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POSCO Reports Q3 Loss, Lowers 2015 Revenue Guidance

Korean steel producer POSCOPKX reported disappointing results for third-quarter 2015, with net loss of KRW 658 billion (US$0.56 billion). Results lagged net earnings of KRW 224 billion (KRW 0.22 billion) recorded in the year-ago quarter.

Net loss came in at KRW 1,885.4 per share or US$1.61 per ADR. The poor bottom-line performance was primarily triggered by impairment losses and adverse impact of foreign currency translations.

Revenues

POSCO generated revenues of KRW 13,996 billion (US$12 billion), down 14% year over year.

Crude steel production totaled 9.7 million tons, up from 9.5 million tons in the year-ago quarter. Finished product sales grew 1.6% year over year. Export ratio of finished product sales was 51.6%.

Margins

POSCO's cost of sales declined 13.8% year over year, representing 88.8% of total revenue versus 88.6% in the year-ago quarter. Gross profit margin edged down 20 basis points (bps) year over year to 11.2%. Selling and administrative expenses fell 6.3% to KRW 918 billion (US$0.79 billion).

Operating profit was KRW 652 billion (US$0.68 billion), down 25.8% year over year. Operating margin was 4.7%, down 70 bps year over year.

Balance Sheet

Exiting third-quarter 2015, POSCO had cash and financial goods balance of KRW 8,857 billion (US$7.41 billion) versus KRW 7,394 billion (US$6.56 billion) recorded at the end of the preceding quarter. Non-current liabilities decreased 4% to KRW 16,137 billion (US$13.5 billion).

Outlook

For 2015, POSCO expects consolidated revenues to be approximately KRW 60.6 trillion (versus KRW 63.9 trillion projected earlier). Finished product sales are estimated at roughly 35.3 million tons (versus prior expectation of 35.4 million tons), while crude steel production is projected to be nearly 37.9 million tons (as against 37.8 million tons predicted earlier). Consolidated investments are likely to be KRW 3.3 trillion, up from the prior forecast of KRW 3.0 trillion.

With a market capitalization of $13.3 billion, POSCO presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the sector include NovaGold Resources Inc. NG , Primero Mining Corp. PPP and AK Steel Holding Corporation AKS . While NovaGold Resources sports a Zacks Rank #1 (Strong Buy), both Primero Mining and AK Steel Holding Corporation carry a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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