005490.KS

• Overall Financial Performance

  • Despite macro headwinds including intensified energy supply risk from the Middle East conflict and Korean won depreciation, POSCO Holdings maintained a rising profit trend, with all core segments (steel, RBM, energy) recording QoQ profit gains.
  • The Argentina lithium business achieved its first ever quarterly profit, pulling the entire RBM segment into surplus after 8 consecutive quarters of losses.

• Strategic Growth Projects & New Business Initiatives

  • Signed an investment agreement with Australia's Mineral Resources for a lithium joint venture, planned for establishment by October 2026; signed a DLE demonstration plant cooperation contract with Anson Resources, scheduled to come online in 2027.
  • POSCO Future M is recalibrating Pohang NCM cathode active material (CAM) lines for LFP production, targeting commercial readiness by January 2027; CNP New Materials (JV with Fino and CNGR) began construction of a new LFP plant, targeting commercial production by end-2027.
  • Completed the 100% owned POSCO Air Solutions high-purity rare gas plant in Gwangyang in June 2026; the plant will meet chip industry rare gas demand once product certification is complete.
  • Signed a rare earth partnership agreement with U.S.-based ReElement Technologies in May 2026, with a total project cost of $200 million targeting commercial production in 2028.
  • Completed Gwangyang's 2.5 million tonne electric arc furnace (EAF) in June 2026; early operations will mix blast furnace molten iron and EAF scrap to produce general purpose steel, with ongoing development to produce high-grade automotive and electrical steel to comply with CBAM and other environmental regulations. Construction of the HyREX demonstration plant has also commenced.

• Restructuring & Capital Efficiency

  • Completed 12 restructuring projects in the first half of 2026, generating KRW 475.4 billion in incremental cash, highlighted by the full divestment of loss-making Chinese steel operations (PZSS, QPSS, STS processing center).
  • The company targets KRW 3.5 trillion in total proceeds from restructuring of underperforming and non-core assets by 2028, to improve long-term performance and capital efficiency.

• Safety Management

  • A fatality occurred at construction affiliate POSCO E&C in June 2026; management is conducting a full group-wide safety assessment of 33 affiliates across 4 core areas with global provider dss+, and will finalize risk rankings and corrective action plans by October 2026.

• Steel Segment: Management expects POSCO's profitability to continue improving quarter-over-quarter in Q3 2026. After completing the major hot rolling mill overhaul, no significant maintenance shutdowns are planned, so the company targets maximum crude steel production of ~9 million tonnes for Q3. The domestic steel market, which has suffered from poor profitability since 2024, is showing early signs of stabilization.
• Lithium Segment: Q3 2026 will see a temporary production slowdown at POSCO Argentina due to seasonal winter reduction in pond evaporation in the Southern Hemisphere, plus planned LP dryer equipment replacement during the off-season. Full operation will resume in Q4 2026, when long-term supply agreements for certified lithium products will kick in; certified products command a ~10% price premium over uncertified goods, so Q4 profits are expected to meaningfully exceed Q2 levels. POSCO Pilbara Lithium Solutions will face continued profit pressure in the second half of 2026 due to unfavorable spodumene-lithium hydroxide price spreads. Expansion of Argentine brine lithium to 100,000 tonnes annually via Phase 3 and 4 will complete a pre-feasibility study by end-2026, with a final investment decision (FID) targeted for end-2027; hard rock lithium expansion decisions will also be made by end-2027 based on market conditions. Long-term profitability projections already price in expected lithium price declines from new Australian mine production.
• Overall Capital Return: The company's guiding principle is that 10% of net proceeds from non-core affiliate equity divestments (projected at KRW 3.5 trillion total, equal to ~KRW 350 billion for shareholder returns) will be allocated to shareholder returns, offsetting expected annual dividend reductions of ~KRW 80 billion from sold stakes. Management projects that new growth assets (primarily lithium) will generate enough incremental profit within 4 years to cover the dividend gap, so shareholder returns will remain stable long-term.

Consolidated revenue for Q2 2026 was KRW 19.3 trillion, a KRW 1.4 trillion quarter-over-quarter (QoQ) increase. Consolidated operating profit (OP) was KRW 819 billion, a 16% QoQ rise, with EBITDA of KRW 1.9 trillion. CapEx for Q2 was KRW 2 trillion, bringing first half total CapEx to KRW 3.7 trillion.

