Higher Cost Pressures on Japan Major Steels

JFE Holdings and Nisshin Steel posted higher consolidated sales and profit for April-December from same period of 2006 while Nippon Steel, Sumitomo Metal Industries and Kobe Steel posted higher sales and lower profit. Higher cost for freight, metallic materials and depreciation method change pressured on the profit despite of the higher selling price under firm steel demand at home and abroad. JFE Holdings revised the full year net profit outlook downward by around 60 billion yen to 260 billion yen for the year ending March 2008 when the firm posts around 50 billion yen of onetime loss for waste treatment plant. The firm also revised the sales and operating profit downward by 30 billion yen and the recurring profit by 40 billion yen. Sumitomo Metals revised the operating profit outlook downward by 5 billion yen due to higher nickel and metallic materials and freight while Kobe Steel revised the sales outlook downward by 20 billion yen due to lower price for aluminium and copper. Nippon Steel and Nisshin Steel keep the original outlook for the full year. Nippon Steel expects the firm posts 600 billion yen of recurring profit renewing the record profit for 4 years in a row. The integrated steel makers enjoyed higher selling price and sales volume for steel business in April-December under firm demand. However, the higher cost for freight and metallic materials than expected pressured on the profit. They try to improve the selling price in January-March to cover the higher cost. On engineering business, Nippon Steel posted 2.3 times higher operating profit at 12.2 billion yen for the 9 months from same period of 2006 while JFE Holdings posted 6.6 billion yen of recurring loss. Kobe Steel reduced the profit due to lower inventory gain for aluminium and copper despite of the firm business for machinery and engineering and construction machinery. They reported higher interest bearing debt at end December from end of March 2007 due to aggressive investment.