Kobe Steel, Ltd.
Tokyo, Japan
Tokyo Stock Exchange No. 5406
November 22, 2000

KOBE STEEL’S CONSOLIDATED FINANCIAL RESULTS
FOR THE FIRST HALF OF FISCAL 2000
(April 1, 2000 - SEPTEMBER 30, 2000)

TOKYO (November 22, 2000) - Kobe Steel, Ltd. reported its financial results for the first half of fiscal 2000, ended September 30, 2000.

OVERALL PERFORMANCE

Conditions in the Japanese economy continued to be severe for the half year ending September 2000. Spurred by growing investment in information technology, private sector capital expenditure rose and exports to Asia continued to be strong. While the economy continued its gradual recovery, personal spending was weak.

Based on a consolidated midterm management plan launched in May, Kobe Steel strove to maximize profitability by strengthening its involvement in three strategic areas - automotive lightweighting, the independent power producer business, and the environmental business - as well as by improving its financial position.

In the interim period, consolidated sales were 654.6 billion yen. Ordinary income (also known as pretax recurring profit) was 24.3 billion yen. Shipments in the Iron and Steel segment rose, as did the product prices of a semiconductor subsidiary. Aftertax net income was 5.2 billion yen, due to extraordinary losses brought about by the introduction of retirement benefit accounting and financial instrument accounting.

Regarding cash flows, loss before income taxes was 9.2 billion yen. Net cash from operating activities totaled 75.2 billion yen, due to depreciation and lower total assets. Net cash from investing activities was a loss of 41.8 billion yen. Net cash from financing activities was a loss of 81.4 billion yen due to a decrease in interest-bearing liabilities. Cash and cash equivalents at the end of the interim period were 121.3 billion yen.

DIVIDENDS
As the company had undisposed deficits on a non-consolidated basis in fiscal 1999, Kobe Steel regrets that it must forgo interim dividend payments, in accordance with Japan’s Commercial Code.

PERFORMANCE BY BUSINESS SEGMENT

IRON & STEEL
Kobe Steel’s consolidated Iron & Steel sales were 263.4 billion yen. While steel prices fell in the domestic market, both domestic and overseas shipments went up. Operating income was 24.3 billion yen despite lower steel prices, due to higher shipments and lower costs from restructuring and other cost reduction measures.

Domestic demand for steel rose in the construction and manufacturing industries. While personal spending was weak, the IT sector exhibited strong growth and private sector capital investment went up. Overseas, exports to Asia were strong owing to a recovery in the Asian economies, though global supply and demand eased with the softening of the U.S. market.

ALUMINUM & COPPER
Aluminum & Copper sales totaled 131.5 billion yen. Exports of aluminum can stock declined, though aluminum plate for semiconductor fabrication equipment along with copper strip for electronic applications and copper tubing for air conditioners, both in the domestic market, were strong. Operating income was 6.2 billion yen due to overall cost reductions.

MACHINERY
Machinery sales were 86.3 billion yen due to low overseas orders. Operating loss was 1.6 billion yen. A major factor was the drop in overseas sales, despite efforts to boost profitability by reducing costs.

Total Machinery segment orders were 112 billion yen and the backlog of orders rose to 230.6 billion yen. In the domestic market, Machinery segment orders were 98.5 billion yen, due to strong environment-related orders for municipal solid waste treatment plants to meet dioxin regulations and due to recovery in private sector capital investment in the engineering field. Overseas, a cement plant order in Europe brought orders to 13.5 billion yen.

CONSTRUCTION MACHINERY
Construction machinery sales were 82.2 billion yen with operating income of 2.5 billion yen. Due to the unclear economic outlook, the crane market, and primarily rough terrain cranes, continued to face severe conditions. However, shipments of hydraulic excavators went up owing to strong demand in North America and Europe, as well as the introduction of new models in the market.

ELECTRONICS & INFORMATION
Sales were 59.5 billion yen owing to higher shipments and prices from a semiconductor subsidiary. Recovery in the semiconductor market along with improved yield and productivity contributed to operating income of 15.2 billion yen.

REAL ESTATE
Sales in this segment were 22.9 billion yen with operating income of 6.5 billion yen. Strong marketing of condominiums, a major part of the business, contributed to sales despite severe competition.

