South Korean steelmaker POSCO, the world's fourth largest steelmaker, has announced that its net profit declined by 68.5 percent to Won 325 billion ($245 million) in the first quarter of 2009 compared to the previous year, citing the global economic downturn which has hit steel demand and higher costs arising from the weakened domestic currency.
In the first quarter of 2009, the company's operating profit plunged 71 percent year on year to Won 373 billion ($282 million), while its sales rose 6.7 percent to Won 6.471 trillion ($4.891 billion), helped by higher product prices.
In its statement, POSCO said, "Steel demand sharply declined amid the economic slowdown, a cut in production led to reduced product sales, and a weaker won drove up raw material costs. However, compared to our rivals in Europe and Japan which may report operating losses in the first quarter, we are faring well by putting top priority on cost competitiveness."
The US dollar rose 48 percent to an average of Won 1,415.22 in the first quarter from Won 955.97 a year earlier, driving up costs of raw materials such as iron ore and coking coal.
Meanwhile, in a move to save more funds, POSCO has revised up this year's cost cutting target by 35 percent to Won 1,296 trillion ($980 million) from the previous Won 958.4 billion ($754 million).
In Q1 2009 POSCO registered a drop of 729,000 mt or 22 percent in its crude steel production compared to the previous quarter. POSCO started to cut output in December 2008 for the first time in its 41-year history.