Japan’s economy in the first half of fiscal 2012 (April 1, September 30, 2012) was slowly recovering on the back of rising demand for reconstruction work from the Great East Japan Earthquake.
However, in the second half of the fiscal year, although the yen became weaker, the economy remained sluggish due to the ending of eco-friendly car subsidies and other factors. Overseas markets saw a gradually recovering economy in the United States, but continuation of the financial turmoil in Europe and growing sluggishness in China’s economic growth.
Kobe Steel’s consolidated group net sales in fiscal 2012 fell to 1685.5bn yen (US$17.55bn) a decrease of 179.1bn yen (US$1.86bn) in comparison to the previous year. Steel accounted for 44% of group sales and the fall in group income was largely a result of low sales volume of steel products, the decrease in steel sales prices, but also low unit sales of hydraulic excavators. Operating income dropped to 11.2bn yen (116.6M), a fall of 49.3bn yen ($513.5M) in comparison to the previous year due to a loss on inventory valuation for steel, aluminium and copper rolled products. Ordinary income, also known as pretax recurring profit, decreased 51.9bn yen ($540.6M) in comparison to the previous year to an ordinary loss of -18.1bn yen ($-188.5M). Net income showed a net loss of 26.9bn yen ($280M) a decrease of 12.7bn yen ($132.3M) in comparison to the previous year despite an increase in deferred tax assets.
Iron & Steel Business
The sales volume of steel products in fiscal 2012 decreased in comparison to the previous year. Although demand was strong in the domestic automotive industry until Q2, demand from the shipbuilding industry was sluggish throughout the year. The export environment worsened due to the weak overseas market and high value of the yen. Sales prices declined in comparison to the previous year as demand for steel products did not improve in the significantly relaxed Asian region despite a decline in raw material prices.
Sales of steel castings and forgings fell in comparison to the previous year due to sluggish demand in the shipbuilding industry which resulted in a drop in sales prices. Sales of titanium products also declined due to a decrease in overseas demand. As a result, consolidated segment sales in fiscal 2012 decreased 13.0% in comparison to the previous year to 742.8bn yen ($7.73bn). Ordinary income reported a loss of -50.2bn yen ($-522.9M) a fall of 35.5bn yen ($369.7M) in comparison to the previous year.
Output of crude steel in FY 2012 (12 months to March 30 2013) reached 7.01Mt, down just 2% on the same period 2011 and sales reached 5.79Mt down 3.66% on FY11. In FY12 27.6% of sales were exported, up 1.4% on the year previous. The average selling price per tonne of exported finished steel was 77200 yen ($804.16) down 12.8% on the previous year.
Forecast for I&S 2013.
Demand for steel products in the shipbuilding industry is anticipated to remain sluggish throughout FY2013. However, steel demand from the automotive industry in North America is projected to be strong, and China is expected to recover. As a result, steel demand is anticipated to remain steady. Although the oversupply of steel in the Asia region is not expected to be resolved, the export environment is likely to show some improvement due to a weaker yen.
Owing to expanded overseas sales, shipments of steel products are anticipated to increase in fiscal 2013. Gaining the understanding of its customers, Kobe Steel will continue to negotiate for higher prices of its steel products to improve the margin between sales prices and raw material costs.
Sales of steel forgings and castings are anticipated to decrease in FY2013 due to sluggish demand from the shipbuilding industry, accompanied by lower sales prices. Sales of titanium products are anticipated to decrease slightly due to continued weak demand.
Due to these factors, segment sales in fiscal 2013 are expected to be similar to fiscal 2012.