Kobe Steel, Ltd.
Tokyo, Japan
Tokyo Stock Exchange No. 5406
May 25, 2000

KOBE STEEL'S CONSOLIDATED FINANCIAL RESULTS FOR FISCAL 1999
(April 1, 1999 - March 31, 2000)

TOKYO (May 25, 2000) - Kobe Steel, Ltd. reported its financial results for fiscal 1999, ended March 31, 2000.

CONSOLIDATED FINANCIAL SUMMARY

NON-CONSOLIDATED FINANCIAL SUMMARY

Notes: * Also known as pretax recurring profit (or loss).
Figures in parentheses denote losses or decreases.

COMPANY PERFORMANCE

The Japanese economy remained severe in fiscal 1999. Although governmental economic measures and a recovering Southeast Asian economy led to indications of a mild improvement, private-sector demand was weak due to low personal spending brought about by worsening unemployment and lower income.

In the last year of its three-year KOBELCO-21 management plan, Kobe Steel vigorously implemented measures to improve group profits. Consolidated sales rose in the two business segments of Electronics & Information and Real Estate, but Iron & Steel and Aluminum & Copper saw a decrease in sales. As a result, consolidated sales decreased 4.1% to 1,252.5 billion yen.

Pretax ordinary income (also called pretax recurring profit) rose to 13.7 billion yen, in comparison to ordinary loss of 22.7 billion yen in fiscal 1998, owing to cost reduction measures and improved performance in semiconductor-related businesses. However, extraordinary losses on business restructuring, amortization of prior service costs of the pension plan, and special employees’ retirement benefits led to consolidated net loss of 53 billion yen.

Regarding cash flows, net cash provided by operating activities totaled 212.6 billion yen. Net cash used in investing activities totaled 108.3 billion yen. Net cash provided by financing activities was a loss of 83.7 billion yen. Cash and cash equivalents at the end of the year were 162.2 billion yen.

DIVIDENDS
As the company had undisposed deficits on a non-consolidated basis, Kobe Steel's Board of Directors has decided to propose at the annual shareholders’ meeting to forgo dividend payments for fiscal 1999.

PERFORMANCE BY BUSINESS SEGMENT

IRON & STEEL
Consolidated sales in the Iron & Steel segment were 499 billion yen, down 4.8% from 524.1 billion yen in fiscal 1998. Operating income rose to 42.9 billion yen, from 38.5 billion yen in fiscal 1998, due to higher shipments, restructuring, cost reductions and lower raw material costs.

Domestic demand for steel decreased in comparison to the previous year. While the government's economic measures exerted a positive influence, private-sector demand was sluggish due to weak personal spending. Exports to the United States decreased due to antidumping charges. Exports to Southeast Asia were strong, resulting in an increase of total exports over the previous year.

For Kobe Steel, vigorous marketing led to higher steel shipments. However, a worsening of the product mix and low sales prices, as well as severe conditions for steel castings and forgings, titanium products and welding consumables led to lower sales.

ALUMINUM & COPPER
Aluminum & Copper sales totaled 251.4 billion yen, an 11.8% decrease from 285.1 billion yen in fiscal 1998, due to a drop in overseas sales brought about by the high yen and a decline in yen-based ingot prices. Operating income rose 2.5 billion yen to 10.2 billion yen due to higher production and shipments and cost reduction benefits.

Shipments of rolled aluminum products rose in comparison to fiscal 1998. Although aluminum can stock growth was crimped by the increase in PET bottles, demand for aluminum foil and auto-related products were strong.

Shipments of rolled copper products also increased. While production at the Chofu Plant was temporarily suspended due to typhoon damage, copper strip for electronic applications and for automotive electrical terminals went up.

MACHINERY
Machinery sales decreased 4.9% to 338.9 billion yen, from 356.3 billion yen in fiscal 1998. Although sales of construction equipment rose, sales decreased in the engineering business, which derives most of its orders from overseas. Operating income was 505 million yen, a decrease of 6.5 billion yen. While operating income in the construction equipment business increased, engineering saw a decrease.

Total Machinery segment orders rose to 304.1 billion yen and the backlog of orders was 198 billion yen. In the domestic market, Machinery segment orders were 229.4 billion yen, an increase of 23.2%, due to high demand for municipal solid waste treatment plants in the urban infrastructure business. Overseas, the Engineering business faced tough competition, resulting in a decrease of 9.1% to 74.7 billion yen.

ELECTRONICS & INFORMATION
Sales rose 17.1% to 87.8 billion yen, versus 74.9 billion yen in fiscal 1998, owing to strong increases in production and shipment of semiconductor-related products. Operating income increased by 19.3 billion yen to 7.4 billion yen owing to increased shipments and cost reductions.

REAL ESTATE
Sales in this segment doubled to 43.9 billion yen, in comparison to 21.3 billion yen in fiscal 1998, due to higher real estate sales for urban development and a larger number of group companies under consolidation. Operating income rose by 15.3 billion yen to 19.6 billion yen.

OUTLOOK FOR FISCAL 2000

Consolidated net sales are forecast to increase slightly to 1,310 billion yen in fiscal 2000. Pretax ordinary income (also called pretax recurring profit) is estimated to rise to 30 billion yen. Contributing to the higher profit forecast is cost reductions, the formation of Kobelco Construction Machinery, Co., Ltd., and the improved performance of other consolidated subsidiaries and equity-valued affiliates.

Although Kobe Steel anticipates an extraordinary loss from the amortization of unrecognized net obligations at transition of retirement benefit accounting, the company predicts aftertax net income of 5 billion yen.

