[E-Daily Reporter Kim Hyung-il ] IBK Investment & Securities projected that POSCO INTERNATIONAL(047050)will see expanded opportunities for trading profits through long-term contracts for U.S.-sourced liquefied natural gas (LNG).

On the 3rd, Lee Dong-wook, an analyst at IBK Investment & Securities, stated, “POSCO INTERNATIONAL’s third-quarter operating profit was 400.7 billion won, exceeding market expectations of 388.8 billion won,” adding, “Operating profit in the energy sector rose 5.8% quarter-over-quarter to 239.1 billion won, helping to shore up overall earnings.” He explained that the decline in profits from the Myanmar gas field was offset by increased production at Australia’s Sennex and improved profitability in the power generation business.

Senex’s operating profit more than doubled year-over-year to 55.1 billion won. Operating profit from the power generation business also expanded from 37.5 billion won in the previous quarter to 85.2 billion won, driven by higher electricity sales prices. Analysts assess that as profit sources within the energy business have diversified, the foundation for absorbing performance volatility in individual businesses has been strengthened.

In contrast, operating profit in the materials and other sectors fell 18.2% from the previous quarter to 168.1 billion won. While the steel and materials/bio businesses underperformed due to exchange rate fluctuations, the Indonesian palm oil business continued its growth trend. Driven by farm acquisitions and improved production management, it recorded an operating profit of 83.7 billion won.

An analyst noted, “The decline in profits from the Myanmar gas field was offset by increased production at Sennex in Australia and improved profitability in power generation,” adding, “It is positive that the diversification of profit sources within the energy business is strengthening the company’s resilience to absorb fluctuations in individual business units.” The analyst further stated, “It is important to pay attention to the increased production at Sennex and the growing profit contribution from the palm oil business.”

The groundwork for further growth is also being laid. Prime examples include the Gwangyang No. 2 LNG Terminal, scheduled for completion in November, and the acquisition of U.S. gas assets, with the transaction targeted for completion by the end of November. The expansion of LNG infrastructure, coupled with the acquisition of overseas gas assets, is expected to broaden the foundation for growth in the energy business.

The sharp rise in European gas prices is also cited as a new revenue opportunity for POSCO INTERNATIONAL. This is because, as competition to secure LNG in Europe drives up prices even in Asia, the company’s competitive edge in procuring long-term contract volumes from the U.S. could come to the fore.

POSCO INTERNATIONAL has signed a 20-year long-term contract with U.S. LNG company Cheniere for approximately 400,000 metric tons annually and began its first shipment last October. These volumes are procured at prices linked to the U.S. Henry Hub. By utilizing Free On Board (FOB) terms, which allow for flexible selection of the destination, the company can allocate volumes to the market offering the highest sales revenue after factoring in transportation costs and other expenses.

The analyst predicted, “As competition to secure LNG in Europe drives up prices in Asia as well, the competitive edge of procuring U.S.-sourced volumes under long-term contracts could come to the fore,” adding, “If price differentials between regions widen, this will work in favor of POSCO INTERNATIONAL, which possesses flexibility in managing its supply volumes.”