SEOUL, South Korea -- Posco's third-quarter net profit fell 1.3%, mainly because of decreased earnings in its stainless-steel business. But analysts said rising nickel prices will buoy fourth-quarter results.

Net profit fell to 871.2 billion won ($949.9 million) from 882.4 billion won a year earlier.

Sales edged down 0.8% to 5.257 trillion won from 5.298 trillion won.

Reduced output of stainless steel cut into profit, said Lee Dong-hee, senior executive vice president, adding that the stainless-steel division usually accounts for 10% of Posco's operating profit.

To reduce its dependence on imported processed nickel, Posco will import the metal from New Caledonia and process 30,000 tons of nickel a year at its Gwangyang plant beginning next September, said Senior Vice President Jang Young-ik.

Despite strong steel prices and cost-cutting efforts, the stainless-steel business was hurt by weak nickel prices. Lower prices of nickel -- a key raw material in making high-end stainless-steel products -- spurred Posco to cut prices four times from June to August.

Analysts forecast that nickel prices will improve through the first half of next year as global demand revives. Richard Kim at Korea Investment & Securities said nickel prices rebounded in mid-September to $30,000 a ton from $25,000 a ton in August, and may rise to about $32,000 a ton by the middle of next year.

Posco's third-quarter operating profit edged up 0.8% to 1.073 trillion won. "Efforts to sell more high-end products such as automotive steel plates and to cut expenses helped Posco's operating profit," the company said.

Posco adjusted its target for cost reductions this year to 804.2 billion won from 487.2 billion won. It achieved 242.6 billion won in reductions in the third quarter.

The steelmaker revised its sales target for the year to 21.8 trillion won from 21.3 trillion won, while raising its target for operating profit to 4.5 trillion won from 4.1 trillion won.

Posco announced it will invest 120 billion won by 2010 to build a 100-megawatt fuel-cell plant in Pohang, 374 kilometers southeast of Seoul. It expects sales from the fuel-cell business to reach 400 billion won in 2012.