent theinternal outbreak of infections and response measures inthe event that influenza victims do emerge. Nevertheless,the spread of infections from this new influenza strain in
Japan and overseas could take a human toll and result ina breakdown in social infrastructure. These events could
potentially impact the Group’s activities and adversely
affect its business performance.

4. Overseas Businesses
The Group conducts its business on a global scale, with afocus on mass-produced machinery and construction
machinery for markets in North America, Asia and Europe.
To meet expanding overseas demand, the Company is
upgrading its marketing networks and production facilities.

Under the Group’s environmental policy, we take a rangeof measures to reduce our environmental footprint suchas avoiding environmental risk factors and minimizing
waste. We have taken every measure to prevent environmental pollution, but cannot rule out responsibility for
instances of environmental pollution due to unforeseen
events. Should the Company be responsible for an incidence of environmental pollution, significant costs could
ensue, negatively affecting the business performance andfinancial position of the Group.

8. Natural and Other Disasters
The Group has in place inspection, training and communications mechanisms for minimizing the occurrence andfallout from disasters such as fires, earthquakes, typhoons
and other wind and flood damage. However, the Group’sbusiness activities could be adversely affected if suchdisasters cause material damage to our operations or injury
to our staff. We cannot guarantee that casualty insurance
would be sufficient to cover all damages from such events.

39

40

Sumitomo Heavy Industries, Ltd.

Consolidated Balance Sheets
March 31, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS
Current assets:
Cash and deposits (Notes 2 and 5) . . . . . . . . . . . . . . . . . . . . . . . .
Trade receivables:
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . .
Inventories (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets (Note 2) . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property, plant and equipment:
Land (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and structure (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and other tangible fixed assets (Note 5) . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . .

Investments, long-term loans and other assets:
Investments in unconsolidated subsidiaries andaffiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable andinvestment securities (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments, long-term loans and other assets . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See accompanying notes.

2009

2008

2009

¥ 44,685¥ 30,256

14,303
141,361(1,012)
149,380
7,631
23,945380,293

15,588170,324(836)
130,450
8,501
27,663381,946

145,951
1,442,455(10,328)
1,524,290
77,867244,3393,880,542

115,909
133,721138,0633,864
391,557(177,529)
214,028

116,536
125,272
126,0425,407
373,257(168,803)
204,454

1,182,750
1,364,502
1,408,803
39,4283,995,483(1,811,519)
2,183,964

14,79027,297150,917

13,582
11,94024,267(1,464)
63,115¥ 657,436

26,706
10,34629,445(1,560)92,234¥ 678,634

138,592
121,834
247,623(14,943)644,023$ 6,708,529$

455,968

Annual Report 2009

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due within one year (Note 5) . . . . . . . . . . . . . . . . . .
Current portion of bonds (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade payable:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance payments received on contracts . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for losses on construction contracts . . . . . . . . . . . . . . . .
Allowance for losses on business restructuring . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities (Notes 5 and 6) . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities:
Long-term debt (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees’ severance and retirement benefits (Note 13) . . . . . . . . .
Allowance for losses from product liabilities . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities on revaluation difference on land . . . . . . . . . .
Other long-term liabilities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

2007

2009

¥ 34,176
1,136
10,00024,000¥ 16,932
2,724—
18,000$ 348,735
11,589102,041
244,898

37,652
98,43849,977
4,810
5,661
274
1,842
34,420302,386

49,297
117,711
48,60014,5236,360
29—
36,005
310,181384,205
1,004,471
509,972
49,07757,765
2,795
18,797351,220
3,085,565

41,02734,808237
32,211
8,070
116,353

51,911
32,748285
32,306
4,832
122,082

418,641
355,184
2,415
328,680
82,357
1,187,277

30,87230,872315,017

20,503
148,725

20,524142,053

209,210
1,517,606(1,471)
198,629(1,425)
192,024(15,006)
2,026,827

(547)

4,224

(5,578)Contingent liabilities (Note 8)
Net assets (Note 7):
Common stock: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares authorized 1,200,000 thousand shares
Number of shares issued 605,726 thousand shares
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost, 2,259,483 shares in 2009 and2,144,702 shares in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total owners’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on securities, net of income taxes . . . . . . .
Unrealized gains (losses) on hedging derivatives,
net of income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment regarding pension obligations ofconsolidated overseas subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Revaluation difference on land . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . .
Total valuation and translation adjustments . . . . . . . . . . . . . . . . .

1,945

2,459

19,843(3,008)40,360(8,798)29,952(999)
40,477(1,101)45,060(30,692)
411,832(89,771)
305,634

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and net assets . . . . . . . . . . . . . . . . . . . . . . . . . .

10,116
238,697¥657,436

9,287
246,371¥678,634

103,226
2,435,687$6,708,529

41

42

Sumitomo Heavy Industries, Ltd.

Consolidated Statements of Income
Years ended March 31, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen

Net sales (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses (Note 9):
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . .
Operating income (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expenses):
IncomeInterest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income of unconsolidated subsidiaries andaffiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special gains (losses):
Gains
Gain on sale of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LossesLoss on valuation of investment securities . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses of fixed assets (Note 4) . . . . . . . . . . . . . . . .
Loss on breach of antimonopoly law . . . . . . . . . . . . . . . . . . . .
Settlement expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized net transition obligation ofseverance and retirement benefit of
newly consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . . . .
Head office relocation expenses . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and minority interests . . . . . . . .
Income taxes (Note 6):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests in net income . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

2008

2009

¥642,918¥660,769$6,560,389

503,072
82,906585,978
56,940505,366
77,613582,979
77,7905,133,384
845,9875,979,371
581,018

1,179

1,190

12,034

755
1,872

2,436
2,920

7,701
19,107(1,611)(1,941)(6,919)(1,194)(1,632)(6,041)(16,440)(19,804)(70,607)

—

689

—

(6,043)(4,932)(2,019)(1,904)(1,638)
—

—
—
—
(700)
—
(1,204)(61,667)(50,324)(20,600)(19,431)(16,710)
—

—
—

(980)
(759)

—
—

33,73972,515344,277

17,711
979
18,690(1,400)¥ 13,649

28,870(58)
28,812(729)¥ 42,974

180,727
9,989
190,716(14,284)$ 139,277
U.S. dollars(Note1)

Yen

Amounts per share of common stock:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends applicable to the year . . . . . . . . . . . . . . . . . . . . .
See accompanying notes.

2009

2008

2009

¥22.62—¥ 6.00¥71.19—¥10.00

$0.23
—
$0.06

Annual Report 2009

Consolidated Statements of Changes in Net Assets
Year ended March 31, 2008
Millions of yen
Owners’ Equity

Net assets at March 31, 2007 . . . . . . . . . . . . . . . .

Number ofshares ofcommon stock(Thousand)Commonstock

CapitalSurplusRetainedearnings

Treasurystock

Sub-total

605,726¥30,872¥20,518¥104,950¥ (996)¥155,344(442)
13(5,132)
42,974(442)
19

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . . .
Disposal of treasury stock . . . . . . . . . . . . . . . . . . .
Decrease due to transfer of revaluation(5,132)
42,9746

difference on land . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of application of FIN No. 48

(66)

(66)

to U.S. subsidiaries (*Note) . . . . . . . . . . . . . . . . . .
Increase from increase of consolidated subsidiaries

(202)

(202)

with change in scope of consolidation . . . . . . . . .
Decrease due to exclusion of consolidated

67

67

subsidiaries from the scope of consolidation . . . .
Decrease due to exclusion of equity method affiliates

(449)

(449)

from the scope of consolidation . . . . . . . . . . . . . .
Increase due to merger . . . . . . . . . . . . . . . . . . . . .
Changes in items other than owners’ equity

(90)
1

(90)
1

in the period (net) . . . . . . . . . . . . . . . . . . . . . . . . .
Total changes in the period . . . . . . . . . . . . . . . . . .

—

—

6

37,103(429)

36,680

Balance at March 31, 2008 . . . . . . . . . . . . . . . . . . .

605,726¥30,872¥20,524¥142,053¥(1,425)¥192,024

Unrealized
gains (losses)
on securities,
net ofincome taxes

Net assets at March 31, 2007 . . . . . . . . . . . . . . . .

¥11,195

Millions of yen
Valuation and translation adjustments
Adjustment
Unrealized
regardinggains (losses)
pensionon hedging obligations ofForeignderivatives, consolidated Revaluation
currency
net ofoverseas
differencetranslation
income taxes subsidiaries
on land adjustments¥(1,652)¥(772) ¥40,411

Sub-total

Minority
interests

Total¥ 166 ¥49,348 ¥1,318 ¥206,010

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . . .
Disposal of treasury stock . . . . . . . . . . . . . . . . . . .
Decrease due to transfer of revaluation(5,132)
42,974(442)
19difference on land . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of application of FIN No. 48(66)

to U.S. subsidiaries (*Note) . . . . . . . . . . . . . . . . . .
Increase from increase of consolidated subsidiaries(202)

with change in scope of consolidation . . . . . . . . .
Decrease due to exclusion of consolidated

67

subsidiaries from the scope of consolidation . . . .
Decrease due to exclusion of equity method affiliates(449)

from the scope of consolidation . . . . . . . . . . . . . .
Increase due to merger . . . . . . . . . . . . . . . . . . . . .
Changes in items other than owners’ equity(90)
1

in the period (net) . . . . . . . . . . . . . . . . . . . . . . . . .

(6,971)

4,111

(227)

66

(1,267)(4,288)

7,969

3,681

Total changes in the period . . . . . . . . . . . . . . . . . .

(6,971)

4,111

(227)

66

(1,267)(4,288)

7,969

40,361

Balance at March 31, 2008 . . . . . . . . . . . . . . . . . . .

¥ 4,224¥ 2,459¥(999) ¥40,477¥(1,101) ¥45,060 ¥9,287 ¥246,371*Note: This amount reflects the effect of application of FIN No.48 “Accounting for Uncertainty in Income Taxes” to U.S. subsidiaries.
See accompanying notes.

43

44

Sumitomo Heavy Industries, Ltd.

Consolidated Statements of Changes in Net Assets
Year ended March 31, 2009
Millions of yen
Owners’ Equity

Net assets at March 31, 2008 . . . . . . . . . . . . . . .

Number ofshares ofcommon stock(Thousand)Commonstock

CapitalSurplusRetainedearnings

Treasurystock

Sub-total

605,726¥30,872¥20,524¥142,053¥(1,425)¥192,024(112)
66

Increase/decrease due to change in accounting
for foreign subsidiaries (*Note) . . . . . . . . . . . . . .

(409)

(409)

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . .
Disposal of treasury stock . . . . . . . . . . . . . . . . . .
Increase due to transfer of revaluation(6,639)13,650(6,639)13,650
(112)
42

(21)

(3)

difference on land . . . . . . . . . . . . . . . . . . . . . . . .
Decrease due to exclusion of consolidated

117

117

subsidiaries from the scope of consolidation . . .
Changes in items other than owners’ equity

(44)

(44)

in the period (net) . . . . . . . . . . . . . . . . . . . . . . . .
Total changes in the period . . . . . . . . . . . . . . . . .

—

—

(21)

7,081

(46)

7,014

Balance at March 31, 2009 . . . . . . . . . . . . . . . . . .

605,726¥30,872¥20,503¥148,725¥(1,471)¥198,629

Millions of yen

Unrealized
gains (losses)
on securities,
net ofincome taxes

Net assets at March 31, 2008 . . . . . . . . . . . . . . .

¥ 4,224

Valuation and translation adjustments
Adjustment
Unrealized
regardinggains (losses)
pensionon hedging obligations ofForeignderivatives, consolidated Revaluation
currency
net ofoverseas
differencetranslation
income taxes subsidiaries
on land adjustments¥2,459¥ (999) ¥40,477

Sub-total

Minority
interests

Total¥ (1,101) ¥ 45,060 ¥ 9,287 ¥246,371

Increase/decrease due to change in accounting
for foreign subsidiaries (*Note) . . . . . . . . . . . . . .

