POSCO Holdings Inc.

the external uncertainties that had continued since the first half became even more complex. Amid these conditions, Postco Holdings on a consolidated basis recorded revenue of 17.3 trillion won and operating profit of 640 billion won. Despite losses at Postco ENC, consolidated OP has bottomed out in the fourth quarter of last year and improved to three consecutive quarters. Our key business sector for sales performance continued to improve. Postco's average mill margin was comparable to that of last quarter, but sales volume rose, and the company's proactive cost-cutting efforts drove up operating profits. As a result, Postco's this quarter's OP margin recorded 6.6%. In steel, although EU duty-free quotas have been reduced and tariffs on steel products increased, Korea's steel market is normalizing, And therefore, we will strive to sustain solid level of profitability going forward. In rechargeable battery materials, losses narrow sharply QOQ. This was because at postcode future M, cathode sales volume increased ahead of the IRA benefit sunset. And at our lithium operations, the price rebound led to reversal of inventory valuation losses. As mentioned during the last earnings call, our top priority in lithium are ramping up new plants, improving process efficiency, and completing customer qualifications through to contract signing. Going forward, we will ensure disciplined execution, working to avoid any additional cost from ramp-up delays, and ultimately securing production efficiency and price competitiveness. In infrastructure, POSCO International maintained solid profits during the summer peak power season. However, as per POSCO E&C, we recognize the full estimated loss from the Shin An Sun Line accident and booked a portion of roughly one month of business suspension losses related to the safety incident. Therefore, profits declined. For POSCO E&C, we expect to recognize the remaining business interruption losses in full in Q4, so results are unlikely to improve meaningfully. But once most of these one-off losses are accounted for in this year, we expect to return to normal level of profitability from next year. We at Posca Group are focused on creating a safe workplace through group-wide safety management innovations. To prevent similar safety incidents, we will establish a comprehensive group-wide safety master plan, and all of us, employees and management, will do our utmost to drive the safe workplace initiative. Now our head of IR will give a more detailed presentation on 2025 Q3 results.

I would like to present the earnings performance by each business sector, page 5. With the safety incidents at POSCO ENC, POSCO Group has taken the opportunity to exert our utmost efforts and make new investments to improve our safety systems. We will share our progress regularly to our investors on a half-yearly basis and update you on major practices to reinforce workplace safety. This is what we will share in our progress. In July, a CEO direct report group safety task force was launched along with comprehensive group-wide safety measures. First, worker participation is encouraged as agents of prevention. Second, systems will drive our safety priorities. Finally, union communication is mobilized to enhance on-site operability. To add more detail, when any element of danger is discovered, a worker has the authority to stop operation. To encourage this authority to stop work, we have introduced a new program. For safety budget, the rule is to administer first and report thereafter. Lowest bidder bidding system has been abolished across the group. Instead, a fair bidding system has been put in place. Safety technologies are developed too. On the next page, we list our accident rate, serious accidents, and LTIFR. Since the last incident, all work has been suspended at POSCO ENC sites and other group work sites deemed high risk in order to perform safety inspections. In early September, an MOU was signed with SGS, a Swiss safety service firm, to enhance objectivity in safety diagnoses. Then we launched our own professional firm, POSCO Safety Solutions. We're also setting up a care service foundation for victims of industrial incidents as our promise to CSR. This will be completed by the first quarter of 2026. The safety of our citizens and employees is POSCO Group's most important value. In recognition of this value, we pledge to do our very best to prevent safety incidents. Portfolio management update. In the third quarter, we restructured seven projects, generating $400 billion in cash. Uzbek textile plant and overseas non-core business sites have been sold. Cross-ownership of NFC shares have also been sold off. Therefore, the portfolio management that began in early 2024 has completed 63 projects generating $1.4 trillion in cash. Next is a deep dive into each company performance. First, POSCO. Operating profit was $322 billion in the final quarter of last year and $346 billion in the first quarter and $513 billion