To Shareholders & Investors

We would like to express gratitude for the continued support you have shown Daifuku.

The global economy in the fiscal year ended March 31, 2008 saw turbulence in the financial markets of developed economies. This was triggered by the subprime mortgage loan crisis in the United States, which gradually began to have repercussions for the real economy. A slowdown in growth became evident in Japan, the United States and Europe. Overall, however, the global economy sustained growth thanks to emerging economies such as China, India, Russia and other Asian countries.

The Japanese economy continued to expand in the first half, backed by firm exports and capital investment, and corporate earnings generally remained solid. In the second half, however, concerns that the business cycle was entering a recessionary phase emerged, as corporate earnings began to decline with the economic slowdown in the United States, the sharp depreciation of the US dollar and appreciation of the yen, falling share prices, and rising prices of energy and raw materials.

In the material handling industry in which Daifuku operates, competition intensified on a global scale, as leading companies emerged as the frontrunners in emerging countries. European companies were also active on the global stage.

In this business environment, Daifuku recorded continuously strong sales in its mainstay Logistics Systems businesses. In this segment, the storage, transport, sorting and picking systems operations for distribution and manufacturing industries such as IT, food, beverage, pharmaceuticals and other manufacturers in Japan, the United States and Europe remained solid. The cleanroom transport and storage systems operations in the United States, Japan and other Asian countries remained strong as well. In addition, Daifuku automotive operations in the United States, Europe, Japan and other Asian countries also continued to do well.

As a consequence, orders surpassed the record high of the previous year, reaching 243,761 million yen, an increase of 3.2% from the year-ago period.

Net sales declined a slight 0.5% from the previous year, to 231,619 million yen, although sales of the Logistics Systems division remained firm.

A number of initiatives helped us bolster profitability. For instance, we expanded capacity utilization to respond to an increase in orders. We also ensured comprehensive cost management of large projects through stronger management. Variable costs were meanwhile reduced with a higher overseas procurement ratio and production in optimal locations around the world. We improved costs with the introduction of a new production management system that uses information technology. And we cooperated closely with local subsidiaries in Asian countries. Meanwhile, earnings from services and retrofits, which take advantage of Daifuku’s unique and extensive track record, increased in each business segment.

As a result, Daifuku surpassed the record highs of the previous year in operating income, ordinary income and net income. Specifically, operating income reached 20,677 million yen (a rise of 9.8% from the previous year), ordinary income was 20,628 million yen (up 11.6%), and net income climbed to 11,893 million yen (up 4.5%), giving us our sixth consecutive year of higher profits.

We respectfully ask our shareholders and investors for their continued support.