Hyundai Steel(004020) improved its performance from the previous quarter this year in the second quarter thanks to higher sales of long products and rising product prices. However, with the burden of materials and supplies costs persisting, operating profit fell 43% from a year earlier and missed market expectations.
Hyundai Steel said in a filing on the 3rd that, on a consolidation basis, operating profit in the second quarter was 57.7 billion won, down 43.3% from a year earlier, on a preliminary basis. That result was 24% below the operating profit consensus of 75.9 billion won forecast by the securities market. Revenue was 6.1073 trillion won, up 2.7% from the same period last year.
Compared with the previous quarter, revenue rose 6.4% and operating profit jumped 267.5%. Net income was 12.1 billion won, down 67.6% from a year earlier, but it swung to a profit from a net loss of 39.3 billion won in the previous quarter. The second-quarter operating margin was 0.9%, down 0.8 percentage points from 1.7% a year earlier.
The improvement from the previous quarter was led by long products. Hyundai Steel's second-quarter steel product sales volume was 4,421,000 tons, up 158,000 tons from the previous quarter. Of this, sales of long products increased from 1,285,000 tons to 1.4 million tons. Sales of flat products also rose from 2,978,000 tons to 3,021,000 tons. Thanks to expanded sales, higher product prices, and cost reductions, standalone operating profit swung to a surplus of 11.1 billion won in the second quarter from a deficit of 72.5 billion won in the first quarter.
Lower profitability than a year earlier is analyzed to have been affected by the burden of materials and supplies costs. The securities market saw the earlier rise in coking coal prices being reflected in costs and the continued strong won-dollar exchange rate, while delayed price hikes for automotive steel sheets and shipbuilding plates limited the extent of profit improvement.
Hyundai Steel expects product prices and raw material price trends to turn favorable for profitability in the second half. Hyundai Steel said, "Prices of flat products are rising due to a decrease in low-priced imports and reduced supply from regular maintenance, and long products are also seeing prices rise due to increased rebar exports and supply adjustments by steelmakers." In contrast, coking coal and iron ore prices are showing a slightly weaker to steady trend due to slowing demand and stabilized supply.
Hyundai Steel plans to expand sales of steel materials for advanced industrial infrastructure, including artificial intelligence (AI) data centers and semiconductor plants, in the second half. After forming a dedicated power infrastructure team at the start of the year, it won new steel orders for seven domestic data centers. For semiconductor plant construction, it will supply product groups such as rebar, sections, heavy plate, and hot-rolled coil, and it also plans to increase sales of steel for energy storage systems (ESS) and transmission towers.
It will also expand products for the energy industry. For next-generation nuclear power plant containment high-spec heavy plate, it has completed building a mass-production system and plans to supply samples to customers in the third quarter of this year. For high-pressure hydrogen pipelines, it obtained global certification for 100-bar products in March this year, following 80-bar products last year. It will also promote expanded sales by developing high-durability materials for hybrid vehicle transmissions and high-strength crane rails to replace imported products.
Due to new investments such as an electric arc furnace steel mill in the United States, borrowing fund increased from 9.2619 trillion won at the end of last year to 10.163 trillion won at the end of June this year. Over the same period, the liability ratio rose 2 percentage points, from 73.6% to 75.6%. Hyundai Steel said it plans to strengthen financial soundness through working capital management.