By Woo Je-yoon and Lee Eun-joo
South Korea’s largest steelmaker Posco Co.’s earnings in the first quarter increased year over year thanks to steady global steel demand and it revised upwards its steel sales forecast for this year, reflecting positive outlook on the global steel demand and steel prices.
The company said in a regulatory filing on Tuesday that its operating profit on a consolidated basis in the first quarter ended March this year climbed 9 percent to 1.49 trillion won ($1.4 billion) from the same period of last year. Net profit jumped 10.9 percent to 1.08 trillion won over the same period, while sales rose 5.2 percent to 15.86 trillion won.
The company’s handsome results largely owed to improved business performance of its overseas operations. In particular, PT Krakatau Posco, the Korean steelmaker’s integrated steel mill operating subsidiary in Indonesia, has seen a steady rise in its operating income since it first swung back to profits in the July-September period of last year. Posco SS Vina Co., Posco’s shape steel manufacturing subsidiary in Vietnam, has also managed to reduce operating losses.
On a separate basis, Posco’s operating profit jumped 27.7 percent on year to 1.02 trillion won in the January-March period, and sales increased 9.8 percent to 7.76 trillion won. Net profit, however, fell 8.4 percent on year to 768.7 billion won after the company reflected a one-off gain in the same period last year.
Posco’s total steel sales reached 9.294 million tons in the first quarter, up 6.6 percent from a year ago thanks to the overall rise in global steel demand. The company’s high-value steel products in the world premium category, in particular, accounted for 54.9 percent of its total sales, up 1.4 percentage points from a year ago.
Led by a rise in demand for premium steel products and steel prices, Posco’s operating margin for the first quarter rose 1.8 percentage points on year to 13.1 percent. Posco’s efforts to reduce costs and improve profitability have also paid off, it said.
Posco projected demand for steel to remain solid onwards, citing the ongoing restructuring in the Chinese steel industry, which would keep global steel supply in check, and expectations for recovery in demand in developing countries. The company said it will continue to improve its financial soundness, reduce costs, and expand sales of premium steel products.
Reflecting positive outlook on the global steel demand and prices, Posco revised up its sales forecast for full 2018 by 1.1 trillion won from early this year to 63 trillion won on a consolidated basis and 30.1 trillion won on an individual basis.
Shares of Posco ended at 354,000 won on Tuesday, up 1.14 percent or 4,000 won from the previous session.