Slide 1: 2Q 2007 Operating Performance
2Q 2007 Operating Performance July 16, 2007
Slide 2: Agenda
Agenda 1 2Q ’07 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2007 Business Plan Figures provided in this presentation are based on unaudited financial statements of the Company. Certain contents in this presentation are subject to change during the course of au
Slide 3: Production/Sales
Production/Sales Production up due to Completion of Major Renovations in 1Q and Operation of No.1 Finex • New Facilities: Dephosphorizer in Pohang (Mar.17) & Commercial FINEX (May.30) • Rationalization: Gwangyang #2 HR (Feb.1~Feb.20), Pohang #2 CR (Nov.29,’06~Mar. 29,’07) Sales up to meet Growing De
Slide 4: Sales by Product
Sales by Product Sales of Strategic Products (Auto, High-end API, Electrical steel, etc) Continue to Grow Sales of Strategic Products ’06. 4Q ’07. 1Q ’07. 2Q (in thousand tons) Automotive Steel 1,304 1,341 1,490 Electrical Steel 53 77 118 2006 2007 2007 (in thousand tons) 2Q 1Q 2Q YoY QoQ Hot Rolled
Slide 5: Income Summary
Income Summary Sales & Op. Income up due to Favorable Market Condition and CostSavings y Carbon Steel Price (thousKRW) : 579(3Q.’06) #¨ 587(4Q) #¨ 590(1Q.’07) #¨ 597(2Q) * Price raised (Apr.’07, thous KRW/ton) : +20(Plates), +220(Grain-oriented electrical steel) Transferred Burden of High Nickel Cos
Slide 6: Summarized Income Statement (POSCO)
Summarized Income Statement (POSCO) 2006 2007 2007 (in billion KRW) 2Q 1Q 2Q QoQ Revenue 4,672 5,701 5,815 2.0% Gross income 1,199 1,431 1,570 9.7% (Gross margin) (25.7%) (25.1%) (27.0%) (1.9%) S G & A 258 318 323 1.6% Operating income 941 1,113 1,247 12.1% (Operating margin) (20.1%) (19.5%) (21.5%)
Slide 7: Financial Structure
Financial Structure Assets Up due to Increase in Investments Liabilities Up due to Increase in Debt 2006 2007 2007 (in billion KRW) 2Q 1Q 2Q YoY QoQ Assets 24,115 27,016 28,686 19.0% 6.2% Current Assets 6,672 7,530 8,204 23.0% 9.0% Non-current Assets 17,443 19,486 20,482 17.4% 5.1% Liabilities 4,190
Slide 8: Summarized Balanced Sheets (POSCO)
Summarized Balanced Sheets (POSCO) 2006 2007 2007 (in billion KRW) 2Q 1Q 2Q QoQ Current assets 6,672 7,530 8,204 9.0% Cash equivalent assets* 2,512 2,838 2,950 3.9% Notes receivable 1,530 1,790 1,939 8.3% Inventory 2,460 2,739 3,164 15.5% Long-term assets 17,443 19,486 20,482 5.1% Investment securit
Slide 9: Financial Ratios
Financial Ratios Operating Income & Margin Return on Equity (KRW bn,%) (%) 1,247 1,097 1,113 18.7 1,064 18.1 941 21.5 15.3 15.5 20.1 20.1 20.3 19.5 14.5 2Q’06 3Q 4Q 1Q’07 2Q 2Q’06 3Q 4Q 1Q’07 2Q Liabilities-to-Equity Ratio Share Price & Market Cap (Quarterly Closing Price) 443,500 won (%) 395,000 24
Slide 10: Consolidated Financial Summary
Consolidated Financial Summary Sales, Operating Income Up due to Sales Increase in Steel & E&C Sector Total Assets Increased due to Addition of Subsidiaries and Increase in Investments No. consolidated subsidiaries ’06/E ’07.1Q ’07.2Q Total 69 77 81 consolidate 61, equity method 20 Domestic 23 24 25
Slide 11: Consolidated Financial Summary: Income Summary by Sectors
Consolidated Financial Summary Income Summary by Sectors 2006 2007 2007 (in billion KRW) QoQ 2Q 1Q 2Q Steel 6,698 8,740 9,130 4.5% E & C 1,100 753 895 18.9% Energy 139 126 112 #¢ 11.1% IT & Others 134 121 113 #¢ 6.6% Total 8,071 9,740 10,250 5.2% Consolidated 5,985 7,742 8,234 6.4% Steel 1,016 1,265
Slide 12: Consolidated Financial Summary: Balance Sheet by Sectors
Consolidated Financial Summary Balance Sheet by Sectors Asset Liability Equity (in billion KRW) 2007 2007 2007 1Q 2Q 1Q 2Q 1Q 2Q Steel 33,366 35,659 8,695 9,308 24,671 26,351 E & C 2,893 3,052 1,623 1,742 1,270 1,310 Energy 887 953 389 446 498 507 IT & Others 760 784 319 336 441 448 Total 37,906 40,
