PKX

Hello. I head up the finance and IR division at POSCO Holdings. My name is Kim Seung-jun. First, I'd like to thank everyone participating in the 2026 first quarter earnings call. Thank you to the investors and analysts. In the first quarter, the U.S.-Iran war disrupted the energy supply chain, which triggered greater fluctuations in the financial market that led to unstable exchange rates, so we witnessed aggravated challenges. Despite these headwinds, POSCO Holdings recorded consolidated revenue of KRW 17.9 trillion and KRW 710 billion in operating profits. Improvements are observed in both revenue and profit against the previous quarter. Looking at each business sector in rechargeable battery materials, lithium prices rose, helping lithium production subsidiaries to perform, significantly reducing losses. Particularly in POSCO Argentina, plant operation is ramped up while elevated lithium price continues to hold.

As a result, in March, it recorded the first-ever monthly KRW profit. We believe this strong performance will continue in the second quarter. In the second quarter, we also anticipate POSCO Argentina's first-ever quarterly KRW profit. In steel, despite volume growth in sales, rise in FX causes us to pay more for raw materials, squeezing KRW profit. Nevertheless, improved performance in overseas subsidiaries helped register an overall rise in KRW profit. Once geopolitical risk in the Middle East subsides and input costs pushed up by FX and oil price hike come down, taking into consideration time delay for cost impact accounting, we anticipate gradual KRW profit gains starting in the second half. In the infrastructure business, POSCO International saw its steel exports climb, as well as demand recover in gas and energy sectors. Additionally, POSCO E&C has recovered its losses resulting from last year's accidents, transitioning to black ink through sizable KRW profit gains.

What is notable this year is the strategic shift in our steel business that is coming to fruition. We finalized the investment of PDSS, the underperforming China subsidiary, and to reduce the load of high cost to aging facilities, No. 2 FINEX has been retired. Beginning in June with the goal to expand our low-carbon production system, the world's largest new 2.5 million ton capacity electrical furnace will go into operation. To validate POSCO's proprietary HyREX technology, a 300,000 ton capacity demo plant has broken ground. We've also acquired government permits for the Pohang HyREX plant site. These developments help us to set up the groundworks to build our sustainable business structure. The integrated steelworks project in Odisha, India is progressing. In October 2024, we signed an MOU with JSW and an HOA in July 2025. Most recently, a JV agreement has been signed.

More detail regarding the recent agreement will be delivered in a few minutes by the Head of our Strategic Investment Division. Finally, allow me to speak about the third interim shareholder return policy to go into effect this year. In our effort to offer a proactive shareholder return policy, we've been paying quarterly dividends since 2016. The first installment of our interim shareholder return policy was announced in 2020. This year, we deliver its third installment. To enhance the ability of our shareholders to have better visibility into dividends, we wish to shift an earnings-based and performance-linked return policy. Based on net income attributable to controlling interests, we aim to deliver 35%-40% shareholder return ratio. We will deliver a blended mix of cash dividends and share buyback and cancellations to boost shareholder value.

Looking forward, we'll continue to drive strategic investment for future growth and harmonize that with earnings and performance-linked shareholder returns. This is how POSCO Holdings will build a virtuous cycle that generates robust business growth that will feed into boosting shareholder value. Now I would like to invite the Head of our Strategic Investment Division to discuss the JVA signing with JSW in India. Ms. Han Young-ah, our IR Office Head, will offer more detail regarding our first quarter 2026 earnings.

Hello, everyone. I'm with the Strategic Investment Division at POSCO. My name is Kim Gwang-mu. On April 20th, JSW and POSCO signed an agreement for joint venture on an integrated steel mill. Let me deliver some more detail. Looking at governance first, this is first of all a 50/50 joint venture.

Each company will represent three directors on the board, and the CEO will have a five-year term, and each will alternate to appoint the CEO. POSCO's technology capability as well as JSW's operational capability and the cost competitiveness is what we are going on on this joint venture project. From a marketing perspective, JSW has a strong sales network, and POSCO Maharashtra has a strong automotive steel sheets capacity. We want to be able to mitigate some of the entry barriers and to be able to generate stable profits in a high-growth market. For operational capability, this is not a market we enter alone. This is a joint venture. It is with the number one steelmaker in India, JSW, and we'll be able to take advantage of their business capability.

Local entry often triggers foreign risk, and we're able to eliminate that here. Product capability, of course, POSCO has a lot of product prowess, we'll be taking advantage of that as well. Low cost iron ore material use is one of our advantages. Construction-wise, we will be completing this project by 2031. Looking at the plant site and the infrastructure surrounding the site, first of all, the site is in the state of Odisha, which is an area that promises convenient supply of raw materials. Rail, shipping, power and water use offer some advantages as well. There's some geographical advantages that we can accrue.

The biggest advantage is because we've tried to do this before and had difficulties in procuring site as well as permits and licenses, this time around, because we've already acquired the site, a lot of the risk involved in this business has already been eliminated. Business overview. This will be blast furnace-based, 6 million ton capacity for high-premium steel products. High-profit automotive steel products need customer certification. First of all, we will be responding to construction steel demand in the beginning stages to be able to generate some profit before we move into automotive steel sheets. Initially, we will be taking some of the materials from Korea, exporting it to India to be processed there for final product. This project is different because we want to be able to localize all sourcing.

Previously, and facility-wise, this will be an integrated mill that is not too different from what we have here in Korea, but we've added a pellet plant. That is the big difference. Investment overview. 30% of our own assets and 70% liability is what the funding is composed of. This is to ensure that we have the highest profitability. From a competitiveness perspective, CapEx competitiveness, first of all, we'll be able to cut costs on construction with cheap labor in India. There will be a lot more competitiveness that we can add to this investment project. As mentioned earlier, we'll be able to use inexpensive iron ore available in India and of course, low-cost labor as well. Our high-tech capability will promise the production of premium steel products that will promise profitability.

Cost-wise, profit-wise, from both perspectives, we can accrue advantages on this project. This is not a one-time investment project. I think, we all know that India is a high-growth market, we will be taking advantage of all growth opportunities in the market going forward. Thank you.

Questions regarding this project, please hold on to them until a little bit later. Next, we will talk about in Q1, consolidated revenue came in at KRW 7.9 trillion, up by around KRW 1 trillion QOQ. OP was KRW 707 billion, improvement from the previous year. EBITDA of KRW 1.8 trillion, up KRW 721 billion QOQ. If you look at the Steel Business, profit increased by KRW 91 billion.

At POSCO, higher FX rates, logistics costs, and raw material prices have left the margins under pressure. That said, supported by the base effect from the Zhangjiagang operation, which had posted large loss in Q4 of last year, and due to restructuring a lot of its sales, as well as earnings recovery in India and Vietnam, the overall profit, including overseas steel, increased slightly. In the rechargeable battery materials, losses narrowed significantly, recovering about KRW 150 billion QOQ. Improvement was driven by higher operating rate at Argentina lithium plant. At POSCO Pilbara Lithium Solution, the rebound in lithium prices and reversal of inventory valuation losses were also accounted for. The profits in the infrastructure also increased by around KRW 415 billion QOQ. POSCO International delivered solid profit growth and supported by favorable market conditions.

POSCO E&C, which recorded large loss in previous quarter, also turned to profit, posting KRW 53 billion in OP. In summary, profit levels which had been way down in the previous quarter by several one-off factors, normalized overall. In particular, what is meaningful structurally is that from the recent rise in lithium prices and the start of full-scale commercial production at the Argentina operation, all of these factors combined have led this upside. Moving on to page six. Let me talk about advancing the structural transformation of steel business. POSCO is shifting business structure by reducing high-cost aging facilities, expanding its EAF-based low-carbon production system. POSCO is moving forward with the closure of No. 2 FINEX at Pohang, which is about 1.5 million tons.

This is actually very crucial, which has been very much a plus for our operations, but it's a very old facility, and it is better for us to close it for its low operational efficiency. We are currently planning to build a demo plant, preparing to transition to a HyREX. There was also approval from MOLIT for the changes to the Pohang Industrial Complex plan. POSCO is now able to utilize 1.35 million sq m of public waters near Pohang Steelworks to create the site that can be used for HyREX transition. There is Gwangyang EAF, which broke ground in February 2024, begin operation in June with an annual capacity of 2.5 million tons and will be a key facility in POSCO's transition.

Now let me delve deeper into our lithium subsidiaries. First of all, POSCO Argentina. Is currently entering the commercial production phase of its phase one plant. As of March, the operating rate had risen to around 70%. The utilization rate has gone up, as for January and February, there have been depletion of the low price contracts. With the signing, there was about KRW 50 billion of losses per quarter. We were able to narrow that gap widely at this time, and we'll be able to turn to profits in the near future. In the third quarter and the fourth quarter, we expect to see earnings improved as well. In the first quarter, there was a signing of long-term supplier agreement with SK On about 25,000 tons. The customer base is also expanding steadily, and we'll be able to also secure more volumes.

Now, with the increase in utilization rates, the costs are going down. Other than that, there is also a mid to long-term effort being made in order to reduce production costs. To give you an example, in April this year, when it comes to the downstream strategy or downstream contract, it was changed into a fixed format, fixed form. There is also additional PP effort being made for the upstream contracts as well. When it comes to the phase II construction, it is progressing towards completion in October this year. We are also securing additional brine resources, and there's also a test commissioning that is underway. We'll be able to bring in more profits for this plant. As for this plant, it will create in a conventional way and also produce technical grade lithium.

