6-K 1 d29179d6k.htm FORM 6-K FORM 6-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2020

Commission File Number: 1-13368

 

 

POSCO

(Translation of registrant’s name into English)

 

 

POSCO Center, 440 Teheran-ro, Gangnam-gu, Seoul, Korea, 06194

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F    ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):    ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):    ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


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POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-translated documents of POSCO’s Interim Report for the year 2020

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

      POSCO
      (Registrant)
Date: September 10, 2020     By  

/s/ Lim, Seung-Kyu

      (Signature)
      Name :  Lim, Seung-Kyu
      Title :  Executive Vice President


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Exhibit 99.1

 

LOGO

INTERIM REPORT

(From January 1, 2020 to June 30, 2020)

THIS IS AN ENGLISH TRANSLATION OF THE INTERIM REPORT ORIGINALLY PREPARED IN THE KOREAN LANGUAGE (IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION). THIS ENGLISH TRANSLATION IS NOT OFFICIAL AND IS PROVIDED FOR INFORMATION PURPOSES ONLY.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON BOTH CONSOLIDATED AND NON-CONSOLIDATED BASIS IN ACCORDANCE WITH THE KOREAN-INTERNATIONAL FINANCIAL REPORTING STANDARDS (K-IFRS) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.


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INTERIM REPORT

(From January 1, 2020 to June 30, 2020)

To:        Korean Financial Services Commission and Korea Exchange

 

/s/ Chang, In-Hwa

Chang, In-Hwa
President and Representative Director
POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si, Nam-gu, Gyungsangbuk-do, Korea

Telephone: +82-54-220-0114

 

/s/ Lim , Seung-Kyu

Lim, Seung Kyu
Executive Vice President
POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si, Nam-gu, Gyungsangbuk-do, Korea

Telephone: +82-2-3457-0114

 

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TABLE OF CONTENTS

 

I.   Overview    4
II.   Business    10
III.   Financial Statements    33
IV.   Corporate Governance and Company Affiliates    37

 

LOGO   Attachment:   Independent Auditors’ Review Report
(Consolidated and Separate)

 

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I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

The Company’s business scope is as follows:

 

Business

(1)   To manufacture, market, promote, sell and distribute iron, steel and rolled products;

(2)   To engage in harbor loading and unloading, transportation and warehousing businesses;

(3)   To engage in the management of professional athletic organizations;

(4)   To engage in the supply of gas and power generation as well as in the distribution business thereof and in the resources development business;

(5)   To engage in leasing of real estate and distribution businesses;

(6)   To engage in the supply of district heating business;

(7)   To engage in marine transportation, processing and sales of minerals within or outside of Korea;

(8)   To engage in educational service and other services related to business;

(9)   To engage in manufacture, process and sale of non-ferrous metal;

(10)  To engage in technology license sales and engineering business; and

(11)  To engage in all other conducts, activities or businesses which are related, directly or indirectly, to the attainment and continuation of the foregoing purposes

B. POSCO Enterprise Group

 

(1)

Name of the Enterprise Group: POSCO

 

(2)

Companies Belonging to the Enterprise Group

POSCO, POSCO CHEMICAL CO., LTD, POSCO INTERNATIONAL Corporation, POSCO COATED & COLOR STEEL Co., Ltd., POSCO ICT, POSCO M-TECH, Busan E&E Co., Ltd., Suncheon Eco Trans Co., Ltd., SNNC, eNtoB Corporation, UITrans LRT Co. Ltd., POSCO O&M Co., Ltd., POSCO Humans, POSCO ENGINEERING & CONSTRUCTION., LTD., POSCO Research Institute, POSCO A&C, TANCHEON E&E, Pohang Scrap Recycling Distribution Center Co., Ltd., POSCO NIPPON STEEL RHF JOINT VENTURE CO., Ltd., POSCO-Terminal Co., Ltd., POSCO ENERGY CO., LTD., PSC Energy Global Co., Ltd., Gale International Korea, LLC, POSCO Venture Capital Co., Ltd., Pohang Special Welding Co., Ltd., POSCO MITSUBISHI CARBON TECHNOLOGY, Samcheok Blue Power Co., Ltd. (By change of name from POSPower Co., Ltd), Songdo Posco family Housing, POSCO Group University, POSCO Research & Technology, Pohang Techno Valley PFV Corporation, Songdo Development PMC (Project Management Company) LLC., Korea Fuel-Cell, POSCO SPS

 

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(3) Related Laws and Regulations

The Korea Fair Trade Commission has designated POSCO as Enterprise Group subject to the limitations on Cross Shareholding and Debt Guarantee for Affiliates under the Monopoly Regulation and Fair Trade Act (the “MRFTA”).

LOGO Details

 

  (a)

Prohibition on Cross Shareholdings (Article 9 (1) of the MRFTA)

 

  (b)

Prohibition on Debt Guarantees for Affiliated Corporations (Article 10-2 of the MRFTA)

 

  (c)

Prohibition on Shareholding of Venture Capitals for Subsidiaries (Article 9 (3) of the MRFTA)

 

  (d)

Limitation of Voting Rights of Financial or Insurance Companies (Article 11 of the MRFTA)

 

  (e)

Resolution of the Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article11-2 of the MRFTA)

 

  (f)

Disclosure of Important Facts such as Unlisted Shares (Article 11-3 of the MRFTA)

 

  (g)

Disclosure of a corporate group (Article 11-4 of the MRFTA)

 

  (h)

Report on Status of Shareholding (Article 13 of the MRFTA)

2. Business Organization

A. Highlights of the Company’s Business Organization

(1) Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyeongsangbuk -do, Korea

(2) Steel Works and Offices

 

  (a)

Pohang Steel Works: 6262 Donghaean-ro (Dongchon-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

 

  (b)

Gwangyang Steel Works: 20-26 Pokposarang-gil (Geumho-dong), Gwangyang-si, Jeollanam-do, Korea

 

  (c)

Seoul Office: POSCO Center, 440 Teheran-ro (Daechi-dong), Gangnam-gu, Seoul, Korea

 

  (d)

Overseas Offices: For the purpose of supporting international business transactions, the Company operates six overseas offices as follows:

 

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United Arab Emirates(Dubai), Iran(Teheran), Brazil(Rio de Janeiro), Argentina(Jujuy), European Union(Germany), and Australia(Perth).

(3) Major Changes in the Board of Directors (as of March 27, 2020)

 

  (a)

Inside Directors

 

   

Re-appointment : Chang, In-Hwa (Representative Director, President), Chon, Jung-Son (Senior Executive Vice President), Kim, Hag-Dong (Senior Executive Vice President) and Jeong, Tak (Senior Executive Vice President)

 

  (b)

Outside Directors

 

   

Re-appointment : Chang, Seung-Wha

 

  (c)

Audit Committee Member

 

   

New member : Pahk, Heui-Jae (Outside director)

(4) Changes of the Major Shareholders of POSCO

 

  (a)

Since January 30, 2007, National Pension Service holds the largest number of common shares of POSCO.

 

  (b)

For further reference, please refer to the public disclosures of changes in common shares of the largest shareholder on Financial Supervisory Service website (http://dart.fss.or.kr) with the filing dates given below:

January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011, July 22, 2011, January 31, 2012, August 1, 2012, February 1, 2013, August 1, 2013, January 14, 2014, January 23, 2014, July 29, 2014,January 23, 2015, August 5, 2015, January 6, 2016, January 26, 2016, March 15, 2016, April 12, 2016, July 4, 2016, July 5, 2016, July 21, 2016, October 7, 2016, October 11, 2016, January 10, 2017, April 10, 2017, July 12, 2017, October 13, 2017, January 10, 2018, April 11, 2018, July 9, 2018, October 10, 2018, January 9, 2019, April 9, 2019, July 9, 2019, October 8, 2019, January 8, 2020, February 10, 2020, March 11, 2020, April 7, 2020, May 8, 2020, June 3, 2020, July 7, 2020, and August 6, 2020)

B. POSCO’s Merger, Acquisition and Handover of Businesses

(1) March 2016 : Small scale merger of POSHIMETAL Co., Ltd into POSCO

(2) May 2016 : Small scale merger of POSCO Green Gas Technology into POSCO

(3) January 2019 : Small scale merger of POSCO Processing & Service Co., Ltd into POSCO

(4) September 2019 : Small scale merger of By-Product Hydrogen Generation Business from POSCO ENERGY into POSCO after spin-off

 

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C. Major Changes in Production Facilities

Refer to the ‘II. Business (5. Production and Facilities)’

3. Equity Capital

A. New Issuance of Registered Common Stock

[None]

4. Other Information Regarding Shares

A. Total Number of Shares

 

     (As of June 30, 2020)  

Authorized Shares

   Issued Shares  

200,000,000

     87,186,835  

 

  LOGO

Currency of the Republic of Korea is Korean Won (“KRW”).

 

  LOGO

Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

 

                               (As of June 30, 2020)  

Method of Purchase

   Type    Beginning*      Increased      Decreased      Cancelled      Balance  

Direct

   Registered      7,071,194        —          —          —          7,071,194  

Trust Contract

   Common      —          358,953        —          —          358,953  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   Stock      7,071,194        358,953        —          —          7,430,147  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Beginning : January 1, 2020

5. Voting Rights

 

            (As of June 30, 2020)

Classification of Shares

   Number of Shares      Remarks

(1) Number of Issued Shares

     87,186,835      —  

(2) Shares without Voting Rights

     7,430,147      - Treasury stock: 7,071,194

     - Trust holding: 358,953

(3) Shares with Voting Rights

     79,756,688      —  

 

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6. Earnings and Dividends

 

                   (In millions of KRW)  
     2020.1H      2019      2018  

(Consolidated) Profit*

     435,675        1,835,087        1,690,612  

(Separate) Profit

     459,666        1,175,712        1,072,592  

Earnings per Share (Consolidated, KRW)

     5,400        22,823        20,911  

Cash Dividend Paid

     160,061        801,156        800,009  

Pay-out Ratio (Consolidated, %)

     36.7        43.7        47.3  

Dividend per Share (KRW)

     2,000        10,000        10,000  

Dividend Yield (%)

     1.1        4.1        4.1  

 

*

(Consolidated) Profit : Profit attributable to owners of the controlling company

7. Stock Prices and Trading Volumes

The stock prices and trading volumes of POSCO for the last 6 months are as follows.

A. The Korean Stock Market

 

                               (KRW/share, In thousands of shares)  
     January
2020
     February
2020
     March
2020
     April
2020
     May
2020
     June
2020
 

Common share

   Highest

Price

     247,000        224,000        197,000        201,500        184,500        203,000  
   Lowest

Price

     221,000        195,500        138,000        155,000        168,000        174,000  
   Average

Price

     235,600        213,725        167,705        171,200        175,763        188,614  

Trading volume

   Daily
highest
     584        538        1,020        994        899        1,149  
   Daily

lowest

     139        182        300        99        245        205  
   Monthly      5,297        5,886        11,691        10,230        9,060        9,582  

 

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B. New York Stock Exchange

 

                               (USD/ADS*, In thousands of ADS*)  
     January
2020
     February
2020
     March
2020
     April
2020
     May
2020
     June
2020
 

American Depositary Share (ADS)

   Highest

Price

     52.3        47.1        41.1        38.6        37.4        42.6  
   Lowest

Price

     44.4        40.2        26.7        31.1        34.3        37.0  
   Average

Price

     50.1        44.3        34.0        34.8        35.9        39.1  

Trading volume

   Daily
highest
     508      449      817      375      533      421
   Daily

lowest

     119      105      252      129      92      107
   Monthly      4,721      4,372      9,676      5,268      4,166      4,902

 

*

ADS : American Depositary Share representing one-fourth of one share of Common Stock

 

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II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Summary of Financial Status of Segment

 

                                 (In millions of KRW)  

Segment

   2020.1H      2019      2018  
   Sales      Operating
Income (Loss)
     Sales      Operating
Income (Loss)
     Sales      Operating
Income (Loss)
 

Steel

     13,479,418        308,755        32,078,45      2,786,517      32,358,009        4,536,318  

Trading

     10,016,612        242,814        22,157,131      542,724      22,407,717        383,934  

Engineering & Construction

     3,395,502        197,071        6,944,629      338,865      6,769,410        411,489  

Others

     1,375,826        124,327        3,186,635      200,749      3,442,641        210,859  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     28,267,367        872,967        64,366,848      3,868,855      64,977,777        5,542,600  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

2. Business Status of Segments

A. Steel

(1) Summary of Business

There are 69 consolidated companies in the steel segment, including 3 domestic companies including POSCO and POSCO C&C, and 65 overseas companies including POSCO (Zhangjiagang) Stainless Co., Ltd. in China and overseas processing centers. POSCO produces steel materials such as hot rolled, cold rolled and stainless steel at Pohang Works and Gwangyang Works. POSCO C&C is a company specializing in manufacturing surface-treated steel products, POSCO (Zhangjiagang) Stainless Co., Ltd., is a stainless steel sheet manufacturer and seller, and there are other overseas processing centers that process and sell steel materials.

 

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The steel industry is a fundamental industry that has taken pivotal roles in the national economic development since the 1970s by supplying basic steel materials to demanding industries such as automobiles, shipbuilding, home appliances, construction, etc. The steel industry is a capital and technology-intensive industry that requires enormous initial investments.

The Korean steel market is tariff-free, and especially within the Northeast Asian region, there is little difference in logistics costs among Korea, China and Japan, so it can be viewed as an open market.

All iron ore and coking coal that are the main raw materials for steel manufacturing, are imported. In order to secure stable raw materials sourcing, the company is continuously increasing purchases through raw material development investments by acquiring shares of overseas raw materials companies.

Environmental regulations for the steel industry are being strengthened. To protect the environment, POSCO has continuously invested in environmental facilities and has been actively responding to future environmental changes such as low-carbon and green growth by commercializing the world’s first eco-friendly steel manufacturing method, FINEX and so on.

In the steel industry, automobiles, shipbuilding, and construction are the main demand industries, and steel products are used as raw materials for these demand industries. In terms of sales, the proportion of domestic sale is 55% of total sales and export sales are around 45%, and by export region, the proportion of China, Southeast Asia, and Japan is high, in the first half of 2020. POSCO maintains order based production and sales system, and to secure stable sales, the proportion of direct sales to customers in domestic sales is maintained at about 60%.

The company will focus on the following management activities:

First, in the steel business, the company will operate flexible production and sales system that can minimize the impact of production cuts along with extreme cost reduction. Second, the POSCO Group businesses will pursue continuous business evolution and focus on core businesses. Third, the company will endeavor to create symbiotic values, the core of realizing the corporate citizenship management philosophy. Fourth, the company will create safe and pleasant workplaces and maintain sound labor-management culture to realize higher labor productivity compared to competitors.

(2) Market Share

 

 

                                 (Millions of Tons, %)  

Category

   2020.1H      2019      2018  
   Production      Market share      Production      Market share      Production      Market share  

Crude Steel Production

     32.9        100        71.4        100        72.5        100  

POSCO

     16.9        51.7        38.0        53.2        37.7        52.0  

Others

     15.7        48.3        33.4        46.7        34.8        48.0  

 

LOGO

Source: World Steel Association (www.worldsteel.org)

 

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B. Trading

(1) Market Share

 

            (Millions of US Dollars)  

Category

   2020.1H      2019.1H      Growth rate  

All Trading Companies in Korea

     240,642        271,148        -11.3

POSCO International Corp.

     2,563        3,265        -21.5

 

LOGO

Source: Korea International Trade Association

(2) Summary of Businesses

POSCO International and its consolidated subsidiaries engage in three major businesses; trading, energy and others. In addition, POSCO International maintains a global network of over 100 subsidiaries and branches in major overseas regions. In the case of the trading business, POSCO International has been actively developing and expanding new businesses in fields such as agro-commodities, LNG trading, and industrial materials based on the know-how accumulated over a long period of time in the traditional trading business and through its vast overseas networks. In the energy business, POSCO International conducts businesses such as natural gas and crude oil development, LNG infrastructure, natural resources and power generation infrastructure.

C. Engineering & Construction

POSCO E&C engages in primarily 4 businesses: construction, energy, civil engineering and plant. In the construction business, based on its know-how in the construction of skyscrapers and commercial complexes, POSCO E&C involves in a new city and private complex development projects. In the energy business, it involves in various power generation plant projects including renewable energy projects. The civil engineering business is about constructing expressways, railroads and bridges. Plant business is the construction of integrated steel mills, EPC projects and industrial plants.

D. Others

(1) POSCO ENERGY

POSCO ENERGY started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 1990’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand for electricity in Korea. POSCO ENERGY acquired the LNG terminal business from POSCO in 2019, providing an opportunity to expand the LNG value chain. The LNG terminal business operates stable business structure through businesses such as tank rental, small scale LNG business, and ship trial run. POSCO ENERGY plans to secure stable profit base through the expansion of the LNG terminal in the future and grow into a general energy company focused on gas and power.

 

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(2) POSCO ICT

Based on the competitiveness in ICT, POSCO ICT has expanded Smart Factory and provided IT solutions to POSCO and POSCO subsidiaries. POSCO ICT has expanded Smart Factory based on the world’s first continuous process platform “PosFrame” and next-generation production optimization system “MES 3.0”. POSCO ICT has been actively applying smart technology for strategic businesses in manufacturing, logistics, trade, and energy sectors, such as building MES at the POSCO CHEMICAL’s anode and cathode material factory, spreading the Smart Management of POSCO International, and spreading the Intelligent Power Plant of POSCO Energy in order to promote the digital transformation of POSCO subsidiaries and other businesses.

(3) POSCO CHEMICAL

POSCO CHEMICAL operates mainly 3 businesses: refractory, quicklime & chemical and energy material. In the refractory business, POSCO CHEMICAL produces and maintains refractories. In the quicklime & chemical business, POSCO CHEMICAL produces quicklime and chemical products such as coal tar and light oil. In the energy material business, POSCO CHEMICAL provides cathode and anode materials which are the main components for secondary cells: cathode, anode, electrolyte and separation membrane. Due to environment-friendly policy with less carbon emission worldwide, demands for Energy Storage System and Electric Vehicle are expected to grow continuously.

(4) POSCO M-TECH

POSCO M-TECH is a specialized supplier of steel products packaging and steel supplementary materials such as aluminum deoxidizers. In the case of steel products packaging, POSCO M-TECH continuously develops packaging automated molding machines and applies environment-friendly packaging materials. In addition, aluminum deoxidizers engage in primarily 3 types : Pellet, Mini-Pellet and Ingot. POSCO M-TECH has expanded the sales of aluminum deoxidizers in overseas markets.

 

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3. Key Products

A. Sales of Key Products (2020.1H)    

 

               (In hundred millions of KRW, %)  

Business Area

  

Item

  

Specific Use

   Total Sales     Ratio  

Steel

   Hot-rolled Product (HR)    Steel pipe, Shipbuilding, etc.      34,434     16.50  
   Cold-rolled Product (CR)    Automobile , Home appliances, etc.      64,101     30.72  
   Stainless Steel Products    Western tableware, etc.      45,506     21.81  
   Others    Plates, Wire rods, etc.      64,589     30.96  
   Gross Sum      208,630     100.00  
   Deduction of Internal Trade      (73,836  
        

 

 

   
   Sub Total      134,794  
        

 

 

   

Trading

   Steel, Metal      118,193     71.83  
   Chemical, Strategic Item, Energy      12,497     7.60  
   Others      33,847     20.57  
   Gross Sum      164,537     100.00  
   Deduction of Internal Trade      (64,371  
        

 

 

   
   Sub Total      100,166  
        

 

 

   

Engineering & Construction

   Domestic Construction    Architecture      22,869     58.29  
   Plant      6,983     17.80  
   Civil Engineering      2,740     6.98  
   Others      —       0.00  
   Overseas Construction      3,213     8.19  
   Owned Construction      2,150     5.48  
   Others      1,275     3.25  
   Gross Sum      39,231     100.00  
   Deduction of Internal Trade      (5,276  
        

 

 

   
   Sub Total      33,955  
        

 

 

   

Others

   Electricity Sales, etc.      26,921  
   Deduction of Internal Trade      (13,163  
        

 

 

   
   Sub Total      13,758  
        

 

 

   
  

Total Sum

     282,674  
        

 

 

   

 

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B. Price Movement Trends of Key Products

 

                (In thousands of KRW/ Tons, KRW/kWh)  

Business Area

   Products   2020.1H      2019      2018  

Steel

   Hot-rolled Product (HR)     631        695        707  
   Cold-rolled Product (CR)     769        800        807  

Others

   Electric Power     85        94        100  
   Refractory     990        1,073        1,073  
   Lime     108        111        108  

 

LOGO

Trade and Engineering & Construction businesses are not reflected on the table above due to difficulties in measuring the price movement trend.

LOGO

From the 1st quarter of the 49th term, price changes of the refractory product are calculated after excluding new refractory products

[Steel]

(1) Criteria for Calculation

 

  (a)

Subjects for Calculation: Unit prices of the standard hot-rolled product and cold-rolled product

 

  (b)

Calculation Method and Unit: The average price of each product based on its total sales including the freight during the given period.

(2) Factors of Price Changes

Since 2016, prices have continued to rise, but after a slight decline in 2019 as the domestic and overseas demand industry worsened, prices fell sharply due to COVID-19 in 2020.

[Others]

(1) Criteria for Calculation

 

  (a)

Electric Power = Price of electric power / Total amount of power generated

 

  (b)

Refractory and lime: Average sales price including shipping cost

 

15


Table of Contents

4. Major Raw Materials

A. Current Status of Major Raw Materials

 

                    (In hundred millions of KRW)

Business Area

  

Type of Purchase

  

Item

  

Specific Use

   Purchase Amount
(Portion, %)
  

Remarks

Steel    Raw Materials   

Materials for

Iron-making,

  

Iron Ore for Blast

Furnaces

   52,128 (58.1)    Iron Ore, Coal
      Sub-materials   

Sub-materials for

Iron-making,

Steelmaking

   17,236 (19.2)   

Iron Material,

Alloy Iron,

Non-ferrous Metal,

Limestone, etc.

      Stainless Steel Materials   

Key Materials for

STS Production

   20,377 (22.7)    Nickel, Ferrochrome,
STS Scrap Iron, etc.
Engineering & Construction    Raw Materials   

Ready-mixed

Concrete

   Construction of Structure    1,231 (21.1)   
     

Steel

Reinforcement

   Strengthening Concrete    977 (16.8)   
      Cable    Electricity Transfer    48 (0.8)   
      Steel Pile    Foundation of Structure    149 (2.6)   
      Others    Construction of Pipe and Structure etc.    3,417 (58.7)   
Others    Raw Materials    LNG    Material for Power Generation    4,508 (53.3)   
      Limestone    Production of Lime    418 (4.9)   
      Others    Engineering business etc.    3,528 (41.7)   

 

16


Table of Contents

B. Price Movement Trends of Major Raw Materials

 

                 (In thousands of KRW)  

Business Area

   Category    2020.1H      2019      2018  

Steel

   Iron Ore(per ton)      103        102        76  
   Coal(per ton)      165        207        228  
   Scrap Iron(per ton)      319        347        395  
   Nickel(per ton)      15,046        16,148        15,074  

Engineering & Construction

   Ready-mixed Concrete

(per m3)

     63        63        63  
   Steel Pile

(per m)

     136        136        146  
   Steel Reinforcement

(per kg)

     1        1        1  
   Cable

(per m)

     1        1        1  

Others

   LNG

(per ton)

     599        668        768  
   Lime

(per ton)

     20        20        19  

 

17


Table of Contents

[Steel]

LOGO Price Movement Trend of Major Raw Materials

 

(1) Iron Ore

 

                                                                    (In US Dollars/ Tons)  
     ’20.2Q      ’20.1Q      ’19.4Q      ’19.3Q      ’19.2Q      ’19.1Q      ’18.4Q      ’18.3Q      ’18.2Q      ’18.1Q      ’17.4Q      ’17.3Q  

Trend of International Benchmark Price (Free On Board, “FOB”)

     88        83        80        92        94        77        64        57        58        68        57        64  

 

(2) Coal

 

                                                                    (In US Dollars/ Tons)  
     ’20.2Q      ’20.1Q      ’19.4Q      ’19.3Q      ’19.2Q      ’19.1Q      ’18.4Q      ’18.3Q      ’18.2Q      ’18.1Q      ’17.4Q      ’17.3Q  

Trend of International Benchmark Price (FOB)

     118        155        140        161        203        206        221        188        190        229        204        189  

(3) Scrap Iron

 

                                                                    (In US Dollars/ Tons)  
     ’20.2Q      ’20.1Q      ’19.4Q      ’19.3Q      ’19.2Q      ’19.1Q      ’18.4Q      ’18.3Q      ’18.2Q      ’18.1Q      ’17.4Q      ’17.3Q  

Trend of Purchase Price (Cost and Freight, “CFR”)

     254        274        270        290        312        325        343        350        364        379        344        322  

(4) Nickel

 

   

’20.2Q

 

’20.1Q

 

’19.4Q

 

’19.3Q

 

’19.2Q

 

’19.1Q

 

’18.4Q

 

’18.3Q

 

’18.2Q

 

’18.1Q

 

’17.4Q

 

’17.3Q

   

Trend of London Metal Exchange ( “LME”) Cash Price

 

USD

5.54 /lb

USD

12,215/ton

 

USD

5.77 /lb

USD

12,723/ton

 

USD

7.01 /lb

USD

15,450/ton

 

USD

7.05 /lb

USD

15,540/ton

 

USD

5.56 /lb

USD

12,258/ton

 

USD

5.61 /lb

USD

12,369/ton

 

USD

5.22 /lb

USD

11,516/ton

 

USD

6.02 /lb

USD

13,266/ton

 

USD

6.56 /lb

USD

14,467/ton

 

USD

6.02 /lb

USD

13,276/ton

 

USD

5.25/lb

USD

11,584/ton

 

USD

4.78/lb

USD

10,528/ton

 

USD

4.18/lb

USD

9,225/ton

 

LOGO

LME : London Metal Exchange

 

18


Table of Contents

[Engineering and Construction]

(1) Criteria for Calculation

 

Products

  

Criteria for Calculation

Ready-mixed Concrete    Standard 25-210-15
Steel Pile    SPIRAL, 609.6, 12T, STP275, KS F 4602
Steel Reinforcement    High Tensile Deformed Bar SD400 D10mm
Cable    TFR-3, 0.6/1KV, 2.5SQ, 2core

[Others]

(1) Criteria for Calculation

<POSCO ENERGY>

LNG: The average price between LNG purchased from Korea Gas Corporation and LNG purchased directly from foreign suppliers

<POSCO CHEMICAL>

Refractory and lime: Purchase prices and transportation fees

 

19


Table of Contents

5. Production and Facilities

A. Production Capacity

[Steel]

 

                   (Thousands of Tons)  

Business Area

   Products      2020.1H      2019      2018  

Steel

     Crude Steel        22,829        47,534        47,590  

[Others]

 

     (Electric Power-MW per year, Lime-Thousands of Tons  per year)  

Business Area

   Products    2020.1H      2019      2018  

Power Generation

   Electric Power    Incheon      3,412        3,412        3,412  
      Gwangyang      —          284        284  
      Pohang      —          290        290  

Lime

   Lime      1,092        2,190        2,190  

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

 

                 (Thousands of Tons)  

Products

   2020.1H      2019      2018  

Crude Steel

     19,105      42,948      42,867

Products

   Hot-Rolled Steel      4,304      8,739      8,716
   Plate      3,536      7,191      7,432
   Wire Rod      1,300      2,756      2,867
   Pickled-Oiled Steel      1,075      2,967      2,946
   Cold-Rolled Products      3,023      7,416      8,551
   Coated Steel      2,910      6,526      7,163
   Electrical Steel      421      819      1,078
   Stainless Steel      1,860      3,850      3,978
   Others      2,264      5,761      5,903
     

 

 

    

 

 

    

 

 

 
   Total      20,694      46,025      48,634
     

 

 

    

 

 

    

 

 

 

 

LOGO

The amount of products is the aggregate amount of POSCO’s production and production of POSCO subsidiaries, which may include interested parties’ transactions.

 

20


Table of Contents

(2) Capacity Utilization Rate

 

                        (Thousands of Tons, %)  
     Company    Capacity      Production      Utilization Rate  

Crude Steel

   POSCO      20,229      16,859      83.3  

Production

   Zhangjiagang Pohang Stainless Steel Co., Ltd      550      485      88.1  
   PT.KRAKATAU POSCO      1,500      1,546      103.1  
   POSCO YAMATO VINA STEEL JOINT
STOCK COMPANY

(Former, SS VINA JOINT STOCK
COMPANY)

     275      215      78.1  
     

 

 

    

 

 

    

 

 

 
   Total      22,554      19,105      83.6  
     

 

 

    

 

 

    

 

 

 

 

LOGO

Trade and Engineering & Construction businesses are not reflected on the table due to difficulties in measuring capacity, production and utilization rate of such businesses.

 

LOGO

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY, formerly SS VINA JOINT STOCK COMPANY, had a production capacity of crude steel 1,100 thousand tons/year: section steel 550 thousand tons/year and reinforcing bar 550 thousand tons/year. However, after the exit of the reinforcing bar business in November 2019, the current crude steel production capacity is 550 thousand tons/year.

[Others]

(1) Production Result

 

                 (Gwh, Thousands of Tons)  

Business Area

  

Products

   2020.1H      2019      2018  

Power Generation

   Electric Power      5,859        15,928        15,297  

Lime

   Lime      1,111        2,542        2,511  

(2) Capacity Utilization Rate

 

          (Electric Power-hr, Lime-Thousands of Tons)  

Business Area

   Products    2020.1H
Capacity
     2020.1H
Production
     Utilization Rate(%)  

Power Generation

   Incheon Power Plant      4,368        2,277        52.1  

Lime

   Lime      1,092        1,111        102  

 

21


Table of Contents

C. Production Facilities

(1) The current status of production facilities

[Land]

                        (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased     Decreased     Depreciation      Ending Book
Balance
 

Steel

     1,900,252      124,350     (238     —        2,024,364

Trade

     171,177      (120,003     —       —        51,174

Engineering & Construction

     25,528      912     (99     —        26,341

Others

     429,102      4,987     (1,762     —        432,327

[Buildings]

                        (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased     Decreased     Depreciation     Ending Book
Balance
 

Steel

     3,312,799      257,214     (19,335     (141,957     3,408,721

Trade

     477,497      (63,007     —       (6,570     407,920

Engineering & Construction

     72,102      3,225     —       (1,253     74,074

Others

     353,056      57,562     (11,292     (10,413     388,913

[Structures]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     2,418,025      76,165      (11,333     (96,233     2,386,624

Trade

     22,484      320      (20,347     (163     2,294

Engineering & Construction

     13,175      94      —       (791     12,478

Others

     450,822      161,485      (818     (15,711     595,778

[Machinery and Equipments]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     15,309,982      1,129,646      (214,226     (1,063,809     15,161,593

Trade

     398,184      7,868      (113,567     (17,809     274,676

Engineering & Construction

     5,267      1,890      (1,113     (669     5,375

Others

     1,504,831      126,772      36,074     (56,387     1,611,290

 

22


Table of Contents

[Vehicles]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     20,095      6,324      (2,067     (3,944     20,408

Trade

     5,852      1,273      (901     (880     5,344

Engineering & Construction

     783      1,538      (757     (1,172     392

Others

     5,555      2,779      (1,556     (1,141     5,637

[Tools and Fixtures]

                        (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased     Decreased     Depreciation     Ending Book
Balance
 

Steel

     48,984      26,682     (5,452     (11,280     58,934

Trade

     11,647      (4,995     (3,438     (1,571     1,643

Engineering & Construction

     599      742     (178     (146     1,017

Others

     9,521      4,526     (1,682     (2,059     10,306

[Equipment]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     64,739      19,882      (8,736     (10,011     65,874

Trade

     30,675      2,685      (1,913     (4,708     26,739

Engineering & Construction

     4,055      2,866      (2,351     (1,317     3,253

Others

     30,663      10,838      (6,034     (2,884     32,583

[Financial Lease Assets]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     417,805      47,936      107,259     (43,952     529,048

Trade

     81,002      41,178      (14,814     (12,476     94,890

Engineering & Construction

     216,170      197,256      (170,755     (20,635     222,036

Others

     59,605      7,205      (2,129     (16,274     48,407

 

23


Table of Contents

[Biological Assets]

 

                          (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased      Depreciation     Ending Book
Balance
 

Steel

     —          —          —          —         —    

Trade

     124,193      27,277      2,163      (3,699     149,934

Engineering & Construction

     —          —          —          —         —    

Others

     —          —          —          —         —    

[Assets under Construction]

 

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     1,436,769      1,288,418      (1,158,580     (12,502     1,554,105

Trade

     105,280      19,901      (52,112     —         73,069

Engineering & Construction

     23,060      1,310      (622     —         23,748

Others

     364,638      118,141      (143,319     —         339,460  

 

24


Table of Contents

(2) New Facility Establishment, Purchase, Etc.

(a) Investments under Construction

 

 

[Steel]

             (In hundred millions of KRW)  

Company

   Date   

Project

   Total
Investment
     Invested
Amount
     Amount
to Be

Invested
 
POSCO    Expansion/
Establishment
   June 2011

~ September 2023

  

P) Establishment of

by-product gas Power Plant

P) Establishment of #6 Coke plant

     15,088        2,013        13,074  
      February 2017

~ July 2022

  

G) The renovation of #3 furnace

P) Establishment of coal storage (Silo)

     20,731        13,891        6,840  

 

LOGO

P stands for Pohang Steel Works.

 

LOGO

G stands for Gwangyang Steel Works.

 

LOGO

Investments over KRW 10 billion are listed on the table.

 

[Trade]

               (In hundred millions of KRW)  

Company

     Date    Project    Total
Investment
     Invested
Amount
     Amount
to Be
Invested
 

PT. BIO INTI AGRINDO

     Establishment      December 2014

~ December 2022

   CPO MILL      463      431      32

 

LOGO

Investments over KRW 10 billion are listed on the table.

