MIRA INFORM REPORT

Report Date :

29.11.2012

IDENTIFICATION DETAILS

Name :	KOBE STEEL LTD

Registered Office :	2-10-26 Wakihamacho Chuoku Kobe 651-8585

Country :	Japan

Financials (as on) :	31.03.2012

Date of Incorporation :	June 1911

Com. Reg. No.:	1400-01-005714 (Kobe-Chuoku)

Legal Form :	Limited Company

Line of Business :	Manufacturer of steel, aluminum & copper, machinery, construction materials, other

No. of Employees :	35,496 employees

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Satisfactory
Payment Behaviour :	No Complaints
Litigation :	Clear

NOTES:

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – June 30^th, 2012

Country Name

Previous Rating

(31.03.2012)

Current Rating

(30.06.2012)

Japan

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

japan - ECONOMIC OVERVIEW

In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan develop a technologically advanced economy. Two notable characteristics of the post-war economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding under the dual pressures of global competition and domestic demographic change. Japan's industrial sector is heavily dependent on imported raw materials and fuels. A tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan imports about 60% of its food on a caloric basis. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, Japan in 2011 stood as the fourth-largest economy in the world after second-place China, which surpassed Japan in 2001, and third-place India, which edged out Japan in 2011. A sharp downturn in business investment and global demand for Japan's exports in late 2008 pushed Japan further into recession. Government stimulus spending helped the economy recover in late 2009 and 2010, but the economy contracted again in 2011 as the massive 9.0 magnitude earthquake in March disrupted manufacturing. Electricity supplies remain tight because Japan has temporarily shut down almost all of its nuclear power plants after the Fukushima Daiichi nuclear reactors were crippled by the earthquake and resulting tsunami. Estimates of the direct costs of the damage - rebuilding homes, factories, and infrastructure - range from $235 billion to $310 billion, and GDP declined almost 0.5% in 2011. Prime Minister Yoshihiko NODA has proposed opening the agricultural and services sectors to greater foreign competition and boosting exports through membership in the US-led Trans-Pacific Partnership trade talks and by pursuing free-trade agreements with the EU and others, but debate continues on restructuring the economy and reining in Japan's huge government debt, which exceeds 200% of GDP. Persistent deflation, reliance on exports to drive growth, and an aging and shrinking population are other major long-term challenges for the economy.

Source : CIA

Company name

KOBE STEEL LTD

REGD NAME

KK Kobe Seikosho

MAIN OFFICE

2-10-26 Wakihamacho Chuoku Kobe 651-8585 JAPAN

Tel: 078-261-5111 Fax: 078-261-4123

URL: http://www.kobelco.co.jp/

E-Mail address: admin@kobelco.co.jp

ACTIVITIES

Mfg steel, aluminum & copper, machinery, construction materials, other

BRANCHES

Tokyo, Osaka, Nagoya, Sapporo, Sendai, Niigata, Toyama, Takamatsu, Hiroshima, Fukuoka, Okinawa, other

(Tot 25)

OVERSEAS

Kobe Steel USA Inc (New York & Detroit), Kobe Steel Asia Pte (Singapore),

Kobe Steel Asia Pte Ltd (Hong Kong), Shanghai, Beijing (--subsidiaries)

FACTORIES

Takasago, Kakogawa, Harima (--Hyogo), Kobe, Fujisawa, Hadano, Ibaraki, Mooka, Chofu, Inabe (Mie)

CHIEF EXEC

HIROSHI SAITOH, PRES

Yen Amount: In million Yen, unless otherwise stated

SUMMARY

FINANCES FAIR A/SALES Yen 1,864,691 M

PAYMENTS No Complaints CAPITAL Yen 233,313 M

TREND SLOW WORTH Yen 571,258 M

STARTED 1911 EMPLOYES 35,496

COMMENT

STEEL MAKER.

FINANCIAL SITUATION COSIDERED FAIR AND GOOD FOR ORDINARY BUSINESS ENGAGEMENTS.

