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The following discussion and analysis is based on our Consolidated Financial Statements, which have been prepared in accordance with IFRS as issued by the IASB. Unless otherwise noted, the amounts included in Item 5.A. are presented on a consolidated basis.
Overview
We are a holding company, and we operate through our consolidated subsidiaries including POSCO, one of the largest steel producers in the world. We also engage in businesses that complement our steel manufacturing operations and also carefully seek out promising investment opportunities to diversify our businesses both vertically and horizontally. One of our principal strategies is to take advantage of our holding company structure to invest in promising businesses. We have made investments in the past decade to secure new growth engines by diversifying into new businesses related to our steel operations that we believe will offer greater potential returns, as well as entering into new businesses not related to our steel operations.
We have six reportable segments as follows:
• Steel Segment. Our Steel Segment includes the production and sale of steel products.
• Infrastructure Business. Our Infrastructure Business includes our businesses related to provision of infrastructure and related services. Such business is divided into three segments as follows:
Ø Trading Segment. The Trading Segment of our Infrastructure Business consists primarily of the global trading activities, natural resources development activities and power generation activities of POSCO INTERNATIONAL. POSCO INTERNATIONAL exports and imports a wide range of steel products that are both obtained from and supplied to POSCO, as well as steel and other products from and to other suppliers and purchasers in Korea and overseas. On January 1, 2023, POSCO Energy, Korea’s largest domestic private power utility company and a provider of alternative low-carbon energy solutions, merged into POSCO INTERNATIONAL.
Ø Construction Segment. The Construction Segment of our Infrastructure Business consists primarily of POSCO E&C’s planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in Korea and overseas.
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Ø Logistics and Others Segment. The Logistics and Others Segment of our Infrastructure Business consists primarily of the information technology and operational technology services of POSCO DX and the integrated logistics services of POSCO FLOW.
• Rechargeable Battery Materials Segment. Our Rechargeable Battery Materials Segment includes (i) the manufacturing and sale of various energy-related and other industrial materials by POSCO Future M, including cathode and anode materials for rechargeable batteries and (ii) investments made by us in production projects relating to other materials such as lithium.
• Others Segment. Our Others Segment includes POSCO HOLDINGS INC. and all other entities which fall below the reporting thresholds. POSCO HOLDINGS INC. actively explores diversification opportunities in promising business areas.
Factors Affecting Our Results of Operations and Financial Condition
One of the major factors contributing to our historical performance has been the growth of the Korean economy, and our future performance will depend at least in part on Korea’s general economic growth and prospects. For a description of recent developments that have had and may continue to have an adverse effect on our results of operations and financial condition, see “Item 3. Key Information — Item 3.D. Risk Factors — Korea and the rest of Asia are our most important markets, and our current business and future growth could be materially and adversely affected if economic conditions in the region deteriorate.” A number of other factors have had or are expected to have a material impact on our results of operations, financial condition and capital expenditures. These factors include:
• our sales volume, unit prices and product mix for steel products;
• costs and production efficiency; and
• exchange rate fluctuations.
As a result of these factors, our financial results in the past may not be indicative of future results or trends in those results.
Sales Volume, Unit Prices and Product Mix for Steel Products
In recent years, our net sales have been affected by the following factors relating to our steel business:
• the demand for our products in the Korean market and our capacity to meet that demand;
• our ability to compete for sales in the export market, including due to tariffs imposed on our export products;
• price levels; and
• our ability to improve our product mix.
Domestic demand for our products is affected by the condition of major steel-consuming industries, such as construction, shipbuilding, automotive, electrical appliances and downstream steel processors, and the Korean economy in general.
In 2024, the unit sales price in Won for each of our principal product lines of steel products decreased compared to 2023 primarily due to continued weakness in global economic conditions. The weighted average unit price for our principal product lines of steel products decreased by 4.3% from
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2023 to 2024, the impact of which was offset in part by the depreciation in the average value of the Won against the U.S. dollar in 2024 compared to 2023 that increased our export prices in Won terms. The Market Average Exchange Rate depreciated from an average of Won 1,305.4 to US$1.00 in 2023 to an average of Won 1,364.0 to US$1.00 in 2024.
The unit sales price of plates, which accounted for 16.1% of total sales volume of our principal steel products, decreased by 9.8% in 2024 compared to 2023. The unit sales price of silicon steel sheets, which accounted for 2.1% of total sales volume of such products, decreased by 8.9% in 2024 compared to 2023. The unit sales price of stainless steel products, which accounted for 8.6% of total sales volume of such products, decreased by 6.5% in 2024 compared to 2023. The unit sales price of hot rolled products, which accounted for 32.5% of total sales volume of such products, decreased by 3.8% in 2024 compared to 2023. The unit sales price of cold rolled products, which accounted for 35.4% of total sales volume of such products, decreased by 3.1% in 2024 compared to 2023. The unit sales price of wire rods, which accounted for 5.2% of total sales volume of such products, decreased by 1.2% in 2024 compared to 2023.
In 2025, the unit sales price in Won for each of our principal product lines of steel products decreased compared to 2024 primarily due to continued weakness in global economic conditions. The weighted average unit price for our principal product lines of steel products decreased by 4.8% from 2024 to 2025, the impact of which was offset in part by the depreciation in the average value of the Won against the U.S. dollar in 2025 compared to 2024 that increased our export prices in Won terms. The Market Average Exchange Rate depreciated from an average of Won 1,364.0 to US$1.00 in 2024 to an average of Won 1,422.2 to US$1.00 in 2025.
The unit sales price of hot rolled products, which accounted for 33.1% of total sales volume of such products, decreased by 8.1% in 2025 compared to 2024. The unit sales price of silicon steel sheets, which accounted for 2.2% of total sales volume of such products, decreased by 4.6% in 2025 compared to 2024. The unit sales price of cold rolled products, which accounted for 36.4% of total sales volume of such products, decreased by 4.1% in 2025 compared to 2024. The unit sales price of plates, which accounted for 15.6% of total sales volume of our principal steel products, decreased by 3.2% in 2025 compared to 2024. The unit sales price of stainless steel products, which accounted for 8.2% of total sales volume of such products, decreased by 1.0% in 2025 compared to 2024. The unit sales price of wire rods, which accounted for 4.5% of total sales volume of such products, decreased by 0.6% in 2025 compared to 2024.
The table below sets out the average unit sales prices for our semi-finished and finished steel products produced by us and directly sold to external customers for the periods indicated.
For the Year Ended December 31,
Products 2023 2024 2025
(In thousands of Won per ton)
Cold rolled products W 1,218 W 1,180 W 1,132
Hot rolled products 935 900 827
Stainless steel products 3,192 2,985 2,955
Plates 1,056 953 922
Wire rods 1,112 1,098 1,091
Silicon steel sheets 2,030 1,848 1,764
Average (1) W 1,273 W 1,218 W 1,159
(1) “Average” prices are based on the weighted average, by sales volume, of our sales for the listed principal products produced by us and directly sold to external customers. See “Item 4. Information on the Company — Item 4.B. Business Overview — Steel Segment — Major Products.” The average unit sales price calculation does not include sales results of steel products categorized as “others.”
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Costs and Production Efficiency
Our major costs and operating expenses are raw material purchases, depreciation, labor and other purchases. The table below sets out our cost of sales and selling and administrative expenses as a percentage of our revenue as well as gross profit margin and operating profit margin for the periods indicated.
For the Year Ended December 31,
2023 2024 2025
(Percentage of revenue)
Cost of sales 91.7 % 92.5 % 92.6 %
Selling and administrative expenses 3.7 4.4 4.8
Gross profit margin (1) 8.3 7.5 7.4
Operating profit margin (2) 3.6 2.0 2.1
(1) Ratio of gross profit to revenue.
(2) Ratio of operating profit to revenue.
We are closely monitoring changes in market conditions and we implemented the following measures in recent years to improve our profit margins:
• pursuing cost reduction through enhancing product designs, improving productivity and reducing fixed costs;
• focusing on marketing activities to increase the sales of higher margin, higher value-added products and to strengthen our domestic market position;
• pursuing synergies among member companies of the POSCO Group through corporate restructurings; and
• establishing a special sales committee to more effectively respond to changes in market trends and preparing responses to various scenarios of future sales.
Production capacity represents our maximum production capacity that can be achieved with an optimal level of operations of our facilities. The table below sets out certain information regarding our production capacity and efficiency in the production of steel products for the periods indicated.
For the Year Ended December 31,
2023 2024 2025
Crude steel production capacity (million tons per year) 45.3 45.1 44.5
POSCO 40.7 40.5 39.8
PT. KRAKATAU POSCO 3.0 3.0 3.0
POSCO (Zhangjiagang) 1.1 1.1 1.1
POSCO YAMATO VINA 0.6 0.6 0.6
Actual crude steel output (million tons) 39.9 39.3 38.6
POSCO 35.7 35.0 34.5
PT. KRAKATAU POSCO 3.0 3.0 2.9
POSCO (Zhangjiagang) 0.8 0.8 0.7
POSCO YAMATO VINA 0.4 0.5 0.5
Capacity utilization rate (%) 88.1 % 87.1 % 87.0 %
POSCO 87.7 % 86.6 % 86.8 %
PT. KRAKATAU POSCO 100.5 % 100.3 % 99.4 %
POSCO (Zhangjiagang) 76.3 % 69.8 % 65.7 %
POSCO YAMATO VINA 75.5 % 88.2 % 81.8 %
Exchange Rate Fluctuations
Our consolidated financial statements are prepared from our local currency denominated financial results, assets and liabilities and our subsidiaries around the world, which are then translated
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into Won. A substantial proportion of our consolidated financial results is accounted for in currencies other than the Won. Accordingly, our consolidated financial results and assets and liabilities may be materially affected by changes in the exchange rates of foreign currencies. In 2025, 61.7% of the Steel Segment’s total revenue was in overseas markets outside of Korea. To the extent that we incur costs in one currency and make sales in another, our profit margins may be affected by changes in the exchange rates between the two currencies. Since the currency in which sales are recognized may not be the same as the currency in which expenses are incurred, foreign exchange rate fluctuations may materially affect our results of operations. Depreciation of the Won may materially affect the results of our operations because, among other things, it causes:
• an increase in the amount of Won required for us to make interest and principal payments on our foreign currency-denominated debt;
• an increase in Won terms in the costs of raw materials and equipment that we purchase from overseas sources and a substantial portion of our freight costs, which are denominated primarily in U.S. dollars; and
• foreign exchange translation losses on foreign currency-denominated liabilities, which lower our earnings for accounting purposes.
