Hitachi Koki Releases Summary of Financial Results for the Half Year ended September 30, 2001

October 30, 2001
Company name: Hitachi Koki Co., Ltd.
Securities code: 6581
Stock market listings: Tokyo Stock Exchange, Osaka Securities Exchange
Headquarters: Tokyo

	Sales	Operating income	Ordinary income
	¥ million %	¥ million %	¥ million %
Fiscal 2002 interim period Fiscal 2001 interim period	64,226 -2.6  65,913 -	2,284 59.7  1,430 -	1,643 264.2     451 -
Fiscal 2001	130,682	2,214	1,187

	Interim net income (Period under review)	Interim net income per share (Period under review)	Interim net income per share (Period under review) after adjustment for latent shares
	¥ million %	¥	¥
Fiscal 2002 interim period Fiscal 2001 interim period	347 -85.4  2,375 -	2.82    19.30	-    19.14
Fiscal 2001	3,018	24.53	24.42

	Total assets	Shareholders' equity	Shareholders' equity ratio	Shareholders' equity per share
	¥ million	¥ million	%	¥
Fiscal 2002 interim period Fiscal 2001 interim period	138,454  147,674	90,629  90,889	65.5  61.5	736.39  738.51
Fiscal 2001	150,061	91,419	60.9	742.84

	Cash flows from operating activities	Cash flows from investing activities	Cash flows from financing activities	Cash and cash equivalents at end of period
	¥ million	¥ million	¥ million	¥ million
Fiscal 2002 interim period Fiscal 2001 interim period	974  -1,159	-1,091  -4,512	-8,104  -1,103	20,631  22,695
Fiscal 2001	1,149	566	-2,604	28,870

	Sales	Ordinary profit	Net income
	¥ million	¥ million	¥ million
Fiscal year	130,000	3,200	500

Management Policies

1. The CompanyÍs Basic Management Policies
The Hitachi Koki GroupÍs basic policy is to contribute to society by providing products and services created using its own outstanding independent technologies. Hitachi Koki supplies easy-to-use and safe products to markets worldwide in its main business fields„power tools, printing systems, and scientific instruments. In addition, Hitachi Koki strives to rapidly introduce attractive new products developed in accordance with its Customer First principle while vigorously carrying out its marketing and service activities. Also, the Hitachi Koki Group is working to strengthen its global consolidated operations by fortifying the ties among the various Group companies.
In the 21st century as well, the Hitachi Koki Group will aim to become the number-one group globally in each of its product and business domains and will meet challenges to create products drawing on its world-class technologies.

2. Strategies for Establishing a Management Control Organization
Turning to business results, the Hitachi Koki Group unavoidably posted net losses for two consecutive years„fiscal 1999 and fiscal 2000. In view of this situation, on April 1, 2000, the Group moved decisively to reorganize its business structure and management, bolster its management structure, and strengthen its competitiveness. Specifically, the Group 1) introduced a business group system, 2) introduced an executive officers system, 3) spun off manufacturing divisions within the Power Tools Group as separate companies, 4) transferred various business affairs functions to subsidiaries, 5) and strengthened its marketing capabilities.
Thanks to the implementation of these measures, the Hitachi Koki Group achieved a profit for fiscal 2001 as well as for the fiscal 2002 interim period ended September 30, 2001. Nevertheless, it is necessary to implement further measures to improve performance as we have yet to completely recover our full strength and because of abrupt changes in the economic and business environments. Accordingly, to establish a structure that can respond to an evolving environment, an urgent task will be to undertake additional structural reforms.

・An Outline of Our Structural Reforms

1) Spinning off a manufacturing division in the Printing Systems Group into a separate company
With the aim of achieving low-cost manufacturing, we are setting up a separate company to transfer the manufacturing division in the Printing Systems Group. Through the establishment of a separate company, we are striving to raise our cost consciousness and enhance price competitiveness through such corporate efforts as pruning expenses. In December 2001, we will establish a new company, Hitachi Koki Katsuta Co., Ltd., that will have approximately 350 employees. Serving as the main production base in our Printing Systems Group, this new company will be highly competitive in all areas of its operations, including technologies, price, and quality.

