Dream comes true in 2068 achieving 500 billion sales?

POSCO has celebrated 50th year anniversary ‘Future vision declaration’ on April, 1st and announced future missions and visions as Top 5 world leading global steel company.

CEO of POSCO, Ohjoon, Kwon is sharing global missions and visions with audience at 50th anniversary

For the future, ‘Unlimit the Limit’

Ohjoon Kwon the CEO of POSCO disclosed POSCO’s new future slogan ‘Unlimit the Limit: Steel and Beyond’ by using TED speech method that is currently considered as one of the most efficient speech method. The mission that has been made based on POSCO’s challenges for 50 years history, is expressed the will of POSCO to ‘overcome the limit and go further to the next step’ especially challenging to non-steel industry.

POSCO is developing a plan to shift gradually from current profit system that 80% of income from steel industry to new profit system that produces profit from 3 different industrial fields: Steel, Infrastructure, New Growth in the ratio of 4:4:2. By successfully operating new profit system, POSCO expects that the mission can be accomplished by 2068 sales up to 500 billion dollars and 70 billon dollars of operating profit.

POSCO is focusing balance of 3 core elements, business, technology, culture. (Source:Bitcoinmagazine)

POSCO’s Perspective: Harmony of business, technology and culture

POSCO’s future vision also has been announced as ‘POSCO the Great’. This was the slogan that Ohjoon Kwon introduced as he had been elected as CEO of POSCO in 2014. The slogan was focused on simply recovering the strength. However, the new slogan is ‘Great Business, Great Technology and Great Culture’ indicating well-organized business structure, advanced technology and organizational culture.

POSCO has contributed significant impact on both Korean country and society in terms of steel and educational support. And POSCO has decided to keep supporting business for the country.

One of the plans that POSCO is contemplating, is establishment of the place for developing creativity for adolescent.

The ’Youth Creativity Center’(tentative) is going to be designed to provide various opportunities to adolescents such as giving experience to understand basic understanding of scientific technology and opportunity to improve creativity.

Furthermore, the ‘Youth Creativity Center’ will contain diverse spaces for culture and arts so all generations will be easy to access. POSCO is expecting the Youth center may be a competitive candidate on coming international contests.

Seoul POSCO center has opened a new product exhibition hall to communicate more with general populations and show their future vision. The exhibition hall has 30 seats visual promotion room. The room provides POSCO promotion videos and visualized POSCO images by 3D technique. Various animations and techniques are prepared to describe steels that are being used in our life and industrial demands of steel for future.

For celebrating 50th anniversary, POSCO will broadcast TV commercial named ’50 years challenge, New Dreams for next 100 years’ until June 10th and POSCO exhibition (Homage to POSCO) will be held in POSCO art gallery in lower ground level until May 8th. POSCO historical museum in Pohang is also going to open gallery (‘Visualized history of POSCO for half century’) showing numerous events during POSCO’s 50 years until June 30th.

POSCO is also preparing the event that gives valuable opportunities to share thoughts between CEO and employees in Seoul, Po hang, Kwang yang city.

‘Together the Better’, POSCO and Korea have strong bond in all history

True companion of Korean history

50 years of POSCO’s history is in the same line with Korean history which means that POSCO has been increasing growth for half century. POSCO was established in 1968, and the very first steel was manufactured in 1973. Since that year, total sales of POSCO has incredibly elevated by 686 times last year from 1973. 

Growth of POSCO gave great influence on major industry in Korea. Especially Korean automobile and shipbuilding industry had similar growth curve which means that materials manufactured from POSCO was true backbone for those industries. For instance, Korean ship manufacturing has reached to 23.5 million tons from 12 thousand tones from 1973. And automobile production also increased 4.11 million from 25 thousand cars.

SEE ALSO: What are Automobiles Made of?

Technology is another fundamental aspect of POSCO’s strength. POSCO has developed eco&efficient furnace by its own technology called ‘FINEX’ technology which fully satisfied current and future global trends, environmental and innovative. With this advanced technology, POSCO has exported its unique iron making technique in China in 2013. This describes that POSCO is global technology provider.

