August 1, 2014 5:24 am JST

Nippon Steel expects 11% profit rise in 2014 through cost cuts

TOKYO -- Nippon Steel & Sumitomo Metal sees pretax profit growing 11% to 400 billion yen ($3.85 billion) in fiscal 2014 by cutting costs, with an eye toward boosting its competitiveness as it develops its overseas market.

     The company released its first full-year forecast on Thursday, when it also reported that April-June profits dropped 14% on the year to 74.3 billion yen.

     But the slump was only caused through extraordinary costs booked in the quarter, which weighed down the figure by about 35 billion yen. The metal maker repaired a blast furnace in its Yawata works, and gains attributed to exchange rates decreased. The decline in iron ore prices also pulled down inventory valuation gains.

     But the company's actual operations are looking up. It suffered minimal impact from the consumption tax hike in April. Demand for steel products used in automobiles, construction and other fields appears to be steady, especially in Japan. "Our profits, based on our actual performance, increased," said Vice President Katsuhiko Ota.

     Nippon Steel expects full-year profit to rise through cutting about 100 billion yen in costs. It plans to close several unprofitable production facilities in Japan. It will also merge the different corporate systems it inherited from its two predecessors.

     The company counts on its overseas ventures to drive long-term growth. It partnered with European giant ArcelorMittal to acquire a U.S. steel plant last fiscal year. It started producing steel sheets for automobiles in Mexico and Thailand, and a joint venture with an Australian partner to produce steel products in Southeast Asia is getting on track.

     Nippon Steel hopes cutting costs domestically will ultimately boost its price competitiveness, which would increase its steel exports to factories overseas and give it a leg up over Chinese and South Korean competitors.