Posco’s on year operating profit, sales drop for Q1

Posco reported on year declines in both operating profit and sales in the first quarter due to the continued sluggish demand for steel worldwide.

The steel manufacturer on Friday announced it reported 705.3 billion won ($630 million) in operating profit in the January-March period, down 41.37 percent on year, on 14.55 trillion won sales, also down 9.17 percent compared to the previous year. Its net profit decreased 44.15 percent to 434.7 billion won from 778.4 billion won on year.

They are consolidated figures that include performance of the steel manufacturer and its affiliates, including Posco Chemical, Posco E&C and Posco Energy.

Operating profit from steel business reported 382.8 billion won, down 57.14 percent from 893.2 billion won in the first quarter last year. Challenges in the shipping, construction and automobile business worldwide all contributed to the profit dip.

“The first quarter is the result of the sluggish global steel demand that began since the second half of last year,” said a Posco spokesperson during a conference call Friday morning. “In a time when concerns about the spread of coronavirus become more serious, automobile and construction businesses also struggled from the dip in product price.”

Posco projected its sluggish sales to continue in the second quarter as 10 of its overseas factories were forced to shut down due to the government guidelines as a result of the coronavirus pandemic.

The factories are scheduled to remain closed until early May.

Posco expects its sales to bounce back in the third quarter on recovered automobile sales.

Posco’s exports account for 45 percent of its sales. Situations in America, Europe and India are particularly grave, according to Kim Young-joong, head of marketing strategy office at Posco.

“In response to a decline in orders from overseas, Posco will try to recover [the losses] by defending the domestic market,” said Kim. “Large scale economic stimulus expected in China will also help.”

Posco denied the possible acquisition of Doosan Solus, an electronics parts supplier. Refractory Posco Chemical makes secondary battery materials.

“At this point, there’s no merger and acquisition plan in terms of secondary battery business,” said a spokesperson for Posco. “Up until now, we have decided to expand the business facilities utilizing internal capabilities.”

Posco said it will strengthen emergency management plans and cut down costs, shifting its focus from profit and loss to cash flow management.

Posco secured 3.3 trillion won in funds before the coronavirus outbreak. Earlier this month, the company said it would buy 1 trillion won worth of its shares. The company will start buying the shares in May.

“In accordance with the change in management environment, Posco will flexibly respond to production and sales while making extreme cuts on non-operation expenses, and readjusting investment priority,” said a spokesperson for Posco.

BY JIN MIN-JI [jin.minji@joongang.co.kr]