in the second quarter of this year. In the third quarter, we registered $585 billion, one which shows a continuous pattern of recovery. Despite a 4.9% increase in production volume, quarterly sales price continued to decline. so revenue dropped 1.7% against the previous quarter. However, various cost-cutting efforts have led to a recovery of 6.6% OP margin rate. Domestic market demand continues to slow. Imports flooded the market prior to the AD ruling. Therefore, this quarter's sales price dropped by about $25,000 per ton against the previous quarter. Key raw materials costs also dropped, keeping the average mill margin similar to last quarter. However, production volume increase led to a higher operation rate, but through cascading efforts and raw materials purchased among others, profit has improved. Proportion of exports in the third quarter rose to about 49.3%. In the fourth quarter, production volume will decline moderately against the third quarter due to scheduled repairs on the Pohang rolling line. Due to imports that flooded the market prior to AD ruling, inventory is saturated at customer end and in distribution. In the fourth quarter, we anticipate seasonal demand drop and depletion of distribution inventory. However, in the fourth quarter, temporary adjustment period will be coupled with our efforts to upgrade efficiency and market normalization owing to AD ruling. So in 2026, steel profits will increase overall compared to the current year. Page 9, Overseas Steel. Overseas steel profits will experience moderate decline due to slow quarterly performance in Mexico and other rolling mills. So the large plants, overseas plants, their performance is projected here. Indonesia and Vietnam will hold steady to the previous quarter. Profit shrank in India due to major repairs. Page 10, POSCO Future M. Owing to the before IRA benefit sunset impact, Cathode anode active material sales almost doubled to register 56 billion won operating profit. Lithium plants such as Pascual Pilbara in Argentina are steadily and surely ramping up their plants. The size of the quarterly loss has declined against the previous quarter. However, lithium price hike led to a reversal in inventory valuation loss, which amounted to about 37 billion won. Page 11. POSCO International. POSCO International registered a profit similar to the previous quarter. While profits went up in energy business, it was offset by seasonal lows in the Indonesian palm farm and fluctuating steel trade triggered by changing policies in the U.S. and the EU. Page 12, POSCO ENC. In the third quarter, the Shenzhen incident costs and overseas project losses were accounted for as one-time costs of 288.1 billion won, recording a deficit. In the fourth quarter, an additional 230 billion costs will likely be needed. However, because the predominant share of the accident costs will be accounted for within this year, In 2026, we anticipate that POSCO E&C will transition to a profit and begin generating OP similar to pre-accident times. This concludes the earnings report of POSCO Holdings. We'll now move straight into the Q&A.

Now we will begin the Q&A session. If you would like to ask a question, please press star on your phone followed by number one. If you want to cancel your question, please press star followed by two. Now, the first question will be asked by Mr. Park Hyun-wook from Hyundai Motor Security. Hello, I'm Park Hyun-wook. Thank you for giving me the opportunity to ask a question. I have three questions for you. First is regarding the business plan that is under development. With regards to steel market outlook in the fourth quarter, regarding the hot rolls, I would like to know about the AD or anti-dumping effect of China and Japan. Can you elaborate on that? And briefly, can you share with us the guidance about the steel market outlook for next year from POSCO's perspective? Second question is from next year. There is the carbon-related cost. I believe there are two issues at hand. One of that is the CBAM of EU will come into force. And in the first year, the impact could be minimal, but the cost could be more and more in the next years to follow. And when it comes to carbon trade emissions, when it comes to effects, I believe that the cost could go up as well. So I would like to know about Postco Holdings' response or countermeasures with regards to these two potential changes. And the third is about Postco International. So in Alaska LNG project, I believe that project is under review and I've read an article on this issue. So if this project becomes realized, I would like to know how much of an annual sales volume will be impacted from the postcode side. And I would like to ask an additional question regarding EU CBAM. So recently in EU, there was a reduction of duty-free quotas, and there is also an increase of tariffs that was announced by EU. But when it comes to Korea, the export regulations in Korea are quite strict, and I think that same applies to POSCO. So if