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01/10 23:33
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates declining financial performance with a 9% revenue drop and a 27% operating profit decline. Softening EV demand, inventory valuation losses, and regulatory challenges add to the negative outlook. While the dividend payout and share repurchase plans are positive, they are overshadowed by geopolitical risks and economic uncertainties. The Q&A section does not provide additional clarity, maintaining a negative sentiment. Overall, the financial challenges and lack of positive forward guidance suggest a negative stock price reaction.
Consolidated Revenue (2023) KRW 77.1 trillion, a 9% decline year-over-year. The decline was attributed to high-interest rates in the U.S., China's underwhelming reopening, suppressed steel prices, and geopolitical risks.
Operating Profit (2023) KRW 3.5 trillion, a 27% decline year-over-year. The decrease was due to softening EV demand, downturn in critical metals prices, and inventory valuation losses.
Annual EBITDA (2023) KRW 7.355 trillion. No year-over-year change or reasons for change were specified.
Total Investment (2023) KRW 8.6 trillion, inclusive of CapEx and share repurchases. This led to a rise in net debt to KRW 8 trillion, with a net debt ratio of 13.4%.
Q4 2023 Consolidated Revenue KRW 18.664 trillion, a significant year-over-year decline. The decline was due to weakened performance in steel and eco-friendly future materials businesses.
Q4 2023 Operating Profit KRW 304 billion, a significant year-over-year loss. The loss was driven by price declines in steel and metals, inventory valuation losses, and reverse lag effects in eco-friendly future materials.
Steel Business Profit (Q4 2023) KRW 346 billion, down from KRW 853 billion in Q3. The decline was due to a rare decoupling of raw material and steel prices, as well as rising feed costs in December.
Eco-Friendly Future Materials Deficit (Q4 2023) KRW 169 billion. The deficit was caused by falling prices of metals, including lithium, and inventory valuation losses of KRW 130.6 billion in Q4.
Inventory Valuation Loss (2023) KRW 148.2 billion, with KRW 130.6 billion recognized in Q4. Losses were due to metals price declines and initial plant ramp-up costs.
Crude Steel Output (2023) 35.687 million tonnes, a 4% year-over-year increase. The increase was due to recovery from flood-related damage.
Steel Revenue (2023) KRW 38.972 trillion, a 9% year-over-year decline. The decline was due to a KRW 34,000 per tonne drop in carbon steel prices.
Steel Operating Profit (2023) KRW 2.83 trillion, a KRW 212 billion year-over-year loss. The loss was due to price declines and high-cost raw materials.
POSCO International Operating Profit (2023) KRW 1.163 trillion, similar to the previous year. Declines in palm oil prices and start-up costs for a new traction motor core plant offset gains in eco-conscious industrial materials.
POSCO E&C Revenue (2023) KRW 11 trillion, a KRW 300 billion year-over-year increase. The increase was due to new project starts, but operating profit declined due to raw material price hikes.
POSCO Future M Revenue (2023) Continuous revenue expansion in rechargeable battery materials due to high-end product sales. However, profitability was hit by inventory impairments caused by falling metal prices.
Low-carbon bridge technologies: Expanded introduction for the BF-BOF route and defined transition strategy to HyREX for sustainable growth.
Rechargeable battery materials: Completed construction on lithium hydroxide and recycling plants in Gwangyang, progressing with Argentine lithium brine project and nickel JV project.
POSCO Pilbara Lithium Solution: Completed construction on POSCO type plant 1 using hard-rock lithium, with final testing underway.
China JV: Joint venture with HBIS, the #2 steelmaker in China, to enhance position in the Chinese market.
India expansion: Exploring additional investment opportunities in India, including an integrated mill with a trustworthy partner.
Merger of POSCO International and POSCO Energy: Generated synergy and enhanced operational efficiency, completing the LNG value chain loop.
High-grade NO plant expansion: Completed 150,000-tonne capacity expansion in Gwangyang, with another 150,000-tonne plant to come online by year-end.
Hydrogen reduction process pilot plant: Plans to build a 300,000-tonne capacity plant by 2027, with construction work underway for a 2.5 million tonne electric furnace for decarbonized steel.
ESG governance: Increased board oversight, established a preventive workplace safety system, and improved ESG scores from major rating providers.
Green hydrogen project in Oman: Secured exclusive rights for business development and operation to produce green hydrogen, with feasibility study underway.
High-interest rates in the U.S.: High-interest rates in the U.S. have negatively impacted the global economy, contributing to suppressed steel prices and reduced demand.
China's underwhelming reopening: China's slower-than-expected economic recovery has suppressed steel prices and weakened demand for steel and other materials.
Geopolitical risks: The ongoing war in Ukraine and the conflict in Gaza have escalated geopolitical risks, leading to increased energy prices and market uncertainties.
Softening EV demand: A downturn in electric vehicle (EV) demand has negatively impacted the market for critical battery metals, including lithium and nickel.
