Nippon Steel Reports Smaller Loss as Asian Demand Increases

By Masumi Suga and Yasumasa Song

Oct. 29 (Bloomberg) -- Nippon Steel Corp., the world’s second-largest steelmaker, reported its smallest loss in three quarters, aided by economic stimulus spending in Asia, and raised its forecast for full-year operating profit.

The net loss narrowed to 29.6 billion yen ($328 million) for the three months ended Sept. 30 from 42.2 billion yen in the previous quarter, the Tokyo-based company said today in a statement. Net income was 78.9 billion in the year-earlier period. The company raised its full-year operating profit forecast to 40 billion, compared with a July break-even outlook.

Stimulus spending in China and emerging Asian nations spurred exports of the metal from Japan and government incentives for fuel-efficient vehicles boosted domestic demand from carmakers. The global steel market has bottomed out and will grow by 9.2 percent next year, the World Steel Association said Oct. 12.

“Recently, volumes and prices have been volatile and the key is whether we will be able to produce flexibly to respond to the changing environment,” Shinichi Taniguchi, executive vice president of Nippon Steel, told reporters today. The company had revised the operating profit forecast after reviewing demand, he said at a briefing.

Nippon Steel shares, which have gained 17 percent this year, fell 0.3 percent to close at 338 yen on the Tokyo Stock Exchange. The Nikkei 225 Stock Average declined 1.8 percent.

Sales were 828.3 billion yen in the second quarter down 41 percent from a year earlier and up 11 percent from the first quarter, according to company data.

Production Forecast

Production was forecast to rise to 15 million metric tons in the second half, compared with 11.5 million tons in the first six months, Nippon Steel said.

ArcelorMittal, the world’s biggest steelmaker, yesterday reported net income of $903 million in the July-to-September period, its first quarterly profit in a year, boosted by a tax gain. The company had “seen the first signs of recovery” in the quarter, Chief Executive Officer Lakshmi Mittal said in a statement.

Japanese steel exports increased 3.4 percent to 3.41 million metric tons in August, compared with a year earlier, the first year-on-year gain in 11 months, the Japan Iron & Steel Federation said Oct. 1.

Tokyo-based JFE Holdings Inc., Nippon Steel’s closest domestic rival, posted a profit of 12.8 billion yen last quarter, aided by shipments to Asia, the company said Oct. 26.

Nippon Steel failed to fully benefit from an improving regional economy as a coke leakage from a furnace in August reduced output at its Kimitsu factory, near Tokyo.

The company forecast the furnace problem at the Kimitsu mill will reduce its pre-tax profit from operations by 19 billion yen this fiscal year.

Sumitomo Metal Industries Ltd., Japan’s third-largest steelmaker, today widened its full-year net loss forecast to 50 billion yen from a previous outlook for a 45 billion yen loss because of weaker-than-expected demand for seamless pipes.

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