(409)

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . .
Disposal of treasury stock . . . . . . . . . . . . . . . . . .
Increase due to transfer of revaluation(6,639)13,650(112)42

difference on land . . . . . . . . . . . . . . . . . . . . . . . .
Decrease due to exclusion of consolidated

117

subsidiaries from the scope of consolidation . . .
Changes in items other than owners’ equity(44)

in the period (net) . . . . . . . . . . . . . . . . . . . . . . . .

(4,771)(514)(2,009)(117)(7,697) (15,108)

829(14,279)

Total changes in the period . . . . . . . . . . . . . . . . .

(4,771)(514)(2,009)(117)(7,697) (15,108)

829(7,265)

Balance at March 31, 2009 . . . . . . . . . . . . . . . . . .

¥ (547)¥1,945¥(3,008) ¥40,360¥(8,798) ¥ 29,952 ¥10,116 ¥238,697*Note: The amount represents the effect of application of the “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (Accounting Standards Board of Japan, Practical Issues Task Force No. 18 issued on May 17, 2006).

Annual Report 2009

Thousands of U.S. dollars (Note 1)
Owners’ Equity

Net assets at March 31, 2008 . . . . . . . . . . . .

Number ofshares ofcommon stock(Thousand)Commonstock

CapitalSurplusRetainedearnings

Treasurystock

Sub-total

605,726$315,071$209,425$1,449,523$(14,538)$1,959,427(1,145)
677

Increase/decrease due to change in accounting
for foreign subsidiaries (*Note) . . . . . . . . . . . .

(4,175)(4,175)

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . .
Disposal of treasury stock . . . . . . . . . . . . . . .
Increase due to transfer of revaluation(67,743)
139,277(67,743)
139,277(1,145)
433

(215)

(29)

difference on land . . . . . . . . . . . . . . . . . . . . .
Decrease due to exclusion of consolidated

1,198

1,198

subsidiaries from the scope of consolidation . .
Changes in items other than owners’

(445)

(445)

equity in the period (net) . . . . . . . . . . . . . . . .
Total changes in the period . . . . . . . . . . . . . .

—

—

(215)

72,258(468)

71,575

Balance at March 31, 2009 . . . . . . . . . . . . . . .

605,726$315,017$209,210$1,517,606$(15,006)$2,026,827

Thousands of U.S. dollars (Note 1)

Unrealized
gains (losses)
on securities,
net ofincome taxes

Net assets at March 31, 2008 . . . . . . . . . . . .

$ 43,104

Valuation and translation adjustments
Adjustment
Unrealized
regardinggains (losses)
pensionon hedging obligations ofForeignderivatives, consolidated Revaluation
currency
net ofoverseas
differencetranslation
income taxes subsidiaries
on land adjustments$25,096$(10,194) $413,030

Sub-total

Minority
interests

Total$(11,237) $459,799 $ 94,769 $2,513,995

Increase/decrease due to change in accounting
for foreign subsidiaries (*Note) . . . . . . . . . . . .

(4,175)

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . .
Disposal of treasury stock . . . . . . . . . . . . . . .
Increase due to transfer of revaluation(67,743)
139,277(1,145)433

difference on land . . . . . . . . . . . . . . . . . . . . .
Decrease due to exclusion of consolidated

1,198

subsidiaries from the scope of consolidation . .
Changes in items other than owners’ equity(445)

in the period (net) . . . . . . . . . . . . . . . . . . . . .

(48,682)(5,253)(20,498)(1,198)(78,534) (154,165)

8,457(145,708)

Total changes in the period . . . . . . . . . . . . . .

(48,682)(5,253)(20,498)(1,198)(78,534) (154,165)

8,457(74,133)

Balance at March 31, 2009 . . . . . . . . . . . . . . .

$ (5,578)$19,843$(30,692) $411,832$(89,771) $305,634 $103,226 $2,435,687*Note: The amount represents the effect of application of the “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (Accounting Standards Board of Japan, Practical Issues Task Force No. 18 issued on May 17, 2006).
See accompanying notes.

45

46

Sumitomo Heavy Industries, Ltd.

Consolidated Statements of Cash Flows
Years ended March 31, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen

2009

2008

2009

¥ 33,739¥ 72,515$ 344,277

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,32013,788

186,939

Impairment losses of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . .

1,904

700

19,431Gain on sale of property, plant and equipment . . . . . . . . . . . . . . .

—

(197)

—

Loss on sale of property, plant and equipment . . . . . . . . . . . . . . .

—

103

—

Loss on disposal of property, plant and equipment . . . . . . . . . . .

859

853

8,767

Gain on sale of investment securities . . . . . . . . . . . . . . . . . . . . . .

—

(689)

—

Loss on valuation of investment securities . . . . . . . . . . . . . . . . . .

6,043

84

61,667

Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,932

—

50,324

Business restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,019

—

20,600Loss on breach of antimonopoly law . . . . . . . . . . . . . . . . . . . . . .

1,638

—

16,710

Settlement expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

1,204

—

Amortization of unrecognized net transition obligation of severance
and retirement benefit of newly consolidated subsidiaries . . . . . .

—

980

—

Cash flows from operating activities:
Income before income taxes and minority interests . . . . . . . . . . . . .
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:

Head office relocation expenses . . . . . . . . . . . . . . . . . . . . . . . . . .

—

759

—

Increase in employees’ severance and retirement benefits . . . . . .

1,345

1,960

13,729Equity in earnings of unconsolidated subsidiaries andaffiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(755)(2,436)(7,701)

Increase (decrease) in allowance . . . . . . . . . . . . . . . . . . . . . . . . .

5

(171)

52

Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,179)(1,190)(12,034)

Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,611

1,194

16,440(Increase) decrease in notes and accounts receivable . . . . . . . . .

30,033(9,522)306,461

Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(19,021)(21,758)(194,091)

Increase (decrease) in notes and accounts payable . . . . . . . . . . .

(25,368)

5,755(258,862)

Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,262(6,242)

63,894Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,387

57,690636,603

Changes in operating assets and liabilities:

Interest and dividend received . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,712

2,499

17,466

Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,615)(1,303)(16,480)

Payment for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(27,808)(29,790)(283,748)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . .

¥ 34,676¥ 29,096$ 353,841

Annual Report 2009

Thousands of
U.S. dollars(Note 1)Millions of yen

2009

2008

2009

Cash flows from investing activities:
Net increase in time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

55

¥

140

$

561

Payments for securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(475)(5,283)(4,848)

Payment for purchase of consolidated subsidiaries withchange in scope of consolidation (Note 2) . . . . . . . . . . . . . . . . .

(7,921)(11,944)(80,831)

Proceeds from sale of securities . . . . . . . . . . . . . . . . . . . . . . . . .

1,045

769

10,668

Payment for purchase of investment in affiliated company . . . . . .

(4,511)(3,465)(46,035)

Receipt due to stock exchange of affiliated company (Note 2) . . .

—

1,390

—

Payments for purchases of property, plant and equipment . . . . . .

(28,073)(24,243)(286,456)

Proceeds from sale of property, plant and equipment . . . . . . . . .

1,112

1,429

11,342

Decrease in short-term loans receivable . . . . . . . . . . . . . . . . . . . .

3,137

—

32,007

Payments for long-term loans receivable . . . . . . . . . . . . . . . . . . .

(57)

(68)

(580)

Collection of long-term loans receivable . . . . . . . . . . . . . . . . . . . .

64

77

658

Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(300)

(52)

(3,057)

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . .

(35,924)(41,250)(366,571)

Net increase (decrease) in short-term loans . . . . . . . . . . . . . . . . .

19,644(5,742)200,443

Increase in commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,000

3,000

61,224

Cash flows from financing activities:

Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .

384

17,500

3,917

Payments for long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,857)(14,443)(29,154)

Proceeds from sale of treasury stock . . . . . . . . . . . . . . . . . . . . . .

42

19

433

Disbursement for acquisition of treasury stock . . . . . . . . . . . . . . .

(112)

(442)

(1,145)

Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,628)(5,115)(67,628)

Payment of dividends for minority stockholders . . . . . . . . . . . . . .

(382)

(15)

(3,897)

Repayments of finance lease obligations . . . . . . . . . . . . . . . . . . .

(466)

—

(4,751)

Net cash provided by (used in) financing activities . . . . . . . . . . . .

15,625(5,238)

159,442

Effect of exchange rate changes on cash andcash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,818)(143)(18,553)

Net (increase) decrease in cash and cash equivalents . . . . . . .

12,560(17,535)

128,159

Cash and cash equivalents at beginning of year . . . . . . . . . . . .

29,87947,523304,885

Increase due to new consolidated company . . . . . . . . . . . . . . .

—

161

—

Decrease from the change in consolidation scope . . . . . . . . .

(39)

(292)

(389)

Increase due to merger of non consolidated subsidiary toa consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

22

143

Cash and cash equivalents at the end of year (Note 2) . . . . . . .

¥ 42,414¥ 29,879$ 432,798

See accompanying notes.

47

48

Sumitomo Heavy Industries, Ltd.

Notes to Consolidated Financial Statements
1. Significant accounting policies
Basis of presenting consolidated financial
statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity
with accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects
as to application and disclosure requirements of International Financial Reporting Standards.
Prior to the year ended March 31, 2009, the accountsof consolidated overseas subsidiaries are based on theiraccounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective
countries of domicile. As discussed in Change in accounting policies (A), the accounts of consolidated overseas
subsidiaries for the year ended March 31, 2009 are prepared in accordance with either International Financial
Reporting Standards or U.S. generally accepted accounting principles, with adjustments for the specified six items
as applicable.
The accompanying consolidated financial statements
have been reformatted and translated into English (withcertain expanded descriptions) from the consolidated
financial statements of Sumitomo Heavy Industries, Ltd.
(“the Company”) prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial
Instruments and Exchange Law. Certain supplementary
information included in the statutory Japanese language
consolidated financial statements is not presented in theaccompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S.
dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at
March 31, 2009, which was ¥98 to U.S.$1. The convenience translations should not be construed as representations of what the Japanese yen amounts have been,
could have been, or could in the future be when converted
into U.S. dollars at this or any other rate of exchange.

Principles of consolidation
The consolidated financial statements include theaccounts of the Company and its significant subsidiaries(“the Companies”). All significant inter-company balance
and transaction have been eliminated in consolidation.
Investments in significant affiliated companies areaccounted for by the equity method. Significant goodwill,
which is difference between the investment cost and net
assets at the date of acquisition are amortized over 5
years. In case of amounts being insignificant, suchamounts are charged or credited to income as incurred.

In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are recorded
based on the fair value at the time the Company acquired
control of the respective subsidiaries.

Consolidated statements of cash flows
In preparing the consolidated statements of cash flows,
cash on hand, readily available deposits and short-term
highly liquid investments with maturity not exceeding threemonths at the time of purchase are considered to be cash
and cash equivalents.

Marketable and investment securities
Held-to-maturity debt securities are stated at amortizedcost. Available-for-sale securities with fair market values
are stated at fair market value. (Unrealized gains and unrealized losses on these securities are reported, net of applicable income taxes, as a separate component of the net
assets. Realized gains and losses on sale of such securities are computed using the moving-average method.)
Equity securities issued by subsidiaries and affiliated companies, which are not consolidated or accounted for using
the equity method, are stated at moving-average cost.
Unlisted available-for-sale securities are stated at costbased on the moving-average method.

Inventories
Prior to April 1, 2008, work in process is stated principallyat cost determined by the specific identification method;finished products, raw materials, and supplies at cost
determined by the average method.
As discussed in change in accounting policies (B),effective April 1, 2008, the Company adopted a new
accounting standard for measurement of inventories andstated the inventories at the lower of cost or net realizablevalue at March 31, 2009.

