Exhibit 99.1

FOR RELEASE: Immediately

Sun Hydraulics Corporation Reports 40% Increase in Second Quarter Sales
Establishes Employee Stock Ownership Plan

SARASOTA, FLA, August 2, 2004 – Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the second quarter 2004 as follows:

(Dollars in millions except net income per share)

Sales increases by business segment were as follows:

Sun Hydraulics President Allen Carlson commented, “The 40% increase in shipments was particularly satisfying because we also maintained our high level of “on time”

shipments to the customers’ delivery schedules. I believe this level of operational performance is helping us increase our market share and will continue to do so”.

Gross profit increased 52% compared to the same quarter last year. Gross profit as a percentage of net sales increased to 32% from 29% last year. The increase in gross profit as a percentage of sales was due to the favorable effects of increased sales volume, exchange rates and productivity increases. These were partially offset by the funding to start an Employee Stock Ownership compensation plan.

In June, the Company’s Board of Directors approved the establishment of an Employee Stock Ownership Plan (ESOP) as the discretionary match portion of its 401(k) retirement plan. The Board also approved the initial funding of the ESOP with approximately five hundred thousand dollars of Company stock. This compensation cost was recorded in the United States operations in the second quarter. Excluding this charge, net income as a percentage of net sales would have increased from 10% to 11% and gross profit would have increased from 32% to 33%.

Carlson concluded, “I believe the ESOP will create an even stronger link between the company’s performance, its shareholders and our employees. I am also pleased that we were able to fund the ESOP this year and recognize the fine performance and perseverance of our employees who saw salary and wage reductions during the difficult years of the U.S. manufacturing recession.”

Outlook

The Company’s order trend has historically tracked closely to the United States Purchasing Managers Index (PMI). The index at the end of June 2004 continued to indicate economic expansion.

Net sales for the third quarter are projected to increase approximately 30% over the third quarter last year and be in the $23 million range. Net income per share on those sales should yield between $0.22 and $0.25.

Webcast

Sun Hydraulics Corporation will broadcast its second quarter financial results conference call live over the Internet at 2:30 P.M. E.T. today, August 2, 2004. To listen, go to http://investor.sunhydraulics.com/medialist.cfm. A copy of this earnings release is posted on the Investor Relations page of our website under “Press Releases.”

Webcast Q&A

Questions may be submitted to the Company via email after reviewing this earnings release. Sun management will then answer these and other questions during the Company’s webcast. If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-800-289-0485.

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Questions can be submitted by going to the Sun Hydraulics website, www.sunhydraulics.com, and clicking on Investor Relations on the left hand menu. Scroll down to the bottom of the page and click on contact email: investor@sunhydraulics.com, which will open an email window to type in your message. Sun Hydraulics will answer as many legitimate questions pertaining to the second quarter earnings release as possible during the webcast time.

Sun Hydraulics Corporation is a leading designer and manufacturer of high performance screw-in hydraulic cartridge valves and manifolds for worldwide industrial and mobile markets. For more information about Sun, please visit our website at www.sunhydraulics.com.

FORWARD-LOOKING INFORMATION

     Certain oral statements made by management from time to time and certain statements contained herein that are not historical facts are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and, because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements, including those in Management’s Discussion and Analysis of Financial Condition and Results of Operations are statements regarding the intent, belief or current expectations, estimates or projections of the Company, its Directors or its Officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company’s strategies regarding growth, including its intention to develop new products; (ii) the Company’s financing plans; (iii) trends affecting the Company’s financial condition or results of operations; (iv) the Company’s ability to continue to control costs and to meet its liquidity and other financing needs; (v) the declaration and payment of dividends; and (vi) the Company’s ability to respond to changes in customer demand domestically and internationally, including as a result of standardization. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that the anticipated results will occur.

Important factors that could cause the actual results to differ materially from those in the forward-looking statements include, among other items, (i) the economic cyclicality of the capital goods industry in general and the hydraulic valve and manifold industry in particular, which directly affect customer orders, lead times and sales volume; (ii) conditions in the capital markets, including the interest rate environment and the availability of capital; (iii) changes in the competitive marketplace that could affect the Company’s revenue and/or cost bases, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; (iv) changes in technology or customer requirements, such as standardization of the cavity into which screw-in cartridge valves must fit, which could render the Company’s products or technologies noncompetitive or obsolete; (v) new product introductions, product sales mix and the geographic mix of sales nationally and internationally; and (vi) changes relating to the Company’s international sales, including

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changes in regulatory requirements or tariffs, trade or currency restrictions, fluctuations in exchange rates, and tax and collection issues. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-Q for the quarter ended June 26, 2004, and under the heading “Business” and particularly under the subheading, “Business Risk Factors” in the Company’s Form 10-K for the year ended December 27, 2003. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

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Sun Hydraulics Corporation
Consolidated Balance Sheets
(in thousands, except share data)

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Sun Hydraulics Corporation
Consolidated Statements of Operations
(in thousands, except per share data)

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Sun Hydraulics Corporation
Consolidated Statements of Operations
(in thousands, except per share data)

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Sun Hydraulics Corporation
Consolidated Statements of Cash Flows
(in thousands)

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