 

[Others]

             (In hundred millions of KRW)  

Company

   Date   

Project

   Total
Investment
     Invested
Amount
     Amount
to Be
Invested
 

POSCO ICT

   Establishment/

Expansion

   January 2020

~ December 2020

  

Expansion of

SM server

     316        49        267  
      January 2020

~ December 2020

   System improvement, IT facility purchase, etc.      182        42        140  

POSCO CHEMICAL

   Establishment/

Expansion

   November 2018
~ September 2020
   Expansion of production lines in #2 anode material factory      1,598        1,594        4  
   Establishment/

Expansion

   March 2019
~ April 2021
   Expansion of product lines in #2 cathode material factory in Gwangyang      2,396        2,222        174  
   Establishment/

Expansion

   November 2019

~ November 2021

   Expansion of product lines in #2 anode material factory      1,373        187        1,186  
   Establishment/

Expansion

   February 2020

~ May 2024

   Establishment of artificial graphite anode factory      2,177        3        2,174  
   Establishment/

Expansion

   November 2019 ~
October 2021
   Renovation of refractory factory for production increase      483        82        401  
   Purchase    February 2020

~ August 2020

   Land purchase for the establishment of artificial graphite anode factory      130        123        7  

POSCO Energy

   Establishment/

Expansion

   March 2020

~ December 2021

   Expansion of evaporator for Gwangyang LNG Terminal      360        1        359  

 

LOGO

Investments over KRW 10 billion are listed on the table

 

25


Table of Contents
(b) Future Investment Plans                   (In hundred millions of KRW)  

Business

   Company   

Project

  

Investment effects

   Planned Investments  
   2020      2021      2022  

Steel

   POSCO    Establishment or expansion on fixed assets    Cost reduction      0        470        2,878  
      Renovation and Replacement of Existing Facilities, etc.    Maintenance of existing facilities, etc.      590        6,553        13,666  
   POSCO-CSPC    Establishment or expansion on fixed assets    Production increase and efficiency      0        0        107  

Trading

   PT. BIO INTI
AGRINDO
   Establishment/Expansion    Realization of profits by selling CPO      0        96        127  

Others

   POSCO
CHEMICAL
   Establishment or expansion on fixed assets    Line up expansion      820        2,077        99  
      Renovation and Replacement of Existing Facilities, etc.    Maintenance of refractory factory for facility enhancement      50        351        0  
   POSCO ICT    Establishment/Expansion    Improvement of POSCO IT service      316        169        542  
         System improvement, etc.      182        380        57  
   POSCO O&M    Establishment/Expansion    Renovation of Existing Facilities      67        107        111  
   POSCO Energy    Establishment/Expansion    Enhancement of generation capacity      1,146        1,417        1,082  

 

LOGO

Investments over KRW 10 billion are listed on the table

 

26


Table of Contents

6. Product Sales

[Steel]

 

          (In hundred millions of KRW)  

Items

   2020.1H      2019      2018  

Domestic

   Hot-Rolled

Products

     17,702      42,605      48,879
   Cold-Rolled

Products

     17,323      39,716      39,901
   Stainless Steel      10,994      21,167      21,281
   Others      31,863      77,026      77,230

Export

   Hot-Rolled

Products

     16,731      41,064      35,231
   Cold-Rolled

Products

     46,777      125,658      124,449
   Stainless Steel      34,513      80,181      79,931
   Others      32,726      70,667      77,310

Total

   Gross Sum      208,630      498,084      504,212
   Internal
Transaction
     (73,836      (177,299      (180,632
   Total      134,794      320,785      323,580

[Trading]

 

          (In hundred millions of KRW)  

Items

   2020.1H      2019      2018  

Domestic

   Merchandise      16,425      29,315      33,706
   Product      2,259      5,120      4,702
   Others      185      1,101      1,483

Export

   Merchandise      31,679      69,347      87,124
   Product      298      205      768
   Others      1      638      736

Trades among the 3 countries

     113,689      270,522      254,670

Gross Sum

     164,537      376,247      383,189

Internal Transaction

     (64,371      (154,677      (159,112

Total

     100,166      221,571      224,077

 

27


Table of Contents

[Engineering & Construction]

 

          (In hundred millions of KRW)  

Items

   2020.1H      2019      2018  

Domestic

   Building      22,869      44,681      37,363
   Plant      6,983      10,953      10,238
   Civil Engineering      2,740      6,098      5,129
   Others      —        —        337

Overseas

     3,213      7,190      9,471

Own Construction

     2,150      5,712      7,568

Other Subsidiary company sales

     1,275      2,248      3,101

Gross Sum

     39,231      76,880      73,207

Internal Transaction

     (5,276      (7,434      (5,513

Total

     33,955      69,446      67,694

[Others]

 

     (In hundred millions of KRW)  

Items

   2020.1H      2019      2018  

Electric Power Sales

     13,758      31,866      34,427

7. Derivatives

We use forward exchange contracts to hedge against the exchange rate risk for foreign currency loans. As of June 30, 2020, we assessed the fair value of our forward exchange contracts to be USD 0.7 billion (expiring October 2020), USD 0.55 billion (expiring April 2021), and a currency swap contracts to be USD 0.5 billion(expiring August 2023), USD 0.5 billion(expiring July 2024), USD 0.5 billion(expiring November 2022), USD 0.5 billion(expiring January 2023), and USD 0.44 billion(expiring January 2025), and EUR 0.5 billion(expiring January 2024).

We recognized KRW 65,882 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 171,246 million of valuation gain on currency swap contracts. The transaction gain of currency swap contracts is KRW 643 million.

 

28


Table of Contents

8. Significant Contracts

 

Company

  

Contract

  

Date

  

Remarks

POSCO    Small scale merger with POSHIMETAL Co., Ltd.    December 2015   

1) Purpose: Enhancing the shareholders’ value by increasing operational efficiency and creating synergies between businesses

2) Information: POSCO holds 100% a stake in POSHIMETAL Co., Ltd. The merger ratio is 1:0, and POSCO will not be issuing new shares

3) Conclusion of a contract: December 23, 2015

4) Date of merger: March 1, 2016

5) Registration of merger: March 15, 2016

 

   Small scale merger with POSCO GREEN GAS TECHNOLOGY   

February

2016

  

1) Purpose: Enhancing the shareholders’ value by increasing operational efficiency and creating synergies between businesses

2) Information: POSCO holds a 100% stake in POSCO GREEN GAS TECHNOLOGY. The merger ratio is 1:0, and POSCO will not be issuing new shares

3) Conclusion of a contract: February 26, 2016

4) Date of merger: May 1, 2016

5) Registration of merger: May 16, 2016

 

   JV Agreement for construction of steel mills for cold rolled steel products and plated steel products   

April

2016

  

1) Purpose: Expansion of sales of automotive steel in Southwest province of China

2) Information: POSCO signed JV contracts with Chongqing Iron and Steel by holding 10% stake in Chongqing CISL High Strength Cold Rolling Steel Co. Ltd, and 51% stake in Chongqing POSCO CISL Automotive Steel Co., Ltd

3) Execution of JV Agreements: April 6, 2016

4) Termination JV Agreements: September, 2017

5) Liquidation of Steel mills set off: November 13, 2017

6) Completion of liquidation: June 28, 2018

 

   Small scale merger of POSCO Processing &
Service
  

August

2018

  

1) Purpose: To increase operational efficiency

2) Information: POSCO Processing & Service (POSCO P&S) is merged into POSCO

-  The merger ratio is 1 : 0.1456475 (POSCO : POSCO P&S)

-  POSCO will distribute its treasury shares to the shareholders of POSCO P&S, and

new shares will not be issued.

3) Conclusion of a contract: August 23, 2018

4) Date of merger: January 1, 2019

5) Registration of merger: February 2, 2019

 

  

Small scale merger with
By-product Hydrogen Generation Business after spin-off from POSCO ENERGY

 

   April 2019   

1) Purpose: To increase operational efficiency

2) Information: By-product Hydrogen Generation Business of POSCO ENERGY will be merged into POSCO

-  The merger ratio is 1 : 0.1145836 (POSCO : POSCO ENERGY)

3) Conclusion of a contract: April 16, 2019

4) Date of merger: September 1, 2019

5) Registration of merger: September 9, 2019

   LNG Terminal Business Transfer Agreement    April 2019   

1) Business transferee: POSCO ENERGY

2) Conclusion of a contract: April 16, 2019

3) Date of transfer: September 1, 2019

4) Transfer amount : KRW 608,019 million

5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to
POSCO ENERGY

 

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Table of Contents
POSCO International Corporation   

Investment on the 2nd stage development of

A-1 / A-3 block

in Myanmar gas field

   June 2018   

1) Investment amount: KRW 511,709,005,500 (USD 473,235,000)

2) Development period: August 1, 2017 ~ December 31, 2022

3) Gas production schedule: By additionally developing Shwe gasfield and newly developing Shwe Phyu gasfield, production will start in 2021 from Shwe and 2022 from Shwe Phyu

4) Other Information

-  Location: North-west offshore, Myanmar

-  This investment is the 2nd stage of development, which consists of 3 stages in

Myanmar gas field development. The purpose of investment is to maintain current

gas production level by completing more drilling and adding more production wells

to current Shwe platform.

-  In July 2018, facility design and construction began, and production is scheduled to start in 2021 in Shwe and in 2022 in She Phyu. But the development period includes the duration of feasibility test and basic design from August 2017 to May 2018.

•  POSCO International Corporation : 51.0%

•  ONGC VIDESH(Oil and Natural Gas Corporation Videsh Limited) : 17.0%

•  MOGE(Myanmar Oil and Gas Enterprise): 15.0%

•  GAIL (India) Limited : 8.5%

•  KOGAS(Korea Gas Corporation): 8.5%

-  Investment size of USD 473,235 thousand, applying the exchange rate of

1USD=1,081.30 KRW, was disclosed on the date of the BOD resolution (May 31, 2018).

-  Detailed information and future timeline on this resource development investment is subject to change.

LOGO Disclosure date : May 31, 2018 (Decision on natural resources investment)

 

   Small scale merger with Steel segment after spinoff from POSCO Processing &Service    November 2016   

1) Purpose: Expanding the company’s capabilities in steel trading business and

enhancing global competitiveness of the company’s steel business

2) Information: POSCO International merges with the steel segment and others of POSCO P&S at the merger ratio of 1: 0.4387662, after the spin off from POSCO P&S

3) Conclusion of a contract: November 4, 2016

4) Date of merger: March 1, 2017

5) Registration of merger: March 2, 2017

 

   Split-off of Domestic steel processing businesses    October 2019   

1) Purpose : To specialize in steel processing business by splitting-off business division

2) Method : Split-off
3) Resolution date of Board of Directors : October 25, 2019
4) Shareholders’ meeting for approval : March 30, 2020
5) Date of Split-off : March 31, 2020
6) Registration date of Split-off : April 3, 2020

 

POSCO ENGINEERING & CONSTRUCTION    Small scale merger with POSCO ENGINEERING CO., LTD.    November 2016   

1) Purpose: Achieving sustainable profit and growth by enhancing competitiveness

2) Information: POSCO E&C merges with POSCO Engineering at the merger ratio of 1:0, and POSCO E&C will not be issuing new shares

3) Conclusion of a contract: November 23, 2016

4) Date of merger: February 1, 2017

5) Registration of merger: February 14, 2017

 

POSCO O&M    Small scale merger with Blue O&M and MegaAsset   

February

2019

  

1) Purpose: Enhancing foundation of growth by improving management efficiency and creating synergies among businesses

2) Information: POSCO O&M merges with Blue O&M and MegaAsset

3) Date of merger: February 1, 2019

4) Registration of merger: February 11, 2019

 

 

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Table of Contents
POSCO ENERGY    Contract of Shares Transfer   

July

2018

  

1) Contract Parties: Nonghyup Bank(The third agent of KIAMCO PowerEnergy Private Special Assets Investment Trust), Doosan Heavy Industries & Construction, POSCO E&C, Industrial Bank of Korea(The first agent of Multi Asset POSPower Samcheok coal-fired private investment trust)

2) Signed Date: July, August, 2018

3) Contract Amount : KRW 343,706 million

4) Information: Contract of shares transfer for disposal of 68.5%(July) and 2.5%(August) POSPower shares

 

  

Spin-off
By-product Hydrogen Generation Business for merger into POSCO

 

   April 2019   

1) Contract counterpart: POSCO

2) Conclusion of a contract: April 16, 2019

3) Date of merger: September 1, 2019

4) Merger payment : KRW 1,163,692 million (No issuance of new shares from POSCO)

5) Information : POSCO merges with Hydrogen Generation Business of POSCO ENERGY at the merger ratio of 1:0.1145836

 

   LNG Terminal Business Transfer Agreement    April 2019   

1) Business transferor: POSCO

2) Conclusion of a contract: April 16, 2019

3) Date of transfer: September 1, 2019

4) Transfer amount : KRW 608,019 million

5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to
POSCO ENERGY

POSCO

YAMATO VINA STEEL JOINT STOCK COMPANY (Former, SS VINA JOINT STOCK COMPANY

   Joint stock contract with YAMATO KOGYO CO., LTD. and SIAM YAMATO STEEL CO., LTD. to improve business structure    March 2020   

1) Purpose: To improve business structure by collaborating with leading company in
section steels

2) Information: POSCO’s 100% share of POSCO SS VINA changes to 51%

YAMATO KOGYO CO., LTD. takes 30% of shares and SIAM YAMATO STEEL CO., LTD. takes 19% of shares.

3) Conclusion of a contract: March 18, 2020

4) Registration of joint stock company : April 28, 2020

 

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Table of Contents

9. Research and Development

A. Research and Development (“R&D”) Organization

 

Business Area

  

Company

  

Organization

Steel    POSCO    Steel Production and Technology Strategy Office
     

 

Safety & Environmental Planning Office

     

 

Technical Research Laboratories

     

 

Steel Product Research Lab

     

 

Process and Engineering Research Lab

     

 

Automotive Steel Research Lab

     

 

Steel Solution Research Lab

  

 

POSCO COATED & COLOR STEEL Co,. Ltd.

  

 

R&D Center

  

 

Zhangjiagang Pohang Stainless Steel Co., Ltd.

  

 

R&D Center

Trading   

 

POSCO International Corporation

  

 

Molding R&D Center

   Stainless Quality Technology Group

 

Engineering & Construction

  

 

POSCO Engineering & Construction,. LTD.

  

 

R&D Center

  

 

POSCO A&C

  

 

R&D Center

Others   

 

POSCO ENERGY Co,. LTD

  

 

Renewable Energy Business Development Office

  

 

POSCO ICT

  

 

R&D Center

  

 

POSCO CHEMICAL

  

 

R&D Center

     

 

Energy Material R&D Center

  

 

POSCO M-TECH

  

 

R&D Center

B. R&D Expenses in 2020.1H (In millions of KRW)

 

Category

   Business Area  
   Steel     Trade     Engineering &
Construction
    Others     Total  

Selling and Administrative Cost

     32,986     52     1,624     14,709     49,371

Manufacturing Cost

     166,217     45     896     102     167,261

R&D Cost (Intangible Assets)

     14,933     —       —       (1,303     13,630

Total*

     214,136     97     2,520     13,508     230,262

Government Subsidy

     —       —       100     —       100

R&D/Sales Ratio (%)

     1.59     0.00     0.07     0.98     0.81

 

*

This total expenses include government subsidy amount

 

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Table of Contents

III. Financial Statements

1. Consolidated Financial Statements

A. Summary of Fiscal Years of 2018, 2019 and 2020.1H

 

     (In millions of KRW)  

Account

   2020.1H      2019      2018  
     As of June 30, 2020      As of December 31, 2019      As of December 31, 2018  

[Total current assets]

     37,746,123      34,842,374      33,651,002

Cash and cash equivalents

     6,038,266      3,514,872      2,643,865

Other receivables, net

     1,562,008      1,581,517      1,385,629

Other short-term financial assets

     10,996,721      8,996,049      8,081,096

Trade accounts and notes receivable, net

     8,561,530      9,078,351      9,282,609

Inventories

     9,743,455      10,920,320      11,499,928

Other current assets

     844,143      751,265      757,875

[Total non-current assets]

     44,365,724      44,216,287      44,597,263

Other receivables, net

     1,205,454      1,140,878      863,240

Other long-term financial assets

     1,595,781      1,669,389      1,647,898

Investments in associates and joint ventures

     3,990,672      3,927,755      3,650,003

Property, plant and equipment, net

     30,161,877      29,925,973      30,018,273

Intangible assets, net

     4,795,377      4,908,473      5,170,825

Other non-current assets

     2,616,563      2,643,819      3,247,024

Total assets

     82,111,847      79,058,661      78,248,265

[Total current liabilities]

     18,265,631      16,323,690      18,937,985

[Total non-current liabilities]

     16,253,071      14,940,264      12,550,729

Total liabilities

     34,518,702      31,263,954      31,488,714

[Equity attributable to owners of the controlling company]

     44,330,920      44,471,873      43,371,260

Share capital

     482,403      482,403      482,403

 

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Table of Contents

Capital surplus

     1,335,149      1,376,251      1,410,551

Hybrid bonds

     199,384      199,384      199,384

Retained earnings

     45,056,397      45,080,118      44,216,018

Other equity attributable to owners of the controlling company

     (2,742,413      (2,666,283      (2,937,096

[Non-controlling Interests]

     3,262,225      3,322,834      3,388,291

Total equity

     47,593,145      47,794,707      46,759,551
     From January 2020
to June 2020
     From January 2019
to December 2019
     From January 2018
to December 2018
 

Revenue

     28,267,367      64,366,848      64,977,777

Operating profit

     872,967      3,868,855      5,542,600

Profit

     539,526      1,982,637      1,892,064

[Profit attributable to owners of the controlling company]

     435,675      1,835,086      1,690,612

[Profit attributable to non-controlling interests]

     103,851      147,551      201,452

Total comprehensive Income

     517,905      2,129,105      1,463,535

[Total comprehensive income attributable to owners of the controlling company]

     412,741      1,997,731      1,271,495

[Total comprehensive income attributable to non-controlling interests]

     105,164      131,374      192,040

Earnings per share(KRW)

     5,400      22,823      20,911  

Number of Consolidated Companies

     165        164        173  

B. The Standards Used for Reporting the Financial Statements

The Company prepared its financial statements in accordance with the Korean-International Financial Reporting Standards (the “K-IFRS”) and applied it to each Company’s final financial statements.

C. Consolidated Financial Statements

Refer to the attached Condensed Consolidated Financial Statements for the Condensed Consolidated Statements of Financial Position as of June 30, 2020, Condensed Consolidated Statements of Comprehensive Income (loss), Condensed Consolidated Statements of Changes in Equity, Condensed Consolidated Statements of Cash Flows for the six-month period ended June 30, 2020, and Notes

 

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Table of Contents

2. Separate Financial Statements

A. Summary of Fiscal Years of 2018, 2019 and 2020.1H

 

     (In millions of KRW)  

Account

   2020.1H      2019      2018  
     As of June 30, 2020      As of December 31, 2019      As of December 31, 2018  

[Total current assets]

     20,016,741      18,216,066      16,796,400

Cash and Cash equivalents

     2,446,945      978,139      259,219

Trade accounts and notes receivable, net

     3,142,894      3,987,041      3,968,372

Other receivables, net

     380,258      321,352      206,432

Other short-term financial assets

     9,727,533      7,858,979      7,025,143

Inventories

     4,215,794      4,988,530      5,288,009

Other current assets

     103,317      82,025      49,225

[Total non-current assets]

     37,603,368      37,494,700      37,329,580

Other receivables, net

     89,055      56,468      57,767

Other long-term financial assets

     1,176,466      1,257,896      1,176,757

Investments in Subsidiaries, associates, and joint ventures

     15,216,814      15,069,857      15,121,339

Property, plant and equipment, net

     20,187,097      20,132,199      20,154,334

Intangible assets, net

     667,491      708,915      645,222

Other non-current assets

     266,445      269,365      174,161

Total assets

     57,620,109      55,710,766      54,125,980

[Total current liabilities]

     4,737,598      3,331,446      3,895,973

[Total non-current Liabilities]

     7,479,749      6,765,135      4,957,905

Total liabilities

     12,217,347      10,096,581      8,853,878

[Share capital]

     482,403      482,403      482,403

[Capital surplus]

     1,252,220      1,252,220      1,154,775

[Hybrid bonds]

     199,384      199,384      199,384

[Retained earnings]

     45,383,559      45,372,411      45,175,459

[Other equity]

     (1,914,804      (1,692,233      (1,739,919

 

35


Table of Contents

Account

   2020.1H      2019      2018  

Total equity

     45,402,762      45,614,185      45,272,102
     From January 2020
to June 2020
     From January 2019
to December 2019
     From January 2018
to December 2018
 

Revenue

     12,854,680      30,373,511      30,659,425

Operating profit

     349,636      2,586,359      3,809,376

Profit

     459,666      1,175,712      1,072,592

Earnings per share(KRW)

     5,700      14,592      13,186

B. The Standards Used for Reporting the Financial Statements

The company prepared its financial statements in accordance with the Korean - International Financial Reporting Standards (the “K-IFRS”).

C. Separate Financial Statements

Refer to the attached Condensed Separate Financial Statements for the Condensed Separate Statements of Financial Position as of June 30, 2020, Condensed Separate Statements of Comprehensive Income (loss), Condensed Separate Statements of Changes in Equity, Condensed Separate Statements of Cash Flows for the six-month period ended June 30, 2020, and Notes.

 

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Table of Contents

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors (“BoD”)

(1) Board of Directors (as of August 13, 2020)

Our Board of Directors consists of five inside directors (Choi, Jeong-Woo, Chang, In-Hwa, Chon, Jung-Son, Kim, Hag-Dong, Jeong, Tak) and seven outside directors (Chung, Moon-Ki, Bahk, Byong-Won, Kim, Joo-Hyun, Kim, Shin-Bae, Chang, Seung-Wha, Kim, Sung-Jin, Pahk, Heui-Jae).

Our Board of Directors manages the following five Special Committees:

(a) Director Candidate Recommendation and Management Committee

(b) Evaluation and Compensation Committee

(c) Finance and Related Party Transactions Committee

(d) Audit Committee

(e) Executive Management Committee

LOGO Composition of the Special Committees under the Board of Directors and their Functions(as of August 13, 2020)

 

Category

  

Composition

  

Directors

  

Major Functions

Director Candidate Recommendation and Management Committee   

3 Outside Directors;

1 Inside Director

  

Kim, Joo-Hyun

(Chairman)

Bahk, Byong-Won Pahk, Heui-Jae Chon, Jung-Son

  

•  Qualification review of Outside Director candidates and recommendation to the general meeting of shareholders

 

•  Preliminary review and qualification review of Inside Director candidates

 

•  Preliminary deliberation on appointment of members of Special Committees

 

•  Pre-deliberation of the appointment of Representative Directors other than the CEO and the Representative Director

 

•  Operation of Outside Director Candidate Recommendation Advisory Panel

 

•  Other matters necessary for recommending candidates for Outside Directors

 

•  Agenda development and establishment of operating standards of the BoD and Special Committees

 

•  Pre-deliberation on revision or repeal of the Board of Directors Regulations

 

•  Pre-deliberation of the composition and operation of the Special Committees under the BoD

Evaluation and

Compensation

Committee

   4 Outside Directors   

Kim, Shin-Bae

(Chairman)

Kim, Joo-Hyun Chang, Seung-Wha Kim, Sung-Jin

  

•  Establishment of management succession and management training plan

 

•  Establishment and execution of management evaluation and compensation plan

 

•  Pre-deliberation on remuneration and retirement allowance of Directors

 

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Table of Contents
Finance and Related Party Transactions Committee    3 Outside Directors; 1 Inside Director   

Kim, Sung-Jin

(Chairman)

Kim, Shin-Bae Chang, Seung-Wha Chang, In-Hwa

  

•  Developing policies for the company’s internal values and financial soundness

 

•  Prior deliberation in case of filing in, KRW 100 billion or more, litigation or arbitration, responding to reconciliation or mediation in the process of trial or taking any equivalent level of legal actions.

 

•  External Investments

 

•  Pre-deliberation on business units other than steel in terms of new external investments, capital increase or investment shares disposal of invested companies (KRW 100 billion or more. Investment and capital increase includes borrowings and liabilities that the company takes)

 

•  Approval of new external investments on business units other than steel in terms of capital increase or investment shares disposal of invested companies (From KRW 10 billion to less than KRW 100 billion. Investment and capital increase includes borrowings and liabilities that the company takes.)

 

•  Deliberation and resolution of donation from over KRW 100 million to KRW 1 billion and pre-deliberation of donation over KRW 1 billion

 

•  Deliberation and resolution of bonds issuance or important borrowings (Including borrowings for refunding over KRW 100 billion)

 

•  Pre-deliberation of bonds issuance or important borrowings (New long-term borrowings over KRW 100 billion)

 

•  Deliberation and resolution on collateral provision of non-current assets

 

•  Deliberation and resolution on debt acquisition of invested company such as security and guarantee (Excludes when the debt is in relation to steel investment)

 

•  Internal transactions under Monopoly Regulation and Fair Trade Act (The act of providing or trading funds, securities, or assets with related party as business counterpart or for related party)

 

•  Review of internal transaction-related problems and improvement measures

 

•  Pre-deliberation of internal transaction (Amount KRW 100 billion or more)

 

•  Deliberation and resolution of internal transaction (Amount from KRW 5 billion to less than KRW 100 billion)

 

•  Appointment of Fair Trade Compliance Manager

 

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Table of Contents
Audit Committee    3 Outside Directors   

Bahk, Byong-Won (Chairman)

Chung, Moon-Ki Pahk, Heui-Jae

  

•  Setting the work scope of the committee

 

•  Matters that the BoD or Representative Directors delegated

 

•  Request for Extraordinary general meeting of shareholders

 

•  Consulting of external experts

 

•  Audit of the legitimacy of management’s business execution

 

•  Review soundness and validity of the company’s financial activities and the appropriateness of financial reporting

 

•  Review the validity of important accounting standards or changes in accounting estimates

 

•  Evaluation of the operation status of the internal accounting management system

 

•  Evaluation of the internal control system

 

•  Agreement on appointment or dismissal of internal audit department representative

 

•  Contract for appointment, remuneration and non-audit services of independent auditors

 

•  Evaluation of independent auditors’ audit activities

 

•  Report internal audit department’s annual audit plan and results

 

•  Report on the evaluation results of the company’s ethical compliance

 

•  An independent auditor reports on important facts of the company’s Directors’ misconduct or violation of laws or Articles of Incorporation

 

•  Report that independent auditors have violated the company’s accounting standards

 

•  Other matters deemed necessary by each committee member

 

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Table of Contents

Executive

Management Committee

   5 Inside Directors   

Choi, Jeong-Woo (Chairman)

Chang, In-Hwa Chon, Jung-Son Kim, Hag-Dong Jeong, Tak

  

•  Business

 

•  Position system, important matters related to human resource development and coordination

 

•  Important matters about changing the work system and welfare

 

•  New establishment plan for chair-professor

 

•  Housing Policy Establishment (Housing fund support standard and plan for housing construction)

 

•  Decision on closure of shareholders’ registry

 

•  Finance

 

•  Preliminary review on in-house investment plan (New establishment or expansion investment of KRW 200 billion or more)

 

•  Approval on in-house investment plan

 

New establishment or expansion investment from KRW 10 billion to less than KRW 200 billion.

 

Investment of KRW 10 billion or more other than new establishment or expansion (Amount of KRW 5 billion or more for investment in the ordinary course of business)

 

•  Pre-deliberation on new external investments, capital increase or investment shares disposal of invested companies in Steel Business Unit (KRW 100 billion or more. Investment or capital increase amount includes borrowings and liabilities that the company takes)

 

•  Approval on new external investments, capital increase or investment shares disposal of invested companies in Steel Business Unit (Amount from KRW 10 billion to less than KRW 100 billion. Investment or capital increase amount includes borrowings and liabilities that the company takes)

 

•  Acquisition or disposal of tangible, intangible, fixed or important investment assets from KRW 10 billion to less than KRW 200 billion

 

•  Technology application of over USD 1 million and technology sales contract approval

 

•  Acquisition of debt such as guarantees for invested company’s collateral involving steel investments

 

•  Other matters that the Chairman deems necessary or deemed necessary by each committee member

 

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Table of Contents

(2) List of Outside Directors (As of June 30 2020)

 

Name

  

Experience

   Relation
with
Majority
Shareholder
  

Remarks

Chung, Moon-Ki   

•  Professor in Accounting, Sungkyunkwan University (2016~Present)

 

•  Partner and Chief Quality Officer, Samil PwC (1981~2012)

 

•  Committee Member, Accounting Review Committee of Financial Supervisory Service

 

•  Ph.D. in Accounting, Sungkyunkwan University

   None    Chairman of the
Board of Directors
Bahk, Byong-Won   

•  Honorary Chairman of Korea Employers Federation (March 2018 ~ Present)

 

•  Chairman of Korea Employers Federation (February 2015 ~ February 2018)

 

•  Chairman of The Korea Federation of Banks (November 2011 ~
November 2014)

 

•  Chairman & CEO Woori Financial Group (March 2007 ~ June 2008)

 

•  MA in Economics, University of Washington (1985)

   None   
Kim, Joo-Hyun   

•  President & CEO, The financial news (April 2017 ~ Present)

 

•  President, Future Korea Institute, Kookmin University (May 2016 ~ March 2017)

 

•  President & CEO, Hyundai Research Institute (January 2004 ~ April 2014)

 

•  Ph.D. in Department of Finance, College of Business, Arizona State University (1989)

   None   
Kim, Shin-Bae   

•  Vice Chairman, SK Group (January 2010 ~ February 2013)

 

•  President, Korea IoT (Internet of Things) Association (March 2005 ~ March 2012)

 

•  President and CEO, SK Telecom (March 2004 ~ December 2008)

 

•  M.B.A., Wharton School, University of Pennsylvania (1985)

   None   
Chang, Seung-Wha   

•  Dean of Seoul National University School of Law (June 2018 ~ Present)

 

•  Professor of Law, Seoul National University (1995 ~ Present)

 

•  World Trade Organization(WTO) as the Appellate Body Member (May 2012 ~ September 2016)

 

•  Member, International Chamber of Commerce(ICC) Court of Arbitration (2000 ~ 2013)

 

•  LL.M and Doctorate in International Trade Law from Harvard Law School (1994)

   None   
Kim, Sung-Jin   

•  Adjunct Professor at Department of Economics, Seoul National University (2011 ~ Present)

 

•  Minister of Maritime Affairs and Fisheries (2006 ~ 2007)

 

•  Administrator of the Small and Medium Business Administration (2004 ~ 2006)

 

•  Ph.D. in Economics Kansas State University (1991)

   None   
Pahk, Heui-Jae   

•  Professor in Mechanical & Aerospace Engineering, Seoul National University (March 1993 ~ Present)

 

•  Chairman of the Board, Korea Youth Foundation (May 2016 ~ Present)

 

•  Head of R&D Strategic Planning, Ministry of Trade, Industry and Energy (April 2013 ~ April 2016)

 

•  SNU Precision CEO (February 1998 ~ December 2016)

 

•  Ph.D in Mechanical Engineering, Seoul National University (1990)

   None   

 

41


Table of Contents

(3) List of Key Activities of the Board of Directors (January 1, 2020 ~ August 13, 2020)

 

No.

  

Date

  

Agenda

  

Approval

1    January 31   

•   Deliberation Agenda

 

1.  Approval of the 52nd financial statements and schedule for the general
meeting of shareholders

 

•   Report Agenda

 

1.  The progress on implementing resolution made by the Board of Directors for the fiscal year of 2019

 

2.  Business performance of the fiscal year of 2019

 

3.  Report on internal control over financial reporting

 

4.  Assessment on the effectiveness of internal control over financial reporting

  

All 1 Case

Approved

2    February 21   

•   Deliberation Agenda

 

1.  Agendas for the 52nd general meeting of shareholders

 

2.  Recommendation of inside director candidates (Candidates other than representative director CEO)

  

 

 

All 2 Cases

Approved

3    March 27   

•   Deliberation Agenda

 

1.  Appointment of the Chairman of the Board of Directors

 

2.  Appointment of the Special Committee Members

 

3.  Designation of Representative Directors and presenting positions to Inside Directors

 

4.  Donation to help organizations and institutions against COVID-19 virus

  

All 4 Cases

Approved

4    April 10   

•   Deliberation Agenda

 

1.  Decision on contract for share repurchase trust

   All 1 Case Approved
5    May 8   

•   Deliberation Agenda

 

1.  Resolution on the 1st quarter dividend for the fiscal year of 2020

 

2.  Transaction Plans with affiliates for the fiscal year of 2020

 

•   Report Agenda

 

1.  The business performance of the first quarter of 2020

 

2.  The progress and plan of venture platform

 

3.  The performance and assessment of Board of Directors for 2019

 

4.  Plan for POSCO Group logistics integration

  

All 2 Cases

Approved

6    August 7   

• Deliberation Agenda

 

1.  Resolution on the 2nd quarter dividend for the fiscal year of 2020

 

•   Report Agenda

 

1.  The progress on implementing resolution made by the Board of Directors for the fiscal year of 2020

 

2.  Business performance of the 2nd quarter of the fiscal year of 2020 and yearly outlook

 

3.  Plans on climate change and climate report publication

 

4.  Plan to build sculptures in Pohang Hwanho Park

  

 

 

All 1 Case Approved

 

42


Table of Contents
LOGO

Major Activities of Outside Directors on the Board of Directors (January 1, 2019 ~ August 13, 2020)

 

No.

  

Date

  

Participation of the Outside Directors

(the Number of total members)

 

Remarks

1

   January 31    7 (7)  

2

   February 21    7 (7)  

3

   March 27    6 (7)   Absence : Chung, Moon-Ki

4

   April 10    6 (7)   Absence : Chung, Moon-Ki

5

   May 8    7 (7)  

6

   August 7    7 (7)  

(4) Composition of the Special Committees and their Activities

 

   

Major Activities of Director Candidate Recommendation Committee(January 1, 2020~March 27, 2020 before the Board of Directors meeting)

 

Date

  

Agenda

   Approval
February 14 & 21,     2020    [Deliberation] Qualification Assessment and Recommendation of Outside Director Candidates    Approved
February 21, 2020    [Preliminary Review] Qualification Assessment of Inside Director Candidates    —  
March 27, 2020    [Preliminary Review]    —  
  

1.  Appointment of the Special Committees Members

 

2.  Appointment of the Representative Directors

   —  

 

   

Major Activities of Evaluation and Compensation Committee(January 1, 2020~March 27, 2020 before the Board of Directors meeting)

 

Date

  

Agenda

   Approval
January 22, 2020    [Deliberation Agenda] Evaluation of the business performance for the fiscal year of 2019    Approved

 

   

Major Activities of Finance and Related Party Transaction Committee (January 1, 2020~August 13, 2020)

 

Date

  

Agenda

   Approval
January 31, 2020   

1.  Contribution to the Internal Labor Welfare Fund

 

2.  Contribution to the Mutual Cooperation Fund

 

3.  Donation to help organizations and institutions against COVID 19 virus

   Approved

 

Approved

 

Approved

May 6, 2020   

1.  Payment guarantee plan for POSUK

 

2.  Payment guarantee plan for POSCO-TCS

   Approved

 

Approved

May 6 & 8, 2020    Plan for POSCO Group logistics integration    Approved
August 6, 2020   

[Deliberation] Venture fund investment to discover new growth business

 

[Report] Fair Trade Compliance Program Performance and Plan

   Approved

 

—  

 

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Table of Contents
   

Major Activities of Executive Management Committee (January 1, 2019 ~ August 13, 2020)

 

Date

  

Agenda

   Approval
January 22, 2020    [Preliminary Review] Establishment of #6 Cokes Oven in Pohang works    —  
February 18, 2020    Establishment of #6 Cokes Oven in Pohang works    Approved
March 17, 2020    Capital increase for IJPC 3# factory in Indonesia    Approved
May 19, 2020   

1.  Construction of air pollutant measurement system in both steel works

 

2.  Carbon credit trading plan

 

3.  Gwangyang CEM plant suspension facility disposal

   Approved

 

Approved

 

Approved

B. Audit Committee

(1) Composition of the Audit Committee

 

Name

  

Qualifications

   Remarks

Bahk, Byong-Won

Chung, Moon-Ki

Pahk, Heui-Jae

   Satisfies the requirements stipulated in the Korean Commercial Act and the Articles of Incorporation    Chairman

(2) Major Activities of the Audit Committee (January 1, 2020 ~ August 13, 2020)

 

Session

   Date   

Agenda

   Approval
1    January 30   

•   Deliberation Agenda

1.  Assessment of internal control over financial reporting

2.  Approval of audit and non-audit services for POSCO and subsidiaries

3.  Assessment of the Audit Committee for the fiscal year of 2019

•   Report Agenda

1.  Report of operation of internal control over financial reporting in 2019

2.  The result of internal audit for the fiscal year of 2019 and audit plans for the fiscal year of 2020

3.  The assessment on the executive and employees’ conformity to the code of ethics for the fiscal year of 2019

  

 

 

All 3 Cases
Approved

2    February 20   

 

•   Deliberation Agenda

1.  Approval of audit and non-audit services for POSCO’s

subsidiaries abroad

2.  Internal audit result for the 52nd term

•   Report Agenda

1.  External audit result for the 52nd term

  

 

 

All 2 Cases

Approved

 

3

  

 

February 21

  

 

Review of agenda for general meeting of shareholders

  

 

Approved

 

 

At the 52nd general meeting of shareholders held on March 27, 2020, due to Chang, Seung-Wha’s expiration of term in the audit committee, a new audit committee member, Pahk, Heui-Jae, was elected.

