Kobe Steel (5406) Q1 2024 earnings summary

Executive summary

• Q1 FY2024 net sales were ¥590.7 billion, down 1.3% year-over-year, with ordinary profit at ¥35.0 billion and profit attributable to owners of parent at ¥24.0 billion.

• Cost pass-through in advanced materials and welding offset negative impacts from weaker yen and higher fixed costs; machinery services sales increased, while electric power saw reduced gains from fuel cost adjustment lags.

• Comprehensive income dropped 11.8% year-over-year to ¥27.8 billion.

• Full-year FY2024 earnings forecast remains unchanged: net sales ¥2,660.0 billion, ordinary profit ¥150.0 billion, and profit attributable to owners of parent ¥120.0 billion.

Financial highlights

• Ordinary profit was ¥35.0 billion in Q1, down 2.4% year-over-year; net sales decreased by ¥7.9 billion.

• Gross profit was stable at ¥95.9 billion versus ¥95.3 billion a year ago.

• Free cash flow for FY2024 is projected at negative ¥40.0 billion due to increased working capital and lower sales volumes.

• Interim and annual dividends are planned at ¥45 and ¥90 per share, respectively, unchanged from prior guidance.

• Basic earnings per share for Q1 FY2024 was ¥60.90.

Outlook and guidance

• Full-year forecasts unchanged: net sales ¥2,660.0 billion, ordinary profit ¥150.0 billion, profit attributable to owners of parent ¥120.0 billion.

• ROIC expected at approximately 6.5%, ROE at 10.8%, and net assets ratio at 40%.

• Negative free cash flow expected due to inventory buildup; focus on optimizing working capital and improving operating cash flow.

• Business environment remains challenging, especially in automotive and construction machinery segments.

• Profit attributable to owners of parent expected to rise 9.5% to ¥120.0 billion; EPS forecast at ¥304.09.