Japanese steel and mining firm, Sumitomo plans to reduce the losses in its metals business and post a profit in its mining business at the end of FY 2020 ending on March 31, 2021.
The company, which reported its earnings for H1 FY20 and Q2 2020 ended September 30, 2020, said that an improvement in demand from the automotive sector would prove beneficial for its steel sheets business. As a result, the company lowered its estimate of expected losses from this segment to JPY3bn ($29.04mn) from JPY6bn as forecasted in August.
However, the firm predicted that earnings from other segments were likely to remain stagnant and the tubular business’s depressed demand environment would likely continue until the end of the fiscal due to the uncertainties surrounding the resurgence of COVID-19 infection cases around the world and the ongoing shutdowns in the European region due to the pandemic.
In the minerals and mining segment, Sumitomo predicted a profit of JPY13bn at the end of the fiscal compared with its original guidance of a JPY3bn loss, estimated in its August guidance. The guidance was revised after the company announced plans to resume operations at its Ambatovy nickel mine in Madagascar by early 2021. Moreover, a rise in commodity prices and stable iron ore mining conditions in South Africa are likely to support the miner’s revised guidance.
The company’s consolidated revenue for H1 FY20 decreased by JPY488.9bn to JPY2.14tn compared with the April-September period in 2019. Gross profits during the same period reduced by JPY88.2bn to JPY358.7bn.
The company attributed the decline in profits to additional costs of construction at one of its large-scale EPC projects and lower shipments from its San Cristobal silver-zinc-lead mining project in Bolivia.
Sumitomo’s metals products business’ losses increased by JPY23bn to JPY12.3bn in the first half of the fiscal compared with H1 FY19, due to lesser earnings from its North American tubular business and overseas steel service centers.
The company’s mining business also suffered losses during the period under review after mining activities at San Cristobal and Ambatovy were suspended due to the pandemic-related shutdowns in the respective countries earlier in the year. The firm’s loss in this business in H1 FY20 increased by JPY90.9bn to JPY57.7bn compared with the same period last year.