Since last February, CEO Kwon has visited Siemens, GE and other businesses in Silicon Valley to explore new technologies and expand POSCO Group’s smartization plan. At CES 2018, CEO Kwon saw first-hand the latest smart technologies and plans to implement them to all of POSCO’s core businesses including steel, construction, IT and energy. He also met officials from leading smart companies such as GE and DPR Construction, and examined possibilities for cooperation over commercializing POSCO’s smart solutions.

POSCO Kwon met Heilmann Matthias, President and CEO of Digital Solutions at Baker Hughes General Electric (BHGE). Matthias oversees the digital solution business of GE Group, and the two discussed the development of PosFrame, POSCO’s proprietary smart platform, its compatibility with Predix, GE’s smart platform, as well as the possibility for joint commercialization.

In particular, POSCO ICT is planning to sign an MOU with DPR Construction, the world leader in Smart Construction, to collaborate on smart projects and find opportunities to apply new ICT technologies to construction. Through this MOU, the two companies will cooperate on projects such as constructing and operating highly-efficient, low-cost data centers and smart factories controlled by PosFrame.

CEO Kwon also visited the automobiles, home appliances, smart city and smart home exhibition booths. He examined the latest tech trends of IT utilization in steel-consuming industries to develop compatible materials and steel solutions.

He also made sure to explore electric vehicle (EV) batteries and new IT technologies surrounding EVs, as lithium materials are the new growth engine of the company. CEO Kwon also evaluated the possibility of securing new markets for the group’s construction business at home and abroad.

POSCO Group plans to continue searching for new, innovative solutions to apply to its smartization efforts and actively develop domestic and overseas data centers and smart factory markets.

Cover photo courtesy of BGR.

The national government, local governments and participating companies held the ceremony at the Jeonnam Creative Economy and Innovation Center to promote the development and diffusion of carbon reduction technology. It is considered an innovative greenhouse gas reduction measure that existed prior to the Paris Agreement, which took effect on November 4.

On November 3, four municipalities and 20 companies in Jeollanam-do signed a business agreement on the national strategic project to convert carbon into future resources. POSCO, second from right, signed the contract as a representative of the companies.

The national strategic project aims to produce useful goods by using carbon sources in by-product and greenhouse gases. This project, designed to cope with the new climate system, will proceed with the Carbon Conversion Flagship and the Carbon Mineralization Flagship by investing 47.5 billion won over six years starting from 2017. Once a budget is allocated to the project by the National Assembly, the government will start on it in full force by assembling a project group in early 2017.

When this technology is completed and applied to steel mills and petrochemical companies, it will contribute to reducing a considerable amount of greenhouse gas emissions.

Approximately 20 companies that participated in the agreement, including POSCO, LG Chem and Lotte Chemical, will contribute not only to slashing greenhouse gas emissions, but to revitalizing local economies by pushing ahead with carbon conversion and enforcing the national strategic project.

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Co-hosted by the Ministry of Education and four organizations including the Korean Society for Engineering Education, this event was prepared in order to share research findings related to engineering education and how it is contributing to the development of humanity.

In the keynote speech, Kwon defined “smart” as: “reinforcing POSCO’s competitiveness and creating new business by applying ICT to the best steel manufacturing technology based on extensive experience and know-how.” He announced that POSCO is now hitting its stride in building Smart Factory, an innovation in the manufacturing business. He also explained the cases of innovation in each country in response to the Fourth Industrial Revolution that is emerging as a big issue worldwide, and emphasized that there is a need for a new industrial classification scheme in line with the changing industrial paradigm. Furthermore, he defined “smart industry” as the territory that can create new added values by seeking convergence of industries with ICT knowledge.

“Korea is a powerful nation in IT and also has a competitive edge in manufacturing, particularly in steel, semiconductors, vehicles and shipbuilding,” said Kwon. “Accordingly, rather than merely increasing or decreasing the proportions of the manufacturing business, Korea should now enhance its industrial competitiveness and create a high value-added business model by applying a new form of advanced ICT and expanding to build a smart industry.”

Moreover, Kwon introduced POSCO’s smart solution platform PosFrame, which performs a key role in Smart Factory, and described a series of processes that can optimize self-learning and control by collecting and analyzing data within the process on a real-time basis.

