Global rating agency Moody's Investors Service said Tuesday it has downgraded POSCO's rating outlook to negative from stable, citing its sluggish 2015 earnings and a continuing supply glut in the Asian steel industry.
POSCO, South Korea's largest steelmaker, swung to a net loss in 2015 on a consolidated basis, for the first time in its history, amid weak demand and losses from its equity ties with affiliates.
The net loss was attributed to the overall slump in the steel industry, along with a decline in the value of assets, including overseas mines and losses tied to currency fluctuations.
For its steel business alone, POSCO remained in the black with a net profit of 1.32 trillion won, up 15.7 percent from a year earlier.
"The negative outlook mainly reflects POSCO's weaker-than-expected earnings in 2015 and the increasing likelihood that POSCO's financial profile will remain weak for its Baa2 rating over the next 12-18 months, as challenging conditions in the Asian steel industry should continue to pressure its earnings," Chris Park, Moody's vice president and senior credit officer, said in a note.
Moody's expected POSCO's operating income to decrease further this year on a persistent supply glut from Korean and Chinese manufacturers. It also remained negative on the natural gas exploration and development business by its affiliate Daewoo International Corp. in the wake of the lower crude oil prices.
"POSCO's efforts to increase value-added products and restructure its loss-making subsidiaries will only partly offset these negative drivers," Park said. (Yonhap)