POSCO drops over 6 percent on steel margin concerns
By Miyoung Kim
SEOUL (Reuters) - Shares in POSCO (005490.KS: Quotazione), the world's fourth-largest steel maker, fell more than 6 percent to a 3-week low on Monday, as rising cost pressure and U.S. recession jitters fanned worries over future profits and steel demand.
Other Asian steel stocks also dropped after POSCO said on Friday it planned no further price rises unless it faces a sharp rise in raw material costs, heightening concerns about industry margins.
The South Korean company reported a forecast-beating 5 percent rise in January-March net profit and raised its 2008 sales target by 17 percent to 28 trillion won ($28.7 billion) to reflect its second increase in major steel product prices this year.
But the group kept its operating profit forecast unchanged at 4.8 trillion, indicating its profit margin may fall to 17 percent this year, from 19.4 percent last year and 21 percent in the first quarter.
"POSCO's Q1 results were strong, but we are not convinced that the earnings momentum will be sustained, especially into the second half," Nomura analyst Cindy Park said in a note.
"The company faces higher input costs while it opted to keep domestic price hikes minimal in pursuit of amicable relationships with customers. This is what we had feared."
Shares of POSCO, the world's second-largest steel maker by value, closed down 6.5 percent to 457,500 won, its biggest percentage fall in six months and under-performing a 1.8 percent fall in the wider market.
Its decline sent the sector lower across Asia, with Dongkuk Steel (001230.KS: Quotazione) down 5 percent, Hyundai Steel (004020.KS: Quotazione) down 4.7 percent and China's Baoshan Iron and Steel (600019.SS: Quotazione) off 5.9 percent. Continua...