Posco Holdings Inc (PKX) 2010 Q4 法說會逐字稿

Good morning, good afternoon, ladies and gentlemen. Welcome to the Macquarie conference call. Our chairperson today is Miss Christina Lee. Christina, please begin your call and I will be standing by for the question and answer session. Thank you.

Hello, everyone. Thank you for dialing in to the POSCO's 2010 earnings conference call. My name is Christina Lee from Macquarie and here we have Mr. Young Hoon Lee, Senior Vice President in charge of Finance Department at POSCO; Mr. Min-Young Noh, Group Leader, of our Finance Planning and IR; and POSCO's IR team with us. Mr. Lee will provide us quite a quick presentation first on 2010 results, and then we will take questions.

Good morning. Thank you for participating in POSCO's 2010 earnings conference call. This is Young-Hoon Lee, Senior Vice President in charge of the Finance Department of POSCO.

I would like to first give a summary of POSCO's 2010 results. I will keep my statement short so we can go quickly into the Q&A session. Please refer to the presentation posted on our website for the details.

In 2010, thanks to fast recovery in steel demand in Asia and successful acquisition of Daewoo International, POSCO's consolidated revenue reached KRW60 trillion and operating income increased 48% to KRW5.7 trillion. Operating margin however fell slightly to 9.5%, largely because of the nature of trading business whose margin is lower than manufacturing business.

In non-consolidated accounts, POSCO's revenue went up by 21% to KRW32.6 trillion and operating income increased by 60% to KRW5 trillion with operating margin of 15.5%.

Crude steel production increased 14% to 33.7m tons and sales volume rose 11% to 31.5m tons.

On capital structure, as we continue our steel and steel-related growth investment, consolidated total assets grew to KRW68 trillion. But rising costs tied up much cash as working capital and growth investment required financing so leverage went up and total liabilities to equity ratio was 83%.

I will highlight some key activities and accomplishments from 2010. You may refer to page 11 to 17 of our presentation for further details.

First, we expanded capacity and strengthened marketing capabilities. We successfully had groundbreaking of POSCO's first overseas integrated steel mill construction in Indonesia, established stronger downstream platforms in key overseas regions and expanded domestic capacity.

Second, we made further advances in our technological and cost leadership. We continued to invest in research and development. Our R&D spending was 1.6% of total revenue. We saved cost by an additional KRW1.3 trillion this year, by finding new solutions and improving processes. And we continued through investment in raw materials to be more self-sufficient and more competitive.

Finally, we secured and set foundation for new growth engine. We successfully acquired Daewoo International and Sungjin Geotech, and made key investment in technology development in order to become a comprehensive material provider.

Looking ahead, global steel outlook looks healthy with demand from rising in most countries. Steel demand in Russia -- India, Russia, China and the US will increase by 14%, 11%, 5% (sic -- see presentation) and 6% respectively from 2010.

In the domestic market, auto industry is expected to set new record in production and shipbuilding industry, who received more new orders in 2010 than expected will continue to demand a steady flow of plates. Although domestic supply will increase as the steelmakers expanded their capacity, much of the additional volume will be replacing import steel rather than disrupting the market.

Moving on to our business plan for 2011. By fully ramping up new and expanded facilities and continuing to lead the steel market, we plan to produce 36m tons of crude steel and sell 34m tons of finished product.

We will strengthen our technology and cost leadership, provide visible evidences of progress in overseas and complete consolidated management structure to maximize synergies.

Our financial targets for 2011 are as follows. Consolidated revenue of KRW63 trillion (sic -- see presentation) with POSCO alone target of KRW36 trillion. And for continuing growth total consolidated investment of KRW9.8 trillion, among this amount POSCO being KRW7.3 trillion.

This concludes my opening remarks. Thank you for listening. Now we are open to your questions.

Thank you. (Operator Instructions).

Okay, if there's no further questions from here, then we'll probably wrap it up here. If you have any more questions, please contact POSCO's IR team or Macquarie. Thank you very much, everyone, for participating. Thank you.