Depreciation and Amortization
Tangible fixed assets (not including lease assets): Buildings
acquired between April 1, 1998 and March 1, 2007 aredepreciated by the former straight-line method. Buildings
acquired after April 1, 2007 are depreciated primarily by
the revised straight-line method. Other tangible fixed
assets acquired on or before March 31, 2007 are depreciated primarily by the former declining-balance method andthose acquired after April 1, 2007 are depreciated by therevised declining-balance method.
Effective from the year ended March 31, 2009, theCompany and consolidated domestic subsidiaries
changed the useful lives based on the reassessment of
useful lives in light of a change in the Corporation Tax Law
of Japan in 2009. This did not have any material impact on

Annual Report 2009

the Company’s consolidated financial statements.
Following the amendments of the Corporation Tax Law
of Japan, a change was made in the method of depreciation applied to tangible fixed assets acquired by theCompany and domestic consolidated subsidiaries after
March 31, 2007. As a result, operating income and income
before income taxes and minority interests declined ¥681
million, respectively, compared to what would have beenreported under the previous accounting policies.
Furthermore, with regard to the amendment of the
Corporation Tax Law of Japan, effective April 1, 2007,
when tangible fixed assets acquired by the Company andconsolidated subsidiaries before April 1, 2007 are depreciated to their allowable depreciation limits (5% of acquisition
costs), amounts of such depreciation limits are recognizedequally over five years commencing on or prior to the year
ended March 31, 2008, or the year immediately following inwhich depreciation has been recognized up to the depreciation limit. This resulted in a decrease in operating income
and income before income taxes and minority interests inthe amount of ¥689 million, respectively.
Lease assets:
The Company and consolidated domestic subsidiaries
account for finance leases commencing prior to April 1,2008 which do not transfer the ownership of the leased
property to the lessee as operating leases with disclosuresof certain “as if capitalized” information. As discussed in
Change in accounting policies (C), the Company and consolidated domestic subsidiaries adopted a new accounting
standard and capitalized finance leases that commenced
after March 31, 2008, except for certain immaterial or
short-term finance leases, which are accounted for as
operating leases.
Property and equipment capitalized under finance leasearrangements are depreciated by the straight-line method
over the lease term.

Allowance for doubtful accounts
The Company and consolidated subsidiaries provide ageneral allowance for doubtful accounts. Calculation ofthis allowance is based on historical collection losses
incurred in the past. Additionally, for accounts receivableconsidered at risk (bankruptcy, companies under rehabilitation plan), an allowance is booked based on an estimation of the uncollectible amount, on a case-by-case basis.

49

The current value of the land on March 31, 2009 fell
¥19,160 million ($195,513 thousand) in comparison withthe book value of the land after revaluation.

Employees’ severance and retirement benefits
In order to provide for retirement benefits to be paid to
employees, the amount considered to have accrued as at
the end of the fiscal year is stated based on the estimatedamount of retirement benefit obligations and pension plan
assets as at the end of the fiscal year.
Prior service costs are recognized in expenses as
incurred by the Company, in equal amounts over a period
within the average remaining service year of employees(mainly 12 years) by consolidated subsidiaries.
The actuarial gains (losses) are recognized in expenses
in equal amounts over a period within the average remaining service year of employees (mainly 12 years) commencing in the next year of the accrual.

Allowance for warranty
In order to provide for expenditure for repair work to be
performed free of charge after delivery of products, allowance for warranty is provided at an amount estimated to
be incurred based on the past experience of such repair
work actually performed.

Allowance for losses on construction contracts
With regard to construction contracts that have not yet
been delivered and are with high probability of incurring
substantial losses at the end of the fiscal year, and where it
is possible to reasonably estimate the amount of suchlosses, the estimated amount of losses to be incurred in
the future is provided as allowance for losses on construction contracts.

Allowance for losses from product liabilities
Allowance for losses from product liabilities is provided at
an estimated amount of product liabilities to be incurred
related to the crane business of overseas subsidiaries.

Allowance for losses on business restructuring
Allowance for losses on business restructuring is provided
at an estimated amount to be incurred in connection withbusiness restructuring of the Company and affiliated companies in the future.

Sales
Revaluation difference on land
The Company revaluated land used for business operations on March 31, 2002 in accordance with Enforcement
Ordinance for the Law Concerning Revaluation Reservefor Land effective March 31, 1998.

Sales are recognized principally on a delivery basis except
those for long-term (over 1 year) contracts of ¥1 billion or
more, which are recognized, based on the percentage-ofcompletion method.

50

Sumitomo Heavy Industries, Ltd.

Software costs
The Companies amortize costs of software for their own
use using the straight-line method over the estimateduseful life (5 years).

Research and development costs
Research and development costs included in production
cost, and selling, general and administrative expenses were
¥10,688 million ($109,006 thousand) and ¥9,960 million forthe years ended March 31, 2009 and 2008, respectively.

Income taxes
The Companies recognize tax effects of temporary differences between the financial statement basis and the tax
basis of assets and liabilities.
The Company and some of the consolidated subsidiaries adopted the Japanese tax regulations allowing theCompany to file a consolidated tax return.

Foreign currency translation
Receivables and payables in foreign currencies are translated into Yen at year-end rates.
All asset and liability accounts of foreign subsidiaries
and affiliates are translated into Yen at balance sheet daterates of each foreign subsidiaries, except for common
stock, capital surplus and retained earnings, which aretranslated at historical rates.
Income and expense accounts are translated atbalance sheet date rates. The adjustment resulting fromforeign currency translation is reported in net assets.

However, if forward foreign exchange contracts
meet certain hedging criteria, the Company accounts
for as follows;
When a forward foreign exchange contract is executedto hedge an existing foreign currency receivable or payable,a) The difference, if any, between the Yen amount of
the hedged foreign currency receivable or payabletranslated using the spot rate at the inception dateof the contract and the book value of the receivableor payable is recognized in the income statement in
the period which includes the inception date, andb) The discount or premium on the contract (that is, thedifference between the Yen amount of the contract
using the contracted forward rate and that using the
spot rate at the inception date of the contract) is
recognized over the term of the contract.
When a forward foreign exchange contract is executedto hedge a future transaction in a foreign currency, thefuture transaction will be recorded using the contracted
forward rate, and no gains or losses will be recognized.
When interest rate swap contracts meet certain hedging criteria, the net amount to be paid or received is added
to or deducted from the interest on the assets or liabilities
for which the swap contract was executed.
When currency option contract is executed to hedge afuture transaction in a foreign currency, the future transaction will be recorded using the contracted forward rate,
and no gains or losses on the currency option contract
are recognized.

Amounts per share
Matters Related to Amortization of Goodwill
Goodwill is amortized based on the straight-line method
over the 5-year period, the estimated period over which
the effect of investment is expected to appear.
However, where goodwill is in a small amount, all suchamount is changed or credited to income as incurred.

Derivatives and hedge accounting
Derivative financial instruments are stated at fair value
and changes in the fair value are recognized as gains orlosses except for hedging purposes. When derivatives
meet the hedging criteria, the Companies defer recognition of gains or losses resulting from changes in fair valueof derivatives until the related losses or gains on thehedged items are recognized.

The computation of net income per share of common
stock is based on the weighted-average number of sharesof common stock outstanding during each fiscal year.
The diluted net income per share is not presented,
because the Company does not have any outstanding convertible bonds or bonds with subscription rights to share.
Year-end cash dividend will be determined at shareholders’ meeting held after the end of fiscal year.

Reclassifications
Certain amounts in the consolidated financial statements
for the year ended March 31, 2008 have been reclassified
to conform to the 2009 presentation.

Change in accounting policies(A) Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements
On May 17, 2006, the Accounting Standards Board ofJapan issued Practical Issues Task Force No. 18 “Practical
Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial Statements”

Annual Report 2009(“PITF No. 18”). PITF No. 18 requires that accounting
policies and procedures applied by a parent company andits subsidiaries to similar transactions and events undersimilar circumstances should, in principle, be unified for the
preparation of the consolidated financial statements. PITF
No. 18, however, as a tentative measure, allows a parent
company to prepare consolidated financial statements
using foreign subsidiaries’ financial statements prepared inaccordance with either International Financial ReportingStandards or U.S. generally accepted accounting principles.
In this case, adjustments for the following six items are
required in the consolidation process so that their impact on
net income is accounted for in accordance with Japanese
GAAP unless the impact is not material.
(a) Goodwill not subject to amortization(b) Actuarial gains and losses of defined-benefit retirement plans recognized outside profit or loss(c) Capitalized expenditures for research and development activities(d) Fair value measurement of investment properties,
and revaluation of property, plant and equipment
and intangible assets(e) Retrospective treatment of a change in accounting
policies(f) Accounting for net income attributable to minority
interests
The adoption of PITF No. 18 did not have any material
impact on the Company’s consolidated financial statements.
(B) New accounting standard for inventories
On July 5, 2006, the Accounting Standards Board of Japanissued ASBJ Statement No. 9, “Accounting Standard for
Measurement of Inventories.” As permitted under thesuperseded accounting standard, the Company and consolidated domestic subsidiaries previously stated inventories
at cost. The new accounting standard requires that inventories held for sale in the ordinary course of business bemeasured at the lower of cost or net realizable value.
As a result of the adoption of ASBJ Statement No. 9,
operating income, ordinary income and income before
taxes and minority interests for the fiscal year ended March
31, 2009 decreased by ¥2,022 million ($20,631 thousand).
(C) New accounting standards for lease transactions
as lessee
Prior to April 1, 2008, the Company and consolidated
domestic subsidiaries accounted for finance leases that
do not transfer ownership of the leased property to thelessee as operating leases with disclosure of certain “as if
capitalized” information in the notes to the consolidated
financial statements.

51

On March 31, 2007, the Accounting Standards Boardof Japan issued Statement No. 13, “Accounting Standard
for Lease Transactions” and Guidance No. 16, “Guidanceon Accounting Standard for Lease Transactions.” The new
accounting standards require that all finance lease transactions be treated as capital leases.
Effective April 1, 2008, the Company and consolidated
domestic subsidiaries adopted the new accounting standards for finance leases commencing after March 31,
2008 and capitalized assets used under such leases,
except for certain immaterial or short-term finance leases,
which are accounted for as operating leases. As permitted, finance leases that commenced prior to April 1, 2008
and have been accounted for as operating leases, continue to be accounted for as operating leases with disclosure of certain “as if capitalized” information.
The adoption of new accounting standards for leasetransactions did not have any material impact on the
Company’s consolidated financial statements.

Business combinations(A) Acquisition of voting rights in SEN Corporation, an
SHI and Axcelis Company
1. General information
The Company acquired voting rights in SEN
Corporation, an SHI and Axcelis Company on March
30, 2009.
The legal form of the transaction is a purchase ofstock. As a result of the transaction, the Company’sownership of the voting rights increased from 50%
to 100%.
In addition, SEN Corporation, an SHI and Axcelis
Company changed the company name to SEN
Corporation on April 1, 2009.
2. Business of the entity combined
The business of SEN Corporation, an SHI and Axcelis
Company is development, manufacture, and sale ofion implanters and related services.
3. Overview of the transaction including its purpose
To accelerate and promote the global market expansion of business of ion implanters (a type of semiconductor equipment).
4. Acquired companies’ financial results for 2009
As the acquisition date is deemed to be on March 31,
2009, the results of operations of the acquired company before March 31, 2009 are included in equity in
net income of unconsolidated subsidiaries and affiliated companies.

52

Sumitomo Heavy Industries, Ltd.

