Kobe Steel Ltd withdrew its net income forecast and said it would not pay its dividend, acknowledging that executives cannot predict how a scandal involving falsified product data will affect earnings in coming months.
The steelmaker eliminated its ￥10 per share (US$0.09) interim dividend and said it cannot make a net income forecast because it might have to reimburse customers, according to a statement from the Kobe, Japan-based manufacturer announcing first-half earnings yesterday.
The forecast for net income had been ￥35 billion for the fiscal year that ends in March.
Over the past three weeks, Kobe Steel has announced it faked data for products ranging from copper and aluminum to steel wires, machinery parts and heavy-plated metal. Clients including Kawasaki Heavy Industries Ltd have said they might seek reimbursement from the manufacturer if their customers start asking for replacement products or compensation.
“It is incredibly difficult to make a forecast,” Bucephalus Research Partnership Ltd managing director Alexander Medd said before Kobe Steel’s announcement. “They have no idea what their one-off costs are going to be until customers have decided if they’re going to sue them or what their level of complaint will be.”
While most of the 525 companies affected did not find any safety problems created by data falsification, the manufacturer has said it will help pay for related costs.
Kobe Steel also lost Japanese Industrial Standards certification at one of its factories in Kanagawa and others are at risk as the government expands its inspections.
The company lowered its current profit forecast by 9.1 percent to ￥50 billion yen and its operating profit by 6.2 percent to ￥75 billion. It maintained its revenue forecast of 1.88 trillion yen.
Revamping quality control for aluminum and copper products will increase costs and lower output, Kobe Steel executive vice president Naoto Umehara said at a press conference yesterday.
The current profit forecast includes a ￥10 billion reduction from the data-falsification issues, he said.
The company will probably receive requests to reimburse customers for expenses related to quality checks and replacements, Umehara said.
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