China Steel Corp (中鋼), the nation’s biggest steelmaker, yesterday reported that fourth-quarter pretax profits dropped 42 percent as oversupply drove down steel prices.
Pretax profits fell to NT$6.14 billion (US$208 million) in the final quarter of last year, compared with NT$10.5 billion in pretax profits in the quarter from July to September.
Lower investment gains also contributed to the drop in earnings, the Greater Kaohsiung-based company said in a statement.
On annual basis, fourth-quarter pretax profits dropped more than 65 percent from the NT$17.91 billion a year earlier.
China Steel said in September it would cut domestic prices for delivery in October and November by 5.9 percent to help customers weather the sagging demand last quarter. Prices stabilized last month.
Despite the drop, China Steel’s fourth-quarter results surpassed Citigroup’s estimate of NT$4.5 billion as the steelmaker shipped 8 percent more products than Citigroup expected, the brokerage said in a research note yesterday.
The firm shipped 2.47 million tonnes of steel last quarter, up 9.3 percent from the 2.26 million tonnes of steel it shipped during the fourth quarter of 2009.
Citigroup analyst Timothy Chen said he expected flooding in Australia — which disrupted production in Australian coal mines and forced ports to be shut down — to have a minor impact on China Steel’s output this quarter because the Taiwanese firm has sufficient coal inventories to support production until April.
China Steel also bought 0.4 million tonnes of steel slab from its subsidiary Dragon Steel Corp (中龍) at the end of last year, Chen said in the research note.
During the current quarter, China Steel could see margins improve sequentially because of higher utilization and lower material costs from inventories bought two months earlier when prices were lower, Chen said.
Last week, China Steel raised prices by 2.9 percent on average for contract prices for March.
Recent rises in coal spot quotes suggested contract prices could increase sharply next quarter.
China Steel slid 0.45 percent to close at NT$33.15 yesterday, outpacing the benchmark TAIEX, which fell 0.7 percent.
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