Decline in critical metals prices: Falling prices of critical metals, such as lithium, have led to inventory valuation losses and reduced profitability in the eco-friendly future materials business.
Steel price decline: Steel prices have continued to decline, while raw material costs, such as iron ore and coking coal, have risen, squeezing profit margins.
Inventory valuation losses: Inventory valuation losses due to falling metal prices have significantly impacted profitability, particularly in the eco-friendly future materials segment.
Oversupply in the steel market: Oversupply in the global steel market, particularly from China, has led to increased competition and price pressures.
Regulatory and compliance challenges: Compliance with regulations such as IRA and FEOC poses challenges, particularly in the battery materials and nickel production sectors.
Economic uncertainties: High inflation, high interest rates, and high raw material costs are expected to continue impacting demand and profitability.
Leadership transition risks: Potential leadership changes at POSCO Holdings could introduce strategic uncertainties, particularly in the rechargeable battery materials business.
Delayed recovery in construction and infrastructure: The construction and infrastructure sectors are experiencing slow recovery, impacting demand for steel and related materials.
Steel Market Outlook: The company anticipates a challenging steel market in 2024 due to high inflation, high interest rates, and high raw material costs. However, they expect a potential price rebound in the domestic market due to low inventory levels and collaboration with other steelmakers to raise prices incrementally.
Lithium Production and Market Projections: POSCO Pilbara Lithium Solution (PPLS) plant is ramping up production, targeting an 80% operation rate by the end of 2024. Despite falling lithium prices, the company expects the plant to turn profitable by Q4 2024 and achieve double-digit operating margins. Long-term purchasing agreements are nearly finalized, and the company remains competitive even with current market oversupply.
Nickel Market and Investment Plans: Nickel prices are projected to stabilize around $15,000-$16,000 per tonne, with no significant price drops expected. The company plans to continue investments in nickel production, including IRA-compliant facilities in North America, and adjust timelines based on market conditions.
Hydrogen Reduction Steelmaking: POSCO plans to build a 300,000-tonne capacity hydrogen reduction process pilot plant by 2027, with construction of a 2.5 million tonne electric furnace for decarbonized steel production targeted for commissioning in 2026.
Green Hydrogen Project in Oman: The company has secured exclusive land use rights in Oman for green hydrogen production. A feasibility study is underway to determine capacity and operational details.
Battery Materials Business: The company expects slower growth in the EV battery materials market in 2024 compared to previous years. However, they anticipate turning profitable in this segment by 2025, with ongoing investments in lithium and nickel production facilities.
Capital Expenditures (CapEx): POSCO plans to allocate approximately KRW 8 trillion in consolidated CapEx for 2024, with significant investments in steel decarbonization and battery materials expansion.
Dividend Payouts: The Board approved a KRW 2,500 per share Q4 dividend, bringing the total annual payout to KRW 10,000 per share for 2023.
Dividend Record Date: The year-end record date is set to February 29, 2024.
Mid-term Shareholder Return Policy: POSCO Holdings renewed its shareholder return program to define dividends prior to posting the record date.
Share Repurchase: Inclusive of CapEx and share repurchases, total investment came to KRW 8.6 trillion in 2023.
Treasury Stock Retirement: POSCO Holdings retired treasury stocks in 2022 and is actively considering this mechanism as part of its shareholder return policy for the future.
The earnings call indicates declining financial performance with a 9% revenue drop and a 27% operating profit decline. Softening EV demand, inventory valuation losses, and regulatory challenges add to the negative outlook. While the dividend payout and share repurchase plans are positive, they are overshadowed by geopolitical risks and economic uncertainties. The Q&A section does not provide additional clarity, maintaining a negative sentiment. Overall, the financial challenges and lack of positive forward guidance suggest a negative stock price reaction.
The earnings call reveals several concerns: lack of share buybacks or dividend announcements, uncertainty in the steel market, and challenges in expansion due to export quotas. The Q&A section highlighted unclear management responses regarding performance improvements and future projections, along with potential capital needs. Despite improved financials, the absence of positive shareholder return plans and market volatility suggest a negative sentiment, likely leading to a stock price decrease of -2% to -8%.
The earnings call summary shows stable financial performance with improved margins and strategic divestitures. However, the Q&A reveals uncertainties in restructuring, capital raising, and trade barriers, with management providing vague responses on key issues. The lack of clear guidance and potential challenges in energy materials and trade barriers offset positive aspects like increased sales in high-demand materials. This results in a neutral outlook, as positive factors are balanced by uncertainties and lack of clear future guidance.
The earnings call summary shows mixed financial performance with steady revenue and operating income, but challenges in steel and battery segments. Positive elements include improved debt management and infrastructure profits. The Q&A reveals uncertainties in price negotiations and market demand, but potential growth in India and Southeast Asia. Despite cautious optimism and strategic initiatives, the lack of strong positive catalysts and ongoing challenges suggest a neutral stock price reaction over the next two weeks.
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