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POSCO Q2 net profit jumps YOY, sees China reforms boosting steel prices

POSCO said July 21 that its second-quarter net profitjumped to 221 billion South Korean won from 117 billion won a year ago, while operating profit fellto 679 billion won from 686 billion won a year ago.

Revenue for the quarter came in at about 12.857 trillion won,down from 15.190 trillion won booked a year ago.

According to the company, its second-quarter crude steel productionfell to about 9.01 million tons from about 9.32 million tons year over year,while steel product output was slightly lower at 8.86 million tons, compared to8.93 million tons a year ago.

For the full year, the steel major is targeting consolidatedrevenue of 58.7 trillion won, up from 58.2 trillion won recorded in 2015.

The company expects to produce 37.2 million tons of crudesteel this year, down from 38.0 million tons produced in 2015.

POSCO expects steel prices to remain stable in the third quarterwhile expecting a slowdown in European demand due to the British decision toexit the EU. In China, auto production is expected to increase as economicstimulus measures have started to take effect.

Consolidated net debt is expected to fall to 14.6 trillionwon this year from 16.5 trillion won a year ago, with CapEx estimated at 2.8trillion won, compared to 2.5 trillion won in 2015.

For the second half, the company expects steel prices tostay around US$350 per tonne for hot-rolled coil in China but sees long-termbenefits for steel prices from China's move to restructure its steel industry, Reuters wroteciting POSCO Vice President Kim Young-joong.

"We believe restructuring in China will happen in thenext four to five years, as China is struggling with trade regulationsworldwide and facing pressure from the United States and the EuropeanUnion," Reuters quoted Kim as saying in an investor call.

POSCO said it has completed the sale, liquidation andconsolidation of 45 subsidiaries and completed the sale of seven companies inthe first half of the year as part of its restructuring plan to save costs.

As of July 20, US$1was equivalent to 1,141.58 South Korean won.