President Kwon, “We will work to earn the pride of the Korean people and to continue our contributions to the development of Korea’s economy”

President Ohjoon Kwon (former chief technical officer) was selected as the candidate to be POSCO’s new CEO.

POSCO held a board meeting on the 16th and unanimously carried a resolution to nominate President Ohjoon Kwon as the candidate for CEO, as inside director.

When POSCO CEO Joonyang Chung tendered his resignation on November 15th last year, POSCO held a special board meeting to establish a Succession Council to select the next CEO candidate, and has since been carrying out an in-depth search of candidates for the past 50 days. The Succession Council, comprising three outside directors including Chair Youngsun Lee as well as an inside director, carried out a transparent and fair procedure using multiple search firms to review a broad range of candidates covering both internal and external POSCO Group personnel . Five candidates were selected in the process, and all were suggested to the board of directors on the 15th.

To finalize candidates selected by the Succession Council, and examine their qualifications, POSCO’s board of directors resolved to form a CEO nomination committee made up of outside directors only, on the same day. For independent and strict candidate selection, the CEO nomination committee carried document screening of candidates for two days, on the 15th and 16th, and two interviews, including an in-depth interview. After examining the final qualifications for the eight capabilities POSCO requires of its CEO, including vision, outcome production competence, steel and related industry expertise and leadership, President Ohjoon Kwon was finally chosen as the CEO candidate.

“The entire steel industry, including POSCO, is facing an environment wherein margins are squeezed due to steel oversupply and intensification of oligopoly in the raw materials market,” said Youngsun Lee, POSCO board of directors Chair. “We need someone to reinforce the POSCO Group’s financial stability by promoting a strong reorganization of the group’s business structure, and to ultimately enhance the POSCO Group value in the long run.”

He added, “We selected President Kwon as CEO candidate because we consider him to be the right person to take the initiative in reengineering POSCO Group by enhancing original steel competitiveness through technology and marketing convergence, and fostering long-term company mega-growth opportunities through development of unique new growth technologies.”

Born in 1950, President Kwon graduated from Seoul National University, where he specialized in Metallurgical Engineering, and earned his master’s degree in the same department at the University of Windsor and a doctorate at the University of Pittsburgh. He joined the Research Institute of Industrial Science and Technology in 1986 and served as assistant director of the research institute, director of the research institute, and director of RIST, and is currently POSCO’s chief technical officer.

Kwon secured exclusive technological competitiveness by leading development of the company’s “World Best, World First” technologies as a technical steel expert serving as research institute and RIST director, while also playing a key role in securing and maintaining a competitive advantage in technology in the general materials field. Another advantage is his network of global steel companies and global competence through his experience serving as European office head.

Kwon will officially take office as CEO on March 14th, after the regular shareholders meeting and board meeting.

CEO Candidate Kwon’s Thoughts

I would like to thank the directors who have selected me as the candidate to be POSCO’s new CEO despite my flaws. If I am selected as the next CEO after the general meeting of shareholders, I will rally the strengths of all POSCO employees to lead our company to the world’s best competitiveness. I will ensure we do our best to solidify POSCO’s status as a company that makes people proud and contributes thoroughly to the development of the national economy.

POSCO’s cutting edge technology built world’s biggest Furnace

Since the initial construction in April 1987, Gwangyang Steelworks’ Furnace 1 extended its size from 3,800㎥ to 3,950㎥ when the second renovation was completed. After its third enhancement made in this year, Furnace 1’s volume now reaches 6,000㎥, bigger than the previously world’s largest furnace (5,800㎥) built by Shagang Group in China. Without a doubt, Furnace 1 at Gwangyang Steelworks is now the greatest furnace every built.

It is indeed a remarkable accomplishment not only for POSCO but also for Korea. POSCO started its steelmaking operation back in 1968 under an unimaginably harsh local condition. In the 1960s, there was no raw material, capital and technology to utilize in Korea. POSCO was able to stand on its own feet by receiving loans and technologies from foreign companies in line with the government’s ambitious plan to boost the economy. After 20 years, POSCO constructed Furnace 1 at Gwangyang Steelworks with the company’s own technologies. Now, the very same furnace has been reborn as the world’s biggest furnace. Isn’t it just amazing?

Cost-saving and Energy-friendly technologies

When a furnace is built, the fire inside is not put off for a single time over about 15 years. Once the lifespan is completed, a repair work is required to completely renew the furnace. The technologies involved in the repair operation are countless as they determine life expectancy, volume and productivity of furnaces.

