SKorea's POSCO Q4 opg profit up 0.8 pct; targets 7.4 trln capex for 2007-UPDATE2

SKorea's POSCO Q4 opg profit up 0.8 pct; targets 7.4 trln capex for 2007-UPDATE2

	Published : Thu, 11 Jan 2007 09:41 By : Agencies Print this Story

SEOUL (XFN-ASIA) - POSCO said it will seek to boost its consolidated sales to 29.8 trln won in 2007 from last year's 25.74 trln by cutting costs and investing aggressively to expand output.

The company set an operating profit target of 4.9 trln won for 2007, up from 4.39 trln in 2006.

'This year, we will accelerate our global business while further focusing on strategic steel products,' the company's chairman Lee Ku-Taek said.

This year's production target is 32.4 mln tons and the sales volume target is 31.7 mln tons.

Parent-based, POSCO is aiming for 21.3 trln won in sales and 4.1 trln in operating profit this year.

The nation's largest steel maker plans to spend 7.4 trln won on capex globally, with 5.9 trln won allocated for the local parent.

Of the capex budget, 1.2 trln won will go on expanding strategic products and 700 bln won on boosting production capacity.

A total of 1.7 trln won will be allocated to international business and 1.3 trln for new growth business.

As part of this plan, the company's board has approved a proposal to increase its Vietnam investment by 130 mln usd to 491 mln usd and boost its production capacity to 1.2 mln tons of cold-rolled steel products, from the originally-planned 0.7 mln tons.

The company also said that it will spend 99.7 bln won on building a galvanized steel with zinc coated plant, with annual capacity of 0.3 mln tons by the end of next year, in a bid to meet the growing need for the product by local and international LCD panel makers.

Earlier POSCO announced that its operating profit in the fourth quarter to December rose 0.8 pct year-on-year to 1.097 trln won, driven by increased sales of upscale and strategic steel products.

The figure fell short of the market consensus for 1.18 trln won.

Sales by value rose 4 pct from a year ago to 5.41 trln won, with a decline in output and sales volume, effectively offset by a better product mix.

'The fourth-quarter results were solid, backed by a sales increase in high value-added products and cost reductions,' Lee said.

Net profit in the quarter jumped to 93.6 bln won from 36.4 bln the year earlier.

For the full year, parent-based sales reached 20.04 trln won, down 7.6 pct year-on-year, while consolidated sales, which include POSCO's 46 overseas operations, totaled 25.74 trln won.

This is the first time the company has announced a consolidated-basis result, and a yearly comparison was unavailable.

Production for 2006 fell 1.3 pct from the previous year to 30.1 mln tons, with sales volume down 0.7 pct at 28.5 mln tons.

Operating profit tumbled 34.2 pct year-on-year to 3.89 trln won, hurt by a fall in steel prices and higher raw material prices.

Net profit for the year also dropped, falling 27.4 pct, to 3.21 trln won.

Chairman Lee projected better steel market conditions in the second half following a weak or flat first-half.

He also said the company will expand its strategic alliances with a number of global industry players and focus on exploring for raw materials.

'We are looking closely at the global industry consolidation trends and will actively respond to them,' Lee said.

He added that the company will be safer from global corporate raiders when its stock price rises further; when it boosts the proportion of strategic products in its sales above 70-80 pct, and as it secures captive mines for at least a third of its raw material needs.

Lee did not rule out the possibility of POSCO bidding for Daewoo Shipbuilding and other local firms when they are put up for sale.

'About 20 pct of our capital is for new business. If we see a synergistic benefit for our steel business, then we will consider such a deal,' he said.

(1 usd = 938.9 won)

eunkyung.seo@xinhuafinance.com