Appreciation of the Won against major currencies, on the other hand, causes:
• our export products to be less competitive by raising our prices in U.S. dollar, Yen and Yuan terms; and
• a reduction in net sales and trade accounts and notes receivables in Won from export sales, which are primarily denominated in U.S. dollars and to a lesser extent in Yen and Yuan.
The overall net impact from fluctuations of the Won against major currencies is difficult to estimate and varies from year to year. We strive to naturally offset our foreign exchange risk by matching foreign currency receivables with our foreign currency payables and our overseas subsidiaries have sought to further mitigate the adverse impact of exchange rate fluctuations by conducting business transactions in the local currency of the respective market in which the transactions occur. In particular, POSCO INTERNATIONAL’s exposure to fluctuations in exchange rates, including the Won/U.S. dollar exchange rate, is limited because trading transactions typically involve matched purchase and sale contracts, which result in limited settlement exposure, and because POSCO INTERNATIONAL’s contracts with domestic suppliers of products for export and with domestic purchasers of imported products are generally denominated in U.S. dollars. Although the impact of exchange rate fluctuations is partially mitigated by such strategies, we and our subsidiaries, particularly POSCO INTERNATIONAL and POSCO E&C, also periodically enter into derivative contracts, primarily foreign currency swaps and forward exchange contracts, to further hedge some of our foreign exchange risks. However, our results of operations have historically been affected by exchange rate fluctuations and there can be no assurance that such strategies will be sufficient to reduce or eliminate the adverse impact of such fluctuations in the future.
Recent Accounting Changes
For a discussion of new standards, interpretations and amendments to existing standards that have been published, see Note 2 to the Consolidated Financial Statements.
Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS
In addition to preparing consolidated financial statements in accordance with IFRS as issued by the IASB included in this Annual Report on Form 20-F, we also prepare consolidated financial statements in accordance with K-IFRS as adopted by the Korea Accounting Standards Board, which we are required to file with the Financial Services Commission and the Korea Exchange under the FSCMA.
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K-IFRS differs in certain respects from IFRS as issued by the IASB in the presentation of operating profit. In addition, under K-IFRS, revenue from the development and sale of real estate is recognized using the percentage of completion method. However, under IFRS as issued by the IASB, revenue from the development and sale of certain real estate is recognized when an individual unit of residential real estate is delivered to the buyer. As a result, our consolidated statements of comprehensive income and our consolidated statements of financial position prepared in accordance with IFRS as issued by the IASB included in this Annual Report on Form 20-F differ from our consolidated statements of comprehensive income and consolidated statements of financial position prepared in accordance with K-IFRS.
The table below sets forth a reconciliation of our operating profit and profit as presented in our consolidated statements of comprehensive income prepared in accordance with IFRS as issued by the IASB for each of the years ended December 31, 2023, 2024 and 2025 to our operating profit and profit in our consolidated statements of comprehensive income prepared in accordance with K-IFRS, for each of the corresponding years, taking into account such differences:
For the Year Ended December 31,
2023 2024 2025
(In billions of Won)
Operating profit under IFRS as issued by the IASB W 2,738 W 1,452 W 1,477
Additions:
Other bad debt expenses 291 69 53
Loss on disposals of assets held for sale 103 34 13
Loss on disposals of investments in subsidiaries, associates and joint ventures 18 73 13
Loss on disposals of property, plant and equipment 126 85 90
Impairment loss on property, plant and equipment 276 608 136
Impairment loss on intangible assets 130 48 52
Loss on valuation of firm commitment 47 40 28
Idle tangible asset expenses 4 3 6
Increase to provisions 38 85 56
Donations 67 75 90
Miscellaneous expenses and others 94 63 91
Total 1,196 1,184 627
Deductions:
Recovery of allowance for other bad debt expenses (8 ) (18 ) (19 )
Gain on disposals of assets held for sale (1 ) (5 ) (54 )
Gain on disposals of investment in subsidiaries, associates and joint ventures (197 ) (14 ) (47 )
Gain on disposals of property, plant and equipment (9 ) (27 ) (16 )
Gain on valuation of firm commitment (11 ) (47 ) (42 )
Reversal of other provisions (9 ) (16 ) (8 )
Gain on insurance claim (13 ) (158 ) (20 )
Gain on bargain purchases (41 ) — —
Gain on disposal of emission rights (26 ) (0 ) (0 )
Miscellaneous income and others (86 ) (103 ) (100 )
Total (402 ) (387 ) (306 )
Revenue recognition related to development and sale of real estate 71 (771 ) 108
Cost of sales recognition related to development and sale of real estate (71 ) 696 (79 )
Operating profit under K-IFRS W 3,531 W 2,174 W 1,827
Profit under IFRS as issued by the IASB W 1,846 W 1,005 W 527
Adjustments related to development and sale of real estate:
Revenue 71 (771 ) 108
Cost of sales (71 ) 696 (79 )
Others (1) — — (62 )
Income tax expense 0 17 10
Profit under K-IFRS W 1,846 W 948 W 504
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(1) Following a notification of a final administrative penalty in March 2026 in relation to the STS No. 4 steelmaking plant incident, we adjusted previously recognized provisions and related accounts accordingly.
Operating Results – 2024 Compared to 2025
The following table presents our consolidated statement of comprehensive income information and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Revenue W 73,459 W 68,987 W (4,472 ) (6.1 )
Cost of sales 67,971 63,850 (4,121 ) (6.1 )
Gross profit 5,488 5,137 (351 ) (6.4 )
Selling and administrative expenses:
Other administrative expenses 3,004 3,094 90 3.0
Selling expenses 235 244 9 4.0
Other operating income and expenses:
Other operating income 387 306 (81 ) (21.1 )
Other operating expenses 1,184 627 (557 ) (47.1 )
Operating profit 1,452 1,477 25 1.8
Share of profit (loss) of equity-accounted investees, net (256 ) 350 606 N.A. (1)
Finance income 5,212 3,222 (1,990 ) (38.2 )
Finance costs 5,081 3,910 (1,171 ) (23.0 )
Profit before income taxes 1,326 1,139 (187 ) (14.1 )
Income tax expense 321 612 291 90.7
Profit 1,005 527 (478 ) (47.6 )
Profit attributable to owners of the controlling company 1,125 691 (434 ) (38.6 )
Profit attributable to non-controlling interests (120 ) (164 ) (44 ) 36.3
(2) N.A. means not applicable.
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Revenue
The following table presents our revenue by segment and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Steel Segment:
External revenue W 39,104 W 37,285 W (1,819 ) (4.7 )
Internal revenue 23,097 22,114 (983 ) (4.3 )
Sub-total 62,201 59,399 (2,802 ) (4.5 )
Infrastructure Business — Trading Segment
External revenue 22,804 23,744 940 4.1
Internal revenue 20,099 18,477 (1,622 ) (8.1 )
Sub-total 42,903 42,221 (682 ) (1.6 )
Infrastructure Business — Construction Segment
External revenue 7,473 5,615 (1,858 ) (24.9 )
Internal revenue 2,357 1,613 (744 ) (31.6 )
Sub-total 9,830 7,228 (2,602 ) (26.5 )
Infrastructure Business — Logistics and Others Segment
External revenue 422 309 (113) (26.8 )
Internal revenue 3,717 3,246 (471 ) (12.7 )
Sub-total 4,139 3,554 (585 ) (14.1 )
Rechargeable Battery Materials Segment
External revenue 2,813 2,096 (717 ) (25.5 )
Internal revenue 1,017 1,242 225 22.1
Sub-total 3,830 3,338 (492 ) (12.8 )
Others Segment:
External revenue 73 45 (28 ) (37.7 )
Internal revenue 2,038 1,455 (583 ) (28.6 )
Sub-total 2,111 1,500 (611 ) (28.9 )
Total revenue prior to consolidation adjustments 125,014 117,241 (7,773 ) (6.2 )
Consolidation adjustments (52,326 ) (48,146 ) 4,180 (8.0 )
Basis difference adjustments (1) 771 (108 ) (879 ) N.A. (2)
Revenue W 73,459 W 68,987 (4,472 ) (6.1 )
(1) Basis difference adjustments are related to the difference in recognizing revenue and expenses of the Construction Segment of the Infrastructure Business in connection with the development and sales of certain residential real estate between the report reviewed by the chief executive officer and the consolidated financial statements. See Notes 3 and 40 to the Consolidated Financial Statements.
(2) N.A. means not applicable.
Our revenue decreased by 6.1%, or Won 4,472 billion, from Won 73,459 billion in 2024 to Won 68,987 billion in 2025 due to decreases in external revenues of most of our segments, particularly external revenues of the Steel Segment, the Construction Segment of the Infrastructure Business and the Rechargeable Battery Materials Segment, the impact of which was offset in small part by an increase in external revenue of the Trading Segment of the Infrastructure Business. Specifically:
Steel Segment. External revenue from the Steel Segment, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 4.7%, or Won 1,819 billion, from Won 39,104 billion in 2024 to Won 37,285 billion in 2025 due to decreases in the average unit sales price per ton of our principal steel products and the sales volume of our principal steel products. The weighted average unit sales price per ton of the principal steel products
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produced by us and directly sold to external customers decreased by 4.8% from Won 1,217,705 per ton in 2024 to Won 1,159,315 per ton in 2025 primarily due to continued weakness in global economic conditions, which impact was offset in part by depreciation of the Won against the U.S. dollar in 2025 that increased our export prices in Won terms during 2025. The overall sales volume of our principal steel products decreased by 0.7%, from 29.2 million tons in 2024 to 28.9 million tons in 2025. Such factors were principally attributable to the following:
• The unit sales price in Won of each of our principal product lines decreased from 2024 to 2025. The unit sales prices in Won of hot rolled products, silicon steel sheets, cold rolled products, plates, stainless steel products and wire rods decreased by 8.1%, 4.6%, 4.1%, 3.2%, 1.0% and 0.6%, respectively, from 2024 to 2025. For a discussion of changes in the unit sales prices of each of our principal product lines, see “— Overview — Sales Volume, Unit Prices and Product Mix” above.
• The sales volume of wire rods, stainless steel products and plates decreased by 14.2%, 5.7% and 3.7%, respectively, from 2024 to 2025. On the other hand, the sales volume of silicon steel sheets, cold rolled products and hot rolled products increased by 2.2%, 1.9% and 1.2%, respectively, from 2024 to 2025. For a discussion of changes in the sales volume of each of our principal product lines, see “Item 4.B. Business Overview — Steel Segment — Major Products.”
