* Q4 operating profit 379 billion won vs 490 billion won
* Targets 32 trillion won in 2013 sales, down 10 percent
* Plans to invest 4 trillion won in 2013, up from 3.6
trillion last year
SEOUL, Jan 29 POSCO, the world's
No.5 steelmaker by output, reported a 51 percent slump in
quarterly operating profit as tepid demand and falling prices
offset lower raw material costs helped by a firmer local
The South Korean steelmaker on Tuesday forecast its 2013
sales may drop 10 percent to 32 trillion won ($29.3 billion),
but said it would raise investment 11 percent to 4 trillion won
this year to stay competitive.
POSCO, backed by billionaire investor Warren Buffett, said
that its operating profit for October to December fell 51
percent to 379 billion won ($346.7 million) on a parent basis
that does not reflect earnings of affiliates from a year
earlier, below a consensus forecast of 490 billion won in a
Reuters' poll of 25 analysts.
The fourth-quarter result compared with a 771 billion won
operating profit a year earlier. Fourth-quarter sales fell 20
percent to 8.07 trillion won, compared with a consensus forecast
of 8.35 trillion won.
POSCO has been posting higher margins than its bigger peers
ArcelorMittal SA, Nippon Steel & Sumitomo Metal Corp
, backed by its dominant position in the domestic market
and its cost efficiency.
POSCO has not been immune to a prolonged industry downturn
as the weak global economy has hurt demand and prices for the
alloy used in the automobile, shipbuilding, construction and
home appliance sectors.
Recent economic data from China points to the recovery of
the world's top steel consumer this year after the economy grew
at the weakest pace in 13 years last year. But the rebound would
be a tepid 8.1 percent, with Europe's debt crisis and a slow
U.S. recovery weighing on exports, a Reuters poll showed last
"The global race for survival will be fiercer than ever this
year," POSCO CEO Chung Joon-yang said in a statement, adding he
expects the global economy to remain sluggish despite moderate
recovery in China and the United States.
Shares in POSCO, 5 percent owned by Warren Buffett's
Berkshire Hathaway , ended down 0.1 percent
prior to the results, after rebounding since late November on
hopes China's economy will recover.
STRONGER WON: BAD OR GOOD?
Byun Jong-man, an analyst at Woori Investment & Securities,
said the appreciation of the South Korean won helped reduce
POSCO's import costs of iron ore and coking coal in the fourth
POSCO's costs of iron ore and coking coal declined by nearly
a third to 357,000 Korean won per tonne in the fourth quarter
from 519,000 won, according to estimates by Mirae Asset
The stronger South Korean won would do more good than harm
for the steelmaker in the near term, "given its bigger raw
material imports than steel product exports," according to Sinn
Min-seok, an analyst at Credit Suisse. POSCO's exports accounted
for 42 percent of its sales volume in the third quarter of last
The South Korean won rose almost 8 percent against the U.S.
dollar last year, its fastest pace since 2009 and Credit Suisse
estimated the appreciation of every 10 won against a dollar
would increase POSCO's annual operating profit by 40 billion
But the stronger won threatens to hurt steel demand from
automakers and other exporters for the longer term, the
APPETITE FOR M&A
POSCO's CEO Chung has spearheaded major investments and
acquisitions, including the purchase of trading and resources
firm Daewoo International for 3.37 trillion won in
2010, leaving the steel giant with heavy debts and leading to a
series of rating cuts by Moody's, S&P and Fitch last year.
POSCO has been struggling to cut debt by selling assets of
its affiliates, but in a setback, its unit POSCO Specialty
Steel, canceled a plan to list shares worth up to $424 million
on the stock market because of tepid demand from investors.
POSCO is continuing its efforts to snap up overseas
resources to secure stable supplies of iron ore and coking coal.
A consortium including POSCO and Taiwan-listed China Steel
Corp agreed to buy a 15 percent stake in ArcelorMittal
Mines Canada for $1.1 billion.
Another group including POSCO was also open to resuming $1.2
billion bid talks with Australian mining firm Arrium Ltd
, a source told Reuters early November, after the
consortium, which also includes Noble Group Ltd, had
dropped the bid on price differences.