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Japan’s Nippon Steel Corp 5401.T raised its full-year net profit forecast by 12% on Tuesday, citing higher margins through price increases and lower costs after a restructuring and capacity cuts.
Net profit in its financial year to March 31 is now projected at a record 670 billion yen ($4.6 billion), up from its August guidance of 600 billion yen and above a mean forecast of 483 billion yen among 10 analysts polled by Refinitiv.
“This is the effect of our efforts over the past two years to reinforce margins,” Executive Vice President Takahiro Mori told a news conference, referring to price increases for key customers such as automakers.
“Fixed costs have been significantly reduced through structural reforms.”
The world’s fourth-biggest steelmaker said in 2021 that it would reduce capacity by a further 10% in addition to a 10% cut flagged a year earlier, citing declining domestic demand and intensifying competition from China.
The stronger profit forecast comes despite lower crude steel production plans, excluding its subsidiaries, at 34 million tonnes, down from a previous forecast of 35 million tonnes.
“Global steel demand has slowed quite rapidly,” Mori said, adding that a recovery will take some time in the face of U.S. monetary tightening and China’s strict curbs to eliminate COVID-19 outbreaks.
Net profit for the April-September period rose 24.7% to 372 billion yen on inventory valuation gains and higher product prices as it passed on rising costs to customers.
Nippon Steel also said its new electric arc furnace in Hirohata, western Japan, began commercial operation in October as part of efforts to produce high-grade steel sheets with lower carbon dioxide (CO2) emissions.