On October 26, Moody’s, an international credit rating agency, upgraded the outlook for POSCO’s long-term corporate credit rating of Baa2 from “stable” to “positive.” The last time POSCO’s credit rating outlook saw an upgrade was a year ago in October, when Moody’s upgraded POSCO’s credit rating outlook from “negative” to “stable.”
Moody’s forecasted that POSCO’s financial status will improve in the next 1-2 years as a result of increased profits from the sales of POSCO’s high-value-added products and decreased borrowings due to the improvement of global market conditions. In particular, the ratings agency predicted that POSCO’s EBITDA (earnings before interest, taxes, depreciation, and amortization) will increase by 20-25 percent over the previous year, and its debt to EBITDA ratio will decline from 4.1 times to 2.8 times in the next 12-18 months.
Moody’s added that its affiliate, POSCO E&C, will also see its profitability improve in the future.
POSCO has reinforced the competitiveness of its steel business and improved its financial health and profitability since the inauguration of POSCO CEO Ohjoon Kwon in 2014, despite an unfavorable external environment marked by the global oversupply of steel and reinforced protectionism around the world.
POSCO has also been attaining its restructuring goal (149 cases) since 2014, and completed 146 cases of restructuring as of Q317, and should the company complete its restructuring by the end of this year, the number of POSCO’s domestic affiliates will be cut down to 38.
Its financial strength has also improved. POSCO’s consolidated debt ratio of Q3 dropped down by 1.5%p QoQ to 68.1%, the lowest ever since 2010, and its separate debt ratio was 16.3 percent, the lowest ever in its history.
POSCO increased its consolidated and separate sales projections by KRW 4.7 trillion and KRW 3.2 trillion, respectively, to KRW 59.5 trillion and KRW 28.8 trillion compared to its plans at the beginning of the year.
POSCO predicts that steel demand will continue to increase based on the restructuring of the Chinese steel industry, along with the anticipated robust growth of demand in emerging and developing countries. It plans to make continued efforts to generate revenues by securing financial strength, reducing costs and increasing the sales of high-value-added products.
Cover photo courtesy of CBS News.