In addition, POSCO is the global top company that produces steel for vehicles. Approximately 9 million tons of steel for vehicle has been produced from POSCO which indicates that 25% of steel for car manufacturing is from POSCO. Simply 1 in 10 cars in global, uses steel from POSCO.

Relationship of growth between GDP per person in Korea and production of steel of POSCO

POSCO has established its own smart platform named ‘PosFrame’ that made POSCO is global leading steel company for smartization.

With all these achievements, POSCO has been listed in ‘worlds most competitive steel maker’by World Steel Dynamics for 8 consecutive years since 2010. Also POSCO has been top ranked in SAM-Dow Jones Sustainability index since 2005.

With the performance increase in both steel and non-steel businesses in Korea and overseas, operating profit was highest it’s been in the last 6 years, and the operating profit to sales ratio was 7.6 percent. Year-on-year consolidated sales increased by 14.3 percent and operating profit and net profit increased by 62.5 percent and 183.7 percent respectively.

The total operating profit of POSCO’s non-steel businesses, which reached KRW 10 billion last year, also turned into a surplus. There was an overall increase in non-steel businesses including trade, energy, ICT, chemicals and materials, resulting in KRW 1.0927 trillion of profits, up KRW 1.0798 trillion from last year.

This is in line with POSCO CEO Ohjoon Kwon’s strategy to focus on group management by securing future growth engines and reforming non-steel businesses.

※ Total operating profit per sector

Indonesia-based integrated steel mill, PT. KRAKATAU POSCO, also generated a surplus for the first time since operations began in 2014. Mexico-based automotive steel sheet plant, POSCO Mexico, as well as India-based cold rolled steel corporation, POSCO Maharashtra, also achieved their highest operating profit, tripling the total operating profit of overseas steel business.

Moreover, separate sales and operating profit increased year-on-year by 17.4 percent and 10.1 percent respectively to KRW 28.5538 trillion and KRW 2.9025 trillion, and the net profit was KRW 2.5457 trillion.

Production and sales decreased year-on-year due to the repair and facility rationalization of Pohang Blast Furnace No. 3, but the sales ratio of World Premium products with better technology and higher returns increased to 53.4 percent, its higher ever.

Financial soundness was also saw improvements. POSCO’s Consolidated debt ratio decreased by 7.5%p year-on-year to 66.5 percent, the lowest since 2010. Separate debt ratio also decreased by 0.5%p year-on-year to 16.9 percent, constantly renewing the lowest record on a yearly basis.

POSCO also demonstrated a cumulative financial improvement of KRW 7 trillion with 150 cases of restructuring in the last 4 years, reinforcing the business structure as well as financial competency. Accordingly, this year the company expects to make more investments in new growth engines such as lithium and cathode materials as well as energy and construction in addition to renewing the facilities at its steel mills. Thus, there will be a budget of KRW 4.2 trillion for consolidated investment, an increase of KRW 1.6 trillion compared to last year. The consolidated sales target is KRW 61.9 trillion.

※ POSCO’s 2017 business performance

PT. KRAKATAU POSCO sold 1.7 million tons of steel in 2014, its first year of operation, then increased its sales to 2.8 million tons in 2016. The company’s annual sales volume has increased continuously, and its cumulative sales reached 10 million tons as of January 15, 2018. Last year’s tentative performance showed an operating profit of about USD 12 million, enabling the company to turn a profit for the first time.

PT. KRAKATAU POSCO, which began operations in December 2013, is the first integrated steel mill in Southeast Asia with a production capacity of 3 million tons. POSCO and Indonesia’s state-operated steelmaker Krakatau Steel invested 70 percent and 30 percent respectively.

PT. KRAKATAU POSCO is the only steel mill in Southeast Asia with a 3 million ton capacity.