Compared to phase I, it will be much easier for production. We completed the Argentinian brine plant resources with 100%, and we believe that we'll be able to secure more additional brine resources in the future. Now let me talk about POSCO Pilbara Lithium Solution. There was about KRW 50 billion losses, but it was actually reduced to KRW 3 billion at this time. Mostly it was driven by increased sales and production, but it was also partially driven by the reversal of the inventory losses. The biggest factor also was the higher lithium prices as well as the spodumene prices. Spodumene prices has gone up to 11% compared to lithium prices in terms of its percentage.

As for this POSCO Pilbara Lithium Solution, if the raw material costs go up, the spreads will squeeze, and it could pose as a burden for the company in the short term. Going forward, it will be very much impacted by the spread that I talked about rather than lithium prices. There are some uncertainties over there. As for the Australia's mineral resources, once we complete the definitive agreement, there are merger control procedures that need to be done. Because of this, merger control reviews, we don't know when the exact timing of the joint venture establishment will be. Both companies are working towards establish a joint venture around the fourth quarter of this year.

Since the time of investment, spodumene prices have risen sharply, we expect this to significantly boost the new JV's ability to generate cash flow. POSCO HY Clean Metal recorded its first ever quarterly profit since its commissioning. As a non-Chinese recycling company, we can say that it has entered a phase of stable operations. Moving on to page eight. From 2023 to 2025, we have implemented our second interim shareholder return policy. Over the past three years, we paid out 2.3 trillion cash dividends and 1.2 trillion KRW in canceled treasury shares, all in on 3.5 trillion KRW of shareholder return. Despite challenging business environment, we did our best to fulfill our promise to our shareholders.

With regards to treasury stock cancellation, the policy that was announced in 2024, it accumulated to KRW 1.2 trillion, and we completed about KRW 635.1 billion of cancellation that remained. All in all, the future, the treasury share cancellation plan was about KRW 1.8 trillion for the past three years, and we have completely succeeded it. Let me talk about the next three years. When it comes to our existing shareholder return policy, it was to make sure that the surplus cash flow can be used to pay out dividends as well. As the strategic investments are rising, on the rise, the pay, dividend payout based on free cash flow in terms of growth could pose limitations.

There were some voices about that. We want to reinforce our high dividend market position and payout visibility. That is why we plan to shift toward a performance-linked shareholder return policy based on earnings. We have set a target shareholder return ratio of 35% to 40% of adjusted net profit attributable to controlling interest. Now, when it comes to net profit, by using this adjusted net profit, excluding non-recurring gains and losses as a baseline, we aim to, for example, the restructuring and so forth will be excluded. By doing so, we aim to secure both the payout visibility and sustainability. We want to address the uncertainties of the dividend payout ratio, payout policy based on free cash flow.

Going forward, we will continue to maintain a balance between growth investments and shareholder returns by thereby enhancing our mid to long-term corporate value. Now let me brief you on the earnings by company in more detail. First, POSCO. POSCO's Q1 OP declined QOQ to KRW 213 billion. Sales volume recovered from the previous quarter. Production and utilization rate normalized. Selling prices also remained broadly stable QOQ, but due to higher raw material prices and because of the war in Iran, the FX rates and freight costs went up, so the cost burden for key raw materials increased. For example, when we source raw materials, because of the Iranian war, the logistics costs have gone up. All of that is serving as a cost burden. We will continue to make.

despite our efforts, this cost push pressure will remain as burden in the second quarter as well. Moving on to page 11, Overseas Steel. Indonesia, India, Vietnam operations are improving results, and the Zhangjiagang operation has been divested. Let's go to page 12, POSCO Future M. POSCO Future M recorded both higher revenue operating profit. When it comes to cathode material, it continues to secure new customers and expand sales. As for anode, the impact of inventory adjustment is still going, but earnings improved due to base effect from the large loss recorded in the previous quarter. Moving on to page 13, POSCO International. POSCO International delivered solid results in both energy and trading businesses. In energy, profits increased on higher power plant utilization rates and S&P rise.

In trading as well, profits improved thanks to higher sales of steel and materials as well as favorable market conditions. The capacity expansion effect from Senex Gas Fields and a rise in the global commodity prices also had a positive impact for trading. Moving on to page 14. POSCO E&C posted a sharp improvement in OP, turning to profit. There were some one-off factors, but the projects are becoming normalized, and we want to also strengthen our cost control. We expect to maintain such profitability level. This concludes brief presentation on 1st quarter earnings of 2026. We will move on to the Q&A session. Thank you very much.

We'd like to begin the Q&A. If you would like to ask a question, please press star one on your phone. If you'd like to cancel your question, please press star two. The first question is from Hyundai Motor Securities. Please ask your question.

Hello, my name is Park Hyun-wook. Thank you for this opportunity to ask a question. I have about four questions. The first is regarding the JV agreement in India. You mentioned that this is part of your localization strategy. Once the JV goes into effect, in the past, you exported items to POSCO Maharashtra to be processed in India. What will happen to PMH after the JV agreement goes into effect? Second question is about the steel market outlook. Hot-rolled products have been rising in price.

What is the rationale behind that price hike, and how does this impact your business? From a distribution price perspective, hot-rolled price has increased, but relatively speaking, cold-rolled has stayed stagnant. What do you project for cold-rolled products going forward? Third question regarding the Iran situation and the Strait of Hormuz. Because this is likely to become a prolonged event, in terms of your exports as well as your FX, and other business decisions, how does this situation impact your business? The fourth question is regarding your lithium business. Lithium prices are rising, and I think it's very positive that performance has improved in the first quarter. Is this the result of rising lithium prices, or is it a result of something else?

For each factor, what is the proportion you would apply as the influencing factors? POSCO Future M has turned a profit. What do you project to be its operating profit this year? That is all of my questions.

My name is Noh Sung-nae, POSCO Marketing Strategy Office.

My name is Kim Gwang-mu, Strategic Investment Division. I actually spoke to you about the JVA in India. In terms of the export volume, we need to consider the volume going to POSCO Maharashtra and the other, the volume that goes from POSCO to India per se. I think we have to separate this into two parts.

Up until the JV goes into effect, I think the hot roll products will continue to export in the same volume that we've seen in the past. Once the JV goes into effect, because we will not be able to produce automotive steel sheets immediately, it will be something that we will gradually move on to. Initially, we'll be supplying non-automotive steel products, and I think our exports will not be impacted.

Second question. I would like to address the second question. Again, my name is Noh Sung-nae, Marketing Strategy Office head. Demand has been lackluster, and because of the price drops as well as hikes in oil price and other input prices, this has caused triggered a lot of pressure. Because demand is increasing, hot roll product prices have been increasing as well.

This price is likely to hold for some time, even into the future. I believe because of the hot roll price, the cold roll product price will be impacted as well. The anti-dumping cases that are being evaluated, this is going to impact future pricing as well. There's still pressures on our cost, but given the situation in the Middle East as well as our own domestic market situation, we will continue to look at our price in consideration of these situations. We've had many factors that pushed the price in the past, but because our input cost is also increasing, our margin is being squeezed. In the future, Southeast Asia and India will become new regions where we will have to identify different sources to for selling.

Hormuz Strait closure as well as oil price hikes, this is something that POSCO is most impacted by, so I'd like to ask someone from POSCO to answer this question.

My name is Ha Seong-Yeol, Finance Office Head. Because of the Iran war, I think the business that is most highly impacted among POSCO group of companies is POSCO, first, because of FX, the other because of oil price hikes, next price hikes in LNG. FX impact is probably self-explanatory because we spend more dollars than to buy dollars. That's where the impact is. We do use a lot of oil, and so this causes a lot of pressure in our input costs. LNG price is the same.

Our response for the FX situation is we want to be able to bring in more dollars. Our settlement currency is being shifted, and we're seeing some impact there already. For LNG, we are diversifying our supply routes to other countries, such as Indonesia. We're seeing impact here as well. Third, by increasing efficiency of energy use, we are identifying various ways to cut energy use costs. We are making efforts to offset some of these price hikes. It's very difficult to offset all cost increases. Therefore, we will have to pass some of this on to the final price of our products. We are an infrastructure business. We have our social responsibility to keep our prices rationalized. We will be very prudent in pushing up prices here.

In relation to this issue, we've talked about oil, FX, and even LNG and energy prices. In terms of FX impact, of course, there's negative impact on POSCO, but we also have POSCO International, which is an exporting company, and at POSCO Future M, they are positively impacted by FX fluctuations. I think the positive impact is able to cover about 50% of the losses experienced at POSCO.

My name is Yoon Tae-il, Energy Materials Business Management Office. We have had continuous deficits, especially in brine lithium as well, as in HY Clean Metal. However, we've seen profits registered this quarter. With these profit gains, we're able to offset some of the losses we've experienced in the past.

Exactly what proportion has offset which parts of the losses, I can't tell you for sure, but what I can tell you is because our leading customer, GM, had canceled all of its contracts, we were unable to deliver what we had produced. Now we are transitioning some of our supplies to energy industries, and so our plant is at 70% utilization rate. I think all of these positive factors are mixed, to say the least.

Infrastructure business, Oh Youngdal. POSCO E&C's profit size projection was the question, I believe. Operating profit is projected to be KRW 120 billion. There are some additional input cost risks. Some of the project value adjustments as well as other cost-cutting efforts will help us to push up our profit. Our business plan is to achieve KRW 120 billion. I believe we will achieve that.

