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MarketScreener Homepage  >  Equities  >  Tokyo  >  Nippon Steel Corp    5401   JP3381000003

NIPPON STEEL CORP

(5401)
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Nippon Steel eyes price hike, plant consolidation to shore up profits

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08/28/2019 | 01:03pm EDT

TOKYO (Reuters) - Japan's top steelmaker Nippon Steel Corp aims to raise product prices and boost productivity by streamlining its manufacturing structure to help shore up faltering earnings, a senior executive told Reuters.

Softening global steel demand for automobiles and machinery amid a prolonged U.S.-China trade row and higher raw materials costs battered the latest round of quarterly earnings at Japan's steelmakers, forcing many to cut their annual earnings forecasts.

The world's third-biggest steelmaker, Nippon Steel forecast a 56% drop in business profit in the year through March 2020, as surging iron ore prices and slumping demand in Asia erode its margins.

"Steel demand is weakening this quarter, especially overseas, and is expected to deteriorate later this year," Nippon Steel Executive Vice President Katsuhiro Miyamoto told Reuters in an interview on Monday.

Demand for flat steel used in automobiles and machinery is slowing in China, prompting fears of an increase in regional exports at a time when the broader Asian economy is stumbling due to the U.S.-China trade war, he said.

"We are worried that flat products will gradually seep out from China to the rest of Asia," Miyamoto said.

The threat comes as the company looks to pass on a raft of higher costs.

"Our current priority to help improve earnings is to raise product prices as our margins have been squeezed for a long time," he said, citing rising costs of raw and subsidiary materials and distribution.

In semi-annual price talks with car maker Toyota Motor, Nippon Steel won a steel price rise for April-September of "a few thousand yen" per tonne from the previous six months, according to local media. The company's steel products averaged 88,100 yen ($836) per tonne in the April-June quarter.

The agreement serves as the benchmark for other steel manufacturers, as well as for sales to the electronics and shipbuilding industries.

Miyamoto confirmed Nippon Steel won a price hike in the talks, but he declined to give a figure and said the rise was not enough to repair the company's margins.

Nippon Steel also plans to raise productivity at its mills, possibly by consolidating production lines and introducing new technology, Miyamoto said.

"We need to think about how we slim down the manufacturing structure to make it most productive," he said.

To raise funds, the company plans to generate 200 billion yen ($1.9 billion) by March 2021 through asset sales, mainly cross-held shares in Japanese companies.

The money will be used for overseas acquisitions and upgrading the company's domestic plants, he said.

While South Korea accounts for about 10 percent of Nippon Steel's exports, Miyamoto said a worsening Tokyo-Seoul relationship has so far not affected its business with South Korean companies.

(Reporting by Yuka Obayashi; editing by Richard Pullin)

By Yuka Obayashi and Ritsuko Shimizu

Stocks mentioned in the article
ChangeLast1st jan.
NIPPON STEEL CORP 0.38% 1575 End-of-day quote.-14.98%
OBAYASHI CORP 1.23% 1073 End-of-day quote.9.49%
SHIMIZU CORPORATION 1.74% 993 End-of-day quote.12.84%
TOYOTA INDUSTRIES CORPORATION 2.42% 6360 End-of-day quote.29.27%
TOYOTA MOTOR CORP 0.78% 7396 End-of-day quote.19.68%
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Financials (JPY)
Sales 2020 3 465 B
EBIT 2020 -124 000 M
Net income 2020 -23 000 M
Debt 2020 2 157 B
Yield 2020 2,67%
P/E ratio 2020 11,0x
P/E ratio 2021 9,53x
EV / Sales2020 1,04x
EV / Sales2021 1,04x
Capitalization 1 450 B
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Mean consensus HOLD
Number of Analysts 13
Average target price 1 791,67  JPY
Last Close Price 1 575,00  JPY
Spread / Highest target 81,6%
Spread / Average Target 13,8%
Spread / Lowest Target -23,8%
EPS Revisions
Managers
NameTitle
Kosei Shindo President & Representative Director
Shoji Muneoka Chairman
Katsuhiro Miyamoto Representative Director, VP & Head-Finance
Akihiko Inoue Representative Director & GM-Technical Development
Eiji Hashimoto Representative Director, VP & GM-Global Business
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1st jan.Capitalization (M$)
NIPPON STEEL CORP-14.98%13 412
ARCELORMITTAL-13.97%17 490
NUCOR3.45%16 249
POSCO--.--%16 064
NOVOLIPETSK STEEL PAO--.--%13 772
SEVERSTAL' PAO--.--%12 645