Posco Holdings' Q2 2023 operating profit falls 38.1% as steel prices weaken
Posco Holdings reported preliminary operating profit of KRW 1.3 trillion ($1.03 billion) for the second quarter of 2023, a 38.1% decline from a year earlier. The South Korean group blamed falling steel prices as weak construction activity in China pushed more low-priced steel into export markets.
Omar Al Nuaimi
Final results confirm the decline
The final figures, released July 24, 2023, left operating profit unchanged at KRW 1.3 trillion. Consolidated net profit fell 55.6% from a year earlier to KRW 800 billion (about $622 million), while sales declined 12.6% to KRW 20.1 trillion.
The company said the annual decline partly reflected a one-off comparison with the post-COVID steel boom and higher steel prices in the second quarter of 2022.
Despite the year-over-year drop, preliminary operating profit beat the KRW 1.22 trillion average analyst forecast compiled by Yonhap Infomax by 6.6%, according to The Korea Times.
On July 24, after the final results were released, Posco Holdings shares closed at KRW 642,000, up 16.5%. Korea JoongAng Daily reported that the gain made the group South Korea's fourth-largest company by market capitalization, behind Samsung Electronics, LG Energy Solution and SK hynix.
China's property slowdown weighs on steel
Posco said declining new property construction in China had left steel that would otherwise have gone into building projects available for export at low prices.
By the end of June, Chinese hot-rolled steel cost $542 per ton, 18.6% less than a year earlier. Over the same period, the average price South Korea paid for hot-rolled steel imported from China fell 28.5%.
"The Chinese steel market is showing a completely different pattern compared with a year earlier," said Chang Jae-hyuk, an analyst at Meritz Securities Co. "The entire steel industry is in recession as the Chinese real estate market fails to rebound despite the government's stimulus measures."
Pohang restart supports quarterly recovery
The comparison with the first quarter was stronger: preliminary group operating profit rose 85.7%, and revenue increased 3.6%, The Korea Times reported.
Korea JoongAng Daily linked the quarterly profit rebound to the restoration of full operations at Posco's Pohang steel mill. Flooding caused by Typhoon Hinnamnor shut the mill on September 7, 2022; it resumed full operations on January 20, 2023, exactly 135 days later.
The July 24 results showed that steelmaking unit Posco earned KRW 841 billion in separate operating profit for April through June. Although that was 36.4% below the year-earlier result, it represented a 235% increase from the first quarter.
Battery materials results and 2030 targets
At subsidiary Posco Future M, costs associated with a newly opened cathode plant in Gwangyang weighed on second-quarter earnings. Operating profit declined 5.6% from a year earlier to KRW 52.1 billion, even as sales climbed 48.5% to a record KRW 1.2 trillion.
A week before the preliminary earnings filing, Posco Holdings set a 2030 sales goal of KRW 62 trillion for its secondary battery materials division. The target was 51% above the estimate it had made the previous year.
Alongside its second-quarter results, the group also announced 2030 production targets of 10.5 million tons of low-carbon steel products and 1 million tons of electrical steel for green vehicles.