 

44


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LOGO

Changes after March 31, 2020

 

Session

   Date   

Agenda

   Approval
4    April 24   

•   Deliberation Agenda

1.  Appointment of the chairman of the audit committee

•   Report Agenda

1.  Consolidated internal control over financial reporting for the fiscal year of 2019

2.  Assessment of the consolidated internal control over financial reporting for the fiscal year of 2019

3.  Audit report of 20-F for the fiscal year of 2019

  

 

Approved

5    May 7   

 

•   Deliberation Agenda

1.  Approval of audit service contract on POSCO SPS

•   Report Agenda

1.  Internal audit result on Consolidated financial statements of the 1st quarter of the fiscal year 2020

2.  External review result on Consolidated financial statements of the 1st quarter of the fiscal year 2020

  

 

Approved

6    August 6   

 

[Deliberation] Approval on changes in the audit service contract for POSCO(Guangdong) Automotive Steel Co., Ltd.

[Report]

1.  Plans to strengthen the operation of the internal accounting management system in 2020

2.  Results of internal audit on consolidated financial statements for the 2nd quarter of 2020

3.  Results of external review on consolidated financial statements for the 2nd quarter of 2020

4.  Internal audit performance for the 1st half of 2020 and plans for the 2nd half of 2020

5.  Audit activity evaluation results of the independent auditor for the year 2019

  

 

Approved

C. Voting Rights of Shareholders

 

(1)

The Cumulative Voting System: The cumulative voting system was introduced at the 36th general meeting of shareholders on March 12, 2004.

 

(2)

Voting by Mail: The voting-by-mail system was introduced at the 36th general meeting of shareholders on March 12, 2004.

 

(3)

The Electronic Voting System: The electronic voting system was determined at the Board of Directors’ meeting on February 20, 2019.

 

45


Table of Contents

D. Compensation of Directors and Officers

 

(1)

Directors’ and the Audit Committee members’ Salaries

 

                             (In millions KRW)  

Category

   Total
numbers
   Total payment      Average payment
(Per person)
    

Ceiling amount approved at

the general meeting of

shareholders

   Remarks  

Inside Director

   5      4,167        833           —    

Outside Director

   4      141        35      10,000      —    

Members of the Audit Committee

   3      106        35           —    

 

LOGO

Payment Period: January 1, 2020 ~ June 30, 2020

 

LOGO

Outside Directors also serving as the members of the Audit Committee are excluded in the count for the Outside Directors.

 

LOGO

Average payment per person is calculated based on the paid amount to the current directors and audit committee members as of June 30, 2020.

 

46


Table of Contents

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2020

(With Independent Auditors’ Review Report Thereon)


Table of Contents


Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of June 30, 2020, the condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019, the condensed consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2020 and 2019, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

Auditors’ review responsibility

Our responsibility is to issue a report on the condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

 

1


Table of Contents

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

The consolidated statement of financial position of the Company as of December 31, 2019, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 12, 2020, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

 

LOGO

Seoul, Korea

August 13, 2020

 

This report is effective as of August 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

2


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of June 30, 2020 and December 31, 2019

(Unaudited)

 

 

(in millions of Won)    Notes    June 30, 2020      December 31, 2019  

Assets

        

Cash and cash equivalents

   21    W 6,038,266        3,514,872  

Trade accounts and notes receivable, net

   4,21,26,27,34      8,561,530        9,078,351  

Other receivables, net

   5,21,34      1,562,008        1,581,517  

Other short-term financial assets

   6,21      10,996,721        8,996,049  

Inventories

   7      9,743,455        10,920,320  

Current income tax assets

        34,166        45,930  

Assets held for sale

   8      79,308        74,158  

Other current assets

   14      730,669        631,177  
     

 

 

    

 

 

 

Total current assets

        37,746,123        34,842,374  
     

 

 

    

 

 

 

Long-term trade accounts and notes receivable, net

   4,21      169,333        198,785  

Other receivables, net

   5,21      1,205,454        1,140,879  

Other long-term financial assets

   6,21      1,595,781        1,669,389  

Investments in associates and joint ventures

   9      3,990,672        3,927,755  

Investment property, net

   11      876,640        878,227  

Property, plant and equipment, net

   12      30,161,877        29,925,973  

Intangible assets, net

   13      4,795,377        4,908,473  

Defined benefit assets, net

   19      13,445        4,280  

Deferred tax assets

        1,281,442        1,237,285  

Other non-current assets

   14      275,703        325,241  
     

 

 

    

 

 

 

Total non-current assets

        44,365,724        44,216,287  
     

 

 

    

 

 

 

Total assets

      W 82,111,847        79,058,661  
     

 

 

    

 

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

3


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of June 30, 2020 and December 31, 2019

(Unaudited)

 

 

(in millions of Won)    Notes    June 30, 2020     December 31, 2019  

Liabilities

       

Trade accounts and notes payable

   21,34    W 3,272,488       3,422,922  

Short-term borrowings and current installments of long-term borrowings

   4,15,21      10,676,978       8,548,212  

Other payables

   16,21,34      1,755,225       1,879,508  

Other short-term financial liabilities

   17,21      107,762       77,827  

Current income tax liabilities

        369,517       396,616  

Liabilities directly associated with the assets held for sale

   8      —         8  

Provisions

   18,35      292,437       360,495  

Other current liabilities

   20,26,27      1,791,224       1,638,102  
     

 

 

   

 

 

 

Total current liabilities

        18,265,631       16,323,690  
     

 

 

   

 

 

 

Long-term trade accounts and notes payable

   21      14,095       20,067  

Long-term borrowings, excluding current installments

   15,21      13,411,809       11,893,401  

Other payables

   16,21      613,401       585,129  

Other long-term financial liabilities

   17,21      17,224       31,494  

Defined benefit liabilities, net

   19      222,937       181,011  

Deferred tax liabilities

        1,482,859       1,691,498  

Long-term provisions

   18,35      448,741       458,154  

Other non-current liabilities

   20,26      42,004       79,510  
     

 

 

   

 

 

 

Total non-current liabilities

        16,253,070       14,940,264  
     

 

 

   

 

 

 

Total liabilities

        34,518,701       31,263,954  
     

 

 

   

 

 

 

Equity

       

Share capital

   22      482,403       482,403  

Capital surplus

   22      1,335,149       1,376,251  

Hybrid bonds

   23      199,384       199,384  

Reserves

   24      (1,169,286     (1,157,980

Treasury shares

   25      (1,573,126     (1,508,303

Retained earnings

        45,056,397       45,080,117  
     

 

 

   

 

 

 

Equity attributable to owners of the controlling company

        44,330,921       44,471,872  

Non-controlling interests

   23      3,262,225       3,322,835  
     

 

 

   

 

 

 

Total equity

        47,593,146       47,794,707  
     

 

 

   

 

 

 

Total liabilities and equity

      W 82,111,847       79,058,661  
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

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Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won, except per share information)         For the three-month periods
ended June 30
    For the six-month periods
ended June 30
 
     Notes    2020     2019     2020     2019  

Revenue

   26,27,34,37    W 13,721,554       16,321,335       28,267,367       32,335,573  

Cost of sales

   7,27,31,34      (12,987,612     (14,707,162     (26,223,142     (28,908,029
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        733,942       1,614,173       2,044,225       3,427,544  

Selling and administrative expenses

   31,34         

Reversal of (impairment loss) on trade accounts and notes receivable

        (25,337     21,129       (35,325     7,998  

Other administrative expenses

   28      (456,541     (476,537     (933,607     (982,620

Selling expenses

   28      (84,348     (90,203     (202,326     (181,463
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

        167,716       1,068,562       872,967       2,271,459  

Share of profit (loss) of equity-accounted investees, net

   9      (11,530     74,670       20,134       141,529  

Finance income and costs

   21,29         

Finance income

        210,669       532,862       1,530,093       1,026,876  

Finance costs

        (232,049     (609,932     (1,577,325     (1,160,525

Other non-operating income and expenses

   34         

Reversal of (impairment loss) on other receivables

        410       (12,026     (787     (15,416

Other non-operating income

   30      102,603       83,024       166,904       157,368  

Other non-operating expenses

   30,31      (103,673     (166,679     (217,437     (303,869
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax

   37      134,146       970,481       794,549       2,117,422  

Income tax expense

   32,37      (29,278     (289,063     (255,023     (657,559
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit

        104,868       681,418       539,526       1,459,863  

Other comprehensive income (loss)

           

Items that will not be reclassified subsequently to profit or loss:

           

Remeasurements of defined benefit plans

   19      1,198       (11,175     (2,652     (20,881

Net changes in fair value of equity investments at fair value through other comprehensive income

   21      36,870       23,383       (165,966     17,844  

Items that are or may be reclassified subsequently to profit or loss:

           

Capital adjustment arising from investments in equity-accounted investees

        142,902       24,000       81,696       72,838  

Foreign currency translation differences

        70,576       98,502       66,142       219,663  

Gains or losses on valuation of derivatives

   21      (784     (132     (841     (100
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

        250,762       134,578       (21,621     289,364  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      W 355,630       815,996       517,905       1,749,227  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit attributable to:

           

Owners of the controlling company

      W 40,282       612,286       435,675       1,353,539  

Non-controlling interests

        64,586       69,132       103,851       106,324  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit

      W 104,868       681,418       539,526       1,459,863  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to:

           

Owners of the controlling company

      W 282,755       742,367       412,741       1,654,770  

Non-controlling interests

        72,875       73,629       105,164       94,457  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      W 355,630       815,996       517,905       1,749,227  
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings per share (in Won)

   33      483       7,622       5,400       16,854  

 

See accompanying notes to the condensed consolidated interim financial statements.

 

5


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Attributable to owners of the controlling company     Non-
controlling
interests
    Total  
     Share
capital
     Capital
surplus
    Hybrid
bonds
     Reserves     Treasury
shares
    Retained
earnings
    Subtotal  

Balance as of January 1, 2019

   W 482,403        1,410,551       199,384        (1,404,368     (1,532,728     44,216,018       43,371,260       3,388,291       46,759,551  

Comprehensive income:

                    

Profit

     —          —         —          —         —         1,353,539       1,353,539       106,324       1,459,863  

Other comprehensive income (loss)

                    

Remeasurements of defined benefit plans, net of tax

     —          —         —          —         —         (10,624     (10,624     (10,257     (20,881

Capital adjustment arising from investments in equity-accounted investees, net of tax

     —          —         —          66,589       —         —         66,589       6,249       72,838  

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

     —          —         —          36,311       —         (18,467     17,844       —         17,844  

Foreign currency translation differences, net of tax

     —          —         —          227,517       —         —         227,517       (7,854     219,663  

Gains or losses on valuation of derivatives, net of tax

     —          —         —          (95     —         —         (95     (5     (100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —         —          330,322       —         1,324,448       1,654,770       94,457       1,749,227  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the controlling company, recognized directly in equity:

                    

Year-end dividends

     —          —         —          —         —         (400,006     (400,006     (60,202     (460,208

Interim dividends

     —          —         —          —         —         (160,231     (160,231     —         (160,231

Changes in subsidiaries

     —          —         —          —         —         —         —         (874     (874

Changes in ownership interest in subsidiaries

     —          (49,889     —          —         —         —         (49,889     7,172       (42,717

Interest of hybrid bonds

     —          —         —          —         —         (4,562     (4,562     (3,617     (8,179

Disposal of treasury shares

     —          12,576       —          —         24,425       —         37,001       —         37,001  

Others

     —          1,700       —          (38,218     —         45,204       8,686       (8,285     401  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners of the controlling company

     —          (35,613     —          (38,218     24,425       (519,595     (569,001     (65,806     (634,807
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2019

   W 482,403        1,374,938       199,384        (1,112,264     (1,508,303     45,020,871       44,457,029       3,416,942       47,873,971  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

6


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Attributable to owners of the controlling company     Non-
controlling
interests
    Total  
     Share
capital
     Capital
surplus
    Hybrid
bonds
     Reserves     Treasury
shares
    Retained
earnings
    Subtotal  

Balance as of January 1, 2020

   W 482,403        1,376,251       199,384        (1,157,980     (1,508,303     45,080,117       44,471,872       3,322,835       47,794,707  

Comprehensive income:

                    

Profit

     —          —         —          —         —         435,675       435,675       103,851       539,526  

Other comprehensive income (loss)

                    

Remeasurements of defined benefit plans, net of tax

     —          —         —          —         —         (2,768     (2,768     116       (2,652

Capital adjustment arising from investments in equity-accounted investees, net of tax

     —          —         —          77,600       —         —         77,600       4,096       81,696  

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

     —          —         —          (162,981     —         (2,985     (165,966     —         (165,966

Foreign currency translation differences, net of tax

     —          —         —          69,000       —         —         69,000       (2,858     66,142  

Gains or losses on valuation of derivatives, net of tax

     —          —         —          (799     —         —         (799     (42     (841
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —         —          (17,180     —         429,922       412,742       105,163       517,905  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the controlling company, recognized directly in equity:

                    

Year-end dividends

     —          —         —          —         —         (320,462     (320,462     (60,517     (380,979

Interim dividends

     —          —         —          —         —         (120,174     (120,174     —         (120,174

Changes in ownership interest in subsidiaries

     —          (6,766     —          —         —         —         (6,766     139,008       132,242  

Repayment of redeemable convertible preferred shares

     —          (33,581     —          —         —         —         (33,581     (245,000     (278,581

Interest of hybrid bonds

     —          —         —          —         —         (4,587     (4,587     (3,637     (8,224

Acquisition of treasury shares

     —          —         —          —         (64,823     —         (64,823     —         (64,823

Others

     —          (755     —          5,874       —         (8,419     (3,300     4,373       1,073  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners of the controlling company

     —          (41,102     —          5,874       (64,823     (453,642     (553,693     (165,773     (719,466
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2020

   W 482,403        1,335,149       199,384        (1,169,286     (1,573,126     45,056,397       44,330,921       3,262,225       47,593,146  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

7


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Notes      June 30, 2020     June 30, 2019  

Cash flows from operating activities

       

Profit

      W 539,526       1,459,863  

Adjustments for:

       

Depreciation

        1,555,037       1,523,108  

Amortization

        230,394       203,733  

Finance income

        (749,166     (562,510

Finance costs

        894,470       712,547  

Income tax expense

        255,023       657,559  

Impairment loss on property, plant and equipment

        21,400       149,659  

Gain on disposal of property, plant and equipment

        (7,346     (16,362

Loss on disposal of property, plant and equipment

        78,989       37,396  

Impairment loss on other intangible assets

        1,184       1,171  

Gain on disposal of investments in subsidiaries, associates and joint ventures

        (41,339     (15,821

Loss on disposal of investments in subsidiaries, associates and joint ventures

        10,073       5,586  

Share of profit of equity-accounted investees

        (20,134     (141,529

Impairment loss on assets held for sale

        5,030       3,346  

Expenses related to post-employment benefit

        123,989       117,226  

Impairment loss on trade and other receivables

        36,112       7,418  

Loss on valuation of inventories

        129,398       73,600  

Increase to provisions

        19,156       82,759  

Others, net

        (14,354     (31,972
     

 

 

   

 

 

 
        2,527,916       2,806,914  
     

 

 

   

 

 

 

Changes in operating assets and liabilities

     36        1,205,502       (553,728

Interest received

        175,455       188,096  

Interest paid

        (346,723     (389,714

Dividends received

        140,616       156,730  

Income taxes paid

        (391,928     (973,112
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 3,850,364       2,695,049  
     

 

 

   

 

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

8


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Notes      June 30, 2020     June 30, 2019  

Cash flows from investing activities

       

Acquisitions of short-term financial instruments

      W (21,020,169     (15,440,039

Proceeds from disposal of short-term financial instruments

        19,491,360       16,213,040  

Increase in loans

        (503,914     (164,574

Collection of loans

        544,806       190,831  

Acquisitions of securities

        (674,767     (370,458

Proceeds from disposal of securities

        270,642       165,242  

Acquisitions of investment in associates and joint ventures

        (85,908     (45,980

Proceeds from disposal of investment in associates and joint ventures

        7,591       3,598  

Acquisitions of investment property

        (3,907     (12,230

Proceeds from disposal of investment property

        250       1,127  

Acquisitions of property, plant and equipment

        (1,622,465     (990,483

Proceeds from disposal of property, plant and equipment

        (19,139     30,957  

Acquisitions of intangible assets

        (197,535     (158,570

Proceeds from disposal of intangible assets

        71,304       9,226  

Proceeds from disposal of assets held for sale

        590       311  

Collection of lease receivables

        27,453       19,107  

Payment for acquisition of business, net of cash acquired

        —         (33,014

Cash received from disposal of business, net of cash transferred

        38,360       34,266  

Others, net

        (3,860     9,460  
     

 

 

   

 

 

 

Net cash used in investing activities

        (3,679,308     (538,183
     

 

 

   

 

 

 

Cash flows from financing activities

       

Proceeds from borrowings

        3,218,540       892,587  

Repayment of borrowings

        (1,044,881     (1,372,044

Proceeds from (repayment of) short-term borrowings, net

        994,266       (1,131,449

Capital contribution from non-controlling interests

        139,008       23,579  

Payment of cash dividends

        (500,915     (625,406

Acquisition of treasury shares

        (64,823     —    

Payment of interest of hybrid bonds

        (8,250     (8,204

Repayment of lease liabilities

        (96,092     (85,989

Repayment of redeemable convertible preferred shares

        (278,581     —    

Others, net

        (7,987     1,485  
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        2,350,285       (2,305,441
     

 

 

   

 

 

 

Effect of exchange rate fluctuation on cash held

        4,698       57,956  
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        2,526,039       (90,619

Cash and cash equivalents at beginning of the period

     8        3,515,246       2,643,865  
     

 

 

   

 

 

 

Cash and cash equivalents at end of the period

     8      W 6,041,285       2,553,246  
     

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

9


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of June 30, 2020

(Unaudited)

 

 

1. General Information

General information about POSCO, its 33 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 131 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 133 associates and joint ventures are as follows:

 

(a)

The controlling company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea, to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of POSCO have been listed on the Korea Exchange since June 10, 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through six of its overseas liaison offices.

As of June 30, 2020, the shares of the POSCO are listed on the Korea Exchange, while its American Depository Receipts (ADRs) are listed on the New York Stock Exchange.

 

(b)

Consolidated subsidiaries newly included during the six-month period ended June 30, 2020, were as follows:

 

Company

   Date of inclusion    Ownership (%)      Reason  

Posco International (Thailand) Co., Ltd.

   January 2020      100.00        New establishment  

PT POSCO INTERNATIONAL INDONESIA

   January 2020      100.00        New establishment  

POSCO SPS CORPORATION

   April 2020      100.00        New establishment  

 

(c)

Subsidiaries excluded from consolidation during the six-month period ended June 30, 2020, were as follows:

 

Company

   Date of exclusion    Reason

LA-SRDC

   April 2020    Liquidation

POSCO China Dalian Plate Processing Center Co., Ltd.

   June 2020    Disposal

 

10


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

2. Statement of Compliance

Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Companies, Etc. in the Republic of Korea.

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

 

(a)

Judgments, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

With the outbreak of COVID-19 pandemic, governments around the globe have implemented measures such as mandatory factory shutdown, shelter-in-place orders, border closures, and travel restrictions. The ultimate impact of COVID-19 pandemic on the Company’s operations is not yet known and will depend on future developments. The duration and significance of COVID-19 is highly uncertain and unpredictable, and the protective measures by the governments around the globe or the Company may lead to substantial business interruption and decrease in business scale. The financial impact of this cannot be reasonably estimated, but management expects the Company to be partially affected to the most areas where it operates. The extent and duration of COVID-19’s impact on the Company’s business cannot yet be reasonably estimated.

 

11


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

Significant valuation issues are reported to the Company’s Audit Committee.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

•  Level 1

      unadjusted quoted prices in active markets for identical assets or liabilities.

•  Level 2

      inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly.

•  Level 3

      inputs for the assets or liabilities that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

12


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2020.

 

(a)

K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors”

The definition of materiality has been clarified, and K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors” have been amended according to the clarified definition. In determining the materiality, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

 

(b)

K-IFRS No. 1103 “Business Combinations”

The amendment clarifies the definition of business when it includes input and process together significantly contribute to ability to create output and requires a simplified assessment that result in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The Company does not expect the effect of the amendment to the consolidated financial statements to be significant.

 

(c)

K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments: Recognition and Measurement”, K-IFRS No. 1107 “Financial Instruments: Disclosures”

The amendments require the application of exceptions to the analysis of future prospects in relation to the application of hedge accounting while uncertainty exists due to the interest rate benchmark reform. The exception assumes that when assessing whether the expected cash flows based on existing interest rate indicators are highly probable, whether there is an economic relationship between the hedged item and the hedging instrument, or whether the hedge relationship between the hedged item and the hedging instrument is highly probable, the interest rate benchmark that the hedged item and the hedging instrument comply with does not change as a result of the interest rate benchmark reform. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

 

13


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Trade accounts and notes receivable

   W 7,730,664        8,352,968  

Finance lease receivables

     234        221  

Due from customers for contract work

     1,266,197        1,136,436  

Less: Allowance for doubtful accounts

     (435,565      (411,274
  

 

 

    

 

 

 
   W 8,561,530        9,078,351  
  

 

 

    

 

 

 

Non-current

     

Trade accounts and notes receivable

   W 179,984        209,310  

Finance lease receivables

     44,740        43,725  

Less: Allowance for doubtful accounts

     (55,391      (54,250
  

 

 

    

 

 

 
   W 169,333        198,785  
  

 

 

    

 

 

 

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to W240,786 million and W244,305 million as of June 30, 2020 and December 31, 2019, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and is recognized as short-term borrowings from financial institutions.

5. Other Receivables

Other receivables as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Loans

   W 305,784        367,580  

Other accounts receivable

     947,622        971,845  

Accrued income

     333,663        272,528  

Deposits

     67,742        86,519  

Others

     21,007        14,510  

Lease receivables

     51,009        48,744  

Less: Allowance for doubtful accounts

     (164,819      (180,209
  

 

 

    

 

 

 
   W 1,562,008        1,581,517  
  

 

 

    

 

 

 

Non-current

     

Loans

   W 713,916        701,529  

Other accounts receivable

     222,348        209,039  

Accrued income

     75,686        65,275  

Deposits

     281,286        238,261  

Lease receivables

     169,230        179,315  

Less: Allowance for doubtful accounts

     (257,012      (252,540
  

 

 

    

 

 

 
   W 1,205,454        1,140,879  
  

 

 

    

 

 

 

 

14


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

6. Other Financial Assets

Other financial assets as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Derivatives assets

   W 142,578        47,541  

Debt securities

     690,538        342,371  

Deposit instruments(*1,2)

     2,742,343        1,744,895  

Short-term financial instruments(*2)

     7,421,262        6,861,242  
  

 

 

    

 

 

 
   W 10,996,721        8,996,049  
  

 

 

    

 

 

 

Non-current

     

Derivatives assets

   W 192,994        64,737  

Equity securities(*3)

     1,017,957        1,204,902  

Debt securities

     19,272        25,555  

Other securities(*3)

     311,402        340,008  

Deposit instruments(*2)

     54,156        34,187  
  

 

 

    

 

 

 
   W 1,595,781        1,669,389  
  

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, W5,689 million and W4,524 million, respectively, are restricted for the use in government projects.

(*2)

As of June 30, 2020 and December 31, 2019, financial instruments amounting to W74,830 million and W73,525 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3)

As of June 30, 2020 and December 31, 2019, W108,792 million and W109,395 million of equity and other securities, respectively, have been provided as collateral for borrowings, construction projects and others.

7. Inventories

Inventories as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Finished goods

   W 1,610,663        1,655,228  

Merchandise

     946,938        1,058,874  

Semi-finished goods

     1,587,368        2,097,289  

Raw materials

     2,789,427        2,656,341  

Fuel and materials

     906,740        1,026,133  

Construction inventories

     848,098        734,649  

Materials-in-transit

     1,205,936        1,824,044  

Others

     65,580        83,905  
  

 

 

    

 

 

 
     9,960,750        11,136,463  
  

 

 

    

 

 

 

Less: Allowance for inventories valuation

     (217,295      (216,143
  

 

 

    

 

 

 
   W 9,743,455        10,920,320  
  

 

 

    

 

 

 

The amounts of loss on valuation of inventories recognized in cost of sales during the six-month period ended June 30, 2020 and the year ended December 31, 2019 were W129,398 million and W96,201 million, respectively.

 

15


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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

8. Assets Held for Sale

Details of assets held for sale as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  
     The controlling
company(*1)
     Subsidiaries(*2)      Total      The controlling
company(*1)
     Subsidiaries      Total  

Asset

                 

Cash and cash equivalents(*3)

   W —          3,019        3,019        —          374        374  

Other financial assets

     —          43,734        43,734        —          185        185  

Property, plant and equipment

     31,705        —          31,705        36,321        32,972        69,293  

Others

     812        38        850        —          4,306        4,306  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 32,517        46,791        79,308        36,321        37,837        74,158  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liability

                 

Others

   W —          —          —          —          8        8  

 

(*1)

During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM plants, and classified the assets as held for sale. During the six-month period ended June 30, 2020, the Company recognized W5,030 million of impairment loss for the difference between the fair value less costs to sell and the carrying amount of the assets.

(*2)

During the six-month period ended June 30, 2020, the Company classified its assets in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale, since it is to be dissolved at its maturity.

(*3)

Cash and cash equivalents in the statement of cash flows include cash and cash equivalents that are classified as assets held for sale.

 

16


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

9. Investments in Associates and Joint ventures

 

(a)

Details of investments in associates as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)   June 30, 2020     December 31,
2019
 

Company

  Number
of shares
    Ownership
(%)
    Acquisition
cost
    Book value     Book value  

[Domestic]

         

EQP POSCO Global NO1 Natural Resources Private Equity Fund

    178,787,468,209       33.41     W 178,787     W 175,248       175,907  

Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1,2)

    4,507,138       34.00       179,410       154,267       161,280  

SNNC

    18,130,000       49.00       90,650       140,813       142,602  

QSONE Co.,Ltd.

    200,000       50.00       84,395       85,634       85,887  

Chun-cheon Energy Co., Ltd(*1)

    17,308,143       49.10       86,541       48,973       56,679  

Western Inland highway CO.,LTD.

    8,818,236       29.80       44,091       43,552       5,115  

Nextrain Co., Ltd.

    8,321,920       32.00       41,610       39,932       41,447  

Keystone NO. 1. Private Equity Fund

    22,523,123       52.58       22,523       19,437       19,438  

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

    2,008,000       29.53       10,040       17,250       17,824  

Daesung Steel(*3)

    108,038       17.54       14,000       15,281       15,375  

PCC Amberstone Private Equity Fund 1(*3)

    8,670,897,169       8.80       8,671       9,230       9,570  

Others (57 companies)(*1)

          111,339       114,490  
       

 

 

   

 

 

 
          860,956       845,614  
       

 

 

   

 

 

 

[Foreign]

         

South-East Asia Gas Pipeline Company Ltd.

    135,219,000       25.04       135,899       229,364       225,933  

AES-VCM Mong Duong Power Company Limited(*4)

    —         30.00       164,303       181,333       178,892  

9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3,5)

    114,452,000       10.40       124,341       137,516       131,529  

Eureka Moly LLC

    —         20.00       240,123       88,505       85,349  

AMCI (WA) PTY LTD

    49       49.00       209,664       72,662       72,937  

NCR LLC

    —         29.40       49,744       47,845       46,391  

KOREA LNG LTD.

    2,400       20.00       135,205       46,582       46,557  

Nickel Mining Company SAS

    3,234,698       49.00       157,585       38,631       37,940  

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

    134,400,000       40.00       22,423       22,719       22,356  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

    10,200,000       34.00       9,517       15,411       15,128  

PT. Wampu Electric Power(*1)

    8,708,400       20.00       10,054       14,556       13,363  

PT. Batutua Tembaga Raya

    128,285       22.00       21,824       10,274       14,717  

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

    50       25.00       4,723       7,015       6,755  

Others (27 companies)(*1)

          103,407       121,048  
       

 

 

   

 

 

 
          1,015,820       1,018,895  
       

 

 

   

 

 

 
        W 1,876,776       1,864,509  
       

 

 

   

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, investments in associates amounting to W278,999 million and W258,754 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2)

During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3)

As of June 30, 2020, it was classified as an associate even though the Company’s ownership percentage is less than 20% of ownership percentage since the Company has significant influence over the investee when considering its structure of the Board of Directors and others.

(*4)

As of June 30, 2020 and December 31, 2019, shares of PSC Energy Global Co., Ltd., a subsidiary of the Company, are provided as collateral in relation to the associates’ borrowings.

(*5)

During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

 

17


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

Details of investments in joint ventures as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31,
2019
 

Company

   Number
of shares
     Ownership
(%)
     Acquisition
cost
     Book value      Book value  

[Domestic]

              

POSCO MITSUBISHI CARBON TECHNOLOGY

     11,568,000        60.00      W 115,680      W 150,859        182,648  

Others (8 companies)

              13,597        10,305  
           

 

 

    

 

 

 
              164,456        192,953  
           

 

 

    

 

 

 

[Foreign]

              

Roy Hill Holdings Pty Ltd(*1)

     13,117,972        12.50        1,528,672        1,326,394        1,235,682  

POSCO-NPS Niobium LLC

     325,050,000        50.00        364,609        390,336        376,410  

KOBRASCO

     2,010,719,185        50.00        32,950        54,813        115,641  

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     —          25.00        61,961        91,406        88,935  

DMSA/AMSA(*1,2)

     —          4.06        398,970        52,678        12,189  

CSP - Compania Siderurgica do Pecem

     1,367,314,532        20.00        631,796        —          —    

Others (10 companies)

              33,813        41,436  
           

 

 

    

 

 

 
              1,949,440        1,870,293  
           

 

 

    

 

 

 
            W 2,113,896        2,063,246  
           

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, the investments in joint ventures are provided as collateral in relation to the joint ventures’ borrowings.

(*2)

All investors of the joint venture have entered into an agreement to extend the due date for loans made to the joint venture as a means of financial support. However, the Company believes the above agreement for financial support is invalid and is currently in arbitration process for annulment. The Company’s obligation to provide financial support is currently on hold and may change depending on the result of the arbitration.

 

18


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(c)

The movements of investments in associates and joint ventures for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

  1)

For the six-month period ended June 30, 2020

 

(in millions of Won)                                       

Company

   December 31,
2019
Book value
     Acquisition      Dividends     Share of
profits (losses)
    Other increase
(decrease)(*1)
    June 30,
2020
Book value
 

[Domestic]

              

EQP POSCO Global NO1 Natural Resources Private Equity Fund

   W 175,907        —          —         (659     —         175,248  

Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*2)

     161,280        —          —         (1,602     (5,411     154,267  

SNNC

     142,602        —          (2,901     (805     1,917       140,813  

QSONE Co.,Ltd.

     85,887        —          (1,140     887       —         85,634  

Chun-cheon Energy Co., Ltd

     56,679        —          —         (8,079     373       48,973  

Western Inland highway CO.,LTD.

     5,115        38,670        —         (236     3       43,552  

Nextrain Co., Ltd.

     41,447        —          —         (1,515     —         39,932  

Keystone NO. 1. Private Equity Fund

     19,438        —          —         (1     —         19,437  

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

     17,824        —          —         (574     —         17,250  

Daesung Steel

     15,375        —          —         (94     —         15,281  

PCC Amberstone Private Equity Fund 1

     9,570        —          (378     121       (83     9,230  

POSCO MITSUBISHI CARBON TECHNOLOGY

     182,648        —          (19,401     (12,388     —         150,859  

Others (65 companies)

     124,795        9,614        (348     (12,591     3,466       124,936  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     1,038,567        48,284        (24,168     (37,536     265       1,025,412  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

[Foreign]

              

South-East Asia Gas Pipeline Company Ltd.

     225,933        —          (29,933     24,736       8,628       229,364  

AES-VCM Mong Duong Power Company Limited

     178,892        —          (12,753     19,291       (4,097     181,333  

9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3)

     131,529        —          (7,380     8,163       5,204       137,516  

Eureka Moly LLC

     85,349        —          —         (7     3,163       88,505  

AMCI (WA) PTY LTD

     72,937        —          —         (1,542     1,267       72,662  

NCR LLC

     46,391        —          —         (427     1,881       47,845  

KOREA LNG LTD.

     46,557        —          (5,331     5,279       77       46,582  

Nickel Mining Company SAS

     37,940        —          —         (993     1,684       38,631  

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

     22,356        —          —         (168     531       22,719  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     15,128        —          —         (142     425       15,411  

PT. Wampu Electric Power

     13,363        —          —         707       486       14,556  

PT. Batutua Tembaga Raya

     14,717        —          —         (4,758     315       10,274  

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     6,755        —          —         (3     263       7,015  

Roy Hill Holdings Pty Ltd

     1,235,682        —          —         63,198       27,514       1,326,394  

POSCO-NPS Niobium LLC

     376,410        —          (4,774     4,733       13,967       390,336  

KOBRASCO

     115,641        —          (37,922     5,832       (28,738     54,813  

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     88,935        —          —         481       1,990       91,406  

DMSA/AMSA

     12,189        52,692        —         (14,279     2,076       52,678  

CSP - Compania Siderurgica do Pecem

     —          37,623        —         (42,126     4,503       —    

Others (37 companies)

     162,484        —          (10,329     (10,305     (4,630     137,220  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     2,889,188        90,315        (108,422     57,670       36,509       2,965,260  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 3,927,755        138,599        (132,590     20,134       36,774       3,990,672  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments effect from translations of financial statements of foreign investees and others.

