China Steel saw earnings slide in June

Taipei, Aug. 4, 2005 (CENS)--Due to a stagnated steel market filled with wait-and-see sentiment, China Steel Corporation (CSC), Taiwan largest maker of steel products, saw sales of steel products decline 9.2% sequentially to reach 798,000 metric tons in June, with earnings slumping 11.6% from May to NT$6.683 billion (US$209.49 million at US$1:NT$31.9), the second lowest level since the beginning of this year.

The company attributed the declined earnings in June to the reduction in sales amount and the price hike in raw materials of iron and coal.

The slide in sales amount and earnings in June showed CSC has peaked out in the first half of this year and would post earnings sliding in the second half because of the high costs in raw materials and the slump in steel prices in the international marketplace.

CSC said its pretax earnings reached NT$42.253 billion (US$42.84 million), or NT$3.99 (US$0.125) in earnings per share, in the first half of this year, setting a historic high record. An industry analyst estimated CSC would see this year's pretax earnings exceed NT$65 billion (US$2.03 billion) posted last year, and earnings per share expected to hit NT$7 (US$0.219).

The company rolled out 843,400 metric tons of steel products in June. But its sales slipped 10% to reach 798,000 metric tons in the month, the second lowest monthly level and only slightly higher than February's 741,100 metric tons since the beginning of this year.

A domestic downstream steel producer criticized CSC for quoting prices at high levels despite the slump of international steel prices, which has forced customers to slow down their pace in taking in ordered products. He said downstream firms wouldn't raise willingness to place orders if the international steel prices continue a sliding trend and there is no preferential measures offered by CSC. In this situation, CSC is expected to see continued growth in inventories in the months to come.

The price hike in such raw materials as iron and coal has burdened CSC with an increase of production costs by NT$1.5 billion (US$31.93 million) per month.

An industry specialist estimated CSC would see monthly earnings hit between NT$4.5 billion (US$141.06 million) and NT$5 billion (US$156.73 million) in the second half of this year and whole-year EPS would reach NT$7 (US$0.219) this year, even if the company cut prices for its products for delivery in the fourth quarter of this year.