Sat, Dec 20, 2003 - Page 10 News List

China steel sees profit drop in 2004

THE CHINA FACTOR An increase in demand worldwide, led by China's thirst for cars, has driven up not only prices for steel, but also production costs


China Steel Corp (中鋼), Taiwan's largest steelmaker, announced yesterday that its pre-tax profit for next year will fall to NT$42 billion, a 6.7-percent drop from this year's NT$45 billion.

In a statement issued after a board meeting, China Steel attributed the decline to price rises of imported raw materials triggered by the strong demand for steel worldwide, along with a surge in transportation costs.

The increase in costs has also led to a rise in sale prices. The firm expects to bring in NT$128.9 billion in sales next year, a 0.2 percent increase from NT$128.6 billion this year, the statement noted.

Pre-tax earnings-per-share (EPS) are estimated to drop of NT$3.37 next year from NT$3.72 for this year, the company said.

"Although we cut back the forecast, the figure is still satisfactory," said Wu Chun-hui (吳俊輝), a special aide to deputy spokesman Chung Le-ming (鍾樂民).

"We expect the prosperity of the steel market will last at least to 2005," Wu said.

China Steel shares rose NT$0.2 to NT$28.1 each on the TAIEX yesterday.

For the first eleven months of the year, China Steel reported NT$41.2 billion in pre-tax revenues, a 137-percent jump from the same period last year, Wu said.

The positive performance will help fatten China Steel employees' pockets, as the company has decided to grant four extra months of salary as year-end bonuses, he added.

China Steel said last month it would raise domestic prices for six types of products -- ranging from NT$111 per tonne to NT$529 per tonne -- starting the first quarter next year.

The company on average produces 10 million tonnes of steel annually, with 75 percent going to the domestic market and the remaining 25 percent to overseas markets, mostly Japan and China, Wu said.

Steel exports to China, where demand for cars and increasing construction have surged in the past few years, will grow significantly, the company said.

To tap the emerging market, Sumitomo Metal Industries Ltd, Japan's third-largest steelmaker, agreed in August that supplies of steel slabs to China Steel be expanded. It plans to expand supplies from the present level of 600,000 tonnes a year to about 1.8 million tonnes by fiscal 2005 for the company to sell more steel to China.

Besides its steel business, China Steel is also seeking to capitalize on the retail business in China.

In October, it established a US$16 million-joint venture with the Kaohsiung-based Ta Tong Group (大統集團) and a Chinese partner to set up a hypermarket in Nanjing, Jiangsu Province.

The proposed hypermarket is expected to open in the second half of next year.

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