5. Acquisition costs
Millions of yen

Acquisition price . . . . . . . . . . . . . . . . . . . . . . ¥11,315
Direct costs attributable to the acquisition . . .
118
Acquisition costs . . . . . . . . . . . . . . . . . . . . . 11,433
6. Negative goodwill(1) Amount of negative goodwill . . . . 3,334 million yen

operations while benefiting the two acquired companies through synergistic effects. Also, as a result of
the stock exchange, Nihon Spindle has been made asubsidiary of the Company, and this will allow the
Company to implement its growth strategies in amore effective manner.
4. The ratio for the stock exchange
Stock exchange ratio(2) Reason that the negative goodwill arose
The negative goodwill arose as the acquisition price,which had been agreed with the seller in considerationof the valuation by a third party institution, was lower
than the net assets measured at fair value as of thedate of the acquisition.
(3) Amortization of negative goodwill
Negative goodwill is amortized using the straight-line
method over a five-year period.
(B) Nihon Spindle Manufacturing Co., Ltd. became aconsolidated subsidiary resulting from its stock
exchange transaction.
1. General information
On October 1, 2007, Nihon Spindle ManufacturingCo., Ltd., an affiliate of the Company (“Nihon Spindle”),
entered into a stock exchange agreement with Izumi
Food Machinery Co., Ltd. (“Izumi Food”) and SNM
Fastener Co., Ltd. (“SNM” and on October 1, 2007,
this company changed the name to SFK Fastener Co.,Ltd), both of which were wholly owned subsidiaries of
the Company.
In line with the stock exchange agreement
executed by Nihon Spindle, the Company acquired
additional 16.2% of the voting rights in Nihon Spindle.
As a result, the Company owns more than 40% of
voting rights of Nihon Spindle. Since the Company
satisfies certain other conditions evidencing the existence of control over Nihon Spindle, Nihon Spindle has
become a consolidated subsidiary of the Company.

Nihon Spindle . . . . . . . . . . . . . . . . . . . . . . . . .
1
Izumi Food . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2
SNM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000(Notes) 1. Ratio for the stock exchange
3.2 shares of Izumi Food and 2,000 shares of SNM were
exchanged for one share of the common stock of Nihon
Spindle.
2. Method of calculation and basis of calculation by a thirdparty institution
Nihon Spindle requested Nomura Securities Co., Ltd.
(“Nomura Securities”) to calculate the ratio for the stock
exchange, while Izumi Food and SNM engaged Sumitomo
Mitsui Banking Corporation (“SMBC”). Nomura Securities
conducted an analysis with respect to Nihon Spindle,
based on the historical stock price analysis method, thediscounted cash flow (DCF) method and the comparable
company analysis method. Nomura Securities also conducted an analysis on Izumi Food and SNM using the DCF
method and the comparable company analysis method.
Izumi Food and SNM are not publicly listed companies.
Therefore, the results of the historical stock price analysis
of Nihon Spindle and the comparable company analysis of
Izumi Food and SNM were considered and examined prior
to the actual application of the historical stock price analysis method.
SMBC conducted an analysis of Nihon Spindle based on
the historical stock price analysis method, the DCF method
and the net assets at fair value method. SMBC also conducted an analysis with regard to Izumi Food and SNM,
based on the comparable company analysis method, theDCF method and the net assets at fair value method.
With reference to proposals submitted by the aforementioned third-party institutions on the stock exchange ratio
and with due consideration given to their own financial
standing, performances and stock price trends, Nihon
Spindle, Izumi Food and SNM agreed and made decisions
on the stock exchange ratio at their individual board of
directors meetings held on May 8, 2007.

2. Business of the entity combined
Nihon Spindle manufactures and sells environmental
equipment, air-conditioning equipment, industrial
equipment and construction materials.

5. Number of shares delivered and estimated value
Number of shares delivered to
Nihon Spindle . . . . . . . . . . . . . . 10,380,000 shares
Estimated value . . . . . . . . . . . . . . 3,332 million yen

3. Overview of the transaction including its purpose
Through this stock exchange transaction, Nihon
Spindle acquired Izumi Food and SNM as its wholly
owned subsidiaries. These acquisitions will enable
Nihon Spindle to accelerate the completion of its
growth strategies and expand the scope of its

The estimated value was calculated based on the average share price over a reasonable period prior to thedate of agreement and public announcement of themain terms and conditions of the stock exchange, multiplied by the number of shares planned to be delivered.

Annual Report 2009

6. Results of operations of Nippon Spindle for thefollowing period are included in the consolidated financial statements
October 1, 2007 to March 31, 2008
7. Acquisition costs
Acquisition price

4. Acquired companies’ financial results for 2008
As Demag Group companies were deemed to havebeen acquired on March 31, 2008, the financial resultsof the acquired companies’ operation are not includedin the Company’s consolidated financial statements forthe year ended March 31, 2008.

millions of yen

Nihon Spindle stocks. . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . .
8. Goodwill(1) Amount of goodwill . . . . . . . . . .

53

3,332
3,332

(313) million yen(2) Reason that the goodwill arose
The goodwill was recognized as a difference between
Nihon Spindle’s net assets and the value of acquired
Nihon Spindle’s shares.
(3) Amortization of goodwill:
Goodwill is fully amortized when generated.
(C) Demag Ergotech GmbH and two other Demag
Plastics Group companies (“Demag Group”) became
wholly owned subsidiaries of the Company.
(In the year ended March 31, 2009, MARMOR 220. VV
GmbH, one of the Demag Plastics Group companies,
combined Demag Ergotech GmbH and changed thecompany name to SUMITOMO (SHI) DEMAG
PLASTICS MACHINERY GmbH.)
1. General information
The Company acquired Demag Group on March 3,
2008, making Demag Group a wholly owned
subsidiary.
The legal form of the transaction is a purchase ofstock (100% of the voting rights).

5. Acquisition costs
millions of yen

Acquisition price . . . . . . . . . . . . . . . . . . . . .
Direct costs attributable tothe acquisition . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . .
6. Goodwill(1) Amount of goodwill . . . . . . . . .

3. Overview of the transaction including its purpose
By making Demag Ergotech and two other DemagGroup companies its wholly owned subsidiaries, theCompany aims to accelerate and bolster its plastics
machinery business in the global market.
Following the Company’s acquisition of DemagGroup’s shares, Demag Ergotech and two other
Demag Group companies have become theCompany’s wholly owned subsidiaries.

696
12,7796,663 million yen(2) Reason that the goodwill arose
The goodwill arose from the difference between thepurchase price, which had been agreed in consideration of the valuation by a third party institution, andthe net assets measured at fair value as of the date ofacquisition.
(3) Amortization of goodwill
Goodwill is amortized using the straight-line method
over a five-year period.

2. Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months orless. Those are readily convertible to known amounts ofcash and have negligible risk of changes in value.
Cash and cash equivalents as of March 31, 2009 and2008 consisted of the following:
Millions of yen

2. Business of the entities combined
Demag Ergotech GmbH (“Demag Ergotech”) and twoother Demag Group companies manufacture, sell andprovide services relating to plastics machinery.

12,083

Cash and deposits . . . . . . . . .
Time deposits with maturities
over three months. . . . . . . . . .
Collateral deposits . . . . . . . . . .
Investment securities(cash equivalents) . . . . . . . . . .
Cash and cash equivalents . . . .

Thousands of
U.S. dollars

2009

2008

2009

¥44,685¥30,256$455,968(2,035)
(237)

(32)
(345)

(20,759)(2,421)

1¥42,414—¥29,87910$432,798

Refer to the Note of Business combination (A), theCompany acquired additional voting rights of an affiliate
SEN Corporation, an SHI and Axcelis Company, whichbecame a consolidated subsidiary as a result.

54

Sumitomo Heavy Industries, Ltd.

The following table summarizes the assets and liabilities
of SEN Corporation, an SHI and Axcelis Company at
acquisition date as well as the stock acquisition price andrelated expense.
SEN Corporation, an SHI and Axcelis Company (as ofMarch 30, 2009)
Millions ofyen

Current assets . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . .
Goodwill generated . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . .
Acquisition cost of stock . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . .
Payment for purchase of consolidated
subsidiaries with change inscope of consolidation . . . . . . . . . . . . . .

Thousands of
U.S. dollars

2009

2009

¥11,477
4,242(3,334)(876)(76)¥11,433(3,512)$117,116
43,285(34,018)(8,940)(776)$116,667(35,836)¥ 7,921$ 80,831

Demag Ergotech GmbH and two other Demag Group
companies (as of March 3, 2008)
Millions of yen

2008

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill generated . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition cost of stock . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Amount to be paid . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for purchase of consolidated subsidiaries
with change in scope of consolidation . . . . . . . . . .

¥ 17,041
5,369
6,663
(10,860)(5,434)¥ 12,779
(293)
(542)
¥ 11,944

3. Inventories
Inventories as of March 31, 2009 and 2008 were as
follows:
Thousands of
U.S. dollars

Millions of yen

Refer to the Note of Business combination (B), theCompany acquired additional voting rights of an affiliate
Nihon Spindle, which became a consolidated subsidiaryas a result.
The following table summarizes the assets and liabilities
of Nihon Spindle at acquisition date as well as the stockacquisition price and related expense.
Nihon Spindle Manufacturing Co., Ltd. (as of October
1, 2007)

2009

2008

2009

Finished products . . . . . . . . ¥ 43,260
Work in process . . . . . . . . .
84,826
Raw materials and supplies . .
21,294
Total . . . . . . . . . . . . . . . . . ¥149,380¥ 39,716
70,74919,985¥130,450$ 441,432
865,574
217,284$1,524,290

4. Impairment losses of fixed assets
The Company and certain consolidated domestic subsidiary recognized the following impairment losses in the year
ended March 31, 2009 and 2008.

Millions of yen

2008

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill generated . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition cost of stock . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Receipt due to stock exchange ofaffiliated company . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 9,5448,442(313)(5,202)(2,710)¥—1,390¥ 1,390

Refer to the Note of Business combination (C), theCompany acquired Demag Group.
The following table summarizes the assets and liabilities
of Demag Group at acquisition date as well as the stockacquisition price and related expense.

Use

Type of assets

Location

Business
Property

Intangible fixed
Germany
assetsKurashiki,
Idle
Buildings, etc.
Okayama Pref.
Idle
Buildings, etc. Saijo, Ehime Pref.
Yokosuka,
Idle
Buildings, etc.
Kanagawa Pref.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Millions ofyen

Thousandsof U.S.
dollars

2009

2009

¥1,633$16,670

116

1,179

108

1,104

47

478

¥1,904$19,431

Millions of
yen

Use

Business
Property

Type of assets

Location

Shinoyama,
Land, etc.
Hyogo Pref.
Yokosuka,
Idle
Equipment
Kanagawa Pref.
Idle
Building, etc.
Chiba, Chiba Pref.
Tadaoka,
Idle
Machinery
Osaka Pref.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2008

¥459
174
51
16
¥700

Annual Report 2009

Reason for recording impairment loss
Due to the decrease in profitability and changes in business plan, it is not expected that amounts of assets canbe recoverable.

Annual maturities of long-term debt as of March 31,
2009 were as follows:
Millions ofyenYear ending March 31

Method of grouping of assets
Asset grouping is basically determined for each operationgroup. Idle assets that are not expected to be used in the
future are evaluated by each item.

Method of calculation of recoverable amountThe recoverable amount is based on the net sale price; itis calculated by deducting costs related to sale from thesale price.

5. Bank loans, commercial paper andlong-term debt
Bank loans at March 31, 2009 and 2008 consisted ofshort-term loans, bearing average interest mainly at 1.15%
and 1.13% per annum, respectively.
Commercial paper at March 31, 2009 and 2008
bears interest principally at 0.50% and 0.66% perannum, respectively.
The amount of lease obligation under finance leases
includes the imputed interest expense portion, and therelated interest rate has not been determined.
Long-term debt at March 31, 2009 and 2008 was
follows:
Millions of yen

2009

1.0% domestic bonds due inMarch 2010 . . . . . . . . . . . . . . ¥10,000
Loans principally from banks
and insurance companies due
serially through June 2018 withinterest ranging from 1.07% to2.20% in 2009
Secured . . . . . . . . . . . . . . . .
1,796
Unsecured . . . . . . . . . . . . . .
40,367
Lease obligations . . . . . . . . . . .
2,460¥54,623
Amount due within one year . .
11,136
Amount due after one year . . .
43,487

Thousands of
U.S. dollars

2008

2009

¥10,000$102,041

2,759
41,876—¥54,635
2,724
51,911

18,331
411,899
25,109$557,380
113,630
443,750

55

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 and thereafter . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .

