January 24, 2018 POSCO 2017 Earnings Release Exhibit 99.1
Disclaimer This presentation was prepared and circulated to release the informations regarding the company’s business performance to shareholders and investors prior to the completion of auditing for the period of the year 2017. As figures in this presentation are based on unaudited financial statements, certain contents may be subject to modification in the course of auditing process. This presentation contains certain forward-looking statements relating to the business, financial performance and results of the company and/or the industry in which it operates. The forward-looking statements set forth herein concern future circumstances and results and other statements that not historical facts, and are solely opinions and forecasts which are uncertain and subject to risks. Therefore, the recipients of this presentation shall be aware of that the forward-looking statements set forth herein may not correspond to the actual business performance of the company due to changes and risks in business environments and conditions. The sole purpose of this presentation is to assist persons in deciding whether they wish to proceed with certain investments to the company. The company does not make any representation or warranty, expressly or impliedly, as to the accuracy and completeness of this presentation or of the information contained herein and shall not have any liability for the informations contained in this presentation.
Parent Performance (Production/Sales) 2017 Earnings Release │ January 24, 2018 2015 2016 2017 YoY Crude Steel Production 37,965 37,496 37,207 -289 Product Production 35,592 35,940 35,210 -730 STS 1,862 1,971 2,028 +57 Product Sales 35,337 35,875 34,709 -1,166 STS 1,842 1,964 1,997 +33 Carbon Steel Sales Price 606 566 691 +125 WP Sales Ratio(%) 38.4 47.3 53.4 +6.1%p Export Ratio(%) 51.5 49.4 46.0 -3.4%p Product Inventory 1,240 1,045 1,323 +278 (thousand tons, thousand KRW/ton) Production and Sales Decreased from Maintenance While World Premium Product and Domestic Sales Volume Lifted · Crude Steel : P) #3 Blast Furnace (-638K tons) · Product : P) #1 HR (-206K tons), #3 Plate (-77K tons) G) #3 HR (-778K tons) 2017 Earnings Result [ YoY Analysis ] ○ Production volume down from blast furnace revamping and facility rationalization * P: Pohang Works, G: Gwangyang Works ○ Product sales dropped · HR (-1,091K tons), Plate (-136K tons), etc. ○ Average sales price raised · Carbon steel (+125 thousand KRW/ton) · Stainless steel (+293 thousand KRW/ton) ○ WP sales ratio surpassed the target of 52% · WP shipment : (’16) 15,973 → (‘17) 17,333k tons ○ Export sales ratio decreased · Domestic sales ratio went up to 54.0% with strategy to secure domestic market
Parent Performance 2017 Earnings Release │ January 24, 2018 2015 2016 2017 YoY Revenue 25,607 24,325 28,554 +4,229 Cost of Goods Sold 21,473 19,904 23,833 +3,929 Gross Profit 4,134 4,421 4,721 +300 (Gross Margin) (16.1%) (18.2%) (16.5%) SG&A 1,896 1,786 1,819 +33 Operating Profit 2,238 2,635 2,902 +267 (Operating Margin) (8.7%) (10.8%) (10.2%) Non-Operating Profit -570 -446 452 +898 Net Profit 1,318 1,785 2,546 +761 (Net Margin) (5.1%) (7.3%) (8.9%) (billion KRW) · Operating profit (+267 bn KRW) · Reduced impairment losses on assets (+374 bn KRW) · Disposal of investment securities (+285 bn KRW) · Corporate income tax, etc. (-165 bn KRW) [ YoY Analysis ] Recorded Highest Earnings Since 2012 by Expanding