Japan’s economy in the first quarter of fiscal 2012 (April-June period) was gradually recovering on the back of rising demand for recovery and reconstruction work after the Great East Japan Earthquake in March 2011 and economic stimulus measures.

In overseas markets, the pace of economic growth in China and economic recovery in the United States continued to decelerate amid the financial crisis in Europe. In this economic environment, the Kobe Steel Group saw sales volume (in terms of tonnes sold) of steel products and aluminium rolled products remaining flat in comparison to the same quarter last year. Although domestic demand was firm, the export environment worsened due to the sluggish overseas steel market and the high yen.

Kobe Steel’s consolidated sales in Q1 fiscal 2012 decreased by 37.2bn yen (US$474.6M) in comparison to the same period last year, to 434.1bn yen ($5.54bn). Operating income decreased 31.8bn yen ($405.7M), in comparison to the same period last year, to operating loss of 2.7bn yen ($34.4M). Ordinary income fell 34.4bn ($438.9M) yen to ordinary loss of 10.4bn yen ($132.7M). In addition to these factors, Kobe Steel posted an extraordinary loss on the write-down of investments in securities. As a result, net income went down 42.0bn yen ($535.9M) to net loss of 32.2bn yen ($12.7M).

The Iron & Steel Business saw sales volume remain sluggish in comparison to the same period last year. Although demand was firm from the automotive sector, demand was slow from shipbuilding and weak demand was seen in overseas markets. The high value of the yen and other factors led to a worsening in the export environment. Sales prices decreased in comparison to the same period last year due to the weak overseas markets and drop in raw material prices. Sales of steel castings and forgings declined in comparison to the same period last year, due to sluggish demand from the shipbuilding industry and drop in sales prices.
As a result, consolidated segment sales in Q1 fiscal 2012 were 192.2bn yen ($2.45bn), similar to the same period last year. Ordinary income decreased 22.3bn yen ($284.5M) to ordinary loss of 18.9bn yen ($241.2M).