Osaka Titanium May Miss Profit Forecast on Delays to Boeing 787

By Masumi Suga and Yasumasa Song

Aug. 10 (Bloomberg) -- Osaka Titanium Technologies Co., the world’s second-largest producer, may miss its second-half profit target partly because of delays in Boeing Co.’s new Dreamliner jet, President Shozo Nishizawa said.

Pretax profit from operations for the six months starting Oct. 1 may at best equal the first-half estimate of 600 million yen ($6.2 million), Nishizawa said in an interview in Tokyo. The company in April forecast second-half profit of 1.4 billion yen.

The worst global recession since the Great Depression ended five years of annual demand growth of about 16 percent for the metal, used in industrial plants and aircraft for its corrosion resistance, strength and light weight. Purchases of titanium for chemical factories may not recover until late 2010 and sales to Boeing will be postponed after the company delayed delivery of its 787 Dreamliner for a fifth time, Nishizawa said.

“We didn’t entirely factor in the impact of the Boeing delay,” said Nishizawa, who took office on June 24. Falling prices and volumes may cut Osaka Titanium’s earnings next fiscal year, he said in Tokyo on Aug. 7

Osaka Titanium rose 1.2 percent to 3,330 yen at 12:53 p.m. on the Tokyo Stock Exchange. The shares have gained 50 percent this year, compared with a 47 percent gain in the Topix Nonferrous Metals Index. Sumitomo Metal Industries Ltd. and Kobe Steel Ltd., Japan’s third and fourth-largest steel mills, each have a 23.9 percent stake in the company, based in Amagasaki city, western Japan.

Contract Prices

The company on July 28 posted pretax profit from operations of 742 million yen in the three months ended June 30 and left unchanged its April forecast for full-year earnings of 2 billion yen. The second-half outlook should be clearer by late September to early October, Nishizawa said. Net income is forecast at 1.14 billion yen for the 12 months ended March 31.

Boeing failed to meet a June 16 pledge at the Paris Air Show that the 787 would fly before the end of that month. The planemaker said last month it wouldn’t provide a new target for the flight or for the first delivery until later this quarter.

Osaka Titanium deepened production cuts by 10 percentage points to more than 50 percent below capacity last month because of excess industry inventories, Nishizawa said. The cuts would be maintained until March, he said.

Toho Titanium Co., Japan’s second-largest producer, may miss its full-year profit target on a delayed recovery in demand for the material used in water desalination and liquefied natural gas plants, President Takeshi Kurushima said July 23.

Prior to the recession, profits at Osaka Titanium and Toho Titanium advanced to records in the year ended March 31, 2008.

Negotiations for 2010 contract prices with buyers are expected to be “very tough” as Chinese and Kazakh rivals offer discounts, Nishizawa said, without specifying numbers. Talks will start next month on the export prices, which declined for the first time in five years for 2009.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net.