POSCO Reports Operating Profit of 705.3 Billion KRW in Q1... Holds Steady Despite Decline in Sales Volume

41.3% ↓ Year-on-Year... 26.5% ↑↑ Quarter-on-Quarter
Minimizing Performance Decline Through Exchange Rate Defense and Domestic Sales Expansion

[Asia Economy Reporter Hwang Yoon-joo] POSCO's operating profit in the first quarter of this year fell 41.3% compared to the same period last year but increased 26.5% from the previous quarter. Despite adverse factors such as blast furnace maintenance, postponement of product price hikes, and the COVID-19 pandemic, the company is evaluated to have performed well through measures such as exchange rate defense and expansion of domestic sales.

POSCO announced that its consolidated operating profit for the first quarter was 705.3 billion KRW, down 41.3% year-on-year. During the same period, sales amounted to 14.5458 trillion KRW, and net profit was 434.7 billion KRW, decreasing by 9.1% and 44.1%, respectively. The operating profit margin stood at 4.8%.

In the first quarter, the third blast furnace at the Gwangyang Steelworks underwent maintenance, reducing sales volume by about 400,000 tons and increasing fixed costs. However, spread improvement due to exchange rate defense led to better operating profit compared to the fourth quarter of last year.

POSCO explained, "Despite the global spread of the COVID-19 crisis, the steel sector focused on defending profitability through flexible market responses such as expanding the proportion of domestic sales. In the global infrastructure sector, steady performance from POSCO International's Myanmar gas field, improved profits in POSCO Engineering & Construction's building business, and lower fuel costs at POSCO Energy contributed to a 26.5% increase in operating profit compared to the fourth quarter of last year, driven by strong trade, construction, and energy businesses."

On a separate basis, operating profit was 458.1 billion KRW. Sales were 6.9699 trillion KRW, and net profit was 453 billion KRW.

Compared to the previous quarter, maintenance of the third blast furnace at Gwangyang and repairs of rolling lines such as hot rolling and thick plate reduced crude steel and product output by 540,000 tons and 240,000 tons, respectively. However, operating profit increased by 24.8% due to a decline in raw material prices since the fourth quarter of last year. The operating profit margin rose by 1.6 percentage points to 6.6%.

Before the full-scale spread of COVID-19, POSCO proactively raised 3.3 trillion KRW in repayment funds by January this year, enhancing liquidity. The current ratio, used as an indicator of corporate stability, improved significantly to 497.1% on a separate basis in the first quarter, compared to 422.7% in the first quarter of last year, marking the highest level among domestic companies. Cash and cash equivalents included in current assets increased by about 4 trillion KRW year-on-year to 11.7 trillion KRW on a separate basis.

Meanwhile, the 1 trillion KRW trust fund for share repurchase announced on the 10th was a decision to improve the undervalued stock price due to COVID-19 as part of an active shareholder return policy. Since surplus cash is being utilized, there are no plans to change the mid-term dividend policy, which targets a payout ratio of about 30%, or to take on additional borrowings.

POSCO forecasted that due to the global spread of COVID-19, steel demand will decline and product prices will fall amid recessions in demand industries such as automotive and construction. The company plans to operate production and sales activities flexibly according to changes in the business environment and implement high-intensity measures such as extreme reduction of indirect costs unrelated to production and adjustment of investment priorities to improve business performance.

This content was produced with the assistance of AI translation services.