Kobe Steel seen swinging into the black this fiscal year
Steelmaking and construction machinery operations set to recover
TOKYO -- Kobe Steel will likely return to profitability in the current fiscal year ending March 2018, driven by the recoveries in its steelmaking and construction machinery segments.
For fiscal 2017, the Japanese company is seen logging a group pretax profit of roughly 40 billion yen ($366 million) and its first net profit in three years.
Sales are expected to rise 7% over the estimated year-earlier result to about 1.8 trillion yen. The iron and steel segment will likely swing to a pretax profit of about 10 billion yen from an estimated 30 billion yen loss a year prior as the company raises prices of steel products for automobiles and other applications to reflect rising raw material costs.
Lower costs for blast furnace refurbishment, consolidation of production capacity, and growth in overseas steel operations are also seen contributing to the return to profit.
The construction machinery segment is seen turning a pretax profit of several billion yen, climbing out of an estimated 34 billion yen hole a year earlier, when the company booked provisions against losses on excavator accounts receivable in China. Charges associated with reorganizing Chinese operations ended in fiscal 2016, and its production revamp there should lower fixed costs.
Kobe Steel probably will not set a dividend for the current fiscal year when announcing year-earlier results April 28, given uncertainty over such factors as raw material prices and exchange rates. The company will not pay a dividend for fiscal 2016.