POSCO Holdings Q2 profit down on higher raw material costs

POSCO Holdings Inc., the holding company of South Korea’s steel giant, reported a lower profit in the second quarter on rising raw material prices although strong revenues from affiliates powered the group’s total sales to a quarterly record high.

POSCO Holdings on Thursday said its operating profit fell 4.7% to 2.1 trillion won ($1.6 billion) in the April-June period from a year earlier even as its sales soared 25.8% to 23 trillion won, the highest level for a quarter.

A company official said surging commodity prices amid a slowing global economy took a bite out of profit.

The operating profit of its steel unit POSCO, the world’s No. 6 player in the industry, dropped 14.4% to 1.8 trillion won as rising coal and iron ore prices hurt profitability despite a 22.6% jump in sales to 19.3 trillion won.

POSCO Holdings revised up its sales forecast for this year to 86 trillion won from the previous 77.2 trillion won thanks to healthy revenue in the second quarter.

That helped its shares end up 1.29% at 235,000 won on Seoul’s main stock exchange, outperforming the 0.93% gain of the wider Kospi. In addition, the company is considering measures to boost shareholder value such as share cancelation.

“We are mulling steps for shareholder value including the cancelation of currently held treasury shares,” said Jeon Joong-Seon, head of POSCO Holdings’ management strategy division, during an earnings call.

STRONG EARNINGS FROM POSCO CHEMICAL, POSCO INTERNATIONAL

POSCO Chemical Co., the group’s chemical and battery material maker, reported record earnings in the second quarter.

Its operating profits jumped 55.1% to a record 55.2 billion won, beating the market consensus forecast of 32 billion won, as sales soared 67.3% to 803.2 billion won with prices of cathode materials, a key ingredient for electric vehicles batteries, staying elevated. The company has been reporting record sales for an eighth straight quarter.

POSCO Chemical is scheduled to complete the construction of a domestic production line with an annual capacity of 90,000 tons in the second half, expanding battery materials production capacity.

POSCO International Co. also enjoyed its largest-ever operating profit and sales for a second consecutive quarter.

The group’s trading company reported an operating profit of 320.6 billion won, up 88.6% on-year, and sales of 11.1 trillion won, 29.9% higher than a year earlier.

The operating profit from its trading business rose 22% to 113.6 billion won thanks to higher sales of steel products, while the profit from its energy unit including the Myanmar gas field soared 219% to 104 billion won on surging gas prices.

POSCO ICT Co., the group’s engineering and IT service provider, turned to the black with an operating profit of 14.5 billion won as sales rose 28.3% to 238.1 billion won. The reorganization of its business structure also contributed to the company’s turnaround.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Jongwoo Cheon edited this article.