Domestic Market Share and High Margin Product Sales 341 Liabilities Ratio 19.3% 17.4% 16.9% Net Debt -2,255 bn KRW -109 ‘15 ‘17 ’16 [Financial Structure] ’16 2,635 ’17 2,902 Mill Margin +237 Domestic Sales +30 Production/Sales -163 +267 bn KRW WP Sales +163 * Mill Margin : Steel sales price – Raw material prices (Iron ore, Coking coal) 2017 Earnings Result ○ Despite decline of production and sales volume and rise of raw material prices, operating profit upped by 267bn KRW on mill margin* improvement ○ Net profit improved by 761bn KRW contributed by decreas in impairment losses and gain on disposal of investment securities
2017 Earnings Release │ January 24, 2018 2016 2017 YoY Steel 2,927 3,605 +678 POSCO 2,635 2,902 +267 Overseas Steel 137 476 +339 Non-Steel 13 1,092 +1,079 Total 2,940 4,697 +1,757 ※ Aggregated Operating Profit by Segment 2015 2016 2017 YoY Revenue 58,192 53,083 60,655 +7,572 Gross Profit 6,534 6,689 8,356 +1,667 (Gross Margin) (11.2%) (12.6%) (13.8%) SG&A 4,124 3,845 3,734 -111 Operating Profit 2,410 2,844 4,622 +1,778 (Operating Margin) (4.1%) (5.4%) (7.6%) Non-Operating Profit -893 -541 -341 +200 Share of Profit(Loss) of Equity-accounted Investees -506 -89 10 +99 Finance Income and Costs -830 -782 -112 +670 Foreign Currency Transaction & Translation Gain(Loss) -383 -142 170 +312 Net Profit -96 1,048 2,974 +1,926 (Net Margin) (-0.2%) (2.0%) (4.9%) Profit Attributable to Owners of the Controlling Company 181 1,363 2,790 +1,427 Consolidated Performance 2017 Earnings Result [ YoY Analysis ] (billion KRW) Operating Profit Boosted to 4.6 tn KRW with Improved Earnings from Steel and Non-Steel Sectors Combined · Operating profit (+1,778 bn KRW) · Disposal of investment securities (+291 bn KRW) · Reduced impairment losses on assets (+173 bn KRW) · Corporate income tax, etc. (-316 bn KRW) ○ Net profit improved from operating profit increase and proceeds of investment securities ○ Steel and E&C segments largely contributed to gain in consolidated OP by 63% · Steel (+678 bn KRW) : Stronger earnings of POSCO and overseas steel with PT.KP’s OP turning profit · Non-Steel (+1,079 bn KRW) : Profit increase in E&C and energy businesses (billion KRW)
2017 Earnings Release │ January 24, 2018 Aggregated Earnings by Segment Segment Revenue Operating Profit Net Profit 2015 2016 2017 2015 2016 2017 2015 2016 2017 Steel 44,837 42,906 47,611 1,843 2,927 3,605 182 1,511 2,791 Trading 27,008 26,420 34,878 374 361 423 39 53 113 E & C 9,868 7,482 7,286 147 -626 289 -276 -1,404 24 Energy 2,008 1,751 1,697 148 97 184 55 -103 100 I C T 945 882 957 3 53 57 -94 29 42 Chemicals/ Materials, etc. 2,806 2,444 2,631 34 128 139 -27 49 91 Total 87,472 81,885 95,060 2,549 2,940 4,697 -121 135 3,161 (+915) (+678) 2017 Earnings Result (billion KRW) Aggregated Operating Profit Expanded on Strong Performance of Domestic/Overseas Steel and E&C Businesses
2017 Earnings Release │ January 24, 2018 2015 2016 2017 Remarks YoY Current Asset 29,181 29,304 31,127 +1,823 Cash Balance* 8,686 7,623 9,595 +1,972 Accounts Receivable 9,596 9,787 8,951 -836 Inventories 8,225 9,052 9,951 +899 Current Ratio (%) 145.0 154.9 164.3 +9.4%p Non-Current Asset 51,228 50,459 47,898 -2,561 Other Long-term Financial Assets** 3,205 3,421 2,791 -630 PP&E 34,523 33,770 31,884 -1,886 Total Assets 80,409 79,763 79,025 -738 Liabilities 35,339 33,925 31,561 -2,364 Current Liabilities 20,131 18,916 18,946 +30 Non-Current Liabilities 15,208 15,009 12,615 -2,394 (Interest-bearing