• Steel: POSCO (domestic steel) reported OP of KRW 274 billion, a KRW 61 billion QoQ increase, with an operating margin of 2.9%. Crude steel production and product sales rose QoQ; average carbon steel selling price increased from KRW 920,000/tonne in Q1 to KRW 962,000/tonne in Q2. Domestic sales share increased to 55.5% from ~51% in prior years. Major overseas subsidiaries remained broadly stable, with the divested Zhangjiagang China operation excluded from consolidation starting this quarter. This segment contributed ~33.5% of total consolidated operating profit.
• Rechargeable Battery Materials (RBM): The segment swung to an operating surplus of KRW 41 billion in Q2, its first profit in 9 quarters. POSCO Argentina (brine lithium) achieved its first ever operating surplus with OP of KRW 11 billion, on sales volume up 160% QoQ and revenue up 290% QoQ. POSCO Pilbara Lithium Solutions (hard rock lithium) had Q2 revenue of KRW 102 billion (up QoQ) and reduced operating losses to ~KRW 1 billion. POSCO Future M reported an OP margin of 3.9%, a 1.6 percentage point QoQ improvement, with small profits in energy materials. POSCO HY Clean Metal operated at nearly 100% utilization and maintained steady monthly profit gains. This segment contributed ~5% of total consolidated operating profit.
• Infrastructure (POSCO International): The segment recorded its highest ever quarterly operating profit, with 22% QoQ profit growth, driven by higher natural gas prices and FX gains at Myanmar and Senex gas fields, plus newly acquired Indonesian nickel production. One-off divestment profits from completed sales of PZSS and Chinese steel subsidiaries were booked in this quarter's net profit. This segment contributed ~55% of total consolidated operating profit.
• POSCO E&C: Reported Q2 OP of KRW 44 billion, bringing first half OP to KRW 97 billion, marking a continued recovery from the KRW 452 billion temporary deficit recorded in 2025. This segment contributed ~5.4% of total consolidated operating profit.

• Macro and Market Risks: Intensified energy supply risk from the ongoing Middle East conflict has increased energy and logistics cost volatility; raw material costs rose ~6% QoQ in Q2 2026, and FX depreciation has created additional cost pressure. New Australian lithium mine expansion could lower lithium prices, squeezing profitability for hard rock lithium operations. Chinese steel industry overcapacity and production adjustments continue to create global market headwinds.
• Trade Risks: The EU's new import quota system for steel will reduce POSCO's allowed export volume, and new AD and tariff investigations on Korean steel products by Japan and the EU create trade uncertainty. Trade barriers may require sales volume rebalancing across markets.
• Operational Risks: Seasonal winter conditions in Argentina will create temporary Q3 2026 production declines for POSCO lithium. The carbon-reduced steel market for EAF-produced product is still in an early stage, with no global pricing standard, so near-term EAF profitability will depend on market development. A workplace fatality at POSCO E&C revealed gaps in group-wide safety management, requiring costly upgrades and additional oversight.
• Project Uncertainty: Major expansion projects in lithium, rare earths, and new steel capacity depend on market conditions, regulatory approvals, and technology development, with final investment decisions pending for multiple large projects.

Q: How will POSCO adjust steel pricing for key end markets (autos, shipbuilding, home electronics) in H2 2026, and how will it respond to new EU steel import quotas? What is the profitability outlook for Indonesian PTKP Phase 1, and what are Phase 2 plans?

A: Management will phase in cost increases gradually rather than implementing rapid price hikes. For formula-priced automotive steel, cost volatility from oil price hikes will be gradually incorporated into H2 prices; for shipbuilding, strong demand allows full pass-through of cost increases; home electronics prices will remain conservative with partial cost pass-through. For EU quotas, POSCO expects a more favorable outcome than competitors via government negotiations, and will shift sales to higher-margin products while using trade frameworks to advocate for favorable terms; EU accounts for 10-15% of POSCO's total exports. PTKP Phase 1 is now profitable and generates positive cash flow, having recovered ~90% of invested CapEx via EBITDA. Phase 2 will target the under-supplied Southeast Asian automotive steel sheet market, with a final construction timing decision still pending.

Q: What are the long-term profitability outlooks for brine and hard rock lithium, what is the progress on the rare earth business, and how will POSCO address growing long products demand from data center construction?

A: At long-term lithium price projections of ~$30,000 per tonne, brine lithium projects can achieve ~80% operating margins after depreciation, with expected lithium price declines from new Australian mines already incorporated into projections. For hard rock lithium, lower spodumene prices would actually improve profitability, which is currently squeezed by high spodumene input costs. For rare earths, POSCO is planning joint ventures with partners to source raw materials from the U.S. and Southeast Asia, and is internalizing separation and refining technology via in-house R&D and external partnerships. For growing data center construction demand, POSCO expects higher demand for thick plate structural steel, PosMAC building products, and electrical steel, and is developing systematic product offerings to capture this new demand.

Q: When will final decisions be made on lithium expansion (Argentina Phase 3/4, hard rock), and what is the framework for shareholder returns from non-core asset divestment?

A: Argentina's Phase 3 and 4 expansion (to 100,000 tonnes total annual production) will focus on lithium carbonate rather than lithium hydroxide; a pre-feasibility study will be completed by end-2026, with a final investment decision (FID) by end-2027. Hard rock lithium expansion decisions will also be made by end-2027, based on market conditions, client demand, and partner input. For shareholder returns, 10% of all divestment proceeds will be allocated to additional shareholder returns, with 90% going to new growth CapEx. This 10% allocation will offset annual dividend cuts from divested affiliate stakes, and management projects that new growth profits (primarily from lithium) will cover the dividend gap within 4 years, so long-term shareholder returns will remain stable.

Q: How does the Gwangyang EAF project factor into Q3 2026 profitability projections, and when will it become profitable?

A: Q3 2026 profitability guidance already includes all expected costs from the newly started Gwangyang EAF operation. Currently, utilization is low, and the market for carbon-reduced steel is still in its early stages. POSCO is currently conducting test supplies to global OEM clients to verify product quality, and plans to ramp up utilization starting in 2027. Once utilization increases and the market for low-carbon steel develops a price premium, the EAF project will achieve target profitability.