6-K 1 d123311d6k.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 June, 2021

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 1st Quarter Report for the year 2021


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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: June 3, 2021     By  

/s/ Chung, Kyung-Jin

      (Signature)
      Name : Chung, Kyung-Jin
      Title : Head of Finance Office


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Exhibit 99.1

 

QUARTERLY REPORT

(From January 1, 2021 to March 31, 2021)

THIS IS AN ENGLISH TRANSLATION OF THE QUARTERLY 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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QUARTERLY REPORT

(From January 1, 2021 to March 31, 2021)

 

To:

Korean Financial Services Commission and Korea Exchange

 

/s/ Kim, Hag-Dong

Kim, Hag-Dong
President and Representative Director
POSCO
6261 Donghaean-ro, Pohang-si, Nam-gu, Gyungsangbuk-do, Korea
Telephone: +82-54-220-0114

/s/ Chung, Kyung-Jin

Chung, Kyung-Jin
Head of Finance Office
POSCO
6261 Donghaean-ro, Pohang-si, Nam-gu, Gyungsangbuk-do, Korea
Telephone: +82-2-3457-0114

 

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TABLE OF CONTENTS

 

I.

  Overview   

II.

  Business   

III.

  Financial Statements   

IV.

  Corporate Governance   

 

Attachment: Independent auditors’ review reports on consolidated and separate financial statements

 

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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., Gale International Korea, LLC, POSCO Venture Capital Co., Ltd., Pohang Special Welding Co., Ltd., POSCO MITSUBISHI CARBON TECHNOLOGY, Samcheok Blue Power Co.,Ltd., Songdo Posco-family Housing Co.,Ltd., POSCO Group University, POSCO Research & Technology, Songdo Development PMC (Project Management Company) LLC., Korea Fuel-Cell Co.,Ltd., POSCO SPS, P&O Chemical Co., Ltd.

 

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(3)

Related Laws and Regulations

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

 

 

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 Enterprise Groups (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: In order to support international businesses, the Company operates five overseas offices as follows:

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

 

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(3)

Major Changes in the Board of Directors (as of March 12, 2021)

 

  (a)

Inside Directors

 

   

Re-appointment : Choi, Jeong-Woo(Representative Director & CEO), Kim, Hag-Dong (Representative Director & President), Chon, Jung-Son (Representative Director & Senior Executive Vice President), and Jeong, Tak (Senior Executive Vice President)

 

   

New appointment : Chung, Chang-Hwa (Senior Executive Vice President)

 

   

Expiration of Term : Chang, In-Hwa

 

  (b)

Outside Directors

 

   

Re-appointment : Kim, Sung-Jin*

 

   

New appointment : Yoo, Young-Sook and Kwon, Tae-Kyun

 

   

Expiration of Terms : Kim, Joo-Hyun and Bahk, Byong-Won

 

  *

Mr. Kim, Sung-Jin was elected as an Outside Director to become an Audit Committee Member.

 

(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, August 6, 2020, September 7, 2020, and October 8, 2020, November 4, 2020, December 4, 2020, January 7, 2021, February 4, 2021, March 5, 2021, April 6, 2021, May 6, 2021)

 

B.

POSCO’s Merger, Acquisition and Handover of Businesses

 

(1)

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

 

(2)

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 March 31, 2021)  

Authorized Shares

   Issued Shares  

200,000,000

     87,186,835  

 

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

Par Value: KRW 5,000 per share

 

B.

Treasury Stock Holding and Cancellation

 

                               (As of March 31, 2021)  

Method of Purchase

   Type    Beginning
Balance
     Increased      Decreased      Cancelled      Ending
Balance
 

Direct

   Common      7,071,194        —          —          —          7,071,194  

Trust Contract

   Stock      4,100,169        389,900        —          —          4,490,069  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

        11,171,363        389,900        —          —          11,561,263  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*

The number of common shares held by the Trust Contract is based on the traded and closed volume as of March 31, 2021.

*

POSCO terminated share repurchase trust contract on April 12, 2021 due to repurchase of treasury shares equivalent to the contract amount and expiration of the contract period. The ending balance as of April 12, 2021 is the same as in March 31, 2021.

 

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5.

Voting Rights

 

 

            (As of March 31, 2021)

Classification

   Number of Common Shares      Remarks

(1) Number of Issued Shares

     87,186,835      —  

(2) Shares without Voting Rights

     11,561,263      Treasury stock and

trust holding

(3) Shares with Voting Rights

     75,625,572      —  

 

*

The above “(3) Shares with Voting Rights” is the number of shares based on holding voting rights as of March 31, 2021.

 

6.

Earnings and Dividends

 

                   (In millions of KRW)  
     2021.1Q      2020      2019  

(Consolidated) Profit*

     1,024,734        1,602,148        1,835,087  

(Separate) Profit

     952,176        965,863        1,175,712  

Earnings per Share (Consolidated, KRW)

     13,477        20,165        22,823  

Cash Dividend Paid

     226,877        620,287        801,156  

Pay-out Ratio (Consolidated, %)

     22.1        38.7        43.7  

Dividend per Share (KRW)

     3,000        8,000        10,000  

Dividend Yield (%)

     1.0        3.0        4.1  

 

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

 

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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)  
          October
2020
     November
2020
     December
2020
     January
2021
     February
2021
     March
2021
 

Common share

   Highest Price      220,000        245,000        279,500        294,500        283,000        327,000  
   Lowest Price      200,500        216,000        245,500        245,500        253,000        285,000  
   Average Price      208,711        234,810        267,738        272,075        268,889        307,045  

Trading volume

   Daily highest      903        627        663        899        875        2,911  
   Daily lowest      191        222        252        340        232        361  
   Monthly      7,812        7,542        8,301        10,236        7,347        17,304  

 

B.

New York Stock Exchange

 

                               (USD/ADS*, In thousands of ADS*)  
          October
2020
     November
2020
     December
2020
     January
2021
     February
2021
     March
2021
 

American Depositary Share (ADS)

   Highest Price      48.7        56.3        64.3        67.2        62.5        72.2  
   Lowest Price      42.2        47.9        56.1        54.8        56.7        63.5  
   Average Price      45.1        52.8        61.2        62.1        60.6        67.7  

Trading volume

   Daily highest      246.1        212.9        246.9        317        319.9        613.8  
   Daily lowest      66.4        58.4        23.8        63.8        55.4        118.8  
   Monthly      3,519        2,527        2,774        3,094      2,549      6,080

 

*

ADS : One American Depositary Share representing one-fourth of one of Common Share

 

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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

   2021.1Q      2020      2019  
   Sales      Operating
Income (Loss)
     Sales      Operating
Income (Loss)
     Sales      Operating
Income (Loss)
 

Steel

     8,476,513      1,262,373      28,892,877        1,372,852        32,078,453      2,786,517

Trading

     5,246,448      95,532      19,345,222        394,954        22,157,131      542,724

Engineering & Construction

     1,460,305      145,340      6,576,170        385,048        6,944,629      338,865

Others

     885,457      49,196      2,978,527        250,181        3,186,635      200,749

Total

     16,068,723      1,552,441      57,792,796        2,403,035        64,366,848      3,868,855

2. Business Status of Segments

A. Steel

(1) Summary of Business

There are 68 consolidated companies in the steel segment, including 4 domestic companies including POSCO and POSCO C&C, and 64 overseas companies including POSCO (Zhangjiagang) Stainless Steel 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 Steel Co., Ltd., is a stainless steel sheet manufacturer and seller, and there are other overseas processing centers that process and sell steel materials.

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 steel-consuming industries such as automobiles, shipbuilding, home appliances, construction, etc. The steel industry is a capital and technology-intensive industry that requires enormous initial investments.

 

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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 almost 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 process, FINEX.

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 57% of total sales and export sales are around 43%, and by export region, the proportion of China, Southeast Asia, and Japan is high. 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 order to maintain the leading position in the steel business, POSCO will secure a new competitive advantage. Second, in the group businesses, we will expand investment to focus on core growth businesses and accelerate the creation of business results. Third, POSCO will focus on fostering new businesses in Green & Mobility as the new growth business in the next-generation. Fourth, POSCO will promote structural and fundamental innovation for the company’s sustainable growth. Fifth, by putting safety as the top priority, POSCO will create the workplace as safe environment without industrial casualties, and actively respond to the low-carbon society as an exemplary company for sustainable growth.

(2) Market Share

 

                                 (Millions of Tons, %)  

Category

   2021.1Q      2020      2019  
   Production      Market share      Production      Market share      Production      Market share  

Crude Steel Production

     17.6        100        67.1        100        71.4        100  

POSCO

     9.6        54.5        35.9        53.5        38.0        53.2  

Others

     8.0        45.5        31.2        46.5        33.4        46.7  

 

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

 

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B. Trading

(1) Market Share

 

            (Millions of US Dollars)  

Category

   2021.1Q      2020.1Q      Growth Rate  

All Trading Companies in Korea

     146,487        130,182        11.13

POSCO International Corp.

