AMSIY Arcelor Mittal (PK)

Korean steel maker, POSCO (PKX) reported its fourth quarter and 2012 financial results on Jan 29, 2013. Results were weak in 2012 as net income fell 35.8% year over year to KRW 2,386 billion (US$2.2 billion) or KRW 27,347 per share (US6.30 per ADR).

Revenue

POSCO’s consolidated revenue in 2012 was KRW 63,604 billion (US$58.6 billion), down 7.7% year over year. Non-steel sectors performed well during the year, registering a revenue increase of 2.3%. These were more than offset by a 6.1% decline in steel sector revenue.

Crude steel production was at its highest level at 37.986 million tons and represented a 1.8% increase over 2011. Finished product sales were up 1.6%; export ratio of finished product sales was at 41.7% versus 38.6% in 2011. Demand for finished products was strong from the Automobile end-market while weaknesses were noticed in Home Appliances and Shipbuilding markets.
 
Margins

As a percentage of revenue, increase in consolidated cost of goods sold has been noticed over the years; from roughly 82.9% in 2010 to 86.8% in 2011 and 88.3% in 2012.

Selling and administrative expenses in 2012 soared 4.4% year over year to KRW 3,808 (US$3.5 billion). Operating margin for the year has gone down by 290 basis points to settle at 5.7%.

Balance Sheet

Exiting 2012, POSCO’s cash and cash equivalents balance stood at KRW8, 527 billion (US$8.0 billion), reflecting a year-over-year increase of 3.3%. Long-term liabilities declined 5.6% and reached KRW 17,061 billion (US$16.0 billion).

Outlook

For 2013, management expects consolidated revenue to be approximately KRW 66 trillion. Finished product sales are estimated to be roughly 34 million tons; crude steel production about 37 million tons while consolidated investments are likely to be approximately KRW 7 to 8 trillion.

Global steel demand is likely to grow by 3% year over year in 2013; being largely pushed by restocking activities in China and strong demand from U.S, India and Southeast Asian countries.

POSCO currently has a Zacks Rank #1 (Strong Buy). Other stocks to watch out for are Gibraltar Industries, Inc. (ROCK) with a Zacks Rank #1 (Strong Buy) and ArcelorMittal South Africa (AMSIY) and Commercial Metals Company (CMC), both with a Zacks Rank #2 (Buy).
 

 
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