POSCO used a new cooling system to minimize damages on the furnace during the repair. POSTECH and RIST worked with POSCO to develop the new technology, which is anticipated to extend the lifespan of Furnace 1. Also, another cutting edge technology has been embedded to Furnace 1 by inputting more reducing gas into the furnace. It will boost the amount of molten metal up to 2.50t/d.㎥. Because it is also an efficient technology, POSCO is expecting to save about KRW 1,000 billion a year for molten iron manufacturing costs.

For the first time in Korea, a dry-based dust collector was used for Furnace 1 as well, enabling us to recover more energy by using high-pressure gas exhaled from the furnace. It will also save us KRW 1.3 billion a year. A non-steam quenched blast equipment was also casted to cool down slags with less electricity, water, unpleasant smells and dusts.

During the ceremony, POSCO’s Chief Executive Officer and Chairman Chung Joon-yang delivered a speech saying, “Gwangyang Steelworks’ Furnace 1 is the mixture of our finest technologies over shaft operation, material quality control and facility management. It has become the symbol of POSCO’s ‘World Best’ and World First’ top quality molten metal manufacturing process.” Chairman Chung also added, “I would like to thank all of you for your continuous supports and loves towards POSCO. Moving forward, we will consistently cooperate with our partners for mutual development to overcome the sluggish economy.”

“The world’s largest furnace pouring out world’s best molten metals,” doesn’t it sound so exciting? POSCO’s latest accomplishment with Furnace 1 at Gwangyang Steelworks was only possible with POSCO employees’ sweat and effort, and also the supports from all of you. POSCO will not be satisfied with the success and continue engaging with more World Best and World First operations to become the more loveable and respectable cooperation.

Despite the 2012 economic slowdown, POSCO excelled at our performance

Last year’s business performance recorded as following, in regards to the previous year’s standard. The total sale was 7.7% lowered (from the standard), marking 63,604 billion won, and our operating profit decreased by 33.2%, reaching 3,653 billion won.

Due to the unprecedented economic meltdown and oversupply, product prices dropped about 100,000 WON per ton. Looking at POSCO exclusively, our sales and profit each decreased 9% and 35.6%, marking 35,665 billion won, 2,790 billion won, collectively.

To overcome this aggravated globally worsened economy, POSCO put strong efforts to maximize and strengthen its marketing capacity to the fullest at all our locations around the world. By creating and propelling our new demand development, POSCO had crude-steel output of 37,990,000 ton, with 35,050,000 tons of sales volume, breaking all our previous records.

This was a never-seen-before achievement that POSCO is proud and grateful for, and it would’ve been impossible without our responsible employees. POSCO, along with all our subsidiaries and corporates around the world, worked our best to overcome the economic crisis as a unified team. We expanded our sales on high-value products, and reduced the production cost enterprise, and invested continuously for long-term future growth. The result, POSCO marked the highest and the best within the international steel community with business profit of 7.8%.

Reduction in production cost with High-Value Products

Last year, the sales rate of automotive steel and power-structural steel—two of the most popular high-value products of POSCO—recorded an increase of 3.4%, 9.3%, resulting in 7,360,000 ton and 2,700,000 ton, collectively. With this impact, the sales proportion of World First and Best products have boosted from 16.9% to 17.1%. What’s more, POSCO developed all new 128 products, which is a big change and a positive growth, compared to only 46 products created the previous year. POSCO’s automotive steels are now available for all Japanese automobile industries, who demand only the products have the world’s best quality.

Furthermore, POSCO put all our employees to actually be involved in projects for reducing the production cost as participants. As a result, POSCO was able to abridge 1,300 billion won. Also, POSCO was able to strengthen our financial soundness by achieving the 6.6% reduced debt ratio at 33.6% today, with the increased equity ratio at 74.9%.

Following this remarkable sequence, the R&D investment accumulated an additional 2.6% at 580 billion won, enabling the continuous expenditure for developing new technologies and products.

Along with our stable growth in the steel industry, POSCO began to show our potentials and achievements in activities concerning energy and materials business. POSCO reached sales of 2,881 billion won and profit of 267 billion won in the area of developing energy sources, with marking sales of 3,568 billion won and profit of 166 billion won in materials business. Also, with the active contracting enterprise, POSCO recorded 9,726 billion won sales and 339 billion won profit in the E&C sector.

“Qualitative Growth of Consolidation of Profitability Foundation”

POSCO expects that international competition for survival amongst corporations will be at its highest this year. Therefore, in 2013, revolutionary-management is extremely crucial, to secure development and market for one’s exclusive technology. Hence, POSCO plans to transform the international economic crisis into an opportunity to stably obtain profitability and growth development by practicing “value-management.” This year, POSCO’s economic activities will focus on what’s called the “Qualitative Growth of Consolidation of Profitability Foundation.”