With “Engineering Education for Smart Society” as its topic, the WEEF & GEDC event will be held until the 10th at COEX and KINTEX in Ilsan, Korea. This forum is for sharing research accomplishments in the industrial, academic and research sectors related to engineering education, and to discuss ways to develop engineering education with industry-academia cooperation toward realizing a smart society. This year marks the 6th anniversary of the forum since its foundation in 2011, and the first time to be held in Korea.

POSCO Looks to Internet of Things (IoT) for a Safer Workplace

POSCO’s Smart Factory: A Thinking Steel Mill

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On October 26, POSCO held an IR session and announced a revenue of KRW 12.748 trillion, as well as an operating profit of KRW 1.034 trillion in the third quarter. Its net income amounted to KRW 475.5 billion.

As the number of its subsidiaries was reduced due to group restructuring, revenue on a consolidated basis declined by 0.9% QoQ. However, thanks to the slight improvement in the performance of the energy and ICT divisions due to the vastly improved performance of the steelmaking division, operating profit and net income increased by 52.4% and 115.6% QoQ respectively.

In particular, due to the increased sale of high value-added products and a reduction in costs, the operating profit of overseas steelmaking subsidiaries increased by 1148% QoQ to KRW 132.3 billion. The integrated steel mill in Indonesia also recorded an operating profit of KRW 38.5 billion. In addition, major overseas steelmaking subsidiaries, including the Mexico CGL, the cold rolling mill in Vietnam and the cold rolling mill and CGL in Maharashtra, India, saw their operating profits greatly increase.

The separate revenue and operating profit of POSCO increased by 1.6% and 19.6% QoQ respectively to KRW 6.106 trillion and KRW 852.4 billion. Its net income amounted to KRW 579 billion, up 86.5% QoQ.

The separate operating profit margin went up by 2.1% QoQ to 14% thanks to the increased sales of WP (World Premium) products and solutions, the higher price of steel and cost-saving efforts. It is the highest figure in 20 quarters since the third quarter of 2011.

The sales of WP products increased by 199,000 tons QoQ to 4,038,000 tons, a record high. As a result, WP products now account for 48.1% of the total sales of POSCO.

Its financial strength drastically improved as well. The consolidated debt-to-equity ratio was lowered by 5.5% QoQ to 70.4%, the lowest level since the introduction of the Consolidated Accounting Standards, and the separate debt-to-equity ratio declined by 2.3% QoQ to 16.9%, the lowest level since its founding. The debt on a consolidated basis decreased from the previous quarter to KRW 2.264 trillion, and on a separate basis, as it has more cash than loans, the net debt became negative (△KRW 829.5 billion).

Meanwhile, POSCO decided to merge POSCO TMC and SPFC into POSCO P&S in the third quarter, and slimmed down the structure of its steel distribution business. It also merged its processing centers in China and Japan to innovate the structure of its overseas steel business. All in all, POSCO completed nine cases of affiliate restructuring and eight cases of asset restructuring. POSCO is planning to finalize 24 cases of affiliate and asset restructuring in the fourth quarter of 2016, and 27 cases next year.

POSCO to Post 678.5 billion Won in Operating Profit on a Consolidated Basis During the Second Quarter

POSCO Announces First Quarter Earnings During IR Conference Call

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12 Years of Sustainable Excellence

In September, the Dow Jones Sustainability Indices (DJSI) once again recognized POSCO for excellence when it comes to sustainable management policies. With the award, POSCO has won DJSI recognition for 12 consecutive years, the only steel company in the world to be so honored.

In this year’s report, POSCO ranked tops among steel companies for risk management, biodiversity, social contribution and stakeholder management.

POSCO Completes Southeast Asia’s First Automotive Steel Plant

In Thailand at the end of August, POSCO held a ceremony to celebrate the completion of Thailand CGL (Continuous Galvanizing Line). POSCO CEO Ohjoon Kwon attended the ceremony, along with more than 250 VIPs and others, including Thailand’s Deputy Prime Minister and Minister for Foreign Affairs Tanasak Patimaprakorn, Minister of Industry Atchaka Sibunruang, Rayong Governor Somsak Suwansujarit, and the Korean Ambassador to Thailand Kwangil Noh.

