Slide 1: 2Q 2006 Operating Performance
2Q 2006 Operating Performance July 12, 2006
Slide 2: Unaudited non-consolidated figures notice
Figures provided in this presentation are based on unaudited non-consolidated financial statements of the Company for the second quarter of 2006. Certain contents in this presentation are subject to change during the course of auditing process.
Slide 3: Agenda
I. 2Q.'06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan ^ Agenda
Slide 4: Production/Sales
Productions/Sales Production and sales volume decreased due to rationalizations of major facilities including Pohang #3 Blast Furnace Export decreased due to priority shipment to domestic market Inventory continued to drop due to market recovery (in thousand tons) * 2Q. 06 Major Facility Rationaliza
Slide 5: Sales by Product
Sales by Product (in thousand tons) 2005 2Q 2006 2006 Quarter-on-Quarter Quarter-on-Quarter 2005 2Q 1Q 2Q Quarter-on-Quarter Quarter-on-Quarter Hot Rolled 2,270 2,114 2,120 6 0.3% Plate 535 948 937 ^11 ^1.2% Wire Rod 514 498 420 ^78 ^15.7% Cold Rolled 2,622 2,676 2,528 ^148 ^5.5% Electrical Steel 19
Slide 6: Income Summary
Income Summary 2005 2Q 2006 2006 Quarter-on-Quarter Quarter-on-Quarter 2005 2Q 1Q 2Q Quarter-on-Quarter Quarter-on-Quarter Revenue Revenue 5,378 4,664 4,672 8 0.2% CoGS CoGS 3,407 3,605 3,473 ^132 ^3.7% Operating Income Operating Income 1,728 790 941 151 19.1% OP Margin 32.1% 16.9% 20.1% 3.2 - Net I
Slide 7: Financial Structure
Financial Structure 2005 2Q 2006 2006 Quarter-on-Quarter Quarter-on-Quarter 2005 2Q 1Q 2Q Quarter-on-Quarter Quarter-on-Quarter Assets Assets 22,344 23,627 24,115 488 2.1% Current Asset 8,143 6,658 6,672 14 0.2% Fixed Asset 14,201 16,969 17,443 474 2.8% Liabilities Liabilities 4,564 3,871 4,216 345
Slide 8: Financial Ratios
Financial Ratios 21.3 25.5 '03 '04 '05 1Q.06 2Q Liability-to-Equity Ratio (%) 42.1 32.6 Equity Ratio (%) 70.4 75.4 24.0 80.6 27.2 Operating Margin (%) 16.9 19.6 83.6 Share Price (KRW) '05.2/4 3/4 4/4 1Q.06 2Q 182,500 234,000 202,000 250,500 254,500 '03 '04 '05 1Q.06 2Q '03 '04 '05 1Q.06 2Q 20.1 21.2
Slide 9: Agenda: Key Management Initiatives
I. 2Q.'06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan ^ Agenda
Slide 10: World's 2nd largest automotive steel production base
Established world's 2nd largest automotive steel production base #6 CGL completed, making POSCO a global supplier with 6.5mn capacity ? Gwangyang works aims to become world's No.1 automotive steel provider ? Gwangyang works aims to become world's No.1 automotive steel provider ? Gwangyang works aims
Slide 11: Expanding auto steel processing centers overseas
Strengthening global service by expanding auto steel processing center overseas ? 7 automotive steel processing centers including POS-NPC, in operation or under construction ? Securing stable supply of 1mn tons of automotive steel < Overseas processing centers > POS-MPC [Mexico] POS-Hyundai POS-Qing
Slide 12: World's 3rd largest stainless steel producer
World's 3rd largest stainless steel producer Zhangjiagang STS steel-making mill ? Run global STS business connecting Asia - Meet local demand with over 10% growth rate - Rise to one of top 3 STS makers in China - Major facilities: STS steel & HR 0.6mn tons (EAF, continuous casting, HR) ^ STS steel p
Slide 13: Commercialization of Magnesium production technology
Commercialization of Magnesium (Mg) production technology Steering Wheel Cell-phone case Laptop case Transmission case Automobile Hood < Magnesium Products > ? Investment Summary - Location : Hae-ryong industrial complex - Capacity : 3000 tons(by '10) - CAPEX : 25.5bn KRW, Completion: Jul.'07 Expect
Slide 14: Major Domestic Facility Investments
Major Domestic Facility Investments Pohang #3 BF Refurbishment ? Period: Mar.7 ~ May.3.'06 (58days) ? Impact - 460k tons/yr capacity increased BF size: 3,795m3 ? 4,350m3 - By applying new cooling system, life extended (20yrs+) ? Expected Benefits - Cost saving & stable operation through energy effic
Slide 15: Major Domestic Facility Investments (Cont'd)
Gwangyang # 1 CR rationalization ? Period : Feb.20 ~ May.30.'06 (100days) ? Impact - PCM (Pickling and tandem cold rolling mill) capacity expansion · production: 1.64mn ? 2.14mn tons/yr ? Expected Benefit - Foundation for high quality, high tensile automotive steel production · Stable supply of feed
Slide 16: Major Domestic Facility Investments (Cont'd)
