Korean Dongkuk Steel profits surge as Brazil CSP turns profitable

Dongkuk Steel Mill Co., the world’s leading manufacturer of color-coated steel, reported the largest operating profit in 13 years on strong demand, while its Brazilian unit turned into the black, improving the South Korean company’s financial structure.

Dongkuk, the country’s third-largest steelmaker, said on Thursday its operating profit more than doubled to 803 billion won ($669.2 million) in 2021, the biggest since 2008, from 294.7 billion won in the previous year on a consolidated basis. Sales rose 39.1% to 7.2 trillion won.

Higher product prices amid rising costs of raw materials such as metal scrap contributed to such strong earnings, Dongkuk said.

Sales of its premium color-coated steel increased with the stabilization of a new production line completed in September last year, according to the company. It also developed high-tech plates and commercialized a new H-steel model.

BRAZILIAN UNIT TURNS INTO THE BLACK

Dongkuk reported a net profit of 605.6 billion won last year, almost nine times of 69.5 billion won in 2020, as its Brazilian unit, Companhia Siderurgica do Pecem steel mill, commonly known as CSP, turned profitable after years of losses.

CSP, in which Dongkuk holds a 30% stake, logged a preliminary operating profit of some 700 billion won, the largest since 2016, the South Korean company said, on increasing steel demand from the US and Europe. CSP is 50% owned by Brazil’s mining giant Vale S.A. and South Korea’s top steelmaker POSCO holds the remaining 20% stake.

The net profit’s jump improved Dongkuk’s financial structure with its debt ratio down to 125% last year from 207% in 2015. The company expected upgrades in its credit ratings. In October last year, Korea Investors Service Inc., an affiliate of Moody’s Investors Service, raised its rating to BBB with a stable outlook from BBB- with a positive outlook.

Dongkuk planned capital expenditures to raise color-coated steel output to 1 million tons a year by 2030 from the current 850,000 tons while seeking expansion of global production and sales bases in Mexico and Vietnam.

Write to Jung-hwan Hwang at jung@hankyung.com
Jongwoo Cheon edited this article.