April 26 (Bloomberg) -- Hyundai Steel Co., South Korea’s second-biggest steelmaker, reported a 84 percent drop in first-quarter profit as a fall in demand narrowed margins and a weaker won caused foreign exchange losses.
Net income fell to 24.8 billion won ($22.3 million) in the three months ended March 31., compared with 156 billion won a year earlier, the Incheon-based company said in a regulatory filing today. That missed the average profit of 53.2 billion won, according to 16 analyst estimates compiled by Bloomberg.
Profit margins have narrowed at South Korea’s steelmakers as prices were forced lower due to slowing growth in China, the world’s biggest producer and consumer of the alloy. Europe’s debt crisis also reduced demand.
The Korean won weakened 4.4 percent against the dollar in the first quarter and the company booked 99 billion won in exchange losses related to its foreign-currency denominated debt, Hyundai said.
Earnings may recover in the second quarter from expansion at a hot-rolled coil line and a seasonal pick-up in demand for construction steel, according to analyst Bang Min Jin at HI Investment & Securities Co. Net income may climb to 205.6 billion won in the second quarter, according to the mean of 16 analyst estimates compiled by Bloomberg.
Shares in Hyundai Steel, an affiliate of the Hyundai Motor Group, fell 0.4 percent to close at 72,700 won in Seoul trading today, bringing this year’s loss to 17 percent. The benchmark Kospi index has fallen 2.6 percent and bigger rival Posco has lost 9.5 percent this year. The earnings were announced after the market closed.
Operating profit fell 13 percent to 140.2 billion won in the first quarter, higher than the 128.2 billion won average of 17 analyst estimates compiled by Bloomberg. Sales fell 21 percent to 2.98 trillion won. The operating profit margin was 4.4 percent in the quarter, compared with 4.3 percent a year ago and 4.9 percent in the previous quarter, Hyundai said today.
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