Thousands of
U.S. dollars

2009

2009

¥11,136
11,058
4,794
19,4161,324
6,895¥54,623$113,630
112,838
48,921
198,120
13,50870,363$557,380

At March 31, 2009 and 2008, assets pledged as collateral for loans, long-term loans from banks and insurancecompanies and domestic mortgage bonds were as follows:
Millions of yen

2009

Cash and deposits . . . . . . . .
Buildings and structure . . . . .
Machinery and other tangible
fixed assets . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

¥

294
2,754

1,663
34,652¥39,363

Thousands of
U.S. dollars

2008

¥

368
2,488

517
36,464¥39,837

2009

$

2,996
28,107

16,972353,593$401,668

The Company has agreements with twelve banks forrevolving lines of credit and four global commitment lines
for timely operating-fund raising in the aggregate.
At March 31, 2009 and 2008, bank loans unexecutedbalance etc, related to revolving lines of credit are as follows:
Millions of yen

Limit loan revolving lines ofcredit and global
commitment lines . . . . . . . .
The amount of loan . . . . . . . .
Net unused . . . . . . . . . . . .

Thousands of
U.S. dollars

2009

2008

2009

¥45,823
4,351¥41,472¥46,019
3,046¥42,973$467,582
44,396$423,186

56

Sumitomo Heavy Industries, Ltd.

6. Income tax
The Companies are subject to a number of income taxes,
which, in the aggregate indicate a statutory tax rate inJapan of approximately 41% for the years ended March
31, 2009 and 2008.
The following table summarizes the significant differences between the statutory tax rate and the effective tax
rate for consolidated financial statement purposes for theyear ended March 31, 2009.
2009

Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses not deductible for tax purposes . . . . . . . . .
Per capita inhabitant tax . . . . . . . . . . . . . . . . . . . . . .
Dividend income deductible for tax purpose . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings in consolidated
overseas subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40.69%
1.37
0.60(1.42)
7.76(8.37)
11.53
3.24
55.40%

Since the effective tax rate for consolidated financial
statement purposes for the year ended March 31, 2008
differed from the statutory tax rate by less than 5%, disclosure of reconciliation between these tax rates is omitted.

Significant components of deferred tax assets andliabilities as of March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Accrued bonuses . . . . . . . .
Allowance for doubtful
accounts . . . . . . . . . . . . .
Allowance for warranty . . . .
Allowance for employees’
severance andretirement benefit . . . . . . .
Unrealized profit oninventories . . . . . . . . . . . .
Devaluation of marketablesecurities andinvestments . . . . . . . . . . .
Excess depreciation . . . . . .
Operating losses
carryforward . . . . . . . . . . .
Loss on valuation of
inventories . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . .
Total deferred tax assets . .
Less-valuation allowance . .
Deferred tax assets—net . .
Deferred tax liabilities:
Excess tax depreciation
reserve . . . . . . . . . . . . . . .
Net unrealized holding
gains on securities . . . . . .
Difference on revaluationof assets and liabilities ofsubsidiaries . . . . . . . . . . .
Accelerated depreciation . .
Retained earnings inconsolidated subsidiaries
overseas . . . . . . . . . . . . .
Deferred hedge profit
or loss . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . .
Net deferred tax assets . . . . .

2009

2008

2009

¥ 3,387¥ 3,724$ 34,563

846
2,048

776
2,112

8,634
20,90315,804

15,652

161,266

880

1,599

8,975

1,621
1,350

1,639
1,067

16,538
13,772

3,461

3,025

35,314

1,686
—
7,359
6,824
38,442
36,418(13,617)(7,516)¥ 24,825 ¥ 28,902

17,20575,093392,263(138,944)$ 253,319

(115)

(97)

(1,169)—(1,441)—(4,089)(545)(4,115)(471)(41,728)(5,559)(1,345)(4,170)(13,723)(1,333)(1,695)(15)(542)¥ (7,442) ¥(12,531)¥ 17,383 ¥ 16,371(13,604)(156)$ (75,939)$ 177,381

Annual Report 2009

7. Net assets
The Japanese Corporate Law (“the Law”) became effective
on May 1, 2006, replacing the Japanese Commercial
Code (“the Code”). The Law is generally applicable toevents and transactions occurring after April 30, 2006
and for fiscal years ending after that date.
Under Japanese laws and regulations, the entire
amount paid for new shares is required to be designatedas common stock. However, a company may, by a resolution of the Board of Directors, designate an amount notexceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distributionof surplus is made, the smaller of an amount equal to 10%of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in-capital and legal
earnings reserve must be set aside as additional paid-incapital or legal earnings reserve. Legal earnings reserve is
included in retained earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set
aside an amount equal to at least 10% of the aggregate
amount of cash dividends and other cash appropriations
as legal earnings reserve until the total of legal earnings
reserve and additional paid-in capital equaled 25% ofcommon stock.
Under the Code, legal earnings reserve and additional
paid-in capital could be used to eliminate or reduce a deficit by a resolution of the shareholders’ meeting or could
be capitalized by a resolution of the Board of Directors.
Under the Law, both of these appropriations generally
require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve
may not be distributed as dividends. Under the Code,however, on condition that the total amount of legal earnings reserve and additional paid-in capital remained equal
to or exceeded 25% of common stock, they were available for distribution by resolution of the shareholders’meeting. Under the Law, all additional paid-in-capital andall legal earnings reserve may be transferred to othercapital surplus and retained earnings, respectively, which
are potentially available for dividends.

57

The maximum amount that the Company can distributeas dividends is calculated based on the non-consolidated
financial statements of the Company in accordance withJapanese laws and regulations. The maximum amountthat the company can distribute as dividends at March 31,
2009, amounted to ¥21,015 million ($214,441 thousand).
Taking into consideration the declining profit level of theCompany Group, the loss of the Company posted on a nonconsolidated basis, and the harsh prospect of the businessenvironment surrounding the Company Group in the next
fiscal year, the Company would like to declare a reduced
dividend by ¥4 compared to the previous fiscal year, hence
only ¥6 per share already distributed as the interim dividend
would be the dividend of this fiscal year and no additional
dividend at the year-end would be distributed.

8. Contingent liabilities
Certain consolidated domestic subsidiary is contingently
liable as endorsers of trade notes receivable discountedwith banks in the amount of ¥3,257 million ($33,240
thousand) and ¥3,827 million at March 31, 2009 and2008. In addition, at the same date the Company andcertain consolidated subsidiaries are contingently liable asguarantors of bank loans or other borrowings by unconsolidated subsidiaries, affiliated companies and employees in the amount of ¥14,178 million ($144,676 thousand)and ¥8,193 million, respectively (net of guarantees by
co-guarantors).

9. Segment information(A) The Companies’ primary business activities include (1)mass-produced machinery, (2) environmental protection
facilities, plants & others, (3) ship, steel structure & otherspecialized equipment, (4) industrial machinery, and (5)construction machinery.

58

Sumitomo Heavy Industries, Ltd.

A summary of net sales, costs and expenses, and operating income by segment of business activities for the years
ended March 31, 2009 and 2008, and a summary of identifiable assets, depreciation, impairment losses of fixed assets andcapital expenditures by segment of business activities for the years ended March 31, 2009 and 2008 are presented below:
Millions of yen

Massproduced
machinery

Environmental
protection
facilities,
plants &others

Ship, steel
structure &otherspecialized
equipment

Industrial
machinery

Construction
machinery

I Sales and operating income
Sales:
Outside customers . . . . . . . . . . . . . . . . . . .
Inter-segment . . . . . . . . . . . . . . . . . . . . . . .

¥227,227
3,883¥92,625
2,648¥ 79,602
650¥84,310226¥159,15431

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses . . . . . . . . . . . . . . . . . .

231,110
218,776

95,27384,55480,252
67,69084,53670,951

159,185
151,642

Operating income . . . . . . . . . . . . . . . . . . . .

¥ 12,334¥10,719¥ 12,562¥13,585¥

II Identifiable assets . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses of fixed assets . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . .

¥263,192
9,357
1,749
14,397¥70,269
1,128
—
999

¥110,701
2,871
—
6,528

¥69,529
1,775
—
3,458

Massproduced
machinery

Environmental
protection
facilities,
plants &others

Ship, steel
structure &otherspecialized
equipment

I Sales and operating income
Sales:
Outside customers . . . . . . . . . . . . . . . . . . .
Inter-segment . . . . . . . . . . . . . . . . . . . . . . .

¥232,593
2,887¥91,250
2,428

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses . . . . . . . . . . . . . . . . . .

235,480
207,272

Operating income . . . . . . . . . . . . . . . . . . . .
II Identifiable assets . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses of fixed assets . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . .

2009Elimination
and/orcorporate¥

Consolidated—(7,438)¥642,918—(7,438)(7,635)642,918585,978

197¥ 56,940¥118,505
3,189
—
6,371

¥25,240—155—¥657,436
18,3201,904
31,753

Industrial
machinery

Construction
machinery

Elimination
and/orcorporate

Consolidated¥ 76,393
1,282¥81,163362¥179,370
7

93,67886,77577,67563,581

81,52569,407

179,377
163,091¥ 28,208¥ 6,903¥ 14,094¥12,118¥ 16,286¥¥290,189
7,392
632
13,911¥69,296
1,056
68
2,305

¥105,624
2,061
—
5,521

¥61,033
1,355
—
2,577

¥137,097
1,924
—
3,866

7,543

¥

Millions of yen

2008

¥

—
(6,966)¥660,769—(6,966)(7,147)660,769
582,979

181¥ 77,790¥15,395———¥678,634
13,788700
28,180Elimination
and/orcorporate

Consolidated

Thousands of U.S. dollars

2009

Massproduced
machinery

Environmental
protection
facilities,
plants &others

Ship, steel
structure &otherspecialized
equipment

Industrial
machinery

Construction
machinery

I Sales and operating income
Sales:
Outside customers . . . . . . . . . . . . . . .
Inter-segment . . . . . . . . . . . . . . . . . . .

$2,318,634
39,618$945,153 $ 812,268
27,0176,637$860,311 $1,624,023
2,311
311

Total . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses . . . . . . . . . . . . . .

2,358,252
2,232,390

972,170
862,790862,622724,002

Operating income . . . . . . . . . . . . . . . .

$ 125,862$109,380 $ 128,181$138,620 $II Identifiable assets . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . .
Impairment losses of fixed assets . . . .
Capital expenditures . . . . . . . . . . . . . .

$2,685,631
95,481
17,849146,907$717,032 $1,129,605
11,50429,299——10,193
66,612$709,477 $1,209,231
18,11732,538——35,28765,009818,905
690,724$

1,624,334
1,547,365
76,969— $6,560,389(75,894)—(75,894)(77,900)$

6,560,389
5,979,371

2,006 $ 581,018$257,553 $6,708,529—
186,939
1,582
19,431—
324,008

Identifiable assets under the elimination and/or corporate column primarily are consisted of cash and time deposits and marketable securities.

Annual Report 2009

Change in distribution method for costs
and expenses
Prior to 2008, the Company allocated expenses associated with administrative divisions to applicable segments
only to the segments of which business units belong tocompany. To reflect the administrative divisions’ greater
involvement with the Company’s consolidated groupcompanies due to increased business spin-offs, theCompany decided to make a allocation of a portion of
costs and expenses associated with administrative divisions
into all segments.
In accordance with this change, certain figures included
under segment information differ from what they would
have been had the previous allocation method been
applied. Thus, in the Mass-produced machinery segment,59

a ¥1,348 million decrease in costs and expenses resulted
in an increase of the same amount in operating income; inthe Environmental protection facilities, plants & others
segment, a ¥480 million decrease in costs and expenses
resulted in an increase of the same amount in operating
income; in the Ship, steel structure & other specialized
equipment segment, a ¥265 million increase in costs andexpenses resulted in a decrease of the same amount in
operating income; in the Industrial machinery segment, a¥310 million increase in costs and expenses resulted in adecrease of the same amount in operating income; and in
the Construction machinery segment, a ¥1,254 million
increase in costs and expenses resulted in a decrease of
the same amount in operating income.