Next question, please.

Next question is from Hana Securities, Park Sung-bong, please go ahead.

Hello, I'm Park Sung-Bong from Hana Securities. I would like to ask two questions. First of all, regarding the direct employment of the subcontractors, we've heard about it on the news, I believe there are about 7,000 of them. If that is realized, the SG&A costs could go up.

I would like to know how much of a hike in the SG&A costs that we can expect. The second question is, you mentioned about turning to profit in the second quarter, and probably in the latter half of the year, the utilization will go up. I think that overall we can look at profitability. When it comes to lithium prices or lithium business, profits, what are your expectations for this year?

Hello, I am Head of Finance at POSCO. Regarding the direct employment of the subcontractors, employees and, cost increase. Of course, partial increase in the cost or expenses will be inevitable because the benefits-related policy and measures need to be included. When it comes to labor costs, as well the employee, benefits costs, that could result in increased expenses.

We're going to complement the relevant policies as well as improve work efficiencies. We want to complement them, the increasing costs, with other measures. Of course, we cannot confirm the actual impact for the time being. Now, when it comes to the brine as well as the iron ore lithium businesses, we have to consider them separately. As for the lithium brine, the Argentinian project, as our CFO mentioned, we believe that it is going to continue to see profits. Last year, there are some low price contracts that will come to completion by the end of April. That could have an impact on April, but from May, we will turn to a profit.

When it comes to the overall volume, it is subject to market conditions in the second half. When it comes to lithium concentrates, since it is a concentrate, it needs spodumene as a raw material. The average spodumene price in March, and if you compare it to now, the selling price has increased about 5%, but the spodumene price has risen 20%. If you make the calculation, the raw material prices, we expected it to be 70%, but it has gone up to 85% overall. It continues to remain very high, but we have to see whether it continues to remain very high. According to our estimation, at this raw material price level, even China, without subsidy, they cannot turn to a profit.

We believe that there is going to be a narrowing of the gap going forward. In the second half, the brine lithium will be able to turn to profit, and the lithium concentrates, the 80% of the selling price is spodumene, we have to really closely watch the prices of the spodumene. Now, let me add some comments about the recruitment or employment of the subcontractor employees. When it comes to POSCO, subcontractor employees, there are some costs that have incurred over the years. Once they are directly employed, they will be translated into the labor cost as well as employee benefit costs. The direct employment will not have a huge impact.

However, when it comes to the level of if we are to include like additional employee benefits, including the communications costs as well as the in-house the meal costs and so forth, that could lead to a slight increase in the labor costs as well as the employee benefit costs. After the direct employment, you know, we will see more streamlined control and supervision structure, so that will lead to enhanced work efficiency and productivity. Overall, it will contribute to enhancing competitiveness of the company. In the long term, it is not going to have a huge impact in terms of costs.

Next question.

Next question is DB Securities. Please ask your question. I have two questions.

First, besides India, some of your overseas investments included Cleveland-Cliffs and the Whyalla steelworks in Australia. Do you have any budgets set aside or timeline set aside? In terms of HyREX investment, you once estimated KRW 40 trillion. In which areas would you continue to invest this? Can you divide this up into the different areas of investment that HyREX will need?

My name is Kim Gwang-mu, Strategic Investment Division. Let me answer your first question. In 2025, in order to enter the U.S. market, we signed an MOU with Cleveland-Cliffs. For cooperation and business synergy, we wanted to be able to cooperate. There's been a lot of negotiation ongoing, especially about corporate valuation, but there are a lot of differences in opinions that is making it difficult for us to reach an agreement.

At this point in time, I'm afraid I don't have any more update, and we do not have a scheduled date for completion of this agreement. On the Whyalla Steelworks, it has gone into bankruptcy management, and this is under Australian government supervision. For POSCO, we are cooperating with BlueScope, Japan's NSC, and India's JSW. We have submitted an NBIO to the government. By the second quarter of this year, they will be selecting priority candidates to take over this facility. Profitability schedule as well as investments will be determined at that point, and FS will continue into the third quarter. At this point in time, the first step we have to pass is to be selected among those viable candidates.

I will answer your second question. My name is Kim Seung-jun. You mentioned KRW 40 trillion. This is inclusive of all costs relevant to HyREX transition. Looking at the different items, there is the cost for the transition of facilities, and there's also the cost related to hydrogen. This includes all of the ancillary projects related to hydrogen development and production. Because the cost is increasing every time, I think I really couldn't give you specific numbers at this point. This is all I can deliver at the moment.

Next question, please.

Next question is KB Securities, Lee Joon-Hyung.

Hello, I'm Lee Joon-Hyung from KB Securities. I have a question about lithium. Now, in the slides, POSCO Argentina earnings have, in terms of revenue, increased by KRW 9 billion, but the OP by KRW 37 billion. How were you able to achieve such a dramatic earnings improvement, especially the profits improvement? Can you please elaborate more on that? The phase II will be completed by October. phase II , when will that have impact on their earnings, since when? From when? If that is accounted for, when will the overall lithium business turn to profit? I would like to ask about the timing of turning to profit.

Hello, I am from Energy Materials Office. The OPs have improved drastically compared to revenue. That is thanks to utilization rate hike. What is also more important is that the lithium prices last year when they were very, very low, we had contracts that were very competitive that were signed. We completed a ramp-up, and we will go for commercial production. The certification is underway, so that is why we have gotten the prices at the index level from our customers. Our selling prices are very much close to the index level as well. That has translated into improved profitability. When it comes to the phase II and that impacting our profitability, our depreciation cost will be reflected from October.

The depreciation level or the base line for reference for Latin America is about 25 years. We consider that it will be about 10 years. We believe that sales will be quite challenging for us because we don't have a lot of customers. We want to consider the depreciations as a fixed cost. As with the phase II, we will have about KRW 15 billion of losses. Phase I and II combined, we believe that we will definitely turn to profit this year. A similar question was made from DB Partners and Corate. I hope that this answer answers your questions as well.

Next question please.

Next question is from iM Securities, Kim Yun-Sang. Please ask your question. Sorry.

My name is Kim Yun-Sang. I have several questions. First, regarding lithium. Let me add one question. There are some plants that have closed and businesses that have gone out of business. I think lithium supply is short. I'd like to know what your projections are about the lithium demand by the end of this year. I think you are at the turnaround point as projected, because our lithium business continues to experience difficulties. There are some businesses that are hard hit, and Albemarle is projecting this as well. When will the deficits turn to profit in the market? Third, CATL's sodium-ion battery, how will this impact the lithium battery sector? Fourth, about India. Through the JV agreement, I think what you are looking to capitalize on is low cost and the availability of input materials.

Given the demand and supply projections, do you have enough to allocate to the JV in India?

Hello. Energy Materials Business Management Office. Lithium is in shortage, especially in the hard rock lithium because of the ESS demand. Brine lithium is very difficult to add volume, so we will have to replace this demand with or respond to this demand with hard rock. Because there are limitations to what we can take from China, we have to turn to Australia, and that's why spodumene prices have really soared. There are many announcements that we heard in February, which put the price at $20-$26. UBS and JPMorgan have assessed this to be above $26. What we believe is we can achieve our operating profit at prices even lower than that.

Our projection is between $24-$25. Twenty-five dollars is, I think, the standard being used by the industry. Compare to about two months ago, prices have gone up by about $2-$3. The second question. As I mentioned earlier, Pilbara Lithium Solution is very much dependent on the price of spodumene. If we can add A and B and get to a positive territory, that would be great, but this is very difficult at the moment. Even with the spodumene prices, at where they are, we want to be able to cut costs, and we are looking into other alternative mines as well. There's a lot of effort we're making. CATL's sodium-ion batteries, how does it impact our lithium battery business? Currently, the impact is small, but how much can this pervade the market is the question that we're trying to answer.

According to experts, some will be looking at about 3% penetration in the ESS market. Others put it at about 3%-4%. There is a lot of advantages here because of price, because of stability, because of charging speed. I think this will continue to pervade or make inroads into the market. How does it impact our lithium battery market? It will replace LFP, but it will not impact NCM market. We are also looking at the LH market, and so I think a calibration with the LH market is a little bit difficult at the moment.

My name is Kim Gwang-mu, Strategic Investment Division. Let me answer your question about the acquisition of iron ore. Iron ore price in India compared to the global iron ore price is quite different. The iron ore index price in the global market and the iron ore price used in India, if you compare the two, it's the Indian price is about 50%-60% lower. The government actually applies 30% tariff to impair to dissuade people from exporting this inexpensive iron ore outside India. I think cost-wise, we have a definite advantage and stable supply of iron ore.

Looking at it from that perspective, most of the iron ore in India is in the eastern region of India. Odisha is on the east side of India, so we are closer to these mines. JSW has 45% self-sufficiency, or so they claim. Because other steel makers have lots of mines, and they own them in the vicinity of our new plant, I don't think we will experience any difficulty in acquiring the needed iron ore. Our plan is to set up by 2031 and then to put it into operation by 2032. Our iron ore acquisition selections have already been made. Once you schedule ends. Some of the mines have sold rights that expire in 2032.

Come 2032, I think we will have more mines that we can acquire, so that we're looking forward to doing that.

Next question, please.

Next question is from Samsung Securities, Peptison. Please go ahead.

