Fri, Dec 09, 2011 - Page 11 News List

China Steel’s pretax profit last month declined 66.2%

By Kevin Chen  /  Staff Reporter

China Steel Corp (CSC, 中鋼), the nation’s largest integrated steel maker, yesterday said its pretax profit last month dropped 66.18 percent from a year ago, marking its fourth consecutive month of decline as demand for steel products remained slow.

Last month’s pretax profit of NT$576 million (US$19.09 million) was also down 47.84 percent from the previous month, the company said in an e-mailed statement.

The figure also marked the lowest monthly level China Steel has posted over the last three years, company data showed.

While revenue last month was 4.42 percent higher than in the previous month at NT$20.46 billion and sales volume grew 4.14 percent to 764,761 tonnes during the same period, the figures were 2.74 percent and 8.36 percent lower than levels seen a year ago respectively, indicating that the company remained under pressure because of weakening global demand and higher raw material costs, including iron ore and coking coal.

Pretax profit in the first 11 months of the year was NT$24.39 billion, down 41.49 percent year-on-year, China Steel said. That translates to earnings per share (EPS) of NT$1.62.

To better control its cost structure to cope with an unfavorable economic environment, China Steel said last month it might cut output by as much as 20 percent this month.

The company also confirmed earlier this week that it was in talks with the world’s major iron ore suppliers to reduce costs, with Vale SA of Brazil agreeing to cut prices for its shipments for the current quarter by about 23 percent, a company official said on Tuesday.

However, its announcement on Nov. 24 that it would lower domestic prices for next month and February contracts by an average of 7.08 percent per tonne would imply “retroactive rebates” for its downstream customers over last month’s and this month’s shipments.

As a result, China Steel is likely to incur an inventory-related writedown for this quarter and report a quarterly loss during the October-to-December period, Credit Suisse said in a report.

Credit Suisse said it expected China Steel’s EPS to reach NT$1.13 for the full year, sharply down from last year’s NT$2.78.

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