With the annual production capacity of 450,000 tons, POSCO has expanded its product capacity for automotive steel sheets overseas to 2.25 million tons per year. POSCO next plans on establishing and extending CGL operations in Gwangyang, Korea, and China, bringing its total operations to seven lines in Korea and six lines overseas.

POSCO’s High Manganese Steel Floor Plate Wins Award for Vibration-Resistant Qualities

In August, POSCO won the Jang Young Sil Award in recognition of its special noise-proof floor plates, developed with POSCO E&C. Made with high manganese steel Z clips, PosCozy floor plating is four times more vibration-resistant than general steel, making it ideal for use in apartment buildings.

Around 150 people attended the award ceremony, including the First Vice Minister Namki Hong from the Ministry of Science, ICT and Future Planning. The award was accepted by POSCO Steel Solution Marketing Department’s Managing Director Deokrak Lee and principal researcher Youngdong Yoo.

POSCO’s Financial Picture Continues to Improve in Second Quarter

In July, POSCO announced its second-quarter financial results, with sales reaching 12.86 billion won and 678.5 billion won in operating profits. Construction and energy sales were down slightly, but steel, ICT and other materials showed improvements, with the steel sector’s operating profits up 33.1% from the previous quarter.

The company’s profit margin reached 11.1%, the highest in four years, thanks to the increased sale of high-quality steel, with 3.839 million tons of World Premium products in the quarter, up by 157,000 tons from the previous quarter.

14 Startups Nurtured at POSCO’s Latest Idea Marketplace

In July, POSCO held its 11^th Idea Marketplace, the company’s representative startup support program that helps a variety of startups develop their promising new ideas and find investors. At the latest Idea Marketplace, 14 startups were announced, joining a program where they develop their business plans and gain the help of mentors over a 10-week period.

Since 2011, POSCO has nurtured 122 startups, investing 8.5 billion won into 53 of them. The Idea Marketplace is part of POSCO’s dedication to developing a creative economy and developing jobs.

POSCO’s High Manganese Steel to Build the World Largest LNG-Powered Bulk Carrier

POSCO’s high manganese steel – independently developed for the first time in the world – is set to transform LNG-powered bulk carriers. Until now, the largest cargo capacity of Liquefied Natural Gas (LNG)-powered bulk carriers was 7,000 tons; but, due to the advantages of POSCO’s high manganese steel, these new bulk carriers being built by Hyundai Mipo Dockyard will be able to carry 50,000 tons of freight.

The high manganese steel developed by POSCO contains about 20% manganese, which allows for the construction of LNG tanks are much stronger than the previous tanks, which are usually nickel or aluminum alloys. POSCO officials say they plan on building the overseas market for high manganese steel together with shipbuilders like Daewoo Shipbuilding & Marine Engineering.

With 2016 already three-quarters done, the year is shaping up to be one of the strongest for POSCO. The world steel industry continues to try adjusting to a sometimes challenging global economic climate, but at POSCO, we remain dedicated to pursuing excellence and innovation.

Growth and Giving Back Highlight POSCO’s 2Q

POSCO Starts 2016 with Exciting News from Around the World

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Around 150 related parties attended the award ceremony held in the Maekyung Media Center, including First Vice Minister Namki Hong of the Ministry of Science, ICT and Future Planning. POSCO Steel Solution Marketing Department’s Managing Director Deokrak Lee and principal researcher Youngdong Yoo had the honor of receiving the awards as representatives of the company and associated developers.

POSCO won the Jang Young Sil Award for its noise-proof floor plate. Steel Solution Marketing Department’s Managing Director Deokrak Lee (on the right) and principal researcher Youngdong Yoo (second from right) are seen receiving the awards.

Unlike conventional flooring that uses non-steel materials such as Styrofoam insulators and rubber buffer materials, POSCO’s floor plate is developed by combining high manganese (Mn) steel Z clips – a material that is 4 times vibration-resistant than general steel – with POSCO’s hot-dip galvanized steel plate, making it capable of reducing noise between floors. The Z-shaped high manganese steel clips absorb the vibration energy applied to the floor, and thus preventing noise. Test results showed that POSCO’s high manganese steel floor plate revealed a noise level that is lower than other top grade floor plates (43㏈or lower for lightweight impact sound, and 40㏈ or lower for heavyweight impact sound).