Total revenue from the Steel Segment, which includes internal revenue from inter-company transactions, decreased by 4.5%, or Won 2,802 billion, from Won 62,201 billion in 2024 to Won 59,399 billion in 2025 as internal revenue from inter-company transactions decreased by 4.3%, or Won 983 billion, from Won 23,097 billion in 2024 to Won 22,114 billion in 2025 primarily due to a decrease in the sale prices of steel products sold through trading subsidiaries.
Trading Segment of the Infrastructure Business. External revenue from the Trading Segment of the Infrastructure Business, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, increased by 4.1%, or Won 940 billion, from Won 22,804 billion in 2024 to Won 23,744 billion in 2025 primarily due to increases in sales volume of steel products traded by POSCO INTERNATIONAL and the trading volume of non-steel products traded by POSCO INTERNATIONAL as well as the depreciation of the Won against the U.S. dollar in 2025 that increased our export prices in Won terms during 2025, the aggregate impact of which was offset in part by decreases in the prices of steel products traded by POSCO INTERNATIONAL.
Total revenue from the Trading Segment of the Infrastructure Business, which includes internal revenue from inter-company transactions, decreased by 1.6%, or Won 682 billion, from Won 42,903 billion in 2024 to Won 42,221 billion in 2025 as internal revenue from inter-company transactions decreased by 8.1%, or Won 1,622 billion, from Won 20,099 billion in 2024 to Won 18,477 billion in 2025 primarily due to decreases in the volume of steel products traded as inter-company transactions.
Construction Segment of the Infrastructure Business. External revenue from the Construction Segment of the Infrastructure Business, which does not include internal revenue from inter-company transactions that are eliminated during consolidation and basis difference adjustments, decreased by 24.9%, or Won 1,858 billion, from Won 7,473 billion in 2024 to Won 5,615 billion in 2025 primarily due to decreases in external revenues from plant construction projects and infrastructure projects.
Total revenue from the Construction Segment of the Infrastructure Business, which includes internal revenue from inter-company transactions, decreased by 26.5%, or Won 2,602 billion, from Won 9,830 billion in 2024 to Won 7,228 billion in 2025 as internal revenue from inter-company transactions decreased by 31.6%, or Won 744 billion, from Won 2,357 billion in 2024 to Won 1,613 billion in 2025 primarily due to decreases in the construction activities for member companies of the POSCO Group from 2024 to 2025.
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Logistics and Others Segment of the Infrastructure Business. External revenue from the Logistics and Others Segment of the Infrastructure Business, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 26.8%, or Won 113 billion, from Won 422 billion in 2024 to Won 309 billion in 2025, primarily due to a decrease in revenue from automation of logistical operation services provided by POSCO DX to its external customers following general slowdowns in economic activity.
Total revenue from the Logistics and Others Segment of the Infrastructure Business, which includes internal revenue from inter-company transactions, decreased by 14.1%, or Won 585 billion, from Won 4,139 billion in 2024 to Won 3,554 billion in 2025 as internal revenue from inter-company transactions decreased by 12.7%, or Won 471 billion, from Won 3,717 billion in 2024 to Won 3,246 billion in 2025 primarily due to a decrease in logistics services following reduced capital expenditures from members companies of the POSCO group.
Rechargeable Battery Materials Segment. External revenue from the Rechargeable Battery Materials Segment, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 25.5%, or Won 717 billion, from Won 2,813 billion in 2024 to Won 2,096 billion in 2025, primarily due to a decrease in sales of cathode and anode materials used, among others, in the production of electric batteries following a decrease in demand for electric vehicles.
Total revenue from the Rechargeable Battery Materials Segment, which includes internal revenue from inter-company transactions, decreased by 12.8%, or Won 492 billion, from Won 3,830 billion in 2024 to Won 3,338 billion in 2025 while internal revenue from inter-company transactions increased by 22.1%, or Won 225 billion, from Won 1,017 billion in 2024 to Won 1,242 billion in 2025 primarily due to increased internal sales from member companies within the Rechargeable Battery Materials Segment to POSCO Future M.
Others Segment. External revenue from the Others Segment, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 37.7%, or Won 28 billion, from Won 73 billion in 2024 to Won 45 billion in 2025, primarily due to a decrease in dividend income following disposals of certain of our investments.
Total revenue from the Others Segment, which includes internal revenue from inter-company transactions, decreased by 28.9%, or Won 611 billion, from Won 2,111 billion in 2024 to Won 1,500 billion in 2025 as internal revenue from inter-company transactions decreased by 28.6%, or Won 583 billion, from Won 2,038 billion in 2024 to Won 1,455 billion in 2025 primarily due to a decrease in dividend payments from our subsidiaries.
Cost of Sales
Our cost of sales decreased by 6.1%, or Won 4,121 billion, from Won 67,971 billion in 2024 to Won 63,850 billion in 2025 primarily due to decreases in the average prices in Won terms of some of our key raw materials for POSCO and a decrease in production volume of finished steel products sold by us, the impact of which was partially offset by depreciation of the Won against the U.S. dollar, which increased the price of our imported raw materials in Won terms. With respect to the principal raw materials for our steel products, the average market price of coal per wet metric ton (Premium Low Vol Coking Coal, FOB Australia Index announced by Platts) decreased from US$240 in 2024 to US$188 in 2025. In addition, the average market price of iron ore per dry metric ton (Iron Ore 62% Fe, CFR China Index announced by Platts) decreased from US$109 in 2024 to US$102 in 2025.
Gross Profit
Our gross profit decreased by 6.4%, or Won 351 billion, from Won 5,488 billion in 2024 to Won 5,137 billion in 2025 primarily due to (i) a decrease in dividend income and fund investment returns of
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the Others segment and (ii) a decrease in POSCO E&C’s participation in higher margin plant and infrastructure construction projects in 2025, which impact was partially offset by (iii) an increase in gross profit from POSCO reflecting cost reductions that outpaced the decrease in revenue. Our gross profit margin, which is gross profit as a percentage of revenue, decreased from 7.5% in 2024 to 7.4% in 2025.
Selling and Administrative Expenses
The following table presents a breakdown of our selling and administrative expenses and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Freight and custody expenses W 35 W 31 (4 ) (10.2 )
Sales commissions 102 94 (8 ) (7.9 )
Sales promotion 10 11 1 8.5
Sales insurance premium 32 35 3 7.7
Contract cost 35 53 18 50.3
Others 21 21 (0 ) (0.8 )
Total selling expenses W 235 W 245 10 4.0
Wages and salaries W 1,212 W 1,324 W 112 9.2
Expenses related to post-employment benefits 136 101 (35 ) (26.1 )
Other employee benefits 300 305 5 1.6
Travel 48 55 7 15.3
Depreciation 174 177 3 2.1
Amortization 113 116 3 2.9
Taxes and public dues 95 100 5 5.2
Rental 45 38 (7 ) (16.7 )
Advertising 102 96 (6 ) (6.6 )
Research and development 208 195 (13 ) (5.9 )
Service fees 269 234 (35 ) (12.8 )
Bad debt expenses (reversal) 134 169 35 25.9
Others 169 184 15 9.7
Total other administrative expenses W 3,004 W 3,094 90 3.0
Total selling and administrative expenses W 3,239 W 3,339 100 3.1
(1) N.A. means not applicable.
Our selling and administrative expenses increased by 3.1%, or Won 100 billion, from Won 3,239 billion in 2024 to Won 3,339 billion in 2025 primarily due to increases in wages and salaries and bad debt expenses, the impact of which was partially offset by decreases in expenses related to post-employment benefits and service fees. Such factors were principally attributable to the following:
• Our wages and salaries increased by 9.2%, or Won 112 billion, from Won 1,212 billion in 2024 to Won 1,324 billion in 2025 primarily due to increased statutory severance payments at POSCO (Zhangjiagang).
• Our bad debt expenses increased by 25.9%, or Won 35 billion, from Won 134 billion in 2024 to Won 169 billion in 2024 primarily due to an increase in non-performing receivables at POSCO E&C.
• Our expenses related to post-employment benefits decreased by 26.1%, or Won 35 billion, from Won 136 billion in 2024 to Won 101 billion in 2025 primarily due to decreases in retirement benefit expenses following workforce reductions at POSCO MOBILITY SOLUTION in 2024.
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• Our service fees decreased by 12.8%, or Won 35 billion, from Won 269 billion in 2024 to Won 234 billion in 2025 primarily due to a decrease in service-related activities of POSCO INTERNATIONAL.
Other Operating Income and Expenses
The following table presents a breakdown of our other operating income and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Recovery of allowance for other bad debt expenses W 18 W 19 W 1 2.4
Gain on disposals of assets held for sale 5 54 49 1,018.4
Gain on disposals of investments in subsidiaries, associates and joint ventures 14 47 33 232.8
Gain on disposals of property, plant and equipment 27 16 (11) (40.5 )
Gain on valuation of firm commitment 47 42 (5) (10.5 )
Reversal of other provisions 16 8 (8) (48.6 )
Gain on insurance claim 158 20 (138) (87.6 )
Miscellaneous income 90 94 4 4.1
Others 13 6 (7) (50.7 )
Total other operating income W 387 W 306 (81 ) (21.1 )
Our other operating income decreased by 21.1%, or Won 81 billion, from Won 387 billion in 2024 to Won 306 billion in 2025 primarily due to a decrease in gain on insurance claim, the impact of which was partially offset by increases in gain on disposals of assets held for sale and gain on disposals of investments in subsidiaries, associates and joint ventures. Such factors were principally attributable to the following:
• Our gain on insurance claim decreased by 87.6%, or Won 138 billion, from Won 158 billion in 2024 to Won 20 billion in 2025 primarily due to significant insurance payments received in 2024 in relation to the flooding caused by Typhoon Hinnamnor at Pohang Works’ facilities in September 2022 compared to no such payments in 2025.
• Our gain on disposals of assets held for sale increased significantly by 1,108.4%, or Won 49 billion, from Won 5 billion in 2024 to Won 54 billion in 2025 primarily due to gains on disposals related to the sale of POSCO Future M’s interest in P&O Chemical Co., Ltd in 2025.
• Our gain on disposals of investments in subsidiaries, associates and joint ventures increased by 232.8%, or Won 33 billion, from Won 14 billion in 2024 to Won 47 billion in 2025 primarily due to gain on disposals of investment in POSCO (Suzhou) Steel Processing Center CO., LTD. in 2025.
