POSCO Chairman Kwon Oh-joon disclosed his plan to nearly double POSCO’s operating profit in a consolidated financial statement to up to 5 trillion won during his three-year term. POSCO chalked up 2.8443 trillion won in operating profit last year. His plan indicates a determinations to increase the steelmaker’s operating profit more than 2 trillion won during his term. The plan is in line with a “new mid-term strategy” to usher in “an era of 5 trillion won in annual operating profit” by finding a profit equilibrium both in the steel business and non-steel business sectors, as well as both Korean and overseas businesses. In a consolidated financial statement, POSCO posted 14.6 trillion won and 740 billion won in sales and operating profit in the first quarter of the year, respectively. The figures each represent a 17 percent surge and an 82 percent jump over the same quarter of last year.
Chairman Kwon made his group’s priority strategies and future vision known during an investor relations session held at the NH Investment & Security Co.’s auditorium on March 30. Also participating in the session were Chief Operating Officer Oh In-hwan and other group executives. POSCO Daewoo Corp. President Kim Young-sang and other subsidiary CEOs also took part.
Chairman Kwon’s mid-term strategy can be summed up as four things upgrading the steel business; improving the profitability of the non-steel business; pursuing future growth in the way differentiating itself for its rivals; and group subsidiaries’ “smartization.” “When the strategy will be wrapped up in 2019, operating profit (of the group) in a consolidated financial statement will surge from about 2.8 trillion won in the end of 2016 to 5 trillion won,” Kwon said. He went on to say that his group is expected to see sales in the “future growth sector” expand to 11.2 trillion won by 2025.
In the steel business, Chairman Kwon put forward the “World Premium Plus” strategy targeting world premium plus products, whose marketability and profitability surpass those of world premium products earning high profits, developed by POSCO in its differentiation scheme. The rate of operating profits of the “world premium” products stands at 18 percent, while the figure for world premium plus products will amount to 25 percent. POSCO plans to raise revenues from the selling of the whole word premium product portfolio from 16 million tons, a 47 percent portion, to 20 million tons, a 60 percent share, by 2019 by expanding world premium plus products, a POSCO official said.
Chairman Kwon said his company plans to dramatically improve the competitiveness of such non-steel segments as trade, construction and energy, which is deemed to fall behind that of the steel sector.
“The non-steel business will see its operating profit jump from about 600 billion won annually to 1.5 trillion by 2019 by restructuring business portfolios focusing on high profits,” he said. POSCO E&C Senior Executive Vice President Lee Woo-gyu said his company will no longer land low-profit orders and narrow strategic countries from 15 to five with a focus on the Southeast Asian market.
POSCO has set, as key future growth segments, secondary battery materials industries, including lithium and nickel, and weight lightening industries, including magnesium and titanium. POSCO is also prioritizing the foreign independent power plant market. POSCO will aggressively implement the mass production of such energy storage materials as lithium and nickel by making the most of its own proprietary technologies, said Chairman Kwon, adding that the magnesium plate for deluxe cars, and the titanium, an aviation material to be localized by 2019 will be key future growth projects.
The business group plans to invest 2.5 trillion won over three years from this year to secure its future growth engines. The group’s “smartization” project is one of the key business areas Chairman Kwon has stressed since he was officially reelected as POSCO chairman recently. POSCO plans to build its own smart platform by taking its cue from such key global smart companies as GE and Siemens and spreading it to group subsidiaries. Explaining the background of the announcement of the new mid-term strategy, Chairman Kwon said with the celebrations of the 50th anniversary slated for next year, now is the right time to prepare for future growth to “write a new success story for another 50 years.”