China Steel Rebounds Back to Profit in Second Quarter

By Yu-huay Sun

July 21 (Bloomberg) -- China Steel Corp., Taiwan’s biggest mill, beat analysts’ expectations after it swung to a second- quarter pretax profit on revalued inventories.

Profit was NT$774 million ($24 million) before taxes for the three months ended June 30, compared with a pretax loss of NT$9.57 billion in the first quarter, the Kaohsiung, Taiwan- based company said in an e-mailed statement today, without giving a year-earlier comparison.

Orders rebounded after customers depleted stockpiles, Executive Vice President Chung Le-min said last month. The company posted losses for two straight quarters as the global recession reduced demand from builders and automakers, and falling prices forced it to cut the value of inventories.

“People have expected China Steel to return to profit in the second half,” Ernest Chiang, who helps manage $61 million for IBT Asset Management Co., said in Taipei. “The profit for the second quarter was a surprise as we overlooked non-operating earnings.”

The writeback of stockpiles and raw materials was NT$6.16 billion, the statement said. China Steel was expected to post a loss of NT$633 million in the April-June period, according to the median estimate of nine analysts in a Bloomberg survey.

Shares Climb

China Steel climbed 0.5 percent to close at NT$30.2 in Taipei trading before the announcement. The stock has risen 31 percent this year, compared with a 51 percent gain in the benchmark Taiex index.

Spending on public works and infrastructure projects by nations including China, Taiwan’s biggest overseas market, is lifting steel demand globally. Steel prices in the mainland have gained 21 percent since April 1, according to the Beijing Antaike Information Development Co.

China Steel announced on June 10 a price increase of an average 7 percent for July and August, the first gain this year. That came after it reported a 52 percent plunge in May sales, according to a June 9 stock exchange filing.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net