Godo Steel: Fiscal 2027 operating profit forecast cut 72.3%

Godo Steel has revised down its consolidated forecasts for the fiscal year ending March 2027. It now expects operating profit to fall 72.3% from its previous forecast, ordinary profit to decline 64.3% and net profit to drop 62.8%. The sales forecast is unchanged.

Forecast earnings per share are ¥110.56, below the previous forecast of ¥299.31 and the prior-year result of ¥550.56. The key change is a steep reduction in the profit outlook while the sales forecast remains intact. Profit is also expected to fall below the previous year's results, pointing to a decline in earnings as well as a cut from the earlier forecast.

In the first half of the fiscal year ending March 2027, sales fell short of the previous forecast and operating results turned to a loss. Ordinary profit and net profit also missed forecasts and were sharply lower than a year earlier.

First-half earnings per share were ¥26.33, below the previous forecast of ¥55.68 and the year-earlier figure of ¥319.19. Godo Steel said prices for its main raw material, steel scrap, rose more rapidly than expected, while improvements in selling prices failed to keep pace. Sales exceeded the year-earlier level, but the company could not absorb the rise in raw material costs in its earnings.

Godo Steel cited expectations that steel scrap prices will remain elevated, as well as higher energy costs stemming from the weaker yen and the situation in the Middle East, as reasons for revising its full-year outlook. It particularly expects electricity costs to rise under power companies' market price adjustment systems.

• Steel scrap: Prices rose more rapidly than expected in the first half, and selling-price improvements did not keep pace. Prices are expected to remain elevated for the full year.
• Foreign exchange and energy: A continuing weaker yen and the situation in the Middle East are expected to push up energy costs.
• Electricity costs: The company expects costs to rise, including increases under market price adjustment systems.

Keeping the sales forecast unchanged while cutting the operating profit outlook indicates that Godo Steel sees raw material and energy costs as a greater concern than growth in sales volume or revenue. Whether selling prices can catch up with rising costs will be key to meeting the revised profit forecast. The disclosure did not specify when price increases might take effect or quantify the increase in costs.