Fitch downgrades Nippon Steel & Sumitomo Metal
TOKYO: Fitch on Monday downgraded Nippon Steel & Sumitomo Metal Corp., the world's second-biggest steel manufacturer, citing a global industry downturn and the firm's weak financial position.
Fitch said it cut the steelmaker's rating by one notch to BBB with a negative outlook, meaning another downgrade could follow.
The firm, created through the recent merger of Japan's Nippon Steel and Sumitomo Metal, posted a $3.9 billion combined net loss in its fiscal first half to September.
The whopping shortfall was largely due to stock investment losses and the writedown of money-losing Japanese mills, it said.
"The downgrade reflects (the company's) weakened financial profile amid a global steel industry downturn," Fitch said.
"Leverage has increased significantly as a result of lower profitability stemming from weak demand and prices.
"The negative outlook reflects low visibility and uncertainty regarding the likely recovery of the steel industry in 2013," Fitch added.
Steel demand has been weighed down by a slowing in China's economy and remained sluggish throughout 2012, Fitch said, with weakening vehicle production also taking a bite out of steelmakers' results.
Japanese producers have struggled with an unfavourable exchange rate, which saw the yen hit record highs against the dollar last year, making their exports less competitive overseas.
Nippon Steel and Sumitomo Metal formally merged in October, creating the world's second-largest steelmaker behind India's ArcelorMittal.
Fitch downgrades Nippon Steel & Sumitomo Metal - Channel NewsAsia
Hmm it seems someone in Fitch is keeping an eye on Japan.....