Posco Holdings Inc (PKX) 2010 Q1 法說會逐字稿

Good day, everyone, you are currently -- we will now begin our conference. I would like to turn the conference over to our moderator, Mr. Sung Yop Chung, of Daiwa Capital Markets Korea.

Thank you, good morning. This is SY Chung, the Korea steel analyst from Daiwa Capital Markets in Korea. We are hosting POSCO's first quarter '10 earnings conference call for you this morning. We have Mr. Young-Hoon Lee, the Head of Finance Department, as well as Senior Vice President for the firm, as well as the Investors Relations team. Let me hand the line over to Mr. Young-Hoon Lee. Mr. Lee?

Okay, thank you. Good morning. Welcome to POSCO's first quarter earnings conference call. This is Young-Hoon Lee, Senior Vice President in charge of Finance Department. I hope by now you have seen our earnings presentation posted on our website. And you must have many questions, so I'll make this statement brief and go quickly into Q&A session.

Thanks to strong demand from major steel-consuming industries such as auto and home appliance sector, our first quarter operating performance continued to show an outstanding result. In the first quarter we were able to maintain full production and produce 8.3m tons of crude steel. There was a slight drop from last quarter, but this was mainly due to less number of days in the first quarter and the scheduled maintenance on number two and number three hot rolling mills.

Sales volume was 7.5m tons, 5.9% decrease from last quarter. Demand from major steel-consuming industries such as auto and home appliance remained solid, resulting cold-rolled steel and stainless steel sales to increase consistently from last year.

Total revenue was about KRW7 trillion, in line with the drop in sales volume. However with the improving condition of global steel markets, average export prices increased offsetting the impact from volume decrease. At the same time cost reduction activities throughout all process continued. As a result, we maintained high profitability with the operating income of KRW1.4 trillion and operating margin over 20%.

Balance sheet remains sound as well. Asset size grew over KRW40 trillion as capacity expansion investment continued. But at the same time liability to equity ratio dropped to 28.9% with a relatively unchanged debt level.

You will find our key activities and accomplishments in more detail on our presentation. But to highlight some, we continued to expand capacity and further enhance market base. We made overseas investment to lay foundation for global growth. We continued raw material investment aiming for higher self-sufficiency. We invested in new growth and green business. Last but least we continued cost saving activities and stayed active in securing technology leadership. With all these strong aspects, World Steel Dynamics ranked POSCO at first position to be the most competitive steel company in the world again.

Now I will talk about the steel market. Crude steel production and utilization ratio of steel mills recovered and steel price surged. In China, steel price continued to rise in anticipation of raw material price hike and a strong demand from major steel consuming industries. Looking ahead, business environment seems quite promising. Steel demand is expected to stay solid both in developed and developing countries. According to World Steel Dynamics, steel demand is forecasted to grow more than 10% globally and about 5% to 8% in China.

However, uncertainties still remain. As you are aware, there seems to be a big shift in dynamics of raw material pricing negotiations. With surging raw material price driven by tight supply and rising demand, suppliers are demanding shorter term pricing system. Because of this it's taking longer time to reach an equitable agreement between suppliers and steelmakers. As of today coal price are only partly agreed depending on the various type and grade. For iron ore, major suppliers are asking for the quarter index pricing. We'll try our best to complete the negotiation in right price with right conditions.

Putting all these things together, we revised our business plan slightly. Crude steel production will be 34.5m tons, sales volume 32.4m tons, at the same level as we announced in the last quarter. Revenue will be KRW31.9 trillion and including allowance of KRW3 trillion, total investment amount will be KRW9 trillion.

I have to apologize again that there is no earning guidance this time. As I mentioned earlier, uncertainties such as raw material price still remain. Once these uncertainties get more clear and visible we will provide you with the number next time.

That concludes my opening remarks. Thank you for listening and we will now take your questions.

(Operator Instructions). There are no questions in the queue at this time. Mr. Chung, please proceed.

Okay, if there's no questions, thank you very much for joining our conference call and have a great day. Thank you.

That does conclude our conference for today. Thank you for everyone for joining us today.