TOKYO (Reuters) - JFE Holdings Inc (5411.T) on Tuesday signalled plans to shore up cash flow, as higher raw materials costs and weaker demand from a global economy that was slowing even before the coronavirus pandemic drove it to a record net loss.
The 197.7 billion yen ($1.84 billion) year to March loss and a further drop in demand linked directly to the outbreak mean Japan’s second-biggest steelmaker face “the highest risk since our foundation” in 2002, Executive Vice President Masashi Terahata said.
To ride out the COVID-19 crisis, it aims to trim annual costs by 100 billion yen while stepping up selling its stakes it holds in other companies, reviewing investment plans and slashing inventories, he told a news conference.
The steelmaker did not give earnings guidance for the current financial year, saying it was difficult to predict the full impact of the outbreak on its business.
The record loss, due to weaker export prices and a hefty impairment loss on its local plants, compared with a revised March forecast of a 190 billion yen loss and a net profit of 163.5 billion yen a year earlier.
JFE Steel, a flagship steel unit of JFE Holdings, has already announced plans to curb output by temporarily suspending two blast furnaces, cutting 25% of its capacity, to meet a coronavirus-related slump in steel demand.
Terahata said the company would be able to manage without shutting any additional furnaces.
Even before the COVID-19 crisis, Japanese steelmakers had been suffering weaker demand amid the U.S.-Sino trade war and higher prices of raw materials such as iron ore due to strong appetite from China, forcing Nippon Steel Corp (5401.T) and JFE to cut their facilities permanently by 10-13%.
They are also struggling to cope with waning local demand amid a declining population, while the coronavirus epidemic has led to widespread disruptions of industrial activity, especially in automakers, their key customers.
JFE’s bigger rival Nippon Steel on Friday reported a record 426 billion yen annual net loss as a massive restructuring charge dampened its earnings, and said it would idle two more blast furnaces from July in response to slumping demand.
Reporting by Yuka Obayashi; editing by John Stonestreet