As PT. KRAKATAU POSCO is POSCO’s first overseas steel mill, POSCO concentrated all the competencies of its group affiliates including POSCO E&C, POSCO Energy and POSCO ICT into constructing and operating the facility. After 4 years of hard work, PT. KRAKATAU POSCO is now the leading steelmaker in Southeast Asia.

Instead of resorting to imports, Indonesia can now procure high-quality steel products from  PT. KRAKATAU POSCO, greatly enhancing the competitiveness of Indonesia’s steel-consuming industries.

PT. Bukaka Teknik, manufacturing steel-frame structures, is planning to purchase 120,000 tons of thick plates from PT. KRAKATAU POSCO, and construct Indonesia’s first steel-framed elevated expressway, and PT. Kenertec, Korindo Heavy Industry’s wind turbine tower production subsidiary, will build wind power generators and wind turbine towers with PT. KRAKATAU POSCO steel for export to the US and Europe.

PT. KRAKATAU POSCO also plans to further reinforce partnerships with local steelmakers and increase investments in downstream industries to continue providing quality steel products to its partners in Southeast Asia.

Cover photo courtesy of Universitas Gadjah Mada.

1. #Winning – competitiveness and sustainability

POSCO was recently named the world’s most competitive steelmaker for the eighth consecutive year by World Steel Dynamics (WSD). POSCO again took home the gold with the highest scores in five categories including innovative technology, cost reduction, skill level of labor, restructuring and investment environment.

POSCO is the world’s most competitive steelmaker.

Not only did POSCO come out on top for competitiveness, the company was ranked 35th among the “Global 100 Most Sustainable Corporations in the World in 2017,” by Toronto-based magazine and research firm Corporate Knights. The list was announced in early 2017 at the World Economic Forum in Davos, Switzerland. This is the third consecutive year POSCO made the list with outstanding scores in safety, environment and the salary levels of employees.

2. Joining the trillion club

POSCO entered the trillion club twice in 2017 as it recorded USD 1.283 billion (KRW 1.365 trillion) of operating profits in the first quarter, and USD 1.0581 billion (KRW 1.1257 trillion) in the third quarter based on its consolidated operating profit. Even in the midst of global oversupply and governments opting for protectionist policies, POSCO’s profits were unscathed. Much of the credit is owed to the company’s steel and non-steel affiliates overseas with strong sales performances. The consolidated debt-to-equity ratio was the lowest since 2010 and the non-consolidated debt-to-equity ratio was at its lowest ever.

POSCO recorded an operating profit over KRW 1 trillion in the first and third quarter of 2017.

To add, international credit rating agency S&P upgraded POSCO’s BBB-plus credit rating outlook to “stable” last February, and Moody’s also upgraded POSCO’s long-term corporate credit rating outlook to “positive” on October 26.

3. Everything’s bigger in…POSCO

Last June, after 102 days of repair, Pohang Blast Furnace No.3 became the world’s fifth-largest blast furnace. Its internal volume expanded from 4350㎥ to 5600㎥, allowing the super-sized blast furnace to put out 15,000 tons of molten metal daily. POSCO currently operates five super-sized blast furnaces, or blast furnaces sized 5500㎥ or larger.

Pohang Blast Furnace No. 3 under construction.

POSCO further upgraded Pohang Blast Furnace No.3 by adding in AI capabilities. It is now equipped with smart technology that can control the internal state of the blast furnace automatically, and smart sensors can now predict accidents before they happen, extending the lifespan of the furnace. Furthermore, POSCO plans to collect big data from the blast furnace and use it to develop fully smart blast furnaces in the future.

4. The smarter the better

Since his taking up the CEO position in 2014, POSCO CEO Ohjoon Kwon has repeatedly expressed his vision for securing future competitiveness through smart solutions. The company even started a smartization training course for employees and held the Smart POSCO Forum 2017 last July to share its insights and progress with clients and affiliates.

POSCO is gaining a competitive edge through smart solutions. (Source: Global Trade Magazine)

Moreover, POSCO also supported a smart talent training project customized for SMEs. The program included job training for AI and big data application technologies. Going forward, POSCO plans to build a “Smart Industry” to increase steel competitiveness and create new business opportunities with new, smart technologies.

