Profits slashed for South Korea steel giant

SEOUL, South Korea -- South Korean steel giant Pohang Iron and Steel Corp (POSCO) said its 2001 net profit plunged 49.9 percent to 819.3 billion won ($615.7 million) due to unusual gains made in the previous year and a depressed steel industry.

POSCO, the world's second largest steelmaker, predicted a 811 billion won net from an earlier target of 1.2 trillion won as signs of a global economic slowdown took hold.

It posted a 1.64 trillion won net profit in 2000.

Analysts blamed the massive drop on unusual gains made by the company a year earlier, having earned 684 billion won from the sale of a stake in Shinsegi Telecom.

"Last year's results look bad year-on-year," POSCO chairman Yoo Sang-boo said in a statement.

"But we did good business considering most advanced steelmakers are expected to suffer losses."

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POSCO also said its 2001 sales slipped five percent to 11.9 trillion won (US$9 billion) from 11.69 trillion won, which analysts blamed on a depressed steel industry.

Overcapacity sent steel prices to 20-year lows, which forced a number of U.S. companies to fold.

Despite the earnings results, POSCO shares ended 2.29 percent higher at 134,000 on Thursday.

Reduced output

POSCO forecast 860 billion won net profit for 2002. The steel giant also expects 1.50 trillion won in earnings before interest and taxes versus 1.43 trillion last year.

But analysts said the targets seem unattainable after the company said it would cut its output this year.

POSCO announced in December it would cut crude steel output by 300,000 tons this year in a bid to bolster global prices.

It expects 2002 sales to drop to 11.05 trillion won from 11.09 trillion in the process.

POSCO produced 27.8 million tones of steel in 2001, bumping Japan's Nippon Steel Corp from the top spot, which produced 25.8 million tons.

Analysts said Washington's decision to impose tighter import regulations was also crucial to profit and output targets.

U.S. President George W Bush is expected to decide on March 6 whether to adopt proposed quotas and tariffs aimed at curbing steel imports to help U.S. makers.

However, damage may not be as big as feared since substantial parts of POSCO's exports are produced by a U.S. subsidiary, analysts said.

Another factor threatening POSCO's earnings is the weakening Japanese Yen.

Analysts said foreign exchange losses caused by a weakening yen is likely to hurt POSCO, with Japan accounting for about 33 percent of its exports.

The yen was trading at 134.19 against the dollar Thursday.