August 1, 2018 / 7:58 AM / a year ago

Kobe Steel first-quarter profit falls 55 percent but annual sales forecast higher

TOKYO (Reuters) - Kobe Steel Ltd on Wednesday reported a 55 percent drop in recurring profit for the April to June quarter as glitches at some plants disrupted steel output, but raised its annual sales estimate on stronger Chinese demand for construction machinery.

FILE PHOTO: The Kobe Steel (Kobelco) headquarters building is seen in Kobe, western Japan October 24, 2017. REUTERS/Thomas White/File Photo

Japan’s third-biggest steelmaker, whose data fraud shook global faith in Japanese manufacturing prowess last year, said its quarterly recurring profit slumped to 12.75 billion yen ($114 million) from 28.25 billion yen a year earlier.

The company increased its sales forecast for the year to March by 40 billion yen to 2.03 trillion yen on solid demand for construction machinery. However it stuck to its profit guidance of 35 billion yen, below a mean estimate of 53 billion yen among 9 analysts surveyed by Thomson Reuters I/B/E/S.

Kobe Steel’s data-tampering scandal cut its profit by 2.5 billion yen during the quarter, the company said, adding that it still expects the issue will have a profit impact of 10 billion yen for the year.

“Our market share in some areas, such as aluminum products, has fallen due to the data falsification,” Yoshihiko Katsukawa, senior managing executive officer at Kobe Steel, told a news conference.

Kobe Steel, which supplies steel and aluminum parts to manufacturers of cars, planes and trains around the world, admitted to supplying products with falsified specifications to more than 600 customers and that the data falsification occurred for nearly five decades.

Last month, the steelmaker said it has been indicted by prosecutors over the data tampering.

It is also undergoing a U.S. Justice Department probe, meaning it still faces legal and financial risk.

Katsukawa said no developments have been made in the probe.

Japanese steelmakers are enjoying healthy market conditions at home, with steel prices rising on increased production by automakers and as construction is in full swing for Tokyo’s 2020 Olympics and on a number of redevelopment projects in the Tokyo metropolitan area.

However, the country’s steelmakers have dealt with repeated technical problems at their plants because of their age, which has capped gains in steel output.

Kobe Steel trimmed its crude steel output outlook for the current year by 100,000 tonnes to 6.9 million tonnes as technical glitches at an iron ore sinter plant and other facilities have delayed production, Katsukawa said.

Reporting by Yuka Obayashi; Editing by Christian Schmollinger

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