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Kobe Steel posts first profit in three years despite data fraud scandal
[TOKYO] Kobe Steel Ltd, Japan's third-biggest steelmaker, on Friday posted its first annual profit in three years, even after admitting to falsifying quality data, a scandal that affected hundreds of customers and hit Japan's manufacturing prowess.
Kobe Steel reported profit of 63.19 billion yen (S$767.99 million) for the year ended March 31, against a loss of 23.05 billion yen a year earlier.
The result was above its own forecast of 45 billion yen and an estimate of 49.56 billion yen among seven analysts surveyed by Thomson Reuters I/B/E/S.
However, the data tampering scandal did curb its earnings. The company said the scandal cut profit for the 2017/18 year by about 12 billion yen and is forecast to cut the next year's earnings by about 10 billion yen.
This week, Kobe Steel said it was under investigation by Japanese authorities because of the scandal. Overall though, the company predicts a 45 billion yen profit for the year to March 2019, in line with a mean profit forecast of 44.62 billion yen from six analysts.
Kobe Steel, which supplies steel and aluminium parts to manufacturers of cars, planes and trains around the world, admitted to supplying products with falsified specifications to more than 600 customers and said the data fraud had been going on for nearly five decades.
Sales rose more than 10 per cent to 1.9 trillion yen, indicating the company has not lost significant numbers of customers since announcing the tampering in October last year. Nippon Steel & Sumitomo Metal Corp and JFE Holdings Inc also reported strong earnings on Thursday, led by solid local demand and higher prices for steel products.
Japanese steelmakers are enjoying the best market conditions in at least three years. Steel prices have risen on increased production by automakers, while construction is in full swing for Tokyo's 2020 Olympics.
Kobe Steel is also the subject of a US Justice Department probe. Additionally, Japanese government-sanctioned seals of quality have also been revoked on some of its product.