Kobelco & Materials Copper Tube to Keep Profitability for F2006

Kobelco & Materials Copper Tube, the joint venture between Kobe Steel and Mitsubishi Materials for copper tube business, aims 50 billion yen of net sales and 1.2 billion yen of recurring profit at parent company in fiscal 2006 ending March 2007, while the firm expects the sales to increase by 50% and the profit to keep the level from fiscal 2005. The firm tries to keep the profitability by cost cut efforts at Hatano plant in Kanagawa Prefecture, Japan, though the firm estimates 300-400 million yen of cost expansion per year due to high prices of fuel and sub materials. The firm plans to sell 59,000 tonnes of copper tube in fiscal 2006 as much as fiscal 2005, when copper alloyed tube demand is increasing mainly for heat pump water heater “Eco Cute.”KMCT completed integration of domestic copper tube production to Hatano plant at the end of September 2005. The operation rate steadily increased and the output volume became to 5,500 tonnes per month at the plant in April which matches the current market size.The firm would be suffered from 300-400 million yen of cost expansion through fiscal 2006 from the previous year due to the surge of fuel and sub materials prices. However, the firm expects to cancel the cost up by cutting productive costs at Hatano plant by 1 billion yen per year continuously.Copper tube demand is decreasing for air conditioners in domestic market when Japanese air conditioner markers shifted their production bases to overseas. On the other hand, copper alloyed tube demand is steadily increasing for Eco Cute in Japan. The annual sales of Eco Cute are estimated to increase to 380,000 units in fiscal 2006 from 230,000 units in fiscal 2005. KMCT holds about 50% of market share of copper tube for Eco Cute. The firm plans to double the output of copper tube for Eco Cute toward fiscal 2008 from current 3,000 tonnes per year.