     1,860        1,400        24.73

 

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 80 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 (2021.1Q)    

 

               (In hundred millions of KRW, %)  

Business Area

  

Item

  

Specific Use

   Total Sales     Ratio  

Steel

   Hot-rolled Product (HR)    Steel pipe, Shipbuilding, etc.      22,500     17.3
   Cold-rolled Product (CR)    Automobile , Home appliances, etc.      42,619     32.7
   Stainless Steel Products    Tableware, pipes, etc.      26,975     20.7
   Others    Plates, Wire rods, etc.      38,157     29.3
   Gross Sum      130,252     100.0
   Deduction of Internal Trade      (45,487  
        

 

 

   
   Sub Total      84,765  
        

 

 

   
Trading    Steel, Metal      70,522     76.5
   Chemical, Strategic Item, Energy      10,100     10.9
   Others      11,613     12.6
   Gross Sum      92,235     100.0
   Deduction of Internal Trade      (39,771  
        

 

 

   
   Sub Total      52,464  
        

 

 

   
Engineering & Construction    Domestic Construction    Architecture      8,231     49.7
   Plant      2,717     16.4
   Civil Engineering      1,253     7.6
   Others      0     0.0
   Overseas Construction      1,628     9.8
   Owned Construction      2,250     13.6
   Others      496     3.0
   Gross Sum      16,575     100.0
   Deduction of Internal Trade      (1,972  
        

 

 

   
   Sub Total      14,603  
        

 

 

   
Others    Electricity Sales, etc.      15,118  
   Deduction of Internal Trade      (6,263  
   Sub Total      8,855  
        

 

 

   
  

Total Sum 

        160,687  
        

 

 

   

 

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B. Price Movement Trends of Key Products

 

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

Business Area

   Products   2021.1Q      2020      2019  

Steel

   Hot-rolled Product (HR)     726        622        695  
   Cold-rolled Product (CR)     843        759        800  

Others

   Electric Power     80        72        94  
   Refractory     898        965        1,073  
   Lime     107        106        111  

 

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

[Steel]

(1) Criteria for Calculation

 

  (a)

Subjects for Calculation: Unit sales 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 costs during the given period.

(2) Factors of Price Changes

Key products prices slightly fell in 2019 due to worsened market condition of domestic and overseas steel industry. In 2020, due to COVID-19 the prices fell sharply. The prices increased in the 1st quarter of 2021 due to recovery of steel market demand.

[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 freight 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

   34,146

(61.8)

   Iron Ore, Coal
      Sub-materials   

Sub-materials for

Iron-making,

Steelmaking

   10,379

(18.8)

  

Iron Material,

Alloy Iron,

Non-ferrous Metal,

Limestone, etc.

      Stainless Steel Materials   

Key Materials for

STS Production

   10,705

(19.4)

  

Nickel, Ferrochrome,

STS Scrap Iron, etc.

Engineering &

Construction

   Raw Materials    Ready-mixed Concrete    Construction of Structure    444

(15.1)

  
     

Steel

Reinforcement

   Strengthening Concrete    443

(15.1)

  
      Cable    Electricity Transfer    57

(2.0)

  
      Steel Pile    Foundation of Structure    21

(0.7)

  
      Others    Construction of Pipe and Structure etc.    1,977

(67.2)

  
Others    Raw Materials    LNG    Material for Power Generation    2,349

(52.4)

  
      Limestone    Production of Lime    232

(5.2)

  
      Others    Engineering business etc.    1,904

(42.5)

  

 

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Table of Contents

B. Price Movement Trends of Major Raw Materials

 

                 (In thousands of KRW)  

Business Area

   Category    2021.1Q      2020      2019  

Steel

   Iron Ore(per ton)      176        120        102  
   Coal(per ton)      141        147        207  
   Scrap Iron(per ton)      493        348        347  
   Nickel(per ton)      19,559        16,254        16,148  

Engineering & Construction

   Ready-mixed Concrete

(per m3)

     65        65        63  
   Steel Pile

(per m)

     144        102        136  
   Steel Reinforcement

(per kg)

     1        1        1  
   Cable

(per m)

     1        1        1  

Others

   LNG

(per ton)

     529        484        668  
   Lime

(per ton)

     19        19        20  

 

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Table of Contents

[Steel]

 

Price Movement Trend of Major Raw Materials

(1) Iron Ore

 

                                                                    (In US Dollars/ Tons)  
     ’21.1Q      ’20.4Q      ’20.3Q      ’20.2Q      ’20.1Q      ’19.4Q      ’19.3Q      ’19.2Q      ’19.1Q      ’18.4Q      ’18.3Q      ’18.2Q  

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

     158        126        110        88        83        80        92        94        77        64        57        58  

(2) Coal

 

                                                                    (In US Dollars/ Tons)  
     ’21.1Q      ’20.4Q      ’20.3Q      ’20.2Q      ’20.1Q      ’19.4Q      ’19.3Q      ’19.2Q      ’19.1Q      ’18.4Q      ’18.3Q      ’18.2Q  

Trend of International Benchmark Price (FOB)

     127        109        115        118        155        140        161        203        206        221        188        190  

(3) Scrap Iron

 

                                                                    (In US Dollars/ Tons)  
     ’21.1Q      ’20.4Q      ’20.3Q      ’20.2Q      ’20.1Q      ’19.4Q      ’19.3Q      ’19.2Q      ’19.1Q      ’18.4Q      ’18.3Q      ’18.2Q  

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

     443        361        289        254        274        270        290        312        325        343        350        364  

(4) Nickel

 

    

’21.1Q

  

’20.4Q

  

’20.3Q

  

’20.2Q

  

’20.1Q

  

’19.4Q

  

’19.3Q

  

’19.2Q

  

’19.1Q

  

’18.4Q

  

’18.3Q

  

’18.2Q

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

  

USD

7.97 /lb

USD

17,570/ton

  

USD

7.23 /lb

USD

15,930/ton

  

USD

6.45 /lb

USD

14,210/ton

  

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

 

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, 9T, STP275, KS F 4602
Steel Reinforcement    SD400 10mm
Cable    TFR-3, 0.6/1KV, 2.5SQ, 2C

[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 including freight costs

 

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Table of Contents

5. Production and Facilities

A. Production Capacity

[Steel]

 

                   (Thousands of Tons)  

Business Area

   Products      2021.1Q      2020      2019  

Steel

     Crude Steel        11,333        45,330        47,534  

[Others]

 

     (Electric Power: MW/year, Lime: Thousands of Tons/year)  

Business Area

   Products    2021.1Q     2020      2019  

Power Generation

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

Lime

   Lime      540     2,196        2,190  

 

*

Production capacity of Lime is based on the 1st quarter of 2021

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

 

                 (Thousands of Tons)  

Products

   2021.1Q      2020      2019  

Crude Steel

     10,760        40,579      42,948

Products

   Hot-Rolled Steel      2,128      9,128      8,739
   Plate      1,715      7,009      7,191
   Wire Rod      664      2,666      2,756
   Pickled-Oiled Steel      726      2,432      2,967
   Cold-Rolled Products      1,996      6,795      7,416
   Coated Steel      1,813      6,316      6,526
   Electrical Steel      221      826      819
   Stainless Steel      1,035      3,900      3,850
   Others      1,264      4,691      5,761
     

 

 

    

 

 

    

 

 

 
   Total      11,561      43,763      46,025
     

 

 

    

 

 

    

 

 

 

 

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

Production

   POSCO      10,170      9,559      94.0  
   PT.KRAKATAU POSCO      750      810        108.0  
   POSCO YAMATO VINA
STEEL JOINT STOCK
COMPANY
     138      138      100.2  
   POSCO (Zhangjiagang)
Stainless Steel Co., Ltd.
     275      253      91.9  
     

 

 

    

 

 

    

 

 

 
   Total      11,333      10,760      94.9  
     

 

 

    

 

 

    

 

 

 

 

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

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY had 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

   2021.1Q      2020      2019  

Power Generation

   Electric Power      3,763        13,998        15,928  

Lime

   Lime      614        2,345        2,542  

(2) Capacity Utilization Rate

 

         

 

     (Hour, %)  

Business Area

   Products    2021.1Q
Capacity
     2020.1Q
Production
     Utilization Rate  

Power Generation

   Incheon Power Plant      2,160        1,420        65.7  

 

                 (Thousands of Tons, %)         

Business Area

   Products    Capacity      Production      Utilization Rate  

Lime

   Lime      540        614        113.8  

 

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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

     2,013,822      13,398      (17     —          2,027,203

Trade

     50,688      157      (154     —          50,691

Engineering & Construction

     25,579      —          (12     —          25,567

Others

     499,998      13      —         —          500,011

[Buildings]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     3,258,592      62,852      (9,376     (70,655     3,241,413

Trade

     374,644      12,898      —         (2,878     384,664

Engineering & Construction

     81,702      10,302      (12,635     (554     78,815

Others

     446,462      2,175      —         (6,178     442,459

[Structures]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     2,433,141      69,855      (3,303     (51,167     2,448,526

Trade

     2,071      62      —         (77     2,056

Engineering & Construction

     4,456      427      (0     (108     4,775

Others

     585,558      30      (38,864     (6,529     540,195

[Machinery and Equipments]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     14,864,929      373,507      (98,484     (534,657     14,605,295