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The following table presents a breakdown of our other operating expenses and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Other bad debt expenses W 69 W 53 W (16 ) (22.7 )
Loss on disposals of assets held for sale 34 13 (21 ) (61.4 )
Loss on disposals of investments in subsidiaries, associates and joint ventures 73 13 (60 ) (82.5 )
Loss on disposals of property, plant and equipment 85 90 5 5.6
Impairment loss on property, plant and equipment 608 136 (472 ) (77.7 )
Impairment loss on intangible assets 48 52 4 7.6
Loss on valuation of firm commitment 40 28 (12 ) (30.5 )
Idle tangible asset expenses 3 6 3 81.1
Increase to provisions 85 56 (29 ) (34.3 )
Donations 75 90 15 20.2
Miscellaneous expenses 46 82 36 76.4
Others 18 8 (10 ) (46.6 )
Total other operating expenses W 1,184 W 627 (557 ) (47.1 )
Our other operating expenses decreased by 47.1%, or Won 557 billion, from Won 1,184 billion in 2024 to Won 627 billion in 2025 primarily due to decreases in impairment loss on property, plant and equipment and loss on disposals of investments in subsidiaries, associates and joint ventures, the impact of which was partially offset by an increase in miscellaneous expenses. Such factors were principally attributable to the following:
• Our impairment loss on property, plant and equipment decreased by 77.7%, or Won 472 billion, from Won 608 billion in 2024 to Won 136 billion in 2025. In 2024, such impairment loss primarily related to impairment losses on certain anode and cathode materials facilities that were in long-term idle status or that did not meet anticipated economic performance. In 2025, such impairment loss primarily related to suspensions of operations in certain of our facilities, such as Finex Plant no. 3.
• Our loss on disposals of investments in subsidiaries, associate and joint ventures decreased by 82.5%, or Won 60 billion, from Won 73 billion in 2024 to Won 13 billion in 2025 primarily due to the disposal of POSCO International Power (PNG Lae) Ltd. in 2024.
• Our miscellaneous expenses increased by 76.4%, or Won 36 billion, from Won 46 billion in 2024 to Won 82 billion in 2025 primarily due to administrative fines imposed on POSCO relating to facilities management and litigation-related costs incurred by POSCO INTERNATIONAL in connection with Peru Block 8.
Operating Profit
Due to the factors described above, our operating profit increased by 1.8%, or Won 25 billion, from Won 1,452 billion in 2024 to Won 1,477 billion in 2025. Our operating profit margin, which is operating profit as a percentage of revenue, increased from 2.0% in 2024 to 2.1% in 2025.
Share of Profit (Loss) of Equity-Accounted Investees
We recorded share of loss of equity-accounted investees (net) of Won 256 billion in 2024 and share of profit of equity-accounted investees (net) of Won 350 billion in 2025.
In 2024, we recognized a net loss from our proportionate share of equity-accounted investees of Won 256 billion primarily due to our share of losses of Won 266 billion from NCR LLC, Won 117 billion
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from Zhejiang Huayou-POSCO ESM Co., Ltd., Won 62 billion from SNNC and Won 49 billion from HBIS-POSCO Automotive Steel Co., Ltd., the aggregate impact of which was partially offset by our share of profit of Won 203 billion from Roy Hill Holdings Pty Ltd. See Note 11 to the Consolidated Financial Statements.
In 2025, we recognized a net profit from our proportionate share of equity-accounted investees of Won 350 billion primarily due to our share of profits of Won 161 billion from Roy Hill Holdings Pty Ltd., Won 95 billion from AMCI (WA) PTY LTD., Won 57 billion from South-East Asia Gas Pipeline Company Ltd. and Won 43 billion from POSCO-NPS Niobium LLC, the aggregate impact of which was partially offset by our share of loss of Won 48 billion from HBIS-POSCO Automotive Steel Co., Ltd.. See Note 11 to the Consolidated Financial Statements.
Finance Income and Finance Costs
The following table presents a breakdown of our finance income and costs and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Interest income W 577 W 533 W (44 ) (7.5 )
Dividend income 77 38 (39 ) (50.5 )
Gain on foreign currency transactions 1,420 1,340 (80 ) (5.6 )
Gain on foreign currency translations 1,188 723 (465 ) (39.1 )
Gain on derivatives transactions 438 299 (139 ) (31.8 )
Gain on valuations of derivatives 899 149 (750 ) (83.4 )
Gain on disposals of financial assets at fair value through profit or loss 165 58 (107 ) (64.5 )
Gain on valuations of financial assets at fair value through profit or loss 201 74 (127 ) (63.0 )
Gain on valuations of financial liabilities at fair value through profit or loss 239 — (239 ) (100.0 )
Others 9 8 (1 ) (16.9 )
Total finance income W 5,212 W 3,222 (1,990 ) (38.2 )
Interest expenses W 1,052 W 1,091 W 39 3.8
Loss on foreign currency transactions 1,448 1,354 (94 ) (6.5 )
Loss on foreign currency translations 1,900 708 (1,192 ) (62.8 )
Loss on derivatives transactions 318 435 117 37.0
Loss on valuations of derivatives 109 69 (40 ) (36.1 )
Loss on disposal of trade accounts and notes receivable 83 73 (10 ) (11.1 )
Loss on disposals of financial assets at fair value through profit or loss 28 7 (21 ) (74.4 )
Loss on valuations of financial assets at fair value through profit or loss 81 132 51 63.3
Loss on valuations of financial liabilities at fair value through profit or loss — 1 1 N.A. (1)
Others 63 39 (24 ) (38.7 )
Total finance costs W 5,081 W 3,910 (1,171 ) (23.0 )
(1) N.A. means not applicable.
We recognized net loss on foreign currency translations of Won 713 billion in 2024 compared to net gain on foreign currency translations of Won 15 billion in 2025, as the Won depreciated against the U.S. dollar at year-end in 2024 but appreciated at year-end in 2025. In terms of the Market Average Exchange Rate, the Won depreciated against the U.S. dollar from Won 1,289.4 to US$1.00 as of December 31, 2023 to Won 1,470.0 to US$1.00 as of December 31, 2024, but appreciated to Won 1,434.9 to US$1.00 as of December 31, 2025. In addition, our net loss on foreign currency transactions decreased by 49.4%, or Won 14 billion, from Won 28 billion in 2024 to Won 14 billion, as
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the average value of the Won against the U.S. dollar depreciated in 2024 and further depreciated (to a greater extent) in 2025. The Market Average Exchange Rate, which was Won 1,305.4 to US$1.00 as of December 31, 2023, depreciated during 2024 to an average of Won 1,364.0 to US$1.00 in 2024 and further depreciated during 2025 to an average of Won 1,422.2 to US$1.00 in 2024. Against such fluctuations, our net gain on valuations of derivatives decreased by 89.9%, or Won 710 billion, from Won 790 billion in 2024 to Won 80 billion in 2025, and we recognized net gain on derivatives transactions of Won 120 billion in 2024 compared to net loss on derivatives transactions of Won 137 billion in 2025.
We recognized net gain on valuations of financial assets at fair value through profit or loss of Won 121 billion in 2024 compared to net loss on valuations of financial assets at fair value through profit or loss of Won 57 billion in 2025. In 2024, we recognized such net gain primarily due to primarily due to the yields on our financial products exceeding market interest rates. In 2025, we recognized such net loss primarily due to the general decrease in interest rates in Korea in 2025.
We recognized net gain on valuations of financial liabilities at fair value through profit or loss of Won 239 billion in 2024 compared to net loss on valuations of financial liabilities at fair value through profit or loss of Won 1 billion in 2025. In 2024, we recognized a net gain as the market price of our shares into which exchangeable bonds we had issued decreased, which in turn resulted in a gain on valuation of financial liabilities. The net gain also included the effect of the early redemption of the exchangeable bonds. In 2025, we did not recognize a material gain on loss on valuation of financial liabilities at fair value through profit or loss as a result of the early redemption of exchangeable bonds in 2024.
Our interest income decreased by 7.5%, or Won 44 billion, from Won 577 billion in 2024 to Won 533 billion in 2025 primarily due to a general decrease in interest rates in Korea, which impact was partially offset by an increase in our average balance of interest-earning financial assets.
Our interest expenses increased by 3.8%, or Won 39 billion, from Won 1,052 billion in 2024 to Won 1,091 billion in 2025 primarily due to an increase in our average balance of interest-bearing liabilities.
Profit before Income Taxes
Due to the factors described above, our profit before income taxes decreased by 14.1%, or Won 187 billion, from Won 1,326 billion in 2024 to Won 1,139 billion in 2025.
The following table presents our profit and loss by segment, prior to adjusting for goodwill and corporate fair value adjustments, elimination of inter-segment losses (profits), income tax expense and basis difference, and changes therein for 2024 and 2025.
Changes
For the Year Ended December 31, 2024 versus 2025
2024 2025 Amount %
(In billions of Won)
Steel Segment W 691 W 1,152 W 461 66.6
Infrastructure Business — Trading Segment 537 563 26 4.8
Infrastructure Business — Construction Segment (194 ) (565 ) (371 ) 191.0
Infrastructure Business — Logistics and Others Segment 104 61 (43 ) (41.3 )
Rechargeable Battery Materials Segment (635 ) (592 ) 43 (6.7 )
Others Segment 1,596 507 (1,089 ) (68.2 )
Goodwill and corporate fair value adjustments (65 ) (66 ) (1 ) 1.8
Elimination of inter-segment profit (1,087 ) (555 ) 532 (49.0 )
Income tax expense(1) 304 602 298 98.4
Basis difference adjustments(2) 75 32 (43 ) (57.3 )
Profit before income taxes W 1,326 W 1,139 (187 ) (14.1 )
(1) Income tax expense presented herein reflects amounts determined under K-IFRS for purposes of segment profit measurement and may differ from income tax expense presented in the consolidated financial statements under IFRS.
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(2) Basis difference adjustments are related to the difference in recognizing revenue and expenses, including income tax expense, of the Construction Segment of the Infrastructure Business in connection with the development and sales of certain residential real estate and other items between the report reviewed by the chief executive officer and the consolidated financial statements. See Notes 3 and 40 to the Consolidated Financial Statements.
Income Tax Expense
Our income tax expense increased by 90.7%, or Won 291 billion, from Won 321 billion in 2024 to Won 612 billion in 2025, primarily due to a significant increase in the effect of tax rate changes resulting from the amendment to Article 55 of the Korean Corporate Tax Act, which revised the corporate tax rate brackets and applicable rates. Our effective tax rate increased from 24.20% in 2024 to 53.74% in 2025. See Note 35 to the Consolidated Financial Statements.