2) Closing of the Kasama Plant
Established in September 1970, the Kasama Plant (Kasama City, Ibaraki Prefecture) has played an important role as a production plant for hammers, which function as the heart of a printer. Currently, the Kasama Plant is manufacturing kanji dot-line printers. Hitachi Koki will close this plant (to be closed in December 2001) and transfer production to Hitachi Koki Yamagata Co., Ltd., which will enable an increase in efficiency by yielding such benefits as allowing the integrated production of kanji dot-line-printers.

3) Consolidating production base
We will consolidate production and carry out efficient operations by consolidating and eliminating production bases in the Power Tools Group and setting up a structure for increased production of power tools at a manufacturing base in China, while transferring the production division of Hitachi Koki (Singapore) Pte. Ltd. to Hitachi Koki (Malaysia) Sdn. Bhd. by February 2002 . In addition, we will raise our global production efficiency by increasing and strengthening production capabilities at Guang Dong Hitachi Koki Co., Ltd., and Fujian Hitachi Koki Co., Ltd.
As an additional measure, Hitachi Koki Haramachi Co., Ltd., a domestic subsidiary, will undertake an extensive restructuring of its operations , including reducing staff.

4) Reducing and achieving an appropriate allocation of staff
Hitachi Koki will strive to reduce personnel costs by taking the following steps.

a. On a non-consolidated basis, Hitachi Koki reduced management staff approximately 15% in August and September 2001 by implementing an early retirement preferential program for management staff.

b. On September 1, 2001, we established a new human resources supporting center as part of vigorous efforts to dispatch staff to external companies.

c. We will work to restrict our total number of employees by scaling down plans for hiring new employees and through natural attrition. During the one-and-half-year period from October 2001 to March 2003, we expect the number of staff in the consolidated operations of the Hitachi Koki Group in Japan to shrink by approximately 100 through natural attrition.

d. We will increase staff for the marketing of printers and further strengthen the independent marketing of print-on-demand products. Hitachi Koki will expand and strengthen staff at Hitachi Koki Information Technology, Ltd., a domestic subsidiary, and aggressively work to expand sales routes for business operations related information systems.

In principle, Hitachi Koki plans to use the proceeds from the sale of idle Company land to cover the extraordinary losses expected to accompany the previously mentioned structural reforms.

The implementation of the aforementioned structural reforms will enable Hitachi Koki to rapidly solidify the foundation of the entire Hitachi Koki Group, including the Printing Systems Group. At the same time, Hitachi Koki will be able to aggressively progress with such measures as speeding up new product development, strengthening marketing capabilities, and consolidating and integrating production bases as it strengthens its global consolidated management.

3. Medium- and Long-Term Corporate Management Strategy

The Hitachi Koki Group is currently striding toward the objectives of its Medium-Term Management Plan being implemented through the end of fiscal 2003. Amid an unprecedented severe operating environment, we are continuing to vigorously implement a host of management strategies as we work to achieve our numerical targets.

・An outline of the Medium-Term Management Plan

(1) Numerical targets
By strengthening the GroupÍs consolidated management, placing an emphasis on management efficiency, bolstering cost-competitiveness, and strengthening new product development capabilities, in fiscal 2003 we aim to record consolidated net sales of ¥150.0 billion, operating income of ¥8.4 billion, ordinary income of ¥7.2 billion, income before income taxes of ¥6.0 billion, and net income of ¥3.5 billion.

(2) Measures for achieving targets

a. Strengthening Group consolidated management

• to carry out global management (including consolidation and
  elimination of bases)
  to undertake extensive reforms of unprofitable bases
  to work toward the realization of self-supporting subsidiaries and expand revenues of these subsidiaries

b. Strengthening Group business strategies

• to fortify marketing and product planning capabilities

c. Thoroughly implementing highly efficient management

• to thoroughly progress with highly efficient management through the Companywide implementation of total supply chain management (TSCM)
• to improve consolidated cash flow

d. Strengthening cost-competitiveness

• to reduce costs through procurement renewal projects (PRP) (a 20% reduction over a two-year period)
• to thoroughly carry out efficient management through the implementation of Six Sigma activities
• to review unprofitable products
• to mutually complement product lines by aggressively pursuing alliances

e. Strengthening new product development capabilities

•  to concentrate development on strategic new products (through ties with the Hitachi Group)
•  to reduce product development times by aggressively using Analysis Leads Design

