Wed, Jul 22, 2009 - Page 12 News List

China Steel posts Q2 profit on revalued inventory

SURPRISE: A median estimate of nine analysts showed the firm was to post a loss of NT$633 million, but non-operating earnings were overlooked

BLOOMBERG

China Steel Corp (中鋼), the nation’s biggest mill, beat analysts’ expectations after it swung to a second-quarter pretax profit on revalued inventories.

Profit was NT$774 million (US$24 million) before taxes for the three months ended June 30, compared with a pretax loss of NT$9.57 billion in the first quarter, the Kaohsiung-based company said in an e-mailed statement yesterday.

The figure, however, was 96.6 percent lower from the NT$23 billion recorded in the first half of last year, the company’s previous financial books showed.

The writeback of stockpiles and raw materials was NT$6.16 billion, the statement said.

China Steel was expected to post a loss of NT$633 million in the April-June period, according to the median estimate of nine analysts in a Bloomberg survey.

“People have expected China Steel to return to profit in the second half,” said Ernest ­Chiang (蔣尚勳), who helps manage US$61 million for IBT Asset Management Co (台灣工銀投信). “The profit for the second quarter was a surprise as we overlooked non-operating earnings.”

The company posted losses for two straight quarters as the global recession reduced demand from builders and automakers, and falling prices forced it to cut the value of inventories.

Shares of China Steel climbed 0.5 percent to close at NT$30.2 in Taipei trading before the announcement. The stock has risen 31 percent this year, compared with a 51 percent gain in the benchmark TAIEX index.

Spending on public works and infrastructure projects by nations including China, Taiwan’s biggest overseas market, is lifting steel demand globally. Steel prices in the China have gained 21 percent since April 1, according to the Beijing Antaike Information Development Co.

China Steel announced on June 10 a price increase of an average 7 percent for this month and next month, the first gain this year. That came after it reported a 52 percent plunge in May sales, according to a June 9 stock exchange filing.

Orders rebounded after customers depleted stockpiles, executive vice president Chung Le-min (鍾樂民) said last month.

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