Edgar Filing: KOMATSU LTD

Form 6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of December 2005

COMMISSION FILE NUMBER: 1-7239

KOMATSU LTD.

Translation of registrant’s name into English

3-6 Akasaka 2-chome, Minato-ku, Tokyo, Japan

Address of principal executive offices

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F X Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes No X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

INFORMATION TO BE INCLUDED IN REPORT

1.	Information Distributed to Security Holders

The registrant, KOMATSU LTD., distributed, or made available from its web-site, to its security holders either or both of the following two documents:

(1)

Interim Report for 2006 (as of September 30, 2005) relative to the 137th Fiscal Period; original prepared and distributed in the Japanese language which is not attached hereto as the Semi-Annual Report referred to in (2) below is the English translation of (1) (except that (1) does not include the charts which are indicated in U.S. dollars and the names and the addresses of the depositaries and that (2) does not include the explanation for the shareholders in Japan regarding the receipt of the dividends);

(2)

Semi-Annual Report 2006 for the six-month period ended September 30, 2005, prepared in the English language, which is attached hereto and constitutes a part hereof.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		KOMATSU LTD.
		(Registrant)

Date: December 5, 2005	By:	/s/ Kenji Kinoshita
		Kenji Kinoshita
		Senior Executive Officer

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To All Our Stakeholders

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Board of Directors
Back row, from left :		Yoshinori Komamura, Masahiro Yoneyama, Hajime Sasaki, Toshio Morikawa, Morio Ikeda, Yasuo Suzuki
Front row, from left :		Kunio Noji, Toshitaka Hagiwara, Masahiro Sakane, Kunihiko Komiyama


Consolidated		< U.S.GAAP >
Net sales		¥809.7 billion (UP 18.4)%
Operating profit*		¥ 79.6 billion (UP 72.6)%
Income before income taxes, minority interests and equity in earnings		¥ 85.1 billion (UP 76.6)%
Net income		¥ 59.7 billion (UP 2.3 times)

*	Operating profit stated hereafter is the sum of segment profit (net sales less cost of sales and selling, general and administrative expenses). It conforms to Japanese accounting principles, and does not represent consolidated operating profit under U.S.GAAP.


[Sales by Operation]

Construction and Mining Equipment		¥615.0 billion (UP 21.2)%
Industrial Machinery, Vehicles and Others		¥140.5 billion (UP 14.1)%
Electronics		¥ 54.0 billion (UP 1.4)%


Nonconsolidated
Net sales		¥290.9 billion (UP 18.3)%
Operating profit		¥ 22.4 billion (UP 62.1)%
Ordinary profit		¥ 24.5 billion (UP 37.0)%
Net income		¥ 14.1 billion (UP 67.6)%


Notes:		1. Yen figures of less than one hundred million are omitted.
		2. Changes(%) from the previous interim period.

For the interim period ended September 30, 2005, we are very pleased to report that Komatsu Ltd. expanded both consolidated sales and profit for the fourth consecutive interim period, centering on improved performance of the construction and mining equipment business. The growth in sales and profit also represents the record-high six-month figures.

Interim Results

Consolidated net sales for the interim period under review expanded 18.4%, over the corresponding period a year ago, to ¥809.7 billion (US$7,166 million, at US$1=¥113). In the construction and mining equipment business, we boosted sales in all major regions of the world, as global demand expanded. In the industrial machinery, vehicles and others business, we advanced sales centering on forklift trucks and industrial machinery against the backdrop of strong market demand in Japan and overseas. Interim sales of the electronics business also increased over the last corresponding period, as the semiconductor market recovered.

Operating profit* reached ¥79.6 billion (US$705 million) for the interim period, registering an increase of 72.6% over the corresponding period a year ago. While costs increased due mainly to price hikes of steel materials, we made the handsome gain in operating profit because we worked to cut down production costs and increase our sales prices in Japan and overseas, coupled with expanded sales in the construction and mining equipment business and the industrial machinery, vehicles and others business. Operating profit ratio for the interim period also improved to 9.8% from 6.8% for the last corresponding period.

*	Operating profit stated hereafter is the sum of segment profit (net sales less cost of sales and selling, general and administrative expenses). It conforms to Japanese accounting principles, and does not represent consolidated operating profit under U.S.GAAP.

Income before income taxes for the interim period also made a sizable gain of 76.6% over the previous interim period, to ¥85.1 billion (US$753 million), reflecting income from the sale of Advanced Silicon Materials LLC, a U.S. subsidiary engaging in production and sales of polycrystalline silicon, in addition to the substantial increase in operating profit. As a result, net income for the interim period reached ¥59.7 billion (US$529 million), registering an increase of 2.3 times over the corresponding period a year ago.

On a nonconsolidated basis, interim sales advanced to ¥290.9 billion (US$2,575 million), up 18.3% over the previous interim period, supported by continued growth in export sales of construction and mining equipment and strong sales of large presses with AC Servo technologies. Ordinary profit and net income for the interim period reached ¥24.5 billion (US$217 million) and ¥14.1 billion (US$125 million) respectively with 37.0% and 67.6% increases. As a result, we recorded the third consecutive growth in both interim sales and profit.

Interim Dividends

Komatsu is building a sound financial position and flexible and agile corporate strength to increase its corporate value. Concerning cash dividends to shareholders, the Company maintains the basic policy of redistributing profits by first striving to continue stable dividends and then considering business results, payout ratio and other related matters in a comprehensive manner.

Based on this policy, at the board meeting held on November 1, we made a resolution to increase the dividends per share for the interim period by ¥3 over the corresponding period a year ago, to ¥8.

