Japanese steelmakers, led by Nippon Steel & Sumitomo Metal Corp, on Thursday reported a surge in nine-month earnings, shrugging off an industrial quality scandal as Kobe Steel reinstated its annual net profit forecast.
The earnings suggest the steelmakers escaped any sustained negative impact from the scandal kicked off when Kobe Steel in October admitted to discovering widespread product data tampering at some of its plants, undermining Japan’s reputation for manufacturing excellence.
Kobe Steel, Japan’s No.3 steelmaker, said it was reinstating a forecast for its first annual profit in three years, after establishing that the tampering had not impacted the safety or performance of its products, which are used widely in planes, trains and automobiles.
Kobe is forecasting 45 billion yen ($411 million) of profit for the year through March and also raised its sales forecast, suggesting customers had not abandoned the company after the scandal. Before withdrawing its forecast in October it had expected an annual profit of 35 billion yen.
Before the scandal - which is expected to cost the company 10 billion yen - clouded its outlook, Kobe Steel had posted annual net losses in the two previous years.
Nippon Steel said it had a 108 percent rise in April-December recurring profit, fed by solid demand and higher prices for steel products, and kept its full-year forecast unchanged.
Japanese steelmakers are enjoying the best market conditions in at least three years. Steel prices have risen on increased production by automakers, while construction is in full swing for Tokyo’s 2020 Olympics.
Nippon Steels’ recurring profit for the nine months through Dec. 31 came to 225.48 billion yen. Its profit forecast for the year to March 31 remained at 300 billion yen, below a mean estimate of 328 billion yen among 13 analysts surveyed by Thomson Reuters I/B/E/S.
JFE Holdings Inc, Japan’s second-biggest steelmaker, said its profit for the nine months through December more than quadrupled to 138.62 billion yen.
Kobe Steel’s data tampering was one of Japan’s biggest industrial scandals. The widespread cheating on product specifications sent shockwaves through global supply chains.
The scandal had raised fears that other steelmakers could be affected if overseas customers shunned Japanese steel, although some analysts had said Nippon Steel and JFE would benefit from Kobe’s woes.