April 24 (Bloomberg) -- Posco, South Korea’s biggest steelmaker, reported a 75 percent plunge in first-quarter profit because of foreign currency losses and results of a tax investigation.
Net income dropped to 69.8 billion won ($67 million) in the three months ended March 31 from 278 billion won a year earlier, according to a regulatory filing today. Profit fell short of the 399.2 billion won estimate of analysts in a Bloomberg survey. Sales fell 6 percent to 15.4 trillion won.
The company cut its consolidated spending target for this year to as low as 5.7 trillion won, compared with 6.5 trillion won estimated in January. Posco’s new Chief Executive Officer Kwon Oh-Joon said in March the company won’t seek new investment for expansion “for a while” as it will focus spending on downstream to increase value.
The stock ended little changed at 299,000 won in Seoul, while the local benchmark Kospi index fell 0.1 percent. The announcement came after the stock market closed.
Product sales dropped 0.4 percent to 8.4 million metric tons, while average prices dropped 3.5 percent to 755 won a ton in the quarter, curbing the operating profit margin. Local sales, which account for more than half of the company’s business, declined 4 percent, according to the statement.
Profitability improved over the previous quarter as prices of raw materials, including coking coal and iron ore, declined.
The average spot price for coking coal in the first quarter fell 26.5 percent to $122 a ton, Posco said. Anglo American Plc agreed to $120 a ton for the first quarter, the lowest in six years, Doyle Trading Consultants LLC, a coal analytics company, said March 26. Iron ore prices at China’s Tianjin port dropped 19 percent in the quarter from a year earlier.
Steel prices, little changed for the past two quarters, are expected to rebound in the three months started April 1, on expectations of a pick-up in sales in China, Posco said in the statement. Global demand for the alloy is expected to grow at 3.1 percent in 2014, compared with 3.6 percent in the prior year, according to the World Steel Association.