Outlook for the Fiscal Year ending March 31, 2006

There are some factors of concern over the economy, such as a further price hike of crude oil and overheating housing investments in the U.S. However, we anticipate that demand for construction and mining equipment will continue to increase steadily, especially in “Greater Asia,” in the broader sense of the term, as well as in Latin America and South Africa. We also project demand to expand for industrial machinery thanks to thriving capital investments by automakers.

In the construction and mining equipment business, we are going to launch new machines featuring our leading-edge “ecot 3” engine technology developed to meet Tier III emission control requirements which will be introduced in January next year starting in the U.S. and Europe. We are also going to focus our efforts to broaden the product range of DANTOTSU (Unique and Unrivaled) products designed to offer unrivaled performance. In response to expanding growth in demand worldwide, we are going to enhance our production capacity for major components such as engines and hydraulic units. We are also going to build a new assembly plant to expand our production capacity for large equipment for mining and other applications. Furthermore, we are working to reform our production and sales planning procedures, for example, by deploying IT to obtain real-time market information directly and promptly around the world. In “Greater Asia” and other emerging markets, we are going to further heighten our market position as we are reinforcing our marketing and customer support capabilities.

Also in the industrial machinery, vehicles and others business, each company of the Komatsu Group will work to introduce products with unique features to differentiate itself and improve its earnings. As for large presses for which we project a high level of orders, we are going to build a new plant and expand our production capacity.

We are going to build previously mentioned two plants adjacent to the ports of Kanazawa and Hitachinaka, respectively in Ishikawa and Ibaraki prefectures. By taking advantage of their location, we will be able to not only cut down our logistics costs but also make contributions to reducing the amount of CO₂ emission, which causes the greenhouse effects of the Earth.

In the electronics business, Komatsu Group companies are working to improve their business results by further improving the quality and costs for silicon wafers in Japan and Taiwan, while steadily increasing the production capacity for the next-generation mainstay 300mm wafers.

The Komatsu Group will resolutely work to accelerate the pace of these efforts above and aim at a 10%-or-higher operating profit ratio.

We at Komatsu believe that our corporate value is the total sum of trust given to us by society and all stakeholders and that appropriate information disclosure is fundamental to maintain and enhance our corporate value. Social trust is particularly important. Therefore, based on our policy of placing top priority on compliance, all top management officers and employees of the Komatsu Group are required to comply with the Business Rules, according to Komatsu’s Code of Worldwide Business Conduct, in addition to the laws and regulations.

On behalf of the members of the Board, we would like to extend our sincere appreciation to our valued shareholders, customers, business partners and employees around the world for their support.

December 2005



Toshitaka Hagiwara		Masahiro Sakane
Chairman of the Board		President and CEO

Interview with Masahiro Sakane, President and CEO

Concerning Komatsu’s Reform of Business Structure

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Masahiro Sakane

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Q: Komatsu has improved business results dynamically since fiscal 2003. Could you tell us the major supporting factors?

Sakane: Most of all, it’s the business structure reform we implemented. When I became president in June 2001, demand for construction and mining equipment was very sluggish worldwide. Coupled with that was the poor performance of our electronics business. Against this backdrop, we recorded our first operating loss for the year ended March 31, 2002. It was also our 80th anniversary year. At any rate, my first task was to get out of the red. Thus I went ahead and carried out the reform of our business structure.

Of course, any reform is accompanied by acute pains. I declared both inside and outside the company that this reform would be a major “surgery” but only once. I decided to start the reform project with the following key concepts “clear separation of costs from growth,” “refinement of our strength and rectification of our weakness,” and “open-door management.” We were able to improve our operating profit by 115 billion yen for the last three fiscal years. Of this amount, 50 billion yen reflect the benefits of the reform, and the remaining 65 billion yen from expanded market demand worldwide and enhanced product competitiveness. Concerning DAN-TOTSU products, as we are ready to successively launch both construction equipment and industrial machinery on the market, I am confident that we will be able to further expand earnings on our own.

Q: What do you think Komatsu’s strengths are?

Sakane: First of all, it is our competitiveness based on superior manufacturing which has been refined and accumulated over the years in Japan. I am totally confident of the capabilities of our development and production people to team up, generate innovative ideas and manufacture excellent products.

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Next, I should point out IT. We mount the information terminal KOMTRAX on our construction equipment, which enables us to access real-time information concerning the operating conditions and location of our customers’ machines. As we manufacturers link directly with our market and customers by means of IT, I believe business models related to production and sales and after-sale services will evolve. We have also been advancing the development of our autonomous hauling system for super-large dump trucks at a copper mine in Chile, South America. I believe we are on the forefront of IT applications in our industry.

Third, the global market expansion is fueled by “Greater Asia” where we have a high market share. It is definitely our strength.

Q: Now, could you tell us how Komatsu has rectified its weaknesses?

Sakane: As to our fixed costs, we implemented fundamental cost reform programs, substantially lowering the level of our SG&A expenses. In the course of our efforts, we also consolidated affiliated companies and machine models aggressively.

Our electronics-related subsidiaries had suffered from chronic deficits for some time. We disposed of their non-performing assets on the parent company’s own responsibility, preparing an environment in which they could engage in self-driven reconstruction. After this stage, we promoted alliances with companies with superior technologies or sales networks. In the silicon wafer business, for example, we sold the land and buildings of a U.S. plant which had discontinued production, while working to reinforce the business by expanding the partnership relations with a local leading company in Taiwan, a growth market.

In this manner, we have built a business structure through which we can allocate more resources to our core businesses of construction and mining equipment, industrial vehicles and machinery.

Q: What do you mean specifically by the “open-door management?”

