JFE Holdings, Inc., the parent company of Japan’s second-largest integrated steelmaker JFE Steel, expects to perform better financially during its current business year ending next March, but the Tokyo-based firm now anticipates that crude steel output on a non-consolidated basis will fall short for forecast by about 1 million tonnes.
Announcing its results for its July-September and April-September business periods on Friday, JFE said better domestic demand and improved metal spread allowed it to record a consolidated business profit for H1 of Yen 187.9 billion ($1.3 billion), Yen 22.9 billion higher than initially forecast last August. Nonetheless, this was lower by a large 5.5% compared with April-September last year.
“The domestic economy and demand for steel continue to recover, but the recovery in auto production and overseas steel markets has been slow,” the company acknowledged in a statement.
Though crude steel output at JFE Steel during this year’s H1 was almost identical to last year’s H1 at 13.37 million tonnes, for the full year till next March JFE has lowered the output projection further to below 25 million tonnes. The original forecast had been for output to come close to last year’s final total of 25.88 million tonnes.
Like counterpart Nippon Steel, during this year’s first half JFE benefited from a surge in steel prices, with its average unit price leaping Yen 131,600/tonne during April-September, compared with just Yen 94,500/t on average during April-September last year. Significantly however, the company makes no prediction for what prices will average during this half.
Also like Nippon Steel, JFE’s export ratio during H1 was largely unchanged YoY at 46.7% though the currency had softened considerably – to Yen 131=$1 compared with Yen 109.9 during the same period last year.
Exchange rate shifts are closely monitored because of the company’s business mix, Mysteel Global notes. During H1, JFE Holdings’ consolidated revenue jumped by 32% on year to Yen 2,564 billion. Within this total, steel accounted for 74% while steel trading and engineering – also important global businesses and facing foreign exchange risks – contributed most of the rest. JFE also has a 35% share in shipbuilder Japan Marine United, whose sales are almost exclusively for exports.
For the full year, JFE remains concerned about the pace of recovery of demand in China and the slowing global economy, it said. The company is expecting a full year business profit of Yen 255 billion which – though Yen 20 billion higher than was predicted in August – would be lower by a high 39% or Yen 161 billion from last fiscal’s Yen 416 billion.
Written by Russ McCulloch, russ.mcculloch@mysteel.com
Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.
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