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Earnings

POSCO revises up sales target after Q1 profit rises to 10-year high

POSCO raises sales target after Q1 profit hits 10-year high

Apr 26, 2021 (Gmt+09:00)


Hot-rolled steel plates produced by POSCO.
Hot-rolled steel plates produced by POSCO.

South Korea’s largest steelmaker POSCO said on Monday it’s raising this year’s sales target by 17.5% after posting its highest quarterly profit in nearly a decade on strong demand amid China’s move to cut steel production.

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 120% to 1.55 trillion won in the first quarter from the year-earlier period, the company said in a regulatory filing.

The operating profit markets the largest amount since 1.7 trillion won in the second quarter of 2011.

First-quarter revenue increased 10.5% on year to 16.07 trillion won, it said.

“All of our business divisions, including steel, infrastructure and new growth, showed improved earnings, boosted by the growing COVID-19 vaccinations and economic boosting measures by governments around the globe,” said Jeon Joong-seon, chief of POSCO's strategic planning division, during a conference call with analysts.

Buoyed by the stellar first-quarter performance, POSCO said it is raising its revenue target for this year to 32.8 trillion won from an earlier goal of 27.92 trillion won. It also raised the steel-product sales target to 35.4 million tons in 2021 from an earlier forecast of 35.3 million tons.

UPBEAT OUTLOOK

POSCO, the world’s fifth-largest steelmaker by output, said steel demand is outpacing supply with the recovery of the global economy.

“Our contracts with local and foreign clients for product shipments are already over until the end of June,” said Kim Young-joong, POSCO's marketing strategy chief. “There’s a supply shortage particularly in Europe, boosting prices.”

The price of hot-rolled steel plates is hitting fresh record highs almost every day, rising to $1,500 per ton recently, he said.

POSCO revises up sales target after Q1 profit rises to 10-year high


Hot-rolled steel plates, created by rolling out slabs produced from a casting system, are used as a basic material for steel products.


The hike came as POSCO and other steelmakers are raising prices of their key products amid strong demand for steel used in cars, ships and construction.

Steel demand from automakers and builders dried up throughout last year as many countries imposed lockdowns in efforts to contain the spread of the pandemic.

However, POSCO now expects a significant improvement in sales and profitability this year, helped by a rebound in the automobile industry and increased cross-border shipments.

CHINA’S OUTPUT CUT TO PROVIDE TAILWIND

Analysts said the steel price uptrend will persist this year as a supply shortage is expected to deepen on China’s announced crude steel production cut as part of its carbon emission reduction efforts.

The Chinese government recently said seven of the 23 steel plants in Tangshan, an industrial prefecture-level city in the northeast of Hebei province, will cut their steel output by 50% in the first half and 30% in the second half.

Industry watchers said Chinese steelmakers that do not meet the quality standard set by the authorities are forced to cut their production under Beijing's drive to pursue a carbon-neutral policy.

Steel products made at POSCO's Gwangyang steel mill.
Steel products made at POSCO's Gwangyang steel mill.

On Monday, POSCO Chemical also reported spectacular first-quarter results.

Operating profit in the January-March period more than doubled to an all-time high of 34.3 billion won on a consolidated basis.

Revenue increased 20.6% on year to a record 467.2 billion won.

Shares of POSCO finished up 2% at 362,500 won on Monday, outperforming the broader Kospi market’s 1% gain. The stock has risen 33% so far this year.

Shares of other Korean steelmakers are performing well on the upbeat industry outlook.

Hyundai Steel Co., the country’s No. 2 steelmaker, has gained 31% year to date, while Dongkuk Steel Mill has advanced 191% this year.

Write to Kyung-Min Kang and Sung-Mi Shim at Kkm1026@hankyung.com

In-Soo Nam edited this article.

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