Trade

     266,848      835      —         (5,634     262,049

Engineering & Construction

     5,071      3,001      (5,550     (245     2,277

Others

     1,720,459      16,624      —       (46,372     1,690,711

 

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Table of Contents

[Vehicles]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     22,881      10,309      (4,490     (2,474     26,226

Trade

     5,469      418      (259     (397     5,231

Engineering & Construction

     1,133      4,596      (5,385     (19     325

Others

     7,673      1,353      (3,662     (794     4,570

[Tools and Fixtures]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     54,166      8,299      (4,030     (6,212     52,223

Trade

     1,363      47      (15     (82     1,313

Engineering & Construction

     1,027      77      (117     (13     974

Others

     3,745      8,484      (155     (1,121     10,953

[Equipment]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     66,145      9,662      (5,092     (5,274     65,441

Trade

     25,298      925      (365     (2,417     23,441

Engineering & Construction

     3,532      6,791      (860     (5,998     3,465

Others

     32,484      9,086          (1,790     39,780

[Financial Lease Assets]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation     Ending Book
Balance
 

Steel

     490,290      141,315      (1,732     (12,978     616,895

Trade

     95,191      26,827      (21,069     (11,671     89,278

Engineering & Construction

     82,876      22,379      (14,994     (10,303     79,958

Others

     105,343      9,885      (2,231     (9,825     103,172

 

23


Table of Contents

[Biological Assets]

                          (In millions
of KRW)
 

Business Area

   Beginning Book
Balance
     Increased      Decreased      Depreciation      Ending Book
Balance
 

Steel

                        
Trade    149,965      10,930           (2,250)      158,645  
Engineering & Construction                         

Others

                        

[Assets under Construction]

                         (In millions of KRW)  

Business Area

   Beginning Book
Balance
     Increased      Decreased     Depreciation      Ending Book
Balance
 

Steel

     1,438,271      330,241      (179,700          1,588,812

Trade

     58,150      2,473      (7,831          52,792

Engineering & Construction

     2,043      17,528               19,571

Others

     119,076      102,743               221,819

 

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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

~
November 2023

  

P) Establishment of #6 Coke plant

P) Establishment of

by-product gas Power

Plant

     14,806        5,275        9,532  
      September 2015

~ May 2024

  

G) The renovation of #4 furnace

P) Improvement of #3, #4 power plant, etc.

     11,787        5,131        6,656  
POSCO SPS    Expansion/
Establishment
   October
2020~August
2021
   Machinery, etc.      101        48        54  
      February 2021

~August 2021

   Cheonan factory      107        —          107  
      February 2021

~October 2021

   Pohang factory      109        —          109  

POSCO-Indonesia Jakarta

Processing Center

   Expansion/
Establishment
   May 2020

~May 2021

   New establishment of 3rd factory      293        252        41  

 

P stands for Pohang Steel Works.

 

G stands for Gwangyang Steel Works.

 

Ongoing investments over KRW 10 billion as of March 31, 2021 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 2021

~ December 2021

   Smart factory expansion and new business growth      194        2        192  
   Establishment/

Expansion

   January 2021

~ December 2021

  

Expansion of

SM server, etc.

     148        3        145  

POSCO O&M

   Establishment/

Expansion

   January 2021

~ December 2021

   Fixed assets acquisitions and facilities replacement      1,083        93        990  

 

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Table of Contents

POSCO CHEMICAL

  

Establishment/
Expansion

  

July 2020
~ November 2022

   The 3rd stage of cathode material factory in Gwangyang      2,895        246        2,649  
   Establishment/

Expansion

   November 2020

~ March 2024

   The 4th stage of cathode material factory in Gwangyang      2,758        73        2,685  
   Establishment/

Expansion

   November 2019

~ December 2022

   The 2nd stage of production line up expansion in #2 anode material factory      1,651        775        876  
   Establishment/

Expansion

   February 2020

~ August 2020

   Establishment of artificial graphite anode factory site      130        125        5  
   Establishment/

Expansion

   February 2020

~May 2024

   Establishment of artificial graphite anode factory      2,177        212        1,965  
   Establishment/

Expansion

   November 2019

~ October 2021

   Renovation of refractory factory for production increase      483        135        348  
   Establishment/

Expansion

   October 2020

~ November 2022

   Facilities rationalization of refractory sintering plant in Pohang      319        —          319  

POSCO Energy

   Establishment/

Expansion

   March 2020

~ December 2021

   Expansion of evaporator in Gwangyang LNG Terminal      360        79        281  
   Establishment/

Expansion

   January 2021

~ May 2024

   Establishment of #6 Tank in Gwangyang LNG Terminal      1,437        2        1,435  

 

Ongoing investments over KRW 10 billion as of March 31, 2021 are listed on the table.

6. Product Sales

[Steel]

 

          (In hundred millions of KRW)  

Items

   2021.1Q      2020      2019  

Domestic

   Hot-Rolled

Products

     12,760      39,663      42,605
   Cold-
Rolled

Products

     11,267      37,870      39,716
   Stainless
Steel
     7,734      23,746      21,167
   Others      18,749      63,111      77,026

Export

   Hot-Rolled

Products

     9,740      37,368      41,064
   Cold-
Rolled

Products

     31,352      101,808      125,658
   Stainless
Steel
     19,242      72,140      80,181
   Others      19,408      66,877      70,667

Total

   Gross Sum      130,252      442,583      498,084
   Internal
Transaction
     (45,487      (153,654      (177,299
   Total      84,765      288,929      320,785

 

26


Table of Contents

[Trading]

 

          (In hundred millions of KRW)  

Items

   2021.1Q      2020      2019  

Domestic

   Merchandise      10,695      33,565      29,315
   Product      194      2,028      5,120
   Others      20      240      1,101

Export

   Merchandise      22,103      75,922      69,347
   Product      80      528      205
   Others      1      1,191      638

Trades among the 3 countries

     59,141      209,446      270,522

Gross Sum

     92,235      322,920      376,248

Internal Transaction

     (39,771      (129,468      (154,677
     

 

 

    

 

 

    

 

 

 

Total

     52,464      193,452      221,571
     

 

 

    

 

 

    

 

 

 

[Engineering & Construction]

 

          (In hundred millions of KRW)  

Items

   2021.1Q      2020      2019  

Domestic

   Building      8,231      42,761      44,681
   Plant      2,717      12,887      10,953
   Civil Engineering      1,253      6,177      6,098
   Others               

Overseas

     1,628      7,089      7,190

Own Construction

     2,250      4,866      5,712

Other Subsidiary company sales

     496      2,320      2,246

Gross Sum

     16,575      76,100      76,880

Internal Transaction

     (1,972      (10,338      (7,434
     

 

 

    

 

 

    

 

 

 

Total

     14,603      65,762      69,446
     

 

 

    

 

 

    

 

 

 

[Others]

 

     (In hundred millions of KRW)  

Items

   2021.1Q      2020      2019  

Electric Power Sales

     8,855      29,785      31,866

 

27


Table of Contents

7. Derivatives

We use forward exchange contracts to hedge against the exchange rate risk for foreign currency loans.

As of March 31, 2021, we assessed the fair value of our forward exchange contracts to be 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), USD 0.44 billion(expiring January 2025), and EUR 0.5 billion(expiring January 2024).

We recognized KRW 25,143 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 103,145 million of valuation gain on currency swap contracts. The transaction gain of currency swap contracts is KRW 326 million.

8. Significant Contracts

 

Company

  

Contract

  

Date

  

Remarks

POSCO   

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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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.

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

  

 

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

  

Investment on the 3rd stage development of

A-1 / A-3 block

in Myanmar gas field

   June 2020   

1) Investment amount: KRW 365,786,302,000

2) Development period: September 1, 2019 ~ December 31, 2024

3) Schedule : Installation Completion of low-pressure gas compression platform and

commenced operation in 2024

4) Other Information

-  Location: North-west offshore, Myanmar

-  This investment is the 3rd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level stably by installing low-pressure gas compression platform.

-  In the first quarter of 2021, the design and production of the equipment for this work will be started, and it is planned to start operation in 2024. The “(2) Development period” above is the period including the basic design progress period, September 2019 to September 2020.

-  Participation rate of each company in gas production and offshore pipeline transportation business

•   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 315,170 thousand, applying the exchange rate of 1USD=1,160.60 KRW, which is the date of the BOD resolution.

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

POSCO International disclosure date :

September 22, 2020 (Decision on natural resources investment)

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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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

  

 

Merger

  

 

May 2020

  

 

1) Contract counterpart : PSC Energy Global Co., Ltd.

2) Signed date : May 26, 2020

3) Date of merger : August 1, 2020

4) Merger ratio : 1.0000000 : 0.0000000

5) Information : POSCO ENERGY merges PSC Energy Global Co., Ltd., a wholly owned subsidiary of POSCO ENERGY

POSCO

YAMATO VINA STEEL 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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9. Research and Development

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

 

Business Area

  

Company

  

Organization

Steel

   POSCO    Steel Production and Technology Strategy Office
   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

  

POSCO (Zhangjiagang) Stainless Steel

Co., Ltd.