SEE ALSO: How Factories Produce Steel- the Smart Way

5. Getting in on electric vehicles

The market for electric vehicles (EVs) is an exciting one with so many companies investing in new technologies. POSCO also hopes to extend its customized material and technology solutions to EV manufacturers. Last October, the company held the Global EV Materials Forum to showcase four of its core business areas: lightweight bodies, batteries, motors and charging infrastructure. More than 380 clients took part in the forum to learn about emerging trends and POSCO’s products and services including POSCO GIGA STEEL and commercially produced lithium batteries for EVs.

POSCO is a solutions provider for EV manufacturers. (Source: Bloomberg)

6. POSCO’s new marketing approach

For the first time ever, POSCO created and aired a TV commercial highlighting a specific product, instead of its corporate brand. This marks POSCO’s first B2C marketing effort and features the company’s innovative auto steel, POSCO GIGA STEEL. The commercial compares POSCO GIGA STEEL to aluminum, another widely-used lightweight material in a visual demonstration so that everyday drivers can better understand the benefits of a stronger yet lighter material.

7. Going for 10 million tons of automotive steel

On April 26, POSCO completed 7CGL, a new steel production facility in Gwangyang, Korea, designed exclusively for the production of POSCO GIGA STEEL. 7CGL has an annual capacity of 500,000 tons and is the world’s first plant capable of producing both 1.5 giga-level galva-annealed (GA) and galvanized (GI) steel sheets.

POSCO Completed 7CGL on April 26, 2017. (Source: Business Korea)

In addition, POSCO managed to reduce investment funds and secure cost competitiveness by designing and constructing 7CGL’s core facilities based on accumulated facility technologies and operating know-how. The 7CGL is POSCO’s 12th plant exclusively for automotive steel sheets, and POSCO aims to sell 10 million tons of automotive steel in 2018 globally.  

8. Setting new records with high manganese

POSCO became the first company in the world to commercialize the technology for producing high manganese using fusible ferroalloys. The technology took KRW 5.5 billion of research and development costs and four years to complete.

POSCO is the first company in the world to commercialize its high manganese production technology. (Source: Eramet)

The core part of POSCO’s high manganese production process is PosLM (POSCO Liquid Manganese), a special holding furnace that stores manganese ferroalloys in a fusible state. POSCO’s technology reduces the production time for high manganese steel by more than 50 percent as well as increases slab production efficiency. PosLM was jointly researched and developed by the Institute of Technology and POSCO M-tech.

9. Bringing home the lithium

On February 7, POSCO opened its PosLX (POSCO Lithium Extraction) plant with an annual capacity of 2,500 tons. The plant is the first plant in Korea capable of commercial lithium production. The technology took 7 years to perfect, but it was well worth it. The production process for high purity lithium now takes just 3 months, compared to the previous 12 to 18 months.

POSCO is making lithium extraction more efficient and sustainable. (Source: Mining)

In the past, Korean manufacturers imported the entire quantity of lithium they needed. With POSCO’s PosLX plant, partners now have access to a local supply of lithium. Moreover, POSCO plans to use lithium phosphate extracted from wasted secondary batteries as raw materials, in keeping with the company’s sustainability standards.

POSCO will continue building on a successful 2017 in the new year, by tackling new challenges and continuing to provide its partners with customized and optimal solutions in all business areas.

Cover photo courtesy of Hitech Building Solutions.

To start, POSCO’s Q3 consolidated sales amounted to KRW 15.361 trillion, its operating profit KRW 1.1257 trillion, and its net income KRW 906.6 billion.

It also noted that sales increased by 0.6 percent, its operating profit by 15 percent, and its net income by 71 percent QoQ. The figures reflect the improved performance of its non-steel affiliates, including its energy and ICT division, as well as the enhanced results of its domestic and overseas steel business.

