S&P “Solid market dominance in the Korean steel market, excellent product mix”, “Adjusted debt-to-EBITDA ratio for the next two years is expected to be 0.8 to 1.4 times”
Standard & Poor’s (S&P) raised the corporate credit rating of POSCO Holdings by one notch from ‘BBB+’ to ‘A-‘ on June 28th. As a result, the credit rating of POSCO Holdings returned to ‘A-‘ for the first time in 10 years since 2012.
Regarding the reason for S&P’s credit rating upgrade, S&P provided the analysis that POSCO Holdings’ earnings will slightly decrease due to the global economic slowdown and easing of steel demand, but the product mix with a high ratio of high value-added products and strong market dominance in Korea will sufficiently offset the decline. In addition, it said that POSCO Holdings is expected to generate EBITDA (operating profit before) of about 8-11 trillion won in 2022 and 2023.
The adjusted debt-to-EBITDA ratio has also noticeably improved from 1.5 times in 2020 to 0.7 times in 2021, and it is expected to remain at 0.8~1.4 times for the next 24 months.
In addition, S&P assessed that investment in new growth businesses promoted by POSCO Holdings, such as secondary battery materials and hydrogen business, can be sufficiently financed internally, and presented the future rating prospect as ‘stable’.
On the same day, S&P provided a credit rating of ‘A-‘ for the first time to POSCO, which was newly established in March. Regarding the rationale for the ‘A-‘ rating, S&P suggested that POSCO has continued to play an important role in the group’s strategy while significantly contributing to the POSCO Group’s performance, and that the adjusted debt-to-EBITDA ratio will be maintained at 0.4-0.8 times over the next two years. It also evaluated that POSCO’s EBITDA margin rate is the highest and most stable in the global steel industry.
Last year, POSCO Holdings recorded 76.3323 trillion won in consolidated sales and 9.2381 trillion won in operating profit, the highest ever since its establishment in 1968 thanks to the highest sales and operating profit from △expanded sales of domestic demand and high value-added products in the steel sector, improved profits of overseas steel corporations, △favorable trading of POSCO International in the environment-friendly infrastructure sector, and improved performance of investment corporations such as environment-friendly car drive motor business △POSCO Chemical’s full-scale mass production of cathode materials.
In the meantime, in order to lay the foundation for surviving the business environment in an era of uncertainty and for leaping forward as a 100-year company, POSCO Group decided to switch to a holding company system and launched POSCO Holdings in March. After becoming a holding company, POSCO Group plans to strengthen the competitiveness of its seven core businesses such as steel, battery materials, lithium/nickel, hydrogen, energy, architecture/infrastructure, and food(agri-bio) in order to realize the five goals of achieving carbon neutrality in the steel industry, leading new mobility, leading green energy sectors, innovating housing, and securing global food resources with the growth vision of .