Posco, the world’s fourth largest steelmaker, posted a 25 percent drop in quarterly profit and cut its annual sales and investment outlooks, as a cooling China economy sapped demand for automotive and shipbuilding steel.
The results come on the heels of a cut in POSCO’s credit rating by Standard & Poor’s, which cited likely tough conditions for the industry over the next 12 to 18 months and which sent its shares down 2.1 percent on Tuesday.
The slowdown for China, the world’s biggest consumer and producer of steel, has sent steel prices there tumbling to a three-year-low in September.
This was down from 1.09 trillion won a year ago, marking a third consecutive quarter of profit decline. POSCO made 1.06 trillion won in the previous quarter.
The South Korean firm cut its 2012 sales target for a third time to 36.3 trillion won, down 3.2 percent from its latest estimate in July and 12 percent below the top of its initial range given in April.
Its investment target, which includes investment in resources but not broad M&A, was cut to 3.9 trillion won, down 300 billion won from its latest estimate and some $1 billion below its initial forecast.
Quarterly parent sales fell 11 percent to 8.9 trillion won, versus an average forecast of 8.95 trillion won.
Its weakened earnings outlook has prompted brokerages to cut their target share prices for the company and its stock has lost 8.3 percent so far this year, after slumping 21 percent and 22 percent in 2010 and 2011, respectively.
Warren Buffett’s Berkshire Hathaway owns some 5% of POSCO.
Japanese steelmaker JFE Holdings plans to announce quarterly earnings on October 24. ArcelorMittal , the world’s largest steelmaker, will report on October 31 while Nippon Steel and Sumitomo Metal Corp, which merged this month, will report results on November 9.
[Source — Business Standard]