Warren Buffett wants to increase his stake in Posco, Asia’s most profitable steel maker, the company said, citing a discussion between chief executive Chung Joon Yang and the chairman of Berkshire Hathaway Inc. on Monday.
Berkshire has “3.9 million to 4 million shares of Posco and will increase the holding”, South Korea’s largest steel maker said on Tuesday in an emailed English statement, citing Buffett. “I should have bought more Posco shares when the stock price dropped during the economic crisis,” Posco cited Buffett as saying.
World steel demand will rise 10% this year, Posco said last week when it announced a 77% jump in fourth quarter profit and plans to push ahead with $30 billion (Rs1.4 trillion) of overseas expansion. Buffett, 79, may have a paper profit of over $1.3 billion in his Posco holding, first disclosed in 2007.
“From the point of view of Buffett, there may be few steel stocks to buy in Asia,” said Chang In Whan, president of KTB Asset Management Co. in Seoul, which manages the equivalent of $8.9 billion in assets. “I’m sure Posco will acquire companies this year, which will help it secure growth in size as well as in efficiency.”
Posco shares rose 1% to end at 604,000 won (Rs24,160) in Seoul. The benchmark Kospi index was little changed.
Omaha, Nebraska-based Berkshire didn’t immediately respond to a message left with Buffett’s assistant Debbie Bosanek after 9.30pm local time late on Monday. Buffett is the largest shareholder of Berkshire, which owns 3.95 million shares in Posco, according to its 2009 annual statement.
According to Bloomberg data, Berkshire holds 4.5% in Posco.
The meeting between Chung and Buffett took place at the headquarters of Berkshire Hathaway in Omaha, Posco said. Posco released statements of the meeting in Korean first and in English later.
“If we actually get data that Buffett increased Posco holdings, that should provide a short-term boost to the shares,” said Kim Young Chan, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages the equivalent of $28 billion in assets.
Posco’s planned $30 billion overseas investment includes building plants in India, Vietnam and Indonesia, and last week it said it will buy a stake in an Australian iron ore mine.
Buffett “strongly” encourages Posco’s investment plans, the company’s English-language statement said. Berkshire first disclosed it bought 3.49 million Posco shares for $572 million in 2007. The number of shares held rose to 3.95 million, bought for a total cost of $768 million, Berkshire said last February.
At Tuesday’s closing price, 3.95 million Posco shares are worth 2.39 trillion won. “The current management is doing well,” the English statement cited Buffett as saying.
Buffett has found Asia profitable. In September 2008, Berkshire unit MidAmerican Energy Holdings Co. agreed to pay HK$1.8 billion (Rs1,064 crore today) for 225 million shares of BYD Co., a Chinese auto maker. BYD shares have rallied eightfold since.