Japan's premier steel producer, Nippon Steel, has revised its net profit outlook for the fiscal year ending in March upwards, following robust H1 results. This comes amid a tough Asian steel market environment, exacerbated by increased output and exports from China. The company now expects an annual net profit of 420 billion yen ($2.8 billion), a rise from its previous forecast of 400 billion yen and surpassing the LSEG poll's average estimate of 399 billion yen. However, this figure falls short of last year's profit of 694 billion yen.
Executive VP Takahiro Mori acknowledged the "unprecedentedly severe business environment" with looming recession threats in both Europe and the US. In response to these challenges, Nippon Steel has formulated strategies such as product differentiation, maintaining consistent production, and pursuing global growth.
The steelmaker has been able to improve profitability through several reform measures. These include downsizing domestic facilities and modifying negotiations with key clients to quickly reflect changes in material costs. Despite a drop in H1 net profit by 19.4% to 300 billion yen, the company still managed to surpass its initial forecast of 200 billion yen, aided by lower-than-expected raw materials prices.
However, the company indicated that a potential surge in raw material prices could negatively impact H2 margins. In addition, Nippon Steel is in ongoing discussions with Teck Resources (NYSE:TECK) about investing in their coking coal unit, with a decision expected by the end of the year.
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