Hyundai Steel Reports 73 Billion KRW Operating Profit Last Year... "Considering Restructuring Low-Profit Businesses" (Comprehensive)

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Steel is once again considering restructuring its loss-making business units this year and focusing on strengthening profitability. The company also announced that it is currently negotiating with customers to raise prices for automotive steel sheets and shipbuilding heavy plates this year. Although operating profit and sales both declined compared to the previous year, it expects performance to improve this year as production and sales recover.

Hyundai Steel announced on the 28th that its consolidated operating profit last year was 73 billion KRW, down 78% from the same period the previous year. During the same period, sales amounted to 18.0234 trillion KRW, a decrease of 12.1%, and it turned to a net loss. The operating profit margin also fell by 1.2 percentage points to 0.4%.

Regarding the decline in performance, Hyundai Steel explained that the global economy as well as domestic demand industries were generally contracted due to the impact of the COVID-19 pandemic, and that overall production volume decreased as a result of business structure optimization.

The company also cited the shutdown of major overseas subsidiaries in the first half of the year due to the global spread of COVID-19 as a factor worsening profitability. However, it noted that production and sales activities have resumed in line with the recent global economic recovery, leading to improvements in sales and profitability.

◆ Considering Restructuring Loss-Making Businesses... Strengthening Profitability This Year

Hyundai Steel stated that it will focus its capabilities on business structure optimization and the development and market penetration of high value-added products to transform into a "profitability-centered steel company." Last year, Hyundai Steel withdrew from less competitive sectors such as thin plate hot-rolling and color steel sheet facilities to pursue business structure efficiency. Additionally, it separated its forging business to launch Hyundai IFC, a forging-specialized subsidiary, which continues to operate profitably.

At the Q4 earnings conference call, a Hyundai Steel official said, "This year, we will also consider restructuring low-profit businesses outside of core operations that continue to show poor profitability," adding, "Although we incurred some short-term net losses during last year's adjustments in thin plate, hot rolling, and forging sectors, from this year onward, removing businesses with sustained losses will positively impact our profit and loss."

He continued, "Heavy plates and special steel are our main steel types, so restructuring is being considered with a long-term perspective," emphasizing that they will focus more on improving profitability than restructuring. However, he added, "The stainless steel business is maintaining its break-even point at last year's level," and "a decision on restructuring has not yet been made."

This year, the company plans to secure its core manufacturing competitiveness in steel. It aims to improve productivity in the hot rolling sector and modernize cold rolling facilities to enhance the productivity and quality of automotive steel sheets. Furthermore, by establishing a mass production system for the '9% Ni heavy plate' developed last year, Hyundai Steel plans to actively target the LNG propulsion ship and LNG storage facility markets, where demand is expanding in line with eco-friendly trends.

◆ Negotiating Price Increases for Automotive Steel Sheets and Shipbuilding Heavy Plates... Plans to Maintain Steel Scrap Product Spreads

With global steel demand recovering, Hyundai Steel is also strengthening its marketing activities. The company plans to actively reflect raw material price increases in product prices and improve profitability by expanding sales of high value-added products.

A Hyundai Steel official said, "We are striving to conclude price negotiations for automotive steel sheets and shipbuilding heavy plates within the first and second quarters," adding, "We are conducting positive negotiations on automotive steel sheet prices with Hyundai Motor and Kia, and price increase negotiations for shipbuilding heavy plates are underway mainly with Hyundai Heavy Industries."

Hyundai Steel plans to respond swiftly to changes in demand markets such as the automotive industry this year and expand proactive sales focused on high value-added products. Since the 2019 Shanghai Motor Show, Hyundai Steel has continuously prepared materials needed for the electric vehicle era, showcasing the automotive material specialized brand 'H-SOLUTION' and the electric vehicle concept car ‘H-SOLUTION EV’.

In addition, to strengthen competitiveness in the global automotive steel sheet market, the company is accelerating the development of new steel grades. Following the development of 48 steel grades in 2020, it plans to develop 45 new grades this year, aiming to complete a total of 311 automotive steel grades.

In the long product sector, Hyundai Steel plans to actively respond to premium product demand in the construction steel market, supported by the recent modernization of the large rolling line at its Incheon plant. This modernization has increased production capacity by approximately 140,000 tons and enables the production of high value-added new products such as ultra-thick and high-strength H-beams, which is expected to strengthen order competitiveness.

The company will also actively promote ESG activities to fulfill its social responsibilities. It plans to continue investing in coke dry quenching (CDQ) facilities to reduce carbon emissions and expand environmental investments using funds raised through green bond issuance. The CDQ facility, scheduled for completion in 2024, is expected to reduce carbon emissions by up to 500,000 tons annually once operational.