China Steel Fourth-Quarter Profit Falls After Costs Increase

China Steel Corp., Taiwan’s largest steelmaker, had a 71 percent decline in fourth-quarter profit after failing to pass on increased costs.

Net income fell to NT$4.53 billion ($153 million) in the three months ended Dec. 31, from NT$15.7 billion a year earlier, according to figures derived from full-year earnings released by the Kaohsiung-based mill today. That compares with the NT$4.67 billion average of 12 analyst estimates compiled by Bloomberg.

The company joined ArcelorMittal, the world’s biggest steelmaker, in reporting lower earnings because of rising raw- material costs and after prices for the alloy fell. Average iron-ore prices in China, a global benchmark, climbed 70 percent last year as Chinese and Indian steel mills increased purchases, according to The Steel Index.

China Steel was squeezed front and back,” said Peter Tzeng, a Taipei-based analyst at Polaris Securities, who has an “equalweight” rating on the stock.

China Steel fell 0.8 percent to close at NT$33.2 in Taipei trading before the announcement. The stock has dropped 0.9 percent this year, compared with the 3.3 percent decline in the benchmark Taiex index.

Sales in the October-to-December period climbed 23 percent from a year earlier to NT$61.7 billion, based on China Steel’s monthly exchange filings.

Full-Year Earnings

Full-year net income was NT$37.6 billion, or NT$2.83 a share, the company said in the statement today.

China Steel plans to pay a cash dividend of NT$1.99 a share on its 2010 earnings, along with a stock dividend of 50 shares for every 1,000 shares held by investors, the company said in the filing.

The mill plans to sell global depositary receipts backed by as many as 840 million shares, China Steel said in a separate statement to the stock exchange today. Proceeds will be used to improve its financial structure and boost working capital.

ArcelorMittal posted a loss of $780 million in the fourth quarter, compared with net income of $1.1 billion a year earlier, the Luxembourg-based company said Feb. 8.

China Steel reduced prices by an average 5.9 percent for October and November contracts after Chinese mills increased exports, the company said Aug. 25.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Amit Prakash at aprakash1@bloomberg.net.

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