(3) Strategies for achieving targets by product group

1. Power Tools Group

a. Review production bases
The Power Tools Group is striving to raise global production efficiency. As part of these efforts, on April 1, 2001 this group established a Manufacturing Control Dept. as it established a system for coordinating domestic and overseas production plants. In particular, we are expanding and strengthening our production structures at Guang Dong Hitachi Koki and Fujian Hitachi Koki, our power tool manufacturing bases in China. On a unit basis, we aim to increase production volume twofold at these manufacturing facilities by fiscal 2003.
As another organizational move, we plan to close the manufacturing division of Hitachi Koki (Singapore) by February 2002 and shift the manufacturing of products to Hitachi Koki (Malaysia). In addition, by March 2002 we plan to transfer the production of such power tools as miter saws and mortisers manufactured by Hitachi Koki Haramachi to Hitachi Koki Sawa Co., Ltd., a principal manufacturing base for power tools in the Hitachi Koki Group. At the same time, we plan to reduce staff at Hitachi Koki Haramachi. By implementing the previously mentioned measures to transfer production, we will consolidate our production and aim for efficient operations of our production activities.

b. Strengthening our marketing
In the domestic market, Hitachi Koki will strive to expand sales, mainly of new cordless impact drivers and miter saws with laser markers, which have emerged as best sellers. In addition, we will continue to make vigorous efforts to expand sales of power tools to home centers. Also, on April 1, 2001, the Component Sales and Service Division of Hitachi Koki Service Co., Ltd. (currently Hitachi Koki Parts Center Co., Ltd.), a domestic subsidiary, was merged into the operations of Hitachi Koki. By making this move, Hitachi Koki is striving to raise efficiency and increase sales.
Overseas, Hitachi Koki is continuing to work toward achieving higher sales„including for nailers as well as for products manufactured in China„with these efforts being focused mainly on North America. Concurrently, Hitachi Koki aims to expand sales to home centers.

c. Concentrating on and speeding the development of new products
By using three-dimensional CAD in design and development related areas, Hitachi Koki will build further on its achievements in rapidly developing new products (cordless impact drivers and nailers) while progressing with the development of hammers and hammer drills.

2. Printing Systems Group

a. Restructuring the operation of HIKIS
Since January 2001, Hitachi Koki Imaging Solutions, Inc. (HIKIS), has been progressing vigorously with an operations restructuring plan under a new management team. As a first measure under this operations restructuring plan, HIKIS will reduce its staff to 730 (including 500 in supply divisions) by the end of 2001, from 850 (including 500 in supply divisions) at the end of 2000. Next, HIKIS will reduce overall costs by consolidating and eliminating marketing bases.
In addition, HIKIS's organizational structure will be restructured into a base for the sale of Hitachi KokiÍs products. This operations restructuring is smoothly progressing according to schedule, and HIKIS is aiming to break even on an operating profit basis in the year ending December 2001.

b. Strengthening marketing capabilities
Hitachi Koki will aggressively undertake marketing activities through measures that include holding regularly scheduled meetings with large-scale OEM customers as part of efforts to steadily ascertain the needs of existing clients. At the same time, we will work to cultivate new OEM customers. To facilitate efforts to secure new orders, Hitachi Koki will strengthen and increase its marketing staff for printers and continue to vigorously work to carry out the independent marketing of print-on-demand products.

c. Developing next-generation continuous-form laser printers
Hitachi Koki will proceed with the development of even faster and higher-quality laser printers that integrate the worldÍs fastest printing technologies.

d. Developing cut-sheet laser printers
We will continue to bolster our sales capabilities for print-on-demand products through such measures as further raising the capabilities of our DDP series of high-speed, cut-sheet laser printers, which were launched in fiscal 2001.

e. Developing high-end color printers
With rising market demand for color printing, we are vigorously progressing with the development of high-speed, high-end color printers as a new business to ensure that we can rapidly introduce new products into the market that respond to these customer needs.

3. Scientific Instruments Group

a. Strengthening sales of new products
We will strengthen sales of our favorably selling new model small centrifuges while working to expand sales of bio-related products, including our microplate robot AP series, used in such fields as genome drug discovery.

b. Strengthening our global business for ultracentrifuges
We are strengthening our alliances with Kendro Laboratory Products, in the United States, as we strive to raise our share of the world market for ultracentrifuges.

