POSCO Holdings Inc.

I am Jeong Gi-seok, CSO at Pusko Holdings. Before we begin today's earnings call, I would like to extend my deepest gratitude to all of our investors on behalf of the company for your trust and support to Pusko Holdings, as well as our operating companies. Going forward, the company will strive further to promote a balanced growth between steel and youth growth businesses, and enhance the long-term corporate value of POSCO Holdings so that we can continue to meet the expectations of our investors. POSCO Holdings in the second quarter of this year recorded an operating profit of 1.33 trillion won. This is because the steel business, which had been impacted from the Pohang mill flooding and the economic downturn, quickly recovered its quarterly OP of 1 trillion won. Such profit recovery in our core business, the steel business, holds a very important meaning for our company. It helps us to maintain global competitiveness in the steel sector, as well as generate stable flow of revenue. And when this is coupled with our new business growth strategy, it will indeed create a virtuous cycle in enhancing our corporate value.

POSCO is also striving for excellence in its steelmaking business to meet the demand of the changing times, which is carbon neutrality. POSCO has placed low-emission steel production as its top priority, such as early operation of Hyrex pilot plant in 2026. The company is also advancing low-carbon product portfolio by boosting the high-grade hyper-NO production capacity for agro-friendly EV traction motors. Also to prepare for the commercialization of hydrogen reduction still in the future, Postco Holdings has developed a 2050 phase hydrogen roadmap based on specific hydrogen demand outlook. And in the short term, it's working hard to deliver success by pursuing CCU and reformed hydrogen-enabled blue hydrogen on top of green hydrogen. Moving on to secondary battery materials business as communicated during the recent value day, the company keeps accelerating investment to gain a strong leadership position in the global market. And especially for lithium, the plan is to commercialize it by this year to deliver strong performance as an independent business. Also, I am glad to announce that significant progress has been made to secure nickel. With that, I will give the floor to our team head who will brief you on 2023 Q2 results.

Good morning, everyone. Let me share with you the 2023 second quarter earnings. So in Q2, Postco Holdings saw consolidated revenue of 20.12 trillion won, up 3.8% quarter on quarter, with OP up by 88% at 1.33 trillion won. Cumulative investments for the first half of the year were $3.7 trillion on a consolidated basis, and the quarter and net debt ratio was 13.3%. Let me explain by business areas. First, the steel business recovered to the average level of quarterly operating profits since the past 20 years in domestic and overseas combined, posting $1.1 trillion in OP following a loss in 2022, Q4, and 2020. 338 billion won profit in 2023 Q1. And this is because all Pohang mills were back in full operation, recovering both production and sales volume, and we had no additional restoration costs this quarter, and the selling price increased slightly as well. So not only the domestic, but the overseas sale business also showed a recovery, posting an OP of 93 billion won. Now, as for the green infrared businesses, revenue and OP all increased QOQ by 9.6% and 16.5% respectively. If you look at the green materials, the revenue increased by 2.7% QOQ, but OP declined by 55%. Actually, POSCO Future M turned around from their previous quarter's lower profit with OP of $52.1 billion, up 60% from the previous quarter. However, the initial costs were incurred for the new plant construction for newly established entities like Pusko HY Clean Metal and the recognition of inventory impairment losses. So this gap will be reduced as the plant becomes operational and generates sales. And Pusko HY Clean Metal began its first shipment at the end of Q2 and is gradually increasing its utilization rate. Next is the major business activities for Q2. The first thing to mention is the rollout of low-carbon steel products. In Q1, POSCO launched renewable energy steel with increased use of renewable energy like solar and wind power. And in Q2, we launched a third-party verified low-carbon product called green certified steel. Going forward, POSCO will secure electric furnace capacity by 2026 and launch products using more scraps and make products with hydrogen direct-reduced iron by completing the hybrids facility by 2030. And it aims to achieve 10.5 million tons in sales of low-carbon products annually by 2030. So building such a proactive low-carbon system is a process transformation for a more sustainable business. the effort to secure a market-leading position with technologies and products in the low-carbon product segment. Second, we are expanding our production for green industries. As you may well know, POSCO currently produces in our Pohang mill 100,000 tons of high-grade NO products annually for green vehicle motor course. The demand for high-grade NO is expected to increase due to the accelerated growth of green vehicles, and there are only about 10 steelmakers in the world capable of manufacturing high-grade NO due to manufacturing technology patent issues. So we plan to additionally expand our investment in Korea and abroad and build a plan to – and has a plan to build a system for producing and selling 1 million tons of high-grade NO by 2023. April 2022, we broke ground for the construction of a 300,000-ton facility expansion in Gwangyang, and it's almost completed, and the operation is planned for the fourth quarter of this year.