Posco's profits decline 10% in 2020 as demand drops

Posco's net profit fell 9.8 percent in 2020 to 1.78 trillion won ($1.6 billion). Annual revenue slumped 10.2 percent to 57.8 trillion won, while operating profit tumbled 37.9 percent to 2.4 trillion won, the company said Thursday.

Posco’s net profit fell 9.8 percent in 2020 to 1.78 trillion won ($1.6 billion).

Annual revenue slumped 10.2 percent to 57.8 trillion won, while operating profit tumbled 37.9 percent to 2.4 trillion won, the company said in its regulatory filing, Thursday.

Posco said the company went through an “unprecedented crisis” last year, due to plummeting steel demand amid the pandemic and a rise in raw material prices. For the first time in the group’s 53-year history, it granted a paid leave to some employees.

The company’s business improved in the second half.

“Dramatic cost cuts and decisions to redirect production and sales to meet a rapidly changing market demand helped our profitability rebound from the third quarter,” Posco said in a Thursday statement.

Posco reported 167.7 billion won in operating profit in the second quarter, 666.7 billion won in the third quarter and 863.4 billion won in the fourth.

In 2020, net profit at the steelmaking unit fell 17.8 percent to 965.9 billion won. Operating profit slumped 56.1 percent to 1.1 trillion won, while its annual revenue fell 12.7 percent on year.

The steelmaking unit’s struggle was partly offset by a stronger performance from the Posco Engineering & Construction subsidiary and Posco Energy’s liquefied natural gas (LNG) business, the company said. As a result, it was able to maintain sustain last year’s debt ratio at 65.9 percent, similar to 2019’s 65.4 percent.

The performance goal for 2021 was set to generate revenue of 59.4 trillion won in revenue. The group plans to use a total of 6.1 trillion won in investments this year.

On Thursday, Posco announced a roadmap for its future business portfolio. Like many other players in traditional manufacturing, the steelmaker faces a major task in transforming its portfolio to be more ecofriendly.

In steel, Posco said it will keep developing high-value products that could be used for future mobility and materials usedfor generators using ecofriendly power sources. Posco will focus on spotting opportunity in LNG businesses including trading and production.

Electric vehicle batteries is another potential market the group is eyeing on — especially battery components and the supply of nickel and lithium. From this year, it will also start preparing to get involved in hydrogen-related endeavors, with a goal of exporting the energy source from 2026.

“With the mid-term business plan, our goal is to realize annual revenue of 102 trillion won in 2023 — in which 46 trillion won will come from steel, a larger 51 trillion will come from infrastructure and 5 trillion will come from new businesses,” the company said.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]