To add, the improved performance of its principal overseas steel subsidiaries contributed to the overall increase in operating profit. The operating profit of its Chinese stainless steel production subsidiary, Zhangjiagang Pohang Stainless Steel, totaled KRW 53.8 billion, up 572.5 percent QoQ, and PT.KP, the integrated steel mill in Indonesia reported an operating profit of KRW 8.8 billion, marking a big turnaround. The operating loss of POSCO SS VINA, its shape steel plant in Vietnam, was greatly reduced.

POSCO’s separate sales increased by 1.7 percent QoQ to KRW 7.255 trillion, and its operating profit rose by 23.4 percent to KRW 721.8 billion. Its net income also increased by 43.3 percent QoQ to KRW 729.9 billion.

POSCO’s financial results continued to show improvements. Its consolidated debt ratio dropped down by 1.5%p QoQ to 68.1 percent, the lowest ever since 2010, and its separate debt ratio was 16.3 percent, the lowest ever in POSCO’s history.

Moreover, POSCO’s consolidated and separate sales projections increased 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.

Steel demand looks to continue based on the restructuring of the Chinese steel industry, along with the anticipated robust growth of demand in emerging and developing countries. POSCO plans to make continued efforts to generate revenue by securing financial strength, reducing costs and increasing the sales of its high-value-added products.

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On July 20, POSCO announced these figures during an investor conference call for Q217. POSCO executives explained that performance declined slightly due to the deterioration of earnings in the steel, construction and energy sectors, but its consolidated revenue and operating profit rose by 16.2% and 44.3% YoY, respectively.

Another factor that slowed growth was renovations for POSCO’s Pohang Blast Furnace #3 and the hot-rolled and thick plate plants. As a result, crude steel production and sales decreased in the second quarter. Also, due to sales of high-priced inventory, which was produced in the first quarter when raw materials were the most expensive, the consolidated revenue and operating profit decreased by 0.9% and 28.3%, respectively, compared to the first quarter.

POSCO’s separate revenue increased by 18.7% YoY to KRW 7.1343 trillion, and its operating profit decreased by 17.9% YoY to KRW 585 billion due to the increased costs of raw materials.

Although still operating in surplus, the E&C division and the trading and energy divisions saw a drop in their operating profit from the first quarter.

POSCO’s consolidated debt to equity ratio was 69.6%, the lowest since 2010, and its standalone debt ratio was 16.3%, the lowest ever. In contrast, the share of sales of World Premium Products, high value-added products, went up by 10.7% YoY to 56%, the highest ever. POSCO killed two birds with one stone, as it reinforced financial soundness as well as increased profitability.

Due to the restructuring of the Chinese steel industry and economic recovery in advanced countries, POSCO forecasts steel products will continue to be in high demand. POSCO is planning to make continued efforts to generate revenue by securing financial soundness, reducing costs and increasing the sales of World Premium Products.

Accordingly, POSCO revised its consolidated and stand-alone revenues that were set at the beginning of the year, increasing them by KRW 4.5 trillion and KRW 2.8 trillion, respectively. The new consolidated revenue is KRW 59.3 trillion and the new separate revenue is KRW 28.4 trillion.

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Consolidated sales slightly increased from the previous quarter while the operating profit ratio increased from 3.1% to 9.1%. Thanks to the increased profits of the steel division, as well as the improved performance of its non-steel divisions, such as trading and engineering & construction (E&C), POSCO’s operating profit increased by 189.4% from the previous quarter.

The aggregate operating profit of the steel division increased by 60.8% to KRW 1.0234 trillion while the aggregate operating profit of the trading division increased by 60% to KRW 126.7 billion. POSCO’s steel subsidiaries saw improved performance, helping overall operating profit. The E&C division also saw profits increase by 26.7% from the previous quarter to KRW 75 billion.

The operating profits of Zhangjiagang Pohang Stainless Steel (ZPSS) in China increased by 41.7% to KRW 52 billion while the operating profits of India POSCO Maharashtra increased by 80% to KRW 38.7 billion. Additionally, operating losses greatly decreased at PT Krakatau POSCO and Vietnam POSCO SS-VINA.