(*2)

During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3)

During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

 

19


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

For the year ended December 31, 2019

 

(in millions of Won)                                       

Company

   December 31,
2018
Book value
     Acquisition      Dividends     Share of
profits (losses)
    Other increase
(decrease)(*1)
    December 31,
2019
Book value
 

[Domestic]

              

EQP POSCO Global NO1 Natural Resources Private Equity Fund

   W 174,123        —          —         (976     2,760       175,907  

Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*2)

     161,477        —          —         (4,744     4,547       161,280  

SNNC

     116,922        —          (1,450     27,655       (525     142,602  

QSONE Co.,Ltd.

     85,550        —          (950     1,287       —         85,887  

Chun-cheon Energy Co., Ltd

     62,478        6,050        —         (11,849     —         56,679  

Western Inland highway CO.,LTD.

     1,494        3,752        —         (167     36       5,115  

Nextrain Co., Ltd.

     10        41,600        —         (163     —         41,447  

Keystone NO. 1. Private Equity Fund

     11,183        8,723        —         (342     (126     19,438  

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

     17,382        —          —         442       —         17,824  

Daesung Steel

     15,644        —          —         (269     —         15,375  

PCC Amberstone Private Equity Fund 1

     9,693        —          (723     1,079       (479     9,570  

POSCO MITSUBISHI CARBON TECHNOLOGY

     180,192        —          (16,369     19,377       (552     182,648  

Others (62 companies)

     143,578        27,221        (669     (24,448     (20,887     124,795  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     979,726        87,346        (20,161     6,882       (15,226     1,038,567  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

[Foreign]

              

South-East Asia Gas Pipeline Company Ltd.

     179,459        —          (24,267     63,749       6,992       225,933  

AES-VCM Mong Duong Power Company Limited

     209,936        —          (18,099     24,126       (37,071     178,892  

9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3)

     126,885        —          (9,902     9,912       4,634       131,529  

Eureka Moly LLC

     82,447        —          —         (25     2,927       85,349  

AMCI (WA) PTY LTD

     71,086        —          —         (4,377     6,228       72,937  

NCR LLC

     37,602        9,605        —         (822     6       46,391  

KOREA LNG LTD.

     43,554        —          (13,404     13,501       2,906       46,557  

Nickel Mining Company SAS

     41,712        —          —         (4,250     478       37,940  

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

     —          22,423        —         61       (128     22,356  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     14,796        —          —         10       322       15,128  

PT. Wampu Electric Power

     14,120        —          —         (1,247     490       13,363  

PT. Batutua Tembaga Raya

     20,479        —          —         (6,209     447       14,717  

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     6,478        —          —         80       197       6,755  

Roy Hill Holdings Pty Ltd

     1,041,600        —          —         158,562       35,520       1,235,682  

POSCO-NPS Niobium LLC

     363,506        —          (24,933     24,543       13,294       376,410  

KOBRASCO

     133,449        —          (74,716     56,474       434       115,641  

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     88,391        —          (1,574     665       1,453       88,935  

DMSA/AMSA

     26,709        23,682        —         (40,415     2,213       12,189  

CSP - Compania Siderurgica do Pecem

     24,832        35,352        —         (57,647     (2,537     —    

Others (38 companies)

     143,236        552        (19,430     30,168       7,958       162,484  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     2,670,277        91,614        (186,325     266,859       46,763       2,889,188  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 3,650,003        178,960        (206,486     273,741       31,537       3,927,755  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments effect from translations of financial statements of foreign investees and others.

(*2)

During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3)

During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

 

20


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(d)

Summarized financial information of associates and joint ventures as of and for the six-month period ended June 30, 2020 and the year ended December 31, 2019 are as follows:

 

  1)

June 30, 2020

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Domestic]

             

EQP POSCO Global NO1 Natural Resources Private Equity Fund

   W 514,469        570        513,899       —          (1,974

Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1)

     956,378        467,794        488,584       —          (2,705

SNNC

     534,166        230,490        303,676       299,820        (10,070

QSONE Co.,Ltd.

     249,626        78,357        171,269       8,366        1,774  

Chun-cheon Energy Co., Ltd

     613,715        513,012        100,703       126,067        (16,766

Western Inland highway CO.,LTD.

     155,127        9,847        145,280       —          (791

Nextrain Co., Ltd.

     139,400        11,758        127,642       —          (1,239

Keystone NO. 1. Private Equity Fund

     184,366        135,430        48,936       9,678        119  

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

     53,271        25,168        28,103       4,197        (1,944

Daesung Steel

     168,164        112,428        55,736       37,567        (532

PCC Amberstone Private Equity Fund 1

     104,936        4        104,932       6,379        1,377  

POSCO MITSUBISHI CARBON TECHNOLOGY

     439,971        188,618        251,353       54,254        (20,022

[Foreign]

             

South-East Asia Gas Pipeline Company Ltd.

     1,784,195        868,215        915,980       229,933        98,785  

9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*2)

     1,334,428        3        1,334,425       —          78,489  

KOREA LNG LTD.

     233,268        356        232,912       27,403        26,394  

Nickel Mining Company SAS

     493,816        361,745        132,071       98,514        (13,569

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

     74,173        17,554        56,619       96        (546

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     71,036        20,083        50,953       44,913        (419

PT. Wampu Electric Power

     229,179        159,480        69,699       9,627        3,537  

PT. Batutua Tembaga Raya

     429,571        419,014        10,557       30,787        (22,099

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     62,771        34,263        28,508       31,476        (9

Roy Hill Holdings Pty Ltd

     8,129,371        1,917,673        6,211,698       1,949,870        666,933  

POSCO-NPS Niobium LLC

     780,468        —          780,468       —          9,465  

KOBRASCO

     156,151        46,526        109,625       20,991        11,663  

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     960,840        622,080        338,760       596,986        2,617  

DMSA/AMSA

     5,720,392        3,288,368        2,432,024       219,424        (356,736

CSP - Compania Siderurgica do Pecem

     3,001,764        4,148,534        (1,146,770     669,786        (1,213,081

 

(*1)

During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*2)

During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

December 31, 2019

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Domestic]

             

EQP POSCO Global NO1 Natural Resources Private Equity Fund

   W 516,659        786        515,873       —          7,479  

Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1)

     707,051        199,846        507,205       —          (5,294

SNNC

     677,508        357,843        319,665       738,977        63,269  

QSONE Co.,Ltd.

     250,364        78,589        171,775       17,591        2,576  

Chun-cheon Energy Co., Ltd

     610,089        492,620        117,469       313,438        (24,677

Western Inland highway CO.,LTD.

     21,980        5,165        16,815       —          (528

Nextrain Co., Ltd.

     136,203        7,322        128,881       —          (509

Keystone NO. 1. Private Equity Fund

     187,156        138,219        48,937       18,342        (887

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

     53,019        22,971        30,048       17,824        1,497  

Daesung Steel

     164,708        108,441        56,267       85,537        (1,536

PCC Amberstone Private Equity Fund 1

     108,797        5        108,792       14,787        12,280  

POSCO MITSUBISHI CARBON TECHNOLOGY

     474,387        170,678        303,709       216,648        32,334  

[Foreign]

             

South-East Asia Gas Pipeline Company Ltd.

     1,808,529        906,254        902,275       555,075        254,582  

9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*2)

     1,276,857        1        1,276,856       —          95,306  

KOREA LNG LTD.

     232,935        147        232,788       69,577        67,507  

Nickel Mining Company SAS

     471,377        331,194        140,183       245,509        2,432  

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

     73,604        17,765        55,839       641        153  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     65,413        15,232        50,181       101,101        28  

PT. Wampu Electric Power

     222,266        158,451        63,815       18,163        (6,233

PT. Batutua Tembaga Raya

     423,608        392,226        31,382       112,568        (28,360

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     61,847        33,989        27,858       77,371        327  

Roy Hill Holdings Pty Ltd

     11,143,705        5,718,152        5,425,553       5,037,471        1,660,577  

POSCO-NPS Niobium LLC

     752,617        —          752,617       —          47,521  

KOBRASCO

     268,139        36,857        231,282       167,022        112,949  

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     969,280        637,478        331,802       1,145,794        1,704  

DMSA/AMSA

     5,703,501        4,202,704        1,500,797       638,797        (504,077

CSP - Compania Siderurgica do Pecem

     3,959,365        4,249,083        (289,718     1,623,843        (465,853

 

(*1)

During the six-month period ended June 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*2)

During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of June 30, 2020 are as follows:

 

Joint operations

  

Operation

   Ownership (%)      Location

Myanmar A-1/A-3 mine

   Mine development and gas production      51.00      Myanmar

Offshore Midstream

   Gas transportation facility      51.00      Myanmar

Greenhills Mine

   Mine development      20.00      Canada

Arctos Anthracite Coal Project

   Mine development      50.00      Canada

Mt. Thorley J/V

   Mine development      20.00      Australia

POSMAC J/V

   Mine development      20.00      Australia

RUM J/V

   Mine development      10.00      Australia

Hanam-Gamil package public housing project

   Construction      7.70      Korea

Hanam-Gamil district B6, C2, C3 Block public housing lot development project

   Construction      27.00      Korea

Yangsan-Sasong district public housing project(private-participation)

   Construction      13.08      Korea

Yangsan-Sasong district public housing project

   Construction      49.00      Korea

Sejong 2-1 P3 Block public housing project

   Construction      37.00      Korea

Yongin-Giheung Station area city development project

   Construction      61.00      Korea

Korean wave world complex land multi-purpose building development project

   Construction      33.30      Korea

Sejong 4-1 P3 Block public housing project

   Construction      60.00      Korea

11. Investment Property, Net

Changes in the carrying amount of investment property for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

(a)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Others(*1)     Ending  

Land

   W 278,465        2,814        (183     —         (3,920     277,176  

Buildings

     598,159        3,316        —         (12,771     9,220       597,924  

Structures

     1,178        —          —         (306     293       1,165  

Right-of-use assets

     425        —          (56     (5     11       375  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 878,227        6,130        (239     (13,082     5,604       876,640  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Includes reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences, and others.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation(*1)     Others(*2)     Ending  

Land

   W 278,585        —          (5,921     —         5,801       278,465  

Buildings

     571,335        1,548        (5,343     (52,416     83,035       598,159  

Structures

     1,408        —          (50     (625     445       1,178  

Right-of-use assets

     —          —          —         —         425       425  

Construction-in-progress

     77,287        18,644        —         —         (95,931     —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 928,615        20,192        (11,314     (53,041     (6,225     878,227  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Includes impairment loss on investment property recognized in relation to the office for rent of POSCO(Dalian) IT Center Development Co., Ltd. amounting to W32,642 million.

(*2)

Includes reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences, and others.

12. Property, Plant and Equipment, Net

 

(a)

Changes in the carrying amount of property, plant and equipment for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

  1)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Impairment
loss(*1)
    Others(*2)     Ending  

Land

   W 2,526,059        19,576        (1,782     —         —         21,463       2,565,316  

Buildings

     4,215,454        19,831        (3,225     (160,142     (288     207,998       4,279,628  

Structures

     2,904,506        76,180        (1,159     (112,306     (860     130,812       2,997,173  

Machinery and equipment

     17,218,264        93,823        (12,741     (1,131,809     (7,211     892,608       17,052,934  

Vehicles

     32,285        2,733        (520     (7,137     —         4,420       31,781  

Tools

     70,751        9,055        (47     (15,076     (9     7,226       71,900  

Furniture and fixtures

     130,132        8,243        (2,564     (18,449     (530     11,617       128,449  

Lease assets

     774,582        64,799        (4,188     (93,337     —         152,525       894,381  

Bearer plants

     124,193        —          —         (3,699     —         29,440       149,934  

Construction-in-progress

     1,929,747        1,323,967        (8,962     —         (12,502     (1,241,869     1,990,381  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 29,925,973        1,618,207        (35,188     (1,541,955     (21,400     216,240       30,161,877  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company estimated recoverable amount for individual assets that ceased operations due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized impairment loss since recoverable amounts are less than their carrying amounts as of June 30, 2020. In addition, during the six-month period ended June 30, 2020, the Company recognized impairment loss on certain assets due to damage from fire.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

 

24


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Acquisitions      Business
Combination
     Disposals     Depreciation     Impairment
loss(*1,2)
    Others(*3)     Ending  

Land

   W 2,548,002        6,550        —          (2,128     —         —         (26,365     2,526,059  

Buildings

     4,402,452        39,551        22,836        (10,376     (314,107     (90,036     165,134       4,215,454  

Structures

     2,917,924        49,931        2        (3,350     (228,616     (27,217     195,832       2,904,506  

Machinery and equipment

     18,518,129        175,743        1,216        (78,236     (2,250,022     (309,604     1,161,038       17,218,264  

Vehicles

     31,341        8,027        189        (742     (15,057     (559     9,086       32,285  

Tools

     66,164        19,178        5,792        (1,340     (28,537     (2,106     11,600       70,751  

Furniture and fixtures

     136,287        34,618        252        (1,630     (36,309     (1,808     (1,278     130,132  

Lease assets(*4)

     137,564        72,640        490        (8,401     (130,905     —         703,194       774,582  

Bearer plants

     80,771        —          —          —         (5,916     —         49,338       124,193  

Construction-in-progress

     1,179,639        2,261,663        17,697        (24,840     —         (10,150     (1,494,262     1,929,747  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 30,018,273        2,667,901        48,474        (131,043     (3,009,469     (441,480     773,317       29,925,973  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company estimated recoverable amount for individual assets related to CEM and Fe-Si factories, etc. that ceased operations due to the disposal plan and others using fair value less costs to sell based on the appraisal value or scrap value. The Company recognized impairment losses of W205,396 million since recoverable amounts are less than their carrying amounts.

(*2)

As of December 31, 2019, POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (formerly, POSCO SS VINA JOINT STOCK COMPANY), a subsidiary, performed the impairment test due to the consecutive operating losses and recognized impairment losses amounting to W204,546 million.

(*3)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

(*4)

On the date of initial application of K-IFRS No.1116 (January 1, 2019), recognition of W704,458 million of right-of-use assets is included in others.

 

(b)

Information on lease agreements for which the Company is a lessee is as follows:

 

  1)

Right-of-use assets

 

 

Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the six-month period ended June 30, 2020 were as follows:

 

(in millions of Won)    Beginning      Acquisitions      Depreciation     Others     Ending  

Land

   W 341,767        7,776        (10,736     14,887       353,694  

Buildings and structures

     171,112        33,828        (22,243     (4,684     178,013  

Machinery and equipment

     215,828        10,100        (29,462     929       197,395  

Vehicles

     14,105        2,849        (5,071     1,220       13,103  

Ships

     24,082        111,537        (13,826     —         121,793  

Others

     8,113        10,246        (12,004     24,403       30,758  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W  775,007        176,336        (93,342     36,755       894,756  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

 

Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the year ended December 31, 2019 were as follows:

 

(in millions of Won)    The date of
initial
application
(January 1, 2019)
     Acquisitions      Depreciation     Others     Ending  

Land

   W 340,107        22,850        (11,461     (9,729     341,767  

Buildings and structures

     209,455        23,015        (38,853     (22,505     171,112  

Machinery and equipment

     219,877        14,610        (33,751     15,092       215,828  

Vehicles

     20,555        8,735        (10,050     (5,135     14,105  

Ships

     26,499        —          (2,417     —         24,082  

Others

     25,529        3,430        (34,373     13,527       8,113  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W  842,022        72,640        (130,905     (8,750     775,007  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

  2)

The amounts recognized in profit or loss related to leases for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

     For the three-month periods      For the six-month periods  
     ended June 30      ended June 30  
(in millions of Won)    2020      2019      2020      2019  

Interest on lease liabilities

   W 8,822        8,825        17,830        17,973  

Expenses relating to short-term leases

     3,845        10,248        8,850        21,786  

Expenses relating to leases of low-value assets

     3,595        3,641        7,924        8,637  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 16,262        22,714        34,604        48,396  
  

 

 

    

 

 

    

 

 

    

 

 

 

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill and other intangible assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

(a)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Amortization     Impairment
loss
    Others(*2)     Ending  

Goodwill

   W 1,097,809        —          —         —         (761     (1,042     1,096,006  

Intellectual property rights

     2,279,210        82,752        (1,360     (143,884     —         21,574       2,238,292  

Membership(*1)

     148,078        293        (5,221     (100     (178     (28     142,844  

Development expense

     94,339        344        —         (24,227     —         11,042       81,498  

Port facilities usage rights

     281,398        —          —         (22,549     —         148       258,997  

Exploratation and evaluation assets

     77,271        7,357        —         —         —         (31,627     53,001  

Customer relationships

     374,875        —          —         (22,239     —         14       352,650  

Other intangible assets

     555,493        109,816        (61,398     (17,395     —         (14,427     572,089  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 4,908,473        200,562        (67,979     (230,394     (939     (14,346     4,795,377  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

 

26


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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Acquisitions      Business
Combination
     Disposals     Amortization     Impairment
loss(*2)
    Others(*3)     Ending  

Goodwill

   W 1,125,149        —          26,256        —         —         (55,445     1,849       1,097,809  

Intellectual property rights

     2,399,525        127,479        —          (6,566     (271,694     (2     30,468       2,279,210  

Membership(*1)

     134,793        15,636        —          (3,326     (181     24       1,132       148,078  

Development expense

     99,163        4,484        —          (35     (44,418     (666     35,811       94,339  

Port facilities usage rights

     305,081        —          —          (4,674     (22,923     —         3,914       281,398  

Exploratation and evaluation assets

     192,130        9,642        —          —         —         (123,888     (613     77,271  

Customer relationships

     421,773        —          —          —         (51,768     —         4,870       374,875  

Other intangible assets

     493,211        141,578        74        (10,718     (40,263     (10,111     (18,278     555,493  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 5,170,825        298,819        26,330        (25,319     (431,247     (190,088     59,153       4,908,473  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

In connection with exploration and evaluation of the AD-7 block in Myanmar, POSCO INTERNATIONAL Corporation failed to find economic gas. The Company recognized impairment loss of W118,140 million for the excess of the carrying amounts of related assets over the special energy loan which may be forgiven the case of project failure.

(*3)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

14. Other Assets

Other assets as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

 

  

Advance payments

   W 409,503        453,538  

Prepaid expenses

     290,506        145,834  

Firm commitment assets

     15,943        17,490  

Others

     14,717        14,315  
  

 

 

    

 

 

 
   W 730,669        631,177  
  

 

 

    

 

 

 

Non-current

     

Long-term advance payments

   W 21,884        21,950  

Long-term prepaid expenses

     81,077        41,256  

Others(*1)

     172,742        262,035  
  

 

 

    

 

 

 
   W 275,703        325,241  
  

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, the Company recognized tax assets amounting to W128,472 million and W213,071 million, respectively, based on the Company’s best estimate of the income tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years’ tax audits and claim for rectification are finalized.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

15. Borrowings

 

(a)

Short-term borrowings and current portion of long-term borrowings as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)   

Lenders

   Interest rate (%)      June 30, 2020      December 31, 2019  

Short-term borrowings

           

Bank overdrafts

   JP Morgan and others      0.20 ~ 8.00      W 207,799        159,075  

Short-term borrowings

   HSBC and others      0.21 ~ 9.75        6,335,935        5,327,258  
        

 

 

    

 

 

 
           6,543,734        5,486,333  
        

 

 

    

 

 

 

Current portion of long-term liabilities

           

Current portion of long-term borrowings

  

Export-Import Bank of Korea and others

     0.40 ~ 6.60        1,228,321        1,491,934  

Current portion of debentures

  

The Goldman Sachs Group, Inc. and others

     1.88 ~ 5.25        2,906,980        1,571,194  

Less: Current portion of discount on debentures issued

           (2,057      (1,249
        

 

 

    

 

 

 
           4,133,244        3,061,879  
        

 

 

    

 

 

 
         W 10,676,978        8,548,212  
        

 

 

    

 

 

 

 

(b)

Long-term borrowings, excluding current portion as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)   

Lenders

   Interest rate (%)      June 30, 2020      December 31, 2019  

Long-term borrowings

  

Export-Import Bank of Korea and others

     0.19 ~ 8.50      W 3,969,138        3,827,152  

Less: Present value discount

           (21,196      (24,374

Bonds

  

KB SECURITIES CO., LTD. and others

     0.50 ~ 4.12        9,508,419        8,124,194  

Less: Discount on debentures issued

           (44,552      (33,571
        

 

 

    

 

 

 
         W 13,411,809        11,893,401  
        

 

 

    

 

 

 

 

(c)

Assets pledged as collateral in regards to the borrowings as of June 30, 2020 are as follows:

 

(in millions of Won)   

Lenders

   Book value      Pledged amount  

Cash and cash equivalents

   Sinhan Bank and others    W 23,928        24,228  

Property, plant and equipment and Investment property

   Korea Development Bank and others      4,842,765        5,343,459  

Trade accounts and notes receivable

   Korea Development Bank and others      46,971        44,737  

Inventories

  

Export-Import Bank of Korea and others

     99,613        12,650  

Financial instruments

   KOOKMIN BANK and others      42,739        41,539  
     

 

 

    

 

 

 
      W 5,056,016        5,466,613  
     

 

 

    

 

 

 

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

16. Other Payables

Other payables as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Accounts payable

   W 697,924        832,845  

Accrued expenses

     680,361        742,370  

Dividend payable

     3,318        3,106  

Lease liabilities

     235,187        149,176  

Withholdings

     138,435        152,011  
  

 

 

    

 

 

 
   W 1,755,225        1,879,508  
  

 

 

    

 

 

 

Non-current

     

Accounts payable

   W 6,359        2,718  

Accrued expenses

     3,971        4,805  

Lease liabilities

     549,519        526,294  

Long-term withholdings

     53,552        51,312  
  

 

 

    

 

 

 
   W 613,401        585,129  
  

 

 

    

 

 

 

17. Other Financial Liabilities

Other financial liabilities as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Derivative liabilities

   W 54,003        28,021  

Financial guarantee liabilities

     53,759        49,806  
  

 

 

    

 

 

 
   W 107,762        77,827  
  

 

 

    

 

 

 

Non-current

     

Derivative liabilities

   W 13,097        17,033  

Financial guarantee liabilities

     4,127        14,461  
  

 

 

    

 

 

 
   W 17,224        31,494  
  

 

 

    

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

18. Provisions

 

(a)

Provisions as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  
     Current      Non-current      Current      Non-current  

Provision for bonus payments

   W 54,201        37,240        76,432        47,237  

Provision for construction warranties

     6,698        176,863        7,655        162,773  

Provision for legal contingencies and claims(*1)

     5,544        67,363        6,996        77,488  

Provision for the restoration(*2)

     5,072        81,252        6,783        80,520  

Others(*3,*4)

     220,922        86,023        262,629        90,136  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 292,437        448,741        360,495        458,154  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

The Company recognized probable outflow of resources amounting to W46,785 million and W54,228 million as provisions for legal contingencies and asserted claim in relation to lawsuits against the Company as of June 30, 2020 and December 31, 2019, respectively.

(*2)

Due to contamination of lands near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery, W19,989 million as provisions for restoration as of June 30, 2020. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available currently to restore the land to its original condition. In addition, the Company has applied a discount rate of 1.45%~1.60% to measure present value of these costs.

(*3)

As of June 30, 2020 and December 31, 2019, POSCO ENERGY CO., LTD., and Korea Fuel Cell recognized W79,934 million and W178,959 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources.

(*4)

As of June 30, 2020, the Company has recognized emission liabilities of W61,718 million for greenhouse gas emissions in excess of the quantity of free quota emission rights received, which is expected to be submitted.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

Changes in provisions for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

  1)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Increase      Utilization     Reversal     Others(*1)     Ending  

Provision for bonus payments

   W 123,669        38,770        (74,528     (1,393     4,923       91,441  

Provision for construction warranties

     170,428        27,046        (11,063     (2,358     (492     183,561  

Provision for legal contingencies and claims

     84,484        2,085        (12,893     (1,005     236       72,907  

Provision for the restoration

     87,303        12,179        (4,294     (14,555     5,691       86,324  

Others

     352,765        73,631        (72,263     (77,867     30,679       306,945  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 818,649        153,711        (175,041     (97,178     41,037       741,178  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Includes adjustments of foreign currency translation differences and others.

 

  2)

For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Increase      Utilization     Reversal     Others(*1)      Ending  

Provision for bonus payments

   W 73,478        122,714        (86,084     (3,077     16,638        123,669  

Provision for construction warranties

     142,233        53,203        (22,858     (3,444     1,294        170,428  

Provision for legal contingencies and claims

     111,150        26,407        (37,087     (18,098     2,112        84,484  

Provision for the restoration

     89,168        23,559        (13,411     (14,379     2,366        87,303  

Others

     316,287        95,747        (38,260     (86,458     65,449        352,765  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
   W 732,316        321,630        (197,700     (125,456     87,859        818,649  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

(*1)

Includes adjustments of foreign currency translation differences and others.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

19. Employee Benefits

 

(a)

Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods      For the six-month periods  
     ended June 30      ended June 30  
     2020      2019      2020      2019  

Expenses related to post-employment benefit plans under defined contribution plans

   W 11,845        11,530        25,047        24,058  

 

(b)

Defined benefit plan

 

  1)

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Present value of funded obligations

   W 2,422,616        2,416,203  

Fair value of plan assets(*1)

     (2,234,092      (2,255,149

Present value of non-funded obligations

     20,968        15,677  
  

 

 

    

 

 

 

Net defined benefit liabilities

   W 209,492        176,731  
  

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, the Company recognized net defined benefit assets amounting to W13,445 million and W4,280 million respectively, since there are consolidated entities whose fair value of plan assets exceeded the present value of defined benefit obligations.

 

  2)

Changes in present value of defined benefit obligations for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Defined benefit obligation at the beginning of period

   W 2,431,880        2,137,161  

Current service costs

     122,511        236,735  

Interest costs

     23,630        51,900  

Remeasurements

     4,252        152,713  

Benefits paid

     (146,492      (152,275

Others

     7,803        5,646  
  

 

 

    

 

 

 

Defined benefit obligation at the end of period

   W 2,443,584        2,431,880  
  

 

 

    

 

 

 

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  3)

Changes in fair value of plan assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Fair value of plan assets at the beginning of period

   W 2,255,149        1,997,717  

Interest on plan assets

     22,152        48,210  

Remeasurement of plan assets

     20        (8,692

Contributions to plan assets

     88,297        342,915  

Benefits paid

     (136,625      (124,962

Others

     5,099        (39
  

 

 

    

 

 

 

Fair value of plan assets at the end of period

   W 2,234,092        2,255,149  
  

 

 

    

 

 

 

 

  4)

The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

     For the three-month periods      For the six-month periods  
     ended June 30      ended June 30  
(in millions of Won)    2020      2019      2020      2019  

Current service costs

   W 61,202        56,060        122,511        114,990  

Net interest costs

     179        1,138        1,478        2,235  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 61,381        57,198        123,989        117,225  
  

 

 

    

 

 

    

 

 

    

 

 

 

20. Other Liabilities

Other liabilities as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Due to customers for contract work

   W 779,829        676,054  

Advances received

     488,475        487,526  

Unearned revenue

     85,027        61,795  

Withholdings

     418,805        388,486  

Firm commitment liabilities

     6,965        15,637  

Others

     12,123        8,604  
  

 

 

    

 

 

 
   W 1,791,224        1,638,102  
  

 

 

    

 

 

 

Non-current

     

Unearned revenue

   W 18,675        27,161  

Others

     23,329        52,349  
  

 

 

    

 

 

 
   W 42,004        79,510  
  

 

 

    

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

21. Financial Instruments

 

(a)

Classification and fair value of financial instruments

 

  1)

The carrying amount and fair values of financial assets and financial liabilities by fair value hierarchy as of June 30, 2020 and December 31, 2019 are as follows

 

 

June 30, 2020

 

            Fair value  
(in millions of Won)    Book value      Level 1      Level 2      Level 3      Total  

Financial assets

              

Fair value through profit or loss

              

Derivative assets

   W 322,743        —          322,743        —          322,743  

Short-term financial instruments

     7,421,262        —          7,421,262        —          7,421,262  

Debt securities

     19,183        —          —          19,183        19,183  

Other securities

     311,402        7,743        1,145        302,514        311,402  

Other receivables

     2,000        —          —          2,000        2,000  

Derivative hedging instruments(*2)

     12,829        —          12,829        —          12,829  

Fair value through other comprehensive income

              

Equity securities

     1,017,957        540,552        —          477,405        1,017,957  

Debt securities

     1,706        —          —          1,706        1,706  

Financial assets measured at amortized cost(*1)

              

Cash and cash equivalents

     6,038,266        —          —          —          —    

Trade accounts and notes receivable

     7,542,447        —          —          —          —    

Other receivables

     2,282,860        —          —          —          —    

Debt securities

     688,921        —          —          —          —    

Deposit instruments

     2,796,499        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 28,458,075        548,295        7,757,979        802,808        9,109,082  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Fair value through profit or loss

              

Derivative liabilities

   W 41,410        —          41,410        —          41,410  

Derivative hedging instruments(*2)

     25,690        —          25,690        —          25,690  

Financial liabilities measured at amortized cost(*1)

              

Trade accounts and notes payable

     3,286,583        —          —          —          —    

Borrowings

     24,088,787        —          24,394,275        —          24,394,275  

Financial guarantee liabilities

     57,886        —          —          —          —    

Others

     2,257,530        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 29,757,886        —          24,461,375        —          24,461,375  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

(*2)

The Company applies hedge accounting which uses forward contracts as hedging instruments in order to hedge the risk of changes in fair value of product prices regarding firm commitments or purchase commitments. Also, the Company applies cash flow hedge accounting which uses currency swap as hedging instruments in order to hedge the risk of changes in foreign currency which influences cash flow from borrowings.

 

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Table of Contents

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Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

 

December 31, 2019

 

            Fair value  
(in millions of Won)    Book value      Level 1      Level 2      Level 3      Total  

Financial assets

              

Fair value through profit or loss

              

Derivative assets

   W 106,104        —          106,104        —          106,104  

Short-term financial instruments

     6,861,242        —          6,861,242        —          6,861,242  

Debt securities

     28,087        —          —          28,087        28,087  

Other securities

     340,008        1,222        3,330        335,456        340,008  

Other receivables

     2,000        —          —          2,000        2,000  

Derivative hedging instruments

     6,174        —          6,174        —          6,174  

Fair value through other comprehensive income

              

Equity securities

     1,204,902        782,108        73        422,721        1,204,902  

Debt securities

     5,686        —          —          5,686        5,686  

Financial assets measured at amortized cost(*1)

 

           

Cash and cash equivalents

     3,514,872        —          —          —          —    

Trade accounts and notes receivable

     8,214,459        —          —          —          —    

Other receivables

     2,193,700        —          —          —          —    

Debt securities

     334,153        —          —          —          —    

Deposit instruments

     1,779,082        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 24,590,469        783,330        6,976,923        793,950        8,554,203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Fair value through profit or loss

              

Derivative liabilities

   W 32,193        —          32,193        —          32,193  

Derivative hedging instruments

     12,861        —          12,861        —          12,861  

Financial liabilities measured at amortized cost(*1)

 

           

Trade accounts and notes payable

     3,442,989        —          —          —          —    

Borrowings

     20,441,613        —          20,666,476        —          20,666,476  

Financial guarantee liabilities

     64,267        —          —          —          —    

Others

     2,401,382        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 26,395,305        —          20,711,530        —          20,711,530  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

 

2)

Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

 

For the six-month period ended June 30, 2020

 

(in millions of Won)    Finance income and costs        
     Interest
income
(expense)
    Gain and loss
on valuation
    Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Others     Total     Other
comprehensive
loss
 

Financial assets at fair value through profit or loss

   W 82,003       7,804       —         2,854       998       93,659       —    

Derivatives assets

     —         264,487       —         138,177       —         402,664       —    

Financial assets at fair value through other comprehensive income

     —         —         —         —         25,568       25,568       (165,966

Financial assets measured at amortized cost

     121,999       —         296,873       (9,620     (160     409,092       —    

Derivatives liabilities

     —         (39,069     —         (176,867     —         (215,936     (841

Financial liabilities measured at amortized cost

     (346,799     —         (415,610     —         130       (762,279     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W (142,797     233,222       (118,737     (45,456     26,536       (47,232     (166,807
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

For the six-month period ended June 30, 2019

 

(in millions of Won)    Finance income and costs        
     Interest
income
(expense)
    Gain and loss
on valuation
    Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Others     Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   W 68,097       (1,372     —         6,424       630       73,779       —    

Derivatives assets

     —         107,978       —         82,589       —         190,567       —    

Financial assets at fair value through other comprehensive income

     —         —         —         —         50,748       50,748       17,844  

Financial assets measured at amortized cost

     85,880       —         285,705       (19,240     (215     352,130       —    

Derivatives liabilities

     —         (2,845     —         (111,034     —         (113,879     (100

Financial liabilities measured at amortized cost

     (391,204     —         (284,351     (2,431     (9,008     (686,994     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W (237,227     103,761       1,354       (43,692     42,155       (133,649     17,744  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

3)

Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2020 and 2019 were as follows:

 

 

For the three-month period ended June 30, 2020

 

(in millions of Won)    Finance income and costs        
     Interest
income
(expense)
    Gain and loss
on valuation
    Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Others     Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   W 40,881       7,471       —         2,549       768       51,669       —    

Derivatives assets

     —         (45,740     —         82,386       —         36,646       —    

Financial assets at fair value through other comprehensive income

     —         —         —         —         262       262       36,870  

Financial assets measured at amortized cost

     70,267       —         (187,582     (3,634     (70     (121,019     —    

Derivatives liabilities

     —         33,221         (86,565       (53,344     (784

Financial liabilities measured at amortized cost

     (171,672       236,596         (518     64,406       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W (60,524     (5,048     49,014       (5,264     442       (21,380     36,086  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

For the three-month period ended June 30, 2019

 

(in millions of Won)    Finance income and costs        
     Interest
income
(expense)
    Gain and loss
on valuation
    Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Others     Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   W 33,024       (2,156     —         5,704       32       36,604       —    

Derivatives assets

     —         59,954       —         49,999       —         109,953       —    

Financial assets at fair value through other comprehensive income

     —         —         —         —         19,838       19,838       23,383  

Financial assets measured at amortized cost

     45,426       —         134,303       (9,832     (107     169,790       —    

Derivatives liabilities

     —         1,396       —         (70,694     —         (69,298     (132

Financial liabilities measured at amortized cost

     (190,726     —         (151,301     (194     (1,737     (343,958     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W   (112,276)       59,194       (16,998     (25,017     18,026       (77,071     23,251  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(b)

Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2019.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

22. Share Capital and Capital Surplus

 

(a)

Share capital as of June 30, 2020 and December 31, 2019 are as follows:

 

(Share, in Won)    June 30, 2020      December 31, 2019  

Authorized shares

     200,000,000        200,000,000  

Par value

   W 5,000        5,000  

Issued shares(*1)

     87,186,835        87,186,835  

Shared capital(*2)

   W   482,403,125,000        482,403,125,000  

 

(*1)

As of June 30, 2020, the total number of ADRs of 30,935,880 outstanding in overseas stock market is equivalent to 7,733,970 shares of common stock.

