Overall sales in the Machinery Sector for the period under review shrank 4.9%, to 338.9 billion yen. Our urban infrastructure engineering sales were hampered by the slump in orders for waste treatment facilities in fiscal 1998. In plant engineering, sales declined year on year due to a decrease in overseas projects. However, machinery sales were firm as we recorded a leap in overseas sales of plastics processing machinery and in domestic sales of crushers.

  Orders in our urban infrastructure engineering business were up due to high demand for large-scale solid waste incineration plants as well as wastewater treatment facilities, bridges, and dams. In plant engineering, domestic orders were slack as capital investment was sluggish, while overseas orders were down due to lower demand and postponed projects. In machinery, orders lost ground year on year as competition intensified in the stagnant domestic economy and as the number of large-scale projects was low. Orders for compressors, crushers, and plastics processing machinery were particularly affected.

  In October 1999, we reorganized our construction machinery business by combining production and sales to increase operational efficiency. Domestically, demand from the rental market and new products enabled the business to perform well. Overseas, sales in Europe were strong owing to improved distribution and new equipment purchases.

  In our R&D activities, we are deeply committed to reducing society's impact on the environment. The Company has already put to use an array of environmental technologies. For wastewater treatment, we have developed a carrier-added activated sludge process. With regard to solid waste treatment, we are marketing technologies to generate electricity from refuse, recover heavy metals, and dispose old refrigerators, including the recovery of fluorocarbons.

  In a joint project with Stella Chemifa Corporation, we developed technology for the mass production of Boron-10, the first time this has been done in Japan. Boron-10 is used in neutron shielding and criticality control.

  In the field of direct reduced iron (DRI), we can now put up a commercial-scale FASTMET Direct Reduction Plant with a production capacity of 200,000 metric tons per year of DRI, based on research results from a demonstration plant at our Kakogawa Works. The process is also applicable for recycling iron-bearing solid waste from steelworks.

  We have also developed and brought to market several innovative new products noted for their environment-friendly and energy-saving features: the Ecocentri, a turbo compressor with a radial turbine; the Ecosand Recymer, which recycles industrial waste generated at sand-making facilities; and our Inverter series of screw compressors.

  Overseas, Midrex Direct Reduction Corporation, a U.S. subsidiary that provides direct reduction technology, posted good results. However, projects in Venezuela engaged in DRI production and sales faced difficult conditions due to low prices. To upgrade our machinery sales and service network in Southeast Asia, we established Kobelco Machinery Asia Pte. Ltd. in Singapore. This subsidiary, in turn, further expanded by setting up a unit in the Philippines. In construction machinery, our European sales company posted firm results. Our construction equipment companies in China and Thailand were also able to expand sales.

  With environmental protection drawing more attention, both the public and private sectors have shown increasing interest in the formation of a recycling society. We, too, are focusing our management resources on the environmental business under our new midterm management plan. Especially in municipal solid waste treatment, there is an increasing trend to collect refuse from a wide area for disposal in large-scale, integrated facilities. In addition, the market for incinerators that can meet or surpass tougher dioxin emission regulations continues to grow. There is also increasing demand for plants that convert refuse into solid fuel to generate electricity.

  Our diversified product range is well attuned to these changing market needs, and we are striving to secure the largest number of orders possible. In addition, we are strengthening our energy business in the nuclear industry and other fields.

  We are expanding our environment-related menu and tearing down our traditional lines of organization in the plant construction business, while also moving into the waste treatment business. In machinery, we are taking steps to improve our overall business base. We are strengthening our compressor and crusher businesses, two major areas in which we are industry leaders. A stronger business base, new products, and industry alliances for our products are key measures aimed at securing more stable profitability for the future.