Hyundai Steel Turns Profit Amid COVID-19... "Significant Performance Improvement from Q4" (Comprehensive)

"Electric Vehicle Steel Sheet Development Plan... Hyundai Motor and Hydrogen Vehicle Technology Development Underway"
Special Steel Expected to Reach Break-even Point as Demand Recovers Post-COVID-19
Electric Furnace Performance Improvement Drives Turnaround to Profitability

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Steel succeeded in turning a profit in the second quarter of this year, recording an operating profit of 14 billion KRW despite the impact of the novel coronavirus disease (COVID-19). With the normalization of factory operating rates at global automakers in the second half of the year, performance is expected to improve significantly from the fourth quarter.

In the second quarter earnings conference call, Hyundai Steel announced that operating profit recorded 14 billion KRW, down 94% compared to the same period last year. Sales amounted to 4.1133 trillion KRW, a decrease of 26.2%. Notably, operating profit turned positive from a loss in the first quarter, while sales dropped by 11.9%.

The company explained that although sales in the blast furnace segment slowed due to the downturn in demand industries such as automobiles and shipbuilding amid the COVID-19 impact, the improvement in the electric furnace segment’s performance led to a turnaround to profitability in the second quarter. Additionally, having a diverse product portfolio covering both long products and flat products allowed the company to improve profitability despite the overall sluggishness in flat products.

Hyundai Steel stated, "Performance is expected to improve significantly from the fourth quarter," adding, "Cold-rolled and hot-rolled products saw the lowest operating rates at overseas automaker plants in the second quarter, and with lockdowns easing in the second half, sales volume is expected to increase substantially in the fourth quarter."

Regarding the specialty steel business, which has had low profitability, the company said, "Once the COVID-19 situation stabilizes and demand normalizes, we expect to reach the break-even point."

In particular, "In the specialty steel segment, when quality was low, we secured it by using high-priced scrap, but now we can maintain quality even with low-priced scrap," and "The cost reduction and switching to low-cost raw materials have been technically successful, resulting in remarkable growth in variable costs compared to the previous year."

Despite the worsening external business environment, Hyundai Steel is pursuing various measures to achieve its goal of qualitative growth focused on profitability, including business structure reorganization, stabilization of specialty steel quality, equipment performance improvement through the innovation activity 'HIT,' and improvement of quality nonconformities.

In this regard, the company explained, "The electric furnace thin hot-rolled coil plant is currently suspended, and a final decision will be made in the second half," adding, "Basically, we are undergoing business restructuring to enhance the competitiveness of the steel business and secure profitability in the mid to long term."

Above all, Hyundai Steel emphasized that it is focusing its capabilities on developing new steel grades to expand the global automotive steel sheet supply while continuously strengthening related marketing to expand sales channels. They expect profitability to gradually improve based on the normalization of automotive steel sheet volumes due to the recovery of global automobile production in the second half and efforts to reduce losses in low-profit sectors.

To secure competitiveness in the electric vehicle market, the company announced plans to develop automotive steel sheets for electric vehicles.

They further explained, "Electric vehicle sales are expected to increase to 1 million units by 2025," adding, "Due to battery weight, aluminum is partially applied in high-end car models for lightweighting, but overall, the impact on the vehicle body will not be significant."

Additionally, by operating the third sintering exhaust gas purification facility at the Dangjin Steelworks, the company plans to complete improvement investments in purification facilities for a total of three sintering plants, aiming to reduce air pollutant emissions by more than 50% compared to 2018.

Meanwhile, '(Hyundai IFC Co., Ltd.),' launched in April through the physical spin-off of the forging business division, demonstrated the efficiency of an independent management system by achieving profitability in the second quarter through early normalization.

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