July 23, 2019 / 2:01 AM / 5 months ago

South Korea's POSCO posts 15% drop in second quarter operating profit on higher raw materials costs

FILE PHOTO: The logo of POSCO is seen at the company's headquarters in Seoul, South Korea, July 20, 2016. REUTERS/Kim Hong-Ji/File Photo

SEOUL (Reuters) - South Korean steelmaker POSCO (005490.KS) said on Tuesday its second-quarter operating profit fell 15% from the same period a year earlier, dragged down by higher raw material costs, meeting analyst estimates.

The world’s fifth-biggest steelmaker forecast a pick-up in China’s steel demand in the second half of the year, supported by a boost to economic policy, but said global steel demand growth is expected to slow due to economic uncertainties.

The steel maker slightly raised its 2019 consolidated revenue target to 66.8 trillion won, from its previous goal of 66.3 trillion won in January.

POSCO posted a consolidated operating profit of 1.1 trillion won ($933.7 million) for the April-June period, compared with 1.3 trillion won a year earlier and an average estimate of 1.1 trillion won, compiled from 13 analyst forecasts according to Refinitiv data.

Net profit increased 17% to 681 billion won, while the steelmaker’s second-quarter revenue rose 1.5% to 16.3 trillion won.

Iron ore futures DCIOcv1 on the Dalian Commodity Exchange have doubled since the start of 2019, hitting a record 924.5 yuan a ton last week. Reduced output following a dam accident in Brazil and a cyclone in Australia have supported prices of the key steelmaking ingredient.

Economic growth in China, a key consumer of steel, slowed to 6.2% in the second quarter of this year, its weakest pace in at least 27 years, as demand at home and abroad faltered amid an ongoing trade conflict with the United States.

POSCO shares were flat by 0155 GMT after the earnings release, while the broader market KOSPI .KS11 was up 0.6%.

Reporting by Jane Chung; additional reporting by Ju-min Park; editing by Kenneth Maxwell and Richard Pullin

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