POSCO : 2018 Earnings Release - Q&A Script

2017 POSCO Earnings Release

Q&A Summary

January 24, 2018

Global and Domestic Steel Market

Globally, major countries including China and Japan will see a continuously strong price trend. In the domestic market, major demand industries will pick up this year. Especially, shipbuilding sector will recover from long-lasted depression. We will pursue price increase mainly led by shipbuilding plate while flexibly responding to the market fluctuation.

2018 Performance Guidance (POSCO & Subsidiaries)

Overall, we aim higher earnings both on a parent and consolidated level. We do not see any sign of concerns about a company or segment. In overseas steel, especially POSCO SS-VINA is expected to show a turnaround.

Raw Material Outlook

Iron ore price will soften from 2Q 2018. The issue lies in that the price gap between high grade and low grade ores is widening. Since last year, we have tried to increase use of low grade ore to minimize the cost rise. Coking coal has surged to U$ 260/ton since the end of last year until recently. After 1Q 2018 when tight supply is forecast due to the weather condition, the price will weaken from 2Q. As a whole, raw material prices this year will be slightly down from last year.

Restructuring

Three-year business restructuring efforts are finalized. From now, we will focus on streamlining of each company by relocating resources from low-profit divisions to profitable ones.

Growth Business

As business restructuring comes to an end, the management discusses about next growth businesses. One of them includes material business such as lithium. We have a target to build a 20,000 ton lithium production capacity by 2020. While we continue to search for the most suitable brine in Argentina, we also look to lithium hard-rock ore in Australia for raw material as we have a proven technology to extract lithium from both material types, and securing brines would not be sufficient for lithium production to meet the global demand.

CAPEX

CAPEX result in 2017 was lowered from early year business plan due to some delayed projects in overseas steel and growth business. Additional CAPEX is allocated in energy storage material, smart factory and environmental expenses in 2018.

Dividend

POSCO has been maintaining a long-term stable cash dividend policy. If business conditions change, the Board of Directors may review new dividend policies, but as of now, we stick to the current scheme.