The floor plate made of high manganese (Mn) steel was jointly developed by POSCO and POSCO E&C beginning in June 2014. After acquiring state-registered performance certification last November, POSCO is currently promoting its steel product for apartment buildings, and will increase its market share in premium housings with on-site pilot projects.

“We are currently developing technologies to apply the high manganese steel plate not only to floor plates, but also to ceilings and walls,” said Youngdong Yoo. “We plan to expand the application scope of this product to various industrial fields beyond the domestic and overseas construction markets, such as ships and home appliances as well.”

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POSCO saw improvement in its performance with 12.8574 trillion won in sales and 678.5 billion won in operating profit on a consolidated basis.

Although the construction and energy sectors showed a slight decrease in sales and operating profit, steel, ICT and other materials exhibited overall improvement, leading to an increase in sales and profit in those sectors by 3.2% and 2.8%, respectively. The operating profit margin amounted to 5.3%, remaining at the same level as the previous quarter.

In particular, the operating profit in the steel sector, which includes the combined profit of overseas steel subsidiaries, increased 33.1% from the previous quarter to make a profit during the second quarter. The overseas steel subsidiaries, which had an overall deficit of 399.1 billion won last year, reduced the deficit to 42.3 billion won in the first quarter and raised 10.6 billion in the second quarter, resulting in an increase of 52.9 billion won from the previous quarter.

Zhangjiagang Pohang Stainless Steel (ZPSS), the manufacturer of STS in China, has realized profit for the second straight quarter thanks to an increase in the prices of raw materials, including nickel. PT. Krakatau POSCO in Indonesia and POSCO SS-VINA in Vietnam have largely reduced their deficit as well.

Recorded profit margin is currently at 11.9%, the highest in four years, thanks to the increased sales ratio of high quality steel (on a parent basis)

In terms of parents, POSCO posted 6.96 trillion won in sales and 712.7 billion won in operating profit, up by 4.2% and 22.4% respectively from the previous quarter. It posted 310.5 billion won in net income during the term, down by 30.4%, due to asset impairment caused by the decrease in the value of their stock holdings and losses on valuation of foreign debt caused by exchange fluctuations.

The operating profit margin for parents amounted to 11.9%, up by 1.8% from the previous quarter, which is the highest since the second quarter of 2012. This was driven by the sales and price increase of World Premium (WP) products. It can also be considered a result of the enhanced competitiveness in basic steelmaking, as the company has actively implemented a marketing solution designed to satisfy the needs of customers from the manufacturing stage to the selling stage.

The sales volume of WP products reached 3.839 million tons, up by 157K tons from the previous quarter. WP products accounted for 45.2% of total product sales, an increase of 0.7% from the previous quarter.

Completed 81 cases of restructuring of assets and subsidiaries since 2014

The company’s overall financial health is steadily improving as well. It recorded 75.9% in debt-to-equity ratio on a consolidated basis, the lowest since 2010, and 19.2% on a parent basis, the lowest since its founding.

Relevant innovation within the business structure, which has been underway since 2014, is being carried out smoothly. The company has completed 45 subsidiary restructuring cases from 2014 up to the first half of this year, which includes the cases completed during the second quarter. An example of such a case is the merger between POSCO AST and POSCO P&S. Eighty-one cases, which include 36 asset restructuring cases, have been completed so far out of a total of 149 cases, with the overall restructuring target to be achieved by 2017. POSCO will restructure 28 domestic and overseas subsidiaries and 13 assets during the second half of this year.

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The Korea Best Scientist Award, which was established by the MSIP and the Korean Federation of Science and Technology Societies in 2003, is given to scientists and engineers who have contributed to the advancement of the country and improvement of national welfare through their world-level achievements in research and development, and innovations in technology.

