POSCO share price has been rising thanks to the improved results in the first half related to the restructuring of its operation ordered by Chairman Kwon Oh-joon. Analysts project its stock price to range between 366,000 won and 410,000 won this year. It's a big turn of events for the company after its stock fell to a low of 156,000 won at one time. The current price is the highest since December 2014.
Market experts attribute the outstanding performance of the steelmaker's shares to expectation of restructuring, financial soundness, cost reduction and the steelmaker's premium steel products, indicating its share price has more room to rise.
The reversal of fortunes comes despite a slowdown in the industries that consume its major products like shipbuilding and autos.
One of the key factors going for POSCO has been its restructuring moves and a segregated marketing strategy for high value-added steel products.
Since his takeover as the top official at the steel maker in March 2014, Chairman Kwon has been stressing Posco's unique steel making technologies, which has been bolstered the competitive strength of the steel maker by getting rid of the non-profitable steel products. He embarked upon a 149-point restructuring process, pushing them until 133 of the cases were achieved as of the second quarter this year.
The number of affiliates, which totaled as many as 71, has now been reduced to only 38, and only 32 are expected to remain by the end of this year.
Chairman Kwon turned his focus to high value-added steel products for sale and solution marketing, combining technologies and marketing knowhow. POSCO was able to secure 1 trillion won in funds by boosting sales of the high value-added steel products and 400 billion won through cost cuts. As a result, POSCO was able to boost its 2015 operating profit to 2.6 trillion won from 2.2 trillion won in 2014 before he was installed as CEO of the steelmaker.
The operating profit ratio rose to 10.8 percent when he became the chairman compared to 7.3 percent before his arrival. The steel maker also cut its debts by 7.1 trillion won since he became the top manager down to 17 percent the lowest in many years.
Korean steel producer Posco reported improved year-over-year results for second-quarter 2017. Net income surged 139.8% to 530 billion won ($0.47 billion) from a year-ago. The rise was primarily driven by revenue growth and improvement in margin profile of the company. Net earnings per share were 1,518.6 won or $1.35 per American Depository Receipt (ADR). However, sequentially (or quarter over quarter) the company's results were disappointing with net earnings falling roughly 45.8%. This was due to poor performance in the steel, E&C and Energy segments as well as fall in operating profit and share of loss of equity-accounted investees.
Revenues
In the quarter, POSCO's revenues totaled 14,944 billion won. The top line improved 16.2% year over year but fell 0.9% sequentially. Crude steel production decreased 3.1% to 8.8 million tons from 9.1 million tons in the previous quarter. Finished product sales declined 3% sequentially.
The company noted that the fall in production and sales volume was primarily due to the revamping of blast furnaces at Pohang Works facility. In the quarter, POSCO's margin profile improved year over year on the back of healthy sales growth, partially offset by 15.8% rise in cost of sales.
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