Slide 1: POSCO 1Q 2008 Operating Performance
POSCO 1Q 2008 Operating Performance April 11, 2008
Slide 2: Agenda
1 1Q ‘08 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2008 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 auditing
Slide 3: Production/Sales
Production/Sales Production & sales increased due to completion of major expansion & upgrades Crude Steel: increased due to more pig iron(496Kt) & improved crude steel capacity and efficiency ’07 major upgrades: FINEX(+1.5mt), Gwangyang #3BF revamping(+670Kt), Pohang dephosophrizer(+800Kt) Finished
Slide 4: Sales by Product
Sales by Product Sales of strategic products continue to grow Sales of Strategic Products (in thousand tons) ’07.1Q 2Q 3Q 4Q ‘08.1Q Automotive Steel 1,341 1,490 1,537 1,304 1,580 High-function CR 1,107 1,173 1,203 1,165 1,283 TMCP 364 307 335 300 375 (in thousand tons) 2007 2007 2008 1Q 4Q 1Q YoY Qo
Slide 5: Income Summary
Income Summary Price Trend ‘07.1Q ‘07.2Q ‘07.3Q ‘07.4Q ‘08.1Q Nickel price (LME/U$) 41,44048,05530,20529,218 28,957 STS price (300s/in thousand won)3,865 4,828 4,294 3,888 3,716 (in billion KRW, %) 20072007 2008 1Q4Q 1Q YoY QoQ Revenue 5,7015,434 6,066 6.4% 11.6% CoGs 4,270 4,260 4,506 5.5% 5.8% Ope
Slide 6: Summarized Income Statement (POSCO)
Summarized Income Statement (POSCO) (in billion KRW) 2007 2007 2008 1Q 4Q 1Q QoQ Revenue 5,701 5,434 6,066 11.6% Gross income 1,431 1,174 1,560 32.9% (Gross Margin) (25.1%) (21.6%) (25.7%) - S G & A 318 298 287 3.7% Operating Income 1,113 875 1,274 45.6% (OP Margin) (19.5%) (16.1%) (21.0%) - Non-op
Slide 7: Financial Structure
Financial Structure Investment increased for domestic facility and overseas projects Key investments: Pohang new steelmaking, Gwanyang plate & Mexico CGL Assets maintain last year’s level due to lower inventory with increase in sales (in billion KRW) 2007 2007 2008 1Q 4Q 1Q YoY QoQ Assets 27,016 30,
Slide 8: Summarized Balance Sheets (POSCO)
Summarized Balanced Sheets (POSCO) (in billion KRW) 2007 2007 2008 1Q 4Q 1Q QoQ Current Assets 7,530 8,768 9,013 2.8% Cash equivalent assets* 2,838 3,566 3,722 4.4% Notes receivable 1,791 1,896 2,050 8.1% Inventory 2,7393,221 3,065 4.8% Long-term Assets 19,48621,725 21,429 1.4% Investment Securities
Slide 9: Financial Ratios
Financial Ratios EBITDA & EBITDA Margin (bn KRW,%) 1,741 1,673 1,516 1,501 1,340 28.8 28.8 28.7 26.3 24.6 ’07.1Q 2Q 3Q 4Q ’08.1Q Return on Equity (%) 18.7 18.1 17.3 16.8 15.9 ’07.1Q 2Q 3Q 4Q ’08.1Q Liabilities-to-Equity Ratio (%) 24.4 24.4 24.2 24.0 23.7 ’07.1Q 2Q 3Q 4Q ’08.1Q Share Price & Market C
Slide 10: Consolidated Financial Summary
Consolidated Financial Summary Sales & op. income up due to sales increase in steel sector Asset up due to addition of new overseas processing centers & more investment No. Consolidated Subsidiaries ’06/E ‘07/E ‘08.1Q Total 69 85 98 Domestic 23 26 31 Overseas 46 59 67 Consolidated Crude Steel Prodn.