   R&D Center
  

 

POSCO SPS

  

 

TMC Business Group

   Stainless Quality Technology Group
Engineering & Construction    POSCO Engineering & Construction,. LTD.    R&D Center
   POSCO A&C    R&D Center
Others    POSCO ENERGY CO., LTD.    Power Generation Business Division
   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 2021.1Q (In millions of KRW)

 

Category

   Business Area  
   Steel     Trade      Engineering &
Construction
     Others      Total  

Selling and Administrative Cost

     23,620     —        780      8,135      32,535

Manufacturing Cost

     76,386     —        57      10      76,453

R&D Cost (Intangible Assets)

     (31,796     —        —        241      (31,555

Total*

     68,210     —        837      8,386      77,433

Government Subsidy

     —       —        193      —          193

R&D/Sales Ratio (%)

     0.80       —        0.06        0.95        0.48  

 

*

Total includes government subsidy.

 

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III. Financial Statements

1. Consolidated Financial Statements

A. Summary

 

    

(In millions of KRW)

 

Account

   2021.1Q      2020      2019  
     As of March 31, 2021      As of December 31, 2020      As of December 31, 2019  

[Total current assets]

     39,442,198      35,830,815      34,842,374

Cash and cash equivalents

     4,546,138      4,754,644      3,514,872

Other receivables, net

     1,736,992      1,494,239      1,581,517

Other short-term financial assets

     13,129,801      11,709,209      8,996,049

Trade accounts and notes receivable, net

     8,953,757      8,120,619      9,078,351

Inventories

     10,253,347      9,051,790      10,920,320

Other current assets

     822,163      700,314      751,265

[Total non-current assets]

     43,380,416      43,256,158      44,216,287

Other receivables, net

     1,186,717      1,195,962      1,140,878

Other long-term financial assets

     1,710,782      1,561,807      1,669,389

Investments in associates and joint ventures

     3,896,677      3,876,249      3,927,755

Property, plant and equipment, net

     29,471,591      29,400,141      29,925,973

Intangible assets, net

     4,348,672      4,449,432      4,908,473

Other non-current assets

     2,765,977      2,772,567      2,643,819

Total assets

     82,822,614      79,086,973      79,058,661

[Total current liabilities]

     18,289,089      16,854,968      16,323,690

[Total non-current liabilities]

     15,318,054      14,557,413      14,940,264

Total liabilities

     33,607,143      31,412,381      31,263,954

[Equity attributable to owners of the controlling company]

     45,262,153      44,331,350      44,471,873

Share capital

     482,403      482,403      482,403

 

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Capital surplus

     1,357,038      1,310,547      1,376,251

Hybrid bonds

     199,384      199,384      199,384

Retained earnings

     46,784,409      46,111,457      45,080,118

Other equity attributable to owners of the controlling company

     (3,561,081      (3,772,441      (2,666,283

[Non-controlling Interests]

     3,953,318      3,343,242      3,322,834

Total equity

     49,215,471      47,674,592      47,794,707
    

From January 1, 2021

to March 31, 2021

    

From January 1, 2020

to December 31, 2020

    

From January 1, 2019

to December 31, 2019

 

Revenue

     16,068,723      57,792,796      64,366,848

Operating profit

     1,552,441      2,403,035      3,868,855

Profit

     1,138,779      1,788,152      1,982,637

[Profit attributable to owners of the controlling company]

     1,024,736      1,602,147      1,835,086

[Profit attributable to non-controlling interests]

     114,043      186,005      147,551

Total comprehensive Income

     1,479,851      1,570,204      2,129,105

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

     1,350,510      1,415,132      1,997,731

[Total comprehensive income attributable to non-controlling interests]

     129,341      155,072      131,374

Earnings per share(KRW)

     13,477      20,165      22,823

Number of Consolidated Companies

     167        167        164  

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.

 

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2. Separate Financial Statements

A. Summary

 

    

(In millions of KRW)

 

Account

   2021.1Q      2020      2019  
     As of March 31, 2021      As of December 31, 2020      As of December 31, 2019  

[Total current assets]

     20,397,788        19,579,954        18,216,066

Cash and Cash equivalents

     1,828,883        1,822,660        978,139

Trade accounts and notes receivable, net

     4,106,907        3,693,535        3,987,041

Other receivables, net

     472,246        279,555        321,352

Other short-term financial assets

     9,133,419        9,607,632        7,858,979

Inventories

     4,758,851        4,093,829        4,988,530

Other current assets

     97,482        82,743        82,025

[Total non-current assets]

     37,867,526        37,215,015        37,494,700

Other receivables, net

     86,491        84,037        56,468

Other long-term financial assets

     1,190,314        1,072,817        1,257,896

Investments in Subsidiaries, associates, and joint ventures

     15,609,637        14,883,152        15,069,857

Property, plant and equipment, net

     20,078,792        20,216,932        20,132,199

Intangible assets, net

     590,373        621,926        708,915

Other non-current assets

     311,919        336,151        269,365

Total assets

     58,265,314        56,794,969        55,710,766

[Total current liabilities]

     5,753,568        5,089,111        3,331,446

[Total non-current Liabilities]

     6,831,454        6,591,154        6,765,135

Total liabilities

     12,585,022        11,680,265        10,096,581

[Share capital]

     482,403        482,403        482,403

[Capital surplus]

     1,339,289        1,339,289        1,252,220

[Hybrid bonds]

     199,384        199,384        199,384

[Retained earnings]

     46,386,728        45,781,777        45,372,411

[Other equity]

     (2,727,512      (2,688,149      (1,692,233

 

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Account

   2021.1Q      2020      2019  

Total equity

     45,680,292        45,114,704        45,614,185
    

From January 1, 2021

to March 31, 2021

    

From January 1, 2020

to December 31, 2020

    

From January 1, 2019

to December 31, 2019

 

Revenue

     7,800,447        26,509,920        30,373,511

Operating profit

     1,072,884        1,135,197        2,586,359

Profit

     952,176        965,863        1,175,712

Earnings per share(KRW)

     12,522        12,123        14,592

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”).

 

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IV. CORPORATE GOVERNANCE

1. Overview of Corporate Governance

A. Board of Directors (“BoD”)

(1) Board of Directors

The Board of Directors consists of five inside directors (Choi, Jeong-Woo, Kim, Hag-Dong, Chon, Jung-Son, Chung, Chang-Hwa and Jeong, Tak) and seven outside directors (Chang, Seung-Wha , Kim, Shin-Bae, Chung, Moon-Ki, Kim, Sung-Jin, Pahk, Heui-Jae Kim, Yoo, Young-Sook, and Kwon, Tae-Kyun).

The Board of Directors manages the following five Special Committees:

(a) ESG Committee

(b) Director Candidate Recommendation Committee

(c) Evaluation and Compensation Committee

(d) Finance Committee

(e) Audit Committee

(f) Executive Management Committee

    Composition of the Special Committees under the BoD and their Functions(as of March 4, 2021)

 

Category

  

Composition

  

Directors

  

Major Functions

ESG Committee   

3 Outside Directors,

1 Inside Director

  

Kim, Shin-Bae

(Chairman)

Chang, Seung-Wha

Yoo, Young-Sook

Kim, Hag-Dong

  

(1)   Review of low-carbon policies related to environment and climate change

(2)   Preliminary review on safety and health plans

(3)   Preliminary review of the operation of BoD and Special Committees

A. Development of agenda and establishment of operation standards for the BoD and Special Committees

B. Preliminary review of amendment or repeal of the Operational Regulations of the BoD

C. Preliminary review of establishment and operation of Special Committees within the BoD

(4)   Execution monitoring and report publication related to ESG

(5)   Deliberation and resolution on donations exceeding KRW 100 million and KRW 1 billion and less, as well as preliminary review on donations exceeding KRW 1 billion

(6)   Matters related with internal transactions in accordance with the Monopoly Regulation and Fair Trade Act

A. Review of issues and improvement measures in relation to internal transactions

B. Preliminary review of internal transactions (KRW 100 billion or more in transaction amount)

C. Deliberation and resolution on internal transactions (KRW 5 billion or more and less than KRW 100 billion in transaction amount)

(7)   Appointment of fair trade compliance officer

 

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Table of Contents
Director Candidate Recommendation Committee   

3 Outside Directors,

1 Inside Director

  

Chung, Moon-Ki

(Chairman)

Kim, Sung-Jin

Kwon, Tae-Kyun

Jeong, Tak

  

(1)   Qualification assessment of Outside Director candidates and candidate nomination at the general meeting of shareholders

(2)   Pre-screening and qualification assessment of Inside Director candidates

(3)   Preliminary review of appointing the Committees members

(4)   Preliminary review of appointing the Representative Directors among Inside Directors (excluding the CEO)

(5)   Operation of the Outside Director Candidate Recommendation Advisory Group

(6)   Other matters necessary to nominate Outside Director candidates

Evaluation and

Compensation

Committee

   4 Outside Directors   

Pahk, Heui-Jae

(Chairman)

Chung, Moon-Ki

Kim, Sung-Jin

Yoo, Young-Sook

  

(1)   Development of management succession and executive development plans

(2)   Establishment and execution of executive evaluation and compensation plans

(3)   Preliminary review on compensation and retirement allowance of Directors

Finance Committee   

3 Outside Directors;

1 Inside Director

  

