KAOHSIUNG, Taiwan--China Steel Corp. (2002.TW), Taiwan's largest steel producer by revenue, has been in the black since March and expects to report a net profit for the second quarter, reversing two consecutive quarters of losses.
The company's results were hit late last year and early this year by sluggish global demand, particularly in China where a slowing economy hurt the construction and automobile sectors, and high costs of feedstock such as iron ore and coal as some mines in Australia were closed after flooding last year.
However, feedstock costs have came down since late in the first quarter, and China's monetary easing policies may help boost demand going forward, which bodes well steel makers.
China Steel Chairman Tsou Jo-chi told shareholders at the company's annual general meeting Friday that the company will produce more high-end steel products to boost profit margins, and it is on track to hit its target of cutting operating costs by US$140 million this year. The company will also continue to invest in more iron-ore and coal mines abroad to further cut feedstock expenses, he added.
Mr. Tsou said the company made "some profits" in March and April and its pretax profit in May was more than 1 billion New Taiwan dollars (US$33.5 million). "We hope we will be profitable for this full year," he added.
Analysts said although demand remains sluggish, they expect China Steel to turn profitable in the second quarter. Six analysts polled by ThomsonReuters said they expect the company to post a net profit of NT$2.19 billion-NT$4.82 billion for the three months ending June 30, compared with a net loss NT$712.2 million in the first quarter and a net loss NT$573.4 million in the fourth quarter last year.
"Even though there are still a lot of uncertainties over the euro-zone crisis and many people are conservative about the outlook of steel prices, we are still confident in overcoming the challenges ahead," Mr. Tsou said.
As part of its overseas acquisition drive, China Steel agreed in late April to buy a 2.5% stake in the Roy Hill iron-ore project in Western Australia state from South Korea's Posco for A$305.2 million.
Write to Fanny Liu at fanny.liu@dowjones.com
Copyright ? 2012 Dow Jones Newswires
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