Slide 11: Consolidated Financial Summary: Income by Sectors
Consolidated Financial Summary Income Summary by Sectors (in billion won) 2007 2007 2008 1Q 4Q 1Q QoQ Steel 8,741 8,608 9,371 8.9% E & C 7531,406 883 37.2% Energy 126 181 186 2.8% Sales IT & Others 121 173 113 34.7% Total 9,74110,368 10,5531.8% Consolidated 7,742 8,210 8,477 3.3% Steel 1,265 945 1,4
Slide 12: Consolidated Financial Summary: Financial Structures by Sectors
Consolidated Financial Summary Financial Structures by Sectors (in billion won) Asset Liability Equity 2007/E 2008.1Q 2007/E 2008.1Q 2007/E 2008.1Q Steel 37,416 38,480 9,457 9,985 27,959 28,495 E & C 3,434 4,326 1,867 2,702 1,567 1,624 Energy 1,007 1,052 484 534 523 518 IT & Others 796 893 330 378 4
Slide 13: Operating Performances of Listed Subsidiaries
Operating Performances of Listed Subsidiaries POSCO C&C (Colored/Coated steel) (bn KRW) ’07.1Q 2Q 3Q 4Q ’08.1Q Sales 154.3 178.0 166.7 178.6 196.3 OP income 2.7 2.6 4.4 4.9 9.4 Net income 1.9 3.3 3.6 0.5 4.9 Share Price Trend 27,500 24,400 22,200won 17,750 24,000 Market Cap. KRW 133.2bn ’07.3/E 6/E
Slide 14: Activities & Accomplishments
1 1Q ’08 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2008 Business Plan 14
Slide 15: Progress on India Project
Progress on India Project Securing land & mining license in process Set land demarcation (Feb), forest diversion (gov’t land) & compensation plan negotiation in process Hearings for prior applicants in proces, to be recommended to Centre upon completion Major Progress Land / Plant Construction Plant
Slide 16: FINEX Operation Status & Plans
FINEX ® Operation Status & Plans Achieved economics of large-scale blast furnace y Achieved target production and coal ratio. To secure engineering tech. for overseas process Operation Status 4400 900 Target : 4,300 T/D (1.5 MT) (T/D) 4100 850 (kg/THM) Production 3800 800 Ratio 3500 750 Coal Prod Co
Slide 17: Facility Upgrades for Premium Products
Facility Upgrades for Premium Products Heavy Thick Massive Plate* Facility Summary - - Construction : May.’06 ~ Jan.’08 (20months) - Details : roughing mill capacity increase, new heating facility & plate cutter (gas) Benefits - Cap. increase to meet domestic premium plate shortage (4.7Mt by 2008) -
Slide 18: Secure Technology Leadership
Secure Technology Leadership Record productivity via tech. development . Pohang #3BF : new world record pig iron productivity (2.95t/d/m 3 ) - Prove stabilized & high productivity in large scale BFs Gwangyang #1HR : 100mn ton production in shortest time (single plant base) - Improved productivity by
Slide 19: Expand Foundation for Leadership in Strategic Product
Expand foundation for Leadership in Strategic Product Global EVI* Forum Summary - - Date : Jan. 29 ~ Jan. 31 ‘08 - Purpose : Expand global base for auto sheets & Strengthen customer EVI partnership - Attendants : 340 persons from domestic/foreign auto & parts makers Results - - Expanded supply reque
Slide 20: Expand Global Marketing Infrastructure
Expand Global Marketing Infrastructure Complete Vietnam Processing Center POSCO-VHPC - - Location : Nearby Ho Chi Min, Vietnam - - Product : CR 100Kt/yr - Equity : POSCO 80%, Metal One 20% Benefits - Early establishment of sales network ahead of CR Mill completion scheduled in 2H ’09 - Strengthen ma
Slide 21: Accelerate Global Market Penetration
Accelerate Global Market Penetration Complete Tin Plate Plant, China Introduction - - Construction : Dec. ’06 ~ Feb. ’08 - - Location : Hebei, economic development zone - - Produce : Tin Plates 250Kt/yr - - Equity : Jung Wol mat’l 66%, POSCO 34% Benefits - Early presence in demand growth expected ar
Slide 22: Key Management Activities
Key Management Activities 40th Annual General Meeting Dividend: KRW 10,000/share (include interim) - Dividend Yield : 1.7%, Payout Ratio : 20.5% Dividend Payment History (won) 10,000 8,000 8,000 8,000 6,000 2,500 ’02 ’03 ’04 ’05 ’06 ’07 Ranked 2nd in Competitiveness WSD announces world best steel ma
Slide 23: Key Management Activities: Price Increase and Cost Savings
Key Management Activities Product Price Increase Background - Global high prices due to raw material price hike & tight market condition - Biased market situation due to wide price gap between import & domestic prices Selling Price Trend 785 (in thousand won) 700 710 665 665 520 580 530 590 ~’08.2 ‘
Slide 24: Key Management Activities (Subsidiaries)
Key Management Activities (Subsidiaries) Steel Equity investment in Molybden development - - Investment : USD 170mn (20% equity stake) - - Stake : POSCAN (17%), Samjung P&A (3%) - Benefits : secure stable supply of Molybden, core subsidiary raw material for premium products • Posrec: transfer/operat
Slide 25: Key Management Activities (Subsidiaries): Energy and IT
Key Management Activities (Subsidiaries) Energy (Posco Power) Fuel cell energy biz to accelerate - - Develop SOFC 2kW stack (Dec.’07) - - Operation scheduled in ’08 (total 4unit, 7.5MW) - - Complete 50MW/yr capacity plant (Aug.’08) Construct 100MW/yr cap. plant by ’10 Power plant expansion business