Debt) 25,220 22,705 21,064 -1,641 Liabilities Ratio (%) 78.4 74.0 66.5 -7.5%p Equity 45,070 45,838 47,464 +1,626 Owners of the controlling company 41,235 42,373 43,733 +1,360 Consolidated Performance (B/S) 2017 Earnings Result *Cash Balance : Cash and cash equivalents, Short-term financial instruments, Short-term tradable securities, Short-term available for sale securities, Current portion of held-to-maturity securities ** Includes other bonds (billion KRW) Financial Soundness Continued to Strengthen with Current Ratio and Liabilities Ratio Enhanced on Robust Earnings · Reduced from disposal of securities · Depreciation 3tn KRW, Acquisition and others 1.1tn KRW · Operating profit was lifted and gain on disposal of investment securities increased · Daewoo’s accounts receivable reduced · Inventories rose due to raw material price surge · Debt decreased by forex impact in overseas subsidiaries (KRW/USD: ’16/E 1,209 → ‘17/E 1,071) · Net debt recorded at 11.5tn KRW
POSCO C&C POSCO Energy POSCO Chemtech 8 2017 Earnings Release │ January 24, 2018 · Operating profit upped mainly due to improvement of trading* segment (billion KRW) 2015 2016 2017 304 353 345 82 124 150 · Earnings gained on increase of coal tar sales price and anode material sales volume 2015 2016 2017 79 101 54 44 60 73 · Contracted losses from overseas project and profit gained in housing business led both OP and NP to a turnaround · Smart Factory business contributed to stronger operating profit and net profit 2016 2017 51 57 11 -80 28 42 · Profit of power generation business went up due to CP increase 2015 2016 2017 66 141 113 19 -135 70 · Sales price hike was insufficient to offset the rise of material cost and fall of exchange rate 2015 2016 2017 40 25 28 13 30 19 2015 POSCO Daewoo POSCO ICT POSCO E&C** 2015 2017 -509 300 -83 80 2016 -678 139 * POSCO Engineering merged in Feb ’17 (**Consolidated earnings) * POSCO P&S merged in Mar ’17 - CP : ’16) 7.60 → ’17) 9.98 KRW/kwh - Anode mat’l sales : ’16) 3,870 → ’17) 6,802 tons - Sales price +109k, Raw material cost +132k KRW/ton - OP up in Smart EIC/IT segment (+11bn KRW) Domestic Subsidiaries (Parent-based) 2017 Earnings Result (billion KRW) Net Profit Operating Profit Net Profit Operating Profit
POSCO Maharashtra PT. Krakatau POSCO 9 2017 Earnings Release │ January 24, 2018 · Recorded first annual operating profit since the start of operation on strong sales price and expansion of domestic plate sales 2015 2016 2017 -72 14 -275 -423 -212 -142 · Sound export/domestic market contributed to achieving historic high sales volume and recording first net profit since ‘15 2016 2017 36 101 -8 -81 -10 99 · Profitability improved on robust market condition and expansion of WP sales 2015 2017 107 129 -80 -116 107 · Recorded highest operating profit since operation started in ‘09 backed by price surge of auto sheets and sales increase 2016 2017 27 50 11 1 0.4 5 · Losses narrowed driven by higher utilization rate and price hike in the regional market 2015 2016 2017 -57 -35 -101 -114 -75 -55 · Profit reduced as sales volume down by trade barriers of the U.S. and material cost increased 2016 2017 29 8 -8 -17 23 1 2016 90 2015 2015 2015 POSCO Mexico Zhangjiagang STS(ZPSS) POSCO Vietnam POSCO SS VINA - Anti-dumping issue of the U.S. resolved in ’18 : Korean-made material excluded from taxation - Plate sales : ‘16) 843 → ‘17) 976k tons - WP sales ratio : ‘16) 49.3% → ‘17) 59.2% - Sales price : ‘16) 565 → ‘17) 855k tons (+51%) - Sales volume : ‘16) 1,223 → ‘17) 1,698k tons (+39%) - Sales volume : ‘16) 553 → ‘17) 573k tons Overseas Subsidiaries (Parent-based) 2017 Earnings Result (billion KRW) Net Profit Operating Profit (billion KRW) Net Profit Operating Profit
