Financial Results for the Half Year Ended September 30, 2000

Hitachi Koki Co., Ltd.
Shinagawa Intercity Tower A, 15-1, Konan 2-chome, Minato-ku
Tokyo, 108-6020, Japan

Listed on the 1st section of the Tokyo and Osaka Stock Exchanges (Code No.: 6581)

October 31, 2000—Hitachi Koki released the financial results for the
six months ended September 30, 2000.

• Summary of Consolidated Financial Statements
  for the Half Year Ended September 30, 2000
  
  
• Management Policy
  
  
• Business Results

Half years ended September 30*

Year ended March 31

	2000	1999	2000
1. Net sales	65,913	-	128,234
2. Operating income (loss)	1,430	-	(656)
3. Recurring profit (loss)	451	-	(2,096)
4. Net income (loss)	2,375	-	(11,964)
5. Net income per share
Basic	19.3	-	(97.22)
Diluted	19.14	-	-

Half years ended September 30

Year ended March 31

			2000	1999	2000
Total assets			147,674	-	157,878
Shareholders' equity			90,889	-	97,673
Shareolders' equity ratio			61.50%	-	61.90%
Shareholders' equity per share			738.51	-	793.64

Half years ended September 30

Year ended March 31

	2000	1999	2000
Cash flows from operating activities	(1,159 )	-	(1,964)
Cash flows from investing activities	(4,512)	-	1,478
Cash flows from financing activities	(1,103)	-	1,375
Cash and cash equivalents	22,695	-	29,480

The Scope of Consolidation and Items Relating to the Application of the Equity Method

1. The number of consolidated subsidiaries: 27
2. The number of non-consolidated subsidiaries to which the equity method is applicable: 0
3. The number of affiliated companies to which the equity method is applicable: 1

Changes in the Scope of Consolidation and Items Relating to the Application of the Equity Method

1. The number of newly consolidated subsidiaries: 1
2. The number of subsidiaries removed from consolidation: 0
3. The number of companies to which the equity method was newly applied: 0
4. The number of subsidiaries removed from the application of the equity method: 0

Management Policy

1. Basic policy
The basic management policy of Hitachi Koki is to contribute to social and economic well-being by developing and introducing new products based on superior technologies nurtured within the company. We supply products renowned for ease of use and safety in three distinct groups—power tools, printing systems and scientific instruments. Hitachi Koki regularly introduces timely and attractive new products oriented to emerging customer needs and supports these and all our products with dedicated sales and service. While carrying out structural and managerial reforms to improve our operational efficiency and competitiveness, we are also endeavoring to strengthen the consolidated management system by bolstering cooperation among the company’s operational groups. In order to be No. 1 worldwide in every product field and operational area in which we compete, we will continue to develop new products and maintain our proprietary technologies at the highest international levels.

2. Measures relating to the reform of the Company management
organizational structure
Partly because of the deterioration of the economic environment and business climate, the Company ran deficits at the net income level for two consecutive years, in the year ended March 31, 1999, and the year ending March 31, 2000. But the Company emerged above the break-even point in the 6-month term ended September 30, 2000, as we carried out drastic reforms in the organization and management effective on April 1, 2000. The reforms (previously described in the 2000 Annual Report) included

(1) introducing a business group system consisting of Power Tools, Printing Systems and Scientific Instruments,
(2) creating new positions for a CEO and executive officers at each business group,
(3) implementing changes to permit each group to operate virtually as an independent company,
(4) transferring some business to subsidiaries and
(5) bolstering the Company's selling power.

As a result, we began to run profits in the 6-month term ended September 30, 2000. We expect that our operation will be in the black also on the full-year basis ending March 31, 2001.

Targets
We are carrying out measures to drastically improve managerial efficiency, strengthen the consolidated group management, bolster cost competitiveness and upgrade new-product development capability. Our targets in fiscal 2002 are sales of ¥160 billion, operating profits of ¥11 billion, recurring profits of ¥9 billion and net income of ¥4.5 billion, all on a consolidated basis.

