Posco Net Profit Slides on Won Strength, Weak Demand

SEOUL--South Korea's largest steelmaker Posco said Tuesday fourth-quarter net profit fell 60% as weaker world-wide demand and the won's strength hit steel prices.

Net profit in October-December was 203 billion won ($187 million) on a parent basis that excludes earnings of affiliates, the company said. That compares with a profit of 512 billion won in the fourth quarter of 2012.

A protracted slump in the steel industry, coupled with China's excess capacity, has weakened global steel demand and prices, hurting Asian steelmakers like Posco and Chinese rival Baosteel.

Posco, in which Warren Buffett's Berkshire Hathaway holds a stake of about 5%, said it expects another tough year in 2014 and cut its investment plans by 14% to 3.7 trillion won.

Fourth-quarter sales declined 4.5% to 7.71 trillion won, while operating profit rose 29% to 488 billion won on higher sales in value-added products like enhanced steel for cars, it said.

However, the South Korean won's strength against the dollar and the yen eroded Posco's repatriated earnings from overseas, cutting into export margins. In comparison Japan's Nippon Steel & Sumitomo Metal has said it expects a sharp rise in annual profit, helped by a weaker yen.

The won gained 3% against the dollar and surged 27% versus the Japanese yen in the fourth quarter from a year earlier.

On a consolidated basis, the world's fifth-largest steelmaker posted a full-year net profit of 1.36 trillion won, down 43% from 2012. Revenue fell 2.7% to 61.87 trillion won.

Earlier this month the Korean steelmaker tapped Kwon Oh-joon to be its new chief executive officer, succeeding Chung Joon-yang who resigned in November after a global downturn in the steel industry hit its earnings.

Write to In-Soo Nam at [e-mail]

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