Scandal-Hit industrial materials makers see only limited impact on earnings

February 14, 2018

Tokyo- Kobe Steel Ltd., Mitsubishi Materials Corp. and Toray Industries Inc. are seeing their recent product data scandals have only a limited impact on their earnings for the year ending next month.

In their respective April-December earnings reports released by Tuesday, the three major Japanese industrial materials manufacturers projected both full-year sales and profit growth, reflecting brisk domestic and overseas demand.

Mitsubishi Materials cut its full-year sales forecast to 1,580 billion yen from 1,600 billion yen and the operating profit projection to 70 billion yen from 75 billion yen, while keeping the net profit estimate unchanged at 35 billion yen.

The company estimated that the data scandal will push down its operating profit by 2 billion to 3 billion yen and the net profit by 4 billion to 5 billion yen, due in part to a rise in payments for lawyers. But it expects the yen's depreciation and other factors to help cover the losses.

Compensation for customers affected by its data fraud is expected to be deferred until the next business year or later.

Kobe Steel even upgraded its sales forecast to 1,890 billion yen from 1,880 billion yen and the recurring profit projection to 60 billion yen from 50 billion yen, continuing to foresee the first black figure in three years.

The steelmaker assumed more than one billion yen in compensation for affected clients and put the data scandal's negative impact on the recurring profit at 10 billion yen. However, it forecast that steel price hikes and other positive factors will more than offset the negative impact.

"As steel products are generally in short supply, the data scandal is unlikely to have a major impact (on Kobe Steel's earnings) for the next year, either," an industry source said.

Toray Industries kept intact its full-year earnings projections, foreseeing record sales of 2,220 billion yen and a record net profit of 100 billion yen.

"We have finished confirming the safety of products delivered to all customers, and there will be no major impact on earnings," a Toray executive said. Jiji Press