Profit
Due to the factors described above, our profit decreased by 47.6%, or Won 478 billion, from Won 1,005 billion in 2024 to Won 527 billion in 2025. Our profit margin, which is profit as a percentage of revenue, decreased from 1.4% in 2024 to 0.8% in 2025.
Operating Results – 2023 Compared to 2024
The following table presents our consolidated statement of comprehensive income information and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Revenue W 77,057 W 73,459 W (3,597 ) (4.7 )
Cost of sales 70,639 67,971 (2,668 ) (3.8 )
Gross profit 6,417 5,488 (929 ) (14.5 )
Selling and administrative expenses:
Other administrative expenses(1) 2,652 3,004 353 13.3
Selling expenses 234 235 1 0.6
Other operating income and expenses:
Other operating income(2) 402 387 (15 ) (3.7 )
Other operating expenses(3) 1,196 1,184 (12 ) (1.0 )
Operating profit 2,738 1,452 (1,286 ) (47.0 )
Share of profit (loss) of equity-accounted investees, net 270 (256 ) (526 ) N.A. (4)
Finance income 3,831 5,212 1,381 36.0
Finance costs 4,203 5,081 878 20.9
Profit before income taxes 2,635 1,326 (1,309 ) (49.7 )
Income tax expense 789 321 (468 ) (59.3 )
Profit 1,846 1,005 (841 ) (45.6 )
Profit attributable to owners of the controlling company 1,698 1,125 (573 ) (33.7 )
Profit attributable to non-controlling interests 148 (120 ) (268 ) N.A. (4)
(1) In 2023, includes reversal of impairment loss on trade accounts and notes receivable of Won 18 billion.
(2) In 2023, includes recovery of allowance for other bad debt expenses of Won 8 billion.
(3) In 2023, includes other bad debt expenses of Won 291 billion (including impairment loss on other receivables of Won 284 billion).
(4) N.A. means not applicable.
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Revenue
The following table presents our revenue by segment and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Steel Segment:
External revenue W 40,393 W 39,104 W (1,289 ) (3.2 )
Internal revenue 23,145 23,097 (49 ) (0.2 )
Sub-total 63,539 62,201 (1,338 ) (2.1 )
Infrastructure Business — Trading Segment
External revenue 24,034 22,804 (1,230 ) (5.1 )
Internal revenue 18,910 20,099 1,189 6.3
Sub-total 42,944 42,903 (40 ) (0.1 )
Infrastructure Business — Construction Segment
External revenue 8,301 7,473 (828 ) (10.0 )
Internal revenue 1,966 2,357 390 19.8
Sub-total 10,268 9,830 (438 ) (4.3 )
Infrastructure Business — Logistics and Others Segment
External revenue 471 422 (49) (10.4 )
Internal revenue 3,475 3,717 242 7.0
Sub-total 3,946 4,139 193 4.9
Rechargeable Battery Materials Segment
External revenue 3,816 2,813 (1,003) (26.3 )
Internal revenue 1,006 1,017 11 1.1
Sub-total 4,822 3,830 (992 ) (20.6 )
Others Segment:
External revenue 113 73 (40 ) (35.2 )
Internal revenue 1,450 2,038 589 40.6
Sub-total 1,562 2,111 549 35.1
Total revenue prior to consolidation adjustments 127,080 125,014 (2,066 ) (1.6 )
Consolidation adjustments (49,953 ) (52,326 ) 2,373 4.8
Basis difference adjustments(1) (71 ) 771 842 N.A. (2)
Revenue W 77,057 W 73,459 (3,597 ) (4.7 )
(1) Basis difference adjustments are related to the difference in recognizing revenue and expenses of the Construction Segment of the Infrastructure Business in connection with the development and sales of certain residential real estate between the report reviewed by the chief executive officer and the consolidated financial statements. See Notes 3 and 40 to the Consolidated Financial Statements.
(2) N.A. means not applicable.
Our revenue decreased by 4.7%, or Won 3,597 billion, from Won 77,057 billion in 2023 to Won 73,459 billion in 2024 due to decreases in external revenues of each of our segments, particularly external revenues of the Steel Segment, the Trading Segment of the Infrastructure Business, the Rechargeable Battery Materials Segment and the Construction Segment of the Infrastructure Business. Specifically:
Steel Segment. External revenue from the Steel Segment, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 3.2%, or Won 1,289 billion, from Won 40,393 billion in 2023 to Won 39,104 billion in 2024 due to a decrease in the average unit sales price per ton of our principal steel products, which was offset in part by an increase in the sales volume of our principal steel products. The weighted average unit sales price per
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ton of the principal steel products produced by us and directly sold to external customers decreased by 4.3% from Won 1,272,754 per ton in 2023 to Won 1,217,705 per ton in 2024 primarily due to continued weakness in global economic conditions, which impact was offset in part by depreciation of the Won against the U.S. dollar in 2024 that increased our export prices in Won terms during 2024. On the other hand, the overall sales volume of our principal steel products increased by 1.1%, from 28.8 million tons in 2023 to 29.2 million tons in 2024. Such factors were principally attributable to the following:
• The unit sales price in Won of each of our principal product lines decreased from 2023 to 2024. The unit sales prices in Won of plates, silicon steel sheets, stainless steel products, hot rolled products, cold rolled products and wire rods decreased by 9.8%, 8.9%, 6.5%, 3.8%, 3.1% and 1.2%, respectively, from 2023 to 2024. For a discussion of changes in the unit sales prices of each of our principal product lines, see “— Overview — Sales Volume, Unit Prices and Product Mix” above.
• The sales volume of silicon steel sheets, cold rolled products, stainless steel products and plates increased by 19.6%, 5.7%, 2.0% and 0.6%, respectively, from 2023 to 2024. On the other hand, the sales volume of wire rods and hot rolled products decreased by 5.9% and 3.2%, respectively, from 2023 to 2024. For a discussion of changes in the sales volume of each of our principal product lines, see “Item 4.B. Business Overview — Steel Segment — Major Products.”
Total revenue from the Steel Segment, which includes internal revenue from inter-company transactions, decreased by 2.1%, or Won 1,338 billion, from Won 63,539 billion in 2023 to Won 62,201 billion in 2024 as internal revenue from inter-company transactions decreased by 0.2%, or Won 49 billion, from Won 23,145 billion in 2023 to Won 23,097 billion in 2024 primarily due to a decrease in the sale prices of steel products sold through trading subsidiaries.
Trading Segment of the Infrastructure Business. External revenue from the Trading Segment of the Infrastructure Business, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 5.1%, or Won 1,230 billion, from Won 24,034 billion in 2023 to Won 22,804 billion in 2024 primarily due to decreases in the prices of steel products traded by POSCO INTERNATIONAL and the trading volume of non-steel products traded by POSCO INTERNATIONAL reflecting deterioration in global economic conditions, the aggregate impact of which was offset in part by (i) depreciation of the Won against the U.S. dollar in 2024 that increased our export prices in Won terms during 2024 and (ii) increase in the sales volume of steel products traded by POSCO INTERNATIONAL.
Total revenue from the Trading Segment of the Infrastructure Business, which includes internal revenue from inter-company transactions, decreased by 0.1%, or Won 40 billion, from Won 42,944 billion in 2023 to Won 42,903 billion in 2024 as internal revenue from inter-company transactions increased by 6.3%, or Won 1,189 billion, from Won 18,910 billion in 2023 to Won 20,099 billion in 2024 primarily due to increases in the volume of steel products traded as inter-company transactions.
Construction Segment of the Infrastructure Business. External revenue from the Construction Segment of the Infrastructure Business, which does not include internal revenue from inter-company transactions that are eliminated during consolidation and basis difference adjustments, decreased by 10.0%, or Won 828 billion, from Won 8,301 billion in 2023 to Won 7,473 billion in 2024 primarily due to decreases in external revenues from plant construction projects and infrastructure projects.
Total revenue from the Construction Segment of the Infrastructure Business, which includes internal revenue from inter-company transactions, decreased by 4.3%, or Won 438 billion, from Won 10,268 billion in 2023 to Won 9,830 billion in 2024 as internal revenue from inter-company transactions
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increased by 19.8%, or Won 390 billion, from Won 1,966 billion in 2023 to Won 2,357 billion in 2024 primarily due to an increase in the construction activities for member companies of the POSCO Group from 2023 to 2024.
Logistics and Others Segment of the Infrastructure Business. External revenue from the Logistics and Others Segment of the Infrastructure Business, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 10.4%, or Won 49 billion, from Won 471 billion in 2023 to Won 422 billion in 2024, primarily due to a decrease in revenue from automation of logistical operation services provided by POSCO DX to its external customers following general slowdowns in economic activity.
Total revenue from the Logistics and Others Segment of the Infrastructure Business, which includes internal revenue from inter-company transactions, increased by 4.9%, or Won 193 billion, from Won 3,946 billion in 2023 to Won 4,139 billion in 2024 as internal revenue from inter-company transactions increased by 7.0%, or Won 242 billion, from Won 3,475 billion in 2023 to Won 3,717 billion in 2024 primarily due to an increase in inter-company transactions as a result of the integration of the rechargeable battery related logistics activities.
Rechargeable Battery Materials Segment. External revenue from the Rechargeable Battery Materials Segment, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 26.3%, or Won 1,003 billion, from Won 3,816 billion in 2023 to Won 2,813 billion in 2024, primarily due to a decrease in sales of cathode and anode materials used, among others, in the production of electric batteries. Global demand for electric vehicles has decreased in recent years, which in turn decreased demand for cathode and anode materials from our key customers in 2024 compared to 2023.
Total revenue from the Rechargeable Battery Materials Segment, which includes internal revenue from inter-company transactions, decreased by 20.6%, or Won 992 billion, from Won 4,822 billion in 2023 to Won 3,830 billion in 2024 as internal revenue from inter-company transactions increased by 1.1%, or Won 11 billion, from Won 1,006 billion in 2023 to Won 1,017 billion in 2024 primarily due to an increase in POSCO Future M’s revenue from sales of scrap, refractory drying and repair services to member companies of the POSCO group from 2023 to 2024.
Others Segment. External revenue from the Others Segment, which does not include internal revenue from inter-company transactions that are eliminated during consolidation, decreased by 35.2%, or Won 40 billion, from Won 113 billion in 2023 to Won 73 billion in 2024, primarily due to a decrease in dividend income following disposals of certain of our investments in financial companies.
