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Japan’s Kobe Steel to cut spending after booking annual loss

Kobe Steel Ltd (5406.T), Japan’s No.3 steelmaker, said on Monday it will cut capital expenditure by a third after one-off charges and weaker demand in steel and aluminium even before the COVID-19 pandemic pushed it to an annual loss.

The steelmaker reported a 68.0 billion yen ($634 million) net loss for the year to the end of March, against a profit of 35.9 billion yen a year earlier, as a special loss of 65 billion yen, including impairment losses on its aluminium and titanium assets, ate into earnings.

Kobe Steel didn’t give guidance for the current year, saying it was difficult to estimate the impact of the COVID-19 crisis, but Yoshihiko Katsukawa, senior managing executive officer, said the company would cut annual capital expenditure to 160 billion yen this year from 240 billion yen in the year just ended.

The coronavirus pandemic had a negative impact of only 2.5 billion yen for the year to end-March 2020, mainly in steel, Katsukawa, told an online news conference.

“But our output and orders have been falling at home and abroad lately … including (in) steel, aluminium and construction machineries due to the pandemic,” he said.

“As an emergency measure, we will freeze capital expenditure and other investments, except for spending needed to continue operations,” he added.

To ride out the COVID-19 crisis, the company, which had 146 billion yen in cash or equivalents and 150 billion yen in available credit lines at the end of March, aims to secure more liquidity by seeking loans from banks, Katsukawa said.

Bigger rivals Nippon Steel Corp (5401.T) and JFE Steel, a unit of JFE Holdings Inc (5411.T), have been forced to temporarily suspend some of their blast furnaces to cope with slumping demand, especially from automakers and construction projects.

Kobe Steel’s run rate at its steel plants is down about 20-30% from a year earlier, Katsukawa said.

“We have no plan to suspend our blast furnaces for now, but we can’t rule out such a possibility depending on future demand,” Katsukawa said.
Source: Reuters (Reporting by Yuka Obayashi; Editing by Kirsten Donovan)

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