Kobe Steel projects 1st net profit in 3 years

TOKYO (Jiji Press) — Kobe Steel Ltd. said Thursday it expects to post its first group net profit in three years in fiscal 2017, despite negative effects from its data manipulation scandal.

Kobe Steel projects a net profit of ¥45 billion for the year ending in March, against a loss of ¥23,045 million in the previous year.

The projection reflects robust sales of hydraulic excavators in China and rises in demand and prices for steel products on the back of global economic growth.

The company left unchanged its forecast that negative effects from the product quality data falsification will push down its recurring profit by ¥10 billion.

But the forecast does not include expected costs related to overseas class-action damages lawsuits triggered by the scandal. This factor is likely to harm the firm’s future earnings.

Kobe Steel had declined to release a bottom-line forecast for the year, citing difficulties assessing the impact of the scandal, which was disclosed in October last year.

By Thursday, it had completed safety checks at 518 firms, or 99 percent of the clients to which affected products were supplied.

The company disclosed the projection because work to assess the amount of compensation to such clients is nearly over, officials said.

Kobe Steel estimates that the scandal will lower profits at its aluminum and copper operations by ¥4 billion, ¥1 billion yen bigger than the initial forecast.

Over ¥1 billion in compensation will be paid to clients affected by the misconduct. In addition, sales volume is expected to drop due to an increase in products recognized as unqualified following the normalization of quality inspections.

“The invalidation of the Japanese Industrial Standards certificates will contribute somewhat to the sales drop,” Managing Executive Officer Kazuaki Kawahara told a press conference.

In its steel and other operations, the scandal will push down profits by ¥6 billion, up ¥1 billion from the previous forecast.

For April-December last year, Kobe Steel reported consolidated sales of ¥1,379,317 million, up 13.3 percent year on year. Net profit stood at ¥55,823 million, against the year-before loss of ¥36,478 million.

The scandal has not caused a marked decrease in clients, officials said. But the situation may change depending on the content of the final investigation report on the scandal due out by the end of this month.

[Jiji Press]

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