Posco Holdings Inc. · KRX:005490
Posco — Q1 2006 Earnings Presentation
31 slides from Posco's earnings presentation, Apr 12, 2006
Slide 1: 1Q 2006 Operating Performance
1Q 2006 Operating Performance April 11, 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 first quarter of 2006. Certain contents in this presentation are subject to change during the course of auditing process.
Slide 3: Agenda
I. 1Q.'06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan ^
Slide 4: Production and Sales
Productions/Sales (in thousand tons) Production and sales dropped due to rationalizations of major facilities and weak market condition Exports increased through expanding sales to high price market such as US, and exploring alternative market such as Middle East Inventory reduced to normal level th
Slide 5: Sales by Product
Sales by Product (in thousand tons) Rationalization of HR mill and maintenance of Electrical Steel and STS mills lead to reduction of related products Production and sales of premium strategic products increased, enhancing product mix ? Strategic Product Ratio : 47.7%(1Q.05) ? 48.4%(4Q.05) ? 53.7%(1
Slide 6: Income Summary
Income Summary (in billion KRW) ? Average sales price 2Q.05 3Q.05 4Q.05 1Q.06 - Carbon Steel 671 ^ 665 ^ 617 ^ 560 (thousand KRW) - Stainless Steel 2,167 ^ 1,972 ^ 1,799 ^ 1,755 ( ^ ) 2005 2005 2006 1Q 1Q 4Q 2006 1Q Quarter-on-Quarter Quarter-on-Quarter Revenue Revenue 5,656 5,203 4,664 ^539 ^10.4%
Slide 7: Financial Structure
Financial Structure (in billion KRW) * Changes in interest bearing debt - Debt repayment at maturity (Samurai Bond): 30 billion JPY (Mar.8,'06) - Issuance of domestic debentures : 300 billion KRW (Mar.21,'06) Fixed Assets increased due to #1 FINEX & #6 CGL investments and acquisition of additional P
Slide 8: Financial Ratios and Share Price
21.3 15.6 25.5 '02 '03 '04 '05 1Q.06 Liability-to-Equity Ratio (%) 42.1 52.3 32.6 Equity Ratio (%) 70.4 65.7 75.4 24.0 80.6 27.2 '02 '03 '04 '05 1Q.06 '02 '03 '04 '05 1Q.06 Operating Margin (%) Financial Ratios 16.9 19.6 83.6 Share Price (KRW) '05.1/4 '05.2/4 '05.3/4 '05.4/4 1Q.06 (Quarterly closing
Slide 9: Key Management Initiatives
^ I. 1Q 06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan
Slide 10: Technology Leadership: Strip Casting
Technology Leadership : Strip Casting 1 Technology Leadership : Strip Casting 1 Summary of Strip Casting Demo Plant - Production Capacity : 600 thousand tons/yr, Produced steel type : STS 304 - Investment Benefit : Cost reduction in STS manufacturing & Production increase of using surplus capacity p
Slide 11: Strip Casting Process Outline
Technology Leadership : Strip Casting 2 Process Outline - Replacing conventional process of continuous casting ^ reheating ^ rolling, with a new process that directly produces HRC from molten steel Strip Casting 1.6 ~ 3. 0 mm 70 m Black Coil Conventional 200 mm 2.7 ~ 6 mm 500 m 32 mm 70 m Black Coil
Slide 12: Strip Casting Economic and Environmental Benefit
Distinctive economic and environmental benefit compared to the conventional process (Casting + HR) Conventional Process Processing Cost 0 50 100 poStrip Investment Cost 60% 65% Economic Benefit Conventional Process poStrip 0 50 100 14% 7% 30% SO2 NOx CO2 Environmental Benefit Technology Leadership :
Slide 13: India Project
India Project India Project Meeting with President of India (Feb. 8) "We ask for active cooperation from Indian government in Steel Mill Construction" Steel Mill Construction" Steel Mill Construction" Steel Mill Construction" Steel Mill Construction" Steel Mill Construction" Steel Mill Construction"
Slide 14: Major Domestic Capital Investments
Major domestic capital investments Pohang # 3BF Refurbishment (2nd) Period : '06.3.7 ~ 5.8 (63days) Impact - Expansion of BF : additional 450K tons/yr (3,050 ^ 3,500K tons/yr) - Increase in BF top gas pressure recovery turbine, longevity of life expanded ? Targeting world record in repair time by em
Slide 15: Strategic Product Service Specialization
Strategic Product Service Specialization Completion of tailored Auto parts factory ? Hot Press Forming - Pressing at over-900^C, followed by rapid cooling, manufacturing 150~200kg-bearing auto parts (1mn/yr) Hydroforming of STS for ventilators - Manufacture with high pressure to produce complicate p
Slide 16: New Demand and New Market Development
New Demand · New Market Development Upgrading Demand for Steel Plates Application of TMCP* on Ilsan bridge (first time in Korea) - Reduce manufacturing cost by 22%, simplifying the structure · Improved weldability and yield point compared to commodity grade steel, reducing use of steel ? Implication
