News Room - Steel Industry

Posted on 29 Oct 2009

Hyundai Steel’s Profit Jumps on Stake Sale, Cost Cuts

Hyundai Steel Co., South Korea’s biggest maker of construction steel, said third-quarter profit more than doubled after it sold its stake in Hyundai Motor Co. and cut costs.

 

Net income increased to 572 billion won ($476 million) in the three months ended Sept. 30, from 220.1 billion won a year earlier, the Incheon, South Korea-based company said in a regulatory filing today. That compares with the 309.4 billion won median profit estimate of 15 analysts compiled by Bloomberg.

 

“The increase in net income was largely because we sold a stake in Hyundai Motor,” Hyundai Steel spokesman Chang Young Sik said today by phone. The company’s cost-cutting efforts also contributed to the improved profit, it said in an e-mailed statement, without providing details.

 

Hyundai Steel said sales will rise 4 percent to 2.23 trillion won this quarter from a year earlier as the government spends $52 billion to counter a drop in demand for cars, appliances and houses that’s hurt steel producers. Bigger rival Posco on Oct. 14 lifted its full-year profit forecast by 23 percent, signaling the worst for the steel market is over.

 

“Underlying demand has been improving, most notably in China,” Terry Fanous, an analyst with Moody’s Investors Service, said in an Oct. 28 report. The Asian steel industry will be underpinned by government infrastructure spending, he said.

 

Hyundai dropped 5.1 percent to 77,600 won at 11:13 a.m. in Seoul. Shares in the company have more than doubled this year, outperforming a 40 percent advance in the benchmark Kospi stock index.

 

“It is still uncertain whether the economy will recover in the fourth quarter,” Hyundai Steel said in an e-mailed statement. “We are going to overcome the hardship by exploring new overseas markets and expanding value-added premium products.”

 

Operating profit, or sales minus the cost of goods sold and administrative expenses, dropped 64 percent to 158 billion won in the third quarter. Sales decreased 37 percent to 2.05 trillion won.