Measures to attain targets

Implementation of efficient management

• Maximization of consolidated cash flow and its efficient distribution (prioritization of investment)
  
  
• Improvement of total asset turnover through the introduction of Total Supply Chain Management (TSCM)

Reinforcement of consolidated group management

• Thorough enforcement of global management
  
  
• Drastic reform of unprofitable business units and/or companies
  
  
• Promotion of subsidiaries' autonomy and increased earnings
  

Reinforcement of cost competitiveness

• Shortening of lead times and reduction of inventories through the
  introduction of Total Supply Chain Management (TSCM)
  
  
• Strategic diversification of the sources for material and parts procurement
  
  
• Taking advantage of active alliances to supplement product line-ups
  

Strengthening of new product development capability

• Shortening of the period needed for the development of new products
  through use of a three-dimensional CAD/CAE designing
  
  
• Reinforcement of research and development and increased utilization of
  Hitachi corporate laboratories.

4. Target managerial indicators
By carrying out the above measures under the medium-term management strategy and expanding sales while cutting costs, we will improve our consolidated profitability and raise the rate of recurring profits to sales on a consolidated basis in fiscal 2002 to 5% or over.

5. The Company's basic policy on profit distribution
We determine the payout ratio (the ratio between dividends for our shareholders and appropriation as retained earnings) basically by considering from a comprehensive viewpoint such factors as the needs of future business projects, the results of operations and financial conditions.

We strive to make efficient distribution of retained earnings through prioritized investment in core products and technologies and equipment for streamlining operations.

Regarding the interim dividends for the six-month term ended September 30, 2000, we have decided to pay ¥4 per share after consideration of the above factors.

6. Basic policy of relationships with Hitachi group companies
Hitachi, Ltd., our biggest shareholder, holds about 23% of our shares issued and outstanding. The aggregate holding of our shares by companies of the Hitachi group is about 32%.

As is evident from the shareholder relations, the Company as a member of the Hitachi group has close relations with Hitachi, Ltd. We cooperate with Hitachi, Ltd., in the development of new printers and entrust sales of some of our printers to Hitachi. We always operate in close cooperation with Hitachi.

One out of our eight directors and two out of four auditors double as officers at Hitachi, Ltd.

Results of Operations

During the six-month term ended September 30, 2000, the Japanese economy again failed to attain a full-fledged recovery even though it showed some stirrings of spontaneous recovery supported by capital investment, because consumer spending and housing investment remained stagnant. Overseas, the United States’ economy continued to do well, and there was general economic expansion in Europe and Asia, but with signs of slowdown in certain regions.

In such an environment, Hitachi Koki Co., Ltd. made great strides toward of a higher level of managerial efficiency under the new three-group system introduced during the term. In order to bolster the earning power on a consolidated basis, we actively strengthened our cost competitiveness, research and development and design capability, and expanded our selling power.

As a result of these and other efforts, the Company's consolidated sales during the six-month term ended September 30, 2000, were ¥65,913 million. On the earnings side, recurring profits were ¥451 million, showing an improvement thanks to an increase in sales and reductions in materials costs and other expenses, and net income was ¥2,375 million, marking a return to the black.

Each group's performance was as follows:

Power Tools
The business climate was generally harsh, but power tool sales totaled ¥38,314 million as products used in capital investment did well on the domestic market and exports to the United States were strong.

Printing Systems
Domestic sales were stagnant, but exports were strong, so sales reached ¥25,879 million.

Scientific Instruments The group did well on both domestic and export markets, led mostly by centrifuges, because research into life science and biotechnology became brisk. Sales reached ¥1,720 million.

Regarding the prospect for the Japanese economy in the second half of the current fiscal year, capital investment will increase but there are uncertainties about public investment, consumer spending and housing investment. Overseas, there are fears of a U.S. economic slowdown. Therefore, optimism must remain guarded.

Turning to the full-year outlook, we believe that sales will be ¥130 billion, consisting of ¥79 billion from power tools, ¥47.4 billion from printing systems and ¥3.6 billion from scientific instruments, that recurring profits will reach ¥1.2 billion and net income will be ¥3.7 billion, all on the consolidated basis.

Cautionary Statement: The documents and other material available on Hitachi Koki's corporate website may contain forward-looking statements with respect to future events and performance. Terms such as "anticipate", "believe", "expect", "estimate", "intend", "plan", "project" and similar expressions may identify forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements and from any historical trends. Such forward-looking information involves risks and uncertainties that could significantly affect expected results. Forward-looking statements may also be based upon assumptions of future events which may not prove to be accurate.

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