Japan’s second largest steel producer, JFE Steel, announced its third quarter October-December 2022 results for the fiscal year 2022 (April 2022-March 2023).
Highlights:
- Crude steel output: Standalone crude steel output declined by 12% q-o-q to 5.48 million tonnes (mnt) in Q3FY22. In H1FY22, the same stood at 12.64 mnt, in keeping with the company’s forecast of less than 13 mnt.
Consolidated crude steel production amounted to 5.81 mnt, a 12% decrease in Q3FY22 as compared with Q2. - Steel product shipments: Standalone steel shipments were recorded at 5.25 mnt, inching down 1% q-o-q in Q3. In H1, total standalone steel shipments stood at 10.86 mnt, lower than the company’s forecast of 11.50 mnt.
- Exports share in Q3 was 41% and that in H1 was 46.7% of the total steel shipments.
Financial results in Apr-Dec’22
- Profit decreased significantly by 28% y-o-y to JPY 231 billion ($1.74 billion) in April -December, 2022. The impact of foreign exchange rates and a reactionary decline in one-time profits led to a significant decline in profit.
- Revenues rose 26% y-o-y to JPY 3,908.5 billion ($29.57 billion) during the period under review.
- Segment profit amounted to JPY 220 billion ($1.66 billion), down 30% y-o-y.
- Segment profit in the steel business was JPY 170 billion ($1.28 billion), falling by 33% y-o-y.
- The company’s overall profit was JPY 143.9 billion ($1.09 billion) down by 35% from JPY 223.0 billion ($1.68 billion) in the same period a year ago.
Market overview
- Automobile demand remains strong: Demand for automobiles remains strong and there is a large backlog of orders as restrictions on the supply of semi-conductors and other components are gradually being eased and the activity levels are expected to improve in the future.
- Ship-building activity stable: The current level of activity is expected to remain stable over the next two to three years, although material prices are skyrocketing and labour is scarce.
- Other manufacturing activities slow: Orders for industrial machinery have declined due to the global economic slowdown. Moreover, demand for steel materials is almost flat compared to the previous year.
- Demand for new housing slow: Demand for steel materials is down slightly from a year earlier. In non-residential use, large projects such as distribution warehouses and semi-conductor factories are stable, but small and medium-sized projects remain sluggish. In residential construction, the number of constructions starts is down due to rising material prices.
- Civil engineering demand slow: In the public sector, budgets are secured at a high level, but there are delays in revising designs due to rising material prices and the demand for steel materials decreased slightly from the previous year.
Output target for FY’22 lowered
JFE Steel has changed crude steel production target to 24 mnt for the entire FY22 (April 2022-March 2023), against the previous forecast of 25 mnt. This is due to the delayed recovery in demand in automobiles and a deterioration of the export environment. “Efforts to improve selling prices are progressing steadily,” said Masashi Terahata (Representative Director) at the press conference and emphasized that earnings are increasing for the next fiscal year.
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