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CEO Forum··· Focusing on securing the world-best earning power in the steel sector and developing its own future growth technologies

Date
Mar. 30, 2017
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  • - CEO Kwon announces a new mid-term strategy··· pursuing a balance between the steel and non-steel businesses, and between domestic and overseas businesses.
    - Aiming for a consolidated operating profit of KRW 5 trillion in 2019··· investing KRW 2.5 trillion in future growth businesses over the next three years
    - The preliminary earnings report for 1Q 2017 is announced··· Its consolidated sales are expected to reach KRW 14.6 trillion, and its operating profit KRW 1.2 trillion.

    POSCO announced a new mid-term strategy including a plan to maintain the world-best earning power in the steel business, and develop future growth businesses based on its own technologies and differentiated competencies. At the CEO Forum held in Yeouido on March 30, CEO Ohjoon Kwon announced a new mid-term strategy in preparation for the global proliferation of protectionism,

    POSCO announced a new mid-term strategy including a plan to maintain the world-best earning power in the steel business, and develop future growth businesses based on its own technologies and differentiated competencies.

     

    ▶ CEO Kwon announces a new mid-term strategy and the preliminary earnings report for 1Q at the CEO Forum that was held in Yeouido on March 30.

     

    At the CEO Forum held in Yeouido on March 30, CEO Ohjoon Kwon announced a new mid-term strategy in preparation for the global proliferation of protectionism, stiffer competition in the global steel industry, and the accelerating paradigm shift in all industries, and promised to create a new 50-year history of success for POSCO.

     

    The key components of POSCO's new mid-term strategy are strengthening the steel business based on its own technologies, improving the profitability of its non-steel business, pursuing future growth based on differentiated competencies, and smartization of group businesses. If the new mid-term strategy is implemented by the end of 2019, its consolidated operating profit, which amounted to KRW 2.8 trillion last year, is expected to increase to KRW 5 trillion, and its sales from the future growth businesses will reach KRW 11.2 trillion by 2025.

     

    According to this strategy, POSCO, featuring the world's best competitiveness, is planning to further expand its distance ahead of its competitors in the steel business by producing and selling highest-quality products based on its own technologies, e.g. World Premium (WP). The WP product sales expansion strategy, which has been pursued since Kwon's inauguration as CEO of POSCO, has been highly successful: WP products' share of sales increased to 50% last year.

     

    In addition, POSCO will name those WP products which have excellent marketability and profitability ‘World Premium Plus Products,' and continuously increase their share of sales and profitability.

     

    As for future growth areas, POSCO will work hard to mass-produce energy storage materials such as lithium and nickel based on its proprietary technologies, e.g. the technology for extracting lithium directly from saline water or recycled secondary batteries, and the nickel smelting technology using low-grade nickel ores.

     

    Its magnesium sheet business based on the wide-body product manufacturing technology , which is expected to be applied to luxury cars, and its titanium business, which plans to localize aerospace materials in 2019, are also regarded as key future growth businesses. POSCO is also planning to increase its sales from future growth businesses to KRW 11.2 trillion in 2025 by expanding its natural gas storage business and overseas IPP (Independent Power Producer) business, and push ahead with its new and renewable energy business. To this end, it will invest KRW 2.5 trillion over the next three years.

     

    Aside from this, POSCO will increase its operating profit, which was KRW 600 billion a year, to KRW 1.5 trillion by restructuring its non-steel businesses which have not been very profitable, such as trading and infrastructure, and place more focus on its highly profitable businesses. In addition, with regard to smartization of group businesses, it is planning to involve all of its main group affiliates, such as POSCO E&C, POSCO Energy and POSCO ICT, and establish a new group-level business platform, including smart factory, smart building & city and smart energy, and explore new business opportunities.

     

    ▶ CEO Kwon stated that POSCO should write a new 50-year history of success by reinforcing the steel business based on its proprietary technologies, improving the profitability of its non-steel business, pursuing future growth based on differentiated competencies, and smartization of group businesses.

     

    CEO Kwon said that the company was successfully restructured in the past three years, and recovered the world-best earning power of its steel business, and it led to a robust financial structure and the enhanced confidence of its employees. With the start of his second term of office, he announced the new mid-term strategy because now, a year before the 50th anniversary of POSCO, is the best time to prepare for another 50 years of success.

     

    In 2014, when Kwon was inaugurated as CEO of POSCO, there were many negative factors both at home and abroad, e.g. the increasing global oversupply of steel and sluggish industrial demand. However, POSCO successfully recovered a double-digit operating margin by reducing costs by KRW 1 trillion and carrying out 126 strong cases of restructuring projects, and regained financial health, i.e. recording the lowest debt ratio in its history. However, new investments in the future growth sector shrunk due to the efforts to redress the overinvestment in the past, and its non-steel business also saw its profitability decline slightly as POSCO E&C and POSCO Energy recorded losses last year.

     

    POSCO is planning to create a balance between its steel and non-steel businesses, and between domestic and overseas businesses after successfully implementing its new mid-term strategy. The company will also find ways to transform itself into a flexible and smart enterprise by adding software to its existing hardware-driven business areas.

     

    Meanwhile, according to the 1Q preliminary earnings announcement on March 30, POSCO's separate sales and operating profit increased YoY by 21% and 27% respectively to KRW 6.99 trillion and KRW 740 billion. The consolidated sales and operating profit are forecast to increase YoY by 17% and 82% respectively to KRW 14.6 trillion and KRW 1.2 trillion.

     

    POSCO's separate operating margin slightly decreased from the fourth quarter of 2016, but rebounded to 10% or so in the first quarter of 2017, and POSCO E&C is also expected to become profitable. The operating profit of POSCO Daewoo and POSCO C&C also increased, and the operating loss of the integrated steel mill in Indonesia and POSCO SS VINA decreased, leading the increase of the overall operating profit.

     

    With regard to the recent investigation by the Supreme Prosecutors' Office, CEO Kwon apologized to shareholders and citizens for causing them anxiety although the management did their best to minimize damage to corporate values by making rational decisions. He emphasized that he would actively reform management by eradicating collusive links between politicians and businessmen and fostering prospective leaders to prevent the recurrence of such an incident, and thus transform POSCO into a company placing high importance on shareholder values and a global exemplary company trusted by stakeholders.



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