Posco Chief Executive Officer Lee Ku Taek has quit after Asia’s third-biggest steelmaker posted fourth-quarter profits that missed analysts’ estimates as the global recession curbed demand from automakers and builders.
Net income was 721 billion ($521 million) in the fourth quarter ended Dec. 31, compared with 713 billion won a year ago, the Pohang, South Korea-based company said today. The results fell short by 30 percent the 1.03 trillion won median profit estimate of 13 analysts compiled by Bloomberg.
The 62-year-old Lee, who steps down one year before his term ends, told investors “I was a bit concerned that my departure may be seen as irresponsible given the worsening business conditions at the moment, but I believe the company needs young and new leadership to overcome the crisis.”
Posco, which said January earnings will be the worst in its 40-year history, will cut output by as much as 12 percent this year. Steel demand in Russia, India and the Middle East may stagnate this year, Posco said.
For the quarter, sales gained 53 percent to 8.31 trillion. Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 60 percent to 1.40 trillion won. The company will pay a dividend of 10,000 won per share, unchanged from a year before.
Chief Executive Lee will leave the company on Feb. 27 when a successor will be announced, the company said. During Lee’s tenure, which started in 2003 and was to last until February 2010, Posco shares more than tripled in price, outperforming the doubling of the benchmark Kospi index.
The likely candidates to succeed Lee include Yoon Seok Man, president of the steelmaker, and Chung Joon Yang, head of unit Posco Engineering & Construction Co., the Munhwa Ilbo reported on Jan. 14.
To combat the slowdown, the company cut output by a total of 570,000 metric tons in December and January and said it may need to extend the reductions to the end of this quarter. Crude steel production for 2009 may be between 29 million metric tons and 32 million tons, a drop of as much as 12 percent from 2008, the company said today. Sales may be between 27 trillion won and 30 trillion won for 2009, it said.
Demand in China may recover in the second half because of the 4 trillion yuan government stimulus plan, Posco said. The company is seeking to cut annual costs by 1 trillion won and expand sales and it will invest up to 7.5 trillion won this year, up 53 percent from 2008.
Costs may fall in the third quarter as steelmakers negotiate lower prices for iron ore and coking coal, Park Wan Sun, a JPMorgan Chase & Co. analyst, said in a Jan. 11 report. The prices of iron ore may decline by 30 percent and coking coal by 45 percent this year, the report said.
It may be “good” to buy mining assets amid declining values this year, CEO Lee said. He also said that Posco is “no longer interested” in bidding for Daewoo Shipbuilding & Marine Engineering Co., the world’s third-largest shipyard.
Source: Bloomberg
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