Hanwa bought 5,697,000 new shares in Nakayama Steel on 2 October for ¥3.79bn. The subscription takes its holding to 20.48% of the Osaka steelmaker and makes Nakayama an equity-method affiliate, according to the subsequent-events note in Hanwa's half-year securities report. Hanwa's board approved the subscription to Nakayama's third-party share issue on 7 August.
What the tie-up covers
The agreement names four areas: closer cooperation in steel raw materials, sales and procurement cooperation in steel products, cooperation on a new electric-furnace project, and other areas the two companies agree. Hanwa's results presentation says Nakayama Steel and Nippon Steel are driving that furnace project. Hanwa expects wider openings to supply its raw material procurement, logistics and sales network.
An equity-method stake is not control, and Nakayama is not a Hanwa subsidiary. Hanwa's note on the stake gives no construction budget or start date for the furnace project.
The earnings backdrop
On 6 November Hanwa raised its full-year forecasts. Ordinary profit is now ¥65bn, up from ¥57bn; operating profit ¥70bn, up from ¥62.5bn; and net profit ¥45bn, up from ¥40bn. Sales guidance stays at ¥3tn. Hanwa said first-half results ran ahead of its original assumptions.
For the six months to September, ordinary profit rose 49.8% to ¥35.74bn on sales of ¥1.48tn, up 15.5%. Hanwa attributed the sales gain to high nonferrous metal and crude oil prices. Steel itself lagged: segment profit fell 5.7% to ¥16.57bn, partly because progress on large construction projects slowed. The Nakayama stake was bought after the period closed, so it sits outside these figures.