Kwon, Tae-Kyun

(Chairman)

Kim, Shin-Bae

Chang, Seung-Wha

Chon, Jung-Son

  

(1)   Establishment of policies for company’s internal values and financial soundness

(2)   Preliminary review in case of filing in litigation or arbitration, or responding to reconciliation or mediation in the process of trial or taking any equivalent level of legal actions with the amount of KRW 100 billion or more

(3)   External Investments

A. Preliminary review of new external investments, capital increase and disposal of share in the invested entity executed by a non-steel business division (KRW 100 billion or more. Investment and capital increase include borrowings and liabilities that the company takes)

B. Approval of new external investments, capital increase and disposal of share in the invested entity executed by a non-steel business division (From KRW 10 billion to less than KRW 100 billion. Investment and capital increase includes borrowings and liabilities that the company takes)

(4)   Deliberation and resolution on bond issuance and important borrowings (including refinancing borrowings exceeding KRW 100 billion)

(5)   Preliminary review on bond issuance and important borrowings (new long-term borrowings exceeding KRW 100 billion)

(6)   Deliberation and resolution on offering non-current assets as collateral

(7)   Deliberation and resolution on takeover of debt such as collateral, guarantee, etc. from invested company (excluding the case involving steel investment)

 

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Table of Contents
Audit Committee    3 Outside Directors   

Kim, Sung-Jin

(Chairman)

Chung, Moon-Ki

Pahk, Heui-Jae

  

(1)   Setting the work scope of the committee

(2)   Matters that the BoD or Representative Directors delegated

(3)   Request for Extraordinary general meeting of shareholders

(4)   Consulting of external experts

(5)   Audit of the legitimacy of management’s business execution

(6)   Review soundness and validity of the company’s financial activities and the appropriateness of financial reporting

(7)   Review the validity of important accounting standards or changes in accounting estimates

(8)   Evaluation of the operation status of the internal accounting management system

(9)   Evaluation of the internal control system

(10)  Agreement on appointment or dismissal of internal audit department representative

(11)  Contract for appointment, remuneration and non-audit services of independent auditors

(12)  Evaluation of independent auditors’ audit activities

(13)  Report internal audit department’s annual audit plan and results

(14)  Report on the evaluation results of the company’s ethical compliance

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

(16)  Report that independent auditors violation of the company’s accounting standards

(17)  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)

Kim, Hag-Dong

Chon, Jung-Son

Kim, Hag-Dong

Jeong, Tak

Chung, Chang-Hwa

  

1. Business

(1)   Important matters in the corporate employee hierarchy, development of human resources and adjustment

(2)   Important changes in terms of working conditions and welfares

(3)   New establishment plan for chair-professor

(4)   Housing Policy Establishment (Housing fund

support standard and plan for housing construction)

(5)   Decision on closure of shareholders’ registry

2. Finance

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

(2)   Approval of in-house investment plan

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

-   Investment other than new establishment or expansion: KRW 10 billion or more.(In the case of ordinary investment, the investment amount is for KRW 5 billion or more)

(3)   Preliminary review on steel business division: New external investments, capital increase and disposal of shares in the invested entity (From KRW 100 billion or more, Investment and capital increase includes borrowings and liabilities that the company takes)

(4)   Approval on steel business division: New external investment, capital increase, and disposal of shares in the invested entity (From KRW 10 billion to less than KRW 100 billion, investment and capital increase to includes borrowings and liabilities that the company takes)

(5)   Acquisition or disposal of tangible· intangible fixed assets and important investment assets from KRW 10 billion to less than KRW 200 billion

(6)   Approval technology application and technology sales contract over USD 1 million

(7)   Acquisition of debt such as guarantee for invested company’s collateral involving steel investments

3. Other matters that the Chairman deems necessary or are deemed necessary by each committee member

(2) List of Key Activities of the Board of Directors

(January 1, 2021 ~ March 31, 2021)

 

No.

  

Date

  

Agenda

  

Approval

2021-1    January 20    1. Approval of participation in POSCO CHEMICAL’s capital increase with consideration    All 1 Case Approved
2021-2    January 28   

•   Deliberation Agenda

1. Approval of the 53rd financial statements and schedule for the general meeting of shareholders

•   Report Agenda

1.  Business performance of the fiscal year of 2020

2.  Report on internal control over financial reporting

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

  

All 1 Case Approved

 

—  

—  

—  

2021-3    February 18   

1. Plans to strengthen roles of the Board of Directors in relation to ESG

2. Recommendation of Inside Directors candidates (other than the candidate for the Representative Director & CEO)

3. Agendas for the 53rd general meeting of shareholders

  

All 3 Cases

Approved

 

*

At the 53rd General Meeting of Shareholders which was held on March 12, 2021, Outside Director Bahk, Byong-Won and Kim Joo-Hyun, and Inside Director Chang, In-Hwa retired due to expiration of the terms. Outside Directors Yoo, Young-Sook and Kwon, Tae-Kyun, and Inside Director Chung, Chang-Hwa were newly elected.

 

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Table of Contents

(March 12, 2021 ~ May 14, 2021)

 

No.

  

Date

  

Agenda

  

Approval

2021-4    March 12   

1. Appointment of the Chairman of the BoD

2. Appointment of the Representative Director CEO

3. Appointment of Representative Directors and Inside Directors

4. Appointment of Special Committees members

   All 4 Cases Approved
2021-5    April 9    1. Investment on commercial plant for hard rock lithium    All 1 Case Approved
2021-6    May 14   

•   Deliberation Agenda

1. Resolution on the dividend for the 1st quarter of 2021

2. POSCO health and safety plan for 2021

3. Joint Venture company establishment with HBIS Group Co., Ltd.

4. Equity investment in an Australian nickel production company

5. Transaction Plans with affiliates for the fiscal year of 2021

•   Report Agenda

  

All 5 Cases

Approved

 

      1. Business performance of the 1st quarter of 2021    —  
      2. Status of global steel growth strategy implementation    —  
      3. The performance and assessment of Board of Directors for 2020      —  

     Major Activities of Outside Directors on the Board of Directors (January 1, 2021 ~ May 14, 2021)

 

No.

  

Date

  

Participation of the Outside Directors

(the Number of total Outside Directors)

  

Remarks

2021-1

   January 20    7 (7)    —  

2021-2

   January 28    7 (7)    —  

2021-3

   February 18    7 (7)    —  

2021-4

   March 12    7 (7)    —  

2021-5

   April 9    7 (7)    —  

2021-6

   May 14    7 (7)    —  

(4) Special Committees under the BoD and Their Activities (From January 1, 2021 to May 14, 2021)

 

   

Director Candidate Recommendation and Management Committee (January 1, 2021~March 11, 2021)

 

Date

  

Agenda

  

Approval

January 28, 2021    Qualification review and recommendation of the Outside Directors candidates    Approved
February 18, 2021   

•   Deliberation Agenda

1. Recommendation of the Outside Directors candidates

•   Preliminary Review

   Approved
   1. Qualification review of the Inside Directors candidates    —  
   2. Plans to strengthen roles of the Board of Directors in relation to ESG    —  

 

   

Finance and Related Party Transaction Committee (January 1, 2021~March 11, 2021)

 

Date

  

Agenda

  

Approval

January 28, 2021    Contribution to the Labor Welfare Fund    Approved

o Evaluation and Compensation Committee (January 1, 2021 ~ March 12, 2021)

 

Date

  

Agenda

  

Approval

January 27, 2021    Evaluation of the business performance for the fiscal year of 2020    Approved

 

   

ESG Committee (March 12, 2021 ~ May 14, 2021)

 

Date

  

Agenda

  

Approval

April 22, 2021   

•   Deliberation Agenda

Plan for publishing Corporate Citizenship Report 2020

•   Report Agenda

2050 Carbon Neutral Declaration and Implementation Status

  

Approved

—  

 

May 13, 2021   

•   Preliminary Review

POSCO health and safety plan for 2021

   —  

 

40


Table of Contents
   

Finance Committee (March 12, 2021 ~ May 14, 2021)

 

Date

  

Agenda

   Approval
April 9, 2021   

•   Preliminary Review

Investment on commercial plant for hard rock lithium

   —  
May 14, 2021   

•   Preliminary Review

Equity investment in an Australian nickel production company

   —  

 

   

Executive Management Committee (January 1, 2021 ~ May 14, 2021)

 

Date

  

Agenda

  

Approval

March 23, 2021   

1. Exhaust gas purification facility replacement at Gwangyang #1 sintering factory

2. EIC facility replacement at Gwangyang #2-4 casting machine

3. Reclamation work for Gwangyang facility expansion site

4. Carbon credit trading plan

   All 4 Cases Approved
April 20, 2021   

•   Preliminary Review

1. Joint Venture company establishment with HBIS Group Co., Ltd.

•   Deliberation Agenda

1. Pohang education center dormitory construction

2. Gwangyang education center construction

3. Contruction of Park1538 Gwangyang PR Hall

  

—  

 

All 3 Cases Approved

B. Audit Committee

(1) Composition of the Audit Committee

 

Name

  

Qualifications

  

Remarks

Kim, Sung-Jin

Chung, Moon-Ki

Pahk, Heui-Jae

   Satisfies the requirements stipulated in the Korean Commercial Act   

Chairman

(2) Major Activities of the Audit Committee (January 1, 2021 ~ May 14, 2021)

 

41


Table of Contents

Session

  

Date

  

Agenda

  

Approval

1    January 27   

•   Deliberation Agenda

1. Consent to appoint the head of the internal audit department

2. Assessment of internal control over financial reporting in 2020

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

•   Report Agenda

  

All 3 Cases Approved

      1. Report of operation of internal control over financial reporting in 2020    —  
      2. Report on approval of POSCO E&C’s audit service contract    —  
      3. The result of internal audit for the fiscal year of 2020 and audit plans for the fiscal year of 2021    —  
      4. Audit Committee activities in 2020    —  
      5. The assessment on the executives’ and employees’ conformity to the code of ethics for the fiscal year of 2020    —  
2    February 17   

•   Deliberation Agenda

1. Internal audit result for the year 2020

•   Report Agenda

1. External audit result for the year 2020

   Approved
3    February 18    Review of the agendas for the Ordinary General Meeting of Shareholders    Approved

- At the 53rd general meeting of shareholders held on March 12, 2021, due to Bahk, Byong-Won’s expiration of term in the Audit Committee, a new Audit Committee member, Kim, Sung-Jin was elected.

