Japanese Steel Makers Upgrade Earnings Forecasts

Strong demand from auto sector.

Major Japanese steelmakers issued upbeat forecasts on March 1 for their earnings for the year to March thanks to robust demand, particularly from the auto sector. Industry leader Nippon Steel forecast a record net profit because of stronger-than-expected demand worldwide and higher-than-expected delivery prices. It now sees a net profit of 345 billion yen (US$2.91 billion), up from a previous projection of 310 billion yen. It forecasts operating profit of 570 billlion yen, up from 530 billion yen, and revenue of 4.28 trillion yen, up from 4.15 trillion yen.

"Although we had initially worried about supply and demand conditions because of active production by Chinese steel makers, strong demand in North America, Europe and the Middle East more than absorbed increased production by Chinese steel makers," Nippon Steel executive vice-president Nobuyoshi Fujiwara said. "Domestic demand was also much better than expected, especially from auto makers and shipbuilders," he said.

Second-ranked JFE Holdings also raised its earnings forecasts for similar reasons. The company now expects a net profit of 295 billion yen, up from 290 billion yen, but kept the operating profit forecast at 495 billion yen. The firm expects its revenue will reach 3.27 trillion yen, up from a previous forecast of 3.24 trillion yen. JFE said cost savings and a weaker yen than expected had offset price increases in zinc and other nonferrous metals.

Meanwhile, their smaller rival Kobe Steel left intact its earnings forecasts, with net profit of 100 billion yen, current profit of 170 billion yen and revenue of 1.9 trillion yen. "Trends in the steel market have not changed greatly from the previous forecast in October last year," Kobe said in a statement. The company enjoyed strong domestic demand but higher steel production in China and rising inventories in the U.S. were a concern, it said.

Copyright Agence France-Presse, 2007

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