CSC saw profit decline in August

Taipei, Sept. 9, 2005 (CENS)--Affected by plummeting steel prices, in August China Steel Corporation (CSC) garnered only NT$4.776 billion (US$149.25 million at US$1:NT$32) in pretax earnings, or NT$0.45 (US$0.014) in earnings per share, the lowest monthly level since the second quarter of last year.

Despite the slowdown in August's earnings, CSC still scored NT$53.162 billion (US$1.66 billion), or NT$5.02 (US$0.156) in EPS, in the first eight months of this year, up 31.9% year-on-year. Analysts attribute the high earnings to the company's outstanding performance in the first half of 2005. A market expert estimated CSC will see pretax earnings hit a historic high of NT$65 billion (US$2.03 billion), or NT$6.5 (US$0.2) in EPS, this year.

CSC said it maintained a high sales performance in August by selling 809,100 metric tons of steel products. Due to the slide in steel prices, however, the company posted sales of only NT$15.196 billion (US$474.87 million) in August, which was lower than any other month in 2005, with the exception of February.

CSC posted NT$129.608 billion (US$4.05 billion) and NT$53.162 billion (US$1.66 billion) in sales and pretax earnings in the first eight months of this year, up 21.76% and 30%, respectively, from the same period last year.

Despite the handsome profits it earned in the first eight months, CSC is expected to see a nosedive in profitability in the fourth quarter because the company has adjusted its wholesale steel prices downward. In addition, the company will also see a rise in steel-refining costs, because recent agreements with suppliers of coal and iron in Brazil and Australia have seen coal prices rise by 1.2 % and iron ore prices inflate by 71.5%.

The slump in steel prices has affected the profitability of steel producers the world over, said a CSC executive, but CSC still looks to retain its competitive edge over its rivals. With steel prices in the U.S. market bottoming out, CSC is expected to see a recovery in profitability in the foreseeable future.

A market analyst estimated that CSC will see monthly profits slip to between NT$3 billion (US$93.75 million) and NT$4 billion (US$125 million) in the fourth quarter. Pretax earnings are expected to reach NT$67 billion (US$2.09 billion) this year, higher than NT$65 billion (US$2.03 billion) posted last year.