all of these are realized, I would like to know, from POSCO Holdings' perspective, what kind of countermeasures that you would have. Thank you. Now with regards to the first question, I believe that Mr. Lee Won Chol of the Steel Business Management as well as the Postcode Marketing Strategy. So the first question will be addressed by the Head of Postcode Marketing Strategy and second by the Steel Business Management Head. You can answer the questions respectively. Yes, I'm Head of Marketing Strategy. With regards to the fourth quarter still market outlook, I believe that was very difficult to directly link it with the hot rolled anti-dumping because in August and in September, before impose, there is the imports that are being distributed in the market before the provisional tariffs that were imposed. And since it is a non-pick season, it will be very difficult to translate them directly into demand for now. But the inventory, or the stock, will be all used up before the fourth quarter is our expectation. And focusing on the real estate market from November and December, we believe to see some positive impact that will come along. When it comes to the still market trend next year, Globally, it is estimated that the growth will be around 1% or 2%, that mostly will be focused on India or Southeast Asia, that are high growth regions. And especially this year, the demand fell in U.S. and Europe. We believe that the demand would pick up next year. But when it comes to China, following this year as well, the demand is expected to decline next year as well. And as for Korea, there are some ups and downs or positive and negative factors. Regarding the 80 tariffs, if the price goes up dramatically, then the customers that are dependent on exports, their demand, would slightly decline. But as for Korea, since the situation was not very good this year, we believe that things would pick up next year. So when it comes to Korea, we believe that the domestic market will stay pretty much the same. Yes, I am Hong Joon Young. of the Trade and Investment Office. Regarding the EU's CBAM from 2026, the CBAM will be implemented, and there will be certification costs that will be incurred. But because of the streamlined law that was enacted, we believe that these costs will be put off to 2027. And with the duty-free quota reduction, we believe that the importer's burden will be much less than we had expected. But as for the free allowances of benchmark of Europe will be shortened and it will phase out. So the certification burden will go up and up year by year. Now when it comes to CBAM rights and the calculations, all of these relevant detailed regulations are not announced yet. So that is causing uncertainty in the Korean market. but there is a European ETS system, and based on the identified information, we're going to develop our guideline as for how to counter the CBAM initiative or implementation. Going forward, we'll continue to address uncertainties regarding CBAM and double our efforts in reducing carbon frontage, and we will continue to engage in communication with EU. Now, I'm Jin Youngjoo. from the Postco Environment Energy. I'd like to answer about the ETS. So when it comes to the Tier 4 or the Phase 4 ETS or emissions, we have had a workshop. And in the beginning, it was about 35 million in the third phase. And the fourth phase, it was about 2.5 billion tons. So there was a huge reduction. Compared to phase three, we believe that we'll be able to reduce much more our carbon footprint in phase four. And when it comes to the prior alliances for the power generation sector, it will be 15% lower than phase three. So our alliances at POSCO will be drastically reduced as well. Now, when it comes to the fourth phase allowances of the government, it has not been confirmed yet. It will be confirmed sometime in November. And by company, it will be confirmed sometime in December. So as for today, when it comes to phase four, a postcode from 2027, the allowances or credits will be lacking. So we may have to purchase additional credits. So in order to minimize costs when it comes to ETS, we We will run the EIF, Electric Arc Furnace, by 2025. That is able to produce about 2.5 million tons per year so that we'll be able to reduce carbon footprint during the manufacturing process. And when it comes to the steelmaking, we will continue to expand the use of scraps for environmental friendliness and leverage OTBB. I am from infra project, infra project team or office. So I think there was a question about a project of Alaska. So when it comes to investment volume amount as well as the LNG fluctuations and there are also risks associated with it. So we are fully looking into this project and it is under review. But if we implement this project in terms of steel supply, we would be able to supply about 300,000 tons through this project. And the timeline would be 2026 to 2028. So in a span of about three years, there will be 300,000 tons of LNG steel and so forth.