SEOUL (Bloomberg) -- Posco, South Korea’s largest steelmaker, posted a 71 percent decline in second-quarter profit after cutting prices and production on waning demand.

Net income fell to 431 billion won ($328 million) in the three months ended June 30 from a year earlier, the Pohang-based company said on Monday in an e-mailed statement. The median net profit estimate of 19 analysts surveyed by Bloomberg was 279.5 billion won. Operating profit plunged 91 percent to 170 billion won.
The global recession has curbed steel use by builders and automakers, prompting Posco to slash output in December for the first time in its 41-year history. Earnings may rebound this half as Posco benefits from lower material costs and rising exports, Chief Financial Officer Lee Dong Hee said June 30.
“The market has factored in that the second-quarter result may be ugly on slow demand, lower prices and higher raw material costs,” Moon Jeong Up, an analyst at Daishin Securities Co. in Seoul, said before the results were announced. “Now the focus is on the recovery in third-quarter demand, which hit the bottom in the second quarter.”
Shares of Posco, 5.2 percent owned by Warren Buffett’s Berkshire Hathaway Inc., fell 1.3 percent to close at 430,000 won in Seoul trading.
Posco on Monday raised its 2009 crude steel output target to 29.8 million metric tons from a previous estimate of 28 million tons. Chief Financial Officer Lee had said on June 30 that output will be increased as customers begin to restock.
-------Sales dropped
Sales in the second quarter dropped 15 percent to 6.34 trillion won. The company didn’t explain why net income in the period was higher than operating profit in its statement.
Posco is targeting a 2009 operating profit of 2.6 trillion won, down from 6.54 trillion won last year, it said on Monday.
The steelmaker, which earns about 60 percent of sales in South Korea, cut local prices for hot-rolled coils by 20 percent in May for the first time since January 2006. Steel demand diminished the most since World War II and output could fall 15 percent this year, the World Steel Association said in April.
A 33 percent plunge in iron ore prices and a drop of almost 60 percent in coal costs since April 1 will shore up Posco’s profit in the second half, spokesman Choi Doo Jin said July 1.
The company will restart the No. 4 furnace in Gwangyang on July 21 after a maintenance shutdown, Choi said. The 3.1 million ton furnace was shut in February ahead of schedule for a regular overhaul.
Posco’s global rivals are also reviving production lines. ArcelorMittal, the world’s biggest steelmaker, said last month it may restart two blast furnaces at its Indiana manufacturing facility to take advantage of higher demand.