China Steel Corp (中鋼公司), the nation’s only integrated steelmaker, reported a 32 percent decline in pretax profit last month as the company booked losses of NT$400 million (US$13.28 million) for a possible legal expense by a subsidiary.
China Steel, which has 43.36 percent of shares of Kaohsiung Rapid Transit Corp (高雄捷運), is likely to incur losses of NT$400 million if Kaohsiung Rapid Transit loses a case against its subcontractor concerning the responsibility for a land subsidence incident in Greater Kaohsiung, China Steel vice president Steve Lee (李慶超) said by telephone yesterday.
The company’s pretax profit last month was NT$1.18 billion, down from NT$1.74 billion a month ago, according to the company’s filing to the Taiwan Stock Exchange. The company did not disclose comparable data from a year ago.
The preparation for possible compensation dragged down China Steel’s pretax profit in the fourth quarter last year to NT$5.17 billion, down 11.32 percent from NT$5.83 billion a quarter ago, the filing said.
However, the quarterly figure was still 85.97 percent higher than NT$2.78 billion a year ago because of higher gross margin last year, Lee said.
“Although steel prices last year were lower than a year ago, we managed to lower our raw material costs and create higher margin,” Lee said.
Last year, the company posted pretax profit of NT$23.21 billion, up more than twofold from NT$7.68 billion a year ago, according to filing.
Lee said the outlook for this quarter is more positive than a quarter ago as demand increases, and shipments of the company this quarter is expected to grow 3 percent to 297.21 tonnes from 288.55 tonnes a quarter ago.
However, Lee said the visibility of the market is low and it is not likely to tell whether the high market sentiment can last after the end of this quarter.
China Steel’s shares remained flat at NT$26.7 yesterday, underperforming the TAIEX, which was up 0.3 percent.