China Steel has first profit in 6 quarters as prices rise

By Yu-huay Sun Bloomberg

China Steel Corp., Taiwan’s largest steelmaker, posted its first increase in profit in six quarters in the fourth quarter after increased demand enabled the company to raise prices. Net income more than doubled to NT$12.5 billion from NT$4.9 billion a year earlier, the first gain since the second quarter of 2005. The figures were derived by subtracting nine-month earnings from full-year numbers the Kaohsiung-based company sent in an e-mailed statement yesterday. Rising demand from construction companies, shipbuilders and home appliance makers enabled China Steel and Asian rivals such as Baoshan Iron & Steel Co. to raise prices. The Taiwanese mill charged domestic customers 4 percent more in the fourth quarter than in the previous three months. “The price hikes translate into extra earnings,” Jennifer Liang, an analyst at KGI Securities Co. in Taipei, who has a “neutral” rating on the stock, said before the earnings announcement. “Steady global demand is supporting prices.” Shanghai-based Baoshan Steel last month announced price increases for the three months from April. Fourth-quarter sales at China Steel surged 21 percent from a year earlier to NT$49.8 billion, according to previous stock exchange filings. The company’s full year profit fell 23 percent to NT$39.2 billion, according to today’s statement. Shares of China Steel climbed 0.3 percent to NT$37.1 in Taiwan yesterday. The stock has advanced 7.2 percent this year, compared with a 0.5 percent decline in the benchmark Taiex index. The company plans to pay a cash dividend of NT$2.78 per share and a stock dividend of 3 percent, the steelmaker said. That compares with a cash dividend of NT$3.75 and a stock dividend of 3.5 percent for 2005. China Steel’s board yesterday approved investment of NT$52.9 billion to expand annual crude steel capacity by 360,000 metric tons and cold rolled and hot-dip zinc-galvanized capacity by 1.5 million tons by 2011, the statement said. Cold-rolled steel and zinc galvanized sheets are used in cars and home appliances.

Chung Lo-min, the steelmaker’s executive vice president, said in August that the company and a unit plan to spend NT$200 billion in the next six years to expand capacity to meet rising demand.