BEIJING: China Steel Corp, the nation’s biggest steelmaker, yesterday posted a 54 percent jump in pre-tax net profit on a consolidated basis for last month, a pick-up from a trough in July.
Pre-tax profit soared to NT$346 million (US$10.58 million) last month, compared with NT$224 million in July, according to a company statement. In July, pre-tax profit fell 84 percent sequentially.
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On an annual basis, last month’s pre-tax profit plunged 88 percent from NT$2.87 billion amid growing competition from China and a global supply glut.
Operating profits surged almost 10-fold to NT$602 million last month from NT$62 million a month earlier, China Steel’s statistics showed.
However, revenue shrank 5 percent to NT$22.63 billion last month from NT$23.94 billion in July.
Shipments fell 2.82 percent to 894,929 tonnes last month, compared with 922,885 tonnes in July.
The Kaohsiung-based company posted a combined pre-tax profit of NT$576 million last month and July, down from NT$5.61 billion during the same period of last year. In the first eight months, the company accumulated NT$11.18 billion in pre-tax profits.
Deutsche Bank analyst James Kan last week downgraded his rating on China Steel to “hold” from “buy” after the company cut about 8 percent sequentially in its domestic quotation prices for steel product delivery in the current quarter and early next quarter.
As China Steel does not expect a strong improvement in shipments this quarter due to rising competition from China and raw material costs would drop merely 8 percent sequentially at best, the company “is likely to continue to report a very weak bottom line in the third quarter of 2015,” Kan said.
Kan reduced his financial forecasts for China Steel’s net profits this year by about 48.4 percent to NT$12.7 billion from his earlier estimate of NT$24.6 billion. The new forecast translates into earnings per share (EPS) of NT$0.82, down from NT$1.59.
Revenue would likely total NT$297.03 billion this year, rather than NT$366.19 billion, Kan forecast.
He also cut the stock’s target price to NT$19.8 from NT$29.8, implying an 1.8 percent downside over the next few months from the stock’s closing price of NT$19.45 in Taipei trading yesterday.