Total revenue from the Others Segment, which includes internal revenue from inter-company transactions, increased by 35.1%, or Won 549 billion, from Won 1,562 billion in 2023 to Won 2,111 billion in 2024 as internal revenue from inter-company transactions increased by 40.6%, or Won 589 billion, from Won 1,450 billion in 2023 to Won 2,038 billion in 2024 primarily due to an increase in dividend payments from our subsidiaries.
Cost of Sales
Our cost of sales decreased by 3.8%, or Won 2,668 billion, from Won 70,639 billion in 2023 to Won 67,971 billion in 2024 primarily due to decreases in the average prices in Won terms of some of our key raw materials for POSCO, the impact of which was partially offset by (i) depreciation of the Won against the U.S. dollar, which increased the price of our imported raw materials in Won terms and (ii) an increase in the production volume of finished steel products sold by us. With respect to the principal raw materials for our steel products, the average market price of coal per wet metric ton (Premium Low Vol Coking Coal, FOB Australia Index announced by Platts) decreased from US$296 in 2023 to US$240 in 2024. In addition, the average market price of iron ore per dry metric ton (Iron Ore 62% Fe, CFR China Index announced by Platts) decreased from US$120 in 2023 to US$109 in 2024.
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Gross Profit
Our gross profit decreased by 14.5%, or Won 929 billion, from Won 6,417 billion in 2023 to Won 5,488 billion in 2024 primarily due to (i) a decrease in the average unit sales price in Won terms of the steel products sold by us that outpaced a decrease in the average prices in Won terms of the principal raw materials used to manufacture such products, (ii) a decrease in gross profit from POSCO Future M reflecting a slowdown in demand for anode materials, (iii) a decrease in POSCO E&C’s participation in higher margin plant and architectural works construction projects in 2024, and (iv) a decrease in gross profit from POSCO INTERNATIONAL’s trading activities. Our gross profit margin, which is gross profit as a percentage of revenue, decreased from 8.3% in 2023 to 7.5% in 2024.
Selling and Administrative Expenses
The following table presents a breakdown of our selling and administrative expenses and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Freight and custody expenses W 56 W 35 (21 ) (37.8 )
Sales commissions 68 102 34 49.9
Sales promotion 10 10 0 4.0
Sales insurance premium 32 32 1 1.6
Contract cost 46 35 (11 ) (23.9 )
Others 23 21 (2 ) (7.0 )
Total selling expenses W 234 W 235 1 0.6
Wages and salaries W 1,156 W 1,212 W 56 4.8
Expenses related to post-employment benefits 93 136 44 47.0
Other employee benefits 273 300 27 9.9
Travel 48 48 (0 ) (0.6 )
Depreciation 160 174 14 8.6
Amortization 96 113 17 17.8
Taxes and public dues 101 95 (6 ) (5.9 )
Rental 48 45 (3 ) (5.8 )
Advertising 107 102 (5 ) (4.6 )
Research and development 175 208 32 18.5
Service fees 235 269 34 14.4
Bad debt expenses (reversal) (18 ) 134 152 N.A. (1)
Others 177 169 (8 ) (4.8 )
Total other administrative expenses W 2,652 W 3,004 353 13.3
Total selling and administrative expenses W 2,885 W 3,239 354 12.3
(1) N.A. means not applicable.
Our selling and administrative expenses increased by 12.3%, or Won 354 billion, from Won 2,885 billion in 2023 to Won 3,239 billion in 2024 primarily due to (i) recognition of reversal of impairment loss on trade accounts and notes receivable in 2023 compared to bad debt expenses recognized on trade accounts and notes receivable in 2024 and (ii) increases in wages and salaries and expenses related to post-employment benefits, the impact of which was partially offset by a decrease in freight and custody expenses. Such factors were principally attributable to the following:
• In 2023, we recognized reversal of impairment loss on trade accounts and notes receivable of Won 18 billion that primarily related to trading activities of POSCO INTERNATIONAL. In 2024, we recognized bad debt expenses on trade accounts and notes receivable of Won 134 billion that primarily related to construction activities of POSCO E&C.
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• Our wages and salaries increased by 4.8%, or Won 56 billion, from Won 1,156 billion in 2023 to Won 1,212 billion in 2024 primarily due to increases in wage levels.
• Our expenses related to post-employment benefits increased by 47.0%, or Won 44 billion, from Won 93 billion in 2023 to Won 136 billion in 2024 primarily due to the implementation of voluntary retirement programs at certain of our sales subsidiaries in 2024.
• Our freight and custody expenses decreased by 37.8%, or Won 21 billion, from Won 56 billion in 2023 to Won 35 billion in 2024 primarily due to a general decrease in freight unit shipping prices.
Other Operating Income and Expenses
The following table presents a breakdown of our other operating income and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Recovery of allowance for other bad debt expenses W 8 W 18 W 10 136.6
Gain on disposals of investments in subsidiaries, associates and joint ventures 197 14 (183 ) (92.8 )
Gain on disposals of property, plant and equipment 9 27 17 182.7
Gain on valuation of firm commitment 11 47 35 308.0
Reversal of other provisions 9 16 7 84.6
Gain on insurance claim 13 158 144 1,101.1
Gain on bargain purchase 41 — (41 ) (100.0 )
Gain on disposal of emission rights 26 0 (26 ) (100.0 )
Others 88 108 20 23.2
Total other operating income W 402 W 387 (15 ) (3.7 )
Our other operating income decreased by 3.7%, or Won 15 billion, from Won 402 billion in 2023 to Won 387 billion in 2024 primarily due to decreases in gain on disposals of investments in subsidiaries, associates and joint ventures and gain on bargain purchase, the impact of which was partially offset by increases in gain on insurance claim and gain on valuation of firm commitment. Such factors were principally attributable to the following:
• Our gain on disposals of investments in subsidiaries, associates and joint ventures decreased significantly by 92.8%, or Won 183 billion, from Won 197 billion in 2023 to Won 14 billion in 2024. In 2023, such gain related primarily to our recognition of Won 185 billion of gain on disposal of investments in associates related to reclassification of QSONE Co., Ltd. as a consolidated subsidiary following our acquisition of the remaining 50% of its shares, which had been previously classified as an investment in associates.
• We recognized gain on bargain purchase of Won 41 billion in 2023 related to our acquisition of additional shares of QSONE Co., Ltd. as described above, compared to no such gain in 2024.
• Our gain on insurance claim increased by 1,101.1%, or Won 144 billion, from Won 13 billion in 2023 to Won 158 billion in 2024 primarily due to significant insurance payments received in 2024 in relation to the flooding caused by Typhoon Hinnamnor at Pohang Works’ facilities in September 2022 compared to no such payments in 2023.
• Our gain on valuation of firm commitment increased by 308.0%, or Won 35 billion, from Won 11 billion in 2023 to Won 47 billion in 2024 primarily due to increases in the prices of non-ferrous metals relating to certain of our firm commitments.
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The following table presents a breakdown of our other operating expenses and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Other bad debt expenses(1) W 291 W 69 W (222 ) (76.3 )
Loss on disposals of assets held for sale 103 34 (69 ) (67.2 )
Loss on disposals of investments in subsidiaries, associates and joint ventures 19 73 55 289.7
Loss on disposals of property, plant and equipment 126 85 (41 ) (32.3 )
Impairment loss on property, plant and equipment 276 608 332 120.5
Impairment loss on intangible assets 130 48 (82 ) (63.1 )
Loss on valuation of firm commitment 47 40 (7 ) (14.9 )
Idle tangible asset expenses 4 3 (1 ) (17.7 )
Increase to provisions 38 85 46 120.6
Donations 67 75 8 11.7
Others 94 63 (31 ) (32.8 )
Total other operating expenses W 1,196 W 1,184 (12 ) (1.0 )
(1) In 2023, includes impairment loss on other receivables of Won 284 billion.
Our other operating expenses decreased by 1.0%, or Won 12 billion, from Won 1,196 billion in 2023 to Won 1,184 billion in 2024 primarily due to decreases in other bad debt expenses, impairment loss on intangible assets and loss on disposals of assets held for sale, the impact of which was substantially offset by an increase in impairment loss on property, plant and equipment. Such factors were principally attributable to the following:
• Our other bad debt expenses decreased by 76.3%, or Won 222 billion, from Won 291 billion in 2023 to Won 69 billion in 2024. In 2023, such impairment loss related primarily to projects of FQM Australia Nickel. In 2024, such impairment loss related primarily to loans and other accounts receivables of POSCO INTERNATIONAL, POSCO E&C and POSCO Canada Ltd.
• Our impairment loss on intangible assets decreased by 63.1%, or Won 82 billion, from Won 130 billion in 2023 to Won 48 billion in 2024. In 2023, POSCO Canada Ltd. recognized impairment loss on intellectual property rights of Won 89 billion related to its investment-in-kind of the assets and liabilities of Greenhills Mine Unincorporated Joint Venture to a new partnership established by Teck Coal Partnership. In 2024, our impairment loss on intangible assets related primarily to impairment losses on goodwill relating to POSCO VST Co., Ltd.
• Our loss on disposals of assets held for sale decreased by 67.2%, or Won 69 billion, from Won 103 billion in 2023 to Won 34 billion in 2024. In 2023, such loss on disposal of assets held for sale related primarily to our disposal of CSP – Compania Siderurgica do Pecem. In 2024, such loss on disposals of assets held for sale primarily related to the disposal of POSCO Canada Ltd.’s interest in the Greenhills Mine Unincorporated Joint Venture.
• Our impairment loss on property, plant and equipment increased by 120.5%, or Won 332 billion, from Won 276 billion in 2023 to Won 608 billion in 2024. In 2023, such impairment loss primarily related to termination of operations of certain lithium production facilities located in Gwangyang and Argentina. In 2024, such impairment loss primarily related to impairment losses on certain anode and cathode materials facilities that were in long-term idle status or that did not meet anticipated economic performance.
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Operating Profit
Due to the factors described above, our operating profit decreased by 47.0%, or Won 1,286 billion, from Won 2,738 billion in 2023 to Won 1,452 billion in 2024. Our operating profit margin, which is operating profit as a percentage of revenue, decreased from 3.6% in 2023 to 2.0% in 2024.
Share of Profit (Loss) of Equity-Accounted Investees
We recorded share of profit of equity-accounted investees (net) of Won 270 billion in 2023 and share of loss of equity-accounted investees (net) of Won 256 billion in 2024.
