Net profits down 8.6 per cent at South Korean steel giant

Oct 12, 2010, 11:57 GMT

Seoul - South Korea's top steelmaker on Tuesday reported a drop of 8.6 per cent in earnings for the third quarter, due to a rise in the cost of raw materials, a news report said.

Posco posted net profits of 1.04 trillion won (919 million dollars) for the period from July to September, down from 1.14 trillion won a year earlier, according to Yonhap News Agency.

Net profit was also down 12.7 per cent on the previous quarter.

But sales were up 24.4 per cent in the same period to 8.52 trillion won, the company reported, and operating income gained 9.1 per cent to 1.11 trillion won.

'Costs of iron ore and other materials increased sharply, but such gains were not fully reflected on product prices,' the firm said.

Production of crude steel gained 4.2 per cent year-on-year in the third quarter to 8.21 millions tons, and sales of steel products were up 2.8 per cent to 7.74 million tons.

But sales were still falling short of forecasts. The company said it was reducing its sales target for the year overall to 32.9 trillion won, down from an earlier 33.5-trillion-won forecast, on the back of weak overseas demand.

Operating income for 2010 was now expected to be 5.2 trillion won, less than the original forecast of 5.6 trillion won.

The company, which in August acquired 68.15 per cent of Daewoo International for 3.37 trillion won, planned to invest a total of 10.4 trillion won in capital investment and acquisitions this year.

According to the World Steel Association, Posco was the world's third-largest steel producer in 2009 by volume, behind Luxembourg-based ArcelorMittal and Baosteel Group Corporation of Shanghai.