I have two brief questions. First is about investment in India. It is seeing increased structural demand, so it is attractive, a market. There is also a domestic capacity expansion in India, and also the global players have entered the Indian market to increase production. Competition is going to become increasingly fierce in that market. In that sense, we can consider ourselves as a latecomer in the market. What kind of competitive edge do we have to be able to fare well in the market? The second is about electrical arc furnace, which will go operational from Q2.

When it comes to EAF, I would like to know about additional costs that could incur because of the operation of EAF. If that is the case, how much would that be?

I am Kim Gwang-mu, Head of Strategic Investment Division. You mentioned about the mismatch between supply and demand in the India market. As of 2024, India's steel demand is about 150 million tons, and supply is about 140 million tons. 10 million tons of shortage of supply. What will be the demand in the Indian market for steel? By 2035-2040, India is going to see an increased economic growth, about 6%-6.5%, and the steel demand is also going to see an increase 5%-6%.

By 2035, we believe that about 250 million tons, 250 million tons-260 million tons of demand for steel will be there. In terms of supply, the major, four major players, according to their disclosure, we lack or we're short of 20 million tons of steel. Even though the plan, if the plan is actually goes ahead as planned, but if it doesn't, then we will have a more shortage. When it comes to a capacity expansion in India, it's a little bit different from China, because the major four represents 80% of the market share. Their influence is very big. In that case, the capacity expansion will not be a next problem. We have to, we believe that our competitive edge in the high-end or premium steel will be our key differentiator, differentiating point.

I am Hong Yoon-Sik, Steel Business Management Office Head. You mentioned about the increasing of costs due to EAF. Compared to the time of our investment decision, demand hasn't gone up very much, but the EAF has been expanded, and we believe that the cost will go up than had expected. Even when we decided to invest, we didn't expect it to go fully operational. We were expecting about 10%-20% of utilization, so we had a step-by-step plan for EAF in terms of going operational. On an annual basis, if the utilization rate is about 10%, the cost will go up by about KRW 70 billion-KRW 80 billion. Of course, if the costs go up, then the prices, selling prices can go up, and there will be some premium that is formed. I think that's going to have a less of a negative impact.

Is there any additional questions from the participants? There are no further questions. Thank you very much. We've received a lot of questions online as well for today's conference call. I think that they were, they are pretty much covered during the conference call, and for additional questions, we'll get back to you through the IR team. Thank you for joining. Goodbye.

Good afternoon. Thank you for joining us for the POSCO Holdings Earnings Call. Today we will have a presentation by POSCO Holdings followed by a Q&A session with our participants. [Operator Instructions] Now let us begin POSCO Holdings earnings presentation for the first quarter of 2025.

Greetings, everyone. I am head of the Finance and IR Division at POSCO Holdings. My name is Kim Sung-Jin. I'd like to extend my appreciation to all investors, who are attending this meeting for taking time out of your busy schedule. As we're all aware including investors, the first quarter witnessed the global tariff war materialized, which has intensified economic uncertainty. Despite this headwind, POSCO Holdings achieved improvement against the previous quarter. In Q1, consolidated revenue hit KRW17.4 trillion and operating profit KRW570 billion. Looking at the general overview by key businesses, despite lingering volatility in export volume and FX rates, the domestic steel market is showing moderate signs of stability. In addition, iron ore and coking coal prices have also become more stable. POSCO Future M is selling more CAM and M, while POSCO International's gas field business continues to perform well. While these Q1 results are insufficient to jump to the conclusion that we have made a turn toward clear recovery, we do however have signals that allow positive assessments little by little. Therefore, barring unexpected exigencies out of the left field we are carefully optimistic that things cannot get any worse from here. Next I turn to a topic that I'm sure many have read in the media. I'd like to address our MOU signed with Hyundai Motor Group. As was illustrated in the POSCO Holdings corporate value enhancement program released in December 2024, we have to find a strategy to invest in the overseas upstream steelmaking process and we have been taking a close and hard look at the high growth market of India and high profit market in North America. As an outcome of that plan in October last year we signed a comprehensive MOU with JSW Group in India to seek collaboration in steel, energy materials and renewable energy businesses. This time with Hyundai Motor Group or HMG, with the goal to address the global trade environment and to enhance our competence in the future mobility materials business, we intend to strengthen our collaboration to jointly invest in to build a steelmaking plant in the US and to jointly develop next generation battery materials. This alliance can be regarded as a strategic choice made to actively address the rapidly changing environment. In steel, in compliance with the USMCA "melted and poured" origin rule, we plan to offer reliable supply of steel products melted and poured in the US to our auto panel manufacturing plant in POSCO, Mexico. Additionally, we will expand volume supply to our US OEMs to whom our volume was limited due to the export quota. In addition, by focusing the EV battery materials technology that both companies possess, we hope to be able to advance to an elevated level of Korea's next generation battery development once the EV market chasm draws to a close. Currently, we're in discussions with HMG regarding the size of equity investment into a US steel mill as well as more specifics on how we will see cooperation. Once we have more details confirmed we'll make sure to share those with you. I'd like now to invite the Head of our IR department to deliver the first quarter results.

Please refer to Page 4 of the presentation materials. On a consolidated basis our Q1 revenue and operating profit came in at KRW17.4 trillion and KRW568 billion respectively, due to a market downturn in the previous quarter and structural adjustments, operating profits dropped to as low as KRW95 billion but has since rebounded across all business segments to KRW568 billion reaching the same level as the previous year. EBITDA reached KRW1.6 trillion and our consolidated CapEx for the quarter amounted to KRW1.5 trillion. Now by business segment. Industrial, the operating profit improved from 2.3% to 3% Q-o-Q. What's particularly notable is that POSCO's OP margin recovered to 3.9%. Overseas steel business also showed improvement. Thanks to strong performance in our engine operations and reduced losses at our China's, Zhangjiagang plant. As for the energy materials, thanks to POSCO Future M's turnaround to profit, overall operating losses were reduced by half Q-o-Q. But due to ramp-up of newly built plants and investment losses continued. As for the infrastructure segment, overall performance remained quite solid. Now looking at Page 5, you will find a summary of the MOU on mutual cooperation with Hyundai Motor Group. Our CFO in his remarks earlier mentioned about the strategic rationale behind what we're seeking to pursue. In essence, it includes cooperation in entering the US upstream Electric Arc Furnace operations and in the Battery Sector, we'll work together on investments in key materials supply chain establishment and joint technology development. Let me elaborate further on page 6. POSCO currently operates not only in Korea, but also in China, Vietnam and Indonesia our upstream steel production basis, while running sales subsidiaries downstream processing lines and processing centers around the world to sell made in Korea products globally. As global steel markets increasingly continue to regionalize and form blocks, we have selected India, US, Indonesia as three priority regions for upstream expansion. In India, together with AWA we're working to establish a specialized automotive steel sheet, specialized company with an estimated capability capacity of about five million tons and we're proceeding with final site selection initial planning step-by-step. The latest announcement regarding Offshore Cooperation is driven by two needs. First is to expand our presence in the US automotive sale market our long-term objective and second is to the USMCA, which will take effect in July 2027, its mid-to-short-term need. USMCA is a revised multilateral trade agreement that replaced at NAFTA among three North American countries to qualify for tariff-free automobiles. There are three conditions one of which is the regional content requirement. Here the molten iron of the seal must be produced within North America for steel to be recognized as North American. POSCO currently uses cold-rolled steel sourced from molten iron produced at Arakongyang Work in Korea with which POSCO Mexico produces coated automotive steel sheets and starting from July 2027, from POSCO Mexico and its operations, it's essential to use cold-rolled steel, made from molten ore, iron produced within North America. So this new partnership is therefore a critical decision that aligns with our long-term strategic ambition in the Automotive Steel Sheet market, also addressing the urgent mid-term need to respond to USMCA. Now Page 7, progress on our rebalancing efforts, through the restructuring of underperforming projects and non-core assets in Q1 of 2025, we try to generate cash, so we divested a total of six assets in the first quarter raising KRW286.6 billion. And since last year, the cumulative cash generated reached KRW949.1 billion with 51 projects completed. So in Q1, we sold off loss making operations like Piano chemical as well as the power demand management business of POSCO DX. So these rebalancing measures are not only just about securing additional cash, but are also expected to help eliminate potential sources of loss going forward. Moving on to the next page, the CapEx plan for this year, this year we have established a CapEx plan of KRW8.8 trillion, slightly down from the previous year. We plan to continue investing in core businesses, while adjusting the pace. We have allocated 43% to steel, 34% to energy materials and 17% to the infrastructure. As for the steel segment, there is the construction of the new EAC in Gwangyang overseas growth and replacement of aging facilities to improve operational efficiency. We have budgeted CapEx for these initiatives and as for the energy materials, its CapEx is spending in 2024 was KRW4 trillion. But major production facilities including Argentina were completed at the end of last year and this year despite ongoing construction of second bring plants in Argentina and cut that materials plant, CapEx burden will be slightly lower to KRW3 trillion. As for the infrastructure, we planned the second project in Australia Stage 4 of Myanmar gas field and construction of a second LNG terminal. Now performance by a key area, Page 9, first is POSCO. POSCO's crude steel output in Q1 mainly due to the impact of overall maintenance works declined by 5.5% Q-o-Q. But while selling prices slightly increased and raw materials costs remain stable and we have been making cost saving efforts enterprise-wide and all of these efforts led to an improvement in op margin which rose to 3.9%. And the volumes were reduced not because of demand cut. So, in Q2, we believe there's going to be a recovery in terms of sales and so forth. And recently in the domestic retail market, there was a reduction in unfairly traded imported products, which had previously caused significant disruption in the market, but we're seeing a gradual normalization of the market prices in certain categories such as steel sheets, which are some positive developments. Now, let's move to Page 10. Profits from overseas steel operations partially recovered. First, our Indian subsidiary has steadily expanded sales of high margin products like automotive steel sheet by seeing improved profit. And second, China's Zhangjiagang, due to a rise in regional stainless steel selling prices, has reduced its losses. But subsidiaries in Southeast Asia continue to underperform. Next, POSCO Future M. With increased sales volume of cathode materials and higher prices for basic materials, operating profits improved, resulting in a turnaround in the first quarter. In particular the sales volume of high nickel cathode materials our main product rose by 64% QoQ. And as for the sales of natural graphite-based add-on materials mostly driven by the demand from customers seeking non-China origin added materials, the sales increased by 33% QoQ. Page 12 at the end of last year Argentina Plant 1 completed its construction. Ramp up is underway and it's implementing client certification process. On the other hand, the Plant 4, in light of the delayed recovery in lithium prices and continued market sluggishness, the completion has been postponed to the first quarter of 2026. So, the Lithium POSCO Solution, domestic downstream subsidiary project has also been rescheduled to the first quarter of 2026 accordingly. As for the POSCO Pilbara Lithium Solution Plant 1, which completed full construction in November last year, it began full-scale shipments of contracted volume starting in the Q2. And as for the Plant 2, which was completed at the end of last year, we aim for a client certification in Q3. That we will focus on testing and ramp up. Next is POSCO International. Due to increased electricity sales during the winter and solid domestic sales from Myanmar gas fields, operating profit and energy increased, in particular in the LNG power generation business, there was a completion of major maintenance works that led to recovery in sales. Now, let's move on to POSCO E&C. As several major large projects were completed at the end of last year first quarter revenue decreased. However, as completion related profits were accounted for, operating profit in both the plant and the infrastructure segments increased slightly. Lastly, let me update you on our recent ESG-related developments. Our group as a company with operations all around the world is striving to establish principles and systems for global standard human rights management not just in Korea, but around our business sites around the world. In Q1, the Chairman and the CEOs of each affiliate jointly proclaimed the POSCO Group Human Rights commitment and we would like to report that we have established a Human Rights Management framework aligned with the UNGC standards including trends in the global legislative landscape and human rights due diligence and grievances redress mechanisms. Now, this ends the presentation. We'll move on to the Q&A session.