On July 13, POSCO CEO Ohjoon Kwon received the 2016 Korea Best Scientist Award from the Ministry of Science, ICT and Future Planning (MSIP). From left, Nam-ki Hong, 1st Vice-Minister of Science, ICT and Future Planning, CEO Kwon and his wife take a commemorative photograph at the award ceremony.

CEO Kwon was credited with improving Korea’s steel technology to one of the highest levels in the world

By introducing high value-added products and commercializing POSCO’s steelmaking technologies at home and abroad, Kwon received the award as recognition for spearheading these projects and establishing Korea as a major player in the global steel industry.

He led the development of new steel products (14 cases), manufacturing technologies (36 cases) and product quality forecasting models (11 cases). Additionally, he furthered research to secure advanced cutting-edge materials, such as the development of automotive high-strength steel.

CEO Kwon has also contributed to the development of domestic-related industries by providing a complete customer-oriented solution that includes assisting with product application technology, financial support and a personalized human solution.

He was highly recognized for providing POSCO with a competitive identity in the global market by leading the development of World Premium (WP) products and its own innovative technologies. He was also recognized for strengthening the foundation for overseas exports of its technologies, and for developing core technologies in new business areas, aiding in the development of future growth industries.

The entirety of the prize money is to be divided and donated, with 100 million won going to POSTECH, the Korea Engineering Academy and Seoul National University, each.

“I’m very pleased to receive Korea’s top science and engineering award as a representative of the steel industry, the traditional smokestack industry. I will strive to continuously improve the competitiveness of the steel industry that POSCO has been focusing on, and also enhance the selling performance of materials and energy sectors,” said CEO Kwon at the award ceremony.

“In order to revitalize the creative economy and help create more jobs, I’d like to donate the prize money, with 100 million won each going to POSTECH and the Korea Engineering Academy, where I am chairman, and my old school, Seoul National University,” he added.

Another recipient of this award is Professor Taek-hwan Hyeon of Seoul National University. He has contributed widely to the field of nanomaterials, establishing the world’s first method for large-scale synthesis of uniform nanoparticles. In 2008, He received the POSCO TJ Park Science prize from the POSCO TJ Park foundation for his contribution to the commercialization of nanotechnology.

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POSCO is embracing the move towards smart technology through its Smart Factory at Gwangjang Steelworks. The factory connects all operations, equipment and machinery through intelligent data sharing to maximize performance and minimize errors.

Here are some examples of smart city technologies and programs that are already being implemented around the world.

Amsterdam

The Amsterdam Smart City initiative, which began in 2009, currently includes 79 projects collaboratively developed by local residents, governments and businesses. These projects are interconnected through wireless devices. Dubbed the “City,” it works to reduce traffic, save energy and improve public safety.

The City has also provided a number of homes with smart energy meters, with incentives for those that actively reduce energy consumption. Other initiatives include flexible street lighting which allows municipalities to control the brightness of street lights, and smart traffic management, which monitors traffic in real time. The traffic flow is then broadcast to allow motorists to determine the best routes to take.

A view of the Reguliersgracht on the corner with the Keizersgracht, in Amsterdam, the Netherlands at dusk. 

Barcelona

Barcelona implemented sensor technology in the irrigation system in Parc del Centre de Poblenou, which monitors irrigation patterns for gardening crews in real time. Barcelona has also designed a new bus network based on data analysis of the most commonly used traffic routes in Barcelona. Barcelona uses smart traffic lights as buses run to optimize the number of green lights. Emergency vehicle routes are also entered into the traffic light system, setting all the lights to green as the vehicles moves towards their destinations without delay.

Stockholm

Stockholm’s smart city technology uses a universal fiber optic network. Stockholm has created a Green IT strategy. The Green IT program seeks to reduce the environmental impact of Stockholm through energy-efficient buildings, traffic monitoring and e-services to minimize paper usage. The Kista Science City region intertwines university, industry and government to develop ICT applications.

Santa Cruz

An alternative use of smart city technology can be found in Santa Cruz, California. Local authorities use surveillance data to analyze historical crime records to predict where police presence may be required. The analytical tools generate a list of ten areas each day where property crimes have occurred historically, sending police to these regions when officers are not responding to emergencies.

How POSCO is Advancing Smart Cities

POSCO commenced construction of an ICT-enabled Smart Factory, starting with the thick plate factory at Gwangyang Steelworks.

