Kobe Steel Ltd. said Monday it has withdrawn its net income forecast and won’t pay dividends, acknowledging that executives can’t predict how the scandal involving falsified product data will affect earnings in coming months.
The steel maker eliminated its ¥10 per share interim dividend and can’t make a net income forecast because it might have to reimburse customers, Kobe Steel said as it announced first-half earnings.
The forecast for net income had been ¥35 billion for the fiscal year that ends in March.
Over the past three weeks, Kobe Steel has announced it faked data for products ranging from copper and aluminum to steel wires, machinery parts and heavy-plated metal.
Clients including Kawasaki Heavy Industries Ltd. have said they might seek reimbursement if their customers start asking for replacement products or compensation.
“It is incredibly difficult to make a forecast,” Alexander Robert Medd, managing director of Bucephalus Research Partnership Ltd., said before Kobe Steel’s announcement. “They have no idea what their one-off costs are going to be until customers have decided if they’re going to sue them or what their level of complaint will be.”
While most of the 525 companies affected didn’t find any safety problems created by data falsification, the manufacturer has said it will help pay for related costs. Kobe Steel also lost Japanese Industrial Standards certification at one of its factories in Kanagawa and others are at risk as the government expands its inspections.
The company lowered its current profit forecast 9.1 percent to ¥50 billion, and its operating profit 6.2 percent to ¥75 billion. The steel maker maintained its revenue forecast of ¥1.88 trillion.
Revamping quality control for aluminum and copper products will increase costs and lower output, Executive Vice President Naoto Umehara said at a news conference Monday. The current profit forecast includes a ¥10 billion reduction from the data-falsification issues, he said.
The company will probably receive requests to reimburse customers for expenses related to quality checks and replacements, Umehara said.
Kobe Steel business units implicated in the crisis include the iron and steel, copper and aluminum, and machinery departments, which account for more than half the company’s revenue.
Over the past two weeks, Kobe Steel announced it had faked data for other products, ranging from steel wires and materials used in DVDs and LCD screens to machinery parts and heavy-plated metal.
Kobe Steel said it will use an external investigation committee to get to the bottom of what happened. While many of the falsification problems occurred in Kobe’s facilities in Japan, data fudging for products in Thailand and Malaysia was also uncovered.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.