Sakane: Companies are supported by all kinds of stakeholders. For Komatsu, our stakeholders include society, customers, shareholders, investors, suppliers, distributors and employees of the Komatsu Group. I believe our corporate value is the total sum of trust given to us by society and all stakeholders. Dialogues with stakeholders are an important means to enhance this trust, leading to the “open-door management.” Through two-way communications with employees, suppliers and distributors, I can share the directions and tasks that the Komatsu Group should take and work on, respectively. By making as many dialogue opportunities as possible with society, customers and shareholders, and by engaging in appropriate information disclosure to eliminate surprises, the trust given to us will build up. Since I became president, I have consistently given explanations and engaged in two-way communications with all stakeholders by making use of all possible occasions, including the announcements of our business results. I have full confidence that I am ahead of anyone in this regard.

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At the internal meetings with employees held at the head office twice a year after announcing interim and fiscal business results.

Q: Could you share your thoughts on the future outlook?

Sakane: In the construction and mining equipment market, we are witnessing a major recovery surge, centering on “Greater Asia,” after 20 years. As a result of our globalization efforts over the years, we have raised the level of our product range and production capabilities on par with our U.S. competitor. In the industrial machinery business, orders have been brisk for our large presses equipped with our new AC Servo mechanism. I am convinced that we have entered a new growth era for Komatsu.

Review of Operations

Construction and Mining Equipment

Net Sales

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Sales by Region

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Consolidated net sales of construction and mining equipment for the interim period advanced 21.2% over the corresponding period a year ago, to ¥615.0 billion (US$5,443 million), registering the record-high six-month figure. Overseas sales climbed 28.1% to ¥485.7 billion (US$4,298 million), while sales in Japan increased 0.8% to ¥129.3 billion (US$1,145 million) for the interim period under review.

Japan

During the interim period, while Japanese construction investments remained slack, demand grew reflecting ongoing reconstruction projects in earthquake and typhoon-devastated areas. Komatsu increased sales slightly from the corresponding interim period last year. In the used equipment business, Komatsu, under the leadership of Komatsu Used Equipment Corp. (KUEC), increased the amount of equipment collected within the Komatsu Group, when the inventory adjustment advanced on the market, reducing the amount of used equipment available in Japan. KUEC also worked to raise the prices of used equipment. In the rental equipment business, Komatsu implemented a new business model by deploying IT and promoted management efficiency of rental companies of the Komatsu Group.

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This Tier III regulations-complied engine incorporates the leading-edge “ecot3” engine technology.

The Americas

Interim sales in the Americas expanded against the backdrop of growth in demand for construction equipment resulting from buoyant housing investments in the United States, coupled with accelerated demand for mining equipment in Latin America.

To meet a high level of demand in North America, Komatsu, under the leadership of Komatsu America Corp., strengthened its distributorships by adding manpower and opening new shops, and carried out aggressive sales activities. As a result, Komatsu boosted North American sales.

Sales in Latin America increased centering on super-large dump trucks, especially in Brazil and Chile.

Europe & CIS

Sales in Europe increased over the corresponding interim period a year ago, reflecting an increase of markets in tandem with growth of the European Union. To meet continuous growth in demand, Komatsu embarked on the transfer of production for certain equipment within Europe. By transferring the production of wheeled hydraulic excavators from Komatsu UK Ltd. (KUK) to Komatsu Hanomag GmbH. in Germany, the major market for these excavators, Komatsu has positioned KUK as an exclusive production base for crawler-type hydraulic excavators, thus enhancing production efficiency in Europe.

In the Commonwealth of Independent States (CIS: former Soviet republics), demand for equipment for use in urban civil engineering works, especially in Russia, increased in addition to expanded demand from energy-related industries. In light of the burgeoning demand for hydraulic excavators for use in metropolitan areas, Komatsu aggressively supported sales activities of its distributors, and sales in CIS grew from the previous corresponding interim period.

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The first PW200 wheeled hydraulic excavator made by Komatsu Hanomag

China

Demand made a sharp nose dive last year but regained a recovery momentum during the interim period under review. While the market was conventionally concentrated in the eastern region, it has expanded to northeastern, western and northern regions, and demand for products has also become diversified. In these market conditions, Komatsu, under the leadership of Komatsu (China) Ltd., broadened its product mix and implemented aggressive sales activities, while fully utilizing the KOMTRAX asset management system for customers and responding to changes on the marketplace promptly. Komatsu also introduced a new distributor management system, reinforcing the operation of distributors. As a result, Komatsu increased sales from the previous corresponding interim period in China.

Asia & Oceania

In Asia there were concerns over negative effects of the skyrocketed oil price on general economies. However, interim sales expanded, centering on mining equipment, as coal and other resource developments remained thriving.

In Oceania, Komatsu effectively captured growth in demand for mining equipment, and interim sales increased over the corresponding period a year ago.

The Middle East & Africa

Interim sales in the Middle East accelerated in Turkey under good economic conditions and oil producing countries where construction investments thrived mainly as a result of the price hikes of crude oil.

Interim sales in Africa made a big gain, reflecting increased demand for mining equipment in the Republic of South Africa, the largest market of the continent, as well as growth in demand for construction equipment for infrastructure developments in other countries.

Industrial Machinery, Vehicles and Others

Net Sales

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This large press incorporates the AC Servo mechanism.

Consolidated net sales of industrial machinery, vehicles and other products for the interim period reached ¥140.5 billion (US$1,244 million), up 14.1% over the corresponding period a year ago.

