3 Min Read
SEOUL (Reuters) - South Korea's POSCO (005490.KS) reported the steepest quarterly profit decline in three quarters as a strong local currency made the steelmaker's prices less competitive in an export market where demand growth has been weak.
POSCO in April-June had to contend with a South Korean won strengthening against the U.S. dollar at its quickest rate in three years. That made its products expensive abroad and reduced the value of income earned in other currencies.
At the same time, POSCO on Thursday said it has been "under enormous pressure" to lower prices from local automakers including Hyundai Motor Co (005380.KS) and General Motors Co's (GM.N) Korean subsidiary, who are trying to fend off imported vehicles made cheaper by the strong won.
The world's sixth-biggest steelmaker by output also said it expected economic stimulus measures in No.1 steel consumer China to raise demand and prices slightly during July-September, but not enough to remedy a long-time supply glut.
As a result, POSCO said it now targets 2014 sales of 30.0 trillion won ($29.17 billion) rather than an earlier goal of 30.3 trillion won. In April-June, sales fell 4 percent to 7.42 trillion won.
Operating profit in the second quarter totaled 565 billion won compared with a 578 billion won mean estimate of 21 analysts polled by Reuters.
The profit result was 20 percent lower than the 703 billion won of a year earlier, marking the steepest annual decline since July-September last year.
Shares of POSCO closed 0.8 percent higher ahead of the earnings announcement versus a 0.1 percent decline in the broader market .KS11. The stock has fallen 1.8 percent so far this year, compared with a 0.8 percent rise in the benchmark.
POSCO on Thursday said it aims to raise about 2 trillion won by the end of 2015 through restructuring, after four years of investment and acquisitions more than doubled its debt.
The sharp rise in debt led to a series of credit-rating cuts by international raters and the company's first domestic cut in 20 years. The higher the credit rating, the easier and cheaper it is to borrow money.
Chairman and Chief Executive Kwon Oh-joon took office in March pledging to shed non-core businesses and reduce debt. Last week, POSCO said it would sell three assets including a liquefied natural gas terminal.
Last month, POSCO also said it had decided against buying two subsidiaries of conglomerate Dongbu Group, citing financial burden and difference over price.
($1 = 1028.4500 Korean Won)
Reporting by Hyunjoo Jin; Additional reporting by Kahyun Yang; Editing by Christopher Cushing