South Korea’s largest steelmaker Posco has registered more than 1 trillion won ($882 million) in operating profit for the third quarter and beat market expectations thanks to recovery in steel prices due to easing in overcapacity in China and contribution from energy, ICT, and overseas operations.

Posco announced in a regulatory filing on Wednesday that its operating profit on a consolidated basis came at 1.03 trillion won in the third quarter on sales of 12.75 trillion won. Its net profit reached 475.5 billion won over the cited period.

The company’s third quarter operating income is more than 100 billion won higher than market estimates of about 900 billion won.

The company’s operating income in the third quarter was up 52.4 percent from the previous quarter while net income 115.6 percent. Sales, however, went down 0.9 percent during the period due to streamlining in non-core business.

The last time the steelmaker reported three-month earnings of more than 1 trillion won was in the third quarter of 2012. The steelmaker expects strong performance to continue in the fourth quarter and the next.

Shares of Posco slipped 1,000 won to close at 248,000 won.

Posco’s robust operating income in the July-September period was backed by improved performance of its overseas corporations. Steel mills and corporations in Indonesia, Mexico, Vietnam, and India raised an operating profit of 132.3 billion won in the third quarter, a whopping 1,148 percent increase from a quarter ago.

Posco’s stand-alone earnings have also improved. The company’s on-quarter sales increased 1.6 percent to 6.1 trillion won and operating income 19.6 percent to 852.4 billion won in the third quarter. Net profit also jumped 86.5 percent to 579 billion won.

The official from Posco said that improved earnings were led by an increase in sales of its world premium products and solution marketing, as well as a recovery in global steel prices and its cost-cutting efforts. The company’s profitability in the third quarter shored up to 14 percent, reaching the highest since the third quarter of 2011.

Posco’s profitability was driven mainly by robust sales of its high value world premium products - sales volume reached a record 4.038 million tons in the July-September period, up 199,000 tons from the previous three months, accounting for 48.1 percent of total steel products.

Posco’s overall financial sheet has also improved significantly. Its debt ratio on a consolidated basis fell 5.5 percentage points to 70.4 percent in the third quarter, recording the lowest level since the company started adopting the consolidated financial statement system. Posco’s stand-alone debt ratio also went down by 2.3 percentage points to 16.9 percent during the period, recording the lowest since 1968 founding.

By Moon Ji-woong

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