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POSCO achieved consolidated operating profit of 2.84 Tril. Won in 2016··· 18.0%up YoY

Date
Jan. 25, 2017
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  • - Held company briefing session on Jan. 25··· achieved separate sales of 24.32 Tril. won and operating profit of 2.6353 Tril. won.
    - Operating margin recovered to double-digit figure first time in 5 years thanks to its revenue-generating efforts e.g. expanding sales of high-value products and reducing costs.
    - Debt-to-equity ratio dropped to 74% consolidated and 17.4% separate due to improved financial soundness.
    - 126 cases of restructuring subsidiaries and assets since 2014··· Securing cash and reducing borrowings led to a financial improvement of 5.8 Tril. won.

    At a company briefing session that took place on January 25, 2017, POSCO announced that it had recorded consolidated sales of 53.835 trillion won and a consolidated operating profit of 2.8443 trillion won in 2016.

     

    POSCO Group's consolidated sales have declined year-on-year due to sluggish domestic and overseas market conditions as well as a decrease in the number of its subsidiaries due to group restructuring. However, the group's consolidated operating profit has increased by 18% year-on-year thanks to a significant improvement in profits in the overseas steel sector including POSCO.

     

    In particular, POSCO's overseas steel subsidiaries showed a combined operating deficit of 429.9 billion won in 2015, but they managed to achieve a combined operating profit of 218.2 billion won last year thanks to increased sales of high value-added products and cost reduction, helping increase POSCO's consolidated profit. The performance of POSCO's major overseas steel subsidiaries has also improved significantly, with Zhangjiagang Pohang Stainless Steel Co., Ltd. achieving an operating profit of 107.4 billion won and POSCO Maharashtra Steel 36 billion won.

     

    POSCO's consolidated net profit has also was in the black, from a net loss of 96.2 billion won in 2015 to a net profit of 1.482 trillion won in 2016.

     

    Separately, POSCO recorded sales of 24.3249 trillion won and an operating profit of 2.6353 trillion won in 2016. POSCO's sales fell by 5% year-on-year due to a decline in product prices. However, POSCO's operating profit grew by 17.7% year-on-year, thanks to the company's expanded sales of its World Premium (WP) products, which are its proprietary high-value-added products, as well as an increase in profitability across the company and its cost reduction efforts.

     

    Although last year saw a depressed market in which the price difference between finished steel products and their raw materials reduced by 1.2 trillion won, POSCO managed to increase its operating profit by more than 400 billion won compared to 2015 by securing 1.4 trillion won with its internal revenue-generation activities alone; 1 trillion won through increasing sales of WP products and profitability improvement and 400 billion won through cost reduction. As a result, the company's operating margin recovered to a double-digit figure for the first time in five years since 2011, recording 10.8%.

     

    The sales of WP products reached a record high of 15.973 million tons, up 32.63 million tons compared to the previous year. As a result, POSCO's sales of WP products reached a share of 47.3% among company's total sales. The company's solution marketing-linked sales also increased by 61% to 3.90 million tons.

     

    POSCO's financial soundness has also improved dramatically. POSCO lowered its consolidated debt-to-equity ratio to 74% by reducing its net debt by 7.1 trillion won for the past three years since POSCO CEO Ohjoon Kwon's inauguration. In particular, POSCO's separate debt ratio stands at 17.4%, the lowest figure since its foundation. The company's consolidated borrowings also decreased by 2.5152 trillion won from the previous year.

     

    The restructuring of the company's affiliates and assets are also going smoothly. Of the 149 restructuring targets that the company set from 2014 until this year, 126 targets have been completed last year, which in turn resulted in a cumulative financial improvement of 5.8 trillion won thanks to the acquisition of cash and the reduction of borrowings.

     

    POSCO's aim is to strengthen its steel earning power, which is the best in the world, as well as to complete the restructuring planned in POSCO 2.0 and set the foundation for future growth. Most notably, the company plans to increase the share of the sales of its WP products to 52% and to increase the volume of solution-linked sales to more than 4.5 million tons this year, thereby further boosting the competitiveness of the steel industry.

     

    In the meantime, POSCO has set 54.8 trillion won consolidated and 25.6 trillion won separate as its sales goals for 2017. In order to secure future competitiveness in an increasingly difficult market environment where you see the global steel industry dealing with oversupply and sluggish demand, the company plans to increase its investment cost by 1 trillion won consolidated and 600 billion won separate, to KRW 3.5 trillion and KRW 2.6 trillion respectively. On the other hand, the company plans to continuously reduce its net debt, to 1.7 trillion won consolidated and 1.3 trillion won separate.



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