Tokyo: Nippon Steel Corp halved its full-year profit forecast to below the market consensus on sluggish demand and prices for construction-use steel and higher raw materials costs, pushing its stock down nearly 4%.
The company, the world’s second-largest steel maker after industry leader ArcelorMittal, said it now expects a ¥10 billion ($111 million) recurring profit, or profit before tax and one-offs, for the year to the end of March.
The new forecast is below the market consensus for an annual profit of ¥33.48 billion in a poll of 20 analysts for Thomson Reuters I/B/E/S, and a fraction of the ¥336.14 billion profit booked in 2008-09.
“The weaker results are due to the slow demand for construction in Japan. The downward revision was a surprise,” said Akira Kishimoto, a steel analyst a JPMorgan Securities.
“But I still belive the company’s export business will grow in the next fiscal year and going forward.”
Nippon Steel, which vies with China’s Baoshan Steel and South Korea’s POSCO in Asia, booked October-December recurring profit of ¥43.3 billion ($479.4 million) versus ¥148.2 billion a year ago.
“We have been able to secure shipping volumes but we were forced to reduce construction steel prices because of weak construction activity in Japan,” Shinichi Taniguchi, executive vice president at Nippon Steel, told a news conference.
“I don’t expect a sharp recovery in domestic construction activity for next fiscal year either. It would probably be about the same as this year. Even if we see a recovery, it would be a minor pickup.”
Domestic rival JFE Holdings Inc, the world’s sixth-ranked steelmaker, is due to announce its third-quarter results on Friday, while India’s Tata Steel Ltd reports later on Thursday.
POSCO on 14 January posted a 77% increase in quarterly net profit, benefiting from lower contract prices for iron ore and coking coal - key ingredients in making steel.
Shares in Nippon Steel were down 3.8% at ¥334 in afternoon trade after the results. The benchmark Nikkei average was up 1.8%.