Japan Major 6 Special Steel Makers Post Mixed Results in F2009

Japanese 6 major special steel makers posted mixed results for fiscal 2009 ended March 2010 by May 7. Hitachi Metals and Aichi Steel returned to profitability in the bottom line while Mitsubishi Steel Mfg. got into the red and other 3 makers posted wider loss. Hitachi Metals and Aichi Steel secured operating profit by minimizing the sales volume decrease and cutting cost. Other 4 makers posted operating loss due to major drop in sales volume and price. They expect higher sales volume and price in fiscal 2010. Hitachi Metals expects higher net profit and Aichi Steel forecasts lower net profit under higher raw materials cost while other 4 makers try to regain profitability.

The demand for automobile and electronics improved in second half of fiscal 2009 due to stimulus package. Hitachi Metals’ high grade metal products and materials unit posted 7% higher operating profit in fiscal 2009 from fiscal 2008 when tool steel distributors’ inventory adjustment finished in January-March. The firm, of which 43% of offshore sales rate was largest in the 6 makers, gained relative higher offshore sales under slumped domestic market. Aichi Steel gained from lower raw materials cost and cost cutting, from which positive effect was larger than negative factor from lower sales volume and price. The firm’s production cut was relative lower at 12% than other makers.

Daido Steel posted largest loss in fiscal 2009 due to 76.6 billion yen of negative factor from lower sales volume and price especially in the first half year under slow industrial activity after Lehman shock. Sanyo Special Steel posted 3.2 billion yen of operating loss due to lower steel sales volume. Mitsubishi Steel Mfg.’s sales decreased by 62% in fiscal 2009 from fiscal 2008when the steel sales volume decreased by 54% due to slow activity in truck and construction machinery makers. The firm also posted 2 billion yen of onetime loss for raw materials sales in the first half. Nippon Koshuha Steel suffered from 46% down for steel sales volume.

The major makers’ profitability improves under demand recovery since October 2009 and Aichi Steel, Sanyo Special Steel and Mitsubishi Steel Mfg. returned to profitability since October-December 2009. They expect better results in fiscal 2010 when they estimate the production level keeps the level in January-March when the production recovered 70-80% of the peak in 2008. They expect the profitability improves in the second half from the first half due to higher selling price and demand recovery in appliances and industrial machinery industry while they have to pass higher raw materials cost on the selling price.