Nippon Steel & Sumitomo Metal Corp. said sales and operating profit fell in the first quarter and forecast further weakness in the year ahead as output declines.
The world’s most-valuable steelmaker said it plans to cut crude steel output to 21.2 million metric tons in the first half, from 22.9 million tons a year earlier, amid a global supply glut.
A weaker yen and a one-time gain from a sale helped boost net income by 51 percent to 72.7 billion yen ($588 million) in the three months to June, the Tokyo-based company said in a statement. Revenue and operating profit slipped 7 percent and 12 percent respectively.
Japanese mills are paring output to shed excess inventories due to the delay in the recovery for local vehicle demand, and China’s slowdown and exports increasing competition on overseas markets. Global oversupply is likely to increase because of China’s overcapacity, Hiroshi Tomono, an advisor at Nippon Steel & Sumitomo Metal, warned on Friday. Nippon Steel was Asia’s largest producer last year.
For the full fiscal year, current profit will probably drop 18 percent to 370 billion yen from a year ago, according to the company. In April, the Tokyo-based steelmaker didn’t give an outlook, saying it was unable to reasonably forecast raw material and product prices.
Nippon Steel fell 0.7 percent to 276.3 yen in Tokyo, to bring losses this year to 8.2 percent compared with a 16 percent gain in the Nikkei 225 Index. Its first-quarter earnings were released after the close.