Posco, the largest steelmaker in South Korea and the fourth largest worldwide, said it will make larger investments this year than last in a bid to achieve qualitative growth amid remaining uncertainties in the global steel industry.
In remarks made at the annual CEO Forum at the Korea Exchange in Yeouido, Seoul, CEO Chung Joon-yang said it will invest up to 8 trillion won ($7.37bn) for the entire group.
“Posco will keep making investments in necessary business areas this year, while selling assets that are considered less crucial for the company’s growth,” said Mr Chung Joon-yang. “Although there are some signs of global economic recovery, market conditions for businesses will still be unfavourable throughout the year due to remaining uncertainties.”
The total size of the investment has inched up from 7.2tr won last year. The steel-making unit alone will get 4tr won, ($3.67bn) up 10% from 3.6tr won in 2012. Around 2tr ($1.83bn) won will be allocated to the company’s material and energy units. The rest will be used for overseas branches.
Park Ki- Hong, vice president of Posco. commented “The investment plan for this year won’t add any financial burden to the company.”
Total target sales for 2013 are 66tr won ($60.58bn) on a consolidated basis, slightly higher than in 2012 and the steel unit’s sales goal is 32tr won ($29.37bn), below what it achieved last year. “When we first set the target late last year, the situation was very bad, so we made a conservative forecast for this year,” Chung said. “But as the first quarter showed positive signs of recovery - with 3% growth in global steel demand - we will keep revising the target.”
In 2012, Posco had 63tr won ($57.8bn) in sales and 3.65tr won ($3.35bn) in operating profit on a consolidated basis, down 7.7% and 33%, respectively, from a year earlier. The steelmaking unit alone recorded 35tr won ($32.12bn) in sales and 2tr won ($1.835bn) in operating profit, down 9% and 35% respectively from the previous year.
“The steelmaker faced lower revenue and operating profit compared to a year earlier, because of steel oversupply and resulting falls in steel prices,” Park said. Steel prices were slashed by around 100000 won per tonne ($91.7/t) compared to a year earlier.
“Although last year was tough, Posco managed to reach the highest sales-to-operating profit ratio among global steel companies,” a company official said.
The company produced 37.99Mt and sold 35.05Mt last year, both record amounts for Posco, owing to brisk marketing activities and its expansion into new markets.
It plans to ramp up steel production capacity to 48Mt/y, from the current 40Mt/y capacity. It also plans to increase power generation capacity to 4474MW from the current 3284MW.