OUTLOOK FOR FISCAL 2000

Japan’s economic outlook is likely to remain unclear for the rest of the fiscal year, ending March 2001. In the second half of the fiscal year, investment in public works is forecast to lose steam. Exports are anticipated to decline due to high inventories of metal products in Asia and a slowdown in the U.S. economy. As a result, the economy is anticipated to continue to be sluggish.

Kobe Steel’s outlook on its business segments are as follows:

IRON & STEEL
Sales in the second half are expected to be flat in comparison to the first half. Kobe Steel’s export shipments are anticipated to decrease in comparison to the first half. Firm demand from the manufacturing sector is anticipated to contribute to higher domestic shipments for Kobe Steel in the second half, in comparison to the first half.

Domestic demand in the second half is likely to be nearly the same as the first half. While shipments to the construction industry are anticipated to dip, private-sector capital investment is forecast to gradually recover and the manufacturing sector is forecast to register an increase. Overseas, an easing in supply and demand is forecast in the Asian markets, leading to lower demand.

ALUMINUM & COPPER
Sales in the second half are anticipated to be roughly the same as in the first half. For rolled aluminum products, the growth of PET bottles is forecast to decrease demand for aluminum can stock. However, demand for general products is expected to remain strong, leading to second-half sales being roughly the same as in the first half. For rolled copper products, demand for copper tubing for air conditioners is forecast to be flat. Copper strip for electronic applications is forecast to continue being strong. As a result copper demand is forecast to be roughly the same as in the first half.

MACHINERY
Sales are expected to rise over the first half. Domestic sales in the second half are anticipated to grow in environment-related businesses, with regard to municipal solid waste treatment and water treatment.

CONSTRUCTION MACHINERY
Sales are anticipated to dip slightly in comparison to the first half. Both the domestic and overseas markets are likely to continue being severe and overall demand is forecast to decrease slightly from the first half.

ELECTRONICS & INFORMATION
Sales are expected to remain roughly the same as in the first half, despite lower DRAM prices dampening sales.

REAL ESTATE
Higher sales than in the first half are anticipated owing to higher sales of condominiums, including the Maya Seaside Place-West under construction in the new city center in eastern Kobe.

MANAGEMENT STRATEGIES

Kobe Steel is focusing on three core areas of business. These areas 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 segments (urban infrastructure, engineering and machinery). The company intends to improve the corporate value of the entire Kobe Steel group by becoming a unified company centered on high return on assets (ROA) and 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. One of management’s priorities is to quickly and aggressively rebuild the company’s business structure by improving ROA. 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.”

In May 2000, Kobe Steel unveiled a three-year consolidated management plan to rapidly and decisively 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. The priority areas in which Kobe Steel excels are automotive lightweighting, the IPP business and the environmental business. The company foresees high growth and high cash flow in these three strategic areas and is focusing its management resources in the three core areas under its policy of selective consolidation. A companywide theme that Kobe Steel is pursuing is information technology, to implement change in its business processes.

Kobe Steel has been making organizational changes, too. At the end of June 2000, the Iron & Steel Company was merged into the head office. To focus corporate resources in the environmental business, the Urban Infrastructure Company and the Engineering Company were merged together and renamed the Infrastructure and Engineering Company. This move unifies the common functions of procurement and design, as well as environmental technologies, and further improves competitiveness. As restructuring of the Electronics and Information segment has been nearly completed, the Electronics and Information Company was abolished. Remaining businesses have become a part of the head office.

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.

I. SUMMARY OF FISCAL 2000 CONSOLIDATED HALF-YEAR RESULTS
(April 1, 2000 - September 30, 2000)

4. SCOPE OF CONSOLIDATION
Consolidation is based on 151 significant, majority-owned subsidiaries and 47 significant, equity-valued affiliates.

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

II. SUMMARY OF NON-CONSOLIDATED FIRST HALF RESULTS OF FISCAL 2000
(April 1, 2000 - September 30, 2000)

INVESTOR INFORMATION
By the end of January 2001, Kobe Steel intends to send semi-annual reports for fiscal 2000 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
Fax +81 (0)3 5739-5973

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