Nippon Steel & Sumitomo Metal Corp (5401 JP) in line with QMG view

Company: Nippon Steel & Sumitomo Metal (5401 JP)

QMG product view: JA27.1 – Producers of basic iron & steel

Event: FY 15 Results

Highlights:

o    Revenue: JPY5.61tn: in line with consensus estimates (Toyo Keizai) and +1.7% yoy

o    Operating profit: JPY349.5bn: +5.9% on consensus estimates (Toyo Keizai) and +17.1% yoy

o    Operating margin: +80bps to 6.2% (and +40bps on consensus estimates)

o    FY 2015 guidance: Not provided

QMGI comment:

The story here is very much in line with what QMG data was highlighting – that these results would surprise on the upside in terms of margin/profitability. Clearly a weaker JPY has helped push Q4 profitability and we note that this is a feature likely to remain a positive across the coming financial year. In addition raw material prices are at more favourable levels, which in the face of an industry wide effort to manage production and reduce excess inventories, should help sustain profit at/around current levels. This does not yet appear to be reflected in consensus estimates. We retain our positive opinion on 5401 in our Japan Focus List.

 

QMG Margins – Producers of basic iron & steel & ferro-alloys (JA29.71) 

JA29.71 - MARGIN - FEB15

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