Seoul: South Korea-based Posco’s chief executive officer (CEO) Lee Ku Taek has quit as Asia’s third biggest steel maker posted a fourth quarter profit that missed analysts’ estimates after the global recession curbed demand from auto makers and builders.
Net income was 721 billion won (about Rs2,558 crore) in the fourth quarter ended 31 December, compared with 713 billion won a year ago, the company said on Thursday. The earnings missed the 1.03 trillion won median profit estimate of 13 analysts compiled by Bloomberg by 30%.
Lee, who will step down next month after a successor is appointed, said the steel maker needs young and new leadership to cope with the crisis. Posco, which said January earnings will be the worst in its 40-year history, will cut output by as much as 12% this year.
It looks like demand in December from construction to auto makers to appliance makers was lower than what a lot of people were expecting, Moon Jeong Up, an analyst at Daishin Securities Co., said in Seoul.
Posco fell 5.3% to 359,000 won in Seoul trading. The stock plunged 34% in 2008, the worst decline in eight years.
For the quarter, sales gained 53% to 8.31 trillion won from 5.43 trillion won a year earlier. Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 60% to 1.40 trillion won from 875 billion won. Global steel demand growth, including in Russia, India and West Asia, may stagnate this year, the first time since 1998, Posco said.
Chief executive Lee, 62, will depart on 27 February when a successor will be announced, the company said. During Lee’s tenure, which started from 2003 and was to last until February 2010, Posco’s shares more than trebled, outperforming the benchmark index that doubled.
The likely candidates to succeed Lee include Yoon Seok Man, president of the steel maker, and Chung Joon Yang, head of unit Posco Engineering and Construction Co., the Munhwa Ilbo newspaper reported on 14 January. Whoever comes in, the biggest challenge is how to overcome difficulties that the company is facing in the downturn, Chung Ji Yun, a steel analyst with HI Investment and Securities Co., said in Seoul.
To combat the slowdown, the company cut output by a total of 570,000 tonnes in December and January.
Crude steel production for 2009 may be between 29 million tonnes (mt) and 32mt, a drop of as much as 12% from 2008, the company said on Thursday.