Posco is seeing giant gains in profit as steel prices rise.
According to a recent report from Reuters, POSCO said its estimated Q1 operating profit likely grew 82%, far exceeding analyst expectations. The reason is simple.
Steel prices are going up faster than the cost of raw materials.
Here is the full Reuters report.
“South Korean steelmaker POSCO (005490.KS) said on Thursday it estimated its first-quarter operating profit likely jumped more than four-fifths, topping analysts’ expectations, underpinned by solid steel demand in China amid rising prices.
For 2019, the world’s fourth-biggest steelmaker said it expects to nearly double its annual operating profit to 5 trillion won compared with last year, fuelled by higher-margin premium products and improvements in non-steel businesses.
Disclosing preliminary earnings guidance for the first time, the world’s fourth-largest steelmaker said operating profit for January-March was about 1.2 trillion won (0.86 billion pounds), climbing 82 percent from 659.8 billion won a year ago and beating a consensus forecast of 816 billion won from 16 analysts’ views.
Steel prices SRBcv1 in China, the world’s biggest consumer, have risen 16 percent so far in 2017, extending last year’s sharp recovery from a six-year decline as Beijing implements efforts to spur infrastructure spending and cut excess manufacturing capacity.
POSCO, which estimated revenue climbed 17 percent to 14.6 trillion won in the period while net profit more than doubled to 800 billion won, expects to report final first-quarter numbers next month.
Company chairman Kwon Oh-joon, who has restructured affiliates and cut debts at the steel giant to help cope with intense competition from China and once-sagging product prices, was appointed for another three-year term early this month.
The estimates were disclosed after POSCO shares closed down 0.9 percent on Thursday while the broader market .KS11 fell 0.1 percent. The company’s shares have risen 10 percent this year, outpacing the market’s 7 percent rise, after snapping six consecutive years of declines last year.”
Reporting by Hyunjoo Jin; Additional reporting by Manolo Serapio in MANILA