Posted on 03 Feb 2016
The Japanese steelmaker on Tuesday made the downward revision to its fiscal 2015 earnings projection. Back in October, it had forecast a net profit of 20 billion yen. This will mark the first net loss in three years and a comedown from fiscal 2014 net profit of 86.5 billion yen.
Sales are expected to drop 2% to 1.84 trillion yen. Steel material prices have fallen due to the sluggish Chinese economy, eating into profitability. And with infrastructure development in China and Indonesia having lost momentum, Kobe Steel is likely to suffer a sales decline in construction machinery.
Pretax profit is seen plummeting 75% to 25 billion yen, some 30 billion yen below the projection due largely to lackluster sales of construction machinery.
The construction machinery operations are seen suffering a 16 billion yen net loss -- the first in 16 years and a stark contrast to fiscal 2014's 21 billion yen profit. The segment will book an extraordinary loss of 15 billion yen as a loss provision in case it cannot collect accounts receivable from dealerships in China and elsewhere.
"With Chinese demand for construction machinery unlikely to pick up in 2016 or 2017, we will reduce factory staff," Executive Vice President Naoto Umehara told a news conference.
Kobe Steel on Tuesday reported a net loss of 13.8 billion yen for the April-December period and said sales fell 1% to 1.35 trillion yen. The company also said it won't pay a year-end dividend, leaving its annual dividend for fiscal 2015 at 2 yen a share, or half the prior year's level.
