Thu, Feb 19, 2009 - Page 11 News List

China Steel likely to report a Q1 loss due to discounting


China Steel Corp (中鋼), the country’s largest steelmaker, confirmed yesterday that it is likely to post an operating loss in the first quarter of the year, mainly because of retroactive discounts to customers.

China Steel executive vice president Chung Lo-min (鍾樂民) said that as a result of retroactive discounts totaling NT$4 billion (US$115.2 million) in the first quarter, the company would likely register a decline in revenues for the January-to-March period.

If Chung’s forecast is accurate, it would be the second quarterly loss in a row for the steelmaker, which is 23 percent owned by the government.

China Steel suffered its first quarterly loss in its nearly 40-year history in the fourth quarter of last year, reporting a loss of NT$18.62 billion, which reduced its income for the year to NT$30.2 billion, down 50 percent from 2007.

In late November, it lowered the prices of its steel products by an average of 22.56 percent, or an average of NT$7,058 per tonne, for the first quarter of this year.

On Tuesday, it announced a further average price reduction of 14.03 percent, or NT$3,353 per tonne, for the domestic market in April and May, with the prices for June to be determined later.

The new prices will be retroactive to the first three months of the year and are expected to cost the company NT$4 billion in first quarter revenue, sending revenues lower for the second consecutive quarter, Chung said.

JPMorgan said in a research note yesterday that China Steel was likely to post a loss in the first two quarters of the year, because the 14.03 percent cut in prices for domestic market was beyond market expectations.

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