Japan 4 Integrated Steels Lower Full-Year Profit Forecasts for F2011

Japanese integrated steel makers, Nippon Steel, JFE Holdings, Sumitomo Metal Industries and Kobe Steel, lowered their full-year consolidated recurring profit forecast for fiscal 2011 ending in March 2012 from the previous estimations. Nippon Steel, JFE Holdings and Kobe Steel would post 50-70% year-to-year lower recurring profit in fiscal 2011. Steel demand slowed down due to the Great East Japan Earthquake and Thai flood while steel supply became excess in Asian market. Historically strong yen trend also impacts their profitability. Integrated steels could not pass raw material cost upsurge on steel product prices fully.

Nippon Steel’s latest full-year consolidated recurring profit forecast is 120 billion yen for fiscal 2011, decreasing by 47% year-to-year. JFE Holdings forecasts its full-year recurring profit would drop by 76% to 40 billion yen while Kobe Steel estimates its full-year recurring profit would worsen by 72% to 25 billion yen. Sumitomo Metals also revised down its full-year recurring profit forecast by 45 billion yen from the previous estimation while the latest forecasted 55 billion yen is still higher by 62% than in fiscal 2010.

The four steel makers are also forced to post extraordinary losses mainly for revaluation loss of investment securities. Nippon Steel’s full-year net profit would be zero. JFE Holdings forecasts full-year net loss at 40 billion yen. Sumitomo Metals forecasts full-year net loss at 55 billion yen and Kobe Steel at at 10 billion yen. Japanese steel makers are now under pressure to review profit structures.