In 2023, we recognized a net gain from our proportionate share of equity-accounted investees of Won 270 billion primarily due to our share of gains of Won 292 billion from Roy Hill Holdings Pty Ltd., Won 50 billion from South-East Asia Gas Pipeline Company Ltd., Won 39 billion from AES Mong Duong Power Company Limited and Won 35 billion from POSCO-NPS Niobium LLC, the aggregate impact of which was partially offset by our share of loss of Won 112 billion of FQM Australia Holdings Pty Ltd. and Won 82 billion of SNNC. See Note 11 to the Consolidated Financial Statements.
In 2024, we recognized a net loss from our proportionate share of equity-accounted investees of Won 256 billion primarily due to our share of losses of Won 266 billion from NCR LLC, Won 117 billion from Zhejiang Huayou-POSCO ESM Co., Ltd., Won 62 billion from SNNC and Won 49 billion from HBIS-POSCO Automotive Steel Co., Ltd., the aggregate impact of which was partially offset by our share of gain of Won 203 billion from Roy Hill Holdings Pty Ltd. See Note 11 to the Consolidated Financial Statements.
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Finance Income and Finance Costs
The following table presents a breakdown of our finance income and costs and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Interest income W 502 W 577 W 75 14.9
Dividend income 50 77 27 53.4
Gain on foreign currency transactions 1,661 1,420 (241 ) (14.5 )
Gain on foreign currency translations 293 1,188 895 305.9
Gain on derivatives transactions 333 438 105 31.5
Gain on valuations of derivatives 201 899 697 346.8
Gain on disposals of financial assets at fair value through profit or loss 204 165 (39 ) (19.3 )
Gain on valuations of financial assets at fair value through profit or loss 572 201 (371 ) (64.9 )
Gain on valuations of financial liabilities at fair value through profit or loss — 239 239 N.A. (1)
Others 15 9 (6 ) (38.5 )
Total finance income W 3,831 W 5,212 1,381 36.0
Interest expenses W 1,001 W 1,052 W 50 5.0
Loss on foreign currency transactions 1,595 1,448 (147 ) (9.2 )
Loss on foreign currency translations 706 1,900 1,195 169.2
Loss on derivatives transactions 320 318 (2 ) (0.8 )
Loss on valuations of derivatives 77 109 31 40.2
Loss on disposal of trade accounts and notes receivable 85 83 (2 ) (2.4 )
Loss on disposals of financial assets at fair value through profit or loss 13 28 15 110.0
Loss on valuations of financial assets at fair value through profit or loss 51 81 29 57.0
Loss on valuations of financial liabilities at fair value through profit or loss 306 — 306 (100.0 )
Others 48 63 15 31.9
Total finance costs W 4,203 W 5,081 878 20.9
(1) N.A. means not applicable.
Our net loss on foreign currency translations increased by 72.5%, or Won 300 billion, from Won 413 billion in 2023 to Won 713 billion in 2024, as the Won depreciated against the U.S. dollar at year-end in 2023 and further depreciated (to a much greater extent) at year-end in 2024. In terms of the Market Average Exchange Rate, the Won depreciated against the U.S. dollar from Won 1,267.3 to US$1.00 as of December 31, 2022 to Won 1,289.4 to US$1.00 as of December 31, 2023, and further depreciated to Won 1,470.0 to US$1.00 as of December 31, 2024. In addition, we recognized net gain on foreign currency transactions of Won 65 billion in 2023 compared to net loss on foreign currency transactions of Won 28 billion in 2024, as the average value of the Won against the U.S. dollar depreciated in 2023 and further depreciated (to a greater extent) in 2024. The Market Average Exchange Rate, which was Won 1,267.3 to US$1.00 as of December 31, 2022, depreciated during 2023 to an average of Won 1,305.4 to US$1.00 in 2023 and further depreciated during 2024 to an average of Won 1,364.0 to US$1.00 in 2024. Against such fluctuations, our net gain on valuations of derivatives increased by 538.7%, or Won 666 billion, from Won 124 billion in 2023 to Won 790 billion in 2024, and our net gain on derivatives transactions increased by 836.5%, or Won 107 billion, from Won 13 billion in 2023 to Won 120 billion in 2024.
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Our net gain on valuations of financial assets at fair value through profit or loss decreased by 76.9%, or Won 400 billion, from Won 521 billion in 2023 to Won 121 billion in 2024. In 2023, we recognized such net gain as interest rates in Korea generally increased in the first half of the year before stabilizing in the second half of the year, which in turn resulted in a gain on valuation of financial assets. In 2024, such net gain decreased primarily due to a decrease in the volume of short-term financial products held.
We recognized net loss on valuations of financial liabilities at fair value through profit or loss of Won 306 billion in 2023 compared to net gain on valuations of financial liabilities at fair value through profit or loss of Won 239 billion in 2024. In 2023, we recognized such net loss as the market price of our shares into which the exchangeable bonds we had issued increased, which in turn resulted in a loss on valuation of financial liabilities. In 2024, we recognized a net gain as the market price of our shares decreased, which in turn resulted in a gain on valuation of financial liabilities.
Our interest income increased by 14.9%, or Won 75 billion, from Won 502 billion in 2023 to Won 577 billion in 2024 primarily due to an increase in our average balance of interest-earning financial assets, which impact was partially offset by a general decrease in interest rates in Korea and abroad.
Our interest expenses increased by 5.0%, or Won 50 billion, from Won 1,001 billion in 2023 to Won 1,052 billion in 2024 primarily due to re-financing of matured borrowings at higher interest rates than the original interest rates of such borrowings.
Profit before Income Taxes
Due to the factors described above, our profit before income taxes decreased by 49.7%, or Won 1,309 billion, from Won 2,635 billion in 2023 to Won 1,326 billion in 2024.
The following table presents our profit and loss by segment, prior to adjusting for goodwill and corporate fair value adjustments, elimination of inter-segment losses (profits), income tax expense and basis difference, and changes therein for 2023 and 2024.
Changes
For the Year Ended December 31, 2023 versus 2024
2023 2024 Amount %
(In billions of Won)
Steel Segment W 1,241 W 691 W (550 ) (44.3 )
Infrastructure Business — Trading Segment 724 537 (187 ) (25.9 )
Infrastructure Business — Construction Segment 183 (194 ) (378 ) N.A. (1)
Infrastructure Business — Logistics and Others Segment 171 104 (67 ) (39.2 )
Rechargeable Battery Materials Segment (236 ) (635 ) (399 ) 169.5
Others Segment 827 1,596 769 92.9
Goodwill and corporate fair value adjustments 172 (65 ) (237 ) N.A. (1)
Elimination of inter-segment profit (1,238 ) (1,087 ) 151 (12.2 )
Income tax expense(1) 789 304 (486 ) (61.5 )
Basis difference adjustments(2) 0 75 75 27,483.1
Profit before income taxes W 2,635 W 1,326 (1,309 ) (49.7 )
(1) Income tax expense presented herein reflects amounts determined under K-IFRS for purposes of segment profit measurement and may differ from income tax expense presented in the consolidated financial statements under IFRS.
(2) Basis difference adjustments are related to the difference in recognizing revenue and expenses, including income tax expense, of the Construction Segment of the Infrastructure Business in connection with the development and sales of certain residential real estate between the report reviewed by the chief executive officer and the consolidated financial statements. See Notes 3 and 40 to the Consolidated Financial Statements.
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Income Tax Expense
Our income tax expense decreased by 59.3%, or Won 468 billion, from Won 789 billion in 2023 to Won 321 billion in 2024, primarily due to the decrease in profit before income tax. Our effective tax rate decreased from 30.0% in 2023 to 24.2% in 2024. See Note 35 to the Consolidated Financial Statements.
In 2023, our effective tax rate of 30.0% was higher than the statutory rate of 26.4% primarily due to Won 151 billion of income tax expense resulting from tax audits of us and our subsidiaries.
Profit
Due to the factors described above, our profit decreased by 45.6%, or Won 841 billion, from Won 1,846 billion in 2023 to Won 1,005 billion in 2024. Our profit margin, which is profit as a percentage of revenue, decreased from 2.4% in 2023 to 1.4% in 2024.
Item 5.B. Liquidity and Capital Resources
The following table sets forth the summary of our cash flows for the periods indicated.
For the Year Ended December 31,
2023 2024 2025
(In billions of Won)
Net cash provided by operating activities W 6,168 W 6,664 W 4,572
Net cash used in investing activities (7,388 ) (4,487 ) (6,687 )
Net cash provided by (used in) financing activities (179 ) (2,302 ) 2,403
Effect of exchange rate fluctuation on cash held 17 222 (6 )
Net increase (decrease) in cash and cash equivalents (1,382 ) 97 282
Cash and cash equivalents at beginning of the period 8,053 6,671 6,768
Cash and cash equivalents at end of the period 6,671 6,768 7,050
Capital Requirements
Historically, uses of cash consisted principally of purchases of property, plant and equipment and other assets and repayments of outstanding debt and payments of dividends. From time to time, we also use cash for repurchases of our shares as well as investments related to our diversification efforts.
Net cash used in investing activities was Won 7,388 billion in 2023, Won 4,487 billion in 2024 and Won 6,687 billion in 2025. Our cash outflows for acquisition of property, plant and equipment were Won 6,733 billion in 2023, Won 7,670 billion in 2024 and Won 5,665 billion in 2025. We currently expect our cash outflows for acquisition of property, plant and equipment and investments in joint ventures and associates to be approximately Won 11.3 trillion in 2026, which we may adjust on an on-going basis subject to market demand for our products, the production outlook of the global steel industry and global economic conditions in general. We may delay or not implement some of our current capital expenditure plans based on our assessment of such market conditions. We had net proceeds from disposal of short-term financial instruments of Won 344 billion in 2023, Won 3,667 billion in 2024 and Won 106 billion in 2025.
In our financing activities, we used cash of Won 4,461 billion in 2023, Won 7,533 billion in 2024 and Won 5,158 billion in 2025 for repayments of borrowings. We used cash of Won 815 billion in 2023, Won 844 billion in 2024 and Won 915 billion in 2025 for payments of cash dividends. In 2023, we also used Won 340 billion for repayment of hybrid bonds. In 2024, we used cash of Won 92 billion for acquisition of treasury shares. We did not acquire any treasury shares in 2023 or 2025.
