Kyoei Steel: FY2027 operating profit forecast cut to ¥9.5bn

Kyoei Steel lowered its forecasts for operating profit, ordinary profit and net profit for the year ending March 2027. The revenue forecast is unchanged, but all three profit figures are expected to come in below both the previous forecast and the prior-year results.

Operating profit is 38.7% below the previous forecast, ordinary profit is down 35.7% and net profit is down 42.9%. Compared with the prior year, operating profit is expected to fall from ¥16.967 billion to ¥9.5 billion, and net profit from ¥9.864 billion to ¥4.8 billion. The revision keeps revenue unchanged but cuts profit expectations, mainly because of weaker margins in the steel businesses at home and abroad and expected losses at the U.S. operation.

Kyoei Steel expects demand for construction steel products in Japan to remain sluggish in the second half. Shipments should recover from the first half but are still likely to miss the plan, while higher scrap prices are also expected to weigh on earnings.

• Demand: Demand for construction steel products is expected to remain sluggish in the second half.
• Shipments: Volumes are expected to recover from the first half but remain below plan.
• Margins: Scrap prices are expected to exceed assumptions, narrowing the spread between product prices and scrap costs compared with the plan.

The recovery in shipments alone will not make up for the shortfall against the plan, while a narrower gap between raw material and product prices will weigh on domestic earnings. Kyoei Steel expects the domestic steel business to underperform its previous forecast as a result.

Kyoei Steel expects its Vietnam and Canada operations to progress broadly in line with plan, but forecasts continued losses at its U.S. operation. The outlook also incorporates one-time losses, including higher depreciation costs stemming from the shortened useful life of existing equipment.

• Vietnam and Canada: Business conditions are favorable, and the operations are expected to perform broadly in line with plan.
• United States: Production problems caused by aging existing equipment are occurring intermittently, and losses are expected to continue.
• One-time losses: The forecast includes higher depreciation costs and other effects associated with the shortened useful life of existing equipment.

Progress at the Vietnam and Canada operations is not expected to offset U.S. losses, leaving the overseas business below the previous forecast. The revision reflects the combined impact of weaker demand and higher raw material costs in Japan, alongside equipment challenges at the U.S. operation. Kyoei Steel said its forecasts are based on information available when the disclosure was released, and actual results may differ depending on future developments.