POSCO Maintains Moody's Credit Rating

[Asia Economy Reporter Park So-yeon] POSCO maintained its current credit rating of 'Baa1 (Stable)' in Moody's regular evaluation this year.

This is in contrast to Moody's downgrading the credit ratings of competing steel companies amid a negative outlook on the steel industry due to the global market downturn.

Moody's analyzed that although POSCO's steel business segment operating performance in the second quarter declined due to weakened demand for automotive steel sheets, which had previously generated high profits amid the COVID-19 pandemic, the operating profit of the non-steel business segment recorded relatively solid results, similar to the same period last year.

Despite the deterioration in operating performance, the reasons for maintaining POSCO's credit rating include the company's crisis response capability in dealing with the COVID-19 situation, a solid capital structure with low debt, and high financial flexibility due to substantial cash holdings.

In fact, POSCO has maintained a stable financial structure by implementing cash flow-focused policies since the spread of COVID-19.

At the Q2 investor briefing on the 21st, POSCO revealed that on a separate basis, it held cash and cash equivalents of KRW 12.0645 trillion and a debt ratio of 26.9%, while on a consolidated basis, it held cash and cash equivalents of KRW 16.9133 trillion and a debt ratio of 72.8%, indicating continuous improvement in its financial structure.

Moody's expects POSCO to continue efforts such as improving operating performance, prudent investment execution, and strengthening working capital management. It forecasts the consolidated 2020 Net D/E (net debt to EBITDA) ratio to rise to 1.8 times but to decrease to around 1.5 times in 2021?2022, deeming the Baa1 rating appropriate.

Meanwhile, Moody's introduced POSCO as a company maintaining excellent financial soundness in its report analyzing and forecasting steel companies in the Asia-Pacific region, 'APAC Steel Outlook.' It analyzed that POSCO effectively defended sales performance and profitability compared to global competing steelmakers through its outstanding domestic market position and cost competitiveness amid the COVID-19 situation.

Another global credit rating agency, S&P, also maintained POSCO's credit rating at BBB+ Stable, the highest level among global steelmakers, in June, showing a contrasting stance to the downgrades of other steel companies' credit rating outlooks. S&P reflected in its evaluation POSCO's operational efficiency maintaining excellent cost competitiveness and its product portfolio focused on high value-added products supporting relatively strong profitability compared to peers.

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