Furukawa-Sky Aluminum Concerns on 10B Cost Impact on 1H Profit

Masateru Yoshihara, president of Furukwa-Sky Aluminum Corporation, described the firm’s strategy to strengthen its profitability by reorganization of domestic plants, capacity expansion at overseas plants, price hike or cost cut efforts at an interview with Japan Metal Bulletin. He explained there is a negative impact on the firm’s consolidated recurring profit for the first half fiscal year (Apr08-Sep08) by around 10 billion yen compared with the originally target along its mid-term management plan. The impact includes 6-7 billion yen caused by depreciation, higher fuel and substantial material costs.

Mr. Yoshihara said the firm tries to cover profit down by continuous cost cut and management efforts while offering price hike for cost expansions that the firm cannot cover by themselves. He said the firm wouldn’t revise down the targets shown in the mid-term management plan.

As to the investment plan, he said the firm plans capital expenditure of total 50 billion yen for 4 years of the mid-term management plan. In fiscal 2008 (Apr08-Mar09), the firm will invest total 10 billion yen for energy saving, fuel shift and environment.

Mr. Yoshihara explained Furukawa-Sky Aluminum has announced price hike for all its products and the most users have approved the offers. Additional hike wouldn’t be implemented soon, he said. The firm aims completion of the present price hike first of all. He referred to the possibility to introduce surcharge price system to cover higher energy and substantial material costs. However, he indicated the introduction is not easy to be accepted by the customers in a short term.

He also explained about the capacity expansions at the extruding plants in China and Indonesia and the casting plant in Vietnam. He described the firm introduced an additional extruding facility at Chinese plant to start operation in 2009. Indonesian plant is in full production with 3 extruding facilities. Mr. Yoshihara said Indonesian plant’s output capacity increased by about 30% to approximately 400 tonnes per month in a year thanks to the introduction of a new shearing machine and a coating line, and the productivity improvement. Vietnamese plant targets 10-million-unit output per month.