CSC’s profit drops amid lackluster market demand

By Kevin Chen  /  Staff reporter

Wed, Oct 10, 2012 - Page 14

China Steel Corp (CSC, 中鋼), the nation’s only integrated steel maker, yesterday said its third-quarter pretax profit dropped 29.14 percent from the previous quarter because of lower sales amid lackluster market demand.

Pretax profit fell to NT$2.06 billion (US$70.1 million) from NT$2.91 billion in the second quarter, the Siaogang District (小港), Greater Kaohsiung-based company said in an e-mailed statement.

Last quarter’s figure was lower than Fubon Securities Investment Services Co’s (富邦投顧) forecast of NT$2.72 billion.

Lower investment gains also contributed to the decline in pretax profit in the July-to-September quarter. China Steel booked NT$23 million in investment gains in the third quarter, which was lower than the previous quarter’s NT$1.64 billion, the company said in its statement.

However, on an annual basis, third-quarter pretax profit fell 61.85 percent from the NT$5.4 billion posted a year earlier, company data showed.

China Steel swung into profit in the second quarter from the first quarter, but it is unlikely to substantially increase profitability in the short term as the global economy remains weak and oversupply in China persists, Fubon Securities analyst Roger Lee said in a note to clients.

However, Lee said lower coking coal and iron ore prices in the July-to-August period would likely be reflected in the company’s cost structure this quarter and next quarter, boosting China Steel’s gross margins to 7 percent and 7.5 percent, respectively, from 6.7 percent in the third quarter and 5.1 percent in the second quarter.

Cumulative pretax income in the first nine months reached NT$3.99 billion, down 82.44 percent from NT$22.71 billion a year earlier. Pretax earnings per share came in at NT$0.26 in this period, compared with NT$1.51 per share the year before, company data showed.

In the statement, China Steel said its revenue fell 12.14 percent to NT$50.14 billion in the third quarter from the second quarter, while sales volume was 2.14 million tonnes in the third quarter, down 8.8 percent sequentially.

Share price in CSC rose 1.35 percent to NT$26.35 yesterday before the company disclosed the quarterly figures, but it has declined 9.72 percent so far this year.