South Korea’s largest steelmaker POSCO is emerging stronger from the pandemic-caused economic slowdown, with a record quarterly profit on robust demand from automakers and shipbuilders.
Operating profit for the quarter ending June 30 soared to an all-time high of 2.2 trillion won ($1.9 billion) on a consolidated basis, from 167.7 billion won a year earlier, the company said in a regulatory filing on Friday.
The consolidated profit, which includes results of its affiliates such as POSCO International, POSCO Chemical and POSCO Energy, came as a surprise as it beat market expectations by a big margin.
Second-quarter sales increased 32.9% to 18.23 trillion won from 13.72 trillion won.
The group attributed the dramatic improvement to higher product prices amid strong demand for steel used in the auto, shipbuilding and construction industries.
On a standalone basis, POSCO’s steel-making business returned to an operating profit of 1.61 trillion won from a loss of 108.5 billion won in the year-earlier period. The separate quarterly profit marks the largest amount since the second quarter of 2010, when it posted a gain of 1.71 trillion won.
The company provided no details for the preliminary quarterly results. Final figures, including its net profit, will be announced in the final week of July.
Analysts said POSCO’s full-year consolidated operating profit could rise to more than 7 trillion won, well above the previous record high of 6.5 trillion won in 2008.
POSCO's furnaces FIRST-EVER LOSS A YEAR AGO
Steel demand from automakers and builders dried up throughout last year as many countries imposed lockdowns in efforts to contain the spread of the pandemic.
Hit hard by the negative impact, POSCO posted its first-ever loss in the second quarter of 2020 on an unconsolidated basis, which excludes performances at its non-steel affiliates.
However, the steelmaker now expects a significant improvement in sales and profitability this year, helped by a rebound in the automobile industry and increased cross-border shipments.
After posting its highest quarterly operating profit in nearly a decade in the first quarter of this year, the company said in April it is raising its full-year revenue target by 17.5% to 32.8 trillion won.
It has also raised the steel-product sales target to 35.4 million tons in 2021 from an earlier forecast of 35.3 million tons.
POSCO, the world’s fifth-largest steelmaker by output, said it expects steel demand to outpace supply throughout this year, with the recovery of the global economy.
A rebounding global economy has also boosted the price of iron ore, a key raw material, from $154.9 per ton in February to $226.5 in May -- a 46% increase.
POSCO said it has raised its hot-rolled steel plate prices seven times so far this year to reflect higher prices of iron ore.
POSCO Chairman Choi Jeong-woo speaks at Strong Korea Forum 2021. NON-STEEL AFFILIATES
The steel-making group’s stellar performance in the second quarter was also helped by improving profitability at other affiliates.
POSCO’s non-steel subsidiaries posted a combined 594.3 billion won in operating profit in the three months to June, more than double their profit in the year-year period.
The affiliates’ contribution to the group’s overall profit will increase in coming years as they are diversifying their business portfolio, according to analysts.
POSCO Energy has said it will strengthen its liquefied natural gas (LNG) projects, while reducing its portion in the thermal power generation business, to raise sales revenue in the emission-free business sector.
