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Announcement on the Posting of an Operating Loss and Business
Restructuring of the Construction Machinery Business in China
Kobe Steel, Ltd. announces it has posted an operating loss in the first nine months of fiscal 2016 (April
1 – December 12, 2016). Kobe Steel plans to dissolve its joint ventures with Chinese partners to rebuild
its construction machinery business in China. Kobe Steel will take the lead in business operations.
Details follow below
1. Details of the Operating Loss
(1) Reason for Posting of Loss
In the Construction Machinery segment’s China business, Kobe Steel judged that the uncertainty of
receivables collection is increasingly growing. Looking at the actual situation that collection would be
difficult and prolonged, a repayment plan with a high degree of certainty was not achieved for existing
retained receivables As a result, for retained receivables, Kobe Steel posted a provision of allowance
for doubtful accounts and a provision for loss on debt guarantees for loan guarantees.
(2) Amount of Loss
In the third quarter of fiscal 2016, Kobe Steel posted provision of allowance for doubtful accounts
amounting to 27.6 billion yen and provision for loss of debt guarantees amounting to 3.4 billion yen.
(3) Future Outlook
Please refer to the “Announcement on Revision to Earnings Forecast and Dividend Forecast for Fiscal
2016, ending March 31, 2017” announced today, which includes this item.
2. Rebuilding the China Business
(1) Outline
Kobe Steel had been holding discussions with its Chinese investment partners in response to business
issues including credit management. As differences of opinion concerning the production systems and
marketing systems became apparent, Kobe Steel agreed today to dissolve the joint ventures with the
Chinese partners. Japanese investors including Kobe Steel will acquire the minority interests held by
Chinese investors in the excavator businesses.
The minority interests in the wheel loader business held by Japanese investors will be entirely
transferred to Chinese investors.
In this way, Kobe Steel will be able to lead the rebuilding of the China business and achieve higher
profitability in the Construction Machinery business under its medium-term plan.