(B) Information by geographic area for the years ended March 31, 2009 and 2008 is as follows:
Millions of yen

Other areas

Elimination
and/orcorporate

Consolidated

Japan

North
America

I Sales and operating income
Sales:
Outside customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter-segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥506,320
38,209¥76,770997¥59,828
11,137¥—(50,343)¥642,918—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

544,529
497,860

77,767
69,93070,96569,748(50,343)(51,560)

642,918585,978

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 46,669¥ 7,837¥ 1,217¥ 1,217¥ 56,940

II Identifiable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥529,250¥50,636¥50,533¥ 27,017¥657,436

Elimination
and/orcorporate

Consolidated

2009

Millions of yen

Japan

North
America

I Sales and operating income
Sales:
Outside customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter-segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥537,268
40,351¥78,963
1,233¥44,538
13,710Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

577,619
513,355

80,19670,68458,24853,664

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 64,264¥ 9,512

II Identifiable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥533,320¥51,359

2008

Other areas¥—(55,294)¥660,769—(55,294)(54,723)

660,769
582,980¥ 4,584¥(570)¥ 77,790¥81,426¥ 12,529¥678,634

Consolidated

Thousands of U.S. dollars

Other areas

Elimination
and/orcorporate

Japan

North
America

I Sales and operating income
Sales:
Outside customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter-segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,166,529
389,894$783,364
10,176$610,496
113,638$—(513,708)$6,560,389—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,556,423
5,080,204

793,540
713,575

724,134
711,711(513,708)(526,119)

6,560,389
5,979,371

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 476,219$ 79,965$ 12,423$ 12,411$ 581,018

II Identifiable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,400,513$516,698$515,638$ 275,680$6,708,529

2009

Notes: 1. Identifiable assets under the elimination and/or corporate column primarily consisted of cash, time deposits and marketable securities.
2. Other areas include mostly the United Kingdom, Germany, Singapore and China.

60

Sumitomo Heavy Industries, Ltd.

(C) Overseas sales of the Companies for the years ended March 31, 2009 and 2008 were as follows:
2009

To North America

Overseas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas sales account for consolidated sales . . . . . . . . . . . . . . . . . .
2008¥102,347¥109,796¥117,017

15.9%

17.1%

18.2%

To North America

Overseas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas sales account for consolidated sales . . . . . . . . . . . . . . . . . .

Millions of yen
To Asia
To other areas

Total¥329,160
642,918
51.2%

Millions of yen
To Asia
To other areas¥120,380¥108,441¥102,989

18.2%

16.4%

15.6%

Total

¥331,810
660,769
50.2%

Thousands of U.S. dollars
2009

Overseas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas sales account for consolidated sales . . . . . . . . . . . . . . . . . .

To North America

To Asia

To other areas

Total$1,044,355$1,120,364$1,194,055

15.9%

17.1%

18.2%

$3,358,774
6,560,389
51.2%

Notes: 1. Other areas include mostly the United Kingdom and Germany.
2. Overseas sales consist of export sales by the Company and certain consolidated domestic subsidiaries as well as sales by overseas consolidated subsidiaries.

(D) The effect of the change on segment information.

Method of depreciation of depreciable assets

New accounting standard for inventories

As discussed in “1. Depreciation and Amortization,” theCompany and consolidated domestic subsidiaries
changed the depreciation method and amounts of scrap
values for certain fixed assets pursuant to the amendmentof the Corporation Tax Law effective April 1, 2007.
Under this new depreciation method, in the Massproduced machinery segment, a ¥802 million increase incosts and expenses resulted in a decrease of the sameamount in operating income; in the Environmental protection
facilities, plants & others segment, a ¥76 million increase incosts and expenses resulted in a decrease of the sameamount in operating income; in the Ship, steel structure &other specialized equipment segment, a ¥247 million
increase in costs and expenses resulted in a decrease of
the same amount in operating income; in the Industrial
machinery segment, a ¥83 million increase in costs andexpenses resulted in a decrease of the same amount in
operating income; and in the Construction machinery
segment, a ¥162 million increase in costs and expenses
resulted in a decrease of the same amount in operating
income. In addition, in the geographic area of Japan, a¥1,370 million increase in costs and expenses resulted in adecrease of the same amount in operating income.

As discussed in “1. Change in policies (B),” from theyear ended March 31, 2009, the Company and consolidated subsidiaries adopt the new accounting standard
for inventories.
Under this adoption, in the Mass-produced machinery
segment, a ¥1,599 million ($16,315 thousand) increase incosts and expenses resulted in a decrease of the sameamount in operating income; in the Environmental protection facilities, plants & others segment, a ¥63 million($644 thousand) increase in costs and expenses resulted
in a decrease of the same amount in operating income;in the Industrial machinery segment, a ¥32 million ($327
thousand) increase in costs and expenses resulted in adecrease of the same amount in operating income; and in
the Construction machinery segment, a ¥328 million($3,345 thousand) increase in costs and expenses resulted
in a decrease of the same amount in operating income. In
addition, in the geographic area of Japan, a ¥1,815 million($18,516 thousand) increase in costs and expenses
resulted in a decrease of the same amount in operating
income; in the other areas, a ¥207 million ($2,115 thousand) increase in costs and expenses resulted in adecrease of the same amount in operating income.

Annual Report 2009

10. Information for certain leases(B) Lessors

The summary of assumed amounts of acquisition cost,
accumulated depreciation and net book value withrespect to finance leases accounted for in the samemanner as operating leases as of March 31, 2009 and2008 is as follows:(A) Lessees

2009

Acquisition
cost

Millions of yen
Accumulated
depreciation

Net book
value

Machinery and other tangible
fixed assets . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

¥20,704514¥21,218¥10,159286¥10,445¥10,545228¥10,773

2008

Acquisition
cost

Millions of yen
Accumulated
depreciation

Net book
value

Machinery and other tangible
fixed assets . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

¥27,221474¥27,695¥10,816213¥11,029¥16,405261¥16,6662009

Thousands of U.S. dollars
Acquisition Accumulated
Net book
cost
depreciation
value

Machinery and other tangible
fixed assets . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

$211,262
5,244$216,506$103,670
2,907$106,577

2009

Machinery and other tangible
fixed assets . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . .

2008

Machinery and other tangible
fixed assets . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . .

2009$107,592
2,337$109,929

Machinery and other tangible
fixed assets . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . .

Acquisition
cost

Millions of yen
Accumulated
depreciation

Net book
value

¥74
¥74

¥59
¥59

¥15
¥15

Acquisition
cost

Millions of yen
Accumulated
depreciation

Net book
value

¥74
¥74

¥48
¥48

¥26
¥26

Thousands of U.S. dollars
Acquisition Accumulated
Net book
cost
depreciation
value

$756
$756

$608
$608

Total lease payments for finance leases which do nottransfer ownership to lessees amounted to ¥3,922 million($40,017 thousand) and ¥4,543 million for the years ended
March 31, 2009 and 2008, respectively.
Future lease payments as of March 31, 2009 and 2008,
inclusive of interest under such leases were as follows:

2009

2008

2009

¥ 3,792
6,981¥10,773¥ 5,534
11,132¥16,666$ 38,694
71,235$109,929

Also, future lease payments under operating leases
as of March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

Future lease payments . . . . .
Including due within
one year . . . . . . . . . . . . . .

Due within one year . . . . . . .
Due after one year . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

Thousands of
U.S. dollars

2009

2008

2009

¥2,544¥3,218$25,960

769

813

7,848

2009

2008

2009

¥11
12
¥23

¥16
25
¥41

$115
120
$235

Also, future lease payments under operating leases
as of March 31, 2009 and 2008, were as follows:

Thousands of
U.S. dollars

Millions of yen

$148
$148

Total lease payments for finance leases which do nottransfer ownership to lessees amounted to ¥15 million($152 thousand) and ¥8 million for the years ended March
31, 2009 and 2008, respectively.
Future lease payments as of March 31, 2009 and 2008,
inclusive of interest under such leases were as follows:
Millions of yen

Due within one year . . . . . . .
Due after one year . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

61

Thousands of
U.S. dollars

Millions of yen

Future lease payments . . . . .
Including due within
one year . . . . . . . . . . . . . . .

2009

2008

2009

¥697

¥815

$7,114

194

248

1,983

62

Sumitomo Heavy Industries, Ltd.

11. Securities(A) Book values of securities not stated at fair value as ofMarch 31, 2009 and 2008 were as follows:

Held-to-maturity debt
securities:
Non-listed corporate
bonds . . . . . . . . . . . . . .
Available-for-salesecurities:
Non-listed equity
securities . . . . . . . . . . . .
Others . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . .

Millions of yen

Thousands of
U.S. dollars

Millions of yen

2009(D) Maturities of available-for-sale securities and held tomaturity securities as of March 31, 2009 and 2008
were as follows:

2008

10

¥

10

Over five
years butwithinten yearsOverten years

Total

¥10
¥10

¥—
¥—

¥—
¥—

¥—
¥—

¥10
¥10

Withinone yearOver oneyear butwithinfive years

Over five
years butwithinten yearsOverten years

Total

¥—
¥—

¥10
¥10

¥—
¥—

¥—
¥—

¥10
¥10

Withinone yearOver oneyear butwithinfive years

Over five
years butwithinten yearsOverten years

Total

$102
$102

$—
$—

$—
$—

$—
$—

$102
$102

2009
2009

¥

Withinone yearOver oneyear butwithinfive years$

102

Bonds . . . . . . .
Total . . . . . . . .

Millions of yen

2,488
11
¥2,5092,442
1,011¥3,46325,386
111$25,599

2008

Bonds . . . . . . .
Total . . . . . . . .

(B) Acquisition costs and book values of securities with fairvalue as of March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

Available-for-sale securities

Equity securities
Acquisition cost . . . . . . . .
Book value . . . . . . . . . . . .
Difference . . . . . . . . . . . . .

2009

2008

2009

¥11,717
10,928¥ (789)¥17,390
23,106¥ 5,716$119,566
111,514$ (8,052)(C) Total sales amount of available-for-sale securities
sold in the year ended March 31, 2009 and 2008
were as follows:
Thousands of
U.S. dollars

Millions of yen

Sale of securities . . . . . . . .
Net gain . . . . . . . . . . . . . . . .

2009

2008

2009

¥1,013
9¥771
689$10,334
96

Thousands of U.S. dollars

2009

Bonds . . . . . . .
Total . . . . . . . .

12. Derivatives information
The Companies enter into forward currency exchange
contracts, interest rate swap contracts and currency
option contracts as derivative financial instruments. The
Companies deal with forward currency exchange transactions to hedge exchange rate risk of monetary receivables
and payables denominated in foreign currencies in orderto minimize the risk of exchange rate fluctuations. Interest
rate swap transactions are made in order to minimize therisk of interest rate hike on borrowings. The Companies
deal with international financial institutions with higher
credit ratings as counter-parties of transactions to avoid
credit risk exposure. Details of transactions are reviewed
and approved by responsible officials of the Companies inaccordance with the Companies’ internal regulations,which include allowed transactions and maximum
amounts thereof. Counter-parties of derivative transactions are creditworthy financial institutions, and theCompanies believe that the risk of default by the counterparties is minimal.

Annual Report 2009

63(A) Forward foreign exchange contracts
The aggregate amounts contracted to be paid/received and the fair values of forward foreign exchange contracts inJapanese yen of the Companies at March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

2009

Contracted amount to be paid/received:
To buy foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To sell foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To buy foreign exchange options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To sell foreign exchange options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value:
To buy foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To sell foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To buy foreign exchange options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To sell foreign exchange options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized exchange gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

2008

2009

872
14,866
819
1,637

¥

—
5,785
205
429

$

8,902
151,694
8,355
16,709692
15,17710(69)¥ (551)

—
5,466
(7)
0
¥ 312

7,060
154,87198(705)$ (5,626)(B) Interest rate swap contracts
There were no interest rate swap contracts of the Companies at March 31, 2009 and 2008.

