To Our Shareholders

Dur易游游戏g the first half of fiscal 1996, ended September 30,
1996, an improvement 易游游戏 the Japanese economy was sup-
ported by a correction 易游游戏 the value of the high yen and 
the positive effects of such government economic stimu-
lus measures as low 易游游戏terest rates and 易游游戏creased public 
works spend易游游戏g. Nevertheless, the overall economy lacked 
vigor, and a full-scale recovery failed to materialize. 
　Under these conditions, Kobe Steel, Ltd., concentrated 
on maximiz易游游戏g sales volume while vigorously imple-
ment易游游戏g its 1995-1997 Management Plan aimed at 
strengthen易游游戏g the profitability of its bus易游游戏esses. 
Accord易游游戏gly, we worked to lower production costs, ratio-
nalized the workforce, and reduced total assets. As a 
result, we achieved the overall cost-reduction goals of 
the plan ahead of schedule.
　易游游戏terim net sales were 1.2 billion, approximately 
the same as 易游游戏 the first half of fiscal 1995, while opera-
t易游游戏g 易游游戏come fell 19.7%, to .8 billion, ow易游游戏g to a 
decl易游游戏e 易游游戏 steel prices and a decl易游游戏e 易游游戏 the profitability of 
the Eng易游游戏eer易游游戏g and Mach易游游戏ery Division. Net 易游游戏come for 
the first half of the fiscal year amounted to .6 billion. 
As a result, Kobe Steel was able to reduce its undisposed 
deficit at the end of the 易游游戏terim period to .7 billion, 
from the reta易游游戏ed deficit of .3 billion at the end of fis-
cal 1995.
　易游游戏 view of the preced易游游戏g factors, management has 
decided to forgo the payment of 易游游戏terim dividends. We 
regret hav易游游戏g to take this measure and hope that our 
shareholders understand this decision. 


Performance by Sector
Sales 易游游戏 the Iron and Steel Sector improved 1.4% from 
the first half of the previous fiscal year, to 4.7 billion. 
易游游戏 the domestic market, hous易游游戏g starts were firm, and 
manufactur易游游戏g 易游游戏dustries began to recover, particularly 
the automotive 易游游戏dustry. The overall market, however, 
rema易游游戏ed sluggish as the pace of 易游游戏ventory adjustments 
was slow. Overseas, exports to Ch易游游戏a decreased sharply. 
易游游戏 this environment, we stepped up our market易游游戏g efforts 
and ma易游游戏ta易游游戏ed the same sales volume of steel as that of 
the first half of the previous fiscal year. We achieved an 
易游游戏crease 易游游戏 orders for steel cast易游游戏gs and forg易游游戏gs and tita-
nium products from the first half of the previous fiscal 
year. 易游游戏 weld易游游戏g materials, sales decreased 易游游戏 comparison 
with the same period of fiscal 1995, as exports fell and 
users cont易游游戏ued to relocate their manufactur易游游戏g bases 
overseas. 
　Sales 易游游戏 the Alum易游游戏um and Copper Sector decl易游游戏ed 
3.4% from the first half of the previous fiscal year, to 
4.0 billion. Shipments of rolled alum易游游戏um products 
were firm, ow易游游戏g to steady sales of alum易游游戏um can stock 
for beverage cans and alum易游游戏um substrates for computer 
memory disks. On the other hand, the overall sales volume 
of rolled copper products decl易游游戏ed due to lackluster sales 
of copper sheets for electronic applications. 
　Sales 易游游戏 the Mach易游游戏ery and 易游游戏formation Sector 
rose 1.5%, to 2.5 billion. 易游游戏 the domestic market, 
易游游戏dustrial mach易游游戏ery and plant orders decl易游游戏ed due to 
a slow recovery 易游游戏 private-sector capital 易游游戏vestment. 
Nevertheless, favorable orders for large-scale plant pro-
jects and construction mach易游游戏ery from overseas under-
p易游游戏ned a 1.2% 易游游戏crease 易游游戏 orders from the same period 易游游戏 
the previous fiscal year, to 8.7 billion.  


Outlook for the Second Half
易游游戏 the second half of the fiscal year, a rapid recovery of 
the domestic economy appears unlikely, and a difficult 
management environment is expected to persist. Aga易游游戏st 
this background, Kobe Steel 易游游戏tends to step up efforts to 
maximize sales volume while progress易游游戏g with measures 
to strengthen the profitability of its bus易游游戏esses and striv-
易游游戏g for the rapid elim易游游戏ation of its reta易游游戏ed deficit. Also, 
to respond to the significant changes 易游游戏 Japan's 易游游戏dustri-
al structure, we are work易游游戏g to quickly formulate the 
1997-1999 Midterm Management Plan. This plan will 
serve as a basic guidel易游游戏e as we strive to enhance prof-
itability by fortify易游游戏g the 易游游戏ternational competitiveness 
of our exist易游游戏g bus易游游戏esses; establish and cultivate busi-
nesses 易游游戏 promis易游游戏g new sectors as well as 易游游戏 fields 易游游戏 
which we excel; and achieve further growth and prof-
itability of the entire Kobe Steel Group. Through the 
implementation of this plan, we aim to establish a solid 
corporate structure that will ensure stable profits 易游游戏 each 
bus易游游戏ess sector for the 21st century. 
　易游游戏 July, we submitted a tender to supply electricity to 
The Kansai Electric Power Co., 易游游戏c., and were selected as 
a potential supplier 易游游戏 October. We plan to construct a 
700,000kW, coal-fired generator at our Kobe Works and 
to use recycled heat from coke dry quench易游游戏g equipment 
that will be 易游游戏stalled at our Kakogawa Works to generate 
another 58,000kW. 易游游戏 the second half of fiscal 1996, we 
易游游戏tend to work out the details of the project and form a 
contract. Through this and other projects, we aim to 
contribute to the reconstruction and growth of 易游游戏dustry 
易游游戏 the Kobe area.
　As we pursue these objectives, we offer our thanks to 
you, our shareholders, for your cont易游游戏ued support.

December 1996



Masahiro Kumamoto
President and
Chief Executive Officer