(*2)

As of June 30, 2020, the difference between the ending balance of common stock and the aggregate par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

 

(b)

Capital surplus as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Share premium

   W 463,825        463,825  

Gain on disposal of treasury shares

     796,623        796,623  

Other capital surplus

     74,701        115,803  
  

 

 

    

 

 

 
   W 1,335,149        1,376,251  
  

 

 

    

 

 

 

 

(c)

On February 25, 2017, POSCO ENERGY CO., LTD., a subsidiary of the Company, issued redeemable convertible preferred shares amounting to W245,000 million (8,643,193 shares) which are classified as non-controlling interests in the consolidated financial statements. Repayments of shares were made on February 25, 2020 (4,477,246 shares) and March 30, 2020 (4,165,947 shares).

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

23. Hybrid Bonds

 

(a)

Hybrid bonds classified as equity as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)      Date of issue        Date of maturity      Interest rate (%)      June 30, 2020     December 31, 2019  

Hybrid bond 1-2(*1)

     2013-06-13        2043-06-13        4.60      W 200,000       200,000  

Issuance cost

              (616     (616
           

 

 

   

 

 

 
            W 199,384       199,384  
           

 

 

   

 

 

 

 

(*1)

Details of hybrid bonds issued by the Company as of June 30, 2020 are as follows:

 

    

Hybrid bond 1-2

Maturity date    30 years (The Company has a right to extend the maturity date)
Interest rate   

Issue date ~ 2023-06-12 : 4.6%

 

Reset every 10 years as follows;

 

•    After 10 years: return on government bond of the Republic of Korea (10 years) + 1.40%

 

•    After 10 years: additionally +0.25% according to Step-up clauses

 

•     After 30 years: additionally +0.75%

Interest payments condition    Quarterly (Optional deferral of interest payment is available to the Company)
Others    The Company can call the hybrid bond at 10th anniversary of issuenace and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common shareholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2020 amounts to W454 million.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

POSCO ENERGY CO., LTD., a subsidiary of the Company, issued hybrid bonds which are classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)

     Date of issue        Date of maturity      Interest rate (%)      June 30, 2020     December 31, 2019  

Hybrid bond 1-4(*1)

     2013-08-29        2043-08-29        5.21      W 140,000       140,000  

Issuance cost

              (429     (429
           

 

 

   

 

 

 
            W 139,571       139,571  
           

 

 

   

 

 

 

 

(*1)

Details of hybrid bonds issued by POSCO ENERGY CO., LTD. as of June 30, 2020 are as follows:

 

    

Hybrid bond 1-4

Maturity date    30 years (The Company has a right to extend the maturity date)
Interest rate   

Issue date ~ 2023-08-29 : 5.21%

 

Reset every 10 years as follows;

 

•    After 10 years: return on government bond of the Republic of Korea (10 years) + 1.55%

 

•    After 10 years: additionally + 0.25% according to Step-up clauses

 

•    After 30 years: additionally +0.75%

Interest payments condition    Quarterly (Optional deferral of interest payment is available to the Issuer)
Others    The issuer can call the hybrid bond at 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common shareholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2020 amounts to W639 million.

24. Reserves

Reserves as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Accumulated comprehensive loss of investments in associates and joint ventures

   W (599,389      (676,416

Changes in fair value of equity investments at fair value through other comprehensive income

     (448,053      (285,073

Foreign currency translation differences

     (133,635      (202,636

Gains or losses on valuation of derivatives

     (1,236      (438

Others

     13,027        6,583  
  

 

 

    

 

 

 
   W (1,169,286      (1,157,980
  

 

 

    

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

25. Treasury Shares

During the six-month period ended June 30, 2020, the Company entered into a trust contract of acquiring treasury shares following approval of the Board of Directors. The amount committed to purchase treasury shares by this trust contract is W1,000 billion, and the contract period is from April 13, 2020 to April 12, 2021. The number of treasury shares acquired according to the contract is 358,953 during the six-month period ended June 30, 2020.

As of June 30, 2020, the Company holds 7,430,147 treasury shares for share price stabilization and other purposes in accordance with the Board of Director’s resolution.

26. Revenue

 

(a)

Disaggregation of revenue

 

  1)

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

 

For the six-month period ended June 30, 2020

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

Types of revenue

              

Revenue from sales of goods

   W 13,227,955        9,738,336        —          367,967        23,334,258  

Revenue from services

     232,864        191,253        22,848        885,331        1,332,296  

Revenue from construction contract

     —          —          3,368,635        14,207        3,382,842  

Others

     18,599        87,032        4,019        108,321        217,971  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,479,418        10,016,621        3,395,502        1,375,826        28,267,367  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

              

Revenue recognized at a point in time

   W 13,246,554        9,825,368        104,538        476,289        23,652,749  

Revenue recognized over time

     232,864        191,253        3,290,964        899,537        4,614,618  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,479,418        10,016,621        3,395,502        1,375,826        28,267,367  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

For the six-month period ended June 30, 2019

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

Types of revenue

              

Revenue from sales of goods

   W 15,919,961        10,936,991        —          341,736        27,198,688  

Revenue from services

     311,731        196,471        24,568        1,154,776        1,687,546  

Revenue from construction contract

     —          —          3,222,542        17,097        3,239,639  

Others

     22,938        68,902        3,452        114,408        209,700  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 16,254,630        11,202,364        3,250,562        1,628,017        32,335,573  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

              

Revenue recognized at a point in time

   W 15,942,899        11,005,893        5,728        461,406        27,415,926  

Revenue recognized over time

     311,731        196,471        3,244,834        1,166,611        4,919,647  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 16,254,630        11,202,364        3,250,562        1,628,017        32,335,573  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

40


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month periods ended June 30, 2020 and 2019 were as follows:

 

 

For the three-month period ended June 30, 2020

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

Types of revenue

              

Revenue from sales of goods

   W 6,256,679        4,823,693        —          176,643        11,257,015  

Revenue from services

     108,391        108,114        10,788        368,404        595,697  

Revenue from construction contract

     —          —          1,762,872        7,587        1,770,459  

Others

     8,895        29,139        2,918        57,431        98,383  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,373,965        4,960,946        1,776,578        610,065        13,721,554  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

              

Revenue recognized at a point in time

   W 6,265,574        4,852,832        93,583        234,076        11,446,065  

Revenue recognized over time

     108,391        108,114        1,682,995        375,989        2,275,489  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,373,965        4,960,946        1,776,578        610,065        13,721,554  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

For the three-month period ended June 30, 2019

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

Types of revenue

              

Revenue from sales of goods

   W 8,019,477        5,529,989        —          181,518        13,730,984  

Revenue from services

     150,001        98,407        12,500        509,075        769,983  

Revenue from construction contract

     —          —          1,717,341        10,637        1,727,978  

Others

     13,336        36,087        2,079        40,888        92,390  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,182,814        5,664,483        1,731,920        742,118        16,321,335  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

              

Revenue recognized at a point in time

   W 8,032,813        5,566,076        2,508        225,262        13,826,659  

Revenue recognized over time

     150,001        98,407        1,729,412        516,856        2,494,676  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,182,814        5,664,483        1,731,920        742,118        16,321,335  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(b)

Details of contract assets and liabilities from contracts with customers as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Receivables

     

Accounts receivable

   W 7,542,447        8,214,459  

Contract assets

     

Due from customers for contract work

     1,188,416        1,062,677  

Contract liabilities

     

Advance received

     492,503        489,658  

Due to customers for contract work

     779,829        676,054  

Unearned revenue

     103,539        88,733  

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

27. Revenue – Contract Balances

 

(a)

Details of ongoing contracts as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  
     Construction
segment
     Others      Construction
segment
     Others  

Accumulated cost

   W 29,893,770        300,248        29,106,218        249,751  

Accumulated contract profit

     2,952,358        59,676        2,863,207        47,107  

Accumulated contract loss

     (1,199,546      (2,403      (1,182,989      (2,211

Accumulated contract revenue

     31,646,582        357,521        30,786,436        294,647  

 

(b)

Details of due from customers for contract work and due to customers for contract work as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  
     Construction
segment
     Others      Construction
segment
     Others  

Due from customers for contract work

   W 1,213,373        52,824        1,087,119        49,317  

Due to customers for contract work

     (751,585      (28,244      (639,130      (36,924
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 461,788        24,580        447,989        12,393  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)

Details of the provisions of construction loss as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Construction segment

   W 33,298        35,526  

Others

     410        406  
  

 

 

    

 

 

 
   W 33,708        35,932  
  

 

 

    

 

 

 

 

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Table of Contents

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Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(d)

Due to the factors causing the variation of costs for the six-month period ended June 30, 2020, the estimated total contract costs have changed. Details of changes in estimated total contract costs and the impact on profit before income taxes for the six-month period ended June 30, 2020 and future periods are as follows:

 

            Changes in profit (loss) of contract  
     Changes in estimated                       
(in millions of Won)    total contract costs      Net income      Future income      Total  

Construction segment

   W 128,439        20,087        127,633        147,720  

Others

     2,665        3,451        869        4,320  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 131,104        23,538        128,502        152,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contract to June 30, 2020. The estimation is evaluated for the total contract costs and expected total contract revenue as of the end of the period. Also, it may change during future periods.

 

(e)

Uncertainty of estimates

 

  1)

Total contract revenues

Total contract revenues are measured based on contractual amount initially agreed. However, the contract revenues can increase due to additional contract work, claims and incentive payments, or decrease due to penalty when the completion of contract is delayed due to the Company’s fault. Therefore, this measurement of contract revenues is affected by the uncertainty of the occurrence of future events.

 

  2)

Total contract costs

Contract revenues are recognized based on the percentage of completion, which is measured on the basis of the gross cost amount incurred to date. Total contract costs are estimated based on estimates of future material costs, labor costs, outsourcing cost and others. There is uncertainty in estimates on future contract costs due to various internal and external factors such as fluctuation of market, the risk of business partner and the experience of project performance and others. The significant assumptions including uncertainty of the estimate of total contract costs are as follows:

 

    

Method of significant assumption

Material cost    Assumption based on recent purchasing price and quoted market price
Labor cost    Assumption based on standard monthly and daily labor cost
Outsourcing cost    Assumption based on the past experience rate of similar project and market price

Management reviews the assumptions used in estimated contract costs at each reporting period end and adjusts them, if necessary.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

28. Selling and Administrative Expenses

 

(a)

Other administrative expenses

Other administrative expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Wages and salaries

   W 197,024        197,241        410,520        405,863  

Expenses related to post-employment benefits

     19,502        18,202        41,881        40,070  

Other employee benefits

     40,293        43,344        85,751        89,121  

Travel

     3,537        11,514        9,890        21,181  

Depreciation

     37,905        31,294        72,857        65,620  

Amortization

     27,351        28,442        54,633        56,802  

Communication

     2,409        2,556        4,801        5,029  

Electricity

     1,849        2,001        4,030        4,031  

Taxes and public dues

     19,719        18,971        32,075        31,856  

Rental

     9,632        9,219        16,265        20,677  

Repairs

     1,311        4,107        3,238        6,624  

Entertainment

     1,437        2,609        3,545        5,641  

Advertising

     17,296        24,059        34,653        41,965  

Research & development

     25,405        26,299        49,271        56,682  

Service fees

     37,342        36,066        76,775        87,588  

Vehicles maintenance

     1,129        1,919        2,499        4,247  

Industry association fee

     2,373        1,980        6,039        5,417  

Conference

     2,482        3,957        5,325        7,810  

Increase to provisions

     355        1,084        1,882        2,482  

Others

     8,190        11,673        17,677        23,914  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 456,541        476,537        933,607        982,620  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(b)

Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Freight and custody expenses

   W 40,640        40,176        86,103        87,537  

Operating expenses for distribution center

     1,661        2,657        3,687        5,251  

Sales commissions

     20,194        22,563        67,919        38,599  

Sales advertising

     312        370        570        604  

Sales promotion

     1,393        2,478        3,236        5,015  

Sample

     331        617        872        1,128  

Sales insurance premium

     7,452        7,916        15,629        15,925  

Contract cost

     8,118        7,439        15,750        16,079  

Others

     4,247        5,987        8,560        11,325  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 84,348        90,203        202,326        181,463  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

29. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Finance income

 

        

Interest income(*1)

   W 111,148        78,450        204,002        153,977  

Dividend income

     1,030        19,870        26,566        51,378  

Gain on foreign currency transactions

     290,855        261,833        636,287        379,766  

Gain on foreign currency translations

     (227,550      54,450        219,977        199,617  

Gain on derivatives transactions

     84,616        51,200        144,640        84,600  

Gain on valuations of derivatives

     (60,773      59,795        281,200        146,869  

Others

     11,343        7,264        17,421        10,669  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 210,669        532,862        1,530,093        1,026,876  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expenses

   W 171,672        190,726        346,799        391,204  

Loss on foreign currency transactions

     236,231        210,009        484,754        315,298  

Loss on foreign currency translations

     (221,940      123,272        490,247        262,731  

Loss on derivatives transactions

     88,795        71,895        183,330        113,045  

Loss on valuation of derivatives

     (48,254      (1,555      55,782        41,736  

Loss on disposal of trade accounts and notes receivable

     3,670        9,832        9,656        19,240  

Others

     1,875        5,753        6,757        17,271  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 232,049        609,932        1,577,325        1,160,525  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Interest income calculated using the effective interest method for the six-month periods ended June 30, 2020 and 2019 were W121,999 million and W85,880 million, respectively.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

30. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Other non-operating income

           

Gain on disposals of assets held for sale

   W —          8,536        299        8,536  

Gain on disposals of investments in subsidiaries, associates and joint ventures

     37,370        1,385        41,339        15,821  

Gain on disposals of property, plant and equipment

     2,511        4,080        7,346        16,362  

Gain on valuation of firm commitment

     17,548        9,258        37,666        28,968  

Gain on valuation of emission rights

     —          25,440        —          25,440  

Gain on disposals of emission rights

     16,823        —          24,566        —    

Reversal of other provisions

     561        5,595        839        6,170  

Others

     27,790        28,730        54,849        56,071  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 102,603        83,024        166,904        157,368  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other non-operating expenses

           

Impairment loss on assets held for sale

   W 5,030        (849      5,030        3,346  

Loss on disposals of investments in subsidiaries, associates and joint ventures

     5,121        3,716        10,073        5,586  

Loss on disposals of property, plant and equipment

     38,318        25,099        78,989        37,396  

Impairment loss on property, plant and equipment

     21,322        81,314        21,400        149,659  

Loss on valuation of firm commitment

     1,742        14,763        36,075        18,572  

Idle tangible asset expenses

     5,330        10,808        10,685        18,427  

Increase to provisions

     372        2,098        1,224        7,371  

Donations

     4,553        1,788        16,708        11,194  

Others

     21,885        27,942        37,253        52,318  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 103,673        166,679        217,437        303,869  
  

 

 

    

 

 

    

 

 

    

 

 

 

31. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows (excluding finance costs and income tax expense):

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Raw material used, changes in inventories and others

   W 8,300,004        9,577,372        16,948,281        19,256,695  

Employee benefits expenses

     852,159        870,497        1,772,198        1,746,165  

Outsourced processing cost

     2,056,490        1,992,121        4,086,789        3,762,751  

Electricity and water

     142,562        329,161        313,258        548,963  

Depreciation (*1)

     784,867        758,349        1,555,037        1,523,108  

Amortization

     116,107        104,471        230,394        203,733  

Freight and custody expenses

     329,787        362,400        682,131        731,634  

Sales commissions

     20,194        22,563        67,919        38,599  

Loss on disposal of property, plant and equipment

     38,318        25,099        78,989        37,396  

Impairment loss on property, plant and equipment

     21,322        81,314        21,400        149,659  

Donations

     4,553        1,789        16,708        11,194  

Other

     990,157        1,306,735        1,848,640        2,375,454  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,656,520        15,431,871        27,621,744        30,385,351  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Includes depreciation expense of investment property.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

32. Income Taxes

The effective tax rates of the Company for the six-month periods ended June 30, 2020 and 2019 were 32.10% and 31.05%, respectively.

33. Earnings per Share

Basic earnings per share for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in Won except share information)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Profit attributable to controlling interest

   W 40,281,852,768        612,285,873,955        435,674,548,777        1,353,539,066,362  

Interests of hybrid bonds

     (1,662,931,506      (1,662,931,506      (3,325,863,013      (3,307,589,040

Weighted-average number of common shares outstanding (*1)

     80,006,436        80,115,641        80,061,039        80,111,845  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per share

   W 483        7,622        5,400        16,854  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

 

(Shares)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
     2020      2019      2020      2019  

Total number of common shares issued

   W 87,186,835        87,186,835        87,186,835        87,186,835  

Weighted-average number of treasury shares

     (7,180,399      (7,071,194      (7,125,796      (7,074,990
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average number of common shares outstanding

   W 80,006,436        80,115,641        80,061,039        80,111,845  
  

 

 

    

 

 

    

 

 

    

 

 

 

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2020 and 2019, diluted earnings per share is equal to basic earnings per share.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

34. Related Party Transactions

 

(a)

Significant transactions between the controlling company and related companies for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

  1)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Sales and others(*1)      Purchase and others(*2)  
     Sales      Others      Purchase of
material
     Purchase of
fixed assets
     Outsourced
processing
cost
     Others  

Subsidiaries (*3)

                 

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   W 3,548        11,096        15        442,305        60        12,835  

POSCO COATED & COLOR STEEL Co., Ltd.

     205,766        1,695        —          —          15,176        208  

POSCO ICT (*4)

     1,429        4,991        —          184,310        20,941        87,668  

eNtoB Corporation

     7        60        113,378        18,848        28        12,493  

POSCO CHEMICAL CO., LTD

     144,466        24,770        229,721        12,830        154,424        4,362  

POSCO ENERGY CO., LTD.

     1,553        1,216        9,995        3        —          11,110  

POSCO INTERNATIONAL Corporation

     2,795,437        54,331        110,798        —          11,371        2,083  

POSCO Thainox Public Company Limited

     106,717        137        3,454        —          —          —    

POSCO America Corporation

     96,266        —          —          —          —          3  

POSCO Canada Ltd.

     —          816        90,805        —          —          —    

POSCO Asia Co., Ltd.

     719,978        965        81,671        2,272        1,162        1,419  

Qingdao Pohang Stainless Steel Co., Ltd.

     70,768        66        —          —          —          176  

POSCO JAPAN Co., Ltd.

     548,842        —          16,420        2,959        —          1,088  

POSCO-VIETNAM Co., Ltd.

     101,105        223        —          —          —          20  

POSCO MEXICO S.A. DE C.V.

     68,574        99        —          —          —          304  

POSCO Maharashtra Steel Private Limited

     153,754        847        —          —          —          185  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     57,645        —          —          —          —          —    

POSCO VST CO., LTD.

     132,216        56        —          —          —          20  

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          804        291,649        —          —          —    

Others

     573,063        18,184        41,106        25,580        128,557        58,065  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     5,781,134        120,356        989,012        689,107        331,719        192,039  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures (*3)

                 

POSCO PLANTEC Co., Ltd. (*5)

     65        41        916        84,839        4,086        12,431  

SNNC

     2,901        3,478        219,060        —          —          —    

POSCO-SAMSUNG-Slovakia Processing Center

     17,154        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          625,545        —          —          —    

Others

     14,332        54,933        28,954        —          —          13,348  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     34,452        58,452        874,475        84,839        4,086        25,779  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,815,586        178,808        1,863,487        773,946        335,805        217,818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)

Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)

As of June 30, 2020, the Company provided guarantees to related parties (Note 35).

(*4)

Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

(*5)

During the six-month period ended June 30, 2020, POSCO PLANTEC Co., Ltd. was excluded from associates due to the Company’s loss of significant influence over the investee.

 

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Table of Contents

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Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

For the six-month period ended June 30, 2019

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Purchase of
fixed assets
     Outsourced
processing
cost
     Others  

Subsidiaries

                 

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   W 3,608        11,089        —          139,349        21        5,233  

POSCO COATED & COLOR STEEL Co., Ltd.

     233,408        1,707        —          —          7,684        491  

POSCO ICT

     1,509        4,989        —          148,817        17,055        88,838  

eNtoB Corporation

     7        60        159,576        16,936        59        13,431  

POSCO CHEMICAL CO., LTD

     197,793        25,129        255,299        7,578        156,383        2,010  

POSCO ENERGY CO., LTD.

     106,602        624        —          —          —          62  

POSCO INTERNATIONAL Corporation

     2,841,376        46,572        330,044        —          26,037        2,569  

POSCO Thainox Public Company Limited

     120,032        13,675        3,733        —          —          3  

POSCO America Corporation

     184,517        —          —          —          —          39  

POSCO Canada Ltd.

     340        604        151,892        —          —          —    

POSCO Asia Co., Ltd.

     861,771        585        248,431        —          987        2,796  

Qingdao Pohang Stainless Steel Co., Ltd.

     59,410        —          —          —          —          —    

POSCO JAPAN Co., Ltd.

     756,357        —          21,553        3,021        —          1,487  

POSCO-VIETNAM CO., Ltd.

     141,535        181        —          —          —          37  

POSCO MEXICO S.A. DE C.V.

     153,766        31        —          —          —          5  

POSCO Maharashtra Steel Private Limited

     333,608        187        —          —          —          256  

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

     43,313        —          1,481        —          —          —    

POSCO VST CO., LTD.

     137,025        —          —          —          —          62  

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          180        322,210        —          —          —    

Others

     425,315        14,560        81,055        10,572        133,582        60,791  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     6,601,292        120,173        1,575,274        326,273        341,808        178,110  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                 

POSCO PLANTEC Co., Ltd.

     183        65        1,399        110,614        9,326        9,362  

SNNC

     2,747        3,380        244,626        —          —          10  

POSCO-SAMSUNG-Slovakia Processing Center

     31,764        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          482,848        —          —          —    

Others

     6,985        86,037        27,127        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     41,679        89,482        756,000        110,614        9,326        9,372  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,642,971        209,655        2,331,274        436,887        351,134        187,482  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(b)

Significant transactions between the controlling company and related companies for the three-month periods ended June 30, 2020 and 2019 were as follows:

 

  1)

For the three-month period ended June 30, 2020

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Purchase of
fixed assets
     Outsourced
processing
cost
     Others  

Subsidiaries

                 

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   W 2,011        17        —          198,832        60        5,123  

POSCO COATED & COLOR STEEL Co., Ltd.

     89,666        1        —          —          6,818        91  

POSCO ICT

     718        2        —          85,004        10,483        41,213  

eNtoB Corporation

     3        —          55,786        9,743        9        6,931  

POSCO CHEMICAL CO., LTD

     61,232        4,828        105,977        8,690        71,609        653  

POSCO ENERGY CO., LTD.

     266        537        5,385        —          —          5,598  

POSCO INTERNATIONAL Corporation

     1,274,878        —          31,102        —          —          941  

POSCO Thainox Public Company Limited

     55,096        71        792        —          —          —    

POSCO America Corporation

     32,624        —          —          —          —          —    

POSCO Canada Ltd.

     —          753        51,250        —          —          —    

POSCO Asia Co., Ltd.

     402,677        746        36,185        504        766        910  

Qingdao Pohang Stainless Steel Co., Ltd.

     35,299        66        —          —          —          119  

POSCO JAPAN Co., Ltd.

     230,608        —          9,698        2,339        —          650  

POSCO-VIETNAM Co., Ltd.

     37,517        108        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     17,483        63        —          —          —          249  

POSCO Maharashtra Steel Private Limited

     36,314        44        —          —          —          —    

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     25,094        —          —          —          —          —    

POSCO VST CO., LTD.

     62,622        56        —          —          —          —    

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          462        136,882        —          —          —    

Others

     304,164        3,644        14,283        12,622        67,484        28,998  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,668,272        11,398        447,340        317,734        157,229        91,476  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                 

SNNC

     1,491        443        98,634        —          —          —    

POSCO-SAMSUNG-Slovakia Processing Center

     3,229        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          303,358        —          —          —    

Others

     4,625        39,739        16,589        —          —          5,695  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     9,345        40,182        418,581        —          —          5,695  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,677,617        51,580        865,921        317,734        157,229        97,171  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

49


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

For the three-month period ended June 30, 2019

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Purchase of
fixed assets
     Outsourced
processing
cost
     Others  

Subsidiaries

                 

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   W 2,198        16        —          72,852        —          2,519  

POSCO COATED & COLOR STEEL Co., Ltd.

     116,211        1        —          —          5,315        119  

POSCO ICT

     729        —          —          87,989        8,498        42,677  

eNtoB Corporation

     3        —          81,080        10,952        33        7,907  

POSCO CHEMICAL CO., LTD

     93,869        5,799        124,303        5,513        78,253        1,881  

POSCO ENERGY CO., LTD.

     49,714        310        —          —          —          42  

POSCO INTERNATIONAL Corporation

     1,423,768        1        154,881        —          13,381        1,629  

POSCO Thainox Public Company Limited

     54,928        13,616        2,063        —          —          —    

POSCO America Corporation

     89,516        —          —          —          —          21  

POSCO Canada Ltd.

     340        529        75,279        —          —          —    

POSCO Asia Co., Ltd.

     445,133        498        100,397        —          429        2,235  

Qingdao Pohang Stainless Steel Co., Ltd.

     5,363        —          —          —          —          —    

POSCO JAPAN Co., Ltd.

     350,682        —          12,033        707        —          853  

POSCO-VIETNAM Co., Ltd.

     66,995        96        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     75,553        17        —          —          —          —    

POSCO Maharashtra Steel Private Limited

     142,945        92        —          —          —          256  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     25,309        —          957        —          —          —    

POSCO VST CO., LTD.

     58,204        —          —          —          —          19  

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          41        198,168        —          —          —    

Others

     204,728        3,439        25,317        4,790        66,424        34,354  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     3,206,188        24,455        774,478        182,803        172,333        94,512  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                 

POSCO PLANTEC Co., Ltd.

     67        5        648        59,868        4,411        6,651  

SNNC

     1,399        1,100        128,978        —          —          —    

POSCO-SAMSUNG-Slovakia Processing Center

     7,901        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          280,820        —          —          —    

Others

     2,993        74,784        13,962        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     12,360        75,889        424,408        59,868        4,411        6,651  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,218,548        100,344        1,198,886        242,671        176,744        101,163  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)

The related account balances from significant transactions between the controlling company and related companies as of June 30, 2020 and December 31, 2019 are as follows:

 

  1)

June 30, 2020

 

(in millions of Won)    Receivables      Payables  
     Trade accounts
and notes
receivable
     Others      Total      Trade accounts
and notes
payable
     Accounts
payable
     Others      Total  

Subsidiaries

                    

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   W 3,005        56        3,061        —          55,360        381        55,741  

POSCO COATED & COLOR STEEL Co., Ltd.

     35,652        —          35,652        —          9        3,089        3,098  

POSCO ICT

     123        —          123        2,602        70,313        35,076        107,991  

eNtoB Corporation

     —          34        34        2,698        31,539        18        34,255  

POSCO CHEMICAL CO., LTD

     20,537        2,904        23,441        11,092        45,121        17,606        73,819  

POSCO ENERGY CO., LTD.

     166        214        380        —          2,563        13,630        16,193  

POSCO INTERNATIONAL Corporation

     438,989        10        438,999        756        238        —          994  

POSCO Thainox Public Company Limited

     34,981        3        34,984        —          —          —          —    

POSCO America Corporation

     4,432        —          4,432        —          —          —          —    

POSCO Asia Co., Ltd.

     295,369        847        296,216        3,810        257        —          4,067  

Qingdao Pohang Stainless Steel Co., Ltd.

     21,523        —          21,523        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     40,423        707        41,130        —          —          —          —    

POSCO Maharashtra Steel Private Limited

     196,825        477        197,302        —          —          —          —    

Others

     597,632        43,367        640,999        15,367        28,726        85,326        129,419  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,689,657        48,619        1,738,276        36,325        234,126        155,126        425,577  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                    

SNNC

     340        216        556        10,364        —          —          10,364  

Roy Hill Holdings Pty Ltd

     —          —          —          169,954        —          —          169,954  

Others

     408        38,077        38,485        4,042        —          —          4,042  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     748        38,293        39,041        184,360        —          —          184,360  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,690,405        86,912        1,777,317        220,685        234,126        155,126        609,937  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

50


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

December 31, 2019

 

(in millions of Won)    Receivables      Payables  
     Trade accounts
and notes
receivable
     Others      Total      Trade accounts
and notes
payable
     Accounts
payable
     Others      Total  

Subsidiaries

                    

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   W 5,702        65        5,767        —          78,512        385        78,897  

POSCO COATED & COLOR STEEL Co., Ltd.

     57,792        —          57,792        —          11        3,828        3,839  

POSCO ICT

     225        1        226        1,147        129,424        42,844        173,415  

eNtoB Corporation

     —          —          —          3,459        27,431        —          30,890  

POSCO CHEMICAL CO., LTD

     35,102        3,578        38,680        17,839        52,710        19,369        89,918  

POSCO ENERGY CO., LTD.

     1,876        4        1,880        —          3,229        14,912        18,141  

POSCO INTERNATIONAL Corporation

     633,073        —          633,073        345        2,218        3,839        6,402  

POSCO Thainox Public Company Limited

     52,826        2        52,828        916        —          —          916  

POSCO America Corporation

     8,448        —          8,448        —          —          —          —    

POSCO Asia Co., Ltd.

     508,962        748        509,710        12,784        171        —          12,955  

Qingdao Pohang Stainless Steel Co., Ltd.

     29,842        —          29,842        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     90,351        702        91,053        —          —          —          —    

POSCO Maharashtra Steel Private Limited

     235,917        444        236,361        —          —          —          —    

Others

     470,734        33,851        504,585        14,397        40,233        87,652        142,282  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,130,850        39,395        2,170,245        50,887        333,939        172,829        557,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                    

POSCO PLANTEC Co., Ltd.

     84        10        94        471        49,511        —          49,982  

SNNC

     297        65        362        19,769        —          —          19,769  

Roy Hill Holdings Pty Ltd

     —          —          —          93,383        —          —          93,383  

Others

     942        706        1,648        3,447        586        —          4,033  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,323        781        2,104        117,070        50,097        —          167,167  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,132,173        40,176        2,172,349        167,957        384,036        172,829        724,822  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(d)

Significant transactions between the Company, excluding the controlling company, and related companies for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

  1)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Others  

Associates and joint ventures

           

POSCO PLANTEC Co., Ltd.

   W 2,558        —          5        —    

New Songdo International City Development, LLC

     51,863        26,450        —          46  

SNNC

     27,202        —          25,282        107,507  

Chuncheon Energy Co., Ltd.

     287        211        —          —    

Noeul Green Energy Co., Ltd.

     3,039        —          —          —    

CSP - Compania Siderurgica do Pecem

     18,311        4,925        123,368        —    

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     18,928        —          24,782        —    

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     —          —          2,393        —    

POS-SEAHSTEELWIRE (TIANJIN) CO., Ltd

     3,294        —          —          —    

PT. Batutua Tembaga Raya

     —          1,111        16,575        —    

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     12,131        —          165        —    

DMSA/AMSA

     —          —          29,198        —    

South-East Asia Gas Pipeline Company Ltd.

     7        38,517        —          —    

POSCO MITSUBISHI CARBON TECHNOLOGY

     15,961        19,438        1,888        452  

Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)

     89,910        —          —          —    

TK CHEMICAL CORPORATION

     59,752        —          18,743        —    

Others

     61,699        29,773        17,714        16,853  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 364,942        120,425        260,113        124,858  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

51


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

For the six-month period ended June 30, 2019

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Others  

Associates and joint ventures

           

POSCO PLANTEC Co., Ltd.

   W 5,659        —          21        7,757  

New Songdo International City Development, LLC

     751        4,471        —          13  

SNNC

     44,025        —          18,961        31,156  

Chuncheon Energy Co., Ltd.

     1,145        —          —          —    

Noeul Green Energy Co., Ltd.

     3,361        —          —          1,217  

USS-POSCO Industries

     2        —          1,316        —    

CSP—Compania Siderurgica do Pecem

     84,598        7,419        220,542        10,586  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     16,545        —          22,155        —    

LLP POSUK Titanium

     —          —          272        —    

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     3        —          1,808        —    

POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd

     5,298        —          —          —    

PT. Batutua Tembaga Raya

     —          495        21,634        —    

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     13,751        —          173        —    

Sebang Steel

     —          —          4,862        —    

DMSA/AMSA

     —          —          30,613        —    

South-East Asia Gas Pipeline Company Ltd.

     27        9,387        —          —    

POSCO MITSUBISHI CARBON TECHNOLOGY

     44,649        16,369        2,620        1,120  

Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)

     79,272        —          —          —    

TK CHEMICAL CORPORATION

     86,987        —          39,454        —    

Others

     103,425        38,024        11,650        9,046  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 489,498        76,165        376,081        60,895  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(e)

Significant transactions between the Company, excluding the controlling company, and related companies for the three-month periods ended June 30, 2020 and 2019 were as follows:

 

  1)

For the three-month period ended June 30, 2020

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Others  

Associates and joint ventures

           

POSCO PLANTEC Co., Ltd.

   W —          —          —          —    

New Songdo International City Development, LLC

     31,663        26,450        —          43  

SNNC

     16,847        —          13,179        508  

Chuncheon Energy Co., Ltd.

     —          —          —          —    

Noeul Green Energy Co., Ltd.

     1,516        —          —          —    

CSP - Compania Siderurgica do Pecem

     1,566        493        39,178        —    

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     8,152        —          12,242        —    

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     —          —          1,437        —    

POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd

     767        —          —          —    

PT. Batutua Tembaga Raya

     —          152        5,034        —    

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     7,287        —          101        —    

DMSA/AMSA

     —          —          3,035        —    

South-East Asia Gas Pipeline Company Ltd.

     —          18,511        —          —    

POSCO MITSUBISHI CARBON TECHNOLOGY

     7,096        37        814        185  

Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)

     48,026        —          —          —    

TK CHEMICAL CORPORATION

     24,411        —          6,547        —    

Others

     28,565        24,208        8,642        7,345  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 175,896        69,851        90,209        8,081  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

52


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

For the three-month period ended June 30, 2019

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Others  

Associates and joint ventures

           

POSCO PLANTEC Co., Ltd.

   W 2,263        —          14        4,386  

New Songdo International City Development, LLC

     390        —          —          10  

SNNC

     26,013        —          13,918        10,532  

Chuncheon Energy Co., Ltd.

     135        —          —          —    

Noeul Green Energy Co., Ltd.

     1,699        —          —          630  

USS-POSCO Industries

     2        —          712        —    

CSP - Compania Siderurgica do Pecem

     62,328        5,352        100,154        10,201  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     7,800        —          11,361        —    

LLP POSUK Titanium

     —          —          —          —    

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     3        —          956        —    

POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd

     1,421        —          —          —    

PT. Batutua Tembaga Raya

     —          130        11,037        —    

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     5,658        —          93        —    

Sebang Steel

     —          —          4,159        —    

DMSA/AMSA

     —          —          13,858        —    

South-East Asia Gas Pipeline Company Ltd.

