POSCO Reports Q2 Consolidated Operating Profit of 167.7 Billion KRW... First Quarterly Loss on Separate Basis

Operating Loss of 108.5 Billion KRW Under Separate Standards Due to COVID-19
Consolidated Sales of 13.7216 Trillion KRW

[Asia Economy Reporter Hwang Yoon-joo] POSCO posted its first-ever quarterly loss on a separate basis in Q2 this year due to the slump in front-end industries such as automobiles caused by the COVID-19 pandemic.

On the 21st, POSCO announced that its consolidated sales for Q2 reached KRW 13.7216 trillion, operating profit KRW 167.7 billion, and net profit KRW 104.9 billion. On a separate basis, sales were KRW 5.8848 trillion, with an operating loss of KRW 108.5 billion. Net profit was KRW 6.6 billion.

Due to the global demand downturn and market deterioration caused by COVID-19, the steel segment saw declines in both sales volume and prices. However, the global infrastructure segment showed relatively favorable results, offsetting the steel segment's slump, thanks to strong sales from POSCO International’s Myanmar gas field, improved profits in POSCO Engineering & Construction’s building and plant businesses, and expansion of POSCO Energy’s LNG terminal business, reflecting efforts to improve profitability in core industries.

While most global steelmakers recorded losses in Q1, POSCO maintained solid performance; however, in Q2, as the impact of COVID-19 intensified, it posted a loss on a separate basis.

Due to decreased demand from COVID-19, crude steel and product production volumes fell by 1.27 million tons and 870,000 tons respectively compared to the previous quarter, and sales volume decreased by 850,000 tons. Nevertheless, POSCO continued operating a flexible production and sales system, adjusting casting costs and steel scrap volumes to minimize the impact of production cuts.

As a result of company-wide inventory reduction and cost-cutting efforts on products and raw materials, POSCO’s separate basis cash holdings increased by KRW 341.1 billion from the previous quarter to KRW 12.0645 trillion, and its debt ratio decreased by 1.4 percentage points to 26.9%. On a consolidated basis, cash holdings rose by KRW 1.5621 trillion to KRW 16.9133 trillion, and the debt ratio fell by 0.7 percentage points to 72.8%, indicating continuous improvement in the financial structure.

POSCO acknowledged that performance decline due to COVID-19 was inevitable but stated it would enhance cost competitiveness through the company-wide cost reduction initiative ‘Cost Innovation 2020’ launched last year. The cumulative cost savings for the first half of this year amounted to KRW 175.2 billion.

Additionally, to improve cost reduction, productivity, and quality, POSCO plans to strengthen competitiveness by advancing its Smart Factory system?pioneered in the global steel industry?from optimization at individual process units to an integrated smart factory spanning pre- and post-processes.

In the second half of the year, POSCO aims to improve profitability by expanding sales of high value-added products such as gigasteel for automotive steel sheets and PosMAC for solar structures, optimizing the sales mix, and strengthening exports to demand recovery regions like China. POSCO forecasts that steel sales are showing stronger-than-expected momentum and that performance will recover from Q3 onward after bottoming out in Q2.

At the group level, POSCO plans to lay the foundation for future profits through expanding food trading by POSCO International and full operation of the Ukraine grain terminal, normalization of POSCO Engineering & Construction’s Songdo International Business District project, expansion of LNG terminal ancillary businesses by POSCO Energy, continued investment in secondary battery materials by POSCO Chemical, and a joint venture for hydrogen peroxide production utilizing by-products from steel plants.

This content was produced with the assistance of AI translation services.