Japan’s NSSMC swings to profit in June quarter on strong domestic demand

Nippon Steel & Sumitomo Metal Corp (NSSMC) swung to an operating profit of ¥56 billion ($572 million) in the June quarter on improving domestic steel demand, reversing a year-earlier loss.

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Demand in Japan was strongest for civil engineering and construction projects, supported by the emergence of more reconstruction demand and the effects of economic policies, NSSMC said in a statement on Wednesday July 31.

The government of Prime Minister Shinzo Abe has pursued an aggressive policy of domestic stimulus and monetary expansion aimed at reviving the Japanese economy.

The company said export activity has also started picking up due to a recovery in some export destinations, particularly in Southeast Asia, and also a correction in the value of the yen from its excessively high level, it added.

Net sales in NSSMC’s steel division for the fiscal first quarter to June rose to ¥1.1 trillion ($11 billion), up 39% year-on-year, and ordinary profit was ¥75.7 billion ($772 million), up markedly from ¥6.6 billion ($67 million) a year earlier.

Japan’s largest steelmaker and the world’s third-largest steelmaker by output said it expects domestic steel demand to benefit from ongoing reconstruction demand in the civil engineering and construction sectors and the emerging full effects of economic stimulus policies. The recovery would be aided by growing demand in the manufacturing sector, accompanied by a recovery in capital investment, improving business confidence, and other factors, it said.

Steel exports have shown signs of recovery but continued high production by Chinese steelmakers remains a concern, it added.

Net sales on a consolidated basis rose 34% year-on-year to ¥1.3 trillion ($13 billion) in the April-June period, while net profit reached ¥63.4 billion ($646 million), reversing from a net loss of ¥87.5 billion ($892 million) a year earlier.

NSSMC is forecasting net sales for its first half of fiscal 2013 on a consolidated basis to reach ¥2.7 trillion ($27 billion), ordinary profit of ¥150 billion ($1.5 billion), and net income of ¥100 billion ($1 billion)

For the full fiscal 2013, the Japanese steelmaker said it aims to secure a rise in consolidated ordinary profit to ¥300 billion ($3 billion) or more.

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