Notes: Unit: In Million Yen

Forecast (or estimated) figures for 31/03/2013 fiscal term

HIGHLIGHTS

This is one of the nation’s leading steel makers, with conglomerate operating materials divisions including: steel (4^th ranked in blast furnace), aluminum & copper, and machinery. Construction machinery business is undertaken in tie-up with Wisconsin-based CNH Global. Strengthening wholesale power supply business. Eager for diversification and globalization of businesses. Construction machinery business undertaken in tie-up with Wisconsin-based CNH Global. Also engaged in IPP business. The company has acquired land next to the plant in Sichuan, China, in hope to expand production of cranes and shovels to cope with increasing demand. The firm plans to double output capacity of the new JV in Mar 2013, by investing Yen 4.5 trillion. It is expecting to capture brisk demand for forging products for automobile-use suspensions. It also plans to introduce hybrid power shovels, seeking improvement in fuel efficiency.

FINANCIAL INFORMATION

The sales volume for Mar/2012 fiscal term amounted to Yen 1,864,691 million, a 0.3% up from Yen 1,858,574 million in the previous term. Japanese economy was gradually recovered from the Great East Japan Earthquake, which caused major production level decreases. However, the overseas economic slowdown, due in part of the impact of floods in Thailand, and the protracted appreciation of the Yen, served as roadblocks to recovery. By Divisions, Steel almost similar at Yen 854,200 million; Welding up 8.5% to Yen 84,400 million; Aluminum & Copper down 4.6% to Yen 289,900 million; Machinery similarly at Yen 152,800 million; Resources & Engineering down 13.1% to Yen 55,800 million. The recurring profit was posted at Yen 33,780 million and the net loss at Yen 14,248 million, respectively, compared with Yen 89,082 million recurring profit and Yen 52,939 million net profit, respectively, a year ago. Wrote off Yen 6,022 as extraordinary losses coming from sales loss of investment/securities for the term.

(Apr/Sept/2012 results): Sales Yen 858,552 million (down 10.6%), operating profit Yen 5,554 million (down 89.3%), recurring loss Yen 11,009 million (previously Yen 38,526 million profit), net losses Yen 38,199 million (previously Yen 17,358 million profit). (% compared with the corresponding period a year ago.)

For the current term ending Mar 2013 the operations are projected to be in deficit to post Yen 25,000 million recurring loss and Yen 60,000 million net losses, respectively, on an 8.3% fall in turnover, to Yen 1,710,000 million. Sales of steel products for automobiles will recover in volume, but those of steel products for shipbuilding will slacken. Profit margin will shrink, reflecting flagging market prices. Operating profit will continue fall, seriously affected by a longer-than-expected slump in lucrative shovels in China and valuation loss on inventory.

The financial situation is considered FAIR and good for ORDINARY business engagements.

REGISTRATION

Date Registered: Jun 1911

Regd No.: 1400-01-005714 (Kobe-Chuoku)

Legal Status: Limited Company (Kabushiki Kaisha)

Authorized: 6,000 million shares

Issued: 3,115,061,100 shares

Sum: Yen 233,313 million

Major shareholders (%): Nippon Life Ins (3.8), Company’s Treasury Stock (3.5), Nippon Steel & Sumitomo Metal (3.4), Sumitomo Metal Ind (3.4), Japan Trustee Services T (3.3), Master Trust Bank of Japan T (2.7), Mizuho Corporate Bank (2.0), SSBT OD05 Omnibus Acct Treaty (1.8), Mitsubishi UFG Trust Bank (1.6), MUFG (1.5); foreign owners (17.1).

No. of shareholders: 162,362

Listed on the S/Exchange (s) of: Tokyo, Osaka, Nagoya

Managements: Hiroshi Satoh, pres; Ikuhiro Yamaguchi, v pres; Hiroaki Fujiwara, v pres; Tetsu Takahashi, v pres; Jun Tanaka, v pres; Tsuyoshi Katsuya, s/mgn dir; Hiroya Kawasaki, s/mgn dir; Kazuhide Naraki, s/mgn dir

Nothing detrimental is known as to the commercial morality of executives.

Related companies: Nippon Koshuh Steel, Kobelco Construction Machinery, Shinko Pantec, Kobelco Eco-Solutions, other

OPERATION

Activities: Manufactures steel, aluminum & copper, machinery, construction machinery, electronics materials, wholesales power supply, others:

(Sales Breakdown by Divisions):

Iron & Steel Div (44%): wire rods & bars, steel sheets, castings & forging, titanium products, steel powder & powder products, welding electrodes, welding wires, welding robots, others;

Wholesale Power Supply Div (4%): Shinko Kobe Power Station has electricity generation capacity of 1.4 million kilowatts;

Aluminum & Copper Div (15%): rolled aluminum products, aluminum alloy & magnesium alloy casting, aluminum processed products, rolled copper products;

