* Full-year forecast 25 percent below expectations
* Domestic demand strong, overseas sales seen weak
* Spending on plants in Japan will limit profit growth
By Yuka Obayashi
TOKYO, Oct 25 JFE Holdings Inc, Japan's
No.2 steelmaker, said on Friday it was sticking to its full-year
profit forecast, which was 25 percent below analysts'
expectations, citing slack overseas markets and extra spending
to upgrade facilities.
The announcement sparked a drop in JFE shares, which ended
4.2 percent lower in their heaviest volume in three months
compared to a 2.8 percent drop in Tokyo's benchmark Nikkei
Despite trouble overseas, demand for construction and
automotive steel has been strong in Japan, backed by Prime
Minister Shinzo Abe's push to end two decades of economic
stagnation with a mix of fiscal expansion and monetary easing,
which has helped local steelmakers recover their profitability.
In fact, JFE's recurring profit, which is pretax and before
one-off items, came to 39.15 billion yen ($402.05 million) in
the July-September quarter, compared to a loss of 5.83 billion
yen a year ago, supported by higher output and cost cuts.
But JFE, which exports about half of its steel products
overseas, maintained its forecast of 170 billion yen in
recurring profit for the fiscal year to March 2014. The figure
is up from its year-ago profit of 52.21 billion yen, but 25
percent below a consensus estimate of 213.18 billion yen in a
poll of 16 analysts in Thomson Reuters I/B/E/S.
"We have decided to spend 15 billion yen to improve
facilities at our plants in Japan to maintain our
competitiveness while our profit is on an upward trend," JFE
executive vice president Shinichi Okada told a news conference,
saying the spending will partially limit profit growth this
"Looking ahead through March, we have no big concerns as we
think steel prices in Asia have hit the bottom and will stay as
they are through March," he said.
But Okada added an increased crude steel output this year
will be used for products to be sold in Japan and not for
JFE, the world's ninth-biggest crude steel producer by
volume, plans to boost its crude steel production to 29 million
tonnes this year to meet strong demand for construction and
automobiles. The figure is up 1 million tonnes from a year ago,
the highest level in six years.
A prolonged slump in prices in Asia brought on by massive
crude steel output from China has been hitting steelmakers in
On Thursday, POSCO, the world's fifth largest
steelmaker, posted its steepest quarterly fall in operating
profit so far this year for the July-September period, hit by
declining sales and slack steel prices. Profit fell by nearly
half to a lower-than-forecast 443 billion won ($417.51 million).
($1 = 97.3750 Japanese yen)
($1 = 1061.0500 Korean won)
(Editing by Matt Driskill)