Major Domestic Facility Investments (Cont'd) Electrical steel mill upgrade ? Impact - 1mn tons capacity of electrical steel · production: 60 ? 100mn tons/yr ? Expected Benefit - Secure manufacturing technology and capacity for premium steel sheet · Major improvements in quality and yield ratio for n
Slide 17: Development of New Demand/New Market
Development of New Demand/New Market Expand demand for high weathering steel Completion of 'DAPA*' building, applying modular construction method - Large scale building with 4 stories, 11,570m2 - Shortened construction (5months) and advanced quality ? Expected Benefit - Market expansion for apartmen
Slide 18: Improve profitability through price increase and cost saving
Reflect international price rise due to increase in global demand ? Reflect increase in raw material cost Improve profitability through price increase and cost saving Price increase ? Raw material cost reduction - Use of low cost raw materials, adopting advanced technology ? Purchasing cost reductio
Slide 19: Agenda: Steel Industry Environment
I. 2Q.'06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan ^ Agenda
Slide 20: Global Consolidation Trend of M&A in Steel Sector
'06. ~ Global Consolidation Size Feature Example '04. ~ '05. Cross-Border Consolidation '97. ~'03. Consolidation within region Cross-Border Consolidation Arcelor ('02) Above 100mm Tons Hostile takeover Mittal + Arcelor Non hostile takeover 50~70 mm Tons 30 mm Tons M&A between two firms Corus ('99) T
Slide 21: Emergence of Arcelor Mittal
Emergence of Arcelor Mittal ? Snapshot of Arcelor Mittal Steel industry restructuring accelerates ? Mittal's influence over steel and steel-related industry increased - Greater influence over demand industry as presence in US and EU grows - Increased cost competitiveness as bargaining power for raw
Slide 22: Global Steel Market Trend
Recovery continued due to increase in demand and inventory adjustments Global Steel Market Trend 1 '06.1H global steel market trend ? Market started recovering Feb. '06. - Continued growth in demand with recovery in Chinese market - Inventory reduction due to production adjustment in Japan & US ? Re
Slide 23: Regional steel spot prices
ASEAN (Unit: U$/T) Weak market as price adjustment to compensate steep rise Guangzhou : 333(Dec.'05) ^ 375(Feb.'06) ^ 421(Apr.) ^ 485(May.) ^ 484(Jun.) ^ 460(Jul.) Despite increase in import, spot price remains strong Midwest : 617(Dec.'05) ^ 609(Feb. '06) ^ 632(Apr.) ^ 694(May.) ^ 712(Jun.) ^ 715(J
Slide 24: China Steel Industry
China Steel Industry 1 Strong growth in flat consuming industries and in exports to high priced region Production of Major Steel Consuming Industries (Jan.'06~May) Automobile : 3.05mn vehicle(YoY +31.8%) Shipbuilding : 4.19mn DWT (YoY +12.8%) Chinese Exports by Region US : 416(3Q'05) ^ 639(4Q) ^ 897
Slide 25: China steel restructuring policy and trade
Despite growth of net-exports, net-importing of high-quality flat products remain Government announces stronger steel industry restructuring policy ? Reinforced capacity control: stronger punishment for illegal review processes and projects ? Gradual closing of outdated facilities: close 100mn tons
Slide 26: Domestic Steel Industry
Domestic Steel Industry Stable growth in demand industry and production of flat products 1H 2H 2006 1H YoY(%) 2H YoY(%) 2006 YoY(%) Consumption 11.4 -2.6 12.1 3.7 23.5 0.5 Production 15.3 1.1 16.6 6.4 31.9 3.8 Import 2.3 4.1 2.1 -1.1 4.3 1.6 Export 6.2 9.9 6.5 8.9 12.7 9.4 < Domestic Flat Product Su
Slide 27: Raw Material Price Trends
Raw Material Price Trends 2006 2008 2010 Demand 715 798 916 Supply 717 818 918 Balance +2 +20 +2 2006 2008 2010 Demand 208 240 274 Supply 215 244 273 Balance +7 +4 -1 < Iron Ore Supply-Demand Forecast > * Macquarie Research(May.'06, Seaborne trading) (mn tons) < Coal Supply-Demand Forecast > (mn ton
Slide 28: Agenda: 2006 Business Plan
I. 2Q.'06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan ^ Agenda
Slide 29: 2006 Business Plan
2006 Business Plan The data above represents the Company's internal objectives, and should not be used as a basis for investment decisions 2005 2006(F) Crude Steel Production (mm tons) 30.5 30.3 - Consolidated Production 31.4 31.4 Sales Volume (mm tons) 28.7 29.0 Revenue (KRW tr) 21.7 19~20 - Consol
Slide 30: 2Q 2006 Operating Performance
2Q 2006 Operating Performance July 12, 2006