[Holdings Era, POSCO] D-10 Countdown... Beyond Steel to the Future

Final Preparations for Transition to Holding Company System
7 Core Businesses Including Hydrogen and New Materials

Two Major Growth Pillars in New Business Sectors Alongside Steel
Kim Hakdong and Jeon Jungsun Lead as Co-CEOs

POSCO Chairman Choi Jeong-woo (second from the left in the front row) is demonstrating the extraction of underground brine at the lithium salt lake exploration site in Argentina in October 2019.

[Asia Economy Reporter Donghoon Jeong] D-10. The era of ‘POSCO Holdings’ has entered its countdown. POSCO Group, which is about to transition to a holding company system?the biggest change since its privatization in 2001?is in the final stages of preparation by activating a task force (TF) for new business investment research and development and organizational restructuring. The transition to a holding company system at POSCO emphasizes moving beyond the steel industry. POSCO Chairman Choi Jeong-woo has also diagnosed that "the global low-carbon transition is fundamentally shaking the competitiveness of existing industries, including steel."

◆Beyond a ‘steel company’=POSCO Holdings, launching on the 2nd of next month, will oversee 30 major subsidiaries of the group. Along with the steel company POSCO, it will have key subsidiaries such as ▲POSCO Chemical ▲POSCO Engineering & Construction ▲POSCO International ▲POSCO Energy ▲POSCO ICT. The newly established corporation POSCO, created after the physical division, will have four steel subsidiaries including POSCO Steel Plate under its umbrella. The newly launched POSCO Holdings has a capital of 482.4 billion KRW and total equity of 48.1194 trillion KRW. Total liabilities and total assets are 3.8415 trillion KRW and 51.9605 trillion KRW, respectively. The debt ratio is at a healthy level of about 8%. Based on this sound financial structure, it will discover businesses aligned with the group’s vision such as hydrogen, secondary battery materials, and energy.

The decisive reason for POSCO’s transition to a holding company system lies in resolving the ‘steel industry discount.’ Recently, investors have been concentrating their investments in the stock market on eco-friendly future industries such as secondary batteries, mobility, and IT. Meanwhile, heavy and chemical industries including steel have been sidelined. Until two to three years ago, POSCO’s market capitalization ranked among the top five but has since fallen outside the top ten. POSCO Group’s strategy is to enhance corporate value through challenges in steel and eco-friendly industries and then reinvest this into research and development in new business areas.

POSCO Group has selected seven core businesses to focus on after the holding company transition. In addition to the existing steel business, these include ▲secondary battery materials ▲lithium and nickel ▲hydrogen ▲energy ▲construction and infrastructure ▲food. POSCO expects growth from new subsidiaries related to secondary batteries, such as POSCO Lithium Solutions and POSCO HY Clean Metal, established last year. While existing business units are expected to continuously explore new business areas, there is a high possibility of establishing new separate affiliates in hydrogen, lithium, and nickel. Especially in hydrogen and nickel businesses, where no new corporations have yet been established, separate subsidiaries are likely to be formed. POSCO plans to develop new businesses such as hydrogen and secondary battery materials alongside its core steel business as two main pillars with the holding company transition. POSCO has set an investment budget of 8.9 trillion KRW on a consolidated basis this year, the largest in the past five years. The separate investment budget for the steel sector alone is 4.9 trillion KRW.

◆The figures leading Choi Jeong-woo’s ‘POSCO 2.0’= The twin leaders of the ‘POSCO 2.0’ era launched by Chairman Choi Jeong-woo are Vice Chairman Kim Hak-dong and Global Infrastructure Division Head (President) Jeon Jung-sun. Both were promoted to vice chairman and president, respectively, in POSCO’s year-end regular personnel reshuffle last year.

Vice Chairman Kim holds the title of vice chairman at POSCO for the first time in 30 years. He is the first since former POSCO Chairman Jeong Myeong-sik, who served as vice chairman from 1992 to 1993. Kim graduated from Seoul National University’s Department of Metallurgical Engineering and earned a degree in Materials Engineering from Carnegie Mellon University in the U.S. He is an expert in POSCO’s production division, having served as Pohang Steelworks Director in 2015 and Gwangyang Steelworks Director in 2017. As the head of the steel company POSCO, he is expected to focus on strengthening the foundation of the steel industry, the root of the group. Calming local public sentiment, which is full of dissatisfaction due to the holding company’s establishment in Seoul, is also a responsibility assigned to Vice Chairman Kim. The ‘POSCO Holding Company Pohang Relocation Citizens’ Committee,’ composed of various figures from Pohang city, demands the relocation of POSCO Holdings headquarters to Pohang and the establishment of research facilities such as the Future Technology Research Institute in Pohang. They plan to hold a rally with 30,000 participants in front of POSCO’s headquarters in Gwedong-dong, Nam-gu, Pohang, on the afternoon of the 24th.

President Jeon Jung-sun is expected to oversee the group’s overall business and devise future strategies at POSCO Holdings. Jeon was promoted to executive director in 2016 when Chairman Choi became POSCO Group’s Chief Financial Officer (CFO). In 2018, when Chairman Choi took office as group chairman, Jeon moved to the POSCO Value Management Center and served as a close aide to the chairman. Jeon has concurrently served as head of the Strategy Planning Headquarters and led the group’s structural reorganization, including the holding company transition. He is also the head of the management strategy team in the ‘Management Structure Advancement TF’ launched earlier this month ahead of the holding company transition. Alongside Chairman Choi, Jeon will lead the group’s future strategy and overall management as the holding company’s representatives.

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