POSCO expects slow market recovery in 2023 after big drop in annual profit

By Hyunsu Yim

SEOUL (Reuters) – POSCO Holdings, parent of South Korea’s biggest steelmaker POSCO, on Friday reported a 46.7% drop in operating profit for 2022 due to a four-month suspension of its major steel plant in the country following a typhoon and flooding in September.

The company reported an operating profit of 4.9 trillion won ($3.97 billion) for 2022, versus a 9.2 trillion won profit a year earlier.

It made an operating loss of 425 billion won in the fourth quarter due to costly flood damage and as steel market conditions deteriorated.

The company had estimated earlier the flooding would cost it 1.3 trillion won in 2022.

Earlier this month, POSCO said operations at all of the 17 rolling mills at its plant in Pohang, southeast of the country, had been fully restored, 135 days after a typhoon caused a nearby river to overflow.

“The Ukraine war and the global supply chain problem such as issues around automotive chip supplies will continue to limit demand recovery.” head of marketing strategy Eom Gichen told analysts on an earnings call.

Eom said steelmakers would raise prices due to inflation and rising raw material costs but added that China’s economic recovery, helped by increased immunity to COVID and the country’s efforts to boost spending, could spur a market recovery in the second half of 2023.

The company said it expects to see annual revenue of 85.8 trillion won this year, similar to the previous year’s 84.8 trillion won.

Analysts expect earnings at the world’s sixth-biggest steelmaker to improve this year on the back of the production resumption, although an uncertain global economic outlook is likely to keep growth of overall steel demand in check. Global steel demand is projected to rise by 1% this year, based on the World Steel Association’s estimate from October. “The fourth quarter of 2022 is the lowest performance point (for POSCO). Earnings are expected to improve swiftly as sales volumes will recover in the first half and global demand will improve in the second half,” analyst Ahn Hoe-soo at eBest Investment & Securities said in a recent report.

($1 = 1,233.7400 won)

(Reporting by Hyunsu Yim. Editing by Jane Merriman)