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POSCO (PKX) Posts Weak 2014 Earnings, Revenues Up Y/Y - Analyst Blog

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Korean steel producer, POSCO (PKX) reported disappointing results for 2014. Net earnings dropped 58.9% year over year to KRW 557 billion (US$0.53 billion). Earnings came in at KRW 1,596 per share or US$1.52 per American Depository Receipt.

Revenues

POSCO generated revenues of KRW 65,098 billion (US$62 billion) in 2014, increasing 5.2% over the year-ago tally.

The company’s crude steel production totaled 37.7 million tons, reflecting an increase of 3.4% year over year. Finished product sales inched up 1.2% year over year. Export ratio of finished product sales was 46.5%.

Margins

POSCO’s cost of sales climbed 5.1% year over year, representing 88.8% of total revenues versus 88.9% in the year-ago quarter. Gross profit inched up 10 basis points (bps) year over year to 11.2%. Selling and administrative expenses grew 5.3% to KRW 4,069 billion (US$3.9 billion).

Operating profit was KRW 3,214 billion (US$3.1 billion), up 7.3% year over year. Operating margin was 4.9%, up 10 bps year over year.

Balance Sheet

Exiting fourth-quarter 2014, POSCO had cash and financial goods balance of KRW 5,274 billion (US$4.8 billion) versus KRW 5,530 billion (US$5.3 billion) recorded at the previous-quarter end. Non-current liabilities decreased 2.5% to KRW 18,084 billion (US$16.4 billion).

Outlook

For 2015, POSCO expects consolidated revenues to reach approximately KRW 67.4 trillion. Finished product sales are estimated at roughly 35.9 million tons, while crude steel production is projected to be nearly 38.4 million tons. Consolidated investments are likely to be KRW 4.2 trillion.
 
With a market capitalization of $19.6 billion, POSCO presently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the industry are Kobe Steel Ltd. (KBSTY), LB Foster Co. (FSTR) and Ossen Innovation Co., Ltd. (OSN). While Kobe Steel sports a Zacks Rank #1 (Strong Buy), both LB Foster and Ossen Innovation carry a Zacks Rank #2.


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