Posco OP in 2020 down 38% on year, but raises hope for this year

South Korea¡¯s steel making giant Posco reported a nearly 40 percent on-year drop in operating profit last year due to the weakening steel demand amid the Covid-19 pandemic, but second-half performance raised hopes for this year.

Posco announced Thursday that its operating profit on a consolidated basis totaled 2.4 trillion won in 2020, down 37.9 percent from a year ago. Sales dipped 10.2 percent to 57.8 trillion won and net profit was down 9.8 percent to 1.8 trillion won.

In the fourth quarter ended December, operating profit jumped 29.4 percent to 863 billion won from the previous quarter, extending gains for the second quarter in a row. Sales also added 7 percent to 15.3 trillion won.

Shares of Posco fell 1.8 percent to close Friday at 245,500 won.

The falling steel demand due to the industry slump amid the pandemic and deteriorated margin were the main culprit behind such poor earnings.

It had to put some of its employees on paid leave for the first time since its foundation due to the unprecedented crisis, but emergency management focusing on improving cash flow and cutting cost has led to a rebound in profitability from the third quarter as well as the fourth quarter, the company said.

Despite the decline in profit from the steel business, the global infrastructure division showed a stable performance. Boosted by the brisk business of its construction subsidiary Posco Engineering & Construction, its quarterly operating profit on a consolidated basis grew from 167.7 billion won in the second quarter to 666.7 billion won in the third and 863.4 billion won in the fourth quarter.

Standalone operating profit of Posco tumbled 56.1 percent on year to 1.13 trillion won. Sales fell 12.7 percent to 26.6 trillion won and net income declined 17.8 percent to 965.9 billion won.

The company said in a conference call after the earnings reports that it is in talks with buyers to increase product prices by reflecting raw material price gains to improve profitability.

Posco also announced that it has set a goal to achieve 102 trillion won in revenue in 2023, with 46 trillion won coming from the steel division, 51 trillion won from the global infrastructure and 5 trillion won from new businesses. Sales target for this year is 59.4 trillion won.

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