Higher Steel Price Increases Kobe Steel’s Profit

Kobe Steel expects the averaged steel selling price increases by 16,000 yen to 73,300 yen for fiscal 2005 ending March 2006 from 57,300 yen in fiscal 2004. Mr. Toru Asaoka, senior managing director of the firm said the selling price increased mainly for domestic manufactures though the export price decreased due to lower international price of commodity grade products. He said the higher price and better products mix increases the consolidated recurring profit by 100.5 billion yen for fiscal 2005 from fiscal 2004 while the raw materials cost increases by 76 billion yen. He said the firm will seek higher price including extra charge of high-valued steel products though the firm succeeded to pass higher cost price on the selling price basically in fiscal 2005. Kobe Steel expects the raw steel output decreases to 7.56 million tonnes in fiscal 2005 from 7.71 million tonnes in fiscal 2004. Mr. Asaoka said the output decreases when the firm reduces hot rolled coil export and domestic sheet steel shipment to keep the selling price. He said, however, the firm keeps high-level production when the firm operates the facility to make high-valued steel products at full capacity while the firm reduces output of commodity grade products under the lower demand. Kobe Steel expects the export decreases in fiscal 2005 from 27% of total sales value in fiscal 2004. Mr. Asaoka said the export rate will decreases in the second half of fiscal 2005 from 23.7% in the first half. He said the firm’s export rate is lower than other Japanese integrated steel makers and Kobe Steel is suffered from negative impact of lower yen rate when the raw materials import value is more than steel products export. He said the lower yen rate in fiscal 2005 than expected reduces the operating profit for steel business slightly from original estimate though he expects the yen rate impact is temporally.