Business / Corporate

Kobe Steel’s April-June net profit halved after quality data scandal

Kyodo

Kobe Steel Ltd. said Wednesday its group net profit in the April-June quarter fell 49.4 percent from a year earlier to ¥12.66 billion ($113 million) due to the negative impact of a data falsification scandal.

Group operating profit dropped 54.4 percent to ¥13.83 billion in the three months ended June, while group sales rose 10 percent to ¥478.32 billion.

The dismal earnings came after prosecutors indicted the company last month on a charge of violating a law preventing unfair competition by falsifying quality data for aluminum and copper products.

The company said the scandal dented its group pretax profit by ¥2.5 billion, due in part to compensation paid to its customers.

Group pretax profit sank 54.9 percent to ¥12.75 billion in the quarter.

Pretax profit for its aluminum and copper business tanked 61 percent to ¥2.4 billion in the quarter.

The aluminum and copper products in question were supplied to over 600 companies at home and abroad, and used to manufacture such things as bullet trains, aircraft, vehicles and defense equipment.

The U.S. Department of Justice is also investigating the company over the scandal, while customers in the United States and Canada have filed class action lawsuits against Kobe Steel seeking compensation.

“We take (the results) seriously and will make efforts to prevent the recurrence of such irregularities,” Yoshihiko Katsukawa, a senior managing executive officer, said at a news conference in Tokyo.

Its mainstay iron and steel business also saw pretax profit tumble to ¥800 million from ¥13 billion, partly because of a rise in raw material costs.

But the steelmaker revised upward its net profit outlook for the first half through September to ¥30 billion from ¥25 billion, aided by solid demand for hydraulic shovels in China, the company said.