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Sumitomo Metal Industries Gains on Higher Net Outlook
12.25.2008 | -- admin

By Dave McCombs

Oct. 31 (Bloomberg) -- Sumitomo Metal Industries Ltd., Japan's third-biggest steelmaker, climbed for a fourth day after the company raised its full-year profit forecast by 16 percent, citing strong sales of high-grade seamless pipes and lower costs.

The shares gained 4.7 percent to close at 247 yen in Tokyo, compared with the 1.9 percent decline in the Topix Iron & Steel sub-index. The Osaka-based company has gained 46 percent since Oct. 27, the biggest four-day rally since at least 1974, the earliest year for which Bloomberg has data.

Net income in the 12 months to March 31 will probably rise 2.5 percent compared with last year to 185 billion yen ($1.9 billion), the Osaka-based company said yesterday in a statement. That compares with the previous forecast of 160 billion yen.

Orders for the company's ``high-quality seamless-pipe products -- an area of strength -- remain strong so far, with further price increases likely,'' Atsushi Yamaguchi, an analyst at UBS AG, wrote in a note. ``The order backlog for power generating boiler tubes also remains strong.'' He left his ``buy'' rating on the shares unchanged.

Sumitomo Metal Industries, which has the highest operating margin among Japan's five blast-furnace steelmakers, has prevented a slump in demand from eroding earnings by focusing on higher-grade products such as pipes used in oil exploration.

Still, the company yesterday said it would trim production by about 1.3 percent in the six months to March 31, responding to a slump in global auto demand.

Operating margin, or operating profit divided by sales, was 13 percent in the three months ended Sept. 30, compared with 9 percent for Nippon Steel Corp., Japan's biggest mill.

 
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