POSCO Future M to Raise 1.1 Trillion Won Through Paid-in Capital Increase... Strategic Investment in Secondary Batteries Despite 'Chasm'

New Shares Issued at 95,800 Won Per Share, Totaling 11,483,000 Shares
Funds to Be Used for Facility and Operating Capital
POSCO Holdings Participates with an Investment of 525.6 Billion Won

POSCO Future M has decided to conduct a large-scale paid-in capital increase worth trillions of won. The company aims to maintain its long-term investment strategy in the secondary battery materials industry, while also improving its recently deteriorated financial structure and securing funds in preparation for a potential market rebound.

POSCO Future M Gwangyang Cathode Material Plant Exterior. Photo by POSCO Future M

According to the Financial Supervisory Service's electronic disclosure system on May 13, POSCO Future M announced that it has decided on a paid-in capital increase of 1.1 trillion won. A total of 11,483,000 new common shares will be issued at 95,800 won per share. Regarding the purpose of the fundraising, the company stated that it plans to allocate 181 billion won for facility investment, 288.3714 billion won for operating funds, and 630.7 billion won for the acquisition of securities of other companies.

POSCO Holdings, the holding company of POSCO Group, will also participate in the paid-in capital increase. Its investment amount is 525.6 billion won.

POSCO Future M has been increasing its investments in the secondary battery materials business. However, due to the electric vehicle chasm (a temporary stagnation in demand) and the tariff war led by U.S. President Donald Trump, uncertainty in the battery industry has grown and profitability has sharply declined, leading to the need for a paid-in capital increase.

Previously, at the first-quarter earnings conference call held on April 24, POSCO Holdings stated, "We will comprehensively review POSCO Future M's financial structure and funding situation, and decide on appropriate methods and timing for capital increases and additional borrowing."

Last year, instead of a paid-in capital increase, POSCO Future M managed its financial soundness by issuing hybrid securities worth 600 billion won. Hybrid securities are classified as equity rather than debt on the balance sheet and are used as a means to increase a company's equity capital. Additionally, expanding equity capital helps lower the debt ratio and secures additional investment capacity.

A POSCO Holdings representative explained, "Although we raised funds by issuing hybrid securities last year, investment costs were higher than initially expected due to rising inflation following COVID-19. Even after starting production following investments, there is a time lag before sales are generated, and a decline in market conditions has led to lower selling prices, making short-term financial support necessary."

Meanwhile, in the first quarter of this year, POSCO Future M recorded consolidated sales of 845.4 billion won and operating profit of 17.2 billion won. These figures represent a decrease of 25.7% and 54.6%, respectively, compared to the same period last year. POSCO Future M's market capitalization stands at approximately 9.3 trillion won, ranking 48th on the Korea Exchange.