We will begin the Q&A. [Operator Instructions] Yuanta Securities, Mr. Lee. Please pose your question.

Hello, my name is Lee, I'm from Yuanta Securities. Low performing businesses and restructuring of those businesses are ongoing. The PZSS office in China I think deficits have been continuing for some time. I think it's been 12 consecutive terms that it has gone into red ink. For PZSS, do you have any plans to improve its performance? Or has it just fallen into the pit of low-performing businesses and perhaps is it being considered for liquidation? Second question is about energy materials. Of course, the size of the deficit has been reduced, but still there's an operating deficit of about KRW100 billion. So I understand that some of these plants are in ramp up stage initial stage of operation, so some of this loss is inevitable. But again, KRW100 billion of deficits is quite large, and is this a repeating pattern, if this continues for about four quarters, it could add up to about KRW400 billion of deficits. Of course, the energy industry is difficult to predict. However, what are some of the projected revenues as well as operating profits that you forecast for the upcoming quarters. And I know it's difficult to look out to 2026, but last year, during the Value Day event, you proposed some revenues and EBITDA numbers. So at this point based on the numbers released last year in energy materials, what are some of the new projections? What are some adjustments downward? Adjustments that you can make at the moment. My last question. There was an earnings report at two o'clock. And I think Chairman Seong has hinted at the possibility of raising more capital. And so looking at Posco Future M, is there any possibility of raising more capital? Or do you not have any such plans in the works?

The first question will be answered by the sales management department and the second question I will address that.

So on PZSS and if there are any plans to improve performance, I think that was the gist of the question. In China for several years, there has been an overcapacity of stainless steel and so we have very little recourse but to look at restructuring. Same is true for PZSS. We've made diverse efforts to improve its performance. And at headquarters in the first half of last year, because we looked at many offices that may have to fall into low-performing assets subject to liquidation. This obviously fell into that list. But we have to look at the Chinese market situation as well as our own corporate strategy and the stainless steel market. And so we have some restructuring efforts going on, but we do need to read the situation. Within the year, we believe that we will be looking at a few more variables to make a more definitive conclusion on this The second question I would like to address. Energy materials companies include HY Clean Metal and PZSS. These are in their initial stage of operation. Some are still being constructed. So we are in ramp-up stage and some of them are supplying to customers. For those plants in ramp-up until we reach a level of stabilization, there is going to be fixed cost that will be generated. And for those who are filling customer orders, we have to provide a discount because they have not yet received quality certification. So it's going to be difficult to turn to a profit this year. That's what I can say for sure. But sequentially, we will be getting customer certification. And so starting in the latter part of next year, we will begin to see some black numbers in our operating profits. By 2027, most of the companies will have -- or plants will have reached a stable operation, and that's when we will see all of our ink turn to black. So I cannot give you any more specifics on that at this point. Please understand. And on raising more capital, paid-in capital, for POSCO Future M, we did provide some funding in about KRW500 billion and about KRW 500 billion. And about KRW 600 billion in terms of hybrid securities. And so this is a lot more CapEx than we had originally anticipated that's for sure. There is some time lag between when the investment is made and when our sales can hit our books. So, yes, there is a lot more need than previously anticipated to assist this business that we are looking into using other borrowing instruments. But S&P ratings have turned a little bit negative but our regular assessment from Moody's is already available so whether we need to look into more borrowing or not we are assessing that. Future M's financial status as well as the financing situation and raising more paid in capital. All of these things are variables that we are looking at and based on our conclusion we will be making a decision shortly. Next question, please.

Next question will be by Hyun Park, Mr. Park from Daishin Securities.

I am Tae Lee from Daishin Securities. Thank you very much for giving me the opportunity to ask the question. I have two questions, so I would like to ask a question about the production cost that was announced by the Steel industry, so about 50 million tons of estimate that has been revealed. So I would like to know if that could be feasible and when can we expect the production to be stabilized and how do you see the future? And do you believe that the production expansion could be possible for the future? And the second is about the integrated mill investment going on in India. So what is the progress on that? And also you've made investments in the secondary battery materials and you're also investing in the steel milking as well. So I would like to know if these two initiatives are taking place in tandem or in parallel.

So the first question I think that Mr. Hong Munsie from the POSCO Marketing strategic Office can answer and I will answer the second question. Yes, I am the head of the marketing strategy office at POSCO. So there was an announcement of the output cut by and I think the volume is about 1 million tons, which is minimal in terms of impact on the market. And at the beginning of March, there was the Chinese Congress party meeting and there was an estimate that the 50 million tons of production cut could be feasible so the output cut. Perspective it seems highly likely for the time being that because of the trade war as well as the Chinese government's production cut feasibility might not be also possible, because of the Chinese government's GDP growth and so forth. And there is an increasing number of private companies in the sector coming from China, so there is an influence coming from the Chinese government. So whether we'll be able to achieve the 50 million tons of production cut or not, I cannot be sure of that, but we can say that it is highly likely. So if the cut is made then of course, it's going to have an impact on the raw material prices and the prices of raw materials may go down. Stabilize, but if you look at the current steel prices as for the price, it is coupled with the raw materials prices, and if you look at the structure of our company, there is the automotive and electronics companies that are our clients. So you can see that we sign contracts price contracts based on semester or based on quarter. So we believe that the spread could go up to give us more profits going forward. So if there are additional cuts in production or output, then the over export volume coming from China could go down and we could have a positive impact on POSCO. Thank you. Now the answer to the second question. As presented the integrated mill investment, the total investment is $8 billion, and in Korean won is about KRW11 trillion. If you look at the cap or investment structure, so in that project the capital is 50% and the borrowing is 50%. And as for the capital of 50% we go in 50% of that 50%. So our fund is only about one-fourth the total investment. So if that is the case that will be KRW2.5 trillion out of KRW11 trillion and it will be implemented over the next five years. So the annual CapEx or investment will be about KRW0.5 trillion. So who is implementing the investment? It would be POSCO and as for POSCO, the annual EBITDA is at least KRW4 trillion. So as for POSCO, out of the KRW4 trillion of cash generation ability, investing about KRW550 billion per year is no problem. And as for the second battery materials investments, the initiatives are ongoing and on a consolidated basis, our cash reserve is about KRW16 trillion. So when it comes to the secondary battery materials making investments in the sector would be not challenging.

Next question.

From iM Securities, we have Kim on the line.

My name is Kim Yoon Sang. I have three questions. So tariff barriers on reduced quotas as well as clarification. All of these create more intensified trade barriers. And so this hits not only headquarters but also overseas plants. So because of these intensified trade barriers, it leads to impacts on the sales volume and also impact sales plans. I'd like to know how it's impacting yours. And because of the adverse impact, we have to have some responsive measures. Of course, the possibility seems a little bit low, but because the quota has been eliminated, there is some impact to the steel business. So what are your countermeasures against these? And next is on hot rolled products, and so we have AD complaints have been filed, and if this were to impact Japan as well, how is Japan likely to react to this? And finally, there's been some adjustment in lithium price. I'd like to know what your projections are on the lithium price going forward.