     22        4,582        —          —    

POSCO MITSUBISHI CARBON TECHNOLOGY

     20,034        —          1,280        407  

Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)

     41,863        —          —          —    

TK CHEMICAL CORPORATION

     43,612        —          17,525        —    

Others

     55,486        23,357        6,087        2,207  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 268,729        33,421        181,154        28,373  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(f)

The related account balances from significant transactions between the Company, excluding the controlling company, and related companies as of June 30, 2020 and December 31, 2019 are as follows:

 

  1)

June 30, 2020

 

(in millions of Won)    Receivables      Payables  
     Trade accounts
and
notes receivable
     Loans      Others      Total      Trade accounts
and
notes payable
     Others      Total  

Associates and joint ventures

                    

New Songdo International City Development, LLC

   W 14,855        —          20,592        35,447        —          —          —    

Chuncheon Energy Co., Ltd.

     —          —          —          —          407        —          407  

Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)

     59,192        —          —          59,192        —          55,428        55,428  

Nickel Mining Company SAS

     —          62,977        144        63,121        —          —          —    

CSP - Compania Siderurgica do Pecem

     174,737        —          12,101        186,838        282        —          282  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     7,981        —          —          7,981        2,762        —          2,762  

PT. Batutua Tembaga Raya

     —          39,017        984        40,001        1,399        —          1,399  

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     9,399        —          —          9,399        113        —          113  

DMSA/AMSA

     112        7,645        —          7,757        —          —          —    

South-East Asia Gas Pipeline Company Ltd.

     —          126,628        —          126,628        —          —          —    

POSCO MITSUBISHI CARBON TECHNOLOGY

     2,912        —          —          2,912        569        —          569  

TK CHEMICAL CORPORATION

     21,953        —          —          21,953        835        —          835  

Others

     56,080        160,200        101,593        317,873        471        13,244        13,715  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 347,221        396,467        135,414        879,102        6,838        68,672        75,510  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

53


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

December 31, 2019

 

(in millions of Won)    Receivables      Payables  
     Trade accounts
and
notes receivable
     Loans      Others      Total      Trade accounts
and
notes receivable
     Others      Total  

Associates and joint ventures

                    

POSCO PLANTEC Co., Ltd.

   W 4,121        —          205        4,326        791        8        799  

New Songdo International City Development, LLC

     23,626        —          20,592        44,218        —          10        10  

Chuncheon Energy Co., Ltd.

     —          8,234        —          8,234        657        —          657  

Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)

     34,945        —          —          34,945        —          67,543        67,543  

Nickel Mining Company SAS

     —          60,516        120        60,636        —          —          —    

CSP - Compania Siderurgica do Pecem

     244,700        —          14,264        258,964        —          33        33  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     10,273        —          —          10,273        633        —          633  

PT. Batutua Tembaga Raya

     —          36,291        19,993        56,284        56        —          56  

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     7,035        —          —          7,035        101        —          101  

DMSA/AMSA

     —          57,999        1,672        59,671        —          —          —    

South-East Asia Gas Pipeline Company Ltd.

     14        147,367        —          147,381        —          —          —    

POSCO MITSUBISHI CARBON TECHNOLOGY

     8,078        —          —          8,078        916        —          916  

TK CHEMICAL CORPORATION

     37,373        —          —          37,373        110        —          110  

Others

     94,914        138,663        97,804        331,381        7,128        13,379        20,507  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 465,079        449,070        154,650        1,068,799        10,392        80,973        91,365  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(g)

Significant financial transactions between the Company, excluding the controlling company, and related companies for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

  1)

June 30, 2020

 

(in millions of Won)    Beginning      Lend      Collect      Others(*2)      Ending  

Associates and joint ventures

              

UITrans LRT Co., Ltd.

     10,579        5,919        —          —          16,498  

DMSA/AMSA (*1)

     57,999        —          —          (50,354      7,645  

South-East Asia Gas Pipeline Company Ltd.

     147,367        —          (24,416      3,677        126,628  

PT. Batutua Tembaga Raya

     36,291        —          —          2,726        39,017  

PT. Tanggamus Electric Power

     4,580        —          —          170        4,750  

PT. Wampu Electric Power

     5,519        —          —          205        5,724  

PT. POSMI Steel Indonesia

     2,316        —          —          86        2,402  

Nickel Mining Company SAS

     60,516        —          —          2,461        62,977  

KRAKATAU POS-CHEM DONG-SUH CHEMICAL

     6,947        —          (1,239      296        6,004  

POS-SeaAH Steel Wire (Thailand) Co., Ltd.

     6,947        —          —          257        7,204  

AMCI (WA) PTY LTD

     78,553        1,567        —          1,496        81,616  

POS-AUSTEM YANTAI AUTOMOTIVE CO.,LTD

     5,789        —          —          215        6,004  

POS-AUSTEM WUHAN AUTOMOTIVE CO.,LTD

     9,262        —          —          343        9,605  

Hyo-chun Co., Ltd.

     2,382        —          —          —          2,382  

Chun-cheon Energy Co., Ltd.

     8,234        —          (8,234      —          —    

POS-AUSTEM Suzhou Automotive Co., Ltd

     5,789        12,067        —          155        18,011  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 449,070        19,553        (33,889      (38,267      396,467  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

During the six-month period ended June 30, 2020, loans amounting to W52,692 million have been converted to ordinary shares of DMSA/AMSA, and its amount is included in others.

(*2)

Includes adjustments of foreign currency translation differences and others.

 

54


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

December 31, 2019

 

(in millions of Won)    Beginning      Lend      Collect     Others(*2)     Ending  

Associates and joint ventures

            

UITrans LRT Co., Ltd.

     5,695        4,884        —         —         10,579  

DMSA/AMSA(*1)

     64,297        15,451        —         (21,749     57,999  

South-East Asia Gas Pipeline Company Ltd.

     191,107        —          (48,027     4,287       147,367  

PT. Batutua Tembaga Raya

     35,100        —          —         1,191       36,291  

PT. Tanggamus Electric Power

     4,423        —          —         157       4,580  

PT. Wampu Electric Power

     5,330        —          —         189       5,519  

PT. POSMI Steel Indonesia

     2,236        —          —         80       2,316  

Nickel Mining Company SAS

     59,664        —          —         852       60,516  

KRAKATAU POS-CHEM DONG-SUH CHEMICAL

     6,709        —          —         238       6,947  

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     3,354        —          (3,354     —         —    

POS-SeAH Steel Wire (Thailand) Co., Ltd.

     6,709        —          —         238       6,947  

AMCI (WA) PTY LTD

     90,480        4,669        —         (16,596     78,553  

POS-AUSTEM YANTAI AUTOMOTIVE CO., LTD

     5,590        —          —         199       5,789  

POS-AUSTEM WUHAN AUTOMOTIVE CO., LTD

     8,945        —          —         317       9,262  

Hyo-chun Co., Ltd.

     —          —          —         2,382       2,382  

Chun-cheon Energy Co., Ltd.

     —          8,234        —         —         8,234  

POS-AUSTEM Suzhou Automotive Co., Ltd

     —          5,827        —         (38)       5,789  
   W 489,639        39,065        (51,381     (28,253     449,070  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*1)

During the year ended December 31, 2019, loans amounting to W23,682 million have been converted to ordinary shares of DMSA/AMSA, and its amount is included in others.

(*2)

Includes adjustments of foreign currency translation differences and others.

 

(h)

For the six-month periods ended June 30, 2020 and 2019, details of compensation to key management officers were as follows:

 

(in millions of Won)    June 30, 2020      June 30, 2019  

Short-term benefits

   W 53,802        56,769  

Long-term benefits

     8,525        7,249  

Retirement benefits

     9,322        10,389  
  

 

 

    

 

 

 
   W 71,649        74,407  
  

 

 

    

 

 

 

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influences and responsibilities in the Company’s business and operations.

 

55


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

35. Commitments and Contingencies

 

(a)

Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of June 30, 2020 are as follows:

 

(in millions of Won)                 Guarantee limit     Guarantee amount  

Guarantor

 

Guarantee beneficiary

 

Financial institution

  Foreign currency     Won equivalent     Foreign currency     Won equivalent  

[The Company]

             

POSCO

  POSCO Asia Co., Ltd.   Credit Agricole     USD       50,000,000       60,035       50,000,000       60,035  
  POSCO-VIETNAM Co., Ltd.   SMBC and others     USD       156,000,000       187,309       156,000,000       187,309  
  POSCO MEXICO S.A. DE C.V.   BOA and others     USD       120,000,000       144,084       120,000,000       144,084  
  POSCO COATED STEEL (THAILAND) CO., LTD.   SMBC and others     THB       5,501,000,000       213,879       5,501,000,000       213,879  
  POSCO Maharashtra Steel Private Limited   ING and others     USD       83,784,000       100,599       83,784,000       100,599  
  PT. KRAKATAU POSCO   Export-Import Bank of Korea and others     USD       1,350,300,000       1,621,306       862,114,318       1,035,142  
  POSCO ASSAN TST STEEL INDUSTRY   SMBC and others     USD       146,527,500       175,936       131,874,750       158,342  

POSCO INTERNATIONAL Corporation

  Daewoo Global Development. Pte., Ltd   Export-Import Bank of Korea and others     USD       186,625,000       224,081       178,750,000       214,625  
  POSCO INTERNATIONAL POWER (PNGLAE) LIMITED   KDB bank     USD       48,317,404       58,015       37,167,234       44,627  
  GOLDEN LACE POSCO INTERNATIONAL CO., LTD.   Shinhan Bank and others     USD       11,000,000       13,208       11,000,000       13,208  
  PT. Bio Inti Agrindo   Export-Import Bank of Korea and others     USD       148,168,985       177,907       146,062,714       175,378  
  POSCO ASSAN TST STEEL INDUSTRY   ING     USD       14,652,750       17,594       14,652,750       17,594  
  POSCO INTERNATIONAL AMERICA Corp.   Bank Mendes Gans     USD       50,000,000       60,035       38,291,323       45,977  
  POSCO INTERNATIONAL SINGAPORE Pte. Ltd..            
  POSCO INTERNATIONAL MEXICO S.A. de C.V.            
  POSCO INTERNATIONAL Japan Corp.            
  POSCO INTERNATIONAL Malaysia SDN BHD            
  POSCO INTERNATIONAL Deutschland GmbH            
  POSCO INTERNATIONAL Italia S.R.L.            
  Mykolaiv Milling Works PJSC.   Black Sea Trade and Development Bank     USD       26,144,680       31,392       26,144,680       31,392  

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

  POSCO E&C Vietnam Co., Ltd.   Export-Import Bank of Korea and others     USD       47,000,000       56,433       47,000,000       56,433  
  POSCO Engineering and Construction India Private Limited   Hana bank     INR       221,000,000       3,514       192,852,525       3,066  
  Songdo Posco family Housing   Shinyoung securities     KRW       20,000       20,000       20,000       20,000  
  JB CLARK HILLS   KOREA INVESTMENT&SECURITIES Co., Ltd.     KRW       60,000       60,000       55,000       55,000  
  PT.POSCO E&C INDONESIA   POSCO Asia Co., Ltd. and others     USD       10,900,000       13,088       10,900,000       13,088  
  HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.   POSCO Asia Co., Ltd. and others     USD       160,000,000       192,112       153,305,000       184,073  

POSCO ICT

  PT.POSCO ICT INDONESIA   POSCO Asia Co., Ltd. and others     USD       1,200,000       1,441       1,200,000       1,441  

POSCO CHEMICAL CO., LTD

  PT.Krakatau Posco Chemical Calcination   POSCO Asia Co., Ltd. and others     USD       15,200,000       18,251       12,000,000       14,408  

POSCO COATED & COLOR STEEL Co., Ltd.

  Myanmar POSCO C&C Company, Limited.   POSCO Asia Co., Ltd.     USD       13,986,947       16,794       13,986,947       16,794  

POSCO ENERGY CO., LTD

  PT. KRAKATAU POSCO ENERGY   Export-Import Bank of Korea and others     USD       193,900,000       232,816       96,985,535       116,451  

POSCO Asia Co., Ltd.

  POSCO America Corporation   SMBC     USD       70,000,000       84,049       70,000,000       84,049  

[Associates and joint ventures]

             

POSCO

  CSP - Compania Siderurgica do Pecem   Export-Import Bank of Korea and others     USD       420,000,000       504,292       372,140,666       446,830  
    BNDES     BRL       464,060,000       103,114       464,060,000       103,114  
  LLP POSUK Titanium   SMBC     USD       13,500,000       16,209       13,500,000       16,209  
  Nickel Mining Company SAS   SMBC     EUR       46,000,000       62,109       46,000,000       62,109  

POSCO INTERNATIONAL Corporation

  GLOBAL KOMSCO Daewoo LLC   Hana Bank     USD       8,225,000       9,876       7,875,000       9,456  

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

  New Songdo International City Development, LLC   Others     KRW       386,000       386,000       386,000       386,000  
  POHANG E&E Co., LTD   Heungkuk Life Insurance Co., Ltd.     KRW       71,930       71,930       62,008       62,008  
  UITrans LRT Co., Ltd.   Kookmin Bank and others     KRW       125,845       125,845       107,307       107,307  
  Incheon-Gimpo Expressway Co, Ltd.   Kookmin Bank and others     KRW       311,468       311,468       289,379       289,379  
  RPSD   Plan-up Sinsajeilcha Co., Ltd     KRW       45,000       45,000       37,000       37,000  
  Metropolitan Outer Ring Expressway Co., ltd   Woori Bank and others     KRW       275,989       275,989       14,486       14,486  
  Pureun Tongyeong Enviro Co., Ltd.   KDB Bank and others     KRW       22,714       22,714       15,542       15,542  
  Pure Gimpo.Co.,Ltd   KDB Bank and others     KRW       44,740       44,740       31,946       31,946  
  Clean Iksan Co.,Ltd   SAMSUNG FIRE & MARINE INSURANCE CO.,LTD     KRW       44,054       44,054       30,668       30,668  
  NEXTRAIN Co., Ltd   Kookmin Bank and others     KRW       634,752       634,752       —         —    
  Chun-cheon Energy Co., Ltd.   Kookmin Bank and others     KRW       149,200       149,200       145,300       145,300  

POSCO ICT

  UITrans LRT Co., Ltd.   Kookmin Bank     KRW       76,000       76,000       76,000       76,000  
  Hyochun Co., Ltd.   Kyobo Securities     KRW       39,575       39,575       39,575       39,575  
  Incheon-Gimpo Expressway Co., Ltd.   KDB Bank     KRW       100,000       100,000       100,000       100,000  
  Shinahn wind power generation   NH INVESTMENT & SECURITIES CO.,LTD. and others     KRW       17,860       17,860       17,860       17,860  
  Western Inland highway CO., LTD.   Kookmin Bank and others     KRW       964,100       964,100       964,100       964,100  
  Metropolitan Outer Ring Expressway Co., ltd   Woori Bank and others     KRW       193,700       193,700       193,700       193,700  

POSCO CHEMICAL CO., LTD

  KRAKATAU POS-CHEM DONG-SUH CHEMICAL   Hana Bank     USD       1,140,000       1,369       506,667       608  

POSCO(Suzhou) Automotive Processing Center Co.,Ltd.

  POS-InfraAuto (Suzhou) Co., Ltd   Export-Import Bank of Korea and others     USD       769,500       924       769,500       924  

[Others]

             

POSCO INTERNATIONAL Corporation

  Sherritt International Corporation and others   Export-Import Bank of Korea     USD       21,818,182       26,197       3,019,552       3,626  

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

  Ecocity CO.,LTD and others   Kookmin Bank and others     KRW       3,984,798       3,984,798       2,135,462       2,135,462  

POSCO ICT

  BLT Enterprise and others   Hana Bank and others     KRW       1,179,464       1,179,464       1,179,464       1,179,464  

POSCO AUSTRALIA PTY LTD

  Department of Trade and Investment (NSW Government) and others   Woori Bank and others     AUD       11,637,255       9,602       11,637,255       9,602  

PT. Bio lnti Agrindo

  KSU Mandob   Bank Muamalat     IDR       80,000,000,000       6,744       80,000,000,000       6,744  
       

 

 

   

 

 

   

 

 

   

 

 

 
        USD       3,369,159,948       4,045,352       2,659,030,636       3,192,702  
        KRW       8,747,189       8,747,189       5,900,797       5,900,797  
        IDR       80,000,000,000       6,744       80,000,000,000       6,744  
        INR       221,000,000       3,514       192,852,525       3,066  
        THB       5,501,000,000       213,879       5,501,000,000       213,879  
        EUR       46,000,000       62,109       46,000,000       62,109  
        AUD       11,637,255       9,602       11,637,255       9,602  
        BRL       464,060,000       103,114       464,060,000       103,114  
       

 

 

   

 

 

   

 

 

   

 

 

 

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(b)

Other commitments

Details of other commitments of the Company as of June 30, 2020 are as follows:

 

Company

  

Description

POSCO    POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2020, 81 million tons of iron ore and 12 million tons of coal remained to be purchased under such long-term contracts.
   POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.
   POSCO entered into consecutive voyage charter (CVC) contract for the transportation of raw materials. As of June 30, 2020, there are 39 vessels under CVC contracts and the average remaining contract period is about 9 years.
   POSCO entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowings up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowings depends on the success of the project. POSCO is not liable for the repayment in full or part of borrowings if the project fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreement. As of June 30, 2020, the ending balance of the borrowing amounts to USD 1.02 million.
   POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO ENERGY CO., LTD.
   POSCO provides a supplementary fund of up to W9.8 billion to the Company’s subsidiary, Busan E&E Co., Ltd., at the request of creditors such as the Korea Development Bank.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   As of June 30, 2020, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has foreign currency guarantees of up to USD 2,481 million provided by financial institutions and uses USD 783 million with Woori Bank and others.
   The Company is responsible for completion of 2 projects, including the development of Parc One in Yeouido-dong. As of June 30, 2020, the outstanding amount of loans related to the responsible payment arrangement is W2,302 billion which may be assumed in the case of non-performance of developers. If the responsibility is not fulfilled, there are duties such as debt assumption and responsibility for lease.
POSCO ICT    As of June 30, 2020, in relation to contract enforcement, POSCO ICT was provided with W89,473 million, W2,882 million and W305 million guaranties from Korea Software Financial Cooperative, Seoul Guarantee Insurance and Engineering Guarantee Insurance, respectively.
   The Company is responsible for completion of 10 projects, including the construction of Bundang Center. As of June 30, 2020, the outstanding amount of developers’ borrowings amounting to W737.2 billion. If the responsiblility is not fulfilled in which the Company provides payment guarantee.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(c)

Litigation in progress

In March 2019, regarding the Songdo International City Development Project in Incheon, NSC Investment and TGC (the “applicant”), former partners of joint venture of POSCO ENGINEERING & CONSTRUCTION CO., LTD. (“POSCO E&C”), have applied to the International Chamber of Commerce of Singapore for arbitration in relation to the POSCO E&C’s alleged contract violation (approximately USD 2 billion). In addition, the applicant filed a confirmation suit with the New York Southern District Court in March 2019 against the fact that all claims listed in the above arbitration application must be settled by ICC arbitration. The claimants are seeking damages allegedly resulting from POSCO E&C’s purported wrongful seizure. As of June 30, 2020, the Company believes that the applicant’s claims are not legally valid and that the present obligation for the above arbitration event does not exist and therefore did not recognize a provision.

The Company is involved in 325 lawsuits aggregating to W891.5 billion as defendant as of June 30, 2020, which arise from ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting to W46.8 billion for 94 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company believes that it does not have a present obligation as of June 30, 2020.

 

(d)

Other contingencies

 

Company

  

Description

POSCO    POSCO has provided 3 blank checks to KOREA ENERGY AGENCY as collateral for long-term foreign currency borrowings.
POSCO INTERNATIONAL Corporation    As of June 30, 2020, POSCO INTERNATIONAL Corporation has provided 33 blank promissory notes and 17 blank checks to Korea Energy Agency and others as collateral for the guarantee on performance for contracts and others.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   As of June 30, 2020, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided 29 blank checks and 4 blank promissory notes as collateral for agreements and outstanding loans, and has provided joint guarantee of W8,530,827 million for guarantee that partners had issued from Korea Housing & Urban Guarantee Corporation and others.
POSCO ICT    As of June 30, 2020, POSCO ICT has provided 6 blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

36. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    June 30, 2020      June 30, 2019  

Trade accounts and notes receivable

   W 524,843        (310,248

Other receivables

     22,494        (197,582

Inventories

     1,260,868        (64,238

Other current assets

     (91,857      82,503  

Other non-current assets

     (71,387      (64,191

Trade accounts and notes payable

     (299,704      (116,517

Other payables

     (75,977      (50,573

Other current liabilities

     168,919        292,868  

Provisions

     (137,663      (81,657

Payments of severance benefits

     (146,492      (87,522

Plan assets

     48,328        45,377  

Other non-current liabilities

     3,130        (1,948
  

 

 

    

 

 

 
   W 1,205,502        (553,728
  

 

 

    

 

 

 

37. Operating Segments

The Company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments - steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segments include power generation, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2019.

Segment assets, liabilities and profit (loss) are generally measured based on separate financial statements in accordance with K-IFRS of the subsidiaries that constitute reportable operating segments.

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(a)

Information about reportable segments for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

  1)

For the six-month period ended June 30, 2020

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

External revenues

   W 13,479,418        10,016,621        3,395,502        1,375,826        28,267,367  

Internal revenues

     7,383,579        6,437,084        527,600        1,316,242        15,664,505  

Inter segment revenue

     5,199,890        2,949,668        489,800        1,234,354        9,873,712  

Total revenues

     20,862,997        16,453,705        3,923,102        2,692,068        43,931,872  

Segment profits

     137,727        150,120        239,257        184,814        711,918  

 

  2)

For the six-month period ended June 30, 2019

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

External revenues

   W 16,254,629        11,202,364        3,250,562        1,628,018        32,335,573  

Internal revenues

     8,810,998        8,118,637        271,167        1,313,099        18,513,901  

Inter segment revenue

     6,083,008        4,353,673        238,116        1,248,146        11,922,943  

Total revenues

     25,065,627        19,321,001        3,521,729        2,941,117        50,849,474  

Segment profits

     1,154,554        162,877        33,084        167,428        1,517,943  

 

(b)

Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    June 30, 2020      June 30, 2019  

Total profit for reportable segments

   W 711,918        1,517,943  

Corporate fair value adjustments

     (38,676      (40,729

Elimination of inter-segment profits

     (133,716      (17,351

Income tax expense

     255,023        657,559  
  

 

 

    

 

 

 

Profit before income tax expense

   W 794,549        2,117,422  
  

 

 

    

 

 

 

38. Events after the Reporting Period

Pursuant to the resolution of the Board of Directors on August 7, 2020, the Company decided to pay interim cash dividends of W500 per common share (total dividend: W39.9 billion).

 

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POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2020

(With Independent Auditors’ Review Report Thereon)


Table of Contents


Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of June 30, 2020, the condensed separate interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019, the condensed separate interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2020 and 2019, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed separate interim financial statements free of material misstatements due to error or fraud.

Auditors’ review responsibility

Our responsibility is to issue a report on the condensed separate interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

 

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Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

The separate statement of financial position of the Company as of December 31, 2019, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 12, 2020, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respect, with the audited separate financial statements from which it has been derived.

 

LOGO

Seoul, Korea

August 13, 2020

 

This report is effective as of August 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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POSCO

Condensed Separate Interim Statements of Financial Position

As of June 30, 2020 and December 31, 2019

(Unaudited)

 

 

(in millions of Won)   

Notes

   June 30,
2020
     December 31,
2019
 

Assets

        

Cash and cash equivalents

   20    W 2,446,945        978,139  

Trade accounts and notes receivable, net

   4,14,20,25,32      3,142,894        3,987,041  

Other receivables, net

   5,20,32      380,258        321,352  

Other short-term financial assets

   6,20      9,727,533        7,858,979  

Inventories

   7,29      4,215,794        4,988,530  

Assets held for sale

   8      69,757        53,924  

Other current assets

   13      33,560        28,101  
     

 

 

    

 

 

 

Total current assets

        20,016,741        18,216,066  
     

 

 

    

 

 

 

Long-term trade accounts and notes receivable, net

   4,20      6,003        6,014  

Other receivables, net

   5,20      89,055        56,468  

Other long-term financial assets

   6,20      1,176,466        1,257,896  

Investments in subsidiaries, associates and joint ventures

   9      15,216,814        15,069,857  

Investment property, net

   10      156,378        158,077  

Property, plant and equipment, net

   11      20,187,097        20,132,199  

Intangible assets, net

   12      667,491        708,915  

Other non-current assets

   13      104,064        105,274  
     

 

 

    

 

 

 

Total non-current assets

        37,603,368        37,494,700  
     

 

 

    

 

 

 

Total assets

      W 57,620,109        55,710,766  
     

 

 

    

 

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of June 30, 2020 and December 31, 2019

(Unaudited)

 

 

(in millions of Won)   

Notes

   June 30,
2020
    December 31,
2019
 

Liabilities

       

Trade accounts and notes payable

   20,32    W 855,533       667,551  

Short-term borrowings and current installments of long-term borrowings

   4,14,20      2,464,650       1,146,476  

Other payables

   15,20,32      1,015,323       1,113,003  

Other short-term financial liabilities

   16,20      7,556       10,969  

Current income tax liabilities

        221,791       237,293  

Provisions

   17      40,125       21,007  

Other current liabilities

   19,25      132,620       135,147  
     

 

 

   

 

 

 

Total current liabilities

        4,737,598       3,331,446  
     

 

 

   

 

 

 

Long-term borrowings, excluding current installments

   14,20      6,097,332       5,191,537  

Other payables

   15,20      234,005       222,802  

Other long-term financial liabilities

   16,20      36,411       46,925  

Defined benefit liabilities, net

   18      58,875       54,146  

Deferred tax liabilities

        1,003,013       1,190,553  

Long-term provisions

   17,33      49,573       53,942  

Other non-current liabilities

   19,25      540       5,230  
     

 

 

   

 

 

 

Total non-current liabilities

        7,479,749       6,765,135  
     

 

 

   

 

 

 

Total liabilities

        12,217,347       10,096,581  
     

 

 

   

 

 

 

Equity

       

Share capital

   21      482,403       482,403  

Capital surplus

   21      1,252,220       1,252,220  

Hybrid bonds

   22      199,384       199,384  

Reserves

   23      (341,677     (183,930

Treasury shares

   24      (1,573,126     (1,508,303

Retained earnings

        45,383,558       45,372,411  
     

 

 

   

 

 

 

Total equity

        45,402,762       45,614,185  
     

 

 

   

 

 

 

Total liabilities and equity

      W 57,620,109       55,710,766  
     

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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POSCO

Condensed Separate Interim Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won, except per share informations)           For the three-month periods
ended June 30
    For the six-month periods
ended June 30
 
     Notes      2020     2019     2020     2019  

Revenue

     25,32      W 5,884,824       7,475,854       12,854,680       15,292,325  

Cost of sales

     7,29,32        (5,742,816     (6,484,077     (11,973,220     (13,211,583
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        142,008       991,777       881,460       2,080,742  

Selling and administrative expenses

     29,32           

Reversal of (Impairment loss) on trade accounts and notes receivable

        (5,231     26       (4,967     4,636  

Other administrative expenses

     26        (192,762     (209,610     (391,531     (416,430

Selling expenses

     26        (52,490     (57,895     (135,326     (112,183
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

        (108,475     724,298       349,636       1,556,765  
     

 

 

   

 

 

   

 

 

   

 

 

 

Finance income and costs

     20,27           

Finance income

        110,535       281,485       784,852       575,194  

Finance costs

        (37,305     (156,029     (497,720     (268,292
     

 

 

   

 

 

   

 

 

   

 

 

 

Other non-operating income and expenses

     32           

Reversal of (impairment loss) on other receivables

        169       (140     (327     (272

Other non-operating income

     28        81,598       35,915       105,723       56,840  

Other non-operating expenses

     28,29        (97,259     (140,046     (175,945     (252,694
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before income tax

        (50,737     745,483       566,219       1,667,541  

Income tax income (expense)

     30        57,383       (200,101     (106,553     (450,987
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit

        6,646       545,382       459,666       1,216,555  

Other comprehensive income (loss)

           

Items that will not be reclassified subsequently to profit or loss:

           

Remeasurements of defined benefit plans

     18        2,627       (1,010     (393     (1,882

Net changes in fair value of equity investments at fair value through other comprehensive income

     6,20,23        30,838       37,713       (160,650     25,590  

Total comprehensive income

      W 40,111       582,085       298,623       1,240,263  
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings per share (in Won)

     31      W 62       6,787       5,700       15,144  

See accompanying notes to the condensed separate interim financial statements.

 

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POSCO

Condensed Separate Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Share
capital
     Capital
surplus
     Hybrid
bonds
     Reserves     Treasury
shares
    Retained
earnings
    Total  

Balance as of January 1, 2019

   W 482,403        1,154,775        199,384        (207,191     (1,532,728     45,175,459       45,272,102  

Comprehensive income:

                 

Profit

     —          —          —          —         —         1,216,555       1,216,555  

Other comprehensive income (loss)

                 

Remeasurements of defined benefit plans, net of tax

     —          —          —          —         —         (1,882     (1,882

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

     —          —          —          31,592       —         (6,002     25,590  

Transactions with owners of the Company, recognized directly in equity:

                 

Year-end dividends

     —          —          —          —         —         (400,006     (400,006

Interim dividends

     —          —          —          —         —         (160,231     (160,231

Interest of hybrid bonds

     —          —          —          —         —         (4,562     (4,562

Disposal of treasury shares

     —          12,576        —          —         24,425       —         37,001  

Business combination

     —          408,490        —          —         —         —         408,490  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2019

   W 482,403        1,575,841        199,384        (175,599     (1,508,303     45,819,331       46,393,057  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of January 1, 2020

   W 482,403        1,252,220        199,384        (183,930     (1,508,303     45,372,411       45,614,185  

Comprehensive income:

                 

Profit

     —          —          —          —         —         459,666       459,666  

Other comprehensive income (loss)

                 

Remeasurements of defined benefit plans, net of tax

     —          —          —          —         —         (393     (393

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

     —          —          —          (157,747     —         (2,903     (160,650

Transactions with owners of the Company, recognized directly in equity:

                 

Year-end dividends

     —          —          —          —         —         (320,462     (320,462

Interim dividends

     —          —          —          —         —         (120,174     (120,174

Interest of hybrid bonds

     —          —          —          —         —         (4,587     (4,587

Acquisition of treasury shares

     —          —          —          —         (64,823     —         (64,823
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2020

   W 482,403        1,252,220        199,384        (341,677     (1,573,126     45,383,558       45,402,762  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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POSCO

Condensed Separate Interim Statements of Cash Flows

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Notes      June 30,
2020
    June 30,
2019
 

Cash flows from operating activities

       

Profit

      W 459,666       1,216,555  

Adjustments for :

       

Expenses related to post-employment benefit

        63,801       59,749  

Depreciation

        1,126,547       1,071,915  

Amortization

        50,851       38,426  

Impairment loss (reversal of) on trade and other receivables

        5,295       (4,364

Finance income

        (551,380     (456,317

Finance costs

        360,312       177,194  

Loss on valuation of inventories

        40,802       1,442  

Gain on disposal of property, plant and equipment

        (6,054     (14,685

Loss on disposal of property, plant and equipment

        94,234       38,537  

Impairment losses on property, plant and equipment

        22,687       161,496  

Gain on disposal of Intangible assets

        (131     (1,011

Gain on disposal of investments in subsidiaries, associates and joint venture

        (21,907     (1,194

Impairment losses on investments in subsidiaries, associates and joint ventures

        —         10,422  

Gain on disposal of assets held for sale

        (26,942     (715

Impairment loss on assets held for sale

        8,945       1,794  

Gain on disposal of emission rights

        (24,566     —    

Gain on valuation of emission rights

        —         (25,440

Increase to provisions

        38,674       1,053  

Income tax expense

        106,553       450,987  

Others

        (3,631     (592

Changes in operating assets and liabilities

     34        1,572,924       (618,543

Interest received

        83,513       74,330  

Interest paid

        (106,974     (81,228

Dividends received

        152,172       200,840  

Income taxes paid

        (247,633     (755,923
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 3,197,758       1,544,728  
     

 

 

   

 

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2020 and 2019

(Unaudited)

 

 

(in millions of Won)    Notes      June 30,
2020
    June 30,
2019
 

Cash flows from investing activities

       

Decrease in deposits

      W 2,137,923       1,500,369  

Proceeds from disposal of short-term financial instruments

        16,810,440       14,496,900  

Collection of short-term loans

        807       —    

Proceeds from disposal of current portion of debt security

        235,068       3  

Proceeds from disposal of equity securities

        7,938       22,616  

Proceeds from disposal of other securities

        990       2,772  

Proceeds from disposal of investments in subsidiaries, associates and joint ventures

        1,292       4,055  

Proceeds from disposal of intangible assets

        66,614       5,579  

Proceeds from disposal of assets held for sale

        161,422       —    

Proceeds from business combination

        —         2,171  

Increase in deposits

        (2,676,730     (1,549,036

Acquisition of short-term financial instruments

        (17,649,928     (13,719,309

Increase in long-term loans

        (14,852     (613

Acquisition of debt securities

        (627,159     (235,011

Acquisition of other securities

        (9,266     (110

Acquisition of investment in subsidiaries, associates and joint ventures

        (194,275     (41,798

Acquisition of property, plant and equipment

        (1,322,802     (703,192

Proceeds from disposal of property, plant and equipment

        (49,934     (6,886

Acquisition of intangible assets

        (68,813     (79,223
     

 

 

   

 

 

 

Net cash used in investing activities

      W (3,191,265     (300,713
     

 

 

   

 

 

 

Cash flows from financing activities

       

Proceeds from borrowings

        2,433,096       300,000  

Increase in long-term financial liabilities

        209       2,975  

Proceeds from disposals of derivatives

        —         4,515  

Receipt of government grants

        540       —    

Repayment of borrowings

        (409,587     (666,981

Repayment of lease liabilities

        (31,654     (19,660

Decrease in long-term financial liabilities

        (284     (1,357

Payment of cash dividends

        (440,648     (560,255

Acquisition of treasury shares

        (64,823     —    

Payment of interest of hybrid bonds

        (4,613     (4,587
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

      W 1,482,236       (945,350
     

 

 

   

 

 

 

Effect of exchange rate fluctuation on cash held

        (19,923     (1,443

Net increase in cash and cash equivalents

        1,468,806       297,222  

Cash and cash equivalents at beginning of the period

 

     978,139       259,219  
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

      W 2,446,945       556,441  
     

 

 

   

 

 

 

See accompanying notes to the condensed separate interim financial statements.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements

As of June 30, 2020

(Unaudited)

 

1. Reporting Entity

POSCO (the “Company”) is the largest steel producer in Korea which was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea, to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of the Company have been listed on the Korea Exchange since June 10, 1988. The Company owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea, and it also operates internationally through six of its overseas liaison offices.

As of June 30, 2020, the shares of the Company are listed on the Korea Exchange, while its American Depository Receipts (ADRs) are listed on the New York Stock Exchange.

2. Statement of Compliance

Statement of compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Companies, Etc. in the Republic of Korea.

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2019. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.