Compared to the previous quarter, the sales profit of POSCO increased by 9.7% to KRW 7.0674 trillion and the operating profit of POSCO increased by 63% to KRW 795.4 billion, resulting in a net profit of KRW 839.6 billion.

Due to the expansion and repair of Pohang blast furnace No. 3, production and sales volume slightly declined from the previous quarter, but the share of sales of its World Premium Products (WPP) increased from 2.4% to 53.4% compared to the previous quarter. Due to increased sales of higher value-added products, reduced costs, continued efforts to improve profitability, and the rise in steel prices, the operating profit ratio increased from 3.7% to 11.3% from the previous quarter.

POSCO’s debt-to-equity ratio has dropped to 17.6% separate and 71% consolidated, a 1.6%  and 6% decrease, respectively, from the previous year.

POSCO has also been moving forward with its restructuring efforts since the inauguration of CEO Ohjoon Kwon and aims to reduce the number of domestic affiliates from 49 to 32 by the end of this year. POSCO plans to secure the future of the company for the next 50 years by laying the groundwork of integrating smart technologies with the core competencies of the Group.  

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The key components of POSCO’s new strategy include strengthening POSCO’s World Premium Products, improving the profitability of its non-steel businesses, investing in future growth engines, and introducing smart technologies to its group businesses.

Kwon announces a new strategy and the preliminary first-quarter earnings report at the CEO Forum that was held in Yeouido, Seoul, on March 30.

POSCO plans to differentiate itself from competitors by continuing to invest in their advanced World Premium Products. The strategy to expand sales of World Premium Product was implemented at the beginning of Kwon’s first term as CEO and has proven to be highly successful. The share of World Premium Products now represents 50% of total sales.

As for future growth areas, POSCO will push to supply energy storage materials, such as lithium and nickel, using proprietary technologies that extract lithium from salt water or recycled batteries and that refine nickel using low-grade nickel ores. Other key future growth businesses include the production of titanium and magnesium sheets, which are expected to be used in aerospace materials and in luxury cars. POSCO is also planning to expand its natural gas storage and overseas IPP (Independent Power Producer) businesses while continuing to push ahead with its new and renewable energy businesses. By investing KRW 2.5 trillion in these new growth engines over the next three years, POSCO hopes to achieve their goal of KRW 11.2 trillion by 2025.

Aside from pursuing new growth engines, POSCO aims to increase profits from KRW 600 billion to KRW 1.5 trillion in its non-steel businesses by restructuring to focus on its more lucrative businesses. Additionally, POSCO plans to incorporate smart technologies into its group businesses (POSCO E&C, POSCO Energy, and POSCO ICT) and establish a new group-level business platform.

CEO Ohjoon Kwon pledges to double operating profits in three years through the strengthening of both of its steel and non-steel businesses.

In 2014, when Kwon was inaugurated as CEO of POSCO, there were many difficult market conditions both at home and abroad, such as the increasing global oversupply of steel and sluggish industrial demand. Despite these market conditions, POSCO was able to achieve a double-digit operating margin by reducing KRW 1 trillion in costs, restructuring the company, and recording the lowest debt ratio in its history.

POSCO is seeking to create a more balanced portfolio of steel and non-steel businesses as well as domestic and overseas businesses. The company is working to find ways to transform itself into a flexible and advanced enterprise by introducing more smart technology solutions to its existing business areas.

According to the preliminary first-quarter earnings announcement on March 30, POSCO’s sales and operating profit increased YoY by 21% and 27% to KRW 6.99 trillion and KRW 740 billion, respectively. The consolidated sales and operating profit are forecast to increase YoY by 17% and 82% to KRW 14.6 trillion and KRW 1.2 trillion, respectively.

POSCO’s operating margin slightly decreased in the fourth quarter of 2016 but rebounded to 10% in the first quarter of 2017. POSCO E&C is also expected to become profitable in the first quarter. Operating losses at the integrated steel mill in Indonesia and Vietnam decreased while POSCO Daewoo and POSCO C&C saw their operating profits increase.

