POSCO logs weaker-than-expected Q4 net on global slump

(ATTN: MOVES UP full-year results to 3rd para; ADDS more details in paras 12, 15-17)
SEOUL, Jan. 15 (Yonhap) -- POSCO, the world's fourth-largest steelmaker, said
Thursday that its fourth-quarter earnings edged up on higher prices and reduced
costs, but fell short of market expectations due to the global economic crisis.

Net profit reached 721 billion won (US$521 million) in the October-December
period, up 1.1 percent from 713 billion won a year earlier but down 41 percent
from the previous quarter, the company said in a regulatory filing. A median
market estimate was around 1 trillion won.
Last year's profit increased 21 percent to 4.45 trillion won and operating income
soared 52 percent to 6.54 million won. Sales also jumped 38 percent last year to
30.64 trillion won.
Third-quarter sales soared 53 percent from a year earlier to 8.31 trillion won
with operating income jumping 60 percent to 1.39 trillion won over the cited
period, according to the company.
Shares of POSCO closed at 359,000 won on the Seoul bourse, a drop of 5.28
percent. The fourth-quarter earnings were released after the market closed.
"POSCO's fourth-quarter result was weaker than market expectations," said Cho
In-je, an analyst at KB Investment & Securities. "Profits will further fall in
the first quarter of the year due to output cuts and low demand."
The weaker-than-expected bottom line came amid concerns that the global steel
industry is facing a sharp drop in demand as automakers, electronics companies
and shipbuilders face financial difficulties resulting from the global economic
crisis.
POSCO said earlier this week that it may have to extend its first-ever output cut
through the current quarter due to reduced demand from automakers and
shipbuilders.
The steelmaker announced the first-ever output cut in its 40-year history last
month, slicing steel production by 200,000 tons in December and another 370,000
tons in January.
"Due to unstable currency rates and raw material prices, our business environment
is very unpredictable," POSCO's outgoing chief executive officer Lee Ku-taek said
in an IR session. "The first-quarter will be the most difficult," he said.
Lee predicted that the economy would bottom out in the first half of the year
before posting a mild recovery down the road.
"A more detailed plan on whether to cut output in February will be announced next
week," he said.
Lee offered his resignation earlier in the day to make way for new leadership.
His successor will be announced on Feb. 27, according to the company. Industry
sources said either Yoon Seok-man, president of POSCO, or Jeong Joon-yang, chief
executive of POSCO's construction arm, could replace Lee.
Lee denied speculation that his resignation is a result of domestic politics.
"There was no pressure on me to step down," Lee said. "I already decided to
resign in early 2007 and I think POSCO needs new leadership."
Top executives at POSCO, a former state-run company, had been replaced whenever a
new administration took office. Lee was named to head POSCO when the
administration of former president Roh Moo-hyun was inaugurated in early 2003.
Since the new administration took office in February last year, Lee has been
mired in allegations of lobbying the National Tax Service to minimize penalty
taxes against the firm.
POSCO estimated its crude steel output for the year would reach up to 32 million
tons, down 12 percent from last year. It said its sales would amount to up to 30
trillion won, also down 12 percent.
POSCO said it plans to spend up to 7.5 trillion won this year to expand or
upgrade production facilities at home and overseas.
sam@yna.co.kr
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