POSCO(US:PKX)2024-04-29 16:01Financial Data and Key Metrics Changes - In Q1 2024, revenue decreased by 3% quarter-over-quarter to KRW 18.52 trillion, while operating profit increased by 92% to KRW 583 billion due to profit recovery in the steel subsidiary and reversal of inventory impairment losses in the rechargeable battery materials business [10] - EBITDA for Q1 was KRW 1.54 trillion, with capital expenditures of KRW 1.8 trillion on a consolidated basis and KRW 3 trillion on a standalone basis [10] - Net borrowings increased by KRW 1.8 trillion from the end of the previous year to KRW 9.86 trillion, maintaining a low net debt-to-equity ratio of 16.3% [10] Business Line Data and Key Metrics Changes - Steel business operating profit slightly fell to KRW 339 billion from KRW 346 billion in the previous quarter, while POSCO's operating profit improved by KRW 32 billion to KRW 295 billion despite lower sales volume at overseas subsidiaries [11] - The infrastructure business recorded an operating profit of KRW 340 billion, up KRW 48 billion from the previous quarter [12] - In the green future materials segment, a loss of KRW 169 billion was recorded due to inventory impairment losses, but a reversal of KRW 66 billion in Q1 led to a return to profit of about KRW 6 billion [12] Market Data and Key Metrics Changes - POSCO's crude steel output decreased by 358 kilotons to 8,661 kilotons due to refurbishment of a blast furnace, while product sales decreased by 101 kilotons to 8,229 kilotons [21] - Despite lower sales volume, product sales price increased, leading to a revenue increase of KRW 14.4 billion to KRW 9.52 trillion [22] - Operating profit in the steel segment increased by KRW 32 billion to KRW 295 billion, aided by price increases and reduced one-time costs [23] Company Strategy and Development Direction - The company aims to enhance global competitiveness in steelmaking and transition to a low-carbon production system to achieve cost competitiveness [3][4] - In the battery materials business, the focus is on acquiring promising assets and developing new technologies for solid-state battery materials [5][6] - The company plans to enhance shareholder value through asset allocation and potential retirement of treasury stocks [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging business environment with declining demand in the steel market, particularly in construction and automotive sectors [33][36] - The lithium market is undergoing adjustments, with current prices around $15,000 per ton, and management is exploring asset acquisitions in North America and South America [38][39] - The company is committed to maintaining profitability while adjusting investment schedules in response to market conditions [15] Other Important Information - The company has begun lithium hydroxide production, with plans to ramp up to 43 kilotons after normalizing operations [17] - A new commercial production line for silicon anode active materials is under construction, with an annual capacity of 550 tons [19] - The company is focusing on enhancing product performance and efficiency through R&D and technology improvements [20] Q&A Session Summary Question: Steel market outlook and lithium price plans - Management noted that the steel market is facing prolonged depression due to various factors, including inflation and geopolitical issues, with domestic demand holding up but exports being active [33][34] - Regarding lithium prices, management indicated that current prices have hit a low point, and they are actively looking for acquisition opportunities in North America and South America [38][39] Question: Changes under new management and mid- to long-term strategy - The new management is revising business plans to improve competitiveness in steel and rechargeable battery materials, with a focus on adjusting growth speed in response to market conditions [50][51] - The mid- to long-term strategy includes cost-saving measures and potential restructuring of underperforming subsidiaries [52][55] Question: CapEx plans and internal sourcing - The company plans to allocate KRW 10.8 trillion in CapEx for 2024, with significant investments in steel and battery materials [81] - Management aims for 100% internal sourcing of lithium and nickel for cathode active materials, with a mid-term target of 50% [86]