POSCO Q4 net jumps 77 pct on lower costs, rising demand

POSCO, South Korea's leading steelmaker, said Thursday that its earnings increased 77 percent from a year earlier in the fourth quarter of last year due to decreased costs and rising demand.

Net profit reached 1.28 trillion won (US$ 1.1 billion) in the October-December period, compared with 721 billion won a year earlier, the company said in a regulatory filing.

Sales, however, fell 12 percent to 7.29 trillion won over the cited period, and operating income rose 14 percent to 1.6 trillion won.

Shares of POSCO closed at 592,000 won on the Seoul bourse, down 0.7 percent. The earnings report was released after the market closed.

Accumulated profit reached 3.17 trillion won last year, down 29 percent. Sales grew 12 percent to 26.95 trillion won, while operating income dropped 52 percent to 3.15 trillion won.

The company said its recovery was faster than other firms and that it was able to weather the economic crisis by cutting output by only 20 percent in the first half, while global rivals had to make cuts of more than 40 percent.

"A meaningful recovery will be visible from the second quarter on rising demand from automakers and builders," the company said. Local steel demand will increase 10 percent, while steel production is expected to rise 12 percent, it said.

"POSCO will continue to report a recovery in its earnings as it is set to raise steel prices and will benefit from falling costs of raw materials," said Chung Ji-yun, an analyst at HI Investment & Securities.

POSCO slashed local prices of hot-rolled coils by 20 percent in May, the first price cut since January 2006, reflecting weak demand.

The steelmaker's crude steel production reached 29.5 million tons last year, compared with 33.1 million tons a year earlier, it said.

POSCO reduced its production by 20 percent in the first half due to weak demand from automakers and shipbuilders.

Its annual production target was set at 34.4 million tons this year, up 16.6 percent from last year, while annual sales projections increased 9.3 percent to 29.5 trillion won.

The company said it plans to spend 9.3 trillion won this year on facilities, up 93 percent from last year.

The company will look to seize opportunities ahead of competitors in the post-crisis era, POSCO chief Chung Joon-yang told a press conference held after the announcement of its earnings.

"Overseas projects will go smoothly this year and we will push for mergers and acquisitions at home," Chung said.

Beside its ongoing project to build a $ 12 billion steel plant in the eastern Indian state of Orissa, the company is also seeking to build a $ 7 billion plant in Karnataka to the south. POSCO has already agreed to invest $ 5 billion in Vietnam, and is involved in a $ 6 billion Indonesian venture.

In the past few years, POSCO has acquired Asia Stainless Corp. in Vietnam and Taihan ST Corp. in South Korea. POSCO is also in talks to buy Thailand's Thainox Stainless Plc.

Last month, POSCO selected Macquarie Group and two other firms to advise on its bid to acquire Daewoo International Corp., a South Korean trading company focusing on energy development.

"Daewoo International is the first (company) we're looking at, and we will review if Daewoo Shipbuilding & Marine Engineering Co. is up for sale," Chung said.

Daewoo Shipbuilding, the world's third-largest shipbuilder, was expected to be put up for sale again soon after Hanwha Group withdrew its bid for it in January last year.

In a separate filing, POSCO said it may buy a 15 percent stake in the Roy Hill iron ore project in Australia. The company will make a decision after conducting a feasibility study.

According to POSCO, the stake purchase, if completed, will help POSCO secure more than 10 million tons of iron ore annually. (PNA/Yonhap)

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