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CEO Kwon of POSCO greets Chairman & CEO Jeffrey Immelt of GE to discuss ways to integrate GE’s smart factory solutions into POSCO’s steel and non-steel factories

In late February, Kwon made trips to Germany and the US to visit Siemens and GE factories. He met with executives to discuss best practices and share thoughts on potential collaborations. At that time, Kwon and Immelt were not able to meet so they took advantage of Immelt’s time in Korea for a face-to-face meeting.

Kwon and Immelt discussed different ways that smart technologies could be incorporated into POSCO’s steel and non-steel factories. By combining GE’s strength in equipment manufacturing and POSCO’s expertise in the steel industry they hope to create more advanced smart industrial solutions. POSCO, in particular, was looking to introduce smart features to their material, energy, and construction businesses through this partnership.

Executives from POSCO, including CEO Ohjoon Kwon, discuss smart factory solutions with GE Chairman & CEO Jeffrey Immelt

After meeting with Immelt, Kwon left for Indonesia to attend the Korea-Indonesia Economic Development Forum in Jakarta. Kwon also visited PT Krakatau POSCO, located in Cilegon, and encouraged field employees to continue their hard work to strengthen their competitiveness in the region.

PT Krakatau POSCO is POSCO’s first overseas integrated steel mill and is capable of producing a total capacity of 3 million tons. Since 2013, it has cut down on operating losses and increased its competitiveness through innovative cost-reduction activities and new technology integration.

Last year, the overseas steel business division’s operating profit reached KRW 218.2 billion, up by KRW 648.1 billion from 2015. This is a result of increased sales of high-margin products and intentional efforts to cut costs.

POSCO plans to focus on strengthening its financial structure by increasing the sales of its World Premium Products. Through this effort, they hope to continuously expand their presence in overseas steelmaking while optimizing the process of locally sourcing product materials.

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S&P forecast that POSCO would maintain its EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) at 20%, which is higher than that of its global competitors. This is, in large part, a result of improved performance in sales (due to the increased sales of high valued-added products), its excellent operating efficiency, and a decrease in the oversupply of steel in the region.

S&P added that POSCO is expected to maintain its adjusted debt-to-EBITDA ratio at 2.5 – 3.0 over the next two years by creating a stable free cash flow and continuously reducing borrowings. As a result, S&P changed POSCO’s financial risk profile from “significant” to “intermediate.” In fact, over the past few years, POSCO improved its adjusted debt-to-EBITDA ratio from 3.8 in 2014 to 2.9 in 2016 by implementing various restructuring measures, including the sale of non-core assets.

S&P also predicted that its affiliate, POSCO E&C, would see its sales performance improve from last year by reinforcing its efforts to reduce costs.

In the midst of challenges such as a global economic recession and industry oversupply, POSCO has devoted a significant amount of effort to reinforce the competitiveness of its main business while improving its financial health and profitability. As a result, its consolidated operating profit increased by 19% YoY with consolidated sales coming to KRW 53.0835 trillion and its operating profit coming to KRW 2.8443 trillion.

Increased sales of POSCO’s World Premium Products, its high value-added products such as PosMAC and PosCoZy, along with corporate-wide efforts to improve profitability and reduce costs, led POSCO’s separate operating profit to increase by 17.7% YoY. As a result, its operating margin reached 10.8%, the first double-digit operating margin since 2011. POSCO’s stock price also rose by 55% compared to the first half of 2016. Moody’s, an international credit rating agency, also upgraded its outlook for POSCO’s “Baa2” credit rating from negative to stable last October.

POSCO continues to take steps towards maintaining its position as one of the world’s most competitive steelmakers. Since being nominated to serve a second term as CEO, Ohjoon Kwon has committed to strengthening POSCO’s financial outlook and secondary business growth. As part of its non-steel business ventures, POSCO recently completed the construction of the lithium factory at Gwangyang Steel Works and also announced its plan to invest KRW 300 billion in the cathode material business for secondary batteries.

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