Dongkuk Steel, Q2 Operating Profit of 293.7 Billion KRW... 41.9% Increase YoY

[Asia Economy Reporter Jeong Dong-hoon] Dongkuk Steel announced on the 16th that it recorded consolidated sales of 2.3133 trillion KRW, operating profit of 293.7 billion KRW, and net profit of 148.8 billion KRW in the second quarter.

Compared to the same period last year, sales increased by 27.2%, operating profit rose by 41.9%, and net profit slightly increased by 0.6% to 148.8 billion KRW.

For the first half of the year, Dongkuk Steel’s consolidated sales reached 4.4446 trillion KRW, up 38.3% compared to the same period last year. Operating profit was 499.5 billion KRW, a 57.9% increase year-on-year. Net profit was 421.3 billion KRW, up 140.2% from the previous year.

Dongkuk Steel maintained an upward trend in both sales and operating profit on a separate and consolidated basis in the second quarter, driven by expanded profitability of steel products and increased profits in the trade and logistics sectors. Proactive sales activities aligned with the seasonal peak in the construction industry led to a 7% increase in sales volume of bars and shaped steel products compared to the previous quarter. Despite stagnation in demand from downstream industries for plate products such as cold-rolled and thick plates, profitability was secured through an increased sales ratio of high value-added products like Luxsteel and a higher export ratio due to sustained high exchange rates.

The slowdown in net profit growth in the second quarter was due to impairment recognition from the sale of shares in the Brazilian CSP steel mill. Dongkuk Steel recognized impairments of 264 billion KRW on a separate basis and 195.9 billion KRW on a consolidated basis from the sale of shares in the Brazilian CSP steel mill. It also recognized disposal gains of 58.9 billion KRW on a separate basis and 77.2 billion KRW on a consolidated basis from the disposal of shares in its Chinese subsidiary (DKSC). The impairment recognition means that Dongkuk Steel has removed the residual value of the Brazilian CSP steel mill it held.

In the first half of the year, Dongkuk Steel pursued restructuring of low-profit businesses and improvement of its financial structure for sustainable growth. As a preemptive response to the global complex crisis, it completed the sale of shares in the Brazilian CSP steel mill and disposal of shares in the Chinese subsidiary, thereby eliminating all business risk factors including management uncertainty, investment burden, and foreign exchange risk.

As of the first half of this year, consolidated total borrowings stood at 2.1444 trillion KRW, and the debt ratio was 108.8%. This is a significant improvement from the total borrowings of 3.0879 trillion KRW and debt ratio of 176.3% in 2016, when the Brazilian CSP steel mill blast furnace was put into operation, and after graduating from the financial structure improvement agreement.

Based on the improved financial strength, Dongkuk Steel expects further credit rating upgrades in the second half of the year. In the first half, Dongkuk Steel’s credit rating was upgraded from BBB (stable) to BBB (positive) by Korea Ratings and Korea Investors Service. Dongkuk Steel plans to focus its core competencies on electric arc furnace steelmaking and color steel sheet businesses centered on sustainable strategies.