Kobelco & Materials Copper Tube to Cut Cost for Better Profit

Japanese copper tube market experiences severe condition when domestic air conditioner market matures and air conditioner makers increase the import from offshore plants along with competition with Chinese copper tube makers. President Shinji Yano of Kobelco & Materials Copper Tube, which is joint venture of Kobe Steel and Mitsubishi Materials, said to Japan Metal Bulletin the firm tries to cut cost in order to improve the profitability.Mr. Yano said the firm posted 1.2 billion yen of recurring profit with 33.4 billion yen of sales and 59,000 tonnes of sales volume in fiscal 2005 ended April 2006. He said the profit includes 1 billion yen of inventory valuation gain at the total average method and without the gain the profit is less than half of the target. He said the profit decreased when the demand decreased for air conditioner, which represents 70% of copper tube demand, and air conditioner import from offshore transplants of Japanese makers was 1.5 times higher than expected. Mr. Yano the Thai operation turned into aggressive marketing after the operation reduced the sales due to price competition with Chinese copper tube makers. He said the Malaysian operation increased the high valued products rate to 5% of total volume and 30% of the marginal profit. Mr. Yano said the firm couldn’t clear the target for the fiscal 2006 despite of slightly higher sales when the cost increases by total 300 million yen for energy and packaging materials. He expects the recurring profit is 1.2 billion yen with 50 billion yen of sales and 59,900 tonnes of sales volume in fiscal 2006. Mr. Yano said the firm refrains from rolling margin hike under extreme higher copper price. He said the firm tries to continue further cost cutting effort at least for the year.