POSCO Operating Profit Drops 40% to 2 Trillion Won Range for the First Time in 4 Years (Update)

[Image source=Yonhap News]

[Asia Economy Reporter Choi Dae-yeol] POSCO announced on the 28th that its operating profit last year was 2.403 trillion KRW (consolidated basis), down 37.9% compared to the previous year. Sales amounted to 57.7928 trillion KRW, down 10.2% during the same period, and net profit decreased by 9.8% to 1.7882 trillion KRW.

The company explained that the deterioration in last year's business performance was due to the steel demand industries being depressed by COVID-19 and product prices not rising in time despite the increase in raw material prices. It also experienced an unprecedented management crisis, including paid leave for the first time since the company's establishment. Previously, sales in 2018 were around 65 trillion KRW and operating profit was about 5.5 trillion KRW, but with a consecutive two-year decline of over 30%, the figures fell to levels similar to those in 2016.

By quarter, operating profit was lowest in the second quarter of last year at 167.7 billion KRW, then gradually improved in the third quarter (666.7 billion KRW) and fourth quarter (863.4 billion KRW). The company stated, "Despite the management crisis, we shifted to a cash flow-focused management system through proactive emergency management and pursued extreme cost reductions," adding, "We operated a flexible production and sales system in response to rapid market changes, leading to a profitability rebound from the third quarter."

On a separate basis, sales were 26.5099 trillion KRW, operating profit was 1.1352 trillion KRW, and net profit was 965.9 billion KRW. Among affiliates, POSCO Engineering & Construction's architecture and plant business divisions showed strong performance, and POSCO Energy maintained similar profit levels as last year through LNG direct import and terminal-linked business expansion.

POSCO announced its mid-term management strategy on the same day, setting a target to achieve total sales of 102 trillion KRW in 2023, comprising 46 trillion KRW in steel, 51 trillion KRW in global infrastructure, and 5 trillion KRW in new growth sectors. The steel division plans to secure future new demand centered on mobility, construction materials, and eco-friendly energy steel, while focusing on maintaining competitive gaps by establishing a low-cost, high-quality, and high-efficiency production system. The global infrastructure division aims to expand synergies among group companies in the LNG business. The new growth division plans to increase production capacity in advance for secondary battery materials and build a specialized company foundation considering the approaching hydrogen economy era.

This year, the consolidated sales target is 59.4 trillion KRW, and the separate basis crude steel production and product sales targets are 37.8 million tons and 35.3 million tons, respectively. Investment costs are set at 6.1 trillion KRW on a consolidated basis and 3.9 trillion KRW on a separate basis. POSCO's board of directors decided this morning to set the annual dividend at 8,000 KRW per share (with a year-end dividend of 4,500 KRW per share), corresponding to a dividend payout ratio of about 30%.