'Raw Material Price Increase' Sangsa Industry Anticipates Strong Q3 Performance Momentum

POSCO Inter surpasses 9 trillion KRW quarterly sales for the first time in history
Samsung C&T exceeds last year's operating profit in H1, continues strong performance in Q3
LX Inter expects over threefold increase in operating profit YoY due to soaring coal prices

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Due to economic stimulus policies worldwide and rising raw material prices, comprehensive trading companies are expected to have significantly improved their third-quarter performance. These trading firms plan to steadily enter new businesses in the fourth quarter, in addition to their traditional trading operations, to create stable revenue sources.

According to the financial investment industry on the 23rd, POSCO International announced yesterday that its consolidated third-quarter sales were tentatively estimated at 9.1515 trillion KRW, an 80.6% increase compared to the same period last year, and operating profit rose 38.7% to 148.5 billion KRW.

With raw material prices soaring sharply, POSCO International surpassed 9 trillion KRW in quarterly sales for the first time since its founding. The cumulative performance up to the third quarter this year recorded sales of 24.763 trillion KRW and operating profit of 445.4 billion KRW. POSCO International explained that its subsidiaries, including the eco-friendly car parts company POSCO SPS and its cotton manufacturing subsidiary in Uzbekistan, also showed an upward trend.

Samsung C&T, which has yet to announce its third-quarter results, is also expected to benefit significantly from the rise in raw material prices. The trading division of Samsung C&T posted an operating profit of 174 billion KRW in the first half of the year, nearly double last year's full-year operating profit of 93.5 billion KRW. Ebest Securities forecast that Samsung C&T's trading division sales for the third quarter will see a slight increase, while operating profit is expected to rise about 21.7% year-on-year to 56 billion KRW.

LX International, which recorded sales and operating profit of 3.1552 trillion KRW and 34.9 billion KRW respectively in the third quarter last year, is also expected to post an earnings surprise with 4.2007 trillion KRW in sales and 154.3 billion KRW in operating profit this quarter, according to the financial investment industry. The increase in cargo volume and the rise in coal prices, a major resource development business area for LX International, have fueled expectations for improved performance. Hana Financial Investment researcher Jae-sun Yoo said, “With the continued strength in thermal coal prices due to raw material prices and supply-demand imbalances, considering inventory demand, performance improvement is possible in the fourth quarter as well. Logistics profitability is expected to remain solid during the peak cargo season.”

Trading companies plan to actively develop new businesses that can be pursued long-term in the fourth quarter. POSCO International plans to conduct exploration for four years after acquiring exploration rights for the 'PM524' block in Malaysia, following Myanmar. In Australia, it is also pursuing the acquisition of specialized battery and petroleum exploration and production (E&P) businesses. Based on this, the company aims to establish a foothold for the group’s hydrogen economy business through carbon-neutral linked projects.

Samsung C&T’s trading division, which has adopted renewable energy as a new growth engine, signed a business agreement in August with Namhae Chemical and Korea Southern Power to introduce and utilize clean hydrogen. Accordingly, Samsung C&T will be responsible for developing the overall business model from overseas clean hydrogen production project development to domestic introduction and utilization. Last month, it also formed a partnership with the global petrochemical company S-Oil related to eco-friendly hydrogen and biofuel businesses.

LX International is actively considering expanding into eco-friendly and healthcare businesses. Key investment areas for LX International include nickel mining and operation, resource recycling, carbon emission rights, hydropower, and diagnostic kit distribution. LX Pantos, LX International’s logistics subsidiary, is also known to be preparing to establish overseas bases and build IT systems.