First question will be answered by Mr. Jung Gi Seop [ph], and next by the International Trade Officer Mr. Hong Yoon-Sik, and finally from EJ Young from Energy Materials Business Management. My name is Hong Yoon-Sik and I'd like to address the trade barriers. How are our affiliated companies and overseas locations impacted? We have many overseas in various locations but by region the impact varies. Let's take Vietnam as an example. So even before the Trump administration imposed tariffs, there was already a 25% tariff and there are a lot of exports to the US but there are no additional tariffs that were imposed on steel products. But US bound Vietnamese made coated steel products. The countervailing taxes are between 40% to 140%, so it's very high. So POSCO Vietnam's cold rolled products, domestic sales could be impacted by this move. But US bound cold world products from Vietnam, I think will only be positively impacted by this. And the same goes to Thailand. We have a coating plant in Thailand. And they have US bound exports that are subject to the same level of tariffs. So the coating plant in Thailand also is likely to be positively impacted by this move and Mexico is the most largely impacted and originally we anticipated high impact, but when we analyze some of the final decisions that were made because of the USMCA mandate. For home electronics still if it is built in North America then there are some provisions that act in favor of some of the products that we make for the region. With the quota eliminated are we going to be able to sell more to the United States? While the quota may have been removed still that is imported into the United States, not only from Korea, but from all other countries are closely monitored, so we anticipate more sanctions, more restrictions and so I think our sales volume is going to be very similar to what we sold last year.

I'm the head of ITO. I'd like to answer the second question. In global steel market, we are seeing various movements such as the EU safeguards, as well as the UK safeguards that are being reassessed. Canada is also imposing new safeguards and they are collecting a team. Turkey and some of the ASEAN nations are also making separate movements in order to look into some anti-dumping issues. So in order to address all of these, I think protectionist measures are going to continue for some time. So the anti-dumping regulations against Japan by the Korean government, as well as other protectionist measures that we are seeing in the market right now, we are going to have to look at some of the traded volumes, as well as prices and to be able to devise diverse countermeasures. Exactly what kinds of countermeasures to take? We cannot give you any conclusions at the moment.

I am in charge of Energy materials investment office. You asked about the lithium price. Because of demand rise with EV market recovery, we are projecting a gradual price increase, but because of the tariff policies that are coming out of the United States that has added uncertainty and therefore it's become more difficult to predict. There are six agencies that predicted prices. Going forward, after 2025 all of those six agencies expect the price to rise and on average by 2028, the price will reach about $20,000.

Next question please.

Next question will be from Park Hyun-Wook from Hyundai Motor Securities.

Thank you for giving me the opportunity to ask the question. I have a few questions for you. First is regarding the Gwangyang electronic arc furnace that will be completed this year. So in terms of sourcing what will be the percentage between domestic and overseas, and I believe that it will be very difficult to source the scraps. And as for the Toyota, it acquired Radius recently. So when it comes to POSCO, are you going to acquire any steel scrap companies going forward? And as for the products that are produced from EAC what is the quality of that produced by EAS compared to the blast furnace, if you could elaborate further on that? And the second question is regarding marketing conditions. So in the latter half of this year, how do you anticipate the steel market when it comes to automobiles and ship building? How do you expect the supply prices to be? And recently regarding the Chinese steel plates, 80 tariffs have been imposed, but can we anticipate any price increase or increase demand sales? Do you see some impact or effects coming from those initiatives? And the third is regarding POSCO E&C. So regarding POSCO E&C there was an accident Gwangmyeong. So is there a cost that should be accounted for a one-off in the second semester -- second half?

Regarding the first question it will be answered by POSCO's Head of Raw Materials One Office. And the second will be by Mr. Kyung-Jin Chung [ph] and the third will be by Mr. Vu Yongdai [ph], who is the Head of the Infrastructure Business Management Office.

Yes. I am in charge of the raw materials. Yes the EF as you said will be completed by the end of this year, but according to our internal plan it will be completed by sometime May next year. And as for the steel scrap when it comes to domestic sourcing and investment we're going to safely secure it and HBI is an alternative so we consider investing and acquiring or purchasing HBI. So when it comes to the domestic and overseas sourcing percentage, I cannot clearly say what is the percentage, but we are very much focused on flexible sourcing but we mostly focused on domestic sourcing and going forward when it comes to the high quality scrap sourcing strategy so we will collect as much as possible scrap coming from our clients and then also sign a strategic partnership with our suppliers and in order to meet the increasing demand in Korea, we are going to invest in the collection hub so that we can still high quality scraps as much as possible. And we will also invest in the facilities to transform a low quality to high quality scraps. You also asked the question about our plans going overseas. Of course if there if there is a need we're going to fully consider that and we will explore some investment opportunities if opportunities arise. And when it comes to the quality so…

Hello I'm in charge of POSCO Technology Strategy. So in Gwangyang in 2026 in the first half we're going to complete EAF -- to produce low carbon products. So when we use the scraps as raw materials compared to the BS production there are lots of impurities. Such as nitrogen and so forth, but EAS we are in the current process of developing technologies that will minimize the impurities. And as for the automotive facility sheets in first we actually produce the internal interior sheets and according to the level of maturity and advancement of the technology we plan to also employ the reinforced sheets going forward.

Now I am in charge of the POSCO Marketing Strategy Office. You asked the question about the steel market outlook for the second half. Simply put if you look at the automotive sector in Korea we're seeing the impact of the tariff war and yet it manages to respond to those initiatives and there are some positive signals or developments that are taking place. But as for the construction sector it's been sluggish since last year and as for the home appliances it's very much related with the construction sector as well. So when it comes to the home appliances sector we believe that the market will be not as good in the latter half. But in terms of prices, as for the heavy plate AD filing last year there was the tentative tariff or provisional tariff that was applied and the Ministry of Finance and Economy confirmed on the provisional tariffs today. So this helps to minimize the inflow of products that are subject to unfair trade practices. So compared to last year when it comes to the retail market prices it has gone up quite a bit and we can expect some additional hike going forward. And when it comes to stainless steel products, there was a result regarding delayed in Vietnam products, and we saw more than 18% additional tariffs compared to the preliminary rulings so we believe that this will be very helpful in blocking the influx of products subject to unfair trade practices and this is going to have a positive impact on the prices as well.

Yes I am in charge of the infrastructure business management, so you asked the question about the accident in Gwangyang. So it was the 9.209 zone of the Xinan online. So it was regarding, when it comes to the demolition cost, of course, it should be accounted for on the books, but as for the 5-209 zone the operation has been suspended fully, so it's very difficult to calculate the cost, so we can say that, it will not be accounted for in the second quarter and what is fortunate is that we have an insurance for that construction site. So when it comes to the demolition as well as the restoration work, we'll be able to be covered to a certain level to a high level by the insurance.

Next question, please.

Aishwarya Pai [ph] 0from Nomura Securities. Please ask your question.

Hi. My question is regarding the recent announcement of POSCO trying to issue a $1 bond. This one that announced a few ago. I'm trying to see if there's any update on that. And my second question is regarding the recent announced Hyundai JV and what impact is expected onto the leverage from?

[Foreign language] And the first question will be answered by the head of finance office and the second question by Mr. Ivan [ph] Steel Business Management Office.

So dollar denominated issue bond issuance progress on that let me address that. So we had this in the plan, but on April 1, with the announcement of the US clarification, the financial market fluctuated wildly, so not just us but also in other companies all bond issuances have been put on hold. We are seeing some signs of the market stabilizing, so perhaps by today maybe by Monday, we will be able to have a better assessment about what the market condition is for the issuance. So on the MOU signed with HMG and how that's going to serve as a leverage for our group. This is an MOU that was signed between POSCO Group and Hyundai Motor Group. So Hyundai Motor Group is a partner that we have a relationship that is as old as five decades. Among many of the strategies that we've had up until recently our strategy for the United States has been in flux. We had considering many options, so among those many options, looking at some of the demands that Hyundai Motor Group had in the United States, they made an announcement first about their investment plans and by Asking for Pasco's participation, we believe we can serve a mutually beneficial role here. Of course, there are some risks that could follow. So, the two largest steelmakers in Korea are investing jointly in the United States, so there could be some investment risk there and from POSCO Group's perspective, I think the CFO at Hyundai Motor Group also explained this a few minutes ago, but it proved to be a market where we can generate some competitiveness and it is a market where material flow is insured and there are some links that we can build with our downstream processes as well. So investing in the United States and jointly with Hyundai Motor Group, we believe there are many more positive impacts than negative ones. Not only in steel, but also in rechargeable battery materials, as well as the potential to extend our cooperation into other parts of the United States as well. So dollar denominated bond issuance, I'd like to add a few more comments. So once again, other company's attempts to issue bonds have been put on hold as well. So we have to look at the financial situation, as well as some of the other companies and how they are moving on these bond issuances, as well as the spread. Those are the variables we'll look at before we assess bond issue next week. At Hyundai Motor Group, I think they mentioned -- had a question about financial leverage. Building a plant in the United States, Hyundai Motor Group will be the major shareholder, the equity holder. So we will not be determining our shares in that plant, but according to Hyundai Steel. That and equity ratio will be fifty-fifty. This is what Hyundai Steel announced. POSCO Group will be a minor shareholder. And I think our shares will be assessed by our Equity, we will not be defining our equity before the investment, so I hope this helps to better explain how it will be structured. We'll take the next question.