Slide 17: Investment in Raw Materials and Energy
Investment in Raw Materials & Energy Nickel mining · refining joint-corporation ? Impact - Stable and economical supply of Nickel (30K tons/yr) ? Joint-venture - Partner : SMSP (New Caledonian iron ore exporter) - For 30yrs (Share: SMSP 51%, POSCO 49%) ? Business Plan - '06.4 : Establishment of join
Slide 18: 38th AGM of Shareholders
38th AGM of Shareholders Separation of Representative Director & BoD Chairman - Reinforcing independence of BoD & monitoring of management ? Abolition of stock option system - Settle negative view on stock option & lay foundation to review alternative Establishment of "CEO Candidate Recommendation C
Slide 19: Cost Competitiveness
Cost Competitiveness Cross-Functional Reduction Initiatives between Operation and Purchasing - - Mega-Y project to reduce raw material cost in Cokes & iron making · develop blending technology to use more low cost raw material - - Steel making sector cost reduction task force · Use of low cost raw m
Slide 20: Practice of Corporate Citizenship
Practice of Corporate Citizenship ? "1st Edison Innovation Award"(Feb.'06) from the Edison Preservation Foundation - Innovative products and entrepreneurial spirits (esp. FINEX) ? "Transparent Management Award"(Feb.'06) from the Korea Employers Federation - Fair and open, socially responsible manage
Slide 21: Steel Industry Environment
^ I. 1Q 06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan
Slide 22: Global Steel Market Outlook
? Price to be stable through 1H.06 - US & Japanese mills to control production and inventory to drop with production cut China steel price, biggest uncertainty - Regional price gaps to narrow as exports rise from China to EU & US - Oversupply of commodity steel from in China remains '06. Global Stee
Slide 23: Regional Steel Prices
ASEAN (Unit: U$/T) Price rise continues as domestic demand and export to high price market increase Guangzhou : 344(Nov.'05) ^ 334(Dec.) ^ 350(Jan.'06) ^ 383(Feb.) ^ 416(Mar.) Remains highest-price region due to low operating rate and supply/demand gap Midwest : 617(Nov.'05) ^ 617(Dec.) ^ 606(Jan.'0
Slide 24: China Steel Industry 1
Market recovery due to stable economic growth, increase in export, and shortage in domestic supply China Steel Industry 1 Steady growth in major flat product consuming industries (POSCO-China,'06.1) < 2006 Domestic Production Outlook in Key Industries > 26.3% 8.3% 6,000 6,500 10.7% 13.9% 5,616 6,400
Slide 25: China Steel Market Trends
Uncertain of price stability as new facilities begin operation 2003 2004 2005 2006(F) Crude Steel Production Crude Steel Production 222 281 349 419 Steel Product Production Steel Product Production 236 296 361 434 Import Export Import Export 38 10 32 17 25 20 18 32 Net Export ^28 ^15 ^5 14 Consumpti
Slide 26: Domestic Steel Industry 1
Stable growth as production of flat increase and demand for long product recovers '05 '06 YoY(%) 1H '05 1H '06 YoY(%) Domestic Consumption 11,513 22,789 11,923 23,357 2.5% Production 14,986 29,872 15,659 30,890 3.4% Import 2,186 4,336 2,104 4,260 ^1.8% Export 5,659 11,554 5,839 11,793 2.1% < Domesti
Slide 27: Domestic Steel Industry 2
Growth continue for major industries as demand for appliance and construction pick up 6.5% 5.6% 3,696 3,903 '05(E) '06(F) 14.2% 3.3% 17,299 17,868 '05(E) '06(F) Shipbuilding (thousand GT) Automobile (thousand vehicles) High oil price leading to increased orders for LNG carriers and high value-added
Slide 28: Raw Materials: Coal, Iron Ore, Nickel, Scrap
Coal & Iron Ore Nickel & Scrap Coal - Price decrease from supply increase (91% contract signed) ^ Hard Coking coal -9%, Semi-soft -30%, PCI coal -34% Iron Ore - Upside & Downside risk co-exist ^ Increased consumption in China and supplier's initial investment burden for expansion ^ Slowing growth ra
Slide 29: 2006 Business Plan
^ I. 1Q 06 Operating Performance II. Key Management Initiatives III. Steel Industry Environment IV. 2006 Business Plan
Slide 30: 2006 Business Plan
The data above represents the Company's internal objectives, and should not be used as a basis for investment decisions 2006 Business Plan 2005 2006(F) Crude Steel Production (mm tons) 30.5 30.1 - Consolidated Production 31.4 31.2 Sales Volume (mm tons) 28.7 29.2 Revenue (KRW tr) 21.7 19~20 - Consol
Slide 31: 1Q 2006 Operating Performance
1Q 2006 Operating Performance April 11, 2006