July 23, 2019 / 2:12 AM / 2 months ago

UPDATE 1-S.Korea's POSCO posts 15% drop in Q2 operating profit on higher raw materials costs

(Adds details, background)

* Q2 operating profit 1.1 trln won, down 15% y/y

* In line with analyst estimates in Refinitiv data

* Sees China steel demand improving in H2 on economic boost

* Expects global steel demand growth to slow

* Raises 2019 revenue target to 66.8 trln won, from 66.3 trln won

By Jane Chung

SEOUL, July 23 (Reuters) - South Korean steelmaker POSCO said on Tuesday its second-quarter operating profit fell 15% from the same period a year earlier, dragged down by higher raw material costs, meeting analyst estimates.

The world’s fifth-biggest steelmaker forecast a pick-up in China’s steel demand in the second half of the year, supported by a boost to economic policy, but said global steel demand growth is expected to slow due to economic uncertainties.

The steel maker slightly raised its 2019 consolidated revenue target to 66.8 trillion won, from its previous goal of 66.3 trillion won in January.

POSCO posted a consolidated operating profit of 1.1 trillion won ($933.7 million) for the April-June period, compared with 1.3 trillion won a year earlier and an average estimate of 1.1 trillion won, compiled from 13 analyst forecasts according to Refinitiv data.

Net profit increased 17% to 681 billion won, while the steelmaker’s second-quarter revenue rose 1.5% to 16.3 trillion won.

Iron ore futures on the Dalian Commodity Exchange have doubled since the start of 2019, hitting a record 924.5 yuan a tonne last week. Reduced output following a dam accident in Brazil and a cyclone in Australia have supported prices of the key steelmaking ingredient.

Economic growth in China, a key consumer of steel, slowed to 6.2% in the second quarter of this year, its weakest pace in at least 27 years, as demand at home and abroad faltered amid an ongoing trade conflict with the United States.

POSCO shares were flat by 0155 GMT after the earnings release, while the broader market KOSPI was up 0.6%. ($1 = 1,178.1000 won) (Reporting by Jane Chung; additional reporting by Ju-min Park; editing by Kenneth Maxwell and Richard Pullin)

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