High Nonferrous Metal Prices Damage Japan Players’ Cash Flow

Japanese nonferrous companies decrease operating cash flow. Fourteen firms out of major 19 firm reported lower operating cash flow and 8 firms reported negative cash flow for the half year to September from same period of 2005, according to results of smelters, electric wire makers, rolled copper makers and light metal rolling firms. They reported higher inventory assets and account receivable under surging metal prices. The cash squeeze could damage their operations, especially for smaller sized companies including electric wire makers, rolled copper makers and the distributors. Seven smelters out of 7 major firms reported lower operating cash flow and Nippon Mining Holdings, Sumitomo Metal Mining, Dowa Holdings and Toho Zinc reported negative cash balance for the first half. They pay for ore at the arriving timing while they take around 4-5 months to recover account receivable. The cash flow is expected to improve when the market regains the stability. Four electric wire makers out of major 6 reported lower operating cash flow for the first half. SWCC Showa Holdings reported negative cash balance. The major 6 increased the inventory assets and account receivable more than higher profit though the 5 makers reported higher net profit. Major 3 rolled copper makers reported negative operating cash flow for the first half under higher inventory assets and account receivable. Their selling price increases when brass turning scrap price increased to 2.5 times in a year under doubling official copper ingot price. They cover the negative cash balance by increasing loan. However, the interest payment increases when interest rate increases. Nippon Light Metal reported lower operating cash flow for the first half while Sumitomo Light Metal Industries and Furukawa-Sky Aluminum increased the cash flow. Their working capital increased under surging aluminium ingot price.