POSCO Ups Stake in Pilbara - Analyst Blog
20 Gennaio 2012 - 2:00PM
Zacks
Korean steel producer,
POSCO (PKX) recently announced that the company
will acquire a 15% stake in the Roy Hill Holdings, located in one
of the richest iron ore belts in Australia, the Pilbara region.
The deal was signed for
approximately KRW 1.779 trillion or US$1.6 billion. The stake
acquisition will elevate POSCO to a position that would enable the
company to counter the rising raw material prices that are used in
steel construction. Moreover, it will help POSCO combat rising
competitive pressure from its Asian counterparts.
Also, of late, the company secured
a major contract involving complete supply of rolled steel required
for the construction of Lotte World Tower.
The tower project entails
construction of the second tallest building in the world with 123
floors above and six floors below the ground. The construction is
expected to be complete by 2015, using approximately 40,000 tons of
rolled steel.
We believe POSCO is very well
placed to benefit from its wide regional diversifications, higher
proportion of value-added products in its product mix and new
facility additions over the longer term. Moreover, the company’s
focus on expansion in fast growing markets like graphene and
synthetic natural gas and investments in raw materials will
eventually be extremely rewarding for POSCO.
According to the World Steel
Association, the world steel demand will increase by 6.5% in 2011
and roughly by 5.4% in 2012. However, impediments in the form of
financial crisis in the European region, political unrest in other
parts of the world, the Japan earthquakes and economic uncertainty
in China are very likely to restrict demand growth.
In the recently reported financial
results, POSCO’s net income plummeted 78.5% year over year,
primarily due to KRW 1.08 trillion foreign currency translation
losses while revenue showed a 51.6% increase. To add to the peril,
competition is increasing manifold for the company, especially from
its peers like Arcelor Mittal (MT) and
Nippon Steel Corp. (NISTY.PK).
The current Zacks Consensus
Estimate for the fiscal years 2011 and 2012 are $8.87 and $10.27,
reflecting a year-over-year decline of 27.35% and growth of 15.78%,
respectively.
ARCELOR MITTAL (MT): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
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