Nippon Steel posted a 21% gain in quarterly profit on higher prices, outweighing sharply higher depreciation and raw materials costs, and stood by its annual profit outlook of flat growth.
The world's second-biggest steel maker, the biggest beneficiary of strong worldwide sales of Japanese cars, earned 148.7 billion yen (US$1.26 billion) in pretax recurring profit before extraordinary items for April-June, compared with 123.08 billion a year ago.
Its profit forecast for the year to March 2008 was unchanged at 600 billion yen, up 0.4%.
Nippon Steel and its biggest client Toyota Motor have agreed to price rises of more than 10 percent for specialty steel and a 5% rise for steel sheet used in car bodies, sources said. The increases will start filtering into its profit in its second quarter ending in September.
A revision in tax rules will result in Japan's top four steel makers -- Nippon, JFE Holdings, Sumitomo Metal Industries and Kobe Steel Ltd -- booking a combined 100 billion yen more in
depreciation costs this business year, while surging zinc, nickel prices and freight costs will weigh on their earnings.
Shares in Nippon Steel rose 4.8% during the quarter ended in June, underperforming the steel sector sub-index, which rose 9%.