Use of estimates and judgments

 

(a)

Judgments, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

With the outbreak of COVID-19 pandemic, governments around the globe have implemented measures such as mandatory factory shutdown, shelter-in-place orders, border closure, and travel restrictions. The ultimate impact of COVID-19 pandemic on the Company’s operations is not yet known and will depend on future developments. The duration and significance of COVID-19 is highly uncertain and unpredictable, and the protective measures by the governments around the globe or the Company may lead to substantial business interruption and decrease in business scale. The financial impact of this cannot be reasonably estimated, but management expects the Company to be partially affected to the most areas where it operates. The extent and duration of COVID-19’s impact on the Company’s business cannot yet be reasonably estimated.

 

(b)

Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

Significant valuation issues are reported to the Company’s Audit Committee.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

   Level 1 –    unadjusted quoted prices in active markets for identical assets or liabilities.
   Level 2 –    inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly.
   Level 3 –    inputs for the assets or liabilities that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2020.

 

(a)

K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors”

The definition of materiality has been clarified, and K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors” have been amended according to the clarified definition. In determining the materiality, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Company does not expect the effect of the amendments to the financial statements to be significant.

 

(b)

K-IFRS No. 1103 “Business Combinations”

The amendment clarifies the definition of business when it includes input and process together significantly contribute to ability to create output and requires a simplified assessment that result in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The Company does not expect the effect of the amendment to the financial statements to be significant.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Trade accounts and notes receivable

   W 3,157,907        3,999,991  

Less: Allowance for doubtful accounts

     (15,013      (12,950
  

 

 

    

 

 

 
   W 3,142,894        3,987,041  
  

 

 

    

 

 

 

Non-current

     

Trade accounts and notes receivable

   W 9,516        9,530  

Less: Present value discount

     (2,501      (2,501

Less: Allowance for doubtful accounts

     (1,012      (1,015
  

 

 

    

 

 

 
   W 6,003        6,014  
  

 

 

    

 

 

 

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to W113,188 million and W167,021 million as of June 30, 2020 and December 31, 2019, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and is recognized as short-term borrowings from financial institutions.

5. Other Receivables

Other receivables as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Loans

   W 2,950        2,950  

Other accounts receivable

     312,290        279,093  

Others

     70,262        47,257  

Less: Allowance for doubtful accounts

     (5,244      (7,948
  

 

 

    

 

 

 
   W 380,258        321,352  
  

 

 

    

 

 

 

Non-current

     

Loans

   W 49,765        34,224  

Long-term other accounts receivable

     44,473        27,570  

Others

     4,017        3,555  

Less: Allowance for doubtful accounts

     (9,200      (8,881
  

 

 

    

 

 

 
   W 89,055        56,468  
  

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

6. Other Financial Assets

(a) Other financial assets as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Short-term derivative assets

   W 109,943        15,603  

Debt securities

     686,479        290,559  

Deposit instruments(*1)

     1,833,331        1,294,525  

Short-term financial instruments

     7,097,780        6,258,292  
  

 

 

    

 

 

 
   W 9,727,533        7,858,979  
  

 

 

    

 

 

 

Non-current

     

Long-term derivative assets

   W 187,985        64,072  

Equity securities

     918,561        1,128,641  

Debt securities

     5,348        9,177  

Other securities

     64,538        55,972  

Deposit instruments(*2)

     34        34  
  

 

 

    

 

 

 
   W 1,176,466        1,257,896  
  

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, W5,689 million and W4,524 million, respectively, are restricted in use in relation to government assigned projects.

(*2)

The Company is required to provide deposits to maintain checking accounts and accordingly the withdrawal of these deposits is restricted.

(b) Equity securities as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31,
2019
 
     Number of
shares
     Ownership
(%)
     Acquisition
cost
     Fair
value
     Net changes in
fair value of
equity securities
    Book
value
     Book
value
 

Listed equity securities

                   

Nippon Steel Corporation

     15,698,500        1.65      W 473,962        177,568        (296,394     177,568        276,133  

KB Financial group Inc.

     3,863,520        0.93        178,839        131,167        (47,672     131,167        184,097  

Woori Financial Group Inc.

     20,280,000        2.81        244,447        178,667        (65,780     178,667        235,248  

SAMWONSTEEL Co., Ltd.

     5,700,000        14.25        8,930        11,343        2,413       11,343        17,214  

DONGKUK INDUSTRIES COMPANY

     2,611,989        4.82        11,911        6,634        (5,277     6,634        6,778  

DONGKUK STEEL MILL CO., LTD

     —          —          —          —          —         —          8,571  

Others (7 companies)

           55,759        30,802        (24,957     30,802        34,157  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
           973,848        536,181        (437,667     536,181        762,198  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Unlisted equity securities

                   

Congonhas Minerios S.A.

     3,658,394        2.02        221,535        292,453        70,918       292,453        292,453  

POSCO PLANTEC CO., LTD(*1)

     18,337,912        10.99        19,437        19,437        —         19,437        —    

Korea Nickel CO.LTD

     75,600        14.00        10,194        10,194        —         10,194        10,194  

Poongsan Special Metal Corp.

     315,790        5.00        7,657        7,657        —         7,657        7,657  

HANKUM.CO.LTD

     21,000        4.99        4,599        4,599        —         4,599        4,599  

Core-Industry Co., Ltd.

     490,000        19.84        4,214        4,214        —         4,214        4,214  

AJUSTEEL CO.,LTD

     17,000        4.36        4,165        4,165        —         4,165        4,165  

Others (28 companies)

           144,191        39,661        (104,530     39,661        43,161  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
           415,992        382,380        (33,612     382,380        366,443  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
         W 1,389,840        918,561        (471,279     918,561        1,128,641  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(*1)

Fair value is based on an analysis performed by an external professional evaluation agency.

 

13


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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

7. Inventories

Inventories as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Finished goods

   W 869,670        868,012  

Semi-finished goods

     1,116,624        1,474,153  

By-products

     12,478        10,763  

Raw materials

     1,166,238        1,139,517  

Fuel and materials

     539,754        646,396  

Materials-in-transit

     551,200        856,706  

Others

     632        660  
  

 

 

    

 

 

 
     4,256,596        4,996,207  

Less: Allowance for inventories valuation

     (40,802      (7,677
  

 

 

    

 

 

 
   W 4,215,794        4,988,530  
  

 

 

    

 

 

 

The amount of loss on valuation of inventories recognized in cost of sales during the six-month period ended June 30, 2020 and the year ended December 31, 2019 were W40,802 million and W7,677 million, respectively.

 

14


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

8. Assets Held for Sale

Assets held for sale as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Assets

     

Investments in subsidiaries(*1,2)

   W 37,240        17,603  

Property, plant and equipment(*3,4)

     31,705        36,321  

Intangible assets

     812        —    
  

 

 

    

 

 

 
   W 69,757        53,924  
  

 

 

    

 

 

 

 

(*1)

The Company determined to dispose its partial interest in POSCO Thainox Public Company Limited, a subsidiary of the Company, and classified the investment as assets held for sale. During the six-month period ended June 30, 2020, the Company recognized W3,915 million of impairment loss for the difference between book value and net fair value of the interest, and completed the disposal for part of it.

(*2)

During the six-month period ended June 30, 2020, the Company classified its investment in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale, since it is to be dissolved at its maturity.

(*3)

During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM Plants, and classified the assets as held for sale. During the six-month period ended June 30, 2020, the Company recognized W5,030 million of impairment loss for the difference between the fair value less costs to sell and the carrying amount of the assets.

(*4)

During the year ended December 31, 2019, the Company completed the disposal of all assets, liabilities and rights other than LNG tanks under construction, which were to be disposed of, related to a LNG terminal business of the Company to POSCO ENERGY CO., LTD. The construction and disposal were completed during the six-month period ended June 30, 2020 and the Company recognized W26,633 million of gain on disposal for the difference between the carrying amount and the sale price.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

9. Investments in Subsidiaries, Associates and Joint ventures

(a) Details of subsidiaries and their carrying amounts as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)              June 30, 2020      December 31,
2019
 
     Country    Principal operations    Ownership (%)      Book value      Book value  

[Domestic]

              

POSCO INTERNATIONAL Corporation

   Korea    Trading      62.91      W 3,383,745        3,383,745  

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   Korea    Engineering and construction      52.80        1,014,314        1,014,314  

POSCO ENERGY CO., LTD.

   Korea    Power generation      89.02        658,176        658,176  

POSCO COATED & COLOR STEEL Co., Ltd.

   Korea    Coated steel manufacturing and sales      56.87        108,421        108,421  

POSCO Venture Capital Co., Ltd.

   Korea    Investment in venture companies      95.00        103,780        103,780  

POSCO CHEMICAL CO., LTD

   Korea    Refractory manufacturing and sales      61.26        207,631        207,631  

POSCO O&M Co., Ltd(*1)

   Korea    Business facility maintenance      47.17        73,374        73,374  

POSCO ICT

   Korea    Computer hardware and software distribution      65.38        70,990        70,990  

POSCO M-TECH(*1)

   Korea    Packing materials manufacturing and sales      48.85        107,278        107,278  

POSCO Family Strategy Fund(*2)

   Korea    Investment in venture companies      69.91        —          29,596  

Busan E&E Co,. Ltd.(*3)

   Korea    Municipal solid waste fuel and power
generation
     70.00        30,148        30,148  

Others (10 companies)

              117,393        117,393  
           

 

 

    

 

 

 
              5,875,250        5,904,846  
           

 

 

    

 

 

 

[Foreign]

              

PT. KRAKATAU POSCO

   Indonesia    Steel manufacturing and sales      70.00        707,509        707,509  

POSCO WA PTY LTD

   Australia    Iron ore sales and mine development      100.00        642,434        640,720  

POSCO Maharashtra Steel Private Limited

   India    Steel manufacturing and sales      100.00        722,569        722,569  

POSCO Canada Ltd.

   Canada    Coal mine development      100.00        560,879        560,879  

POSCO AUSTRALIA PTY LTD

   Australia    Iron ore sales and mine development      100.00        330,623        330,623  

POSCO (Zhangjiagang) Stainless Steel Co.,Ltd.

   China    Stainless steel manufacturing and sales      58.60        283,845        283,845  

POSCO Thainox Public Company Limited

   Thailand    Stainless steel manufacturing and sales      84.29        212,339        212,339  

POSCO-China Holding Corp.

   China    Investment management      100.00        593,841        593,841  

POSCO-India Private Limited

   India    Steel manufacturing and sales      99.99        75,567        75,567  

POSCO MEXICO S.A. DE C.V.

   Mexico    Plate steel manufacturing and sales      83.28        180,072        180,072  

POSCO America Corporation

   USA    Steel trading      99.45        192,156        192,156  

POSCO-VIETNAM Co., Ltd.

   Vietnam    Steel manufacturing and sales      100.00        160,572        160,572  

POSCO VST CO., LTD.

   Vietnam    Stainless steel manufacturing and sales      95.65        144,573        144,573  

POSCO(Guangdong) Automotive Steel Co., Ltd.

   China    Plate steel manufacturing and sales      83.64        52,936        52,936  

POSCO COATED STEEL (THAILAND) CO., LTD.

   Thailand    Plate steel manufacturing and sales      100.00        121,592        121,592  

POSCO Asia Co., Ltd.

   Hong Kong    Steel and raw material trading      100.00        117,710        117,710  

POSCO ASSAN TST STEEL INDUSTRY

   Turkey    Steel manufacturing and sales      60.00        92,800        92,800  

POSCO JAPAN Co., Ltd.

   Japan    Steel trading      100.00        68,436        68,436  

Qingdao Pohang Stainless Steel Co., Ltd.

   China    Stainless steel manufacturing and sales      70.00        65,982        65,982  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

   China    Steel manufacturing and sales      90.00        62,494        62,494  

POSCO AFRICA (PROPRIETARY) LIMITED

   South Africa    Mine development      100.00        50,297        50,297  

POSCO-Malaysia SDN. BHD.

   Malaysia    Steel manufacturing and sales      81.79        45,479        45,479  

POSCO Argentina S.A.U.

   Argentina    Mineral exploration, manufacturing and sale      100.00        370,250        370,250  

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Formerly, POSCO SS VINA JOINT STOCK COMPANY)(*4)

   Vietnam    Steel manufacturing and sales      51.00        130,526        —    

Others (28 companies)(*5)

              510,080        485,668  
           

 

 

    

 

 

 
              6,495,561        6,338,909  
           

 

 

    

 

 

 
            W 12,370,811        12,243,755  
           

 

 

    

 

 

 

 

(*1)

The Company classified POSCO M-TECH and POSCO O&M Co., Ltd. as the investments in subsidiaries, considering additional facts and circumstances, such as the relative size of the voting rights held by the Company and the degree of distribution of other shareholders, although the Company holds less than half of the voting rights of POSCO M-TECH and POSCO O&M Co., Ltd.

(*2)

During the six-month period ended June 30, 2020, the Company classified its investment in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale, since it is to be dissolved at its maturity.

(*3)

As of June 30, 2020 and December 31, 2019, the investments in a subsidiary amounting to W30,148 million were provided as collateral in relation to the loan agreement of Busan E&E Co., Ltd.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(*4)

During the six-month period ended June 30, 2020, POSCO SS VINA JOINT STOCK COMPANY changed its name to POSCO YAMATO VINA STEEL JOINT STOCK COMPANY. The Company sold 49% of POSCO YAMATO VINA STEEL JOINT STOCK COMPANY and invested W130,526 million in cash.

(*5)

During the six-month period ended June 30, 2020, the Company sold the investment in POSCO China Dalian Plate Processing Center Co., Ltd., a subsidiary.

(b) Details of associates and their carrying amounts as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)              June 30, 2020      December 31,
2019
 
     Country   

Principal operations

   Ownership (%)      Book value      Book value  

[Domestic]

              

EQP POSCO Global NO1 Natural Resources Private Equity Fund

   Korea    Investment in mines      31.64      W 169,316        169,316  

SNNC

   Korea   

STS material manufacturing and sales

     49.00        100,655        100,655  

QSONE Co.,Ltd.

   Korea    Real estate rental business      50.00        85,550        85,550  

Others (6 companies)(*1)

              21,177        22,468  
           

 

 

    

 

 

 
              376,698        377,989  
           

 

 

    

 

 

 

[Foreign]

              

Nickel Mining Company SAS

   New
Caledonia
  

Raw material manufacturing and sales

     49.00        189,197        189,197  

9404-5515 Quebec Inc.
(Formerly, 7623704 Canada Inc.)(*2)

   Canada    Investment in mines      10.40        124,341        124,341  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

   China    Tinplate manufacturing and sales      24.00        11,003        11,003  

Others (6 companies)

              39,692        39,590  
           

 

 

    

 

 

 
              364,233        364,131  
           

 

 

    

 

 

 
            W 740,931        742,120  
           

 

 

    

 

 

 

 

(*1)

During the six-month period ended June 30, 2020, the investment in POSCO PLANTEC Co., Ltd., an associate, was reclassified from associates to equity securities as the paid-in capital increase of POSCO PLANTEC Co., Ltd. reduced the company’s ownership percentage to less than 20%, resulting in a loss of significant influence over the investee.

(*2)

As of June 30, 2020, it was classified as an associate even though the Company’s ownership percentage is less than 20% since the Company has significant influence over the investee when considering its structure of the Board of Directors and others. During the six-month period ended June 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(c) Details of joint ventures and their carrying amounts as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)                June 30, 2020      December 31,
2019
 
     Country     

Principal operations

   Ownership (%)      Book value      Book value  

Roy Hill Holdings Pty Ltd(*1)

     Australia      Mine development      10.00      W 1,225,464        1,225,464  

CSP - Compania Siderurgica do Pecem

     Brazil      Steel manufacturing and sales      20.00        343,553        322,463  

POSCO-NPS Niobium LLC

     USA      Mine development      50.00        364,609        364,609  

KOBRASCO

     Brazil     

Steel materials manufacturing and sales

     50.00        98,962        98,962  

Others (3 companies)

              72,484        72,484  
           

 

 

    

 

 

 
            W 2,105,072        2,083,982  
           

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, the investments in joint ventures amounting to W1,225,464 million were provided as collateral in relation to loans from project financing of Roy Hill Holdings Pty Ltd.

10. Investment Property, Net

Changes in the carrying amount of investment property for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Depreciation(*1)      Transfer(*2)      Ending  

Land

   W 91,738        —          232        91,970  

Buildings

     57,228        (2,033      388        55,583  

Structures

     9,111        (305      19        8,825  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 158,077        (2,338      639        156,378  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*2)

Mainly includes assets transferred from property, plant and equipment in relation to changes in rental ratio and the purpose of use.

(b) For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Business
Combination(*1)
     Depreciation(*2)     Transfer(*3)      Ending  

Land

   W 44,637        41,195        —         5,906        91,738  

Buildings

     54,277        25        (4,070     6,996        57,228  

Structures

     9,301        —          (620     430        9,111  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
   W 108,215        41,220        (4,690     13,332        158,077  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(*1)

These increases were due to business combination with POSCO Processing & Service.

(*2)

The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*3)

Mainly includes assets transferred from property, plant and equipment in relation to changes in rental ratio and the purpose of use.

 

18


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

11. Property, Plant and Equipment, Net

Changes in the carrying amount of property, plant and equipment for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Impairment(*1)     Others(*2)     Ending  

Land

   W 1,398,081        —          (6     —         —         (231     1,397,844  

Buildings

     2,100,503        2,228        (1,927     (103,267     (268     107,227       2,104,496  

Structures

     2,030,853        1,443        (1,276     (85,825     (860     18,284       1,962,619  

Machinery and equipment

     12,602,435        18,329        (9,257     (890,670     (9,057     704,439       12,416,219  

Vehicles

     9,951        956        (3     (3,250     —         3,237       10,891  

Tools

     27,288        694        —         (6,042     —         3,047       24,987  

Furniture and fixtures

     38,329        1,182        —         (5,608     —         5,543       39,446  

Lease assets

     262,368        —          —         (29,547     —         109,986       342,807  

Construction-in-progress

     1,662,391        1,251,944        (3,951     —         (12,502     (1,010,094     1,887,788  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 20,132,199        1,276,776        (16,420     (1,124,209     (22,687     (58,562     20,187,097  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company estimated recoverable amount for individual assets that ceased operations due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized impairment loss since recoverable amounts are less than their carrying amounts as of June 30, 2020. In addition, during the six-month period ended June 30, 2020, the Company recognized impairment loss on certain assets due to damage from fire.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

(b) For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Acquisitions      business
combination(*5)
     Disposals     Depreciation     Impairment(*1)     Others(*2,4)     Ending  

Land

   W 1,458,632        —          —          (1,805     —         —         (58,746     1,398,081  

Buildings

     2,199,429        7,157        67,751        (7,706     (202,171     (25,869     61,912       2,100,503  

Structures

     2,244,099        10,777        39,783        (3,125     (173,181     (9,585     (77,915     2,030,853  

Machinery and equipment

     12,911,467        92,136        696,204        (21,616     (1,717,864     (176,295     818,403       12,602,435  

Vehicles

     7,340        747        40        —         (6,244     —         8,068       9,951  

Tools

     23,864        5,348        138        (24     (11,499     —         9,461       27,288  

Furniture and fixtures

     36,287        4,781        94        (9     (9,805     (137     7,118       38,329  

Lease assets(*3)

     142,801        27,376        —          —         (34,669     —         126,860       262,368  

Construction-in-progress

     1,130,415        1,838,490        696        —         —         (10,150     (1,297,060     1,662,391  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 20,154,334        1,986,812        804,706        (34,285     (2,155,433     (222,036     (401,899     20,132,199  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company estimated recoverable amount for individual assets related to CEM and Fe-Si factories, etc. that ceased operations due to the disposal plan and others using fair value less costs to sell based on the appraisal value or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2019.

(*2)

During the year ended December 31, 2019, the Company decided to sell the rights related to the operation of LNG Terminal to POSCO ENERGY CO., LTD. and reclassified to assets held for sale and liabilities directly associated with the assets held for sale. As of December 31, 2019, the Company recognized W28,626 million of gain on disposal for the difference between the carrying amount and the sale price.

(*3)

Right-of-use assets of W128,610 million recognized on the date of initial application (January 1, 2019) of the K-IFRS No. 1116 “Leases” are included in other changes.

(*4)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

(*5)

This has increased due to the business combination between the company and POSCO ENERGY’s by-product power generation business.

 

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Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

(c) Information on lease agreements for which the Company is a lessee is as follows:

 

  1)

Right-of-use assets

 

 

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the six-month period ended June 30, 2020 were as follows.

 

(in millions of Won)    Beginning      Acquisitions      Depreciation     Others     Ending  

Buildings

   W 71,921        —          (3,231     —         68,690  

Structures

     64,434        —          (2,607     —         61,827  

Machinery and equipment

     60,198        —          (2,750     —         57,448  

Vehicles

     6,755        —          (250     —         6,505  

Ships

     24,082        111,537        (13,826     —         121,793  

Furniture and fixtures

     34,978        —          (6,883     (1,551     26,544  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 262,368        111,537        (29,547     (1,551     342,807  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

 

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the year ended December 31, 2019, were as follows.

 

(in millions of Won)    The date of initial
application
(January 1, 2019)
     Acquisitions      Depreciation     Others     Ending  

Buildings

   W 78,384        —          (6,463     —         71,921  

Structures

     53,761        13,502        (2,829     —         64,434  

Machinery and equipment

     65,698        —          (5,500     —         60,198  

Vehicles

     7,256        —          (501     —         6,755  

Ships

     26,499        —          (2,417     —         24,082  

Furniture and fixtures

     39,813        13,874        (16,959     (1,750     34,978  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 271,411        27,376        (34,669     (1,750     262,368  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

2) Amount recognized in profit or loss

The amounts recognized in profit or loss related to leases for the three-month and the six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods      For the six-month periods  
     ended June 30      ended June 30  
     2020      2019      2020      2019  

Interest on lease liabilities

   W 2,399        2,196        5,057        4,461  

Expenses related to short-term leases

     884        1,014        1,890        1,937  

Expenses related to leases of low-value assets

     1,574        1,323        3,389        2,727  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,857        4,533        10,336        9,125  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

12. Intangible Assets, Net

Changes in the carrying amount of intangible assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Amortization     Transfer(*2)     Ending  

Intellectual property rights

   W 24,545        —          (1,360     (2,984     3,486       23,687  

Membership(*1)

     82,657        —          (345     —         —         82,312  

Development expense

     86,023        102        —         (22,503     10,982       74,604  

Port facilities usage rights

     278,072        —          —         (22,571     —         255,501  

Construction-in-progress

     137,273        50,381        —         —         (13,160     174,494  

Other intangible assets

     100,345        19,725        (61,302     (2,793     918       56,893  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 708,915        70,208        (63,007     (50,851     2,226       667,491  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Economic useful life of memberships is indefinite.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, and others.

(b) For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Amortization     Transfer(*2)     Ending  

Intellectual property rights

   W 24,377        —          (1,270     (5,678     7,116       24,545  

Membership(*1)

     73,183        9,204        (6     —         276       82,657  

Development expense

     91,758        2,205        —         (41,793     33,853       86,023  

Port facilities usage rights

     305,710        —          (4,674     (22,964     —         278,072  

Construction-in-progress

     58,561        114,638        —         —         (35,926     137,273  

Other intangible assets

     91,633        615        (4,568     (6,755     19,420       100,345  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 645,222        126,662        (10,518     (77,190     24,739       708,915  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, and others.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

13. Other Assets

Other assets as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Advance payments

   W 9,901        6,252  

Prepaid expenses

     23,659        21,849  
  

 

 

    

 

 

 
   W 33,560        28,101  
  

 

 

    

 

 

 

Non-current

     

Long-term prepaid expenses

   W 4,735        5,088  

Others(*1)

     99,329        100,186  
  

 

 

    

 

 

 
   W 104,064        105,274  
  

 

 

    

 

 

 

 

(*1)

As of June 30, 2020 and December 31, 2019, the Company recognized tax assets amounting to W96,312 million and W97,185 million, respectively, based on the Company’s best estimate of the income tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years’ tax audits and claim for rectification are finalized.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

14. Borrowings

(a) Borrowings as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Short-term borrowings

     

Short-term borrowings

   W 465,153        167,021  

Current portion of debentures

     2,000,980        980,460  

Less: Current portion of discount on debentures issued

     (1,483      (1,005
  

 

 

    

 

 

 
   W 2,464,650        1,146,476  
  

 

 

    

 

 

 

Long-term borrowings

     

Long-term borrowings

   W 1,225        1,181  

Debentures

     6,132,211        5,216,681  

Less: Discount on debentures issued

     (36,104      (26,325
  

 

 

    

 

 

 
   W 6,097,332        5,191,537  
  

 

 

    

 

 

 

(b) Short-term borrowings as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    Lenders      Issuance
date
     Maturity
date
     Annual
interest rate (%)
     June 30 , 2020      December 31, 2019  

Transfers of account receivables that do not qualify for derecognition

     —          —          —          —        W 113,188        167,021  

Borrowings in Foreign Trade

     MUFG and others       

2020.05.19~

2020.06.23

 

 

    

2020.08.17~

2020.09.18

 

 

     0.84~1.99        351,965        —    
              

 

 

    

 

 

 
               W 465,153        167,021  
              

 

 

    

 

 

 

(c) Current portion of long-term borrowings as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    Lenders      Issuance
date
     Maturity
date
     Annual
interest rate (%)
     June 30 , 2020      December 31, 2019  

Debentures

     Domestic debentures 306-2 and other       
2013.10.04~
2016.05.03

 
    
2020.10.04~
2021.05.03

 
     1.88~3.50      W 319,896        169,930  

Foreign debentures

     Global debentures 2 and other       
2010.10.28~
2011.04.14

 
    
2020.10.28~
2021.04.14

 
     4.25~5.25        1,679,601        809,525  
              

 

 

    

 

 

 
               W 1,999,497        979,455  
              

 

 

    

 

 

 

(d) Long-term borrowings excluding current portion, as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    Lenders      Issuance
date
     Maturity
date
     Annual
Interest rate (%)
     June 30, 2020      December 31, 2019  

Foreign borrowings

     KOREA ENERGY AGENCY       
2007.12.27~
2008.12.29

 
     2022.12.29       
3 year
Government bond

 
   W 1,225        1,181  

Debentures

    
Domestic debentures 304-2
and others
 
 
    
2011.11.28~
2019.10.16

 
    
2021.07.05~
2029.10.16

 
     1.56~4.12        2,355,147        2,504,194  

Foreign debentures

    
Japan Yen private bond and
others
 
 
    
2011.12.22~
2020.01.17

 
    
2021.12.22~
2025.01.17

 
     0.50~4.00        3,740,960        2,686,162  
              

 

 

    

 

 

 
               W 6,097,332        5,191,537  
              

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

15. Other Payables

Other payables as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Accounts payable

   W 461,508        630,162  

Accrued expenses

     432,256        432,835  

Dividend payable

     2,259        2,296  

Lease liabilities

     108,874        40,463  

Withholdings

     10,426        7,247  
  

 

 

    

 

 

 
   W 1,015,323        1,113,003  
  

 

 

    

 

 

 

Non-current

     

Long-term accrued expenses

   W 43        842  

Lease liabilities

     230,239        216,508  

Long-term withholdings

     3,723        5,452  
  

 

 

    

 

 

 
   W 234,005        222,802  
  

 

 

    

 

 

 

16. Other Financial Liabilities

Other financial liabilities as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Financial guarantee liabilities

   W 7,556        10,969  

Non-current

     

Derivative liabilities

   W —          8,285  

Financial guarantee liabilities

     36,411        38,640  
  

 

 

    

 

 

 
   W 36,411        46,925  
  

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

17. Provisions

(a) Provisions as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  
   Current      Non-current      Current      Non-current  

Provision for bonus payments(*1,2)

   W 12,621        27,845        14,020        35,816  

Provision for restoration(*3)

     4,902        15,087        6,783        15,942  

Provision for legal contingencies and claims(*4)

     —          2,052        204        2,184  

Provision for product warranties(*5)

     22,602        4,589        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 40,125        49,573        21,007        53,942  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents the provision for bonuses limited to 33%~67% of annual salaries for executives.

(*2)

The Company estimated the present value of estimated future cash payments about the long-term service reward, based on actuarial measurement.

(*3)

Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery as provisions for restoration as of June 30, 2020. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available currently to restore the land to its original condition. In addition, the Company has applied discount rates of 1.45%~1.60% to assess present value of these costs.

(*4)

The Company has recognized provisions for certain litigations and other contingencies as of June 30, 2020.

(*5)

As of June 30, 2020, the Company recognized the expected claim cost to be charged as a provision.

(b) Changes in provisions for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

1) For the six-month period ended June 30, 2020

 

(in millions of Won)    Beginning      Increase      Reversal     Utilization     Ending  

Provision for bonus payments

   W 49,836        8,373        —         (17,743     40,466  

Provision for restoration

     22,725        221        (340     (2,617     19,989  

Provision for legal contingencies and claims

     2,388        424        (709     (51     2,052  

Provision for product warranties

     —          39,077        —         (11,886     27,191  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 74,949        48,095        (1,049     (32,297     89,698  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

2) For the year ended December 31, 2019

 

(in millions of Won)    Beginning      Increase      Reversal     Utilization     Transfer      Ending  

Provision for bonus payments

   W 36,749        23,523        —         (18,038     7,602        49,836  

Provision for restoration

     29,703        549        (277     (7,250     —          22,725  

Provision for legal contingencies and claims

     46,432        538        (11,207     (33,375     —          2,388  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
   W 112,884        24,610        (11,484     (58,663     7,602        74,949  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

18. Employee Benefits

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and the six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods      For the six-month periods  
     ended June 30      ended June 30  
     2020      2019      2020      2019  

Expenses related to post-employment benefit plans under defined contribution plans

   W 8,710        8,515        18,907        17,621  

(b) Defined benefit plans

 

  1)

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Present value of funded obligations

   W 1,424,326        1,435,942  

Fair value of plan assets

     (1,365,451      (1,381,796
  

 

 

    

 

 

 

Net defined benefit liabilities

   W 58,875        54,146  
  

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

2)

Changes in present value of defined benefit obligations for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Defined benefit obligation at the beginning of period

   W 1,435,942        1,265,675  

Current service costs

     63,559        119,957  

Interest costs

     13,856        31,567  

Remeasurement(*1)

     —          104,442  

Business combination

     —          317  

Reclassification to liabilities directly associated with the assets held for sale

     —          (1,448

Benefits paid

     (89,031      (84,568
  

 

 

    

 

 

 

Defined benefit obligation at the end of period

   W 1,424,326        1,435,942  
  

 

 

    

 

 

 

 

(*1)

The Company does not remeasure the defined benefit plans for the purpose of interim reporting.

 

3)

Changes in the fair value of plan assets for the six-month period ended June 30, 2020 and the year ended December 31, 2019 were as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Fair value of plan assets at the beginning of period

   W 1,381,796        1,264,812  

Interest on plan assets

     13,614        32,347  

Remeasurement of plan assets

     (542      (6,668

Contributions to plan assets

     61,585        161,500  

Business combination

     —          670  

Reclassification to liabilities directly associated with the assets held for sale

     —          (1,448

Benefits paid

     (91,002      (69,417
  

 

 

    

 

 

 

Fair value of plan assets at the end of period

   W 1,365,451        1,381,796  
  

 

 

    

 

 

 

 

4)

The amounts recognized in the statements of comprehensive income for the three-month and the six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods      For the six-month periods  
     ended June 30      ended June 30  
     2020      2019      2020      2019  

Current service costs

   W 31,355        28,775        63,559        60,139  

Net interest costs

     121        (195      242        (390
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 31,476        28,580        63,801        59,749  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

19. Other Liabilities

Other liabilities as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Current

     

Advances received

   W 5,493        5,112  

Withholdings

     108,777        106,474  

Unearned revenue

     18,350        23,561  
  

 

 

    

 

 

 
   W 132,620        135,147  
  

 

 

    

 

 

 

Non-current

     

Unearned revenue

   W 540        5,230  

20. Financial Instruments

(a) Classification and fair value of financial instruments

 

  1)

The carrying amount and the fair values of financial assets and financial liabilities by fair value hierarchy as of June 30, 2020 and December 31, 2019 are as follows:

 

 

 

 

June 30, 2020

 

            Fair value  
(in millions of Won)    Book value      Level 1      Level 2      Level 3      Total  

Financial assets

              

Fair value through profit or loss

              

Derivative assets

   W 297,928        —          297,928        —          297,928  

Short-term financial instruments

     7,097,780        —          7,097,780        —          7,097,780  

Debt securities

     8,050        —          —          8,050        8,050  

Other securities

     64,538        —          —          64,538        64,538  

Other receivables

     2,000        —          —          2,000        2,000  

Fair value through other comprehensive income

              

Equity securities

     918,561        536,181        —          382,380        918,561  

Debt securities

     1,648        —          —          1,648        1,648  

Financial assets measured at amortized cost(*1)

              

Cash and cash equivalents

     2,446,945        —          —          —          —    

Trade accounts and notes receivable

     3,144,814        —          —          —          —    

Debt securities

     682,129        —          —          —          —    

Other receivables

     316,419        —          —          —          —    

Deposit instruments

     1,833,365        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 16,814,177        536,181        7,395,708        458,616        8,390,505  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Financial liabilities measured at amortized cost(*1)

              

Trade accounts and notes payable

   W 855,533        —          —          —          —    

Borrowings

     8,561,982        —          8,807,627        —          8,807,627  

Financial guarantee liabilities

     43,967        —          —          —          —    

Others

     1,177,012        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 10,638,494        —          8,807,627        —          8,807,627  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

 

28


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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

 

December 31, 2019

 

            Fair value  
(in millions of Won)    Book value      Level 1      Level 2      Level 3      Total  

Financial assets

              

Fair value through profit or loss

              

Derivative assets

   W 79,675        —          79,675        —          79,675  

Short-term financial instruments

     6,258,292        —          6,258,292        —          6,258,292  

Debt securities

     8,050        —          —          8,050        8,050  

Other securities

     55,972        —          —          55,972        55,972  

Other receivables

     2,000        —          —          2,000        2,000  

Fair value through other comprehensive income

              

Equity securities

     1,128,641        762,198        —          366,443        1,128,641  

Debt securities

     1,686        —          —          1,686        1,686  

Financial assets measured at amortized cost(*1)

              

Cash and cash equivalents

     978,139        —          —          —          —    

Trade accounts and notes receivable

     3,983,573        —          —          —          —    

Debt securities

     290,000        —          —          —          —    

Other receivables

     202,819        —          —          —          —    

Deposit instruments

     1,294,559        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 14,283,406        762,198        6,337,967        434,151        7,534,316  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Fair value through profit or loss

              

Derivative liabilities

   W 8,285        —          8,285        —          8,285  

Financial liabilities measured at amortized cost(*1)

              

Trade accounts and notes payable

     667,551        —          —          —          —    

Borrowings

     6,338,012        —          6,525,464        —          6,525,464  

Financial guarantee liabilities

     49,609        —          —          —          —    

Others

     1,325,336        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,388,793        —          6,533,749        —          6,533,749  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  2)

Financial liabilities were recognized in connection with financial guarantee contracts as of June 30, 2020. The details of the amount of guarantees provided are as follows:

 

(in millions of Won)         Guarantee limit      Guarantee amount  

Guarantee beneficiary

  

Financial institution

   Foreign
currency
     Won
equivalent
     Foreign
currency
     Won
equivalent
 

Subsidiaries

                 

POSCO Maharashtra

   SCB      USD        33,784,000        40,564        33,784,000        40,564  

Steel Private Limited

   ING      USD        50,000,000        60,035        50,000,000        60,035  

POSCO ASSAN TST

   SMBC      USD        62,527,500        75,077        56,274,750        67,569  

STEEL INDUSTRY

   ING      USD        60,000,000        72,042        54,000,000        64,838  
   BNP      USD        24,000,000        28,817        21,600,000        25,935  

POSCO Asia Co., Ltd.

