Nippon Steel forecasts 6% profit drop, beating market estimate

TOKYO : Japan's top steelmaker Nippon Steel Corp on Thursday predicted a 6 per cent drop in annual net profit due to lower output, a far smaller fall than analysts were expecting as it expressed confidence in being able to pass on rising costs to customers.

The world No.4 company by crude steel output forecast year to March net profit of 600 billion yen ($4.5 billion), down from 637.3 billion yen a year earlier. That exceeded a mean estimate of 355 billion yen from 11 analysts surveyed by Refinitiv.

Executive Vice President Takahiro Mori said a domestic steel recovery might be delayed due to higher energy and natural resource prices, with Japanese demand in construction and manufacturing expected to weaken.

However, Nippon Steel aimed "to maximize profits through various measures to improve the earnings structure ... and ...passing on higher costs of raw materials and fuels to product prices," he told a news conference.

The guidance is based on an estimate that parent-only crude steel output will fall to 35 million tonnes this year from 38.68 million a year earlier.

Net profit for the April-June first quarter rose 43 per cent to 231 billion yen on hefty valuation gains on inventory and as the company was able to hike product prices.

"We aim to boost product prices again in the second half to pass on soaring expenses," Mori said.

Some weakness in demand started to appear in the United States amid rising interest rates, but brisk demand for its seamless pipes will likely continue thanks to increased gas drilling activities outside Russia, Mori said.

JFE Holdings Inc, Japan's No.2 steelmaker, on Wednesday forecast a 51 per cent drop in full-year net profit to 140 billion yen, saying a lower yen against the dollar would boost procurement costs.

($1 = 134.2100 yen)