POSCO, the world’s fifth-largest steelmaker, has swung to an operating profit in the third quarter from the second quarter, when it reported its first-ever loss due to the fallout from the COVID-19 pandemic.
The South Korean steelmaker reported in an Oct. 23 regulatory filing that it posted 261.9 billion won ($231 million) in operating profit in the July-September period, a turnaround from the 108.5 billion won loss of the previous quarter.
The latest operating profit figure, however, still marks a 61% decline from the year-earlier period.
Third-quarter net profit soared to 180.8 billion won compared to the second-quarter’s 6.6 billion won profit, but fell 64% from the third quarter of 2019.
Revenue gained 12% on quarter to 6.58 trillion won, but declined 15% from a year earlier.
POSCO attributed the handsome quarter-on-quarter profit gains to the gradual recovery in global economic activity to pre-COVID-19 levels, lower iron ore prices, and growing demand for high-margin steel products for automobiles.
Steel demand from automakers and builders was slashed in the first half of the year as many countries around the world imposed lockdowns in efforts to contain the spread of the coronavirus.
But since then, heavy stimulus spending in China for construction and infrastructure has helped lift steel consumption.
On a consolidated basis, which includes results of its affiliates such as POSCO International, POSCO Chemical and POSCO Energy, the steelmaking group’s operating profit rose nearly 300% on quarter to 666.7 billion won, but declined 36% from a year earlier.
Market consensus for its consolidated operating profit was 478.3 billion won.
Revenue gained 3.9% on quarter to 14.26 trillion won, but fell 11% on year.
Steel products made at POSCO's Gwangyang steel mill STEEL DEMAND FORECAST TO RISE
POSCO said it expects continued improvement in sales and profitability in the coming quarters, helped by a rebound in the automobile industry and increased cross-border shipments.
According to the World Steel Association (WSA), global steel demand is forecast to fall 2.4% this year, but rise 4.1% in 2021 as steel consumption is spreading from China to other countries, including India and Japan.
POSCO said it expects its consolidated operating profit to rise 60% to 3.17 trillion won in 2021 after posting a 48% on-year decline this year.
Shares of POSCO finished 4.8% higher at 220,000 won on Friday, outperforming the broader Kospi market's 0.2% gain.
Write to Man-Su Choe at bebop@hankyung.com In-Soo Nam edited this article.
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