` ` Business Restructuring · Boost profitability (0.4tn/yr) : Exited from loss-making businesses · Eliminate potential insolvency (1.2tn) : Sold off high-risk PF, Excluded POSCO Plantec from consolidation 2017 Earnings Release │ January 24, 2018 Completed 150 Cases of Business Restructuring from 2014 to 2017 Achieving 7.0 tn KRW Worth Financial Effect IP 2.0 (’15.7~’17.E) Restructure Businesses (Non-core/Low-profit Biz) From 2018 Adjust Business Portfolio of Each Subsidiary Strengthen Group Competitiveness by Relocating Growth Businesses Accumulated financial effect (Proceeds 5.7tn, Debt reduction 1.3tn) (trillion KRW) ` · Disposed 38% stake in POSCO E&C, Sold Santos CMI · Merged POSCO Engineering to POSCO E&C, Integrated operation of A&C ` · Sold real estates/securities/non-profit making assets - POSCO E&C office building, investment securities, idle assets in Pohang and Gwangyang ` · Sold POSCO Specialty Steel, Namisa Mine · Integrated domestic and overseas steel trading - TMC · AST · SPFC → Merged to P&S → Merged to P-Daewoo · Sold off insolvent and low-profit making businesses - POSCO LED, PONUTech, POS-HiAL, POSCO Magnet Annual number of cases (85 Subsidiaries, 65 Assets) Restructuring Achievements Steel/ Trading E&C Restructuring Non-core/ Low-profit Biz Non-operating Assets ` 2017 Results · Disposed investment securities worth of 1tn KRW - KB Financial, Hyundai Heavy Industries, NSSMC · Sold off and liquidated overseas subsidiaries including POSCO M-TECH Indonesia, Sold POSCO employee housing IP 1.0 (’14.3~’15.6) Enhance Financial Structure (Non-debt Financing) ` ∙ Restructuring 149 Cases ∙ 7.0tn KRW Financial Effect Restructuring Target 10 2017 Business Activity Assets Subsidiaries
Steel Business with Unmatched Technology * World Premium : World Best/First/Most 2017 Earnings Release │ January 24, 2018 · Lead technology by developing industry-oriented WP/WP+ · Applied high-Manganese steel in LNG-fueled bulker ‘Green Iris’ first time in the world · Fuel tanks manufactured with high-Mn steel endures low temperature of -196℃ suitable for storing and shipping LNG · Superior weldability and cost competitiveness vs. Ni or Al alloys · Solution marketing-based sales boosted Stainless Steel 2016 2018(P) 2017 12,710 15,973 17,333 38.4% 47.3% 53.4% 2015 [WP/WP+ Sales Volume and Ratio] 8,361 25.7% Construction Shipbuilding Automobile · Lightweight solution for Ssangyong G4 Rexton with frame body · By increasing ratio of high-strength steel from 0% to 61% on body-on-frame* structure, driving performance and fuel efficiency of SUV enhanced · Support application technology for 1.5GPa steel for car frame · Steel Box made of plate is applied in highway construction from Jakarta to Cikampek stretching 37km (‘17.1-’18.8) · PT.KP and POSCO can cooperate in designing steel bridges, from which demand increase of KP-manufactured plate is expected in Indonesia where concrete is normally used <Hockey Stadium> <LNG-fueled Carrier> 2016 2017 2018(P) 3,900 5,140 6,000 2015 2,420 [Solution-based Sales Volume] · WP/WP+ sales volume continued to increase · Used STS curtain wall material for the ice hockey stadium of PyeongChang Olympics to lock in steel supply for premium products by providing