To achieve the following, POSCO will strictly continue and push for the “subsidiary-spatial operation reconstruction”, which began last year. The operation aims to maximize our synergy capacity by reorganizing steel, energy, various raw materials as our firm divisional structures. Currently, the steel department is experiencing steady growth in China due to the increase of steel prices after inventory adjustments and demand recovery. Also, POSCO set a new agenda to improve the natural competitiveness of steel itself as a raw material, since there is a high probability of an increased international demand for steel by about 3%.

Furthermore, by successfully completing the Indonesian integrated mill and third Finex steel mill, POSCO decided to further secure our grounds for global production system. POSCO also plans to actively seek research in high-value products that encompass leading-edge technologies. This year again, POSCO propels to reduce 763 billion won in production cost with the previous executive staff who were involved in the process last year. We also expect a profit of more than 300 billion won in the following 20 years’ annual average. Such success is highly possible due to “Myanmar Gas-Field Project,” which is currently operating with the official rate of 92% and the commercial production will start this May.

Moreover, POSCO plans to strengthen our futuristic business portfolio that understands both profitability and growth possibility in the company’s infrastructures and trade relations by increasing our crude-steel capacity to 48,000,000 ton until 2015(40,000,000 ton in 2012), ability for advancing facilities to 4,474MW (3,284MW in 2012), and material sales to 8,200 billion won (5,500 billion won in 2012).
On another note, POSCO set 7,000 to 8,000 billion won as our investment key within the ability range of cash profit in this year, under a strict principle that considers both the enhancement of competitiveness and securement of growth potential.

Through all the above enterprise, POSCO established our sales goal as 66,000 billion won in consolidated earnings and 32,000 billion won as parent earnings, along with 37,000,000 ton of crude-steel production and product sales amount of 34,000,000 ton in 2013.

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UPCOMING CEO FORUM AT NEW YORK CITY

Date: Feb 21, 2013

Location : Four Seasons Hotel, New York

Agenda: 2012 Operating Performance & 2013 Business Plan announcement

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However, POSCO was somewhat different. The Korean steel giant demonstrated a true strength in this doomed age, through achieving a higher operating profit than ArcelorMittal, Baoshan Steel and Nippon Steel Corporation by 2 to 6 percent in the first three quarters of 2012. It was possible because POSCO had secured a lucrative profitability by focusing on developing distinctive product lines and cost reduction. In fact, POSCO’s high added value products, such as ‘World First’ and ‘World Best’ lines, have shown increases in sales from the 2Q 2012. The exports of steel sheets for automobiles and the sales of thick plates for energy-use have also surged higher than the previous year.

POSCO’s financial position also reflects its fine fitness. In the 3Q 2012, its debt ratio narrowed down to 35.9 percent, 4.3 percent lower figure year-on-year, and a ratio of net worth was increased by 2.3 percent. POSCO’s credit rating excels other steel makers on the basis of such figures. POSCO is rated the highest, amongst its steelmaker competitors, by Fitch IBCA, Moody’s and the Standard & Poor’s, the world’s three major credit rating agencies. It indicates, amidst the global economic downturn, POSCO has achieved stable profits and a sound financial structure as well as presenting an optimistic growth potential.

In June 2012, the World Steel Dynamics (WSD), a leading steel information institute, has awarded POSCO as ‘World’s Most Competitive Steelmaker’ for 3 consecutive years. The World Economic Forum in Davos ranked POSCO at 30th in ‘the Global 100 Most Sustainable Corporations’ in January 2012. These facts and figures reflect POSCO’s globally recognized superior innovation in technologies, production scale, profitability and price power. Once again, POSCO proved itself to be the No. 1 steelmaker of the world.

For POSCO, 2013 looks even brighter. According to the Korea Iron and Steel Association (KISA) and POSCO Research Institute (POSRI), Korean steel industry is anticipated to enjoy a much optimistic year. From the second half of 2013, an expansion in the investments for China’s infrastructure with the nation’s new government and a recovery of the U.S.’s economy is forecasted to take place. They are highly positive factors for POSCO’s another triumphant business year. Kyung-joong Kim, a steel industry analyst of Eugene Investment and Securities, commented “POSCO is increasing its emphasis on providing highly profitable and fine quality products such as steel sheets for car manufactures and energy business from the current 34 percent.” “It seems the firm will be benefiting from a higher profitability than its competitors in 2013,” he added.