13. Information regarding retirement benefits(A) Projected benefit obligation on the balance sheet date consists of the following:Thousands of
U.S. dollars

Millions of yen(1) Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Fair value of employee retirement benefit trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Unfunded projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Unrecognized actuarial difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Prepaid pension benefit expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) Allowance for severance and pension benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

2008

2009

¥(74,428)
29,007(45,421)
10,451170(8)(34,808)¥(77,050)
41,325(35,725)
2,761
229
(13)
(32,748)$(759,467)
295,985(463,482)
106,647
1,732(81)(355,184)(B) Included in the statements of operation for the years ended March 31, 2009 and 2008 are the following severance
and pension benefit expenses:
Thousands of
U.S. dollars

Millions of yen(1) Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Recognized actuarial difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) Recognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Unrecognized net transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) Severance and pension benefit expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

2008

2009

¥3,602
1,774
(642)
815
346
—
¥5,895¥3,548
1,760
(723)
(572)
79
980
¥5,072$36,747
18,105(6,549)
8,316
3,529
—
$60,148

64

Sumitomo Heavy Industries, Ltd.

(C) Included in the statements of operation for the years ended March 31, 2009 and 2008 are the following assumptions
for calculating:
2009

2008

(1) Allocation of the estimated amount of all retirement
benefits to be paid at the future retirement date . . . . . .

Equally to each service year
using the estimated number of
total service years

Equally to each service year
using the estimated number of
total service years(2) Assumed discount rate . . . . . . . . . . . . . . . . . . . . . . . . .

Mainly 2.0%

Mainly 2.0%

(3) Expected rate of return on plan assets . . . . . . . . . . . . .

Mainly 0.0%
(Trust assets for retirement
benefits; 0.0%)

Mainly 0.0%
(Trust assets for
retirement benefits; 0.0%)(4) Amortization period of actuarial differences . . . . . . . . . .

Mainly 12 years

Mainly 12 years(5) Amortization period of prior service cost . . . . . . . . . . . .

the Company: 1 year
Subsidiaries: Mainly 12 years

Mainly 12 years

14. Subsequent events
There is no significant subsequent event to disclosed.

Annual Report 2009

Independent Auditors’ Report
To the Board of Directors of Sumitomo Heavy Industries, Ltd.

We have audited the accompanying consolidated balance sheets of Sumitomo Heavy Industries, Ltd. andconsolidated subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of income,changes in net assets and cash flows for the years then ended, expressed in Japanese yen. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to independently
express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Sumitomo Heavy Industries, Ltd. and subsidiaries as of March 31, 2009 and 2008, and theresults of their operations and their cash flows for the years then ended, in conformity with accounting principles
generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2009 are presented solely for convenience. Our audit also included the translation of yen amounts into
U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to theconsolidated financial statements.

Tokyo, Japan
June 26, 2009

65

66

Sumitomo Heavy Industries, Ltd.

Glossary■ Power transmission and control equipment
Power transmission and control equipment raises torque as the rotary speed of a motor is reduced
to an optimum level. This kind of equipment has many applications, including elevators, escalators,
industrial robots and factory production lines. SHI produces a wide range of power transmission andcontrol devices, from micro-miniature devices with a motor capacity of 6 watts to very large devicesof several thousand kilowatts. SHI has the leading share of the Japanese market for this equipment.

Cyclo® Drive

Hyponic drive®

■ Plastic injection molding machines
Plastic injection molding machines are used to pour melted plastic into molds. Of the two system
types, hydraulic and electromotive, the latter enables greater molding precision. SHI specializes in
the precision, high-cycle molding required for manufacturing optical discs and connectors and has
the top share in Japan for these devices.
Full-electric injection molding machine “SE75DUZ”■ Cyclotrons
A cyclotron is an accelerator for particles that it ionizes using magnetic force. SHI is the only manufacturer of these devices in Japan and has the top share of the domestic market for cyclotrons for
positron emission tomography (PET) applications, which are highly effective in discovering andpinpointing cancer cells.
PET radio-tracer production system “HM-12S”■ Ion-implantation devices
To create the transistors and other components that comprise semiconductors, the necessary type/volume of elements required for such components must be added to a flat silicon single-crystal
substrate known as a wafer. Ion-implantation devices electrically ionize the elements and accelerate
the resulting ions at high voltage for high-precision injection into the wafer.
Ion-implantation devices “SHX II”■ Precision positioning stages
Precision positioning stages set the vertical and horizontal positioning of substrates, wafers andother components in precision processing. Because two axes are involved, they are also called XY
stages. These products are used for manufacturing and inspection processes for liquid crystal panels
and semiconductor wafers. SHI’s high-precision positioning stages are one of its particular strengths.
Precision positioning stage SL series “SL-500G”■ Circulating fluidized-bed (CFB) boiler
Employing jets of air blown from below to evenly mix fuel particles at a high temperature, this CFB
boiler is an efficient combustor suitable for use with a wide variety of fuels. The CFB boiler can evenburn such renewable energy fuels as low-grade coal and biomass-based fuels.

CFB boiler■ Vertical aerator systems
Used in water treatment processes, these systems direct air to polluted water, helping bacteria to
break down substances more efficiently. The operation of SHI vertical aerator systems can be
optimized for the volume of water being treated, and SHI boasts the top share of these products
in Japan.
SUMI-RATOR UD■ Superfine-bubble membrane tube diffusers
Superfine-bubble membrane tube diffusers are used for aeration systems at sewage treatment
facilities. The use of a high-quality silicon rubber membrane for the diffuser tubes contributes to thehigh performance and durability of the systems.
Superfine-bubble
membrane tube diffuser
MICRUS®

Annual Report 2009

■ Coke drums
This equipment is used in oil refining to extract high-value-added light oil from heavy oil that is
subjected to heat cracking after refining. SHI has the world’s leading share in coke drums.

Coke drum■ Aframax tankers, Suezmax tankers
Aframax tankers are midsized oil tankers with deadweight freight capacity in the 80,000 to
120,000MTDW class; 150,000MTDW class tankers are called Suezmax tankers.

105,000MTDW oil tanker■ Continuous ship unloaders
Continuous ship unloaders are large harbor-installed hoists used for the continuous unloading ofiron ore and other bulk raw materials from cargo vessels at dock. SHI has the top share of thismarket in Japan.

Continuous ship unloader■ Goliath craneThis is a large portal-type crane installed mainly in shipyards. Our Goliath crane has a maximum
lifting capacity of 1,200 tons and helps raise the efficiency of shipbuilding operations. SHI has the
top share of the domestic market.

Goliath crane■ Jib cranes
These are large cranes installed at harbors and shipyards and travel on rails. SHI has the top share of
the domestic market.

Jib crane■ Transfer cranes
Self-propelled cranes used to transport containers at ports and other sites; electricity to power the
motor during hoisting and lowering is supplied by a generator incorporated into the crane.

Transfer crane■ Asphalt pavers
Self-propelled machines used to spread asphalt when paving roads; SHI is the market leader inasphalt pavers in Japan.

Asphalt Paver HA90C■ Crawler cranes
This is a self-propelled crane for construction sites. It travels on caterpillar tracks.

Lattice crawler craneLS-218HSL

67

68

Sumitomo Heavy Industries, Ltd.

Network[Domestic Network] Offices
Head Office
1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan
Tel: 81-3-6737-2000
URL: http://www.shi.co.jp
Kansai Office
7-28, Kitahama 4-chome, Chuo-ku, Osaka-shi,
Osaka 541-0041, Japan
Tel: 81-6-6223-7111
Tanashi Works
1-1, Yato-cho 2-chome, Nishitokyo-shi,
Tokyo 188-8585, Japan
Tel: 81-42-468-4104
Chiba Works731-1, Naganumahara-machi, Inage-ku,
Chiba-shi, Chiba 263-0001, Japan
Tel: 81-43-420-1355
Yokosuka Works
19, Natsushima-cho, Yokosuka-shi,
Kanagawa 237-8555, Japan
Tel: 81-46-869-1842
Nagoya Works
1, Asahi-machi 6-chome, Obu-shi,
Aichi 474-8501, Japan
Tel: 81-562-48-5111
Okayama Works
8230, Tamashima-Otoshima, Kurashiki-shi,
Okayama 713-8501, Japan
Tel: 81-86-525-6101
Ehime Works—Niihama Factory
5-2, Sobiraki-cho, Niihama-shi,Ehime 792-8588, Japan
Tel: 81-897-32-6211
Ehime Works—Saijo Factory
1501, Imazaike, Saijo-shi,Ehime 799-1393, Japan
Tel: 81-898-64-4811
Research and Development Center
19, Natsushima-cho, Yokosuka-shi,
Kanagawa 237-8555, Japan
Tel: 81-46-869-2300

Major Subsidiaries
Sumitomo Heavy Industries Environment
Co., Ltd.
25-9, Nishigotanda 7-chome, Shinagawa-ku,
Tokyo 141-0031, Japan
Principal business: Development, design,
manufacture, sale and repair ofwater and sewage treatment
facilities for the private sector andother industrial equipment
Tel: 81-3-6737-2700
URL: http://www.shiev.shi.co.jp
100% owned subsidiary

Sumitomo Heavy Industries Marine &Engineering Co., Ltd.
1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan
Principal business: Sales, design, production, repair
and reconstruction of vessels(excluding naval vessels) andmarine structures; marine
engineering
Tel: 81-3-6737-2620
URL: http://www.shi.co.jp/me
100% owned subsidiary
Sumitomo Heavy Industries Engineering &Services Co., Ltd.
1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan
Principal business: Design, production anddistribution of general industrial
machinery, as well as remodeling,
repairs, inspection andmaintenance
Tel: 81-3-6737-2640
URL: http://www.shi.co.jp/ses
100% owned subsidiary

SEN Corporation
10-1, Yoga 4-chome, Setagaya-ku,
Tokyo 158-0097, Japan
Principal business: Semiconductor equipment,
especially ion implantation
systems
Tel: 81-3-5491-7800
100% owned subsidiary
Sumitomo NACCO Materials Handling Co., Ltd.
75, Daitoh-cho 2-chome, Obu-shi,
Aichi 474-8555, Japan
Principal business: Forklift trucks and other materials
handling equipment
Tel: 81-562-48-5251
URL: http://www.sumitomonacco.co.jp
50% owned subsidiary
Sumiju Environmental Engineering, Inc.
9-11, Kitashinagawa 5-chome, Shinagawa-ku,
Tokyo 141-0001, Japan
Principal business: Operation and maintenance forenvironmental systems and plants
Tel: 81-3-5421-8484
100% owned subsidiary

Shin Nippon Machinery Co., Ltd.
1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan
Principal business: Steam turbines and pumps
Tel: 81-3-6737-2630
URL: http://www.snm.co.jp
100% owned subsidiary

Lightwell Co., Ltd.
18-10, Moto-Asakusa 3-chome, Taito-ku,
Tokyo 111-0041, Japan
Principal business: Software and related equipment
Tel: 81-3-5828-9230
URL: http://www.lightwell.co.jp
100% owned subsidiary

Sumitomo Heavy Industries Techno-Fort Co., Ltd.
5-2, Sobiraki-cho, Niihama-shi,Ehime 792-0001, Japan
Principal business: Forging presses and otherindustrial machinery
Tel: 81-897-32-6300
URL: http://www.shi.co.jp/stf/
100% owned subsidiary

Izumi Food Machinery Co., Ltd.
4-2-30 Shioe, Amagasaki-shi,
Hyogo 661-8510, Japan
Principal business: Food processing machines andrelated equipment
Tel: 81-6-6543-3500
URL: http://www.izumifood.shi.co.jp
100% owned subsidiary