solution for entire processes from design, material supply and manufacturing to building · Superior in strength, corrosion resistance and light-weight compared with currently-used materials <Steel Box for Bridge> <Car Frame Body> * Body-on-Frame Structure: Separate body is mounted on frame in constructing automobile [Future Goals] (thousand tons) WP Ratio 18,875 9,925 57.0% WP+ Ratio 30.0% Solution combining steel development, application technology, commercial support 2017 Business Activity Consolidate Steel Competitiveness through Solution Marketing-based WP* Sales (thousand tons) · Strengthen individual care for customers by supporting marketing solution · Innovate utilization of digital devices and speed of responding to customers
Future Growth by Differentiated Capabilities Prepare for Electric Vehicle Ecosystem as a Total Solution Provider · Lithium Carbonate - Lithium production plant (PosLX) completed in Feb ’17 with 2,500 ton capacity, which can produce 100k EV batteries · Giga Steel - Next-generation steel used mainly for automobiles sustaining 100kg per 1 ㎟ - In comparison with aluminum, superior in strength, light-weight, safety and environment-friendliness · Hyper NO* - Expanded annual capacity to 160k tons in Feb ’17, which can supply 2.6 million Evs - Maintain 100% domestic market share of Hyper NO for EV traction motor · EV Traction Motor (TMC Division of Daewoo) - Manufacture high-efficiency EV traction motor core with POSCO- made premium Hyper NO and supply major automakers EV Charger Charging Infra [Charging Infrastructure] * NO : Non-oriented electrical steel · EV Charging Stations - Operate 700 stations nationwide with largest market share, provide full coverage of EV charging from operation to service [High-efficiency Motor] Hyper NO* EV Traction Motor · Anode Mat’l (POSCO Chemtech) - From current 12k ton anode materials manufacturing capacity, expansion up to 40k with 200 bn KRW revenue by ‘20 is planned · Cathode Mat’l (POSCO ESM) - Supply global battery-makers with Ni 80% high-content NCM (Nichel· Cobalt·Manganese) - 20k ton capacity and 370 bn KRW revenue targeted until ‘20 Battery Cathode/Anode [Battery Materials] Car Body [Lightweight Car Body] Giga Steel 2017 Business Activity 2017 Earnings Release │ January 24, 2018 POSCO POSCO Chemtech · ESM POSCO Daewoo POSCO ICT
2018 Business Plan 2017 Earnings Release │ January 24, 2018 (trillion KRW, million tons) Business Plan 2017 2018년 Result Plan POSCO Revenue 28.6 29.0 Crude Steel Production 37.2 37.4 Product Sales 34.7 35.3 Capex 1.7 2.9 Debt 3.9 4.4 Consolidated Revenue 60.7 61.9 Capex 2.6 4.2 Debt 21.1 21.5
2017 Earnings Release │ January 24, 2018 Chinese Steel Market Demand by Region “Strong price trend is expected to stay on insufficient supply due to winter production cut in China” “Global steel demand forecast to gradually increase in ’18 on sound demand in emerging markets” * CRU(2018.1), SteelHome(2018.1) (million tons) * World Steel Association(2017.10), POSRI(2018.1) Region 2015 2016 2017 2018(f) YoY YoY U.S. 96.1 91.8 96.2 4.8% 97.3 1.1% EU 153.9 158.2 162.1 2.5% 164.3 1.4% China 672.3 681.0 752.5 10.5% 752.5 0.0% India 80.2 83.5 87.1 4.3% 92.1 5.7% ASEAN 65.1 74.1 77.7 4.8% 83.0 6.8% MENA 72.9 72.6 72.6 0.0% 75.8 4.5% World 1,501 1,516 1,601 5.6% 1,627 1.6% 【Steel Demand Outlook】 Complying with the Chinese government’s most strict environment regulations in history, steelmakers have reduced production mainly led by Hebei area since