POSCO Holdings Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Third quarter revenues and operating profits were similar to the second quarter, but steel prices fell more than anticipated. Battery materials faced key raw material price declines.
• Strategic alliance with JSW Group in India: MOU signed for integrated steel mill, rechargeable battery materials, and renewable energy. Discussions on LFP-type EV battery materials.
• POSCO Argentina Brine Lithium Phase 1 plant completed, with initial production of lithium hydroxide. Phase 2 to be completed by next year. POSCO Lithium plant production ramp-up ahead of schedule.
• POSCO International invested in Black Rock Mining for 60,000 tons of battery grade flake graphite. Restructuring program: sold low-margin assets and non-core assets, freeing up KRW625.4 billion cash by end of September.

Segment Performance

• Steel Segment: Operating profit was KRW466 billion, down KRW31 billion from the previous quarter. POSCO's operating profit was KRW438 billion, but sluggish steel demand in China and deterioration in Chinese subsidies affected results. Infrastructure segment had operating profit KRW449 billion, up KRW20 billion. POSCO International's profit improved due to high power generation. WTP products (high-end steel) make up 32% of sales.
• Battery Materials (Future M): Sales increased slightly, but anode active material sales volume was lower and cathode material had losses. POSCO Pillar lithium solution reflected initial production costs.

Guidance

• Fourth quarter raw material prices expected to decline further, production sales volumes to increase slightly. Profit in the fourth quarter is expected to be in line with the third quarter, but the sales environment remains challenging.
• Aim to advance normalization of lithium production, secure key mineral acids, and participate in lithium project negotiations in Chile (Altoandinos project) and others (Maricunga Salt, hard rock-based lithium projects).

Risks

• Sluggish market causing delayed cost recovery in steel and battery materials.
• Price declines in lithium hydroxide and challenges in cost recovery.
• Potential conflicts in joint ventures, oversupply concerns in the India market, and impact of Chinese steel products on antidumping issues.

Question and Answer

• Q: Regarding steel market price negotiations in automobiles and shipbuilding, impact of Chinese stimulus package.

A: Mixed signals, half-year contracts, Chinese stimulus led to price rebound then decline.

• Q: On nonessential assets and underperforming businesses restructuring.

A: Restructuring on schedule, profits outweigh losses.

• Q: Investment in India, blast furnace vs hydrogen, location, Adani, carbon neutrality.

A: 50-50 JV, blast furnace initially, working with local partner, MOU with Adani canceled, advanced technologies for carbon neutrality.

• Q: India demand-supply, overseas penetration, Chinese steel products antidumping.

A: India demand growing, focus on high-end products, plans for US and Southeast Asia, responding to AD filings.

• Q: Steel market recovery, CapEx for India project, PMH feedstock, silicon solution clients.

A: CapEx manageable, PMH feedstock phased, silicon solution in negotiations for certification.

• Q: India JV shareholding, production process, carbon neutrality calculation, lithium breakeven.

A: 50-50 BOD, production process not finalized, carbon emissions considered globally, lithium breakeven early stages, but high-quality brine gives confidence.