Against the backdrop of thriving capital investments by automakers, sales of industrial machinery grew substantially, including large presses built by Komatsu, small and medium-sized presses by Komatsu Industries Corporation, and machine tools by Komatsu Machinery Corporation. Concerning large presses, Komatsu led the industry by introducing new presses which incorporate AC Servo technologies that the Company has refined and accumulated over the years for small and medium-sized presses. Both sales and orders for large presses with the AC Servo mechanism advanced steadily, reflecting outstanding appraisals by customers for their low-noise and high-economy performance in addition to super-high precision and productivity.

Komatsu Forklift Co., Ltd. effectively capitalized on growth in demand in Japan and abroad and aggressively worked to expand sales of its mainstay LEO-NXT-V engine-driven series forklift trucks. Komatsu Forklift also increased the prices. As a result, sales increased over the previous corresponding period.

Komatsu Zenoah Co. introduced new products with unique features, including the brushcutter with an improved start-up mechanism, implemented aggressive sales promotion for them, and expanded sales.

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BC2350Hb hybrid e-START brushcutter made by Komatsu Zenoah

Review of Operations

Electronics

Net Sales

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Silicon wafers made by Komatsu Electronic Metals

Consolidated net sales from the electronics segment for the interim period totaled ¥54.0 billion (US$478 million), up 1.4% over the corresponding period a year ago. In July 2005, Komatsu sold Advanced Silicon Materials LLC, a U.S. subsidiary engaging in production and sales of polycrystalline silicon, to Renewable Energy Corporation AS of Norway. Reflecting this sale, overall sales of the electronics segment registered a slight increase from the previous interim period.

Demand for silicon wafers remained brisk during the interim period under review, as the semiconductor market came out of the inventory adjustment phase and got on a recovery track. Komatsu Electronic Metals Co., Ltd. (KEM) and its group companies manufactured high value-added 200mm wafers designed to meet higher integration needs as well as discrete wafers in Japan and Taiwan, and engaged in aggressive sales promotion in major markets, including the emerging Chinese market. As for 300mm wafers, the next-generation mainstream product, the KEM Group has established a monthly production capacity of 75,000 pieces in Japan and worked to refine their quality and to expand sales. As a result, consolidated net sales of KEM for the interim period improved from the corresponding period a year ago.

Komatsu Women’s Judo Team:

Going Global to Win

Thank you, our shareholders, for your continuing support!

The Komatsu Women’s Judo Team was formed in April 1991, as part of Komatsu’s 70th anniversary projects.

Since then, the Komatsu Judo Team has won the All Japan Corporate Judo Federation Championship title four times, while members have added to impressive records in individual matches both in Japan and abroad, including the Olympics and World Judo Championships.

In addition to their own trainings, they give Judo lessons to boys and girls every Wednesday and Friday, supporting the growth of next-generation Judo athletes.

Introduction to all members of

the Komatsu Women’s Judo Team


		Yoshiyuki Matsuoka (Manager) 1. April 1, 1997 2. Eighth dan 3. Hyogo Prefecture 4. Seoi-nage (shoulder throw) 5. Gold medalist of the 65 kg category at the 1984 Los Angeles Olympics

		Atsuko Nagai (Coach) 1. April 1, 1998 2. Fourth dan 3. Saitama Prefecture 4. Uchimata (inner thigh throw) 5. Gold medalist of the 2000 Jeju Asian Judo Championships and 2000 France World Championships

		Mizuho Matsuzaki (Captain) 1. April 1, 2001 2. Second dan, 78-kg weight category 3. Kumamoto Prefecture 4. Seoi-nage (shoulder throw) 5. Silver medalist of the 2003 All Japan Individual Competition, Gold medalist of the 2003 Jeju Asian Judo Championships, Gold medalist of the 2004 Germany World Championships, Silver medalist of the 2005 All Japan Individual Competition, and Gold medalist of the 2005 Canada World Championships.

		Hisae Takara (Sub Captain) 1. April 1, 2002 2. Second dan, 52-kg weight category 3. Miyazaki Prefecture 4. Seoi-nage (shoulder throw) 5. Gold medalist of the 2003 All Japan Individual Competition, Bronze medalist of the 2004 Australia World Championships, Silver medalist of the 2004 Kodokan Cup, Silver medalist of the 2005 All Japan Individual Competition, Silver medalist of the 2005 All Japan Corporate Individual Competition, and Gold medalist of the 2005 Canada World Championships.


		Ayumi Tanimoto 1. April 1, 2004 2. Third dan, 63-kg weight category 3. Aichi Prefecture 4. Uchimata (inner thigh throw) and Ippon-seoi-nage (one arm shoulder throw) 5. Bronze medalist of the 2001 World Championships, Gold medalist of the 2004 All Japan Individual Competition, Gold medalist of the 2004 Jeju Asian Judo Championships, Gold medalist of the 2004 Athens Olympics, Silver medalist of the 2005 Germany World Championships, Silver medalist of the 2005 All Japan Individual Competition, and Silver medalist of the 2005 World Championships.

		Reiko Yoshinaru (Training Captain) 1. April 1, 2004 2. Third dan, 57-kg weight category 3. Chiba Prefecture 4. Seoi-nage (shoulder throw) 5. Gold medalist of the 2000 and 2001 All Japan Junior Competition, Bronze medalist of the 2003 Kodokan Cup, Bronze medalist of the 2003 Korea World Championships, and Silver medalist of the 2005 Pan-Pacific Championships.

		Ikumi Tanimoto 1. April 1, 2003 2. Second dan, 63-kg weight category 3. Aichi Prefecture 4. Sodetsuri-haraigoshi (Sleeve lifting/sweeping hip throw combination) and Uchimata (inner thigh throw) 5. Silver medalist of the 2003 All Japan Junior Competition, Silver medalist of the 2005 Canada World Championships, and Silver medalist of the 2005 USA World Championships.