Nov ’17 - Blast furnace utilization rate fell to around 80% early ‘18 - Production cut is expected at 35 million tons during the period Price forecast remains strong in ’18.1Q backed by continued impact of production reduction and restocking demand China’s steel demand in ’18 is forecast to be stagnant due to restriction on heated real estate market and lower production of manufacturing industry from environment enforcements Although sluggish demand growth is forecast in developed countries, developing countries are expected to demonstrate a 5~6% range growth rate from expansion of infrastructure investment 【China’s Steel Price / Blast Furnace Utilization Rate】 Utilization Rate (%) HR Domestic Price (U$/ton) (Appendix) Global Steel Demand
2017 Earnings Release │ January 24, 2018 Demand Industry Outlook Steel Supply and Demand (million tons) Shipbuilding Construction Automobile Auto production expected at low level of 4.1 million cars due to slowdown of both domestic and export markets in ’18 While shipbuilding volume will decline in ‘18 from order draught of ’16, new order-taking will slightly go up Softening housing market and reduction of government SOC budget likely to turn construction investment slower 4,556 4,229 4,115 4,144 2015 2016 2017 2018(f) 【Production】 (thousand cars) 24.1 4.4 16.1 17.8 2015 2016 2017 2018(f) 【New Orders】 (million GT) * Clarkson(2018.1), POSRI(2018.1) * Bank of Korea (2017.12) , POSRI(2018.1) 2015 2016 2017 2018(f) 6.6% 10.7% 7.5% 0.6% 【Construction】 (YoY) 2015 2016 2017(e) 2018(f) YoY YoY Nominal Consumption 55.8 57.1 56.2 - 1.6% 56.7 + 1.0% Export 31.6 31.0 31.7 + 2.3% 31.7 0.0% Production 74.1 74.3 76.9 + 3.5% 78.1 +1.5% Import 13.2 13.7 10.9 - 20.6% 10.3 - 6.0% Including Semi-product 22.1 23.7 19.7 - 16.8% 18.6 + 5.7% * POSRI(2018.1) (Appendix) Korean Steel Demand * Korea Automobile Manufacturers Association(2018.1), POSRI(2018.1)
16 2017 Earnings Release │ January 24, 2018 Coking Coal 2017.4Q 2018.1Q (US$/ton) 2016 1Q 2016 2Q 2016 3Q 2016 4Q 2017 1Q 200 285 2017 2Q 191 2017 3Q 81 84 93 2017 4Q 204 “1Q HCC price forecast at U$220~240/ton” 189 While China regulated on steel and coke production, strong steel product market and concerns over short supply due to congestion of coal ports in East Australia affected coking coal price to rebound from November. Surging price trend eased as shipping delay in East Australian ports resolved. However, supply may become tight due to seasonal reasons, which will hold the 1Q HCC price to remain hovering U$200/ton. Iron Ore 2017.4Q 2018.1Q (US$/ton) 2016 1Q 2016 2Q 2016 4Q 2017 1Q 2017 2Q 86 2016 3Q 63 2017 3Q 48 55 58 70 2017 4Q 66 71 2018 1Q(f) 70~75 2018 1Q(f) 220~240 As demand for iron ore declined due to Chinese government’s environmental regulations, the price fell to U$60/ton range but went up again over to U$75/ton end of the quarter as demand for high grade iron ore increased for enhancing productivity and steel price remained strong. “1Q fine ore price forecast at U$70~75/ton” While restocking demand ahead of Spring Festival and temporary supply disruption due to typhoon in West Australia will lead to a strong price trend, it will shortly turn weaker, which is expected to continue as supply will be sufficient even after environment regulation period is ended in March. (Appendix) Raw Materials Outlook *62% Fe IODEX CFR China (Quarterly Average Spot Price) [Iron Ore Price] [Coking Coal Price] *Premium LV HCC FOB Australia (Quarterly Price)