Income Analysis
During fiscal 1996, non-consolidated net sales declined 0.4%, to 1,142.0 billion yen. Domestic sales decreased 1.9%, to 931.9 billion yen, but overseas sales grew 6.9%, to 210.1 billion yen.
Sales in the Iron and Steel Sector, which includes Kobe Steel's welding operations, edged up 1.2%, to 506.0 billion yen, making up 44.3% of net sales, compared with 43.6%, in the previous fiscal year. Sales in the Aluminum and Copper Sector declined 2.2%, to 264.7 billion yen, accounting for 23.2% of total sales, down from 23.6% in fiscal 1995. In the Machinery and Information Sector, sales declined 1.2%, to 371.3 billion yen, or 32.5% of net sales, compared with 32.8% in the previous fiscal year.
Operating income fell 20.0%, to 80.0 billion yen. As a result, the profit margin declined to 7.0%, from 8.7% in fiscal 1995.
Net other expenses totaled 52.3 billion yen, 84.4% higher than in the previous fiscal year. Therefore, income before income taxes was 27.7 billion yen. After 6.0 billion yen in corporate taxes, net income for the period was 21.7 billion yen, a 68.7%decline yen from the previous fiscal year. Net income per share was 7.65 yen. As a result, Kobe Steel eliminated a 16.4 billion yen undisposed deficit that was carried over from the previous fiscal year and recorded 5.4 billion yen in unappropriated retained earnings at the end of the year. However, because Kobe Steel's financial condition does not permit the payment of dividends, management was once again obliged to forego the payment of dividends.
Return on average assets was 1.2%, compared with 3.7% in fiscal 1995 and -4.9% in fiscal 1994. Return on average equity was 5.4%, compared with 19.6% in 1995 and -26.1% in fiscal 1994.

Analysis of Cash Flow and Financial Position
The Company's operating, investing, and financing activities during the fiscal year resulted in a 14.4% increase in cash and cash equivalents at fiscal year-end, to 14.6 billion yen. Net cash provided by operating activities amounted to 35.2 billion yen, down from 68.4 billion yen in the previous year.
During the year, the Company allocated 75.7 billion yen for the purchase of plant and equipment, and 12.3 billion yen for the acquisition of marketable securities, investments, and other assets. On the other hand, the Company registered a 56.3 billion yen inflow from the sale of plant and equipment and a 1.2 billion yen inflow from the sale or collection of marketable securities, investments, and other assets. As a result, net cash used in investing activities amounted to 30.5 billion yen.
Net cash used in financing activities was 2.9 billion yen, a 186.5 billion yen decline from the previous fiscal year. During the year, the Company procured 59.1 billion yen through an increase in short-term borrowings and 63.7 billion yen through the issuance of long-term debt and bonds. On the other hand, the repayment of long-term debt and the redemption of bonds totaled 125.7 billion yen.
Total assets at the end of fiscal 1996 amounted to 1,774.4 billion yen, a decrease of 2.6% from the previous fiscal year-end. Total stockholders' equity at fiscal year-end was 409.2 billion yen, compared with 387.5 billion yen, at the end of fiscal 1995. As a result, the Company's net worth ratio was 23.0%.