		Mina Watanabe 1. April 1, 2004 2. First dan, 70-kg weight category 3. Ibaraki Prefecture 4. Ippon-seoi-nage (one arm shoulder throw) 5. Bronze medalist of the 2004 Bulgaria World Championships, Gold medalist of the 2004 Fukuoka International Women’s Judo Championships, Bronze medalist of the 2005 Germany World Championships, Bronze medalist of the 2005 Individual Competition, Gold medalist of the 2005 Jeju Asian Judo Championships, Gold medalist of the 2005 All Japan Corporate Individual Competition, Gold medalist of the 2005 Canada World Championships.

		Mayumi Takara 1. April 1, 2005 2. Second dan, 48-kg weight category 3. Miyazaki Prefecture 4. Seoi-nage (shoulder throw) and Kataguruma (shoulder wheel) 5. Gold medalist of the 2004 All Japan Students Competition, Gold medalist of the 2004 World Students Competition, Gold medalist of the 2005 Russia World Championships, Gold medalist of the 2005 Pan-Pacific Championships, and Gold medalist of the 2005 All Japan Corporate Individual Competition.

		Chie Iwata 1. April 1, 2005 2. Third dan, 57-kg weight category 3. Kumamoto Prefecture 4. Uchi-mata (inner thigh throw) and Osoto-gari (major outer reaping) 5. Bronze medalist of the 2003 Fukuoka International Women’s Judo Championships, Bronze medalist of the 2003 Czech World Championships, Bronze medalist of the 2005 All Japan Corporate Individual Competition, and Gold medalist of the 2005 Canada World Championships.

		Asuka Oka 1. April 1, 2005 2. Third dan, 70-kg weight category 3. Tokyo Metropolitan Area 4. Ippon-seoi-nage (one arm shoulder throw) and Ashiwaza (foot techniques) 5. Silver medalist of the 2003 Fukuoka International Women’s Championships, Gold medalist of the 2004 Kodokan Cup, Bronze medalist of the 2004 Fukuoka International Women’s Judo Championships, Bronze medalist of the 2005 All Japan Corporate Individual Competition, and Gold medalist of the 2005 Canada World Championships.

1:	Date of joining Komatsu

Rank

3:	Place of birth

Specialty

5:	Major record

Consolidated Balance Sheets (Unaudited)

Komatsu Ltd. and subsidiaries

As of September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
ASSETS
Current assets
Cash and cash equivalents	¥	85,076		¥	64,647		$	752,885
Time deposits		77			77			681
Trade notes and accounts receivable—less allowance for doubtful receivables		351,397			302,675			3,109,708
Inventories		337,679			291,072			2,988,310
Other current assets		105,318			90,610			932,018

Total current assets		879,547			749,081			7,783,602

Long-term trade receivables		71,786			65,770			635,274

Investments		100,225			75,757			886,947

Property, plant and equipment—less accumulated depreciation		375,169			369,300			3,320,080

Other assets		106,251			130,217			940,274

* Total	¥	1,532,978		¥	1,390,125		$	13,566,177

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term debt (including current maturities of long-term debt)	¥	184,994		¥	172,108		$	1,637,115
Trade notes and accounts payable		286,527			240,478			2,535,637
Income taxes payable		23,593			22,545			208,788
Other current liabilities		154,479			136,820			1,367,071

Total current liabilities		649,593			571,951			5,748,611

Long-term liabilities		287,478			332,376			2,544,053

Minority interests		43,465			38,277			384,646

Shareholders’ equity
Common stock		67,870			67,870			600,619
Capital surplus		136,172			135,758			1,205,062
Retained earnings		353,385			271,507			3,127,301
Accumulated other comprehensive income (loss)		(458	)		(23,026	)		(4,053	)
Treasury stock		(4,527	)		(4,588	)		(40,062	)

Total shareholders’ equity		552,442			447,521			4,888,867

Total	¥	1,532,978		¥	1,390,125		$	13,566,177

Accumulated other comprehensive income (loss):
Foreign currency translation adjustments	¥	(13,280	)	¥	(20,580	)	$	(117,522	)
Net unrealized holding gains on securities available for sale		26,619			15,860			235,566
Pension liability adjustments		(13,177	)		(17,506	)		(116,610	)
Net unrealized gains (losses) on derivative instruments		(620	)		(800	)		(5,487	)

Note:

The translations of Japanese yen amounts into United States dollar amounts are included solely for convenience and have been made at the rate of ¥113 to U.S.$1, the approximate rate of exchange at September 30, 2005.

* Note: While trade notes and accounts receivable and inventories increased in tandem with expanded sales during the interim period, Komatsu made further progress in paying back borrowings. Komatsu also continued to improve its financial position. Mainly reflecting increased profits, shareholders’ equity advanced, pushing up shareholders’ equity ratio to 36.0%.

Consolidated Statements of Income and Unappropriated Retained Earnings (Unaudited)

Komatsu Ltd. and subsidiaries

For the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Revenues and other
* Net sales	¥	809,709		¥	683,976		$	7,165,566
Interest and other income		23,088			15,255			204,319

Total		832,797			699,231			7,369,885

Costs and expenses
Cost of sales		595,472			508,723			5,269,664
Selling, general and administrative		134,538			129,084			1,190,602
Interest		6,086			5,241			53,858
Other		11,565			7,983			102,345

Total		747,661			651,031			6,616,469

* Income before income taxes, minority interests and equity in earnings		85,136			48,200			753,416

Income taxes		20,849			19,904			184,504
Minority interests in (income) of consolidated subsidiaries		(5,027	)		(2,957	)		(44,487	)
Equity in earnings of affiliated companies		536			684			4,743

* Net income	¥	59,796		¥	26,023		$	529,168

Unappropriated retained earnings at beginning of the period	¥	277,196		¥	227,825		$	2,453,062
Cash dividends paid		(5,948	)		(3,970	)		(52,637	)
Transfer to retained earnings appropriated for legal reserve		(354	)		(292	)		(3,133	)

Unappropriated retained earnings at end of the period	¥	330,690		¥	249,586		$	2,926,460


Note: Based on the Statement of Financial Accounting Standards (SFAS) No.130, “Reporting Comprehensive Income,” the aggregated net income for the six months ended September 30, 2005 and 2004, was ¥80,823 million (US$715,248 thousand) and ¥26,791 million, respectively.

