An earlier-than-expected recovery in steel demand along with improved prices especially in the automotive sectors, helped Kobe Steel beat its sales forecast for H1 FY 2020 ended September 30, 2020.
The company had predicted that it would end the first half of the fiscal with sales at JPY770bn ($7.43bn) in early August. However, it beat its estimates by 0.8pc, ending H1 FY20 with net sales at JPY776.4bn. However, sales remained 17.8pc down compared with the same six months last fiscal. Demand in the aircraft and shipbuilding sectors remained weak in Q2 ended Sep 30.
Based on the improved H1 and Q2 results, Kobe Steel has revised its full-year sales guidance, upward by 0.6pc to JPY1.4tn. The new forecast for the year ending March 31, 2021, remains 18pc lower than Kobe’s actual sales in FY 2019.
Operating income losses expected at JPY50bn in H1 FY20 were reduced by 45pc to a loss of JPY27.1bn, down from a profit of JPY7.4mn in the same period in the previous year. For the full-year Kobe has revised its operating loss guidance to JPY15bn, compared with a profit of JPY9.9bn last fiscal.
Operating losses could be mitigated due to cost improvements after decreasing steel production, improving inventory evaluation, and other operational efficiencies.
In H1, the Japanese steelmaker’s crude steel production fell by 26.8pc to 2.48mn mt compared with H1 FY19. Steel sales volumes fell by 25pc to 2.04mn mt during the same period, with 70pc of steel products sold domestically and the balance exported. Steel product prices slipped by 8.8pc to an average of JPY79,100/mt in H1 FY20 from JPY86,700/mt in the same period last fiscal.
Net sales in Kobe’s top three divisions declined with steel and aluminum falling by 21.4pc to JPY311.2bn in H1 FY20 from a year ago, construction machinery declining by 18.2pc to JPY197.8bn, and advanced materials sales dropping by 29.6pc to JPY105.3bn during the same period under comparison. Machinery and electric power were the only business segments that improved by 7.5pc and 4.5pc, respectively. Machinery hit net sales of JPY86.4bn while electric power achieved sales of JPY37bn.
The steel and aluminum division increased its losses by JPY37.3bn to JPY41.8bn in H1 FY20 compared to JPY4.5bn in H1 FY19. The losses in the advanced materials division posted a loss of JPY10.9bn in H1 FY20 against JPY9.6bn in the prior-year period. Construction Machinery income declined by 46pc to JPY4.7bn in H1 FY20 from JPY8.7bn in the same period a year ago.