Sumitomo Metals posts JPY 50 billion loss in FY 2009-10, expects costs to rise

Wednesday, 28 April 2010 12:35:05 (GMT+3)   |  
       

Japan-based Sumitomo Metal Industries, Ltd. (Sumitomo Metals) has announced its consolidated financial results for the Japanese financial year 2009-10, ended on March 31, 2010.
 
Accordingly, the company's net sales declined by 30.3 percent year on year to JPY 1.29 trillion ($13.75 billion), while it registered an operating loss of JPY 928 million ($9.93 million) compared to an operating income of JPY 226.05 billion in FY 2008-09. Sumitomo Metals' net loss for the financial year in question amounted to JPY 49.77 billion ($532.37million), due to a decrease in sales prices as well as the use of raw materials purchased through contracts in the previous fiscal year and the valuation loss of inventories caused by decline in raw material prices, compared with a net profit of JPY 97.3 billion for the FY 2008-09. However, the company stated that demand for steel, which was weak during the first half of the period under review, showed a recovery during the second half of the period but remained at a low level taking the period as a whole. The company's crude steel output in the given period totaled 11.65 million metric tons, decreasing by 9.48 percent year on year.
 
Sumitomo Metals stated that, although it predicts that demand for steel will recover in FY 2010-11, future trends in raw material prices and the influence they will have on the sales prices of steel products remain difficult to foresee. The company said that the market prices of raw materials such as iron ore and coal are rising, spurred on by demand; meanwhile, structural changes in the raw materials market are forcing the company to change the pricing system so that procurements of main raw materials will have to be arranged via quarterly contracts rather than through annual contracts. As a result, at this point in time, Sumitomo Metals expects that its raw material costs will significantly increase in FY 2010-11.
 
"Given these circumstances, we will strive to further reduce costs to improve our financial condition, and make efforts to quickly reflect changes in raw material prices in the sales prices of our products. Our financial target on consolidated basis for FY 2010-11 is JPY 90 billion in operating income and JPY 50 billion in net income. With regard to forecasts of yearly net sales and business performance for the first half for FY 2010-11, we are unable to make an appropriate forecasting," reads the company's statement.

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