Steel producer Erdemir posts sharp fall in profits

ISTANBUL - Reuters

This aerial photo shows the Erdemir steel plant in the northwestern province of Zonguldak. The producer posted 72.2 percent drop in net profits in the second quarter.

Erdemir, the largest flat steel producer in Turkey, posted a 72.2 percent drop in consolidated net profits in the second quarter of the year, down to 81.7 million liras, compared with the same period a year earlier.
The main reasons behind the sharp fall were a decrease in steel prices and a narrower profit range due to the upward pressure in costs, according to analysts.

The company’s net profits in the second quarter of 2011 stood at 294.1 million liras.

According to a filing to the Istanbul bourse, Erdemir’s profits on sales increased by a mere 7.3 percent, reaching 2.35 billion liras. This pulled down the steel company’s first-half consolidated profits to 205.7 million liras, a 63-percent drop from the first six months of 2011.

The company’s EBITA margin in the first half fell to 9.3 percent from 23.7 percent last year.

Steel prices

“Steel prices fell about 10 percent in dollars [from last year],” said TEB investment analyst Alper Paksoy.

“But the raw material prices did not fall that much. What’s more, steel prices had increased during the second half of last year. This helped Erdemir profit from goods in its stocks.”

According to Erdemir’s figures the company’s exports fell 47 percent because of the shrinkage in the European and North African markets, while shipping to domestic markets rose 13 percent, reaching 2.7 million tons.

The company said it increased its market share in flat steel to 35 percent.