Drop in sales, rise in production costs reduce POSCO profits

Rising raw materials costs coupled with falling output and sales dealt a significant blow to POSCO’s profits for the third quarter of the year.

POSCO’s operating profits for the quarter that ended Sept. 30 came in at 1.11 trillion won ($982 million), down 39.5 percent compared to the second quarter of the year, the company said in a regulatory filing on Tuesday.

Third-quarter net profits of the world’s fourth-largest steelmaker came in at 1.04 trillion won, a drop of 12.7 percent from the second quarter.

POSCO’s revenues for the third quarter, however, increased by 7.5 percent from the second quarter to 8.52 trillion won as the increased raw materials costs were reflected in products sold during the period, the company said. 

Over the same period, the company’s crude steel output decreased by 1.8 percent to 8.2 million metric tons, while sales declined by 1.2 percent to 7.74 million tons. 

The company attributed the drop in sales to the temporary decrease in its production capacity brought on by maintenance work on the Pohang facility’s fourth blast furnace and related facilities carried out during the third quarter.

POSCO also said that it is altering its targets for sales to 32.9 trillion won and for operating profits to 5.2 trillion won in light of developments such as a slower than expected recovery of exports.