Chairman Kwon Oh-joon of POSCO.

POSCO has been overcoming the crisis with the strategy of sticking to its main business line.

This year, the steel maker plowing forward with a plan to overcome the crisis by merging or closing affiliates that are not doing well, cutting expenses and focusing on boosting sales of high-quality steel products.

Last year, the steel maker saw its net profit rise 15.7 percent YoY to 1.318 trillion won, borrowing costs fall to 5.7 trillion won, and its consolidated debt rate decrease to 78.4 percent, the lowest since 2010.

This year, the steel maker plans to cut expenses and affiliates by more than 1 trillion won by saving money on purchase costs, and expanding the reuse rate of the installations to cut the investments in new installations, among others.

POSCO said it’s on track to achieve the targets in a restructuring plan it announced last year. Early last year, POSCO set out to restructure its 19 affiliates, but the number rose to 34 including Postech, Pos High Metal and New Iltech. In addition, the steel maker restructured the asset of 12 of its affiliates, including POSCON’s sale of its stakes, to bring the number of restructuring cases to 46 altogether, saving some 2.1 trillion won in financial expenses last year, including borrowing costs.

This year, the steel maker and its affiliates have been undertaking 54 cases of restructuring, including 25 cases among its affiliates and 19 cases of asset restructuring among its affiliates. Six restructuring cases were completed in the first quarter, including three cases of financial restructuring.

Officials of POSCO said the financial restructuring this year will have a total effect valued at some 4 trillion won when completed.

The steel maker’s highest value-added product, steel sheets for autos, came to around 10 percent of total steel sheets produced last year at 8.7 million tons. The steel maker plans to sell more than 9 million tons of steel sheets for autos this year and 10 million tons in 2018. To meet its ambitious target, POSCO has been expanding its steel sheet production facilities to boost the production of those steel products.

POSCO has been at work since 1995 to refurbish the cold-rolled steel production facilities at its Gwangyang Steel Complex in Gwangyang, South Jeolla Province, to focus on the production of the steel sheets for autos, totaling 2.2 million tons annually.

This year, POSCO will focus on the restructuring of its operational set up, cutting general expenses, profit, and other existing operational structures to the point of breaking them apart and rebuilding them to enhance the steel maker’s original business of steel making, POSCO officials said.

POSCO Chairman Kwon Oh-joon said the steel giant has been consistent in closing unprofitable business units as part of a strategy to overcome financial difficulties.

In line with that perspective, POSCO said it plans to cut the number of affiliates in half by 2017, while shedding 30 percent of its none-core overseas businesses.

Kwon also stressed that the company will take additional measures if necessary.

While POSCO has seen some progress in restructuring, the pace had been missing earlier targets. Data from the Financial Supervisory Service (FSS) showed that POSCO only sold its advertisement unit Poreka during the third quarter of 2015.

Six other affiliates were separated, as either losing control after POSCO Plantec was put on a workout program, or because special purpose companies such as EPC Investment were closed.

POSCO refuted claims that its restructuring efforts were slow, saying that "The company's restructuring process is ongoing according to schedule."

POSCO said it sees another tough year for 2016 and some market watchers say the government will minimize its intervention in the steel company.

A view of POSCO Steel Complex in Gwangyang, South Jeolla Province.(Photos: POSCO)