Reuters logo
UPDATE 2-POSCO Q2 profit jumps 44 pct from year ago on improved profit margins
July 20, 2017 / 8:06 AM / 2 months ago

UPDATE 2-POSCO Q2 profit jumps 44 pct from year ago on improved profit margins

* Q2 profit 979.1 bln won vs consensus fcast of 940 bln won

* Q2 2017 profit margin 6.6 pct vs. 5.3 pct Q2 2016

* Expects Q3 coking coal prices to be around $140-$160/T

* Q3 Iron ore prices to be around $60-$65/T

* Sees global steel demand to continue to rise (Adds executive comments in paragraph 13, third-quarter outlook)

By Jane Chung and Hyunjoo Jin

SEOUL, July 20 (Reuters) - South Korea steelmaker POSCO reported on Thursday that operating profit for the April-to-June period rose 44.3 percent from the same time a year ago because of higher profit margins for its steel sales.

POSCO, the world’s fifth-largest steelmaker, said consolidated operating profit climbed to 979.1 billion won ($870.95 million) in the second quarter, compared with 679 billion won a year earlier and a 940 billion won average estimate of 20 analysts polled by Reuters.

Operating margins for the quarter were at 6.6 percent versus 5.3 percent during the year ago period, POSCO reported. Revenue rose 16.2 percent from a year ago to 14.9 trillion won.

China’s steel rebar futures have climbed about 36 percent so far this year buoyed by economic growth in the world’s top steel producer and Beijing’s efforts to reduce a supply glut.

But rising raw material prices cut into POSCO’s profit margins during the second quarter versus the prior quarter. Coking coal prices climbed after a cyclone in Australia disrupted rail lines carrying supplies from mines to ports earlier this year.

POSCO’s second-quarter operating profit was 28 percent lower than the first quarter, when profit margins were at 9.1 percent.

The company forecasts operating profit to improve in the third quarter on higher output and sales growth and a likely drop in raw material costs.

Coking coal, used in furnaces to make steel, are forecast to be between $140 and $160 a tonne during the third quarter, down from $194 in the second quarter, the company said.

Meanwhile, iron ore prices will be between $60 and $65 per tonne in the third quarter, down from $63 in the previous quarter, it said.

POSCO executives downplayed the impact of potential U.S. steel tariffs.

To protect U.S. companies against cheaper steel imports from China, South Korea and others, President Donald Trump said last week that he is considering quotas and tariffs.

However, the tariffs would have little impact on POSCO’s sales since U.S. exports only accounted for 1 percent of its sales in the first half of 2017, said Jeong Tak, head of POSCO’s steel business on call discussing the results.

“We will expand domestic demand by products and diversify exports to minimize the impact,” Jeong said.

POSCO shares ended up nearly 3 percent at 327,000 won per share while the benchmark KOSPI index closed 0.5 percent higher before the earnings release. ($1 = 1,124.1700 won) (Reporting by Jane Chung and Hyunjoo Jin; Editing by Christian Schmollinger)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below