The Smart Factory is an example of the future of manufacturing factories. POSCO hopes to build a world-class smart manufacturing site by finding innovative best practices based on the data generated from its Smart Factory project at Gwangyang Steelworks. This will allow POSCO to develop a standard model which can be applied to manufacturing processes and scaled to fit similar processes in the future.

Technology companies are partnering with construction companies to build the infrastructure required to makes smart cities a reality.

POSCO will be modifying its mid-term strategy in order to achieve “growth with substantiality”. On May 19 at the Korea Exchange in Yeouido, Seoul, POSCO had its first investors forum since CEO Kwon was installed as the new CEO. On this day, new management strategies to restore financial soundness based on a focus on the core steel business, mega growth, and management restructuring for efficiency were announced.

 Pictured here: CEO Ohjoon Kwon, speaking at the POSCO Investors’ Forum

According to the new management strategies, POSCO has plans to strengthen its EBITDA to 8.5 trillion won with Credit A ratings by 2016, to be at the global top standards for financial soundness.  At the same time, POSCO has plans to cultivate its source material and clean energy businesses to promote mega growth.

Pictured here: CEO Ohjoon Kwon, speaking at the POSCO Investors’ Forum

In order to achieve its mid-term management goals, POSCO plans to change from its former ‘Own & Compete’ based M&A strategy to a ‘Connect & Collaborate’ based strategic partnership, with plans to seek a diverse range of domestic and international companies.

POSCO’s business structure will be reformed so that the strategy that previously focused on expanding steel, materials, energy industries will now be focused on the core steel business and promote mega-growth engines in the two sectors of source material and clean energy. The projects nominated for focused development are source material which encompasses lithium, nickel and clean energy which includes fuel cells and clean coal businesses.

Other fields can be subject to subsequent business restructuring if it will increase the company value and meet the following principles:

1)      First, evaluate whether the entity is recognized as top tier in the domestic market or is seen as essential towards strengthening the competitiveness of the core steel business

2)      Second, even if it is a blue-chip affiliate, consider pushing ahead with the sale or IPO of shares that exceed what is necessary to maintain right of management

3)      Third, plan internal restructuring to strengthen efficiency based on business consolidation, divisions or other adjustments

 Pictured here: Attendees at the POSCO Investors’ Forum

The priority will be placed on restructuring that has the most impact and can relatively be done easily. Although specific plans for restructuring have not been confirmed yet, entities that have been selected will promptly push ahead to show results.

The reorganization that emphasizes the steel business will select seven strategic industries including automotive, marine and energy to grow sales and expand the sales percentage of profitable, premium products. In addition, in order to turnaround overseas business to surplus by 2016, POSCO plans to develop high added-value products in a timely matter to meet market demands and also strengthen solution marketing offerings.

The energy business plans to grow the domestic coal power plant market and target emerging markets for overseas growth while also fostering the fuel cell industry. It also has plans to devote initial investment towards securing technologies for the source material business to strengthen competitiveness.  Business entities including E&C, Trading, and ICT will focus on core competencies that will provide profitability and growth for the entire company.

Pictured here: Q&A session during the POSCO Investors’ Forum

If POSCO’s new management strategies run smoothly, POSCO can expect 32 trillion KRW in sales with 3 trillion KRW in operating profit, 9% operating profit margin, on a stand-alone basis.  On a consolidated basis, that would mean 78 trillion KRW in sales with 5 trillion KRW in operating profit, 6% operating profit margin. Debt-to-equity ratio can be expected to be lower as well.

Pictured here: Panel discussion at the POSCO Investors’ Forum

At the investors forum, CEO Kwon announced, “The strategy paradigm will change in order for POSCO to have stable growth and we will focus on strengthening competitiveness and improving profitability.” Moreover, he said, “With drastic restructuring focused on internal efficiency, we will give back to shareholders, investors, customers, partners, employees, local communities and all those who support and love POSCO.”

Pictured here: Ohjoon Kwon, speaking at the POSCO Investors’ Forum

Growth laid on internal strength will allow POSCO to achieve the new vision of ‘POSCO the Great!’