4. Management Indicators Serving as Targets

By implementing the previously mentioned various strategies under our medium-term management plan and expanding sales while reducing costs, we are striving to raise profitability on a consolidated basis and are aiming for a consolidated ordinary income to net sales ratio of 5% for fiscal 2003.
Regarding ROE (net income/shareholders§Eequity), Hitachi Koki will strive to build a structure for achieving a consolidated ROE of 4% over the medium term and more than 8% over the long term. For ROA (income before income taxes/total assets), Hitachi Koki is striving for a consolidated ROA of 4% in the near term and more than 6% in the long term.

5. Basic Policy on the Distribution of Income

As its basic policy regarding the distribution of income, Hitachi Koki decides amounts of income to be distributed to shareholders as well as amounts to be retained internally on making comprehensive considerations that include future business plans and the state of its business results and financial condition.
In addition, Hitachi Koki strives for the efficient allocation of retained earnings, concentrating investments on core products and technologies as well as for rationalizing facilities.
Taking into consideration the overall business situation, Hitachi Koki will pay interim cash dividends per share of ¥4.

6. Basic Policy Regarding Related Business Parties

Regarding the status of parties holding shares in Hitachi Koki, Hitachi, Ltd., is the CompanyÍs main shareholder, owning approximately 23% of the shares issued by Hitachi Koki. Moreover, companies in the Hitachi Group, including Hitachi, hold approximately 32% of the total shares of Hitachi Koki.
In this manner, as a member of the Hitachi Group, Hitachi Koki maintains close ties with Hitachi and is cooperating with Hitachi as a partner in development to develop printer products. At the same time, Hitachi Koki has also commissioned Hitachi to handle sales of a portion of Hitachi's printer products. Backed by such strong ties, Hitachi Koki is carrying out its business operations. In addition, one of Hitachi Koki's eight directors and two of its four auditors concurrently serve with Hitachi.

Operating Results

During the interim period, overall conditions in the Japanese economy were extremely harshed owing to such factors as a continued slump in housing investment as well as a decline in capital investment„which previously showed an increase„and an ongoing deflationary trend. Overseas, growth dulled in Europe and Asia due to a sharp deceleration in the U.S. economy, mainly in IT industries.
Amid this environment, the Hitachi Koki Group strengthened its consolidated Group management, thoroughly carried out high-efficiency management measures, bolstered its product development capability, and fortified its cost-competitiveness as it carried out vigorous management activities to achieve a full-fledged recovery in business results.
Against this background, the Hitachi Koki Group recorded interim consolidated net sales of ¥64.2 billion. At the profit level, the Hitachi Koki Group posted interim ordinary income of ¥1.6 billion and interim net income of ¥300 million, due to factors that included an extraordinary gain on the sale of land.

Performance by product group in the interim period was as follows.

1) Power Tools Group

Despite overall difficult conditions in the domestic market, we recorded favorable domestic sales of new cordless impact drivers. Overseas, we posted robust sales in North America, Europe and Asia. As a result of these developments, sales amounted to ¥39.4 billion.

2) Printing Systems Group

The Printing Systems Group posted lower interim sales in the domestic market due to a lagging economic recovery, the consolidation of operations of financial institutions, and a shift in demand away from printers used exclusively with large-scale computer systems toward printers used with networks. Overseas sales also decreased, as a result of the effects of such factors as the slowdown in the U.S. economy.
As a result of these developments, sales amounted to ¥23.0 billion.

3) Scientific Instruments Group

Sales of vacuum pumps declined because of restraints in capital investments related to semiconductor manufacturing equipment. Nevertheless, both domestic and overseas sales of centrifuges rose thanks to brisk activity in biotechnology-related research and the introduction of new products. As a result of these developments, sales amounted to ¥1.9 billion.

Regarding the outlook for the entire fiscal year, difficult conditions in the business environment are expected to persist amid growing concern over a global recession that includes worries about the adverse effects of the series of terrorist incidents in the United States.

Looking at expected performance for the entire fiscal year, Hitachi Koki is forecasting consolidated net sales of ¥130.0 billion (¥80.9 billion in the Power Tools Group, ¥45.5 billion in the Printing Systems Group, and ¥3.6 billion in the Scientific Instruments Group), ordinary income of ¥3.2 billion, income before income taxes of ¥1.9 billion, and net income of ¥0.5 billion.

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