   Credit Agricole      USD        50,000,000        60,035        50,000,000        60,035  

POSCO MEXICO S.A. DE C.V

   CITI BANAMEX      USD        30,000,000        36,021        30,000,000        36,021  
   BOA      USD        30,000,000        36,021        30,000,000        36,021  
   SMBC      USD        20,000,000        24,014        20,000,000        24,014  
   MIZUHO      USD        20,000,000        24,014        20,000,000        24,014  
   ANZ      USD        20,000,000        24,014        20,000,000        24,014  

POSCO-VIETNAM Co., Ltd.

   SMBC      USD        50,000,000        60,035        50,000,000        60,035  
   Credit Agricole      USD        40,000,000        48,028        40,000,000        48,028  
   BTMU      USD        26,000,000        31,218        26,000,000        31,218  
   Citi      USD        20,000,000        24,014        20,000,000        24,014  
   MIZUHO      USD        20,000,000        24,014        20,000,000        24,014  

PT. KRAKATAU POSCO

   Export-Import Bank of Korea      USD        567,000,000        680,797        363,264,797        436,172  
   SMBC      USD        140,000,000        168,098        89,832,217        107,862  
   BTMU      USD        119,000,000        142,883        75,125,217        90,203  
   MIZUHO      USD        105,000,000        126,074        66,286,957        79,591  
   SCB      USD        107,800,000        129,435        69,504,217        83,454  
   Credit Suisse AG      USD        91,000,000        109,264        57,448,696        68,979  
   HSBC      USD        91,000,000        109,264        57,448,696        68,979  
   ANZ      USD        73,500,000        88,251        47,850,478        57,454  
   BOA      USD        35,000,000        42,025        22,095,652        26,530  
   The Tokyo Star Bank, Ltd      USD        21,000,000        25,215        13,257,391        15,918  

POSCO COATED STEEL

   Citi      THB        801,000,000        31,143        801,000,000        31,143  

(THAILAND) CO., LTD.

   ANZ      THB        1,175,000,000        45,684        1,175,000,000        45,684  
   MUFG      THB        1,175,000,000        45,684        1,175,000,000        45,684  
   SC      THB        1,175,000,000        45,684        1,175,000,000        45,684  
   SMBC      THB        1,175,000,000        45,684        1,175,000,000        45,684  

Associates

                 

LLP POSUK Titanium

   SMBC      USD        13,500,000        16,209        13,500,000        16,209  

Nickel Mining Company SAS

   SMBC      EUR        46,000,000        62,109        46,000,000        62,109  

Joint ventures

                 

CSP - Compania

   Export-Import Bank of Korea      USD        182,000,000        218,527        162,772,945        195,441  

Siderurgica do Pecem

   Santander      USD        47,600,000        57,153        41,873,544        50,278  
   BNP      USD        47,600,000        57,153        41,873,544        50,278  
   MIZUHO      USD        47,600,000        57,153        41,873,544        50,278  
   Credit Agricole      USD        20,000,000        24,014        17,593,933        21,125  
   SOCIETE GENERALE      USD        20,000,000        24,014        17,593,933        21,125  
   KfW      USD        20,000,000        24,014        17,593,933        21,125  
   BBVA Seoul      USD        17,600,000        21,132        15,482,645        18,590  
   ING      USD        17,600,000        21,132        15,482,645        18,590  
   BNDES      BRL        464,060,000        103,114        464,060,000        103,114  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
        USD        2,340,111,500        2,809,770        1,789,413,734        2,148,550  
        EUR        46,000,000        62,109        46,000,000        62,109  
        THB        5,501,000,000        213,879        5,501,000,000        213,879  
        BRL        464,060,000        103,114        464,060,000        103,114  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  3)

Finance income and costs by category of financial instrument for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

 

For the six -month period ended June 30, 2020

 

(in millions of Won)    Finance income and costs     Other
comprehensive
income (loss)
 
   Interest income
(expense)
    Dividend
income(*1)
     Gain and loss on
foreign currency
    Gain and loss
on disposal
     Gain and loss
on valuation
     Others      Total  

Financial assets at fair value through profit or loss

   W 77,159       —          —         485        223,151        —          300,795       —    

Financial assets at fair value through other comprehensive income

     —         24,483        —         —          —          —          24,483       (160,650

Financial assets measured at amortized cost

     24,207       —          94,915       —          —          —          119,122       —    

Financial liabilities at fair value through profit or loss

     —         —          —         447        13,977        —          14,424       —    

Financial liabilities measured at amortized cost

     (113,808     —          (217,448     —          —          11,840        (319,416     —    
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W (12,442     24,483        (122,533     932        237,128        11,840        139,408       (160,650
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W147,724 million for the six -month period ended June 30, 2020.

 

 

For the six -month period ended June 30, 2019

 

(in millions of Won)    Finance income and costs     Other
comprehensive
income (loss)
 
   Interest income
(expense)
    Dividend
income(*1)
     Gain and loss on
foreign currency
    Gain and loss
on disposal
     Gain and loss
on valuation
     Others      Total  

Financial assets at fair value through profit or loss

   W 64,673       —          —         461        68,545        —          133,679       —    

Financial assets at fair value through other comprehensive income

     —         41,088        —         —          —          —          41,088       25,590  

Financial assets measured at amortized cost

     16,948       —          84,249       —          —          —          101,197       —    

Financial liabilities at fair value through profit or loss

     —         —          —         19        34,744        —          34,763       —    

Financial liabilities measured at amortized cost

     (73,589     —          (122,843     —          —          4,666        (191,766     —    
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 8,032       41,088        (38,594     480        103,289        4,666        118,961       25,590  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W187,941 million for the six -month period ended June 30, 2019.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  4)

Finance income and costs by category of financial instrument for the three-month periods ended June 30, 2020 and 2019 were as follows:

 

 

For the three-month period ended June 30, 2020

 

(in millions of Won)    Finance income and costs  
   Interest income
(expense)
    Dividend
income(*1)
     Gain and loss on
foreign currency
    Gain and loss
on disposal
     Gain and loss
on valuation
    Others      Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   W 38,444       —          —         289        (29,542     —          9,191       —    

Financial assets at fair value through other comprehensive income

     —         237        —         —          —         —          237       30,838  

Financial assets measured at amortized cost

     13,798       —          (46,814     —          —         —          (33,016     —    

Financial liabilities at fair value through profit or loss

     —         —          —         422        2,435       —          2,857       —    

Financial liabilities measured at amortized cost

     (56,712     —          108,704       —          —         3,903        55,895       —    
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
   W (4,470     237        61,890       711        (27,107     3,903        35,164       30,838  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W38,066 million for the three-month period ended June 30, 2020.

 

 

For the three-month period ended June 30, 2019

 

(in millions of Won)    Finance income and costs  
   Interest income
(expense)
    Dividend
income(*1)
     Gain and loss on
foreign currency
    Gain and loss
on disposal
     Gain and loss
on valuation
     Others      Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   W 31,220       —          —         461        17,190        —          48,871       —    

Financial assets at fair value through other comprehensive income

     —         13,301        —         —          —          —          13,301       37,713  

Financial assets measured at amortized cost

     9,415          33,449       —          —          —          42,864       —    

Financial liabilities at fair value through profit or loss

     —         —          —         —          31,109        —          31,109       —    

Financial liabilities measured at amortized cost

     (36,677     —          (64,875     —          —          2,356        (99,196     —    
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 3,958       13,301        (31,426     461        48,299        2,356        36,949       37,713  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W88,506 million for the three-month period ended June 30, 2019.

 

(b)

Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the separate financial statements as of and for the year ended December 31, 2019.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

21. Share Capital and Capital Surplus

(a) Share capital as of June 30, 2020 and December 31, 2019 are as follows:

 

(in Won, except share information)    June 30, 2020      December 31, 2019  

Authorized shares

     200,000,000        200,000,000  

Par value

   W 5,000        5,000  

Issued shares(*1)

     87,186,835        87,186,835  

Share capital(*2)

   W 482,403,125,000        482,403,125,000  

 

(*1)

As of June 30, 2020, the total number of ADRs of 30,935,880 outstanding in overseas stock market is equivalent to 7,733,970 shares of common stock.

(*2)

As of June 30, 2020, the difference between the ending balance of common stock and the aggregate par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Share premium

   W 463,825        463,825  

Gain on disposal of treasury shares

     796,623        796,623  

Loss on disposal of hybrid bonds

     (1,787      (1,787

Loss from merger

     (6,441      (6,441
  

 

 

    

 

 

 
   W 1,252,220        1,252,220  
  

 

 

    

 

 

 

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

22. Hybrid Bonds

Hybrid bonds classified as equity as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    Date of issue      Date of maturity      Rate of Interest (%)      June 30, 2020     December 31, 2019  

Hybrid bond 1-2(*1)

     6/13/2013        6/13/2043        4.60      W 200,000       200,000  

Issuance cost

              (616     (616
           

 

 

   

 

 

 
            W 199,384       199,384  
           

 

 

   

 

 

 

 

(*1)

Details of hybrid bonds as of June 30, 2020 are as follows:

 

    

Hybrid bond 1-2

Maturity date    30 years (The Company has a right to extend the maturity date)
Interest rate   

Issue date ~ 2023-06-12 : 4.60%

 

Reset every 10 years as follows;

 

•  After 10 years : return on government bond of the Republic of Korea (10 years) + 1.40%

 

•  After 10 years : additionally + 0.25% according to Step-up clauses

 

•  After 30 years : additionally + 0.75%

Interest payments condition    Quarterly (Optional deferral of interest payment is available to the Company)
Others    The Company can call the hybrid bond at 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common shareholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of June 30, 2020 amounts to W454 million.

 

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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

23. Reserves

Reserves as of June 30, 2020 and December 31, 2019 were as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Changes in fair value of equity investments at fair value through other comprehensive income

   W (341,677      (183,930

24. Treasury Shares

During the six-month period ended June 30, 2020, the Company entered into a trust contract of acquiring treasury shares following approval of the Board of Directors. The amount committed to purchase treasury shares by this trust contract is W1,000 billion, and the contract period is from April 13, 2020 to April 12, 2021. The number of treasury shares acquired according to the contract is 358,953 during the six-month period ended June 30, 2020.

As of June 30, 2020, the Company holds 7,430,147 treasury shares for share price stabilization and other purposes in accordance with the Board of Director’s resolution.

25. Revenue

 

(a)

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Types of revenue

           

Sales of steel product

   W 5,683,303        7,221,131        12,422,165        14,771,099  

Transportation services

     161,641        193,164        348,051        389,835  

Others

     39,880        61,559        84,464        131,391  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,884,824        7,475,854        12,854,680        15,292,325  
  

 

 

    

 

 

    

 

 

    

 

 

 

Timing of revenue recognition

           

Revenue recognized at a point in time

   W 5,709,534        7,264,321        12,477,283        14,866,745  

Revenue recognized over time

     175,290        211,533        377,397        425,580  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,884,824        7,475,854        12,854,680        15,292,325  
  

 

 

    

 

 

    

 

 

    

 

 

 

(b) Details of contract assets and liabilities from contracts with customers as of June 30, 2020 and December 31, 2019 are as follows:

 

(in millions of Won)    June 30, 2020      December 31, 2019  

Receivables

     

Accounts receivable

   W 3,144,814        3,983,573  

Contract assets

     

Accounts receivable

     4,083        9,482  

Contract liabilities

     

Advance received

     5,493        5,112  

Unearned income

     18,634        28,484  

 

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Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

26. Selling and Administrative Expenses

(a) Other administrative expenses

Other administrative expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Wages and salaries

   W 54,435        56,073        115,690        113,307  

Expenses related to post-employment benefits

     6,539        5,906        14,182        15,193  

Other employee benefits

     11,052        13,167        23,287        26,493  

Travel

     1,822        3,780        4,607        6,814  

Depreciation

     6,809        6,451        13,662        12,928  

Amortization

     9,039        9,144        18,456        18,288  

Rental

     10,946        9,509        24,204        18,452  

Repairs

     1,581        3,345        3,831        5,817  

Advertising

     14,490        19,263        29,384        32,902  

Research & development

     15,586        19,267        31,392        42,276  

Service fees

     40,068        41,147        77,441        82,727  

Supplies

     126        585        360        3,091  

Vehicles maintenance

     1,166        1,816        2,448        3,117  

Industry association fee

     1,244        908        3,220        2,631  

Training

     3,863        6,228        8,182        11,763  

Conference

     885        1,496        1,967        2,991  

Others

     13,111        11,525        19,218        17,640  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 192,762        209,610        391,531        416,430  
  

 

 

    

 

 

    

 

 

    

 

 

 

(b) Selling expenses

Selling expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Freight and custody

   W 29,401        29,976        63,102        63,685  

Operating expenses for distribution center

     1,439        2,387        3,158        4,743  

Sales commissions

     19,535        21,865        64,788        37,431  

Sales advertising

     219        489        305        621  

Sales promotion

     302        1,257        696        2,261  

Sample

     157        331        333        545  

Sales insurance premium

     1,437        1,590        2,944        2,897  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 52,490        57,895        135,326        112,183  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

27. Finance Income and Costs

Details of finance income and costs for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Finance income

           

Interest income(*1)

   W 52,242        40,635        101,366        81,621  

Dividend income

     38,303        101,807        172,207        229,029  

Gain on foreign currency transactions

     85,665        83,938        232,829        118,877  

Gain on foreign currency translations

     (43,959      3,276        27,339        35,939  

Gain on valuation of derivatives

     (27,107      48,316        237,128        102,788  

Others

     5,391        3,513        13,983        6,940  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 110,535        281,485        784,852        575,194  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance costs

           

Interest expenses

   W 56,712        36,677        113,808        73,589  

Loss on foreign currency transactions

     59,730        60,011        136,197        89,805  

Loss on foreign currency translations

     (79,914      58,629        246,504        103,605  

Others

     777        712        1,211        1,293  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 37,305        156,029        497,720        268,292  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Interest income calculated using the effective interest method for the six-month periods ended June 30, 2020 and 2019 were W24,207 million and W16,948 million, respectively.

28. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Other non-operating income

           

Gain on disposals of property, plant and equipment

   W 2,232        3,196        6,054        14,685  

Gain on disposals of investment in subsidiaries, associates and joint ventures

     21,907        —          21,907        1,194  

Gain on disposals of assets held for sale

     26,644        680        26,942        715  

Gain on insurance proceeds

     6,027        131        6,886        258  

Gain on valuation of emission rights

     —          25,440        —          25,440  

Gain on disposals of emission rights

     16,823        —          24,566        —    

Others

     7,965        6,468        19,368        14,548  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 81,598        35,915        105,723        56,840  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other non-operating expenses

           

Loss on disposals of property, plant and equipment

   W 42,935        25,422        94,234        38,537  

Impairment loss on property, plant and equipment

     22,687        88,681        22,687        161,496  

Impairment loss on investment in subsidiaries, associates and joint ventures

     —          3,987        —          10,422  

Donations

     3,000        1,000        11,709        8,400  

Impairment loss on assets held for sale

     2,616        (713      8,945        1,794  

Others

     26,021        21,669        38,370        32,045  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 97,259        140,046        175,945        252,694  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

37


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POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

29. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows (excluding finance costs and income tax expenses):

 

(in millions of Won)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Changes in inventories(*1)

   W 289,400        (217,026      387,281        1,681  

Raw materials and consumables used

     3,578,505        4,606,866        7,724,146        9,018,589  

Employee benefits expenses

     437,550        436,959        897,134        868,661  

Outsourced processing cost

     568,597        628,682        1,227,456        1,227,096  

Depreciation(*2)

     565,690        533,300        1,126,547        1,071,915  

Amortization

     25,235        19,336        50,851        38,426  

Electricity and water

     49,901        135,567        116,551        288,587  

Service fees

     61,282        63,620        119,628        124,861  

Rental

     20,162        13,481        42,908        26,569  

Advertising

     14,490        19,263        29,384        32,902  

Freight and custody expenses

     164,813        212,431        380,504        440,291  

Sales commissions

     19,535        21,865        64,788        37,431  

Loss on disposals of property, plant and equipment

     42,935        25,422        94,234        38,537  

Impairment loss on property, plant and equipment

     22,687        88,681        22,687        161,496  

Impairment loss on investments in subsidiaries, associates and joint ventures

     —          3,987        —          10,422  

Other expenses

     229,607        299,332        397,217        601,086  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,090,389        6,891,766        12,681,316        13,988,550  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Changes in inventories include the changes in the balance of product, semi-finished products and by-products.

(*2)

Includes depreciation of investment property.

30. Income Taxes

The effective tax rates of the Company for the six-month periods ended June 30, 2020 and 2019 were 18.82% and 27.05%, respectively.

 

38


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

31. Earnings per Share

Basic earnings per share for the three-month and six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in Won, except share information)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Profit for the period

   W 6,645,986,027        545,381,748,420        459,666,301,329        1,216,554,712,849  

Interests of hybrid bonds, net of tax

     (1,662,931,506      (1,662,931,506      (3,325,863,013      (3,307,589,040

Weighted-average number of common shares outstanding(*1)

     80,006,436        80,115,641        80,061,039        80,111,845  

Basic earnings per share

   W 62        6,787        5,700        15,144  

(*1) The weighted-average number of common shares used to calculate basic earnings per share are as follows:

 

(shares)    For the three-month periods
ended June 30
     For the six-month periods
ended June 30
 
   2020      2019      2020      2019  

Total number of common shares issued

     87,186,835        87,186,835        87,186,835        87,186,835  

Weighted-average number of treasury shares

     (7,180,399      (7,071,194      (7,125,796      (7,074,990
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average number of common shares outstanding

     80,006,436        80,115,641        80,061,039        80,111,845  
  

 

 

    

 

 

    

 

 

    

 

 

 

Since there were no potential shares of common stock which had dilutive effects as of June 30, 2020 and 2019, diluted earnings per share is equal to basic earnings per share.

 

39


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

32. Related Party Transactions

 

(a)

Significant transactions with related companies for the six-month periods ended June 30, 2020 and 2019 were as follows:

1) For the six-month period ended June 30, 2020

 

(in millions of Won)    Sales and others(*1)      Purchase and others(*2)  
     Sales      Others      Purchase of
material
     Purchase of fixed
assets
     Outsourced
processing cost
     Others  

Subsidiaries(*3)

                 

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   W 3,548        11,096        15        442,305        60        12,835  

POSCO COATED & COLOR STEEL Co., Ltd.

     205,766        1,695        —          —          15,176        208  

POSCO ICT(*4)

     1,429        4,991        —          184,310        20,941        87,668  

eNtoB Corporation

     7        60        113,378        18,848        28        12,493  

POSCO CHEMICAL CO., LTD

     144,466        24,770        229,721        12,830        154,424        4,362  

POSCO ENERGY CO., LTD.

     1,553        1,216        9,995        3        —          11,110  

POSCO INTERNATIONAL Corporation

     2,795,437        54,331        110,798        —          11,371        2,083  

POSCO Thainox Public Company Limited

     106,717        137        3,454        —          —          —    

POSCO America Corporation

     96,266        —          —          —          —          3  

POSCO Canada Ltd.

     —          816        90,805        —          —          —    

POSCO Asia Co., Ltd.

     719,978        965        81,671        2,272        1,162        1,419  

Qingdao Pohang Stainless Steel Co., Ltd.

     70,768        66        —          —          —          176  

POSCO JAPAN Co., Ltd.

     548,842        —          16,420        2,959        —          1,088  

POSCO-VIETNAM Co., Ltd.

     101,105        223        —          —          —          20  

POSCO MEXICO S.A. DE C.V.

     68,574        99        —          —          —          304  

POSCO Maharashtra Steel Private Limited

     153,754        847        —          —          —          185  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     57,645        —          —          —          —          —    

POSCO VST CO., LTD.

     132,216        56        —          —          —          20  

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          804        291,649        —          —          —    

Others

     573,063        18,184        41,106        25,580        128,557        58,065  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     5,781,134        120,356        989,012        689,107        331,719        192,039  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures(*3)

                 

POSCO PLANTEC Co., Ltd.(*5)

     65        41        916        84,839        4,086        12,431  

SNNC

     2,901        3,478        219,060        —          —          —    

POSCO-SAMSUNG-Slovakia Processing Center

     17,154        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          625,545        —          —          —    

Others

     14,332        54,933        28,954        —          —          13,348  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     34,452        58,452        874,475        84,839        4,086        25,779  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,815,586        178,808        1,863,487        773,946        335,805        217,818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)

Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)

As of June 30, 2020, the Company provided guarantees to related companies (Note 20).

(*4)

Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

(*5)

During the six-month period ended June 30, 2020, POSCO PLANTEC Co., Ltd. was excluded from associates due to the Company’s loss of significant influence over the investee.

 

40


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

2) For the six-month period ended June 30, 2019

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Purchase of fixed
assets
     Outsourced
processing cost
     Others  

Subsidiaries

                 

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   W 3,608        11,089        —          139,349        21        5,233  

POSCO COATED & COLOR STEEL Co., Ltd.

     233,408        1,707        —          —          7,684        491  

POSCO ICT

     1,509        4,989        —          148,817        17,055        88,838  

eNtoB Corporation

     7        60        159,576        16,936        59        13,431  

POSCO CHEMICAL CO., LTD

     197,793        25,129        255,299        7,578        156,383        2,010  

POSCO ENERGY CO., LTD.

     106,602        624        —          —          —          62  

POSCO INTERNATIONAL Corporation

     2,841,376        46,572        330,044        —          26,037        2,569  

POSCO Thainox Public Company Limited

     120,032        13,675        3,733        —          —          3  

POSCO America Corporation

     184,517        —          —          —          —          39  

POSCO Canada Ltd.

     340        604        151,892        —          —          —    

POSCO Asia Co., Ltd.

     861,771        585        248,431        —          987        2,796  

Qingdao Pohang Stainless Steel Co., Ltd.

     59,410        —          —          —          —          —    

POSCO JAPAN Co., Ltd.

     756,357        —          21,553        3,021        —          1,487  

POSCO-VIETNAM Co., Ltd.

     141,535        181        —          —          —          37  

POSCO MEXICO S.A. DE C.V.

     153,766        31        —          —          —          5  

POSCO Maharashtra Steel Private Limited

     333,608        187        —          —          —          256  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     43,313        —          1,481        —          —          —    

POSCO VST CO., LTD.

     137,025        —          —          —          —          62  

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          180        322,210        —          —          —    

Others

     425,315        14,560        81,055        10,572        133,582        60,791  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     6,601,292        120,173        1,575,274        326,273        341,808        178,110  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                 

POSCO PLANTEC Co., Ltd.

     183        65        1,399        110,614        9,326        9,362  

SNNC

     2,747        3,380        244,626        —          —          10  

POSCO-SAMSUNG-Slovakia Processing Center

     31,764        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          482,848        —          —          —    

Others

     6,985        86,037        27,127        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     41,679        89,482        756,000        110,614        9,326        9,372  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,642,971        209,655        2,331,274        436,887        351,134        187,482  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(b)

Significant transactions with related companies for the three-month periods ended June 30, 2020 and 2019 were as follows:

1) For the three-month period ended June 30, 2020

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Purchase of fixed
assets
     Outsourced
processing cost
     Others  

Subsidiaries

                 

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   W 2,011        17        —          198,832        60        5,123  

POSCO COATED & COLOR STEEL Co., Ltd.

     89,666        1        —          —          6,818        91  

POSCO ICT

     718        2        —          85,004        10,483        41,213  

eNtoB Corporation

     3        —          55,786        9,743        9        6,931  

POSCO CHEMICAL CO., LTD

     61,232        4,828        105,977        8,690        71,609        653  

POSCO ENERGY CO., LTD.

     266        537        5,385        —          —          5,598  

POSCO INTERNATIONAL Corporation

     1,274,878        —          31,102        —          —          941  

POSCO Thainox Public Company Limited

     55,096        71        792        —          —          —    

POSCO America Corporation

     32,624        —          —          —          —          —    

POSCO Canada Ltd.

     —          753        51,250        —          —          —    

POSCO Asia Co., Ltd.

     402,677        746        36,185        504        766        910  

Qingdao Pohang Stainless Steel Co., Ltd.

     35,299        66        —          —          —          119  

POSCO JAPAN Co., Ltd.

     230,608        —          9,698        2,339        —          650  

POSCO-VIETNAM Co., Ltd.

     37,517        108        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     17,483        63        —          —          —          249  

POSCO Maharashtra Steel Private Limited

     36,314        44        —          —          —          —    

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     25,094        —          —          —          —          —    

POSCO VST CO., LTD.

     62,622        56        —          —          —          —    

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          462        136,882        —          —          —    

Others

     304,164        3,644        14,283        12,622        67,484        28,998  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,668,272        11,398        447,340        317,734        157,229        91,476  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                 

SNNC

     1,491        443        98,634        —          —          —    

POSCO-SAMSUNG-Slovakia Processing Center

     3,229        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          303,358        —          —          —    

Others

     4,625        39,739        16,589        —          —          5,695  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     9,345        40,182        418,581        —          —          5,695  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,677,617        51,580        865,921        317,734        157,229        97,171  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

41


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

2) For the three-month period ended June 30, 2019

 

(in millions of Won)    Sales and others      Purchase and others  
     Sales      Others      Purchase of
material
     Purchase of fixed
assets
     Outsourced
processing cost
     Others  

Subsidiaries

                 

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   W 2,198        16        —          72,852        —          2,519  

POSCO COATED & COLOR STEEL Co., Ltd.

     116,211        1        —          —          5,315        119  

POSCO ICT

     729        —          —          87,989        8,498        42,677  

eNtoB Corporation

     3        —          81,080        10,952        33        7,907  

POSCO CHEMICAL CO., LTD

     93,869        5,799        124,303        5,513        78,253        1,881  

POSCO ENERGY CO., LTD.

     49,714        310        —          —          —          42  

POSCO INTERNATIONAL Corporation

     1,423,768        1        154,881        —          13,381        1,629  

POSCO Thainox Public Company Limited

     54,928        13,616        2,063        —          —          —    

POSCO America Corporation

     89,516        —          —          —          —          21  

POSCO Canada Ltd.

     340        529        75,279        —          —          —    

POSCO Asia Co., Ltd.

     445,133        498        100,397        —          429        2,235  

Qingdao Pohang Stainless Steel Co., Ltd.

     5,363        —          —          —          —          —    

POSCO JAPAN Co., Ltd.

     350,682        —          12,033        707        —          853  

POSCO-VIETNAM Co., Ltd.

     66,995        96        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     75,553        17        —          —          —          —    

POSCO Maharashtra Steel Private Limited

     142,945        92        —          —          —          256  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     25,309        —          957        —          —          —    

POSCO VST CO., LTD.

     58,204        —          —          —          —          19  

POSCO INTERNATIONAL SINGAPORE PTE LTD.

     —          41        198,168        —          —          —    

Others

     204,728        3,439        25,317        4,790        66,424        34,354  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     3,206,188        24,455        774,478        182,803        172,333        94,512  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                 

POSCO PLANTEC Co., Ltd.

     67        5        648        59,868        4,411        6,651  

SNNC

     1,399        1,100        128,978        —          —          —    

POSCO-SAMSUNG-Slovakia Processing Center

     7,901        —          —          —          —          —    

Roy Hill Holdings Pty Ltd

     —          —          280,820        —          —          —    

Others

     2,993        74,784        13,962        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     12,360        75,889        424,408        59,868        4,411        6,651  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,218,548        100,344        1,198,886        242,671        176,744        101,163  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)

The related account balances from significant transactions with related companies as of June 30, 2020 and December 31, 2019 are as follows:

1) June 30, 2020

 

(in millions of Won)    Receivables      Payables  
     Trade accounts
and notes
receivable
     Others      Total      Trade accounts
and notes
payable
     Accounts
payable
     Others      Total  

Subsidiaries

                    

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   W 3,005        56        3,061        —          55,360        381        55,741  

POSCO COATED & COLOR STEEL Co., Ltd.

     35,652        —          35,652        —          9        3,089        3,098  

POSCO ICT

     123        —          123        2,602        70,313        35,076        107,991  

eNtoB Corporation

     —          34        34        2,698        31,539        18        34,255  

POSCO CHEMICAL CO., LTD

     20,537        2,904        23,441        11,092        45,121        17,606        73,819  

POSCO ENERGY CO., LTD.

     166        214        380        —          2,563        13,630        16,193  

POSCO INTERNATIONAL Corporation

     438,989        10        438,999        756        238        —          994  

POSCO Thainox Public Company Limited

     34,981        3        34,984        —          —          —          —    

POSCO America Corporation

     4,432        —          4,432        —          —          —          —    

POSCO Asia Co., Ltd.

     295,369        847        296,216        3,810        257        —          4,067  

Qingdao Pohang Stainless Steel Co., Ltd.

     21,523        —          21,523        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     40,423        707        41,130        —          —          —          —    

POSCO Maharashtra Steel Private Limited

     196,825        477        197,302        —          —          —          —    

Others

     597,632        43,367        640,999        15,367        28,726        85,326        129,419  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,689,657        48,619        1,738,276        36,325        234,126        155,126        425,577  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                    

SNNC

     340        216        556        10,364        —          —          10,364  

Roy Hill Holdings Pty Ltd

     —          —          —          169,954        —          —          169,954  

Others

     408        38,077        38,485        4,042        —          —          4,042  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     748        38,293        39,041        184,360        —          —          184,360  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,690,405        86,912        1,777,317        220,685        234,126        155,126        609,937  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

42


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

2) December 31, 2019

 

(in millions of Won)    Receivables      Payables  
     Trade accounts
and notes
receivable
     Others      Total      Trade accounts
and notes
payable
     Accounts
payable
     Others      Total  

Subsidiaries

                    

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   W 5,702        65        5,767        —          78,512        385        78,897  

POSCO COATED & COLOR STEEL Co., Ltd.

     57,792        —          57,792        —          11        3,828        3,839  

POSCO ICT

     225        1        226        1,147        129,424        42,844        173,415  

eNtoB Corporation

     —          —          —          3,459        27,431        —          30,890  

POSCO CHEMICAL CO., LTD

     35,102        3,578        38,680        17,839        52,710        19,369        89,918  

POSCO ENERGY CO., LTD.

     1,876        4        1,880        —          3,229        14,912        18,141  

POSCO INTERNATIONAL Corporation

     633,073        —          633,073        345        2,218        3,839        6,402  

POSCO Thainox Public Company Limited

     52,826        2        52,828        916        —          —          916  

POSCO America Corporation

     8,448        —          8,448        —          —          —          —    

POSCO Asia Co., Ltd.

     508,962        748        509,710        12,784        171        —          12,955  

Qingdao Pohang Stainless Steel Co., Ltd.

     29,842        —          29,842        —          —          —          —    

POSCO MEXICO S.A. DE C.V.

     90,351        702        91,053        —          —          —          —    

POSCO Maharashtra Steel Private Limited

     235,917        444        236,361        —          —          —          —    

Others

     470,734        33,851        504,585        14,397        40,233        87,652        142,282  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,130,850        39,395        2,170,245        50,887        333,939        172,829        557,655  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and joint ventures

                    

POSCO PLANTEC Co., Ltd.

     84        10        94        471        49,511        —          49,982  

SNNC

     297        65        362        19,769        —          —          19,769  

Roy Hill Holdings Pty Ltd

     —          —          —          93,383        —          —          93,383  

Others

     942        706        1,648        3,447        586        —          4,033  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,323        781        2,104        117,070        50,097        —          167,167  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,132,173        40,176        2,172,349        167,957        384,036        172,829        724,822  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(d)

For the six-month periods ended June 30, 2020 and 2019, details of compensation to key management officers were as follows:

 

(in millions of Won)    June 30, 2020      June 30, 2019  

Short-term benefits

   W 21,409        23,896  

Long-term benefits

     2,172        3,123  

Retirement benefits

     4,836        6,173  
  

 

 

    

 

 

 
   W 28,417        33,192  
  

 

 

    

 

 

 

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

33. Commitments and Contingencies

 

(a)

Commitments

 

  1)

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of June 30, 2020, 81 million tons of iron ore and 12 million tons of coal remained to be purchased under such long-term contracts.

 

  2)

The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

 

43


Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

  3)

The Company entered into consecutive voyage charter (CVC) contract for the transportation of raw materials. As of June 30, 2020, there are 39 vessels under CVC contracts and the average remaining contract period is about 9 years.

 

  4)

The Company entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowings up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowings depends on the success of the project. The Company is not liable for the repayment in full or part of borrowings if the project fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreement. As of June 30, 2020, the ending balance of the borrowing amounts to USD 1.02 million.

 

  5)

The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO ENERGY CO., LTD.

 

  6)

The Company provides a supplementary fund of up to W9.8 billion to the Company’s subsidiary, Busan E&E Co., Ltd., at the request of creditors such as the Korea Development Bank.

 

(b)

As of June 30, 2020, the Company has provided three blank checks to KOREA ENERGY AGENCY as collateral for long-term foreign currency borrowings.

 

(c)

Litigation in progress

The Company is involved in 21 lawsuits aggregating to W38.9 billion as defendant as of June 30, 2020, which arise from the ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting to W2.1 billion for 1 of 21 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company does not believe it has a present obligation as of June 30, 2020.

 

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Table of Contents

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of June 30, 2020

(Unaudited)

 

 

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the six-month periods ended June 30, 2020 and 2019 were as follows:

 

(in millions of Won)    June 30, 2020      June 30, 2019  

Trade accounts and notes receivable, net

   W 830,252        (307,715

Other accounts receivable

     (5,207      (25,342

Inventories

     740,396        (139,320

Prepaid expenses

     (1,924      (24,988

Other current assets

     (3,652      152  

Long-term guarantee deposits

     (448      58  

Derivative assets

     4,898        —    

Other non-current assets

     444        548  

Trade accounts and notes payable

     193,651        (25,513

Other accounts payable

     (89,951      (92,763

Accrued expenses

     (16,670      22,413  

Advances received

     381        82  

Withholdings

     2,303        (251

Unearned revenue

     (5,227      2,876  

Other current liabilities

     (14,429      (4,835

Derivative liabilities

     5,692        —    

Payments of severance benefits

     (89,031      (48,921

Plan assets

     29,417        29,487  

Other non-current liabilities

     (7,971      (4,511
  

 

 

    

 

 

 
   W 1,572,924        (618,543
  

 

 

    

 

 

 

35. Events after the reporting period

Pursuant to the resolution of the Board of Directors on August 7, 2020, the Company decided to pay interim cash dividends of W500 per common share (total dividend: W39.9 billion).

 

45