Next question will be by Annie Guo from TD Securities.

Hello, I am Annie Guo from TB Security. I have two questions. First -- about the Chinese steelmakers, not only in China, but also abroad. They're investing in the coking coal, as well as iron ore projects. It is quite active. So as for Korea in order to, what would be your strategy in terms of the competitiveness strategy and also the pricing strategies and I believe the raw material prices are likely to go down. So that is why China's strategy could not be threatening for us. Is that your take or I would like to know your strategy or your perspective. And second is regarding the next generation secondary materials the progress on the precursor development. So, I'd like to know about how you're going to secure competitiveness in pricing or the capacity and updates on testing as well as clients.

Regarding the first question, it will be by Mr. [indiscernible], the head of the Materials One office and then the second will be by Mr. [indiscernible] from the Energy Materials Investment Office.

Together with the Chinese steelmakers has the plan to invest in raw materials projects and we are indeed implementing this type of strategy. And as for the iron ore, we are sourcing it by making a 50% investment and as for the coking coal, the level is about 20% because of the ESG issues. So we are considering all of these and making investments in this field. When it comes to iron ore, we believe that investments have been fully made and when it comes to the coking coal. We believe that there are more returns that we can achieve on our investments, so we're going to continue to monitor the ESG developments. And identify mines that will be of interest to us and make active investments and also do natural hedging with regards to price fluctuations.

Yes, I'm the head of the energy materials investments, regarding the lithium sulfate development. So of course there are companies that we have invested in our future institute and we are making – we are researching the intermediate goods coming from a lithium plants to make low priced lithium sulfate and the results have become – have realized these days. So we are now going for a more larger scale that is we are considering implementing a demo plant. And regarding the JKSS, so recently there's been a solid precursor that was produced from here. We thought it was quite promising. So together with OEM companies and battery companies we're conducting a test and for the details, please understand that we cannot disclose the details now. Thank you.

Next question please.

Eugene Securities, Lee Eugen [ph]. Please ask your question.

I am Eugen. There was a one-time impairment loss in the first quarter. Can we assume that no other impairments will be assessed and you mentioned leadership in the auto sector, we believe HBIS was mentioned. If you have any projections on the auto industry profits, please share them with us and based on automotive steel sheets, what is the tonnage? And what is the timeline on hitting these profits as well as volumes? And I'd like to know if we are experiencing a deficit in steel plates.

First question I will address that. Second question will be answered by – let me address the first question first. In the first quarter yes, we had a one-time impairment loss effects. These impairment losses usually occur in the process of restructuring when we sell off assets and close down plants. And there is a disparity between the book price and the selling price. And secondly, when the market turns downward the value of the business also declines. So there is an impairment loss there as well. So in the first quarter, we continued with our restructuring and of course, there were some losses. Last year, because market really soured and we continued to restructure. There were some priorities that we could have defined, but nonprofit and non-essential assets were first on our list. And so because of the market downturn, as well as the liquidation of our assets that were underperforming there were larger impairment losses as last year. This year, we will continue with the restructuring, but in terms of size and intensity it will be smaller than last year. And also this year -- do we anticipate the market will sour as much as last year? We don't think so. I think it's not going to be as bad as last year. And so based on that projection, the impairment losses will not be as big as last year. HBIS joint venture in China. We are looking to hit KRW420 billion in terms of revenues and we believe we'll achieve that. To hit that revenue, we are planning 170,000 tons, but our operating profit is still going to be in the red and the automotives steel sheets how much tonnage are we targeting? For wire, rods and stainless steel, setting those aside, we are looking at about 8.5 million in India. Before we set up the plants in the US and India we're not going to be adding more capacity, so our sales will be based on between 8 million to 9 million tons. The third question was whether our steel plates are suffering from a deficit. Of course each steel grade is a little bit different, but at the end of last year, we did have a lot of deficit bearing plates. But because of the AD filings, many have transitioned into black ink now. The Indian Steel works. I think the question was about the construction schedule. Our JV partner. is working to confirm the plant's site in Odisha. Once we select the site, then we will be able to add more detail to this plan. Once the site is determined we also have to do an environmental impact assessment and go through other procedures as well. But if we can stay on plan I think we'll be completing the plant by 2031.

Now this will be the last question. Last question will be by [indiscernible] from HSBC.

Hello, I’m [indiscernible] from HSBC. I have two questions. First, I think that it was addressed in your previous answers. So when it comes to the AD filing for the heavy plates, I would like to know what are the ongoing negotiations. And I would like to know if there's been any financial evaluation or valuation losses that occurred. And with regards to lithium sourcing, I would like to know if you have acquired any additional assets. So first is -- will be answered by Mr. Hong Yoon-Sik, Marketing Strategy Head Office.

So regarding the answer for the first question, after the AD filing of the Chinese heavy plates, the retail prices are constantly going up. And I think that I cannot disclose all the detailed negotiations taking place in terms of price by client. But with the three shipbuilders, we have completed our negotiations for the second quarter. And I cannot share with you the detailed numbers, but the price negotiations have been taking place reasonably in line with the current trends.

And I will answer the third question first. So it will be by the Head of the Energy Materials Investment. It was about sourcing lithium assets or securing lithium-related assets. So as said, in order to increase our cost competitiveness, we are leveraging this low market conditions in order to acquire prime assets, not only for brine, but also in terms of mine. And we are also engaged with some specific deals, but they are on the process of private deal process and also competition bidding. So we cannot disclose any further on these initiatives, please do understand.

And Energy Raw Materials Office head is going to answer a question about the second. So the metal prices are going down, the nickel as well and going down to $9. So when it comes to the valuation -- asset valuation losses is inevitable. And this is the same situation for all the secondary battery materials sector. And when it comes to the losses level, there is one plant under construction in Argentina and one plant is undergoing ramp-up. And one in Gwangyang Line is under ramp-up and another one is under study. So when it comes to losses, it will be determined by the fixed costs.

I would like to close the first quarter 2025 earnings report call for POSCO Holdings. Through this call, I hope people gained better insight into how we intend to drive our business forward. Once again, I'd like to thank everyone for your participation. Again, I'd like to close the first quarter 2025 earnings report call. Thank you.

Good afternoon. Thank you for joining us at POSCO Holdings Earnings Call. We will have a presentation from POSCO Holdings followed by a Q&A session with the participants. [Operator Instructions] We will now begin the POSCO Holdings 2024 Earnings Call. Greetings, everyone. I'm the Head of Finance and IR Division at POSCO Holdings. My name is Kim Jun-Hyung. I'd like to begin by expressing my profound gratitude to the investors who offer unwavering attention and support to our business. Thank you. In 2024, various internal and external challenges impacted our business, resulting in consolidated account revenue of KRW72.7 trillion and operating profit of KRW2.2 trillion both of which declined against the previous year. In steel, China's oversupply and its construction industry in a recession pushed the excess volume to exports, causing steel price in Asia to remain suppressed. We also feel limited in our ability to improve mill margin. In Energy Materials, given the slow EV market growth rate, essential minerals prices have tumbled. This led to inventory value impairment that have adversely impacted our earnings performance. Especially notable last year has been the successful completion of Q4 -- in Q4 of various EV battery materials plants, including POSCO Argentina, [PPOS] (ph) and POSCO Lithium Solution. However, high initial operation costs during the ramp up stage of new plants on top of inevitably low plant operation rate during product certification have led to larger shortfalls. Despite these steel business cycle headwinds in the region based on our value add steel products, POSCO Group has been able to maintain relatively stable profits. In addition, we are making steady progress on our core strategies such as in our plans to invest in abroad and to build electric furnaces. In the Energy Materials business, we were successful in building a system within 2024 capable of producing essential minerals such as lithium and cathode active materials. This carries remarkable meaning and proves our clear progress made in business. Surely, given the challenges faced in the rechargeable battery industry, we will also adjust in speed and calibrate. However, compared to competition, we have sound financials that make us fit to seize new opportunities. This is what we will prepare in a thorough and steady fashion. Also beginning early last year, POSCO Group has taken the initiative to restructure low performing businesses and non-essential assets in our effort to enhance asset efficiency. Low profit real estate and simple equity shares have been sold. Through these restructuring efforts, KRW662.5 billion cash has been generated, KRW100 billion of that cash will be used to buy back and retired treasury shares. I would like to remind our investors that we face higher trade barriers around the world, while EV market growth continues to slow. It is no secret that the business environment in 2025 will continue to be rough. Hence, we will focus the group's energy in sustaining strong profits. In Steel, we intend to drive explicit progress in overseas growth market investments and in achieving carbon neutrality. Also by enhancing facility capacity and efficiency, we'll focus on sustaining price competitiveness. In the Energy Materials business, we'll be proactive to acquire quality lithium assets in South America and Australia. At the same time, our goal is to achieve ramp up of our new plants ahead of schedule. In the infrastructure business, we will continue to invest in Australia and Myanmar to expand our production capacity, while adding to the domestic LNG terminal space, as a means to focus on strengthening our energy business foundation. Additionally, we would like to focus on stabilizing our business to the greatest extent possible. In addition, by completing our restructuring goals within the year, we'll improve our asset efficiency. With the cash generated from this effort, it will help to finance the group's future growth investments. Now allow me to introduce our IR department leader. She will share more detail on the 2024 earnings.

