POSCO Q2 net rises on higher steel prices

POSCO, South Korea's leading steelmaker, said Friday that its second-quarter earnings climbed 13 percent from a year earlier on increased steel prices and demand, but said it may face tougher business conditions during the second half of the year. Net profit reached 1.25 trillion won (US$1.19 billion) in the April-June period, compared with a profit of 1.19 trillion won a year earlier, the company said in a regulatory filing. Sales jumped 27 percent to 10.03 trillion won over the cited period, while operating income dropped 16.8 percent to 1.49 trillion won. Shares of POSCO closed at 474,000 won on the Seoul bourse, up 0.85 percent. The second-quarter business results were released after the market closed. In April this year, POSCO raised its domestic product prices for the first time in nine months, which boosted sales. But the steelmaker's second-quarter operating profit was hurt as it did not fully pass on costs under government pressure to contain prices due to rising inflation, although costs of raw materials surged. Asia's fourth-largest economy, heavily dependent on energy and other commodity imports, is battling to curb inflation stoked by high prices of raw materials such as crude, grains, metals, coal and iron ore. POSCO said the steelmaking sector is expected to face weakening global steel demand growth and persistently high raw material prices. The world's third-largest steelmaker said its crude steel output increased 11 percent on-year to 9.28 million tons in the second quarter, with sales of steel products gaining 10.5 percent to 8.66 million tons. POSCO said it set its sales target for this year at 40 trillion won, compared with last year's 32.6 trillion won, and aims to churn out 37 million tons of crude steel, up 10 percent from last year. The steelmaker also said it is targeting 34.7 million tons in sales of steel products this year, up 10 percent from last year. The company said it plans to spend 7.3 trillion won on facility investment and acquisitions this year, down from last year's 9.4 trillion won. POSCO also said it will seek to raise its self-sufficiency ratio of key raw materials to over 50 percent by 2020 from last year's 19 percent. The steelmaker has been trying to buy coal and iron ore mines in Australia, Canada, Brazil and other natural resource-rich countries in a bid to secure stable supplies of raw materials used to make steel products.