Report of Operating Results and Financial Position for the Six Months ended April 30, 2015

[Management Environment]

During the first two quarters of Kanamoto's current consolidated fiscal year, Japan's economy followed a gradual recovery trajectory as corporate earnings improved and the employment situation brightened as well, supported by a weaker yen and the continuing rise in stock prices against the backdrop of proactive economic and monetary policy measures.

[Second Quarter Consolidated Operating Results]

In the construction industry related to the Kanamoto Group, activities ranging from public investment to programs such as earthquake disaster recovery works and disaster prevention measures remained robust. Viewed nationally, however, activity slowed somewhat compared with the environment one year ago, which benefited from the implementation of a supplementary budget. In addition, private sector capital spending exhibited upward momentum because of the improvement in corporate performance. Nevertheless, the industry continued to struggle with a variety of problems, including increased labor costs because of a shortage of construction workers, ongoing glitches in project bidding because of the jump in materials prices, and a backlog of projects on which ground has still not been broken.
In light of these circumstances, the Kanamoto Group continued to focus on critical items, working to strengthen its business structure for the future and improve its financial position, based on the various measures in its Medium-term Management Plan (fiscal 2014 - fiscal 2016). With regard to its overseas strategy, which takes a far-sighted view of changes in construction markets, the Group proceeded aggressively with business measures that will ensure earnings opportunities for the future, including moves to newly establish joint venture companies in Thailand, Vietnam and the Philippines.
As a result, consolidated net sales for the interim period were ¥68,307 million, up 6.4% compared with the same period of the previous consolidated fiscal year. In terms of earnings, operating income expanded 5.8% from the same period of the previous consolidated fiscal year to ¥10,652 million, ordinary income rose 8.1% year-on-year to ¥10,655 million, and interim period net income increased 15.5% year-on-year to ¥6,528 million.

[Segment Information]

Business related to the Construction Equipment Rental Division

In the construction-related business that is Kanamoto's main business, in addition to full-scale earthquake reconstruction efforts, construction equipment rental demand remained brisk, centered primarily on disaster prevention works and infrastructure-related projects.
To meet this growth in demand, Kanamoto continued to proactively undertake capital investments, and worked to maintain and improve its asset utilization ratios by taking steps such as transferring construction equipment to the Tohoku Region, where demand remains at a high level.
Used construction equipment sales were up 53.9% year-on-year, as Kanamoto pursued sales of equipment assets based on its initial plan, in order to maintain an appropriate asset portfolio.
As a result of the above factors, consolidated net sales for the interim period for Kanamoto's construction-related businesses expanded 5.9% from the same period of the prior consolidated fiscal year to ¥64,012 million, and operating income was up 5.3% year-on-year to ¥10,344 million.

Other Businesses

In the Company's other businesses, steel products-related sales expanded substantially more than initially envisaged, driven by the recovery in private sector demand. Net sales rose 14.1% from the same period of the prior consolidated fiscal year to ¥4,295 million, and operating income climbed 49.9% year-on-year to ¥119 million.

[Change in number of branches]

The Company did not open any new branches or close any branches during the interim period consolidated accounting period.

Consolidated Operating Results

Divisional Sales (Consolidated)

Projected Consolidated Operating Results for the Fiscal Year Ending October 2015