Posco Q1 net profit down on low prices, high costs

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South Korea's Posco, the world's third largest steelmaker by output, said on Friday first-quarter net profit dropped 42 per cent year-on-year due to price cuts and higher raw material costs.

Net profit was 539 billion won ($473 million) for January-March compared with 927 billion a year earlier, the company said in a statement.

Price discounts due to slowing demand amid global economic turmoil were the main factor squeezing margins, said spokesman Chung Jae-Woong.

"The closure of a small blast furnace and regular maintenance resulted in a decline in production volume," Chung said.

Operating profit fell 54 per cent to 422 billion won from 921 billion a year earlier while sales rose 3.8 per cent to 9.460 trillion won.

The steelmaker said it expects demand to start to improve from April-June as major industries begin recovering and the company starts using cheaper raw materials.

Posco is also planning further cost controls in a bid to deal with the global uncertainty. It envisages 4.2 trillion won in capital spending this year, down 26 per cent from last year.

Posco also sold some of its holdings in SK Telecom, KB Financial Group and Hana Financial Group to raise a total of 493.5 billion won early this month.

On a consolidated basis, including overseas operations, Posco's net profit fell 41 per cent from a year earlier in the first quarter to 643 billion won.