NSSMC’s operating profit down 12% on lower sales, price pressure

Operating profit at Nippon Steel & Sumitomo Metal Corp (NSSMC) fell by 12.1% year-on-year in the June quarter as it grappled with lower demand in Japan and pressure from competitors abroad.

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Consolidated operating profit at the world’s second-largest steelmaker slipped to ¥52.4 billion ($424 million) in April-June – the first quarter of its 2015 financial year – it announced on Wednesday July 29.

“Steel demand in Japan remained generally firm overall but decreased from the same period of the previous fiscal year due to inventory adjustments in the automobile sector and other factors,” NSSMC said.

“The company made production adjustments so as to respond to the customers’ inventory adjustments and [provide] market inventories at an appropriate level,” it added.

NSSMC’s crude steel output fell by almost 1 million tonnes on a yearly basis, to 10.9 million tonnes in the June quarter, from 11.9 million tonnes in the same period of 2014, following a reduction announced at the beginning of April.

Finished steel shipments dropped to 9.9 million tonnes from 10.4 million tonnes in the same comparison, NSSMC said, while its average selling price fell to ¥82,800 ($670) from ¥87,600 (709) per tonne.

As a result of the lower shipments and prices, NSSMC’s consolidated net sales revenues decreased by 7.1% to ¥1.3 trillion ($10 billion).

Helped by a weak yen, the company increased the share of exports in its total steel sales revenue, to 48% from 46% one year earlier, but noted competition abroad is becoming fiercer amid a “downtrend” in international steel markets.

“Supply pressure from Chinese and South Korean steelmakers remained strong,” it pointed out.

NSSMC also reported an ordinary profit of ¥84.42 billion ($683 million), up 13.6% year-on-year.

The company’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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