JFE Holdings Inc., Japan’s second-biggest steelmaker, cut its forecast for the year after first-quarter profit fell amid a global supply glut.
Operating profit fell 22 percent to 24.6 billion yen ($198 million) for the three months ended June 30, the Tokyo-based company said Thursday in a statement. JFE reduced its current profit forecast for the full year to 200 billion yen, down 13 percent on last year’s level. Sales over the quarter slipped 8 percent as the company cut output.
JFE cited delays in reducing domestic inventories, further declines in overseas markets, and oversupply as China’s economic slowdown boosts that nation’s steel exports. JFE will cut its crude steel output by 1 million metric tons in the first half to about 13.5 million tons.
The company said it expects a recovery in steel production and prices in the second half of the year. It will also take a 5 percent stake for 27 billion yen in a joint venture that’s constructing Vietnam’s first integrated steelworks, Shinichi Okada, executive vice president, said at a briefing in Tokyo. The venture will invest $10.5 billion in the first phase of the project.
JFE’s stock, having dropped initially on the earnings announcement, rallied to close 4.5 percent higher at 2,418.5 yen in Tokyo.
While net income rose 12 percent to 17.3 billion yen, it missed analysts’ expectations of 23.2 billion yen. The year-ago figure was deflated by a one-time charge.
JFE joins domestic rival Nippon Steel & Sumitomo Metal Corp. in cutting output to cope with excess supply. Nippon Steel said Wednesday that current profit will likely fall 18 percent to 370 billion yen for the full year.