In recent years, we have also selectively considered various opportunities to acquire or invest in companies that may complement our businesses, as well as invest in overseas resources development
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projects. We may require additional capital for such acquisitions or entering into other strategic relationships. Other than capital required for such activities, we anticipate that capital expenditures, repayments of outstanding debt and payments of cash dividends will represent the most significant uses of funds for the next several years.
Payments of contractual obligations and commitments will also require considerable resources. In our ordinary course of business, we routinely enter into commercial commitments for various aspects of our operations, including raw materials purchase obligations and long-term shipping service contracts, as well as issue guarantees for indebtedness of our related parties and others. For our contingent liabilities on outstanding guarantees provided by us, see Note 38 to the Consolidated Financial Statements. Our purchase obligations include supply contracts to purchase iron ore, coal, nickel, LNG and other raw materials. These contracts generally have terms of one to ten years and the long-term contracts provide for periodic price adjustments according to the market prices. As of December 31, 2025, 48 million tons of iron ore and 18 million tons of coal remained to be purchased under long-term contracts.
In addition, POSCO entered into an agreement with Tangguh LNG Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. In order to compensate for a decrease in purchase volume in 2023, POSCO has agreed to purchase 120 thousand tons of LNG after completion of such 20-year term, from September 2025 to December 2026. The purchase price under the agreement with Tangguh LNG Consortium is variable based on the monthly standard oil price (as represented by the Japan Customs cleared Crude Price), subject to a ceiling.
POSCO INTERNATIONAL SINGAPORE PTE LTD. (“POSCO INTERNATIONAL SINGAPORE”) entered into a purchase agreement with Cheniere Marketing, LLC to purchase 370 thousand tons of LNG annually for 15 years commencing in November 2026, with an option to extend the agreement for five years. The purchase price is subject to adjustments based on the U.S. Henry Hub Natural Gas Spot Price. POSCO entered into an agreement to purchase such LNG from POSCO INTERNATIONAL SINGAPORE.
Capital Resources
We have traditionally met our working capital and other capital requirements principally from cash provided by operations, while raising the remainder of our requirements primarily through long-term debt and short-term borrowings. We expect that these sources will continue to be our principal sources of cash in the future. From time to time, we may also generate cash through issuance of hybrid bonds and sale of treasury shares and our holdings in available-for-sale securities.
Our net cash provided by operating activities increased by 8.0%, or Won 496 billion, from Won 6,168 billion in 2023 to Won 6,664 billion in 2024. Our profit decreased from Won 1,846 billion in 2023 to Won 1,005 billion in 2024. However, we recorded cash outflow related to increase in trade accounts and notes receivable of Won 983 billion in 2023 compared to cash inflow related to decrease in trade accounts and notes receivable of Won 1,354 billion in 2024 due to better management of our trade accounts and notes receivables. In addition, our cash used for income tax payments decreased from Won 727 billion in 2023 to Won 554 billion in 2024 and our cash generated from interest received increased from Won 448 billion in 2023 to Won 571 billion in 2024. Such positive impacts on our cash flows were partially offset by (i) cash outflow related to other current liabilities of Won 1,020 billion in 2024 compared to cash inflow related to other current liabilities of Won 15 billion in 2023 and (ii) a decrease in our cash inflow related to build up of our inventories from Won 1,313 billion in 2023 to Won 914 billion in 2024.
Our net cash provided by operating activities decreased by 31.4%, or Won 2,092 billion, from Won 6,664 billion in 2024 to Won 4,572 billion in 2025. Our profit decreased from Won 1,005 billion in 2024 to Won 527 billion in 2025. In addition, we recorded cash inflow related to decrease in trade
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accounts and notes receivable of Won 1,354 billion in 2024 compared to cash outflow related to increase in trade accounts and notes receivable of Won 649 billion in 2025. Furthermore, our cash used for income tax payments increased from Won 554 billion in 2024 to Won 840 billion in 2025 and our cash generated from dividends received decreased from Won 745 billion in 2024 to Won 438 billion in 2025. Such impacts on our cash flows were partially offset by cash outflow related to other current liabilities of Won 1,020 billion in 2024 compared to cash inflow related to other current liabilities of Won 389 billion in 2025.
We had net proceeds from borrowings, after adjusting for repayments of borrowings, Won 3,356 billion in 2023, net repayment of borrowings, after adjusting for proceeds from borrowings, of Won 1,633 billion in 2024 and net proceeds from borrowings, after adjusting for repayments of borrowings, of Won 235 billion in 2025. We had net repayment of short-term borrowings, after adjusting for proceeds of short-term borrowings, of Won 2,524 billion in 2023, net repayment of short-term borrowings, after adjusting for proceeds from short-term borrowings, of Won 218 billion in 2024 and net proceeds from short-term borrowings, after adjusting for repayments of short-term borrowings, of Won 2,159 billion in 2025. Long-term borrowings, excluding current installments, were Won 15,011 billion as of December 31, 2023, Won 14,882 billion as of December 31, 2024 and Won 16,375 billion as of December 31, 2025. Total short-term borrowings and current installments of long-term borrowings were Won 10,959 billion as of December 31, 2023, Won 11,116 billion as of December 31, 2024 and Won 12,117 billion as of December 31, 2025.
We periodically increase our short-term borrowings and adjust our long-term borrowings depending on changes in our capital requirements. For the maturity profile of our borrowings, their currency denomination and interest rates, see Notes 17 and 23 to the Consolidated Financial Statements. We continually take into consideration various factors when meeting our financial requirements, including financial market conditions, specific funding needs at a given time, and hedging requirements to address our market risks such as exchange rate risk and interest rate risk. From time to time, we also generate cash from the sale of our treasury shares. Our net borrowings-to-equity ratio, which is calculated by deducting cash and cash equivalents from total borrowings and dividing the net amount by our total equity, was 32.38% as of December 31, 2023, 31.30% as of December 31, 2024 and 34.36% as of December 31, 2025.
We believe that we have sufficient working capital for our current requirements and that we have a variety of alternatives available to us to satisfy our liquidity requirements to the extent that they are not met by funds generated by operations, including the issuance of debt and equity securities and bank borrowings denominated in Won and various foreign currencies. However, our ability to rely on some of these alternatives could be affected by factors such as the liquidity of the Korean and the global financial markets, prevailing interest rates, our credit rating and the Government’s policies regarding Won currency and foreign currency borrowings. For a discussion of our use of financial instruments for hedging purposes, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Liquidity
We had working capital (current assets minus current liabilities) of Won 24,264 billion as of December 31, 2023, Won 21,324 billion as of December 31, 2024 and Won 20,514 billion as of December 31, 2025. Our holdings of cash and cash equivalents (which do not include cash and cash equivalents categorized under “assets held for sale”) were Won 6,671 billion as of December 31, 2023, Won 6,768 billion as of December 31, 2024 and Won 7,050 billion as of December 31, 2025. As of December 31, 2025, we held approximately 59% of such cash and cash equivalents denominated in Won and the remainder denominated in foreign currencies. Our holdings of other receivables (current assets) and other short-term financial assets were Won 13,351 billion as of December 31, 2023, Won 10,761 billion as of December 31, 2024 and Won 10,699 billion as of December 31, 2025. As of December 31, 2025, approximately 23% of our cash and cash equivalents, other receivables and other
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short-term financial assets were held outside of Korea, which we expect to use in our operations abroad, including capital expenditure activities. In the event that such assets are needed for our operations in Korea, such amounts are typically not restricted under local laws from being used in Korea. In addition, we believe that there are no material tax implications in the event our foreign subsidiaries elect to grant cash dividends to us. POSCO had total available credit lines of Won 3,000 billion as of December 31, 2025, Won 590 billion of which was used as of such date. We have not had, and do not believe that we will have, difficulty gaining access to short-term financing sufficient to meet our current requirements.
Our liquidity is affected by exchange rate fluctuations. See “— Overview — Exchange Rate Fluctuations.”
Capital Expenditures and Capacity Expansion
Our cash outflows for acquisition of property, plant and equipment were Won 6,733 billion in 2023, Won 7,670 billion in 2024 and Won 5,665 billion in 2025. We currently expect our cash outflows for acquisition of property, plant and equipment and investments in joint ventures and associates to be approximately Won 11.3 trillion in 2026, which we may adjust on an on-going basis subject to market demand for our products, the production outlook of the global steel industry and global economic conditions in general. We may delay or not implement some of our current capital expenditure plans based on our assessment of such market conditions.
Our current plan for capital investment in production facilities emphasizes capacity rationalization, increased production of higher value-added products, improvements in the efficiency of older facilities in order to reduce operating costs and construction and expansion of facilities related to our non-steel businesses. The following table sets out the major items of our capital expenditures as of December 31, 2025:
Project Expected Completion Date Total Cost of Project Estimated Remaining Cost of Completion as of December 31, 2025
(In billions of Won)
Restoration of Pohang Phase 3 coke ovens February 2030 W 5,886 W 4,230
Construction of anode/cathode and lithium ore commercialization plant July 2027 7,388 2,181
Construction of Gwangyang LNG terminal May 2027 994 261
Item 5.C. Research and Development, Patents and Licenses, Etc.
We maintain research and development programs to carry out basic research and applied technology development activities. As of December 31, 2025, POSCO Technical Research Laboratories, which engages in research and development efforts primarily in the areas of advanced steel manufacturing technologies, employed 628 personnel, including 432 researchers. As of December 31, 2025, our New Experience of Technology Hub, which focuses on research and development relating to (i) artificial intelligence, (ii) raw materials for rechargeable batteries and (iii) hydrogen and other environmentally-friendly energy solutions, employed 276 personnel, including 217 researchers.
Our technology development department also works closely with the Pohang University of Science & Technology, Korea’s first research-oriented college founded by us in 1986, and the Research Institute of Industrial Science and Technology, Korea’s first private comprehensive research institute founded by us in 1987. We also established POSCO Research Institute (POSRI) in 1994, which engages in research activities and consulting services.
Our research and development program has filed 48,713 industrial rights applications relating to steel-making technology, 10,155 of which were registered as of December 31, 2025, and has
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successfully applied many of these to the improvement of our manufacturing process. In addition, our research and development program has filed 2,885 industrial rights applications relating to electric vehicles and rechargeable battery materials technology, 1,684 of which were registered as of December 31, 2025.
Item 5.D. Trend Information
These matters are discussed under Item 5.A. and Item 5.B. above where relevant.
Item 5.E. Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with IFRS as issued by IASB. See Note 2 to the Consolidated Financial Statements for a discussion of our critical accounting estimates.
Item 6. Directors, Senior Management and Employees