POSCO has announced its financial reports at Investor Relation (IR) conference call on April 24th that its first quarter consolidated sales were up to 14.7 billion dollars and its consolidated operating profit was 1.4 billion dollars. The consolidated net profit was approximately 1 billion dollars.

POSCO’s consolidated profits indicates positive sign for both domestic and overseas

Reach to 14.7 billion dollars consolidated sales, 1.4 billion dollars in consolidated operating profit

Sales, operating profit and net profit has elevated by 5.2%, 9% and 10.9% compared to the previous year. This impressive achievement is done by the improvement of both domestic and overseas steel production and non-steel affiliates.

Non-consolidated sales of 7.7 billion dollars and 946 million dollars of operating profit.

PT. KRAKATAU POSCO, which is an integrated steel mill in Indonesia also turn into profit from the third quarter. Despite of decrease of steel bar and shaped steel plant from POSCO SS VINA in Vietnam, operating profit has increased gradually. This great performance of oversea steel subsidiaries gives positive indication of growth in sales.

Its non-consolidated sales rate has increased by 9.8% year-on-year to 7.7 billion dollars. Also, the proportion of the sales of World Premium products went up by 1.4% year-on-year to 54.9%.

Increased sales of high-value-added products, cost reduction, continued improvement of profitability, and the increased price of steel were the driving force of increasing operating profit margin from 1.8%p year-on-year to 13.1%.

Future is even brighter

POSCO expects that demand of steel will continuously increase on the back of steady restructuring of the Chinese steel industry and recovery of emerging economies. POSCO still also continue to secure financial soundness, reducing costs, and expanding high value-added sales.
All those efforts of POSCO brought impressive result of increasing consolidated and non-consolidated sales to 58.4 billion dollars and 27.9 billion dollars.

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.

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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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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On April 21, POSCO held an Investor Relations (IR) conference call to announce improved operating performance of its first quarter.

Although POSCO recorded KRW 12.46 trillion in revenue in the first quarter on a consolidated basis, which is a slight decrease from the previous quarter, it recorded KRW 659.8 billion in operating profit, KRW 319.3 billion up from the previous quarter, and KRW 352.5 billion in net income during the term,  KRW 243 billion up from the previous quarter. The company also accounted for 5.3% in operating profit margin, which is 2.9%p up from the previous quarter.

Operating profit increased due to improvement in sales performance in steel and trading 

These positive results can be attributed to increased performance in the steel and trading divisions, being operated by POSCO Daewoo and POSCO-China, even though the construction division showed a decrease in sales and profits. Overseas steel corporations exhibited remarkable improvement in sales performance, as Zhangjiagang Pohang Stainless Steel (ZPSS) and POSCO-Mexico realized profits, and the operating deficits of PT. KRAKATAU POSCO and POSCO SS-VINA are beginning to be reduced.

KRW 582.1 billion in operating profit, 10.1% in operating profit margin (in paraent basis) 

On a parent basis, POSCO recorded KRW 5.767 trillion in revenue, KRW 582.1 billion in operating profit and KRW 445.9 billion in net income during the term. Although revenue has slightly decreased, the company recorded KRW 210.9 billion in operating profit and KRW 184.1 billion in net income during the term, which is an increase from the previous quarter. This is driven by the sales increase of World Premium (WP) products, POSCO’s proprietary high-value products, along with the improvement of market conditions due to the price increase of carbon steel products and restructuring of Chinese steel companies.

POSCO recorded 3.682 million tons in sales volume of WP products, which amounts to an increase of 255,000 tons from the previous quarter. Among total product sales, the sales of WP products accounted for 44.5%, which is an increase of 4.8%p from the previous quarter.

Also POSCO recorded 10.1% in operating profit margin which is an increase of 3.9%p from the previous quarter.

POSCO forecasts to improve the financial structure of KRW 4 trillion within this year by accelerating the restructuring of subsidiary companies

POSCO realized continuous improvement of its financial structure. On a consolidated basis, it recorded 77% in debt-to-equity ratio, which is a decrease of 1.4%p from the previous quarter, while registering 19.2% on a parent basis, which is 0.1%p down from the previous quarter.

In particular, on a parent basis, the company recorded -356.3 billion in net debt in the first quarter from 341.3 billion in the  previous quarter as total cash and cash equivalents have increased more than debt. This is the result of improving the company’s overall financial structure that it has strived for over the last two years.

POSCO completed 6 subsidiary restructuring cases in the first quarter, which have been carried out since the announcement of the management reform plan in July of last year. The company sold Genesis, a subsidiary in the power generation sector, and finalized liquidation of POSCO-RUS, while completing the merger of POSCO Green Gas Technology. It is expected that the improvement effect will reach to approximately KRW 4 trillion through the restructuring of subsidiary companies.

Meanwhile, POSCO announced its sales goal of KRW 58.7 trillion on a consolidated basis, and 37.2 million tons for the production of crude steel and 35.3 million tons for product sales. The company also estimated that its investment costs amounted to KRW 2.8 trillion, which is KRW 300 billion up from last year, and net debt was KRW 14.6 trillion, which is KRW 1.9 trillion down from last year.

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