	Yen						U.S. cents
	2006			2005			2006
Net income per share:
Basic	¥	60.27		¥	26.23			53.34	¢
Diluted		60.18			26.22			53.26
Dividends per share		6.00			4.00			5.31


Note:		In consolidation, dividends per share have been calculated based on dividends paid in each fiscal year.
		As for fiscal 2006, interim dividend payment of ¥8 per share has been approved by the Board of Directors of the Company.

* Note: Overseas sales accelerated for the interim period, centering on the construction and mining equipment segment. Both sales and profit continued to improve for the fourth consecutive interim period. Sales, income before income taxes, minority interests and equity in earnings of affiliated subsidiaries, net income registered the record-high figures for six-month period.

Consolidated Statements of Cash Flows (Unaudited)

Komatsu Ltd. and subsidiaries

For the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Operating activities
Net income	¥	59,796		¥	26,023		$	529,168
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,388			34,889			304,319
Deferred income taxes		(6,318	)		(3,277	)		(55,912	)
Net loss (gain) from sale of investment securities		(19,506	)		433			(172,619	)
Gain on sales of property		(465	)		(10,467	)		(4,115	)
Loss on disposal or sale of fixed assets		1,718			1,998			15,203
Impairment loss on long-lived assets held for use		1,809			2,386			16,009
Pension and retirement benefits—net		1,040			877			9,203
Changes in assets and liabilities:
Decrease (increase) in trade receivables		(20,821	)		(2,964	)		(184,257	)
Decrease (increase) in inventories		(28,084	)		(27,209	)		(248,531	)
Increase (decrease) in trade payables		19,245			12,353			170,310
Increase (decrease) in income taxes payable		10,399			9,436			92,027
Other—net		5,525			9,632			48,894

* Net cash provided by operating activities		58,726			54,110			519,699

Investing activities
Capital expenditures		(50,100	)		(34,155	)		(443,363	)
Proceeds from sales of property		5,488			20,957			48,566
Proceeds from sales of available for sale investment securities		2,851			448			25,230
Purchases of available for sale investment securities		(2,415	)		(3,341	)		(21,372	)
Sale (acquisition) of subsidiaries—net of cash (acquired) disposed		26,115			(280	)		231,106
Collection of loan receivables		6,936			11,157			61,381
Disbursement of loan receivables		(8,163	)		(9,254	)		(72,239	)
Decrease (increase) in time deposits		(23	)		376			(203	)

Net cash used in investing activities		(19,311	)		(14,092	)		(170,894	)

Financing activities
Proceeds from long-term debt		12,230			11,082			108,230
Repayments on long-term debt		(52,406	)		(31,787	)		(463,770	)
Increase (decrease) in short-term debt—net		(1,022	)		(16,836	)		(9,044	)
Repayments of capital lease obligations		(5,137	)		(5,355	)		(45,460	)
Sales (repurchase) of common stock—net		42			(890	)		372
Dividends paid		(5,948	)		(3,970	)		(52,637	)

Net cash used in financing activities		(52,241	)		(47,756	)		(462,309	)

Effect of exchange rate change on cash and cash equivalents		392			979			3,469

Net increase (decrease) in cash and cash equivalents		(12,434	)		(6,759	)		(110,035	)
Cash and cash equivalents, beginning of period		97,510			71,406			862,920

Cash and cash equivalents, end of period	¥	85,076		¥	64,647		$	752,885

* Note: By using cash provided by strong operating activities, Komatsu increased cash dividends and made aggressive investments to expand its production capacity. Komatsu also continued to pay back borrowings, working to further improve its financial position.

Consolidated Business Information (Unaudited)

Komatsu Ltd. and subsidiaries

As of September 30, 2005 and 2004 as well as for the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively

<Information by business unit>


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Net sales:
Construction and mining equipment	¥	623,753		¥	514,383		$	5,519,938
Industrial machinery, vehicles and others		178,120			152,805			1,576,283
Electronics		54,064			53,294			478,442

Total		855,937			720,482			7,574,663
Elimination		(46,228	)		(36,506	)		(409,097	)

Consolidated		809,709			683,976			7,165,566

Segment profit:
Construction and mining equipment		64,732			35,891			572,849
Industrial machinery, vehicles and others		10,737			7,081			95,018
Electronics		5,569			5,608			49,283

Total		81,038			48,580			717,150
Corporate expenses and elimination		(1,339	)		(2,411	)		(11,850	)

Consolidated segment profit		79,699			46,169			705,300
Interest and other income		23,088			15,255			204,319
Interest expense		6,086			5,241			53,858
Other expenses		11,565			7,983			102,345

Consolidated income before income taxes		85,136			48,200			753,416

Identifiable assets:
Construction and mining equipment		1,062,376			929,957			9,401,558
Industrial machinery, vehicles and others		238,441			214,090			2,110,097
Electronics		121,261			142,387			1,073,106

