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UPDATE 1-Nippon Steel forecasts annual profit to rise 72 pct on higher product prices
Reuters Reuters
Friday July 28, 2017 06:15
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* Nippon Steel passes higher material costs on to customers
* Swings back to profit in April-June from loss a year ago
* Kobe Steel reports 6-fold jump in April-June profit
(Adds details, executive's comments and Kobe Steel results)
By Yuka Obayashi
TOKYO, July 28 (Reuters) - Nippon Steel & Sumitomo Metal Corp , Japan's biggest steelmaker, forecast on Friday its recurring profit would rise 72 percent for the year ending in March 2018 as it passed on higher material costs to customers by raising prices.
The world's fourth-largest steelmaker by crude steel output said that recurring profit - pre-tax earnings before one-off items - will increase to 300 billion yen ($2.7 billion) from 174.5 billion yen the previous year. That was roughly in line with a mean estimate of 303.7 billion yen among 15 analysts surveyed by Thomson Reuters I/B/E/S.
"We have managed to raise prices of our products to offset higher costs of coking coal and iron ore," Toshiharu Sakae, Nippon Steel's executive vice president, told a news conference.
"We aim to boost our annual profit to over 300 billion yen by improving our margins and conducting cost cuts further," he added.
For the April to June quarter, it posted 108 billion yen in recurring profit, swinging from a loss of 12 billion yen a year earlier and handily beating analyst estimates of 36 billion yen, thanks also to gains in the value of their inventories.
Following a series of fires at its Oita plant, its crude steel output in the April-September period will fall 5 percent, but it aims to step up output in the second half of the financial year to make its annual production come nearly in line with last year's 42.62 million tonnes, Sakae said. Expenses for Japanese steelmakers have risen because of spikes in coking coal, used in blast furnaces, late last year and in April. However, Sakae sees prices of the key steel-making ingredient to be stabilised at around $160-170 per tonne for a while.
Kobe Steel Ltd , Japan's third-largest steelmaker, also reported healthy earnings for the latest quarter, marking a six-fold jump in recurring profit to 28.25 billion yen, while raising its full-year forecast by 10 percent to 55 billion yen.
Both Nippon and Kobe downplayed any possible steel tariffs being enacted by U.S. President Donald Trump. Nippon Steel has not included any impact from a potential U.S. action, Sakae said, citing an uncertainty over the move.
Kobe Steel's Executive Vice President Naoto Umehara said: "Even if some measure is taken to curb imports by the U.S., the impact will be limited as our exports to the U.S. are small."
($1 = 111.0400 yen)
(Reporting by Yuka Obayashi; Editing by Christian Schmollinger)