Scandal clouds prospects for Kobe Steel's turnaround
Nikkei -- Oct 31
As its data-doctoring scandal continues to unfold, Kobe Steel is grappling with the consequences for a diversification plan that has returned it to the cusp of profitability.

Executive Vice President Naoto Umehara avoided directly commenting on the scandal's impact in a news conference Monday to announce earnings for the six months ended Sept. 30. "We may be asked for compensation, but that's difficult to predict at this time," he said.

Kobe Steel withdrew a full-year net profit forecast showing the Japanese steelmaker in the black for the first time in three years and canceled a planned interim dividend of 10 yen per share.

Just the beginning?

The company still sees sales growing 11% to 1.88 trillion yen ($16.6 billion) for the fiscal year ending March 2018 but has lowered its pretax profit estimate by 5 billion yen to 50 billion yen. An anticipated boost from price hikes on steel products is expected to be offset by a 10 billion yen hit from the scandal, including declining orders as well as the cost of scrapping products failing to meet quality standards.

These are just the losses that can be foreseen now. The possibility of customers starting to flee in earnest later on makes it hard to tell how much orders will ultimately be affected.

Investigation results released Thursday showed that just 40% or so of the 525 companies that received affected products had fully verified their safety. While such automakers as Toyota Motor confirmed that aluminum sheet used in vehicle hoods is safe, JR West and Kawasaki Heavy Industries are thinking about seeking compensation.

News source: Nikkei
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