CSC's July Pretax Profits Up 17% MoM to NT$2.735 Bn.

Mainly driven by price drops in raw materials and profitable reinvestments, China Steel Corp. (CSC), the largest steelmaker in Taiwan by size, posted pretax profits of NT$2.723 billion (US$90.76 million), or NT$0.17 per share, in July, up 17% month-on-month (MoM) or 49.53% year-on-year (YoY) to hit a one-year high, according to its latest financial report.

The report shows CSC's consolidated revenue for the month of NT$30.643 billion (US$1.021 billion) for a 1% monthly growth, with operating profits of NT$2.711 billion (US$90.36 million), up 14% MoM. For the first seven months of this year, its cumulative pretax profits totaled NT$14.429 billion (US$480.96 million), or NT$0.93, for a 3.97% YoY increase.

CSC sold some 800,000 tonnes of carbon steel in the month, with 65% to domestic downstream manufacturers. In January-July, its cumulative sales volume reached 5.6 million tonnes.

Such banner profit, institutional investors note, are partly attributable to weakening international prices of raw materials, particularly iron ore, of which the price once  plummeted 30% YoY. The price drops are expected to continue throughout 2014 to benefit Taiwanese steelmakers.

Another factor driving CSC's July profit growth is the strong return on reinvestments in Taiwanese companies, including Taiwan Semiconductor Manufacturing Co., Ltd., world's largest semiconductor and IC foundry; CSBC Corp., Taiwan, a shipbuilder with flood of  orders recently; and Rechi Precision Co., Ltd., a globally prestigious supplier of air conditioner compressors. In the month, the firm received over NT$150 million (US$5 million) in total return-on-reinvestment.

As for Q3 outlook, institutional investors indicate that CSC will see better performance than in the Q2, partly because the company's four furnaces all have been in full operation to reach single-month capacity of 800,000 tonnes of melt iron.

CSC is also optimistic towards its H2  performance, based on China's new around of urbanization plans to develop new cities nationwide that would trigger demand for steel bars, cables and wiring, cars and household appliances, which will surely profit the steel industry in the short term. (SC)

CSC's Profits in 2014 by Month
Month	Jan.	Feb.	Mar.	Apr.	May	Jun.	Jul.
Pretax Profits	NT$1.499 Bn.	NT$1.510 Bn.	NT$2.064 Bn.	NT$2.094 Bn.	NT$2.195 Bn.	NT$2.332 Bn.	NT$2.735 Bn.
Pretax Profits per Share	NT$0.09	NT$0.09	NT$0.13	NT$0.14	NT$0.15	NT$0.16	NT$0.17

Source: China Steel Corp.