POSCO Holdings Inc.

Good afternoon. Thank you for joining us at the Postco Holdings earnings call. We will have a presentation from Postco Holdings followed by a Q&A session with the participants. If you have any questions, please press the start key and then number one on your phone. We will now begin the Postco Holdings 2024 earnings call.

Greetings, everyone. I'm the Head of Finance and IR Division at POS Goldings. My name is Kim Sung-Joon. I'd like to begin by expressing my profound gratitude to the investors who offer unwavering attention and support to our business. Thank you. In 2024, various internal and external challenges impacted our business, resulting in consolidated account revenue of $72.7 trillion and operating profit of $2.2 trillion, both of which declined against the previous year. In steel, China's oversupply and its construction industry in a recession pushed the excess volume to exports, causing steel price in Asia to remain suppressed. We also feel limited in our ability to improve mill margin. In energy materials, given the slow EV market growth rate, essential minerals prices have tumbled. This led to inventory value impairment that have adversely impacted our earnings performance. Especially notable last year has been the successful completion of Q4, in Q4, of various EV battery materials plants, including POSCO Argentina, PPLS, and POSCO Lithium Solution. However, high initial operation costs during the ramp-up stage of new plants, on top of inevitably low plant operation rate during product certification, have led to larger shortfalls. Despite the steel business cycle headwinds in the region, based on our value-add steel products, Posco Group has been able to maintain relatively stable profits. In addition, we are making steady progress on our core strategies, such as in our plants, to invest abroad and to build electric furnaces. In the energy materials business, we were successful in building a system within 2024 capable of producing essential minerals such as lithium and cathode active materials. This carries remarkable meaning and proves our clear progress made in business. Surely, given the challenges faced in the rechargeable battery industry, we will also adjust in speed and calibrate. However, compared to competition, we have sound financials that make us fit to seize new opportunities. This is what we will prepare in a thorough and steady fashion. Also beginning early last year, Posco Group has taken the initiative to restructure low-performing businesses and non-essential assets in our effort to enhance asset efficiency. Low-profit real estate and simple equity shares have been sold. Through these restructuring efforts, $662.5 billion cash has been generated. $100 billion of that cash will be used to buy back and retire Treasury shares. I would like to remind our investors that we face higher trade barriers around the world while EV market growth continues to slow. It is no secret that the business environment in 2025 will continue to be rough, hence we will focus the group's energy in sustaining strong profits. In still, we intend to drive explicit progress in overseas growth, market investments, and in achieving carbon neutrality. Also, by enhancing facility capacity and efficiency, we'll focus on sustaining price competitiveness. In the energy materials business, we'll be proactive to acquire quality lithium assets in South America and Australia. At the same time, our goal is to achieve ramp-up of our new plants ahead of schedule. In the infrastructure business, we will continue to invest in Australia and in Myanmar to expand our production capacity while adding to the domestic LNG terminal space as a means to focus on strengthening our energy business foundation. Additionally, we would like to focus on stabilizing our business to the greatest extent possible. In addition, by completing our restructuring goals within the year, we'll improve our asset efficiency. With the cash generated from this effort, it will help to finance the group's future growth investments. Now allow me to introduce our IR department leader. She will share more detail on the 2024 earnings.

Good afternoon. I will now present the 2024 yearly and fourth quarter earnings. Please refer to page four. As for the yearly revenue, recorded 72.7 trillion won operating profit of 2.2 trillion won. EBITDA for the year was 6.1 trillion, and yearly CAPEX amounted to 9 trillion with 1 trillion on a standalone basis. Q4 operating profit came in particularly weak at 95 billion. Amidst the ongoing market downturn in both steel and battery materials, New secondary battery plants were commissioned in many numbers, with initial operation costs accounted for. And there were also one-off cost increases in the steel business, including labor costs that were reflected, reflecting the December wage negotiation results. So if you look at the business segment, steel operating profit declined 35% YOY. Postcode OP margin dropped by 3.9%, with 29% YOY decrease in profit. As for overseas steel, despite the good performance of the Indian subsidiary, due to weak performance in Indonesia, Vietnam, and other Southeast Asia subsidiaries, profit decline was significant. As for energy materials, the business recorded 278 billion won losses with the deficit widening further. Posca Futurum fell into the red in Q4, mainly due to high initial costs at newly commissioned plants. Now, infrastructure. Operating profit declined 14% to YOY, This was because as POSCO E&C completed large-scale planned projects both domestically in Samchuk and overseas in Malaysia, additional costs were accounted for. Now, if you look at the performance in Q4, we turned to a net loss of 703 billion won. This was primarily because in the fourth quarter alone, 1.3 trillion won in non-cash expenses including asset impairment losses were accounted for. Let me elaborate further on the next page. Now looking at the non-operating losses, we recognized asset impairment losses of 1 trillion won in Q4 and 1.2 trillion for the full year. These can be divided into three categories of asset impairment losses. First is the still business. In Q4, we suspended operations of outdated low-efficiency assets like Pohang Steelmaking Line Number 1 and Wire Rod Mill Number 1, accounting for the impairment losses for these assets. Second, we accounted for the impairment losses of certain aging and low-profit assets of the batter business, including the Gumi Cathode Materials Plant and precursor JV in China. Third. As part of our ongoing business restructuring efforts since the beginning of this year, we proactively recognize impairment losses on assets marked for sale. So, let me give you an example. Vietnam's Mung Dung coal fire power plant, which does not align actually with our ESG policies, is currently being sold. So, all of this has been accounted for proactively. As for the operating profit, inventory valuation losses of 88.2 billion won for the full year had an impact. So you can see that the newly commissioned battery material plants in 2024, that is postcopio borrower lithium solution and Argentinian subsidiaries, the significant inventory valuation losses. And moving on to page six.