Slide 26: Demonstrating Corporate Citizenship
Demonstrating Corporate Citizenship • Best Korean Ethic Management (Feb.’08) (Hankook Ilbo, Study of Ethic Management) - Corporate transparency, Value & Innovative management, Social responsibility, HR management Good CEO qualifications & Strategic management • Most Respected Corporation (Feb.’08) (
Slide 27: Long Term Vision for 2018
Long Term Vision for 2018 Strategic Target Become a global leader targeting global big 3, top 3 Seek new growth engine through fostering strategic business Strategic Direction 3-S Strategy : Size Up, Speed Up, Synergy Up Growth (Size Up) Global capacity of 50mt+, with focus on overseas growth Secure
Slide 28: Long Term Vision for 2018: Growth (Size Up)
Long Term Vision for 2018 Growth (Size Up) : Leap to become a global player 50 Million Ton + India-Middle East The 2 nd Growth Base Asia’s Business Hub Emerge as regional leader Independent America Biz Deintegration between S.A & N.A Emerging Europe Middle Japan China Korea East Africa India Vietnam
Slide 29: Long Term Vision for 2018: Competitiveness (Speed Up)
Long Term Vision for 2018 Competitiveness (Speed Up) : Strengthen competitiveness to survive any mkt. condition Strengthen Steel Technology Leadership · Promote World Best, World First Tech. — W/B: 62unit/2Mt(’08) 90/3.2(’12) — W/F: 10unit/0.6Mt(’08) 10/1.4(’12) Increase international cooperation an
Slide 30: Long Term Vision for 2018: Group Management (Synergy Up)
Long Term Vision for 2018 Group Management (Synergy Up): Maximize group value with subsidiary competitiveness Target Foster new growth engine · Strengthen current core growth business & seek for new business Strategy · Strengthen synergy & establish group management system New Growth Engine Subsidia
Slide 31: Long Term Vision for 2018: Consolidated Sales Target
Long Term Vision for 2018 Consolidated sales of KRW 100 trillion (steel 70, non-steel 30) by year 2018 - AS-Was(’98) Steel 12 Non-steel 2 Consolidated Sales 14 10% Average Year Growth AS-IS(’08) 33 5 38 10% Average Year Growth To-Be(2018) 70 30 100 (in trillion won) 31
Slide 32: Steel Industry Environment
1 1Q ’08 Operating Performance 2 Activities & Accomplishments 3 Steel Industry Environment 4 2008 Business Plan 32
Slide 33: Global Steel Market Outlook
Global Steel Market Outlook 1 Crude prod’n keep rises due to growth in emerging mkt. & resource export countries Global demand continues mainly from China and emerging market despite slow N.A demand Overcapacity less likely as demand growth exceeds production growth Demand (Nominal) (in million tons
Slide 34: Global Steel Market Outlook: Prices
Global Steel Market Outlook 2 Prices remain strong as raw material prices rise & market enters seasonal upturn Regional HRC Spot Price (U$/T) Price move upward as local mills raise prices & inventory drops Midwest: 639(Mar. ‘07) 584(Jun) 584(Sept) 634(Dec) 739(Jan.’08) 882(Mar) Price hike due to sea
Slide 35: China Steel Industry Trend
China Steel Industry Trend Price maintain high due to strong demand industry and high raw material price Rapid growth continues as Jan.~Feb. auto prod’n/sales each increased by 11.3%, 19.9% from ‘07 Production surplus continue to drop - Supply/demand trend (mn tons, avg/month) Prod’n Consump’n Diffe
Slide 36: Domestic Steel Industry
Domestic Steel Industry Favorable market to continue as demand industry (auto, ship, etc.) remain strong Domestic steel supply & demand (in thousand won) ‘07 ‘08 YoY(%) 1Q 1Q (e) Consumption 13,037 55,108 14,570 57,686 4.7% Production 14,792 61,617 15,949 64,373 4.5% Import 2,930 12,628 3,428 13,481
Slide 37: Raw Material
Raw Material Tight market continues due to natural disasters & high demand Iron Ore • Tight market continues - -Increased iron ore imports from China - -Poor infrastructure of Australian suppliers • Negotiation partially finished - -Fine ore : +65% agreed with Vale (Feb.15 ’08) - -Pellets : +86.7% a
Slide 38: Stainless Steel Market
Stainless Steel Market Demand recovery in Asia delays, recovery expected from 2Q Recent STS Market Trend Asia - - Gradual domestic recovery on CR, uptrend price - - Visible recovery delays, despite low inventory in Asia (China, Japan, etc) Expects recovery after 2Q Europe - - Quick recovery with dem
Slide 39: 2008 Business Plan
11Q ’08 Operating Performance 2Activities & Accomplishments 3Steel Industry Environment 4 2008 Business Plan 39
Slide 40: 2008 Business Plan
2008 Business Plan (in million ton, tr KRW) 2007 2008(f) (%) Consolidated POSCO Consolidated POSCO Consolidated POSCO Crude Steel 32.8 31.1 35.2 33.4 7.3% 7.4% Production Sales Volume 32.2 29.6 34.7 31.9 7.8% 7.8% Revenue 31.6 22.2 37.7 27.9 19.3% 25.7% Operating 4.9 4.3 5.6 4.8 14.3% 11.6% Income I
Slide 41: POSCO 1Q 2008 Operating Performance
POSCO 1Q 2008 Operating Performance April 11, 2008