Tue, Jul 19, 2011 - Page 12 News List

China Steel Corp’s profits surge on increased sales

By Kevin Chen  /  Staff Reporter

Rising steel prices and increased sales offset a surge in raw material costs to boost China Steel Corp (中鋼), the nation’s largest and only integrated steelmaker, which posted a 36.52 percent increase in profits quarter-on-quarter for the second quarter of the year.

Pre-tax profit totaled NT$9.99 billion (US$345.1 million) from April to last month, up NT$2.67 billion from NT$7.32 billion in the previous quarter, the Siaogang District (小港), Greater Kaohsiung-based company said in an e-mailed statement yesterday.

“A bigger increase in selling prices, compared with cost -increases, and an increase in the volume of steel product sales resulted in a growth in profits,” China Steel said in the statement.

However, second-quarter profit fell 30.3 prcent from NT$14.33 billion posted a year earlier because of raw material price hikes, company data showed.

In the first six months of the year, pre-tax income reached NT$17.3 billion, down 36.95 percent from NT$27.45 billion a year earlier, according to the company’s tallies.

With 13.57 billion issued shares, pre-tax earnings per share was NT$1.27 in the first half.

Revenue in the second quarter rose by NT$7.12 billion, or 12.6 percent, to NT$63.63 billion from the previous quarter, the -company said.

Year-on-year, second--quarter revenue was up 7.36 percent from NT$59.27 billion for the same period last year, while first-half revenue rose 6.78 percent to NT$120.13 billion, according to the company’s data.

Citigroup Global Markets analyst Timothy Chen said the company’s pretax profit was 8 percent below Citigroup’s forecast.

China Steel’s second-quarter performance came after the company adjusted upward its quarterly steel prices for domestic clients by NT$2,811 per tonne, or 12.1 percent, to reflect rising raw material costs.

However, on May 26 and July 13, China Steel announced a total of 5.88 percent cut in prices for third-quarter contracts for domestic customers, prompting worries about its profitability for this quarter.

"We forecast gross margin to fall from 15 percent in the second quarter to 7 percent in the third quarter due to falling prices and rising material costs," Chen wrote in a note yesterday.

Shares in China Steel closed 1.27 percent higher at NT$32 yesterday before the release of its quarterly figures. The stock has risen 5.07 percent since the beginning of the year, compared with a decline of 4.43 percent on the benchmark TAIEX over the same period, stock exchange tallies showed.

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