Kobe Steel says lack of quality controls, focus on profits to blame for data tampering

Chief Executive Officer Hiroya Kawasaki submitted the internal report on Friday to Akihiro Tada, director general of METI’s manufacturing industries bureau, before releasing the report publicly. (Reuters)
Updated 10 November 2017
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Kobe Steel says lack of quality controls, focus on profits to blame for data tampering

TOKYO: Kobe Steel said on Friday a lack of quality controls and a focus on profits was behind the widespread data tampering that has shaken up the supply chains of car and plane makers around the world.
Japan’s third-largest steelmaker, which has posted losses in the last two business years, promised to automate more of its operations and reorganize its quality control systems to recover from one of the nation’s biggest corporate scandals.
The 112-year-old company admitted last month that workers had tampered with product specifications for at least a decade, causing global automakers, aircraft manufacturers and other companies to check whether the safety or performance of their products had been compromised.
No safety issues have so far been identified from the data cheating, which mainly involves falsely certifying the strength and durability of products.
Kobe Steel was ordered by the Ministry of Economy, Trade and Industry (METI) last month to provide a detailed explanation of the data cheating and say what steps it would take to prevent future abuses.
Chief Executive Officer Hiroya Kawasaki submitted the internal report on Friday to Akihiro Tada, director general of METI’s manufacturing industries bureau, before releasing the report publicly.
“Clarifying your company’s thinking on the causes of this incident is a meaningful step toward restoring trust,” Tada told Kawasaki as he arrived to deliver the report. “I look forward to getting a proper explanation.”
The company also appointed a trio of outside investigators who are due to report back by the end of the year. Sources have said that Kawasaki and other executives will decide whether to resign for the scandal happening on their watch only after the external report.
“Given the magnitude of the scandal, we expect upper management to get the boot,” Thanh Ha Pham, an analyst at Jefferies in Tokyo, wrote in a note on Friday, without saying when that might happen.
Kobe Steel, also subject of a US Justice Department inquiry as well, has had a Japanese government-sanctioned seal of quality revoked on some of its products and lost customers.
As of Friday, the company said 474 out of 525 affected customers found no safety issues or their products were deemed safe by Kobe Steel, up from 470 earlier this week.
The company has said it cannot yet fully state what impact the tampering will have on its finances. Last week, it pulled its forecast for its first annual profit in three years for the 12 months through next March.
Kobe Steel’s shares have fallen by nearly a fifth since it revealed the data fabrication a month ago.


SABIC prepares to meet investors to offer bond

Updated 25 September 2018
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SABIC prepares to meet investors to offer bond

  • The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston from Sept. 25
  • SABIC has also confirmed the appointment of BNP Paribas and Citigroup as global coordinators on the sale

LONDON: Saudi Basic Industries Corp. (SABIC) is preparing to offer its dollar-denominated unsecured bond to the global market with investor meetings due to start this week.
The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston from Sept. 25, according to a filing on the Saudi stock exchange on Tuesday.
The Saudi company is likely to be keen to tap into the heightened international interest in the Kingdom’s financial markets following the lifting of some restrictions on foreign investors’ activities at the start of the year.
SABIC has also confirmed the appointment of BNP Paribas and Citigroup as global coordinators on the sale, alongside HSBC Bank, Mitsubishi UFG Securities EMEA and Standard Chartered Bank acting as joint lead managers, in its Tadawul note.
The proposed issuance has been well-received so far by analysts with ratings agency Moody’s Investor Service assigning an ‘A1’ rating to the proposed senior unsecured notes to be issued by the financial vehicle, referred to as SABIC Capital II, and guaranteed by SABIC itself.
“SABIC’s A1 rating reflects its strong business position in the chemical sector and its ability to weather industry volatility, particularly given its healthy operational cash flows and conservative liquidity profile,” said Rehan Akbar, a senior analyst at Moody’s, in a note on Monday.

 

The bond is anticipated to be used in part to refinance an existing SR11.3 billion ($3 billion) one-year bridge loan raised in January this year to fund the company’s 24.99 percent stake in the Swiss chemical company Clariant, according to the Moody’s note. All regulatory requirements were completed on this acquisition earlier this month.
Cash proceeds from the bond may also be used to repay a $1 billion bond due on Oct. 3, according to Moody’s.
On Tuesday SABIC confirmed that the bond will be used mainly to refinance “outstanding financial obligations” of the company and its subsidiaries.
Analysts at rating agency S&P Global were also upbeat about SABIC’s outlook, with research published on Monday stating that the company has “strong profitability” via its KSA operations and a “strong” liquidity position.
“The debt issuance is helpful for the credit profile in the sense that it extends the company’s debt maturity profile and strengthens its liquidity position,” said Tommy Trask, corporate and infrastructure credit analyst at S&P Global.
The agency currently assigns the petrochemical firm an ‘A Minus’ rating, with a “stable outlook,” which it said reflects its “view on the sovereign as well as its expectations that SABIC will maintain high profitability under current benign industry conditions.”
S&P Global’s report said margins in the global chemical industry will “largely stabilize in 2018 following several years of improvement, attributable to the increase in commodity chemical capacity.”
However, it also warned that a key risk to credit quality is
the trend for mergers and acquisitions within the sector and the “potential negative impact on credit metrics from funding them with debt.”

FACTOID

SABIC operates in more than 50 countries across the world.