Slide 13: Operating Performances of Listed Subsidiaries
Operating Performances of Listed Subsidiaries POCOS (Coated steel) POSDATA (IT) (bn KRW) ’06.2Q 3Q 4Q ’07.1Q 2Q (bn KRW) ’06.2Q 3Q 4Q ’07.1Q 2Q Sales 153.0 145.3 156.1 154.3 178.0 Sales 86.6 77.2 99.0 81.1 76.3 OP Income -2.3 7.0 2.7 2.7 2.7 OP Income 2.7 2.0 3.5 0.7 #¢ 0.5 Net Income -3.0 12.6 4.1
Slide 14: Agenda
Agenda 1 2Q ’07 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2007 Business Plan
Slide 15: Commercialization of FINEX
Commercialization of FINEX Secured Global Technology Leadership with Successful Development of Revolutionary Process y Lower cost: use of cheaper iron ore & coal -Fine-ore used (high Al/Zn content acceptable) - Semi-soft coking coal used (abundant reserve) y Lower investment: omit raw mat’l pre-trea
Slide 16: Commercialization of FINEX
Commercialization of FINEX Completion of Commercialized No.1 FINEX Plant after 15yrs of Intensive R&D FINEX Demo Plant (600K tons) Commercialized FINEX Plant (1.5 mn tons) y Demo Plant Test Operation y Completion of Commercialized FINEX Plant -Establish melter/reactor linked operation process -Verif
Slide 17: FINEX Snapshot
FINEX ® Snapshot Pollutants Emission Comparison Commercialized FINEX Plant Operation Status SOx NOx Dust Normal Op Result 10 0 B.F Target (May.’07) Sinter Per annum 1.5 1.35 Plant (mn ton) Production 50 Per day 3,800 ~ 28 % 4,300 Cokes (ton) 4,000 Oven 3 % Rate of Op % 95 95 1 % 0 Coal Rate kg/tHM 7
Slide 18: Progress on India Project
Progress on India Project India Govt. Continues Support and Inter-dept Cooperation y Prime Minister calls meetings to review progress (1 st : Apr.19, 2 nd :Jun.27) y State continues support on land acquisition & promotion of community development y Env’t approval for port & plant through ‘hand on’ c
Slide 19: Growth in Emerging Markets
Growth in Emerging Markets Strengthened Steel Investment in Construction of CR Mill y Overview - -Capacity : CR 1.2mn ton (F/H 50, CR 70) -Location : Phy-my #2 Plant, Southern Vung-Tau - Period : Nov.’07 ~ Dec.’09 (25months) y Benefits - - Set up a stepping stone into S.E.A market * Steel industry i
Slide 20: R&D for premium products
R&D for premium products Extremely thin tire cord y R&D overview -Date : Jan.’06 ~ Apr.’07 -JV with Koryo Steel Group - -Dramatic improvement in strength y Benefits -Substitute cords < 0.20mm ƒ 3 (20thous ton/yr) -Expand exports of high value-added product New 400 series stainless steel y Overview -
Slide 21: Magnesium Sheet Business
Magnesium Sheet Business Business Overview y Overview - -Location : Hae-ryong Industrial Complex - -Production Capacity : 3,000 ton/yr - -CAPEX : KRW 25.3 bn y Progress - - Feb. ’04 Joint Venture with RIST started - - Sep. ’06Start construction of plant - - Mar.’07 Registered to Nat’l Mg Association
Slide 22: Strategic Alliances to enhance Competitiveness
Strategic Alliances to enhance Competitiveness Strategic Alliances with Hyundai Heavy Industry & Dong- kuk Steel Cross Shareholding 9.8% 1.9% (Union Steel) Hyundai Heavy Dong Kuk Industries POSCO Steel (Mipo Dockyard) 1.0% 9.8% (POCOS + POSCO) • Tech. JV for premium shipment steel incl. TMCP • Stabi
Slide 23: Key Management Activities
Key Management Activities VW Group Award y Awarded for - -Cost savings through suggesting Hot Dipped GI -Best technical service & process efficiency y Benefits - -Expand sales to Eastern Europe & Brazil plants ·Current sales about 100Kt to Mexico/China plants - -Establish global total prod’n process