 

Session

  

Date

  

Agenda

  

Approval

4    March 12    1. Appointment of the chairman of the audit committee    Approved
5

 

  

April 23

 

  

•   Report Agenda

 

  
     

1. POSCO E&C and POSCO ICT deficit projects status and management

plans

   —  
      2. Operation plan for Internal Accounting Management Policy in 2021    —  
     

3. Results of internal audit on the consolidated financial statements for

the 1st quarter of 2021

   —  
     

4. Review of the impact of amendments to the U.S. listed company

regulations on independence of external auditors

   —  
     

5. The results of the 20-F audit for 2020 and the results of external

reviews on the consolidated financial statements for the 1st quarter of 2021

   —  

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.

 

42


Table of Contents

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

D. Compensation of Directors and Officers

(1) Directors’ and the Audit Committee members’ Salaries

 

                          (In millions KRW)  

Category

   No. of
people
     Total
payment
     Average
payment

(Per
person)
     Ceiling amount approved at
the general meeting of
shareholders
     Remarks  

Inside Director

     5        2,545        382           —    

Outside Director (Excluding Audit Committee Members)

     4        82        12        10,000        —    

Members of the Audit Committee

     3        52        17           —    

 

No. of people : The number of Directors and the Audit Committee members who are in office as of March 31, 2021.

Total payment : The total amount of remuneration paid to all Directors, including the Audit Committee members, who served from January 1 to March 31, 2021.

Average payment per person is calculated based on the paid amount to the current Directors and Audit Committee members as of March 31, 2021.

 

43


Table of Contents

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2021

(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 March 31, 2021, the condensed consolidated interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2021 and 2020, 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.

Auditor’s 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”.


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, 2020, 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 4, 2021, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2020, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

 

Seoul, Korea

May 14, 2021

 

This report is effective as of May 14, 2021, 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 March 31, 2021 and December 31, 2020

(Unaudited)

 

 

(in millions of Won)    Notes      March 31, 2021      December 31, 2020  

Assets

        

Cash and cash equivalents

     21      W 4,546,138        4,754,644  

Trade accounts and notes receivable, net

     4,21,26,27,34        8,953,757        8,120,619  

Other receivables, net

     5,21,34        1,736,992        1,494,239  

Other short-term financial assets

     6,21        13,129,801        11,709,209  

Inventories

     7        10,253,347        9,051,790  

Current income tax assets

        33,396        49,481  

Assets held for sale

     8        48,074        34,210  

Other current assets

     14        740,693        616,623  
     

 

 

    

 

 

 

Total current assets

        39,442,198        35,830,815  
     

 

 

    

 

 

 

Long-term trade accounts and notes receivable, net

     4,21        76,191        86,423  

Other receivables, net

     5,21        1,186,717        1,195,962  

Other long-term financial assets

     6,21        1,710,782        1,561,807  

Investments in associates and joint ventures

     9        3,896,677        3,876,249  

Investment property, net

     11        998,405        994,781  

Property, plant and equipment, net

     12        29,471,591        29,400,141  

Intangible assets, net

     13        4,348,672        4,449,432  

Defined benefit assets, net

     19        71,346        86,149  

Deferred tax assets

        1,356,921        1,335,154  

Other non-current assets

     14        263,114        270,060  
     

 

 

    

 

 

 

Total non-current assets

        43,380,416        43,256,158  
     

 

 

    

 

 

 

Total assets

      W 82,822,614        79,086,973  
     

 

 

    

 

 

 

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 Financial Position, Continued

As of March 31, 2021 and December 31, 2020

(Unaudited)

 

 

(in millions of Won)    Notes      March 31, 2021     December 31, 2020  

Liabilities

       

Trade accounts and notes payable

     21,34      W 3,807,052       3,755,513  

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

     4,15,21        9,198,919       8,677,529  

Other payables

     16,21,34        2,332,310       1,845,266  

Other short-term financial liabilities

     17,21        147,511       141,404  

Current income tax liabilities

        587,682       366,476  

Liabilities directly associated with the assets held for sale

     8        7       25  

Provisions

     18,35        356,656       443,273  

Other current liabilities

     20,26,27        1,858,952       1,625,482  
     

 

 

   

 

 

 

Total current liabilities

        18,289,089       16,854,968  
     

 

 

   

 

 

 

Long-term trade accounts and notes payable

     21        14,907       22,323  

Long-term borrowings, excluding current installments

     15,21        12,425,771       11,820,078  

Other payables

     16,21        698,123       558,924  

Other long-term financial liabilities

     17,21        51,773       133,588  

Defined benefit liabilities, net

     19        171,319       141,785  

Deferred tax liabilities

        1,361,099       1,320,726  

Long-term provisions

     18,35        551,287       522,969  

Other non-current liabilities

     20,26        43,775       37,020  
     

 

 

   

 

 

 

Total non-current liabilities

        15,318,054       14,557,413  
     

 

 

   

 

 

 

Total liabilities

        33,607,143       31,412,381  
     

 

 

   

 

 

 

Equity

       

Share capital

     22        482,403       482,403  

Capital surplus

     22        1,357,038       1,310,547  

Hybrid bonds

     23        199,384       199,384  

Reserves

     24        (1,052,788     (1,380,918

Treasury shares

     25        (2,508,294     (2,391,523

Retained earnings

        46,784,410       46,111,457  
     

 

 

   

 

 

 

Equity attributable to owners of the controlling company

        45,262,153       44,331,350  

Non-controlling interests

     23        3,953,318       3,343,242  
     

 

 

   

 

 

 

Total equity

        49,215,471       47,674,592  
     

 

 

   

 

 

 

Total liabilities and equity

      W 82,822,614       79,086,973  
     

 

 

   

 

 

 

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 periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won, except per share information)    Notes      March 31, 2021     March 31, 2020  

Revenue

     26,27,34,37      W 16,068,723       14,545,813  

Cost of sales

     7,27,31,34        (13,930,948     (13,235,530
     

 

 

   

 

 

 

Gross profit

        2,137,775       1,310,283  

Selling and administrative expenses

     31,34       

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

        6,155       (9,987

Other administrative expenses

     28        (506,321     (477,067

Selling expenses

     28        (85,168     (117,978
     

 

 

   

 

 

 

Operating profit

        1,552,441       705,251  

Share of profit of equity-accounted investees, net

     9        78,000       31,664  

Finance income and costs

     21,29       

Finance income

        795,544       1,319,425  

Finance costs

        (866,299     (1,345,277

Other non-operating income and expenses

     34       

Impairment loss on other receivables

        (6,606     (1,197

Other non-operating income

     30        129,971       64,301  

Other non-operating expenses

     30,31        (123,492     (113,764
     

 

 

   

 

 

 

Profit before income tax

     37        1,559,559       660,403  

Income tax expense

     32,37        (420,780     (225,745
     

 

 

   

 

 

 

Profit

        1,138,779       434,658  

Other comprehensive income (loss)

       

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

       

Remeasurements of defined benefit plans

     19        (1,725     (3,850

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

     21        92,006       (202,836

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

       

Capital adjustment arising from investments in equity-accounted investees

        88,099       (61,206

Foreign currency translation differences

        162,706       (4,434

Gains or losses on valuation of derivatives

     21        (14     (57
     

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

        341,072       (272,383
     

 

 

   

 

 

 

Total comprehensive income

      W 1,479,851       162,275  

Profit attributable to:

       

Owners of the controlling company

      W 1,024,736       395,393  

Non-controlling interests

        114,043       39,265  
     

 

 

   

 

 

 

Profit

      W 1,138,779       434,658  
     

 

 

   

 

 

 

Total comprehensive income attributable to :

       

Owners of the controlling company

      W 1,350,510       129,987  

Non-controlling interests

        129,341       32,288  
     

 

 

   

 

 

 

Total comprehensive income

      W 1,479,851       162,275  
     

 

 

   

 

 

 

Basic and diluted earnings per share (in Won)

