Posco 4th-Qtr Profit Surges to Record 1.19 Trln Won (Update2)
Jan. 13 (Bloomberg) -- Posco, the world's most profitable steelmaker, more than doubled net income to a record in the fourth quarter after demand from China boosted prices.
Profit rose to 1.19 trillion won ($1.1 billion) in the three months to Dec. 31, from 462.3 billion won a year earlier. The figure was calculated by subtracting nine-month earnings from full-year results released by the Pohang-based company in a statement.
Chinese demand for cars, ships and appliances helped drive steel prices to a record high last year, enabling Posco, Nippon Steel Corp. and other producers to pass on surging costs for coal and iron ore. Posco plans to invest some of its $3.5 billion in cash in China, Brazil and India to ensure growth as domestic demand slows and to secure raw material supplies.
``The company's steel business will continue to be in good shape this year,'' said Yoo Ji Yeong, who helps manage the equivalent of $965 million at CJ Investment Trust Management Co. in Seoul, including Posco shares. ``I expect Posco to raise its domestic steel prices at least twice in the first half.''
Posco's shares rose 1.7 percent to 181,000 won, closing higher for only the second time in 10 trading days.
The company released its earnings ahead of schedule after Reuters reported details from a speech prepared for Kang Chang Oh, president of the company, that was due to be given to the Federation of Korean Industries tomorrow.
Full-year earnings at Pohang-based Posco rose 93 percent to 3.83 trillion won, from 1.98 trillion won, the company said in a statement to the South Korean stock exchange.
Sales
Sales for 2004 rose 38 percent to 19.79 trillion won, Posco said in its statement. Operating profit rose 65 percent to 5.05 trillion won, it said.
The median forecast of eight analysts polled by Bloomberg was for fourth-quarter net profit of 1 trillion won and for full- year net profit to rise 85 percent to 3.67 trillion won.
Profit growth may slow to 6.6 percent this year, the analysts said. Earnings may start falling next year as costs rise faster than steel prices.
Coking coal prices will more than double in the year starting April 1 after Japanese mills agreed in benchmark-setting talks to pay BHP Billiton, the world's largest mining company, about $125 a metric ton. Iron ore prices may rise 20 percent to a record, analysts polled by Bloomberg in December said.
China
Analysts such as Pitzi Lau at Citigroup Inc. and Se Chung at Samsung Securities Co. said it may be harder for Posco to pass on higher raw material costs to consumers as demand in China slows and a surge in Chinese production increases competition.
``China's strong steel imports were the key drivers of Asian steel prices in 2003 and 2004,'' Lau said in a Jan. 10 report. ``The steel cycle will weaken due to a China slowdown and an increase in Chinese supply.''
Prices of Chinese imports of hot-rolled coil, an Asian benchmark, rose 59 percent to $615 a ton last year, according to Metal Bulletin data.
Samsung's Chung said it may be difficult for Posco to pass on costs as easily as last year because global steel prices may be flat or fall in the second half. Posco raised steel prices as much as four times last year. Chung expects the company to raise average domestic steel prices by about 50,000 won a ton in February.
Chinese steel production grew 22 percent in the first 11 months of 2004, adding more than the output of South America in the period, according to Brussels-based International Iron & Steel Institute.
China is Posco's biggest export market, buying 2.5 million tons of steel in 2003, up 50 percent from 2002. Posco has said it plans to invest $2.25 billion in the country.
Posco also plans to build plants in India and Brazil that would bring it closer to raw materials. The company plans an $8.4 billion mill and mine in the Indian state of Orissa with BHP. It is also in talks with Cia. Vale do Rio Doce, the world's largest iron ore producer, over a slab mill in Brazil.
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