– CEO Ohjoon Kwon holds investors forum to explain mid-term strategy
– Drastic restructuring and increased efficiency to enhance corporate value and restore credit rating
POSCO will be modifying its mid-term strategy in order to achieve “growth with substantiality”. On May 19 at the Korea Exchange in Yeouido, Seoul, POSCO had its first investors forum since CEO Kwon was installed as the new CEO. On this day, new management strategies to restore financial soundness based on a focus on the core steel business, mega growth, and management restructuring for efficiency were announced.
According to the new management strategies, POSCO has plans to strengthen its EBITDA to 8.5 trillion won with Credit A ratings by 2016, to be at the global top standards for financial soundness. At the same time, POSCO has plans to cultivate its source material and clean energy businesses to promote mega growth.
In order to achieve its mid-term management goals, POSCO plans to change from its former ‘Own & Compete’ based M&A strategy to a ‘Connect & Collaborate’ based strategic partnership, with plans to seek a diverse range of domestic and international companies.
POSCO’s business structure will be reformed so that the strategy that previously focused on expanding steel, materials, energy industries will now be focused on the core steel business and promote mega-growth engines in the two sectors of source material and clean energy. The projects nominated for focused development are source material which encompasses lithium, nickel and clean energy which includes fuel cells and clean coal businesses.
Other fields can be subject to subsequent business restructuring if it will increase the company value and meet the following principles:
1) First, evaluate whether the entity is recognized as top tier in the domestic market or is seen as essential towards strengthening the competitiveness of the core steel business
2) Second, even if it is a blue-chip affiliate, consider pushing ahead with the sale or IPO of shares that exceed what is necessary to maintain right of management
3) Third, plan internal restructuring to strengthen efficiency based on business consolidation, divisions or other adjustments
The priority will be placed on restructuring that has the most impact and can relatively be done easily. Although specific plans for restructuring have not been confirmed yet, entities that have been selected will promptly push ahead to show results.
The reorganization that emphasizes the steel business will select seven strategic industries including automotive, marine and energy to grow sales and expand the sales percentage of profitable, premium products. In addition, in order to turnaround overseas business to surplus by 2016, POSCO plans to develop high added-value products in a timely matter to meet market demands and also strengthen solution marketing offerings.
The energy business plans to grow the domestic coal power plant market and target emerging markets for overseas growth while also fostering the fuel cell industry. It also has plans to devote initial investment towards securing technologies for the source material business to strengthen competitiveness. Business entities including E&C, Trading, and ICT will focus on core competencies that will provide profitability and growth for the entire company.
If POSCO’s new management strategies run smoothly, POSCO can expect 32 trillion KRW in sales with 3 trillion KRW in operating profit, 9% operating profit margin, on a stand-alone basis. On a consolidated basis, that would mean 78 trillion KRW in sales with 5 trillion KRW in operating profit, 6% operating profit margin. Debt-to-equity ratio can be expected to be lower as well.
At the investors forum, CEO Kwon announced, “The strategy paradigm will change in order for POSCO to have stable growth and we will focus on strengthening competitiveness and improving profitability.” Moreover, he said, “With drastic restructuring focused on internal efficiency, we will give back to shareholders, investors, customers, partners, employees, local communities and all those who support and love POSCO.”
Growth laid on internal strength will allow POSCO to achieve the new vision of ‘POSCO the Great!’