     33        13,477       4,915  

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 Changes in Equity

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

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

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

     —          —         —          —         —         395,393       395,393       39,265       434,658  

Other comprehensive income (loss)

                    

Remeasurements of defined benefit plans, net of tax

     —          —         —          —         —         (4,084     (4,084     234       (3,850

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

     —          —         —          (67,770     —         —         (67,770     6,564       (61,206

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

     —          —         —          (201,529     —         (1,307     (202,836     —         (202,836

Foreign currency translation differences, net of tax

     —          —         —          9,338       —         —         9,338       (13,772     (4,434

Gains or losses on valuation of derivatives, net of tax

     —          —         —          (54     —         —         (54     (3     (57
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —         —          (260,015     —         390,002       129,987       32,288       162,275  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

                    

Year-end dividends

     —          —         —          —         —         (320,462     (320,462     (59,655     (380,117

Changes in ownership interest in subsidiaries

     —          (2,792     —          —         —         —         (2,792     125,410       122,618  

Repayment of redeemable convertible preferred shares

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

Interest of hybrid bonds

     —          —         —          —         —         (2,294     (2,294     (1,838     (4,132

Others

     —          (39     —          —         —         (8,051     (8,090     5,707       (2,383
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners of the controlling company

     —          (36,412     —          —         —         (330,807     (367,219     (175,376     (542,595
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2020

   W 482,403        1,339,839       199,384        (1,417,995     (1,508,303     45,139,312       44,234,640       3,179,747       47,414,387  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

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

Balance as of January 1, 2021

   W 482,403        1,310,547       199,384        (1,380,918     (2,391,523     46,111,457       44,331,350       3,343,242       47,674,592  

Comprehensive income:

                    

Profit

     —          —         —          —         —         1,024,736       1,024,736       114,043       1,138,779  

Other comprehensive income (loss)

                    

Remeasurements of defined benefit plans, net of tax

     —          —         —          —         —         (254     (254     (1,471     (1,725

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

     —          —         —          90,686       —         —         90,686       (2,587     88,099  

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

     —          —         —          94,108       —         (2,102     92,006       —         92,006  

Foreign currency translation differences, net of tax

     —          —         —          143,370       —         —         143,370       19,336       162,706  

Gains or losses on valuation of derivatives, net of tax

     —          —         —          (34     —         —         (34     20       (14
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —         —          328,130       —         1,022,380       1,350,510       129,341       1,479,851  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

                    

Year-end dividends

     —          —         —          —         —         (342,565     (342,565     (57,375     (399,940

Changes in ownership interest in subsidiaries

     —          52,182       —          —         —         —         52,182       539,053       591,235  

Interest of hybrid bonds

     —          —         —          —         —         (2,268     (2,268     (1,799     (4,067

Acquisition of treasury shares

     —          —         —          —         (116,771     —         (116,771     —         (116,771

Others

     —          (5,691     —          —         —         (4,594     (10,285     856       (9,429
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners of the controlling company

     —          46,491       —          —         (116,771     (349,427     (419,707     480,735       61,028  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2021

   W 482,403        1,357,038       199,384        (1,052,788     (2,508,294     46,784,410       45,262,153       3,953,318       49,215,471  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statement

 

7


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won)    Notes      March 31, 2021     March 31, 2020  

Cash flows from operating activities

       

Profit

      W 1,138,779       434,658  

Adjustments for:

       

Depreciation

        788,318       770,170  

Amortization

        110,780       114,287  

Finance income

        (517,135     (914,256

Finance costs

        601,541       993,094  

Income tax expense

        420,780       225,745  

Impairment loss on property, plant and equipment

        16,892       78  

Gain on disposal of property, plant and equipment

        (3,323     (4,835

Loss on disposal of property, plant and equipment

        18,657       40,671  

Impairment loss on other intangible assets

        7,183       423  

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

        (3,842     (3,969

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

        1,104       4,952  

Share of profit of equity-accounted investees

        (78,000     (31,664

Expenses related to post-employment benefit

        62,493       62,608  

Impairment loss on trade and other receivables

        451       11,184  

Loss on valuation of inventories

        26,977       97,504  

Increase to provisions

        (2,502     17,009  

Others, net

        (23,156     5,243  
     

 

 

   

 

 

 
        1,427,218       1,388,244  
     

 

 

   

 

 

 

Changes in operating assets and liabilities

     36        (1,883,160     123,104  

Interest received

        51,813       73,960  

Interest paid

        (119,697     (139,460

Dividends received

        90,685       35,927  

Income taxes paid

        (134,770     (191,110
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 570,868       1,725,323  
     

 

 

   

 

 

 

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 Cash Flows, Continued

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won)   

Notes

   March 31, 2021     March 31,
2020
 

Cash flows from investing activities

       

Acquisitions of short-term financial instruments

      W (10,444,413     (9,143,509

Proceeds from disposal of short-term financial instruments

        8,993,223       7,807,693  

Increase in loans

        (160,590     (401,063

Collection of loans

        235,136       479,949  

Acquisitions of securities

        (90,882     (199,977

Proceeds from disposal of securities

        170,646       211,015  

Acquisitions of investment in associates and joint ventures

        (26,897     (54,564

Proceeds from disposal of investment in associates and joint ventures

        4,421       3,347  

Acquisitions of investment property

        —         (3,115

Acquisitions of property, plant and equipment

        (537,878     (937,795

Proceeds from disposal of property, plant and equipment

        (3,940     17,837  

Acquisitions of intangible assets

        (43,161     (109,420

Proceeds from disposal of intangible assets

        3,357       10,463  

Proceeds from disposal of assets held for sale

        29       590  

Collection of lease receivables

        16,202       14,990  

Others, net

        528       (503
     

 

 

   

 

 

 

Net cash used in investing activities

        (1,884,219     (2,304,062
     

 

 

   

 

 

 

Cash flows from financing activities

       

Proceeds from borrowings

        559,981       1,822,765  

Repayment of borrowings

        (488,762     (383,099

Proceeds from short-term borrowings, net

        574,287       877,646  

Capital contribution from non-controlling interests

        597,356       125,410  

Payment of cash dividends

        (1,567     (1,363

Acquisition of treasury shares

        (116,771     —    

Payment of interest of hybrid bonds

        (4,087     (4,132

Repayment of lease liabilities

        (63,340     (46,443

Repayment of redeemable convertible preferred shares

        —         (278,581

Others, net

        (5,067     123  
     

 

 

   

 

 

 

Net cash provided by financing activities

        1,052,030       2,112,326  
     

 

 

   

 

 

 

Effect of exchange rate fluctuation on cash held

        52,815       32,737  
     

 

 

   

 

 

 

Net increase(decrease) in cash and cash equivalents

        (208,506     1,566,324  

Cash and cash equivalents at beginning of the period

   8      4,755,578       3,515,246  
     

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   8    W 4,547,072       5,081,570  
     

 

 

   

 

 

 

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 March 31, 2021

(Unaudited)

 

1. General Information

General information about POSCO, its 34 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 132 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 131 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 five of its overseas liaison offices.

As of March 31, 2021, the shares of the POSCO are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchange.

 

(b)

Consolidated subsidiaries acquired or newly established during the three-month period ended March 31, 2021, were as follows:

 

Company

   Date of inclusion   

Ownership (%)

   Reason

Poland Legnica Sourcing Center Sp. z o.o

   February 2021    100.00    New establishment

 

(c)

Subsidiaries for which the Company has lost control during the three-month period ended March 31, 2021, are as follows:

 

Company

  

Date of exclusion

  

Reason

POSCO E&C Mongolia    January 2021    Liquidation

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(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 Stock 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, 2020. 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.

 

(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.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

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.

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, 2020. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2021.

(a) K-IFRS No. 1116 “Lease”- COVID-19 Related Rent Concessions

The amendment introduces an optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of COVID-19. A lessee that applies the practical expedient is not required to assess whether eligible rent concessions are lease modifications. The Company is required to disclose the amount recognized in profit or loss for the reporting period arising from application of the practical expedient. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

(b) K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments : Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1104 “Insurance Contracts” , K-IFRS No. 1116 “Lease” – Interest Rate Benchmark Reform

Market-wide interest rate benchmark reform requires disclosure of exceptions to practical expedients and discontinuation of hedge accounting in accordance with K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments : Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1104 “Insurance Contracts” , K-IFRS No. 1116 “Lease”. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31, 2020  

Current

     

Trade accounts and notes receivable

   W 8,334,832        7,471,916  

Finance lease receivables

     42,180        41,841  

Due from customers for contract work

     919,346        948,879  

Less: Allowance for doubtful accounts

     (342,601      (342,017
  

 

 

    

 

 

 
   W  8,953,757        8,120,619  
  

 

 

    

 

 

 

Non-current

     

Trade accounts and notes receivable

   W 120,830        131,010  

Finance lease receivables

     —          46  

Less: Allowance for doubtful accounts

     (44,639      (44,633
  

 

 

    

 

 

 
   W 76,191        86,423  
  

 

 

    

 

 

 