Sumitomo (S.H.I.) Construction MachineryCo., Ltd.
1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan
Principal business: Construction Machinery
Tel: 81-3-6737-2600
URL: http://www.sumitomokenki.co.jp
100% owned subsidiary

Nihon Spindle Mfg. Co., Ltd.
2-30, Shioe 4-chome, Amagasaki-shi,
Hyogo 661-8510, Japan
Principal business: Industrial machinery,
environmental protection
equipment and building materials
Tel: 81-6-6499-5551
URL: http://www.spindle.co.jp
40.6% owned subsidiary

Seisa Gear, Ltd.
16-1, Wakihama 4-chome, Kaizuka-shi,
Osaka 597-8555, Japan
Principal business: Power transmission equipment
Tel: 81-724-31-3021
URL: http://www.seisa.co.jp
53.5% owned subsidiary
Sumitomo Heavy Industries PTC Sales Co., Ltd.
2-2-900, Umeda 1-chome, Kita-ku, Osaka-shi,
Osaka 530-0001, Japan
Principal business: Power transmission equipment
Tel: 81-6-6346-0820
URL: http://www.sumiju.co.jp
100% owned subsidiary

Sumitomo Heavy Industries Himatex Co., Ltd.
5-2, Sobiraki-cho, Niihama-shi,Ehime 792-0002, Japan
Principal business: Castings, rolls and bimetallic
cylinders
Tel: 81-897-32-6484
URL: http://www.shiff.co.jp
100% owned subsidiaryAnnual Report 2009

[Overseas Network] Offices
Sumitomo Heavy Industries (Shanghai), Ltd.
Room 1301, Xingdi Business Building, No. 1698
Yishan Road, Minhang District, Shanghai,
People’s Republic of China.
Tel: 86-21-3462-7660
100% owned subsidiary

Major Subsidiaries
Sumitomo Machinery Corporation of America
4200 Holland Boulevard, Chesapeake,
Virginia 23323, U.S.A.
Principal business: Power transmission equipment
Tel: 1-757-485-3355
URL: http://www.smcyclo.com
100% owned subsidiary
Sumitomo (SHI) Cyclo Drive Germany GmbH
Postfach 62 (PLZ85227), Cyclostrasse 92 D-85229
Markt Indersdorf, Germany
Principal business: Power transmission equipment
Tel: 49-8136-66-0
URL: http://www.sumitomodriveeurope.com
100% owned subsidiary
Sumitomo (SHI) Cyclo Drive Asia Pacific Pte. Ltd.
No. 36 Tuas South Street 3, Singapore 638031
Principal business: Power transmission equipment
Tel: 65-6863-2238
URL: http://www.sumitomodrive.com.sg
100% owned subsidiary
Sumitomo Heavy Industries (Vietnam) Co., Ltd.
1-7, Thang Long Industrial Park, Dong Anh District,Hanoi, Vietnam
Principal business: Manufacture of motors for powertransmission equipment
Tel: 84-4-9550004
100% owned subsidiary
Sumitomo Heavy Industries (Tangshan), Ltd.
Tangshan Modern Equipment Manufacturing
Industrial Park, Tangshan City, Hebei Province, China
Principle business: Manufacture of large and middle
size power transmission
Tel: 61-3390880
100% owned subsidiary
Sumitomo (SHI) Cyclo Drive China, Ltd.
No. 7 Sanjing Road,
Dongli Economic Development Zone, Tianjin, China
Principal business: Power transmission equipment
Tel: 86-22-2499-3501
URL: http://www.smcyclo.com.cn
100% owned subsidiary
SHI Plastics Machinery, Inc. of America
1266 Oakbrook Drive, Norcross,Georgia 30093, U.S.A.
Principal business: Holding company of Sumitomo(SHI) Plastics Machinery Mfg.
(USA), LLC and Sumitomo (SHI)
Plastics Machinery (America), LLC
Tel: 1-770-447-5430
URL: http://www.sumitomopm.com
100% owned subsidiary
Sumitomo (SHI) Demag Plastics Machinery GmbH
Altdorfer str. 15, 90571 Schwaig, Germany
Principle business: Manufacture and sales of plastic
molding machines
Tel: 49-911-50610
URL: http://www.sumitomo-shi-demag.eu
100% owned subsidiary

SHI Plastics Machinery (Europe) B.V.
Breguetlaan 10A, 1438 BC OUDE MEER,
Netherlands
Principal business: Plastics machinery
Tel: 31-20-65-33-111
100% owned subsidiary
S.H.I. Plastics Machinery (S) Pte. Ltd.
67 Ayer Rajah Crescent #01-15 to 26,
Singapore 139950
Principal business: Plastics machinery
Tel: 65-6779-7544
100% owned subsidiary
SHI Plastics Machinery (Taiwan) Inc.
3F-1, No. 687, Sec. 5, Chung Shan North Road,
Taipei, Taiwan
Principal business: Plastics machinery
Tel: 886-2-2831-4500
URL: http://www.spm-northasia.com
100% owned subsidiary
SHI Plastics Machinery (Hong Kong) Ltd.
RM601, Telford House, 12-16 Wang Hoi Road,
Kowloon Bay, Hong Kong
Principal business: Plastics machinery
Tel: 852-2750-6630
URL: http://www.spm-northasia.com
100% owned subsidiary
SHI Plastics Machinery (Shanghai) Co., Ltd.
Dept. F, 1st Fl., Building A, No. 51, Ri Jing Road,
Shanghai Waigaoqiao Free Trade Zone,
Pu Dong New Area, Shanghai, China
Principal business: Plastics machinery
Tel: 86-21-6340-3488
URL: http://www.spm-northasia.com
100% owned subsidiary
SHI Plastics Machinery (Malaysia) Sdn. Bhd.
Lot AG 16, 17 & 18, PJ Industrial Park,
Jalan Kemajuan, Section 13, 46200 Petaling Jaya,
Selangor, D.E. Malaysia
Principal business: Plastics machinery
Tel: 60-3-7958-2079
49% owned subsidiary
Sumitomo (SHI) Cryogenics of America, Inc.
1833 Vultee St., Allentown,
Pennsylvania 18103-4783, U.S.A.
Principal business: Manufacturer of MRI magnet
cryocoolers, cryopumps andlaboratory cryostats for researchand development
Tel: 1-610-791-6700
URL: http://www.apdcryogenics.com
100% owned subsidiary
Sumitomo (SHI) Cryogenics of America, Inc.
Chicago Office
1500-C Higgins Road, Elk Grove Village,
Illinois 60007, U.S.A.
Principal business: Service and sales of cryocoolers
Tel: 1-847-290-5801
100% owned subsidiary

Sumitomo (SHI) Cryogenics of Europe, Ltd.
2 Eros House, Calleva Industrial Park, Aldermaston,Berkshire RG7 8LN, U.K.
Principal business: Manufacturer of MRI magnet
cryocoolers, cryopumps andlaboratory cryostats for researchand development
Tel: 44-011-8981-9373
100% owned subsidiary
Sumitomo (SHI) Cryogenics of Europe GmbH
Daimlerweg 5a D-64293, Darmstadt,
D-64287, Germany
Principal business: Service and sales of cryocoolers
Tel: 49-6151-860610
100% owned subsidiary
Sumitomo (S.H.I.) Construction Machinery(Tangshan) Co., Ltd.
Tangshan Modern Equipment Manufacturing
Industrial Park, Tangshan City, Hebei Province, China
Principle business: Manufacture of hydraulic excavators
Tel: 61-3391000
100% owned subsidiary
Link-Belt Construction Equipment Company
2651 Palumbo Drive, P.O. Box 13600,
Lexington, Kentucky 40583-3600, U.S.A.
Principal business: Mobile cranes
Tel: 1-859-263-5200
URL: http://www.linkbelt.com/
100% owned subsidiary
LBX Company, LLC
2004 Buck Lane, Lexington,
Kentucky 40511-1073, U.S.A.
Principal business: Construction machinery
Tel: 1-859-245-3900
URL: http://www.lbxco.com/
50% owned subsidiary
SHI Machinery Service (Hong Kong) Ltd.
Unit 2203, Level 22, Tower II, Metroplaza,No. 223 Hing Fong Road, Kwai Chung,
New Territories, Hong Kong
Principal business: Maintenance service for harbor
cranesTel: 852-2521-8433
100% owned subsidiary
SHI Designing & Manufacturing Inc.
8th & 9th Floor Octagon Center, Sanmiguel Ave.,
Ortigas Center, Pasig City, Metro Manila, Philippines
Principal business: Plant engineering, machinery
design and software development
Tel: 63-2-636-1935
100% owned subsidiary
SHI Manufacturing & Services (Philippines) Inc.
Barangay Sta. Anastacia, Sto.Tomas,
Batangas, Philippines
Principal business: Manufacture of key components
for XY stages, cryocoolers,
controllers and metal injection
molding
Tel: 63-43-405-6263
100% owned subsidiary

69

70

Sumitomo Heavy Industries, Ltd.

Corporate Data
Head Office:

Sumitomo Heavy Industries, Ltd.
1-1, Osaki 2-chome, Shinagawa-ku, Tokyo 141-6025, Japan
Tel. +81-3-6737-2331
URL http://www.shi.co.jp

Founded:1888

Incorporated:

November 1, 1934

Paid-in Capital:¥30,871,651,300

Number of Employees*:

14,984 (Consolidated)

Transfer Agent:

The Sumitomo Trust and Banking Co., Ltd.

Stock Exchange Listings:

Tokyo, Osaka

Shares Outstanding*:

605,726,394

3,032 (Non-consolidated)

Number of Shareholders*: 60,671
Major Shareholders*:

Percentage ofvoting rights

Name of shareholder

Japan Trustee Services Bank, Ltd. . . . . . . . . . . . . . . . . . . . . . . . .

20.6%

The Master Trust Bank of Japan, Ltd. . . . . . . . . . . . . . . . . . . . . . .

11.0%

Trust & Custody Services Bank, Ltd. . . . . . . . . . . . . . . . . . . . . . .

3.9%

Sumitomo Life Insurance Company . . . . . . . . . . . . . . . . . . . . . . .

3.8%

Sumitomo Mitsui Banking Corporation . . . . . . . . . . . . . . . . . . . . .

2.5%

Nippon Life Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . .

2.1%State Street Bank and Trust Company . . . . . . . . . . . . . . . . . . . . .

2.0%

Sumitomo Heavy Industries, Ltd. Kyoei-kai . . . . . . . . . . . . . . . . . .

1.6%Investors Bank and Trust Company . . . . . . . . . . . . . . . . . . . . . . .

1.6%

UBS AG LONDON A/C IPB Segregated Client Account . . . . . . . .

1.4%* As of March 31, 2009

Breakdown of Shareholders as of March 31, 2009

Breakdown of Shareholders

Financial Institutions . . . . . . . . . . . . . . . .
Securities Companies . . . . . . . . . . . . . .
Individuals and Others . . . . . . . . . . . . . .
Foreign Investors . . . . . . . . . . . . . . . . . .
Other Corporations . . . . . . . . . . . . . . . .

Number ofshares held
(unit 1,000)

303,251
8,595
91,777140,543
53,985The “Other Corporations” category also includes treasury stock,
government institutions and local governments, and Japan
Securities Depository Center, Inc.
Number of shares held are rounded down to the nearest 1,000.

9.37%

23.41%
50.51%
15.29%■ Financial Institutions■ Securities Companies■ Individuals and Others■ Foreign Investors■ Other Corporations

1.43%

Additional copies of this annual report and other information may be obtained at the above URL or by contacting:Corporate Communications Department, Sumitomo Heavy Industries, Ltd.
1-1, Osaki 2-chome, Shinagawa-ku, Tokyo 141-6025, Japan Tel: +81-3-6737-2331

Sumitomo Heavy Industries

Annual Report 2009http://www.shi.co.jp

Printed in Japan

O048 E 091