Machinery Div (8%): screw compressors, centrifugal compressors, reciprocating compressors, refrigeration compressors, uninterruptible power sources, hot isostatic presses, cold isostatic presses, surface modification systems, inspection & analysis systems, crushers, plastic processing machinery, tire & rubber machinery, high pressure anneal equipment, supercritical CO2 equipment;

Construction Machinery Div (18%): hydraulic excavators, mini excavators, wheel loaders, crawler cranes, rough terrain cranes, work vessels, electric mining shovels;

Electronics & Information Div (3%): electronics equipment, communication systems, superconductive products, specialty alloy & other new materials, semiconductor-related equipment, information services;

Real Estate Div, others (8%): community & urban development, real property services, building management, others.

Clients: [Mfrs, wholesalers] Shinsho Corp, Toyota Tsusho Corp, Mitsui & Co, Sumitomo Corp, Metal One, Daiwa Can Co, other.

No. of accounts: 2,000

Domestic areas of activities: Nationwide

Suppliers: [Mfrs, wholesalers] Shinsho Corp, Sojitz Corp, Mitsubishi Corp, Kansai Coke & Chemicals, Shinko Engineering & Maintenance, Shimabun Corp, Seika Corp, other.

Payment record: No Complaints

Location: Business area in Kobe. Office premises at the caption address are owned and maintained satisfactorily.

Bank References:

Mizuho Corporate (H/O)

MUFG (H/O)

Relations: Satisfactory

FINANCIALS

FINANCES: (Consolidated in million yen)
			Terms Ending:		31/03/2012	31/03/2011
INCOME STATEMENT
	Annual Sales				1,864,691	1,858,574
	Cost of Sales				1,635,862	1,570,779
	GROSS PROFIT				228,828	287,795
	Selling & Adm Costs				168,273	163,244
	OPERATING PROFIT				60,555	124,550
	Non-Operating P/L				-26,775	-35,468
	RECURRING PROFIT				33,780	89,082
	NET PROFIT				-14,248	52,939
BALANCE SHEET
	Cash				95,378	145,875
	Receivables				313,074	302,846
	Inventory				308,544	381,344
	Securities, Marketable				40,642	26,005
	Other Current Assets				185,756	140,687
	TOTAL CURRENT ASSETS				943,394	996,757
	Property & Equipment				904,837	933,339
	Intangibles				20,494	22,231
	Investments, Other Fixed Assets				290,787	279,205
	TOTAL ASSETS				2,159,512	2,231,532
	Payables				447,316	478,675
	Short-Term Bank Loans				204,719	170,657

	Other Current Liabs				229,536	239,047
	TOTAL CURRENT LIABS				881,571	888,379
	Debentures				172,172	177,349
	Long-Term Bank Loans				394,579	441,099
	Reserve for Retirement Allw				52,587	29,345
	Other Debts				87,345	97,993
	TOTAL LIABILITIES				1,588,254	1,634,165
	MINORITY INTERESTS
	Common stock				233,313	233,313
	Additional paid-in capital				83,125	83,125
	Retained earnings				280,582	302,376
	Evaluation p/l on investments/securities				13,020	19,742
	Others				12,845	10,438
	Treasury stock, at cost				(51,627)	(51,627)
	TOTAL S/HOLDERS` EQUITY				571,258	597,367
	TOTAL EQUITIES				2,159,512	2,231,532
CONSOLIDATED CASH FLOWS
				Terms ending:	31/03/2012	31/03/2011
	Cash Flows from Operating Activities				39,486	177,795
	Cash Flows from Investment Activities				-85,267	-96,686
	Cash Flows from Financing Activities				-40,233	-98,196
	Cash, Bank Deposits at the Term End				101,900	189,707
ANALYTICAL RATIOS Terms ending:					31/03/2012	31/03/2011
		Net Worth (S/Holders' Equity)			571,258	597,367
		Current Ratio (%)			107.01	112.20
		Net Worth Ratio (%)			26.45	26.77
		Recurring Profit Ratio (%)			1.81	4.79
		Net Profit Ratio (%)			-0.76	2.85
		Return On Equity (%)			-2.49	8.86

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.55.70
UK Pound	1	Rs.89.34
Euro	1	Rs.72.35

INFORMATION DETAILS

Report Prepared by :

MNL

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
----	NB	New Business	----

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.