UPDATE 1-JFE sees 4 pct profit rise in current year, books loss on coal mines

Wed Jul 30, 2014 8:03am EDT

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TOKYO, July 30 (Reuters) - JFE Holdings Inc, Japan's No.2 steelmaker, forecast a 3.6 percent rise in recurring profit for the fiscal year through March on higher margins, though it booked a loss on the sale of a stake in its Australian coal mines, hit by coal prices at near five-year lows.

JFE, which ranks behind only Nippon Steel & Sumitomo Metal Corp in the sector in Japan, predicted 180 billion yen ($1.8 billion) in recurring pretax profit before one-off items for the current year, against 174 billion a year ago, driven by higher earnings from its mainstay steel business.

The forecast, however, came below a consensus estimate of 201 billion in a poll of 15 analysts in Thomson Reuters I/B/E/S.

The company noted Japan's decision to raise a consumption tax from 5 percent to 8 percent from April 1 but said the effects had not been great.

"The overall impact from a sales tax hike ... has been limited as sound demand from shipbuilders and automakers offset weaker housing demand," JFE Executive Vice President Shinichi Okada told a news conference.

The group's improved margins, thanks to higher prices of its products, are expected to boost profit of its steel unit by 11 percent. "But we'll stay cautious on export as the steel prices are still in a slump in Asia," Okada said.

For the April-June quarter, the company posted a 1.5 percent year-on-year drop in recurring profit at 34.7 billion yen and booked a 7 billion yen appraisal loss on the sale of a stake in a coal mine project in Australia.

JFE Shoji Trade Corp, a unit of JFE Holdings, is in the process of selling its 37.5 percent stake in Baralaba Coal and a 20 percent stake in Wonbindi Coal in Queensland, Australia, to its partner Cockatoo Coal Inc, its parent said.

The withdrawal follows a string of mine sales, closures and project cancellations as coal producers battle prices at near five-year lows, high costs and a stubbornly high Australian dollar.

Okada said the amount of coking coal the JFE group will procure from mines in which it holds stakes will drop to 15 percent from 18 percent after the sale.

"We have not taken down a target to raise our equity production of coking coal and iron ore to 30 percent. But it is not likely happen any time soon as there are not attractive deals now," he said. ($1 = 102.2300 Japanese Yen) (Reporting by Yuka Obayashi; Editing by Edwina Gibbs and David Holmes)

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