Report of Operating Results and Financial Position for the Six Months ended April 30, 2014

< Management Environment >

During the first two quarters of the Kanamoto Group's current consolidated fiscal year Japan's economy traced a modest recovery trend, as improvements in corporate earnings and the employment situation were seen against the backdrop of government economic policy measures and exchange rate stability.

< Second Quarter Consolidated Operating Results >

In the construction industry related to the Kanamoto Group, the level of demand remained above the Company's assumption at the start of the period. In addition to an increase in outlays for public works projects based on economic policy measures and a recovery in private sector capital investment, the industry witnessed a surge in demand ahead of the consumption tax hike. On the other hand, however, these activities engendered several causes for concern, including conspicuous glitches in project bidding activities and delayed construction starts, as the result of a shortage of skilled construction workers and a sharp rise in raw material prices.
Based on such circumstances, the Kanamoto Group continued its efforts to concentrate management resources in the Tohoku Region, where manpower and construction equipment are insufficient, and to further strengthen its sales and marketing organization there, in order to achieve rapid restoration of the disaster-stricken area, and also strove to boost profit margins, strengthen cooperation among Group firms, enhance its business structure and improve its financial position based on optimal asset utilization.

Consolidated net sales for the interim period totaled ¥64,212 million, up 17.3% compared with the same period of the previous consolidated fiscal year. In terms of earnings, operating income rose 49.2% from the same period of the previous consolidated fiscal year to ¥10,072 million, ordinary income increased 46.9% year-on-year to ¥9,860 million and interim period net income jumped 52.1% year-on-year to ¥5,651 million.

Consolidated Operating Results

Divisional Sales (Consolidated)

< Segment Information >

Business related to the Construction Equipment Rental Division

In the construction-related business that is Kanamoto's main business, the Company has moved ahead with its current regional strategy, and with the formation of an organization that is capable of responding to maximum demand by means such as promptly executed aggressive equipment investments. Efforts to bolster sales and marketing through cooperation with Group firms also paid returns, generating operating results that exceeded the prior year's results in every region of Japan.
Sales of used construction equipment were up sharply, climbing 92.1% compared with the same period one year ago, as planned sales of equipment holdings were implemented on a timely basis with the goal of optimizing the asset portfolio mix.

As a result of the above factors, interim period net sales for Kanamoto's construction-related businesses increased 17.6% from the same period of the previous consolidated fiscal year to ¥60,449 million, and operating income improved 49.8% year-on-year to ¥9,825 million.

Other Businesses

In the steel products sales the Company is developing in Hokkaido, sales for seismic isolation works-related locations and for harbor revetment-related works were strong. Sales were also boosted by the rush in demand ahead of the consumption tax increase. As a result of these factors, net sales were up 12.6% over the same period one year earlier. In addition, in the Company's information and telecommunications-related business, Kanamoto attracted new demand as a result of personal computer rental period extensions and migrations to new operating systems, and achieved growth in its employee dispatching business as well, and net sales for these businesses grew by 19.9% year-on-year.

As a result of these factors, interim period net sales for Kanamoto's other businesses rose by 13.6% from the same period of the previous consolidated fiscal year to ¥3,763 million, and operating income increased 26.4% year-on-year to ¥79 million.

< Business Development Issues Deserving Special Mention and Status of Branch Office Changes >

During the interim period, Kanamoto opened one new branch, the Rikuzentakata Branch (Rikuzentakata City, Iwate Prefecture). The Company did not close any branches during this period.

Projected Consolidated Operating Results for the Fiscal Year Ending October 2014