Tokyo — Nippon Steel, Japan’s top steelmaker, posted a 23% drop in net profit in the first quarter of the 2023/2024 fiscal year, but raised its full-year forecast by 8% on higher-than-expected margins amid falling prices of raw materials, it said on Friday.
The move comes despite sluggish steel demand at home and abroad including China, the world’s top steel consumer.
Net profit of the world’s No.4 steelmaker in the April-June quarter came to 177 billion yen ($1.24 billion), down from 231 billion yen a year ago, on weak demand and the lack of hefty appraisal gains on its inventories that it had enjoyed a year earlier.
Still, the company lifted its annual profit outlook to 400 billion yen from its May guidance of 370 billion yen, citing falling prices of steel-making ingredients such as coking coal as well as its shift to more profitable high-end products.
The latest prediction beat the mean 392 billion yen profit estimate in a poll of 11 analysts by Refinitiv.
“Steel demand is sluggish and business environment is really severe, but we were able to raise the annual forecast, which means we have taken the right measures,” Nippon Steel Executive Vice President Takahiro Mori told a press conference.
The steelmaker has been shutting down several local facilities including blast furnaces due to declining demand while changing the negotiation formula with its key industry customers such as automakers so that they could swiftly reflect any change in materials costs to their product prices.
JFE Holdings, Japan’s second-biggest steelmaker, said this week its first-quarter net profit fell by 29%.
Nippon Steel’s Mori also said it is still in talks with Teck Resources to buy a stake in the Canadian miner’s coking coal unit and it wants to settle the deal by the end of this year. But he declined to give any further details.
The CEO of Teck said last month that the miner is considering a range of proposals including a partial sale of its coal business from various interested parties after Glencore offered up to $8.2 billion for the unit.
Reporting by Katya Golubkova and Yuka Obayashi; Editing by Tom Hogue and Kim Coghill – Reuters
