NSSMC swings to profit on higher demand, cost reduction

Nippon Steel & Sumitomo Metal Corp (NSSMC) has boosted its operating profit by almost 14 times in the 2013 fiscal year as a result of increased steel demand in Japan and cost improvements.

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Operating profit reached ¥298.39 billion ($2.93 billion) in the year ended March 31, against ¥20.11 billion ($197 million) in the 2012 fiscal year, Japan’s largest steelmaker said on Friday May 9.

NSSMC also swung to a profit. It posted a net profit of ¥242.75 billion ($2.38 billion) in financial year 2013, compared with a ¥124.56 billion ($1.22 billion) loss in the preceding year.

Its consolidated net sales revenue increased by 25.7% year-on-year to ¥5.51 trillion ($54.2 billion) due to both higher shipments and prices for steel products.

Steel shipments increased to 42.02 million tonnes from 40.97 million tonnes, while the steelmaker achieved an average sales price of ¥86,000 ($845) per tonne, which compares with ¥80,100 ($787) per tonne the year before.

In Japan, demand was driven by the civil engineering and construction sectors, as well as the automotive and other manufacturing industries, NSSMC said.

The share of exports in the company’s total sales also increased from 44% to 46% on a yen basis, helped by the devaluation of the Japanese currency last year.

Despite signs of recovery on the back of improving economic conditions overseas and the yen adjustment, NSSMC noted that market conditions for exports remained “severe” in the fiscal year 2013 because of stagnant demand for steel.

This was caused mainly by strong supply pressure from Chinese and South Korean steelmakers, it explained.

Cost cuts
NSSMC also noted its steelmaking business continued efforts to maximize the efficiency of its cost structure.

Steps towards that goal included raising the usage ratio of low-cost materials, improving yield, and “thoroughly constraining fixed costs”, Japan’s biggest steelmaker said.

The cost reduction also included business integration effects following the October 2012 merger between Nippon Steel Corp and Sumitomo Metal Industries that formed NSSMC.

The steelmaker produced 48.16 million tonnes of crude steel in the fiscal year 2013, up from 46.03 million tonnes in the previous period.

NSSMC’s product mix ranges from flat steel such as plate, hot rolled coil, cold rolled coil and hot-dipped galvanized coil to longs like bars and wire rods, as well as pipes and tubes and stainless steel goods.

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