OUTLOOK BY BUSINESS SEGMENT

Kobe Steel forecasts that market conditions will continue to be severe. The economy is showing indications of improving, but difficult conditions are expected to remain. In the overseas markets, competition will continue to be severe.

IRON & STEEL
Domestic demand is forecast to rise slightly owing to growing recovery in manufacturing industries, although demand from the construction industry is likely to be flat. Overseas, high inventories in the Asian region are anticipated to lead to a decrease in exports. In fiscal 2000, Nippon Koshuha Steel Co., Ltd. will be included as a subsidiary and will therefore contribute to higher segment sales.

ALUMINUM & COPPER
Kobe Steel expects demand for rolled aluminum products to be nearly the same as in the previous year. Can stock demand is anticipated to be dull, while automotive, telecommunications, and the information fields will continue to be strong. Rolled copper products are also anticipated to be flat. Due to the high yen, sales are expected to decrease in comparison to fiscal 1999.

MACHINERY
Large overseas plant orders are anticipated to recover from fiscal 2001, but urban infrastructure orders are expected to be strong in fiscal 2000. Demand for hydraulic excavators is anticipated to rise. As a result, the Machinery segment anticipates sales to increase.

ELECTRONICS & INFORMATION
High growth in the semiconductor market is forecast to lead to higher sales.

REAL ESTATE
Sales in this segment are expected to be flat.

MANAGEMENT STRATEGIES

Kobe Steel intends to concentrate on three major business fields. These fields are 1) materials (steel, welding, aluminum and copper); 2) the independent power producer (IPP) business, which utilizes the infrastructure of the Iron & Steel segment; and 3) the machinery and engineering businesses (urban infrastructure, engineering and machinery). The company intends to improve the corporate value of the entire Kobe Steel group. Kobe Steel will focus on becoming a unified company centered on high ROA and on business units with high cash flow.

In April 1999, Kobe Steel turned its business divisions into internal companies, appointed corporate officers, and implemented other measures to improve its management structure. The aim was to quickly and aggressively rebuild the business structure by improving ROA, one of management’s priorities. While strengthening the company by channeling management resources into core businesses, Kobe Steel has been divesting and selling businesses without synergy or those that are unprofitable under a policy called “selective consolidation.”

Earlier this month, Kobe Steel unveiled a three-year consolidated management plan to decisively and rapidly deal with changes in the business environment.

The plan is centered on reducing interest-bearing liabilities by increasing cash flow and ROA. By improving its financial position and by building a solid business base, Kobe Steel intends to increase its corporate value, an issue of highest importance. Priority areas, in which it excels, are automotive lightweighting, the IPP business and the environmental business. Foreseeing high growth and increasing cash flow in these three priority areas, the company plans to focus its management resources in the three areas, under its policy of selective consolidation. In addition, companywide themes that Kobe Steel will pursue include utilizing information technology to implement changes in its business processes.

At the end of June 2000, the Iron & Steel Company will be merged into the head office. This step is in anticipation of a possible move to a holding company structure.

Foremost in management’s mind is dividend payments. Improving its internal reserves and financial performance, the company aims for an early resumption of dividend payments to its shareholders.

1. SUMMARY OF FISCAL 1999 CONSOLIDATED FINANCIAL RESULTS
(April 1, 1999 - March 31, 2000)

(in millions of yen)

Notes
i. Figures are in millions of yen unless otherwise indicated.
ii. The equity value of the net loss of affiliates was 6,630 million yen in fiscal 1999. In fiscal 1998, the equity value of the net loss was 1,244 million yen.
iii. The difference between the market value of marketable securities and the balance sheet amount of the securities as of March 31, 2000 was 32,161 million yen of unrealized gain.
iv. The difference between the market value of derivatives and the contract amount as of March 31, 2000 was an unrealized loss of 9,875 million yen.
v. No changes have been made in accounting policies.
vi. Figures in parentheses denote losses or decreases.
vii. * Also known as pretax recurring profit (or loss).

4. SCOPE OF CONSOLIDATION
Consolidation is based on 125 significant, majority-owned subsidiaries and 48 significant , equity-valued affiliates.

(Overseas sales consisted of export sales of Kobe Steel and its domestic consolidated subsidiaries and sales of overseas consolidated subsidiaries, excluding sales to Japan.)

14. NON-CONSOLIDATED FORECAST FOR FISCAL 2000 (ending March 2001)

Notes
ⅰ．Average number of shares at March 31, 2000: 2,835,482,251
Average number of shares at March 31, 1999: 2,835,436,826
ⅱ．No changes have been made in accounting policies.
ⅲ．Number of shares issued at March 31, 2000: 2,835,981,926
Number of shares issued at March 31, 1999: 2,835,436,826
ⅳ．* Ordinary income is also known as pretax recurring profit.
ⅴ．Figures in parentheses denote losses or decreases.

ADDITIONAL INFORMATION

By the end of September 2000, Kobe Steel intends to send annual reports for fiscal 1999 to its overseas shareholders through their proxies in Japan. This report will also be available upon request from:

Kobe Steel, Ltd.
Investor Relations, Tokyo
Tel +81 (0)3 5739-6043

Media contact:
Gary Tsuchida
Publicity Group
Kobe Steel, Ltd.
9-12 Kita-Shinagawa 5-chome
Shinagawa-ku, Tokyo 141-8688
Japan

Tel +81 (0)3 5739-6010
Fax +81 (0)3 5739-5971
Email www-admin@kobelco.co.jp