Hyundai Steel Co. (004020.SE) said Friday first-quarter net profit fell 39% on year as sluggish demand dented product prices and higher raw-material costs cut into the bottom line.
Net profit for the three months ended March 31 fell to KRW157.54 billion ($139 million) from KRW258.31 billion, the company said in a statement.
Weighed down by regular maintenance and low seasonal demand, sales of steel products declined 5.4% to 3.95 million metric tons in the first quarter, it said.
Operating profit fell 49% to KRW156.56 billion in the January-March period from KRW309.31 billion. Sales were up 0.1% to KRW3.550 trillion from KRW3.547 trillion.
In the second quarter, Hyundai Steel is targeting 7.0% on-quarter sales growth to KRW3.8 trillion as it expects more investment in construction and more demand from car makers, particularly Hyundai Motor Co. (005380.SE) and Kia Motors Corp. (000270.SE).
The Dangjin-based steel maker supplies about 25% of its automotive steel production to Hyundai and Kia, which together form the world's fifth-largest car maker by sales.
Analysts expect Hyundai Steel's profitability to improve in the second quarter on the use of lower-priced materials and smaller discounts. The company said it will continue to cut costs, with a target of KRW450 billion this year. Last year, it reduced costs by KRW620 billion.
The company's operating profit will jump to KRW275 billion on quarter in the second, Lee Won-jae at SK Securities.
Still, "slow recovery in steel demand and additional pressure from shipbuilders to lower thick-steel-plate prices will be major risk factors in the second quarter," said Kim Jung-wook with Hana Daetoo Securities.
On a consolidated basis, net profit fell 42% to KRW154.03 billion.
Source: Dow Jones