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Saturday, December 03, 2005


Posco SEC filings
Posco stock chart

Steel company stock prices are low because of it (just like homebuilders). Buffett mentioned something about a highly profitable Korean steel company (it wasn't Posco), so I wondered just how profitable POSCO is and whether it might be worthy of looking at. I did this a week or more ago and I didn't put much effort into it, so it's not all that good, but useful to get a sense of the industry.

Top world steel producers:

World production increased 6.3% in 2005 vs 2004. Everyone just knows this will drop.

What I really need to look at is return on assets and gross margin per ton of steel. Those aren't covered here.

9 month revenue 2005: EU 24.26 million
gross margins: 18.5% (22.3% for flat carbon steel, 21.0% for long carbon steel, 5.8% for stainless alloys and specialty plates)
operating margins: 14.2% (17.7% for flat carbon steel, 16,8% for long carbon steel, 1.8% for stainless alloys and specialty plates)
net margins: 10.7%

US$141 gross profit per ton in Q3.

operating margins: 10.9% in Q3, 18.3% in Q2, 26.8% in Q1
net margins: 6.7% in Q3, 14.3% in Q2, 17.8% in Q1

Mittal's charts show ROIC to be close to 30% for Nucor, Mittal, and Posco (in that order).

operating profit per ton dropped from US$114 in Q2 to US$59 in Q3.

Nippon Steel
For the 6 month period from March 31, 2005 to Sept 30, 2005
gross margins are 23%
operating margins are 14.3% (for the full year to Sept 30, 2005 for steel business only)
net margins are 10.5%

US$105 gross margin per ton of steel for year ending Sept 30, 2005.

not easily obtained

gross margins: 29.3%
operating margins: 20.7%
net margins: 19.4%

gross margins: 36.6%
operating margins: 32.1%
net margins: 23.4%

gross margins: 36.0%
operating margins: 31.4%
net margins: 23.1%

US$700 gross profit per ton

Shanghai Baosteel
State owned, I didn't find details

U.S. Steel
gross margins: 18.2% in Q2, 23.7% in Q1
operating income: 5.0% in Q3, 11.5% in Q2, 18.2% in Q1
net income: 3.1% in Q3, 6.8% in Q2, 13.0% in Q1

Corus Group
More or less first half 2005 results
operating margin: 9.1%
net margin: 6.3%

9 months results
gross margins: 20.1%
operating margin: 15.8%
net margin: 10.2%

Q3 3 month results
gross margins: 19.5%
operating margins: 14.8%
net margins: 5.1%

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