Posco Rolls Out Record Quarter
Steel Price Drives Doubling Of Profit to $1.13 Billion;
Solid '05 Results Forecast
By SEON-JIN CHA
DOW JONES NEWSWIRES
January 13, 2005 4:31 p.m.
SEOUL, South Korea -- High steel prices helped Posco more than double its fourth-quarter net profit, and the company said its high-end products will help it overcome surging raw-materials costs and possible steel-price declines to chalk up another solid year in 2005.
The world's fifth-largest steelmaker in terms of output said net profit for the fourth quarter was a record 1.18 trillion won ($1.13 billion), compared with 462.3 billion won a year earlier.
"A boom in the global steel market and an overall increase in sales contributed to our record-high performance," Posco said.
The South Korean steelmaker had an operating profit of 1.61 trillion won for the quarter, more than twice the year-earlier 778.3 billion won. Sales rose 43% to 5.61 trillion won.
Eight analysts surveyed by Dow Jones Newswires had estimated fourth-quarter net profit at 1.08 trillion won on sales of 5.3 trillion.
"It can't be any better than this," said Yang Ki In, an analyst at Daewoo Securities, in reference to the earnings. "Posco has been raising prices in the domestic market in line with international trading prices, and it will have to hike the prices further this year to reflect higher material costs."
The global steel industry has enjoyed a sharp rise in steel prices, backed by strong demand from China and economic recovery world-wide.
"We will have to raise prices this year, as we cannot absorb all of the surging material costs," Chairman and Chief Executive Lee Ku Taek told analysts and journalists at a presentation Thursday. Mr. Lee didn't provide details on the timing of price increase.
Prices for hot-rolled steel , Posco's benchmark product, jumped 52% in 2004 from the previous year.
Posco said last week that it reached an agreement with Australian miners to increase the price it pays for hard coking coal to $125 a ton beginning in April, more than double the year-earlier price of $57.50 a ton.
Although Posco hasn't concluded price negotiations for iron ore, a key ingredient of steelmaking along with coking coal, the company said it is expecting a "considerable increase" in those prices as well.
Recently, observers have said the outlook for the global steel industry has dimmed somewhat because of skyrocketing raw-materials prices and signs Chinese demand is waning because of Beijing's measures to rein in its economy.
Mr. Lee sought to dispel such worries in Thursday's presentation, but he conceded that the company's materials costs would rise by one trillion won this year. Posco is expected to pay between 9.1 trillion won and 9.2 trillion won for iron ore and coking coals this year, up from 8.1 trillion won estimated for 2004, said another Posco executive.
However, "I don't see there'll be an overflow in steel supply in China any time soon, especially for the high-end products we are producing," Mr. Lee said. "Though China turned to a net exporter of steel temporarily in September to October, it was due to the increased shipments of lower-end products like steel bars or half-finished products. Demand for our products still remains high."
Posco said it is targeting sales of 23.01 trillion won this year, up 16% from 2004, while its aims for operating profit to rise by 15% to 20%.
For all of 2004, Posco realized a net profit of 3.83 trillion won, up 93% from a year earlier, while operating profit rose 65% to 5.05 trillion won. Sales rose 38% to 19.79 trillion won.
The steelmaker plans to invest 4.08 trillion won this year, sharply higher than 2.28 trillion won spent in 2004, to increase production capacity and refurbish facilities. |