Slide 24: Key Management Activities (Subsidiaries)
Key Management Activities (Subsidiaries) Steel y POCOS : Invest coat/color plant in Vietnam -Construction : Jan.’08 ~ Aug.’09 (20mos.) -Capacity : 300K t/y -Benefits ·Secure mkt for high-end Al & pre-painted sheet y POSCO Specialty : Completed Forging Line -Construction : Dec.’05 ~ Jun.’07 -Capacity
Slide 25: Key Management Activities (Subsidiaries) Energy
Key Management Activities (Subsidiaries) Energy (PoscoPower) y Renewable Energy – Fuel Cell Biz -May.’07 Group-wide MOU for cooperation -May.’07 MOA w/ Pohang City on fuel cell biz ) To construct 100MW production base by ’10 y Begin Plant Expansion -Feb. ’07tech assistance agreed with KOPEC -May.’07
Slide 26: Demonstrating Corporate Citizenship
Demonstrating Corporate Citizenship Dasan Business Award (June’07) (The Korea Economic Daily) - - Global Steel Company, Progress Overseas Growth Most Respected Entrepreneur(May ’07.5) (KMAC) - Actively Promoting Foreign Project, Corporate Ethics, Technology Research 2007 Most Transparent Company (Ju
Slide 27: Agenda
Agenda 1 2Q ’07 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2007 Business Plan
Slide 28: Global Steel Market Long-term Forecast
| | | | | | | | Global Steel Market Long-term Forecast Expecting 1.89 bn ton Steel Consumption by ’17, Driven by Growth in BRICs y Rapid growth in mid-class population(China, India, etc) : 1.15 bn(’00) #¨ 2.55(’10) #¨ 3.35(’20) ) Growth in steel-intensive sector : global auto prodn 73 mn(’07) #¨ 86(
Slide 29: Global Steel Market
Global Steel Market 1 Global Steel Market to Maintain High Level of Production and Consumption 1 H ’07 Overview 2 H ’07 Outlook y Despite production increase, price remained y Expects ‘De-Coupling’ in global steel market -Dev’d countries: strong demand & low inventory high & inventory low as market
Slide 30: Global Steel Market: Steady Price
Global Steel Market 2 Steady Global Steel Price as Market Enters into a Seasonal Upturn Regional HRC Spot Price (in U$/T) Soft market continues while import increase despite of inventory drop Midwest : 694(Sept.’06) #¨ 595(Dec) #¨ 562(Feb.’07) #¨ 639(April) #¨ 617(May) #¨ 584(June) Turning soft as i
Slide 31: Global Steel Market Outlook
Global Steel Market Outlook Upturn Expected in 4Q after Swift Decrease during Summer (WSD, Jun.’07) Global HRc Export Price Forecast (U$) $675~700 700 (early ’08) $610 z Steel demand up $596 (’06.6) (’07.3) z Scrap price up 600 z Low consumer inv. $571 z US HR mkt recover (’07.6) $515~540 z China ex
Slide 32: China Steel Industry Trend
China Steel Industry Trend Domestic Price Weak due to Stronger Export Regulation by Government y Export to slow due to tax rebate cut & export license control - Tax rebate reduction (Apr.’07) : HR, Plate, Wire, etc 8% #¨ 0%, CR, GI, STS, etc 11% #¨ 5% - License control (May.’07) : HR, Plate, Long Pr
Slide 33: Domestic Steel Industry
Domestic Steel Industry Market to Recover as Demand Industries(Auto,ship,equipment,etc) Remain Strong Domestic steel supply & demand (in thousand tons) ’06 ’07 YoY(%) 1H 1H Consumption 24,220 49,634 26,390 52,547 5.9% Production 27,811 57,239 29,954 60,729 6.1% Import 5,417 10,591 6,053 11,614 9.7%
Slide 34: Agenda
Agenda 1 2Q ’07 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2007 Business Plan
Slide 35: 2007 Business Plan
2007 Business Plan (in million tons, tr KRW) 2006 2007 (%) Consolidated POSCO Consolidated POSCO Consolidated POSCO Crude Steel 31.2 30.1 32.6 30.8 4.5% 2.3% Production Sales Volume 30.9 28.5 31.9 29.3 3.2% 2.8% Revenue 25.8 20.0 32.2 22.7 24.8% 13.5% Operating 4.4 3.9 5.4 4.6 22.7% 17.9% Income Inv