China Steel Corp (中鋼), the nation’s largest and only integrated steelmaker, yesterday said it swung into profit in the second quarter as rising sales offset a decline in steel prices.
Pretax profit totaled NT$2.91 billion (US$97 million) in the April-to-June quarter, compared with a pretax loss of NT$978 million three months earlier, the Siaogang District (小港), Greater Kaohsiung-based company said in an e-mailed statement.
Increased investment gains also contributed to the rise in pretax profit in the second quarter, the company said in the statement.
China Steel booked NT$1.64 billion in investment gains in the second quarter, which made up 56.36 percent of overall profit in the quarter and was higher than the previous quarter’s NT$532 million.
On an annual basis, however, second-quarter pretax profit fell 70.87 percent from the NT$9.99 billion posted a year earlier because of higher raw material costs, company data showed.
Cumulative pretax income in the first half of the year reached NT$1.93 billion, down 88.84 percent from NT$17.3 billion a year earlier. Pretax earnings per share came in at NT$0.13 in the first half of the year, compared with NT$1.27 per share the year before, company data showed.
Last month, Taiwan Ratings Corp (中華信評) lowered its long-term corporate credit rating and unsecured corporate bond issue rating on China Steel to “twAA” from “twAA+,” with a “negative” outlook, citing concern over uncertainty in the global steel industry and its financial risk profile.
Taiwan Ratings, the local arm of Standard & Poor’s Ratings Service, warned that steel demand in the region would remain lackluster in the near term and persistent overproduction in China would continue to weigh down steel prices over the next year.
In addition, China Steel’s weakness in product diversity would make it more vulnerable than its regional peers to industry downturns, the agency said in a press release on June 18.
The firm is scheduled to announce its domestic steel prices for September contracts tomorrow. It had left prices for July-August shipments mostly unchanged.
IBTS Investment Consulting Co (台灣工銀投顧) analyst Mandy Lin (林秋香) said earlier last month that she expected China Steel to lower domestic prices by between US$10 and US$20 a tonne for its September deliveries to reflect still-weak market sentiment, adding more pressure to the company’s third-quarter revenue outlook.
China Steel’s revenue in the second quarter rose by NT$3.43 billion, or 6.46 percent, to NT$57.07 billion from the previous quarter.
On an annual basis, quarterly revenue was down 10.31 percent from NT$63.63 billion last year, while first-half revenue declined 7.87 percent to NT$110.68 billion from NT$120.13 billion, according to the company’s data.
Shares in China Steel closed 0.56 percent higher at NT$27.05 yesterday before the release of its quarterly figures. The stock has fallen 6.08 percent since the beginning of the year, compared with a decline of 0.33 percent on the benchmark TAIEX over the same period, stock exchange tallies showed.