KOBE STEEL’S NON-CONSOLIDATED FINANCIAL RESULTS FOR FISCAL 1998

TOKYO (May 24, 1999) -- The Japanese economy continued to be in a severe slump in fiscal 1998. Although concerns about the financial system eased, private-sector demand was sluggish. Capital investment dropped sharply and personal spending was weak.

Against this background, Kobe Steel, Ltd. vigorously implemented cost-cutting and other measures outlined in its KOBELCO-21 midterm management plan and made strong efforts to ensure profits. However, in this depressed economic climate, shipments and sales prices in the Iron and Steel Sector fell, while Kobe Steel's other business sectors suffered from declines in demand.

As a result, non-consolidated net sales for fiscal 1998 declined 15.9% to 938.4 billion yen and the company incurred an ordinary pretax loss (also known as pretax recurring loss) of 9.8 billion yen. Gain on the sale of fixed assets resulted in extraordinary income. Extraordinary losses included special retirement benefits for permanent transfers of seconded employees and restructuring costs. From fiscal 1998, Kobe Steel began using tax effect accounting, and thus posted an after-tax net loss of 23.3 billion yen.

As for the outlook for the Japanese economy, Kobe Steel believes the current severe situation will continue. It will be difficult to expect a solid recovery in private-sector capital investment and personal consumption. As firms restructure, competition is becoming increasing severe amid the trend toward stricter evaluation of companies in capital and financial markets on the basis of global standards.

Under a new management structure that includes the formation of internal companies and executive officers, Kobe Steel is implementing the KOBELCO-21 midterm plan and additional measures to improve profitability and build a strong management foundation for the 21st century. In particular, Kobe Steel intends to allocate management resources in promising new businesses that will become pillars of growth in the future. The Company also intends to closely review its portfolio and withdraw from unprofitable businesses to improve capital efficiency. Through these measures, Kobe Steel aims to rapidly refocus its businesses to achieve strategic and structural reforms.

NON-CONSOLIDATED SECTOR PERFORMANCE
Non-consolidated sales in the Iron and Steel Sector were 462.2 billion yen, down 12.1% from 525.9 billion yen in the previous year. Domestic sales were 367.4 billion yen, while exports were 94.7 billion yen.

Domestic demand for steel decreased over the previous year. While the government's economic measures exerted a positive effect, the weak economy severely curtailed private-sector capital investment and personal spending. Demand from the construction and manufacturing industries remained sluggish. Exports rose in fiscal 1998. Shipments to North America and Europe increased owing to the strong economy. However in the second half, dumping charges from the United States caused exports to plummet.

For Kobe Steel, overall sales volume decreased. While exports rose in the first half, domestic shipments went down. Domestic prices, too, went down as did export sales prices, due to soft demand in the international steel market.

Non-consolidated Aluminum and Copper Sector sales were 222.7 billion yen, down 16.3% from 266.2 billion yen in the previous period. Domestic sales amounted to 191 billion yen with export sales making up 31.7 billion yen. The sales volume of rolled aluminum decreased. A primary reason was due to cold weather, which slowed the demand for canned beverages and consequently demand for aluminum can stock. The sales volume of rolled copper went down due to decreases in copper strip for electronic applications and copper tubing for air conditioners. Sales also suffered from lower aluminum ingot and copper cathode prices.

Non-consolidated Machinery and Information Sector sales were 253.4 billion yen, down 21.5% from 323 billion yen in the previous year. Domestic sales were 182.3 billion yen and exports were 71.1 billion yen. Sales in all businesses, including construction machinery, dropped sharply.