Good afternoon. I will now present the 2024 yearly and fourth quarter earnings. Please refer to Page 4. As for the yearly revenue, recorded KRW 72.7trillion, operating profit of KRW2.2 trillion. EBITDA for the year was KRW6.1 trillion and yearly CapEx amounted to KRW9 trillion, with KRW1 trillion on a stand-alone basis. Q4 operating profit came in particularly weak at KRW95 billion. Amidst the ongoing market downturn in both steel and battery materials, new secondary battery plants were commissioned in many numbers with initial operation costs accounted for and there were also one-off cost increases in the steel business including labor costs that were reflecting the December wage negotiation results. So if you look at the business segments, still operating profit declined 35% Y-o-Y, POSCO’s OP margin dropped by 3.9% with 29% Y-o-Y decrease in profit. As for overseas steel, despite the good performance of the Indian subsidiary due to weak performance in Indonesia, Vietnam and other Southeast Asia subsidiaries, profit decline was significant. As for Energy Materials, the business recorded KRW278 billion losses with the deficit widening further. POSCO Future M fell into the red in Q4, mainly due to high initial costs at newly commissioned plants. Now infrastructure. Operating profit declined 14% Y-o-Y. This was because as POSCO E&C completed large scale plant projects both domestically in Samcheok and overseas in Malaysia, additional costs were accounted for. Now if you look at the performance in Q4, return to a net loss of KRW703 billion. This was primarily because in the fourth quarter alone, KRW1.3 trillion in non-cash expenses including asset impairment losses were accounted for. Let me elaborate further on the next page. Now looking at the non-operating losses, we recognized asset impairment losses of KRW1 trillion in Q4 and KRW1.2 trillion for the full year. These can be divided into three categories of asset impairment losses. First is the steel business. In Q4, we suspended operations of outdated low efficiency assets like Pohang Steelmaking Line 1 and Wire Rod Mill 1, accounting for the impairment losses for these assets. Second, we accounted for the impairment losses of certain aging and low profit assets of the battery business, including the Gumi Cathode Materials plant and precursor JV in China. Third, as part of our ongoing business restructuring efforts since the beginning of this year, we proactively recognized impairment losses on assets marked for sale. So let me give you an example. Vietnam's Mong Duong coal fire power plant, which does not align actually with our ESG policies, is currently being sold. So all of this has been accounted for proactively. As for the operating profit, inventory valuation losses of KRW88.2 billion for the full year had an impact. You can see that the newly commissioned battery material plants in 2024 that is POSCO Pilbara Lithium Solution and Argentina subsidiary saw significant inventory valuation losses. Now moving on to Page 6. Despite adverse business circumstances, we made some notable progress in 2024. To respond to the formation of economic blocks in steel, we are pursuing a JV Upstream investment in India with JSW. Additionally, low carbon steel is progressing evidenced by investments in electrical furnaces and the initial tapping on the pilot electric smelter facility, which is a milestone in our low carbon technology development. In Energy Materials, we celebrated year one of lithium production by completing hard rock and brine based lithium plants in Korea and overseas. Initial production has been successful. At year end, next generation silicon anode active materials plant also came online. In cathode active materials, we expanded lines for NCA production. In infrastructure, offshore gas field Phase 3 commercial production was launched in Myanmar. At the same time, Phase 4 expansion kicked-off construction. In Australia, we added Velocity to the new Senex development project to triple production. Next on Slide 7. Here we offer the latest updates on the Energy Materials business. Our paramount focus at the moment is to stabilize operation at our new plants and to build on associated technology developments. Argentina Phase 1 brine lithium plant was commissioned at the end of last year. Our goal is to complete ramp up by second quarter this year and to acquire battery maker certification by the fourth quarter. Lithium carbonate production is Phase 2 of this project, a project that is shooting for completion by August. POSCO Pilbara Lithium Solution Plant 1 or PPLS Plant 1 has reached full ramp up as of second half of 2024. So POSCO Future and product certifications have been completed and two other battery makers are ramping up their certifications. As a result, in fourth quarter, we have been negotiating contracts. So we signed a supply agreement with SK ON for 15,000 tons over 3 years and with Future M for 20,000 tons in 2025. With these two contracts alone, we have orders worth 25,000 tons per year, which surpasses the capacity of Plant 1, which stands at [21,500] (ph) tons. So again, with just these two orders alone, we exceed the capacity of Plant 1. Besides these two agreements, our search and supply agreements are in negotiations. Plant 2 completed construction at the end of last year, because this plant uses a different process, a separate certification process is underway. We expect certifications to be acquired from POSCO Future M by June and from two other battery makers and CAM manufacturers by September. POSCO HY Clean Metal is our recycling plant, whose operation rate is 95% or above. Recovery ratio is very favorable as well. So with this kind of ramp up and stabilization, stable operations are helping to shave-off losses. Because of this kind of progress and because we completed construction of Plant Phase 2 and the plant in POSCO Argentina, as these plants ramp up and as we prepare for other new plants on a short-term basis, it's difficult to say that we'll be able to shift to black ink anytime soon. But because things are happening without any snags, I believe a medium-term recovery into black ink is very possible. HY Clean Metal will be able to shave up most of its losses by next year. That is our hope and plan. And within the next two years to three years, I believe we'll be able to see a lot of stabilization happening in many of the other plants as well. Recently, we've seen a lot of policy shifts and policy changes in various countries, but because the U.S. Policy shift has not become specific, we are going to be focusing on select strengths. So strengthen our core competence, while reducing less competitors businesses. And as a result, we've taken significant interest in acquiring quality assets. So we're looking not only at Salt Lake in Latin America, but also an additional hard rock lithium development projects in Australia, where we have signed an MoU with Hancock. On certain projects where price structure is weak or markets are overly sensitive, we seek to rebalance our strategy by pulling out or postponing investments. To offer examples, P&O Chemical shares have been sold-off, precursor nickel JV between Future M and [YU] (ph) have been canceled. A decision was made to postpone our JV investment in precursors with CNGR 2. Next is Slide 8 on our restructuring progress. In 2024, POSCO Group dissolved 45 assets, renumerating KRW662.5 billion. This year, we will liquidate another 61 assets to generate additional cash of KRW1.5 trillion. By turning down low profit non-operation assets, we intend to focus on improving our assets efficiency. Next, let's delve into the performance of each affiliated company. First Page 9 is POSCO. POSCO's crude steel production for Q4 was slightly down from the previous quarter, it stood at the full year of 35.47 million tons. And in 2025, the total crude steel output is expected to remain flat or slightly lower because of the number No. 3 Finex fire and partial refurbishment at Pohang No. 2 furnace. Originally, the 3 Finex facility was scheduled for refurbishment in 2026, but due to the last year's fire, we decided to accelerate the process aiming for completion by September this year. [None of] (ph) the selling prices, which saw a slight rebound in Q2 last year, dropped another 5% in Q4 compared to Q3, but the production cost declined even more significantly, leading to a slight recovery in mill margins, so Q-on-Q. But despite all that, the overall profitability declined because of higher energy costs due to rising power rates and the rising labor costs I mentioned before. Now as exchange rate hike has pushed up import sale prices in Q1 2025, price increases may be possible for certain clients with high dependence on imported steel, but as the depreciation of the Korean won will impact cost with a time lag, cost pressures are also expected to increase. So given this that currently we're at the bottom of the market situation, from a conservative view of things, we believe that an immediate or significant expansion of operating profit in Q1 may be somewhat challenging. But there are some notable developments including import quota of countries and several policy shifts in China Steel industry announced last year. We will continue to monitor that and continue to cut costs and enhance our product mix. Now page 12. As for the overseas sale business, despite stable profitability in the Indian subsidiary, due to deteriorating performance in [Southeast Asian] (ph) subsidiaries with intensifying competition due to exports of Chinese, Japanese and Korean filmmakers to overall profit decline. But with aggressive cost cutting, we are targeting a profitable recovery in 2025. Now POSCO Future M. Revenue declined 22% Y-o-Y with profits nearing to breakeven levels and the company fell into the red in Q4. While high nickel cathode material sales increased, this offset the sharp decline in mid nickel sales, resulting in only a slight Y-o-Y increase in total cathode material sales. But due to the falling mineral prices and the cathode material revenue fell 30% Y-o-Y. For anode materials, the deferral of FEOC in the U. S. was confirmed in May 2024, which led to sales volume falling below BP and additionally with artificial graphite mass production starting from last year, fixed costs increased contributing to operating losses. So in 2025 as we complete the ramp up with a new high nickel clients and move into full scale mass production and sales, we expect cathode material sales to grow by more than 30% compared to 2024. Now POSCO International, while profits from steel trading declined, steady earnings in the energy sector helped maintain overall operating profit. However, in Q4, the stabilization of natural gas and oil prices led to a drop in S&P, causing a significant Y-o-Y decline in profit. Now POSCO E&C. After maintaining stable operating profit, Q4 turned into a loss due to additional cost, including delayed penalties on the commissioned Malaysia LNG power project. However, we expect profitability to improve in 2025. This concludes the business performance presentation for POSCO Holdings. We'll now move on to the Q&A session.

Let us begin the Q&A. [Operator Instructions] The first question comes from Hyundai Motors Insurance, Mr. Park.

Hello. My name is Park Hyun-Wook. Thank you very much for the opportunity to ask this question. I have three questions. The first is about the steel industry market situation. Because of the real estate market slowdown in China as well as, the inauguration of Trump 2.0, there are many uncertainties. So how does POSCO Group see the market this year? In addition, Chairman, Chang in his New Year's address promised innovation in price competitiveness. So how will this happen? In what