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UPDATE 2-Nippon Steel FY profit slips 13 pct on surging coal prices, but beats forecast
April 28, 2017 / 6:38 AM / 7 months ago

UPDATE 2-Nippon Steel FY profit slips 13 pct on surging coal prices, but beats forecast

* Recurring pft 174.5 bln yen vs 145.9 bln yen consensus

* Aims for higher FY17/18 pft on steady steel demand, cost cuts

* Raises annual dividend by 20 yen to 45 yen/share (Adds executive comments and details)

By Yuka Obayashi

TOKYO, April 28 (Reuters) - Nippon Steel & Sumitomo Metal Corp, Japan’s biggest steelmaker, said its recurring profit for the year ended March slid 13 percent, hit by higher coking coal costs, and held off from issuing earnings predictions for the current year citing volatility on coal and steel pricing.

The world’s third-largest steelmaker said in a statement on Friday that recurring profit - pre-tax earnings before one-off items - declined to 174.5 billion yen ($1.6 billion) from 200.9 billion yen the previous fiscal year. That beat both its own estimate of 130 billion yen and a consensus of 145.9 billion yen from 14 analysts surveyed by Thomson Reuters I/B/E/S.

“We can’t make reasonable forecast now since it is unclear where prices of coking coal and steel prices are headed,” Nippon Steel’s executive vice president Toshiharu Sakae said at a news conference.

“But we’ll make various efforts to boost our profit this year,” Sakae said. Steady steel demand at home and abroad, plans to cut costs by over 50 billion yen, and scheduled price hikes on some products of about 5,000 yen per tonne would help offset heavier raw materials costs, he said.

A mean forecast of 15 analysts for Nippon Steel’s recurring profit for this year comes to 308 billion yen, according to Thomson Reuters I/B/E/S.

Higher-than-planned steel shipments and stronger earnings in its overseas units contributed to results beating the company’s own estimates, Sakae said. Reflecting that, Nippon Steel raised its annual dividend for the last year by 20 yen to 45 yen per share.

While Sakae didn’t give a detailed outlook on coking coal prices, he said raw material prices will likely become less volatile.

The price of coking coal - a vital steelmaking ingredient - has been volatile, nearly quadrupling between March and late November 2016, but then halving between that time and the end of March 2017.

Last month brought a new twist, when Cyclone Debbie hit Australia, cutting rail lines in the world’s biggest coking coal export region and sending prices higher again. While rail links have been restored, Japanese steelmakers have had to scramble for alternative supplies.

On Thursday, JFE Holdings Inc, Japan’s No.2 steelmaker, reported recurring profit jumped nearly by a third in the 12 months that ended March, boosted by hefty appraisal gains on inventories of coking coal.

JFE also increased its annual dividend estimate for the last year by 10 yen to 30 yen per share.

$1 = 111.3400 yen Reporting by Yuka Obayashi Additional reporting by Aaron Sheldrick; Editing by Kenneth Maxwell

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