The Company sold trade accounts and notes receivable with recourse to financial institutions. These trade accounts and notes receivable have not been derecognized from the statement of financial position, because the Company retains substantially all of the risks and rewards associated with the transferred assets. The amounts received on transfer have been recognized as secured borrowings. As of March 31, 2021, and December 31, 2020, the carrying amounts of such secured borrowings are W 231,407 million and W 328,807 million, respectively, which are presented in the statements of financial position as the short-term borrowings.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

5. Other Receivables

Other receivables as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31, 2020  

Current

     

Loans

   W  256,651        258,735  

Other accounts receivable

     1,019,123        835,791  

Accrued income

     374,600        298,157  

Deposits

     75,539        82,884  

Others

     14,380        18,015  

Lease receivables

     65,747        68,198  

Less: Allowance for doubtful accounts

     (69,048      (67,541
  

 

 

    

 

 

 
   W  1,736,992        1,494,239  
  

 

 

    

 

 

 

Non-current

     

Loans

   W 805,557        798,287  

Other accounts receivable

     192,379        197,304  

Accrued income

     68,551        86,920  

Deposits

     307,795        284,588  

Lease receivables

     123,905        128,366  

Less: Allowance for doubtful accounts

     (311,470      (299,503
  

 

 

    

 

 

 
   W  1,186,717        1,195,962  
  

 

 

    

 

 

 

6. Other Financial Assets

Other financial assets as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31, 2020  

Current

     

Derivatives assets

   W  107,849        99,324  

Debt securities

     84,026        154,154  

Deposit instruments(*1,2)

     3,945,376        2,322,327  

Short-term financial instruments(*2)

     8,992,550        9,133,404  
  

 

 

    

 

 

 
   W  13,129,801        11,709,209  
  

 

 

    

 

 

 

Non-current

     

Derivatives assets

   W 42,921        18,551  

Equity securities(*3)

     1,229,005        1,120,968  

Debt securities

     18,701        20,260  

Other securities(*3)

     385,130        364,404  

Deposit instruments(*2)

     35,025        37,624  
  

 

 

    

 

 

 
   W 1,710,782        1,561,807  
  

 

 

    

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020, W5,967 million and W4,881 million, respectively, are restricted in use for government project.

(*2)

As of March 31, 2021 and December 31, 2020, financial instruments amounting to W101,122 million and W46,855 million, respectively, are restricted in use for financial arrangements, pledge and others.

(*3)

As of March 31, 2021 and December 31, 2020, W138,263 million and W113,674 million of equity and other securities, respectively, have been provided as collateral for borrowings, construction projects and others.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

7. Inventories

Inventories as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31, 2020  

Finished goods

   W 1,463,696        1,285,552  

Merchandise

     753,944        751,245  

Semi-finished goods

     1,833,102        1,626,855  

Raw materials

     2,459,076        1,980,518  

Fuel and materials

     847,433        876,593  

Construction inventories

     859,837        936,813  

Materials-in-transit

     2,080,200        1,664,770  

Others

     65,852        61,086  
  

 

 

    

 

 

 
     10,363,140        9,183,432  
  

 

 

    

 

 

 

Less: Allowance for inventories valuation

     (109,793      (131,642
  

 

 

    

 

 

 
   W  10,253,347        9,051,790  
  

 

 

    

 

 

 

The amounts of loss on valuation of inventories recognized in cost of sales during the three-month period ended March 31, 2021 and the year ended December 31, 2020 were W26,977 million and W54,014 million, respectively.

8. Assets Held for Sale

Details of assets held for sale as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31, 2020  
     The controlling
company(*1)
     Subsidiaries      Total      The controlling
company(*1)
     Subsidiaries      Total  

Asset

                 

Cash and cash equivalents(*2)

   W —          934        934        —          934        934  

Other financial assets

     —          273        273        —          273        273  

Property, plant and equipment

     36,308        —          36,308        32,244        40        32,284  

Intangible Assets

     9,841        —          9,841        —          —          —    

Others

     —          718        718        —          719        719  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W  46,149        1,925        48,074        32,244        1,966        34,210  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liability

                 

Others

   W —          7        7        —          25        25  

 

(*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 year ended December 31, 2020 the Company recognized W5,030 million of impairment loss for the difference between the fair value less cost to sell and the carrying amount of the assets.

(*2)

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

 

15


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

9. Investments in Associates and Joint ventures

 

(a)

Details of investments in associates as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31, 2020  

Company

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

[Domestic]

              

EQP POSCO Global NO1 Natural Resources

              

Private Equity Fund

     178,691,901,565        36.34      W 178,787      W 175,604        175,939  

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

     4,507,138        34.00        179,410        140,934        145,092  

SNNC

     18,130,000        49.00        90,650        162,325        160,332  

QSONE Co.,Ltd.

     200,000        50.00        84,395        85,169        86,004  

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

     17,308,143        49.10        86,541        24,519        23,913  

Western Inland highway CO.,LTD.

     9,533,364        29.40        47,667        44,866        45,070  

Nextrain Co., Ltd.(*1)

     9,904,000        20.01        49,520        47,442        47,364  

Metropolitan Outer Ring Expressway co., ltd.(*1)

     3,545,306        21.46        17,727        16,979        13,721  

CHUNGJU ENTERPRISE CITY

              

DEVELOPMENT Co.,Ltd

     2,008,000        29.53        10,040        16,353        17,137  

Daesung Steel(*2)

     108,038        17.54        14,000        17,333        16,990  

PCC Amberstone Private Equity Fund 1(*2)

     8,570,603,277        8.80        8,453        9,172        9,230  

Others (59 companies)(*1)

              91,047        103,472  
           

 

 

    

 

 

 
              831,743        844,264  
           

 

 

    

 

 

 

[Foreign]

              

South-East Asia Gas Pipeline Company Ltd.

     135,219,000        25.04        132,907        214,778        199,342  

AES-VCM Mong Duong Power

              

Company Limited(*1)

     —          30.00        164,303        174,705        158,777  

9404-5515 Quebec Inc.(*2)

     114,452,000        10.40        124,341        130,784        123,296  

Eureka Moly LLC

     —          20.00        240,123        45,340        43,520  

AMCI (WA) PTY LTD

     49        49.00        209,664        72,858        71,732  

NCR LLC

     —          22.10        62,116        56,396        46,608  

KOREA LNG LTD.

     2,400        20.00        135,205        25,293        42,229  

Nickel Mining Company SAS

     3,234,698        49.00        157,585        46,821        40,890  

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

     134,400,000        40.00        22,423        22,743        22,147  

Zhongyue POSCO (Qinhuangdao) Tinplate

              

Industrial Co., Ltd

     10,200,000        34.00        9,517        15,900        15,181  

PT. Wampu Electric Power(*1)

     8,708,400        20.00        10,054        14,041        12,716  

PT. Batutua Tembaga Raya

     128,285        22.00        21,824        126        15  

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

     50        25.00        4,723        7,701        7,110  

Others (25 companies)(*1)

              113,446        105,006  
           

 

 

    

 

 

 
              940,932        888,569  
           

 

 

    

 

 

 
            W  1,772,675        1,732,833  
           

 

 

    

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020, investments in associates amounting to W430,113 million and W410,573 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2)

As of March 31, 2021, 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.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(b) Details of investments in joint ventures as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)    March 31, 2021      December 31,
2020
 

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 157,825        153,457  

Others (6 companies)

              9,746        14,014  
           

 

 

    

 

 

 
              167,571        167,471  
           

 

 

    

 

 

 

[Foreign]

              

Roy Hill Holdings Pty Ltd(*1)

     13,117,972        12.50        1,528,672        1,377,846        1,418,056  

POSCO-NPS Niobium LLC

     325,050,000        50.00        364,609        368,512        353,725  

KOBRASCO

     2,010,719,185        50.00        32,950        56,443        54,400  

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     —          25.00        61,961        95,264        91,270  

DMSA/AMSA(*1,2)

     —          4.27        406,556        29,721        31,104  

CSP - Compania Siderurgica do Pecem

     1,581,419,343        20.00        676,060        —          —    

Others (10 companies)

              28,645        27,390  
           

 

 

    

 

 

 
              1,956,431        1,975,945  
           

 

 

    

 

 

 
            W 2,124,002        2,143,416  
           

 

 

    

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020, the investments in joint ventures are provided as collateral in relation to the joint ventures’ borrowings.

(*2)

All of the shareholders of the joint venture entered into financial support agreement with lenders on behalf of the joint venture to extend the maturity of the loans granted to the joint venture by the lenders. However, the Company believes the shareholders’ financial support agreement 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.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(c)

The movements of investments in associates and joint ventures for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

  1)

For the three-month period ended March 31, 2021

 

(in millions of Won)                                       

Company

   December 31, 2020
Book value
     Acquisition      Dividends     Share of
profits (losses)
    Other increase
(decrease)(*1)
    March 31, 2021
Book value
 

[Domestic]

              

EQP POSCO Global NO1 Natural Resources

              

Private Equity Fund

   W  175,939        —          —         (335     —         175,604  

Samcheok Blue Power Co.,Ltd.

     145,092        —          —         (1,536     (2,622     140,934  

SNNC

     160,332        —          (1,469     3,462       —         162,325  

QSONE Co.,Ltd.

     86,004        —          (1,140     305       —         85,169