Total		1,422,078			1,286,434			12,584,761
Corporate assets and elimination		110,900			103,691			981,416

Consolidated		1,532,978			1,390,125			13,566,177

Depreciation and amortization:
Construction and mining equipment		23,605			24,073			208,894
Industrial machinery, vehicles and others		3,818			3,758			33,787
Electronics		6,361			6,475			56,292

Consolidated		33,784			34,306			298,973

Capital expenditures:
Construction and mining equipment		42,378			28,724			375,027
Industrial machinery, vehicles and others		6,418			5,757			56,796
Electronics		12,555			6,801			111,106

Consolidated	¥	61,351		¥	41,282		$	542,929

<Geographic Information>

Net sales recognized by sales destination for the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen				Thousands of U.S. dollars
	2006		2005		2006
Japan	¥	249,775	¥	241,501	$	2,210,398
The Americas		225,500		171,344		1,995,575
Europe and CIS		114,272		95,953		1,011,257
China		38,185		31,405		337,920
Asia (excluding Japan and China) and Oceania		124,917		101,818		1,105,460
The Middle East and Africa		57,060		41,955		504,956

Consolidated	¥	809,709	¥	683,976	$	7,165,566

Net sales recognized by geographic origin and long-lived assets at September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen				Thousands of U.S. dollars
	2006		2005		2006
Net sales:
Japan	¥	352,370	¥	327,068	$	3,118,319
U.S.A.		222,030		169,227		1,964,867
Europe		104,743		84,708		926,929
Others		130,566		102,973		1,155,451

Consolidated	¥	809,709	¥	683,976	$	7,165,566

Long-lived assets:
Japan	¥	325,812	¥	315,540	$	2,883,292
U.S.A.		56,012		72,763		495,681
Europe		21,829		21,418		193,177
Others		36,799		33,424		325,655

Consolidated	¥	440,452	¥	443,145	$	3,897,805

Note:

No individual country within Europe or other areas had a material impact on net sales or long-lived assets. There were no sales to a single major external customer during the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005.

<Information by Region>

For the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Net sales:
Japan	¥	502,850		¥	449,059		$	4,450,000
The Americas		233,708			181,585			2,068,212
Europe		118,002			94,214			1,044,266
Others		140,604			108,850			1,244,283
Elimination		(185,455	)		(149,732	)		(1,641,195	)

Consolidated		809,709			683,976			7,165,566

Segment profit:
Japan		37,121			25,428			328,504
The Americas		22,911			11,860			202,752
Europe		8,065			4,522			71,371
Others		12,285			7,808			108,717
Corporate expenses and elimination		(683	)		(3,449	)		(6,044	)

Consolidated		79,699			46,169			705,300

Identifiable assets:
Japan		991,483			1,001,586			8,774,186
The Americas		371,947			321,969			3,291,566
Europe		128,184			109,570			1,134,372
Others		164,788			135,365			1,458,301
Corporate assets and elimination		(123,424	)		(178,365	)		(1,092,248	)

Consolidated	¥	1,532,978		¥	1,390,125		$	13,566,177


Overseas sales:
	2006			2005			2006
The Americas	¥	225,500		¥	171,344		$	1,995,575
		(27.8	)%		(25.1	)%		(27.8	)%
Europe		114,272			95,953			1,011,257
		(14.1	)%		(14.0	)%		(14.1	)%
Others		220,162			175,178			1,948,336
		(27.2	)%		(25.6	)%		(27.2	)%
Total		559,934			442,475			4,955,168
		(69.1	)%		(64.7	)%		(69.1	)%

Consolidated	¥	809,709		¥	683,976		$	7,165,566


Notes:	1.	Overseas sales represent the sales of the Company and its consolidated subsidiaries to customers in the areas other than Japan.
	2.	Regions are categorized depending on geographical proximity.
	3.	Major regions for the geographical categories are as follows:
		(1) The Americas: North America and Latin America (2) Europe: Germany, the United Kingdom and CIS (3) Others: China, Australia and Southeast Asia
	4.	Figures in the parentheses represent the percentages of overseas sales in consolidated net sales.

Nonconsolidated Balance Sheets

Komatsu Ltd.

As of September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Assets
Current assets:	¥	405,309		¥	336,224		$	3,586,810
Cash on hand and in banks		59,493			33,940			526,495
Notes receivable		3,984			4,445			35,264
Trade accounts receivable		157,370			145,435			1,392,656
Bonds issued by affiliated companies		500			—			4,425
Finished products and merchandise		24,959			24,008			220,881
Materials and supplies		3,771			2,431			33,379
Work in process		32,374			27,237			286,496
Prepaid expenses		837			682			7,413
Deferred income taxes-current		15,916			13,322			140,850
Short-term loans receivable		74,035			63,898			655,179
Other current assets		33,006			21,521			292,097
Allowance for doubtful receivables		(940	)		(698	)		(8,324	)

Fixed assets:		426,302			431,188			3,772,586
Tangible fixed assets		114,942			110,393			1,017,188
Buildings		38,262			37,234			338,611
Structures		6,945			7,136			61,460
Machinery and equipment		30,330			25,287			268,413
Vehicles and delivery equipment		237			192			2,106
Tools, furniture and fixtures		7,277			6,371			64,404
Land		31,024			33,463			274,555
Construction in progress		863			707			7,638

Intangible fixed assets		8,254			9,254			73,048
Utility rights		78			171			694
Software		8,160			9,015			72,217
Other intangible assets		15			67			137

