Bloomberg reported that JFE Holdings Inc has more than doubled first quarter profit and forecast full year earnings will beat estimates as it pares production costs to make up for falling prices.

First quarter current profit, or pretax profit from operations, fell by 61% to JPY 9.9 billion as the strong yen and global oversupply squeezed its profit margins. The company is targeting cost reduction of JPY 120 billion this fiscal year by using cheaper low grade steelmaking materials.

Net income surged to JPY 18.1 billion in the three months ended June 30th 2012 from JPY 7.1 billion a year earlier after a one time earthquake related charge wasn't repeated. The company booked a JPY 12.7 billion disaster related charge after the March 2011 earthquake disrupted supply lines at carmakers and other customers.

Mr Shinichi Okada EVP of JFE Holdings said that "The company's forecast may still be a bit too optimistic, given the current environment as the industry struggles with severe demand and product prices."

JFE forecast full year sales will increase 4.2% to JPY 3.3 trillion, in line with the analyst estimates. Production in the current quarter, excluding affiliates and units, is targeted at 7.2 million tonnes of crude steel, up from 6.94 million tonnes a year earlier and little changed from the first quarter. Exports account for about 49% of its shipments.

The steelmaker expects to charge customers JPY 71,000 a tonne in the three months ending September 30th 2012, less than the JPY 85,600 a year earlier. Product prices fell to JPY 75,700 in the first quarter from JPY 82,400 a year earlier.

Source - Bloomberg

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