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Nippon Steel notes broader economic woes as fiscal Q1'19 profit slumps

Nippon Steel Corp. on Aug. 1 reported a 61% year-over-year fall in net profit attributable to owners of the parent to ¥33.33 billion, or ¥36.20 per basic share, for the first quarter of its fiscal 2019.

Revenue for the June quarter rose 4.3% on a yearly basis to ¥1.522 trillion, with operating profit falling 33.1% to ¥60.60 billion.

Revenue for the steelmaking and fabrication segment climbed to ¥1.347 trillion, compared to ¥1.302 trillion a year ago, with business profit for the segment declining to ¥56.0 billion from ¥84.1 billion due to a rise in raw material prices, impacts of electricity outage at the Kimitsu Works, inventory valuation difference and other factors.

The Japanese steelmaker expects to declare an interim dividend of ¥10.00. Nippon Steel sees prolonged China-U.S. trade tensions further strengthening concerns about an overall economic slowdown, especially in China, with conditions in the Japanese economy expected to reflect heightened concerns over future uncertainty.

"The company is also encountering unexpected developments, such as significant narrowing of profit margins, particularly for export products for spot markets, and a deteriorating product mix associated with a decline in steel demand for indirect exports," Nippon Steel said in a release.

Business profit in fiscal 2019 is expected to total ¥150 billion, with net seen rising 2.0% to ¥3.000 trillion and profit attributable to owners expected to fall 74.3% to ¥30.00 billion, or ¥33.0 per basic share.

The company's consolidated crude steel production in the quarter rose to 12.44 million tonnes from 11.89 Mt a year ago, with output for the full year seen rising to 49 Mt from 47.84 Mt in fiscal 2018. Steel shipments fell to 9.11 Mt from 9.57 Mt year over year, with full-year shipments expected to slightly fall to 37.80 Mt from 37.97 Mt the previous year.

Capital expenditure in fiscal 2019 is estimated at ¥500 billion, and depreciation charges are seen hitting ¥450 billion, compared to ¥440.8 billion in capex and ¥408.6 billion in depreciation booked for fiscal 2018.

As of July 31, US$1 was equivalent to ¥108.60.