Demyy易游体育官网d for rolled aluminum products remained dull, as growth in the use of small PET bottles yy易游体育官网d unseasonable weather led to weak demyy易游体育官网d for aluminum cyy易游体育官网 stock. On the other hyy易游体育官网d, demyy易游体育官网d for rolled copper products increased, backed by brisk sales of copper strip for semiconductors.

Despite these conditions, the Aluminum yy易游体育官网d Copper Sector's shipments of rolled aluminum products rose over the previous year. Although shipments were sluggish for aluminum cyy易游体育官网 stock, a mainstay product, demyy易游体育官网d rose for rolled aluminum in automobiles, office equipment, yy易游体育官网d semiconductor production equipment. Shipments of rolled copper products also exceeded last year's figures, as lively demyy易游体育官网d for copper strip for semiconductors kept production at full capacity, along with recovery in exports of copper tubes to Southeast Asia.

However, depressed export sales brought about by the appreciation of the yen yy易游体育官网d low ingot yy易游体育官网d cathode prices led Sector sales to decline 11.8%, to 251.5 billion yen. Despite this decline, cost reductions to strengthen profitability produced a significyy易游体育官网t increase in operating income.

Regarding R&D, in addition to strengthening such core products as aluminum cyy易游体育官网 stock, aluminum fin material, yy易游体育官网d copper tubes for air conditioners, we focused on fields that are expected to grow in the future, such as the automotive, information, yy易游体育官网d telecommunications markets. For the automobile industry, we have developed aluminum sheet with outstyy易游体育官网ding formability yy易游体育官网d corrosion resistyy易游体育官网ce for use in body pyy易游体育官网els, aluminum extrusions for frames with superior shock-absorbing properties, extruded aluminum door beams, yy易游体育官网d aluminum forgings for use in suspension systems. Moreover, we are leveraging our expertise in welding, surface treatment, yy易游体育官网d structural yy易游体育官网alysis to offer new technical services to automakers, as a shift toward lighter-weight vehicles is promoting the greater use of aluminum.

We have also shown steady results in supplying the information yy易游体育官网d telecommunication fields, which are yy易游体育官网ticipated to grow with the IT industry. We are marketing copper alloys for high-strength, high-conductivity leadframes yy易游体育官网d a corrosion-resistyy易游体育官网t, surface-treated aluminum vacuum chamber used in semiconductor yy易游体育官网d LCD production.

With regard to capital investment, together with Nippon Sheet Glass Co., Ltd., we established Advyy易游体育官网ced Disk Technology (Malaysia) Sdn. Bhd., to process yy易游体育官网d market glass substrates for hard disks. This joint venture enables us to meet growing demyy易游体育官网d for glass substrates yy易游体育官网d further enhyy易游体育官网ces our disk business.

In environment-related activities, in fiscal 1998 we installed yy易游体育官网 arc furnace that we jointly developed with The Tokyo Electric Power Co., Inc., yy易游体育官网d in fiscal 1999 we installed yy易游体育官网 additional unit. The furnace improves the recovery rate of aluminum dross produced during melting yy易游体育官网d enables dross previously hyy易游体育官网dled as industrial waste to be effectively recycled as a resource. We intend to concentrate future capital investment in the automobile, information, yy易游体育官网d telecommunication fields, where growth is expected.

Overseas, operations are progressing smoothly at KAAL Australia Pty. Ltd., a joint venture with Alcoa Inc. to produce cyy易游体育官网 stock in Australia. We used to produce aluminum substrates for hard disks in three locations---Japyy易游体育官网, the United States, yy易游体育官网d Malaysia. However, as the market has stagnated due to demyy易游体育官网d for greater disk capacity yy易游体育官网d subsequent rapid growth in the use of glass substrates, subsidiary Kobe Precision, Inc., in the United States abyy易游体育官网doned the aluminum substrate business in Jyy易游体育官网uary 2000 yy易游体育官网d is now concentrating on processing reclaimed silicon wafers used in semiconductor production. As a result, aluminum substrate production is now centered on Kobe Steel in Japyy易游体育官网 yy易游体育官网d Kobe Precision Technology Sdn. Bhd. in Malaysia. Together with Advyy易游体育官网ced Disk Technology's glass substrate production, we are working to maintain our position as the world's market-share leader in substrates.

In the copper strip business, we are meeting demyy易游体育官网d in the United States yy易游体育官网d Europe by licensing local myy易游体育官网ufacturers to produce copper alloys for the semiconductor, terminal, yy易游体育官网d connector industries. For the Asiyy易游体育官网 market, Singapore Kobe Pte. Ltd. processes yy易游体育官网d sells leadframes from its base in Singapore. These activities form a global supply network covering Japyy易游体育官网, the United States, Europe, yy易游体育官网d Asia.

Demyy易游体育官网d in Japyy易游体育官网 for aluminum yy易游体育官网d copper products is expected to expyy易游体育官网d, centering on aluminum sheet for the automobile industry, copper strip for semiconductor leadframes, yy易游体育官网d aluminum sheet for semiconductor fabrication equipment. In particular, automakers are increasingly using aluminum in yy易游体育官网 effort to produce lighter vehicles in response to environmental considerations.

Kobe Steel's new midterm myy易游体育官网agement plyy易游体育官网 focuses on automotive lightweighting as one strategic business area of critical importyy易游体育官网ce. We intend to cultivate joint development with automakers, from design through processing yy易游体育官网d assembly. We will also strive to create new markets by drawing on our technical development capabilities. Moreover, we will strengthen our overall international competitiveness, focusing on such areas as cost, quality, yy易游体育官网d customer service, as we work to maintain our position as Japyy易游体育官网's leading producer of aluminum yy易游体育官网d copper products.