South Korea POSCO's profit falls more slowly in third quarter on improved demand for steel

SEOUL (Reuters) - South Korean steelmaker POSCO posted a 36% fall in year-on-year operating profit in the third quarter, but profits fell by less than expected as a rebound in the automobile industry underpinned demand for steel.

The logo of POSCO is seen at the company's headquarters in Seoul, South Korea, July 20, 2016. REUTERS/Kim Hong-Ji/File Photo

The world’s fifth-biggest steelmaker said steel production and sales recovered to pre-COVID-19 levels during the quarter as coronavirus restrictions eased globally, after demand for steel was hard hit by the pandemic earlier this year.

POSCO said in a statement it expected continued improvement in sales and profitability, as well as solid cash flows, in the current quarter.

Consolidated operating profit for the July-September quarter was 667 billion won ($587.55 million) versus 1 trillion won a year earlier, POSCO said in a statement. It rose from 168 billion won in the second quarter.

That beat an estimate of 521 billion won from 10 analysts, according to an average Refinitiv estimate.

The company’s third-quarter revenue fell 11% year-on-year to 14.3 trillion won, and its net profit rose 4% to 514 billion won.

Steel demand from automakers and builders was hit in the first half of the year as many countries imposed lockdowns to try to contain the spread of the coronavirus.

But since then, heavy stimulus spending in China for construction and infrastructure has helped lift steel consumption, while analysts expect demand to continue to recover next year.

The coronavirus-related decline in global steel demand this year will be less than expected at 2.4% after a buoyant recovery in China, the World Steel Association (WSA) said this month. In June, it had forecast a 6.4% decline.

POSCO shares were up 2.6% by 0147 GMT after the earnings announcement, while the wider market fell 0.2%.

Reporting by Joyce Lee; Editing by Ana Nicolaci da Costa and Christian Schmollinger