Investments and miscellaneous assets		303,105			311,540			2,682,350
Investment securities		64,586			45,835			571,560
Securities and other investments in affiliated companies		270,407			267,959			2,392,985
Bonds issued by affiliated companies		—			500			—
Long-term loans receivable		3,430			5,072			30,356
Long-term prepaid expenses		885			1,266			7,836
Deferred income taxes—non-current		1,866			41,744			16,516
Other investments		4,527			4,927			40,070
Allowance for doubtful receivables		(4,945	)		(6,380	)		(43,762	)
Allowance for loss on valuation of investments in unlisted companies		(37,653	)		(49,384	)		(333,212	)

Total assets	¥	831,611		¥	767,412		$	7,359,396


Notes:		1. Yen figures of less than one million are omitted.
		2. Accumulated depreciation of tangible fixed assets 2006: ¥300,816 million 2005: ¥297,335 million


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Liabilities and Shareholders’ Equity
Current liabilities:	¥	234,850		¥	158,726		$	2,078,325
Trade notes payable		304			1,366			2,696
Trade accounts payable		125,673			96,970			1,112,156
Short-term debt		2,719			4,000			24,063
Current portion of bonds		35,000			—			309,735
Other accounts payable		28,871			26,029			255,503
Income taxes payable		7,754			13,896			68,627
Advances received		2,155			2,722			19,075
Deferred profit on installment sales		148			628			1,315
Accrued bonuses		5,985			4,246			52,965
Warranty reserve		7,422			5,799			65,683
Other current liabilities		18,815			3,066			166,508

Long-term liabilities:		106,682			142,640			944,093
Bonds		30,000			65,000			265,487
Long-term debt		60,622			63,000			536,484
Liabilities for employee retirement benefits		14,537			13,236			128,649
Liabilities for Director and Statutory auditor retirement benefits		633			943			5,608
Other long-term liabilities		888			460			7,864

Total liabilities		341,533			301,366			3,022,417

Shareholders’ equity:
Capital:		70,120			70,120			620,537
Common stock		70,120			70,120			620,537
Capital surplus:		140,636			140,223			1,244,572
Additional paid-in capital		140,140			140,140			1,240,177
Other capital surplus		496			83			4,395
Gain on disposal of treasury stock		496			83			4,395
Retained earnings:		256,021			243,743			2,265,675
Legal earnings reserve		18,036			18,029			159,618
Voluntary reserve		197,658			194,835			1,749,186
Reserve for special depreciation		29			54			263
Reserve for losses on overseas investments		—			1			—
Reserve for advanced depreciation deduction		14,683			14,420			129,944
Reserve for special advanced depreciation account		2,585			—			22,882
General reserve		180,359			180,359			1,596,097
Unappropriated retained earnings		40,326			30,878			356,871

Net unrealized gains on available-for-sale securities		27,287			16,006			241,482
Net unrealized gains on available-for-sale securities		27,287			16,006			241,482
Treasury Stock, at cost:		(3,987	)		(4,047	)		(35,287	)
Treasury Stock, at cost:		(3,987	)		(4,047	)		(35,287	)

Total shareholders’ equity		490,078			466,046			4,336,979

Total liabilities and shareholders’ equity	¥	831,611		¥	767,412		$	7,359,396

Nonconsolidated Statements of Income and Unappropriated Retained Earnings

Komatsu Ltd.

For the six months ended September 30, 2005 and 2004, of fiscal 2006 and 2005, respectively


	Millions of yen						Thousands of U.S. dollars
	2006			2005			2006
Net sales	¥	290,966		¥	246,001		$	2,574,925
Cost of sales		225,195			190,875			1,992,882
Deferred profit on installment sales		(199	)		(348	)		(1,768	)

Gross profit		65,970			55,474			583,811
Selling, general and administrative expenses		43,483			41,605			384,808

Operating profit		22,487			13,869			199,003

Non-operating income:		8,437			9,290			74,667
Interest and dividend income		8,032			7,995			71,083
Other non-operating income		404			1,295			3,584

Non-operating expenses:		6,379			5,241			56,458
Interest expenses		761			767			6,738
Other non-operating expenses		5,618			4,474			49,721

Ordinary profit		24,544			17,917			217,212

Extraordinary income:		16,904			8,666			149,594
Gain on sale of land		—			8,541			—
Gain on sale of investment securities		361			57			3,200
Gain on sale of shares of affiliated companies		—			68			—
Reversal of loss on valuation of investments in unlisted companies		16,542			—			146,394

Extraordinary losses:		5,039			15,237			44,598
Loss on sale of land		41			8			368
Loss on valuation of investment securities		—			133			—
Provision for loss on valuation of investments in unlisted companies		—			5,969			—
Impairment loss		4,287			9,126			37,939
Cost of disposing of PCB (polychlorinated biphenyl)		711			—			6,292

Income before income taxes		36,409			11,346			322,207
Income taxes;
Current		8,953			12,453			79,232
Deferred		13,307			(9,548	)		117,768

Net income		14,148			8,441			125,207
Unappropriated retained earnings at the beginning of the period		26,178			22,437			231,664
Unappropriated retained earnings at the end of the period	¥	40,326		¥	30,878		$	356,871


Notes:	1.	Yen figures of less than one million are omitted.
	2.	Net income per share (using the average number of common shares outstanding, less treasury stocks.) 2006: ¥14.26 2005: ¥8.51
	3.	The Company adopted Amendment of Accounting Standards for Retirement Benefits from for the six months ended September 30,2005. The effect of adopting this Amendment was to increase ordinary profit and income before income taxes by ¥221million, respectively.

Directors, Auditors and Officers

As of September 30, 2005

Board of Directors

Toshitaka Hagiwara

Chairman of the Board

Masahiro Sakane

President and Chief Executive Officer

Kunio Noji