China Steel Corp (中鋼), the nation’s largest integrated steel maker, yesterday said its third-quarter pretax profit fell 26.71 percent to NT$10.5 billion (US$341 million) from NT$14.33 billion in the second quarter as the company failed to pass higher raw material costs on to customers.
The third-quarter figure was 4.99 percent less than the NT$11.05 billion the company posted a year earlier, but higher than the NT$10 billion predicted by Citigroup.
Based on the 13.53 billion shares the company has in issue, earnings per share were NT$0.77 in the third quarter, down from NT$1.06 in the previous three months and NT$0.82 a year earlier.
The firm was “unable to fully pass on the cost increases of raw materials by raising selling prices and that resulted in the decline of gross margin,” the Kaohsiung-based company said in an e-mailed statement.
Revenue rose 9.6 percent to NT$64.96 billion in the third quarter from NT$59.27 billion in the second quarter, the statement said. The figure was up 54.42 percent from NT$42.07 billion a year ago.
Production volume was 2.48 million tonnes in the third quarter, up from 2.43 million tonnes in the second quarter, while sales volume totaled 2.52 million tonnes in the third quarter, compared with 2.49 million tonnes in the previous quarter, the statement showed.
Citigroup analysts Peter Kurz and Timothy Chen said in a note yesterday that China Steel saw third-quarter shipments increase from the previous quarter as the company cut prices to lure orders, but they expect fourth-quarter shipments to fall 9 percent from the third quarter because of slow holiday restocking demand, especially after the company on Tuesday set a flat contract price for its domestic customers for December shipments to reflect moderating demand from the downstream sector.
In the first nine months of the year, the company’s pretax profit totaled NT$37.95 billion, far higher than the NT$2.26 billion it made in the same period of last year.
Shares of China Steel fell 0.16 percent to NT$31.35 yesterday before the company disclosed its quarterly numbers, compared with a decline of 0.12 percent on the benchmark TAIEX.
With the company’s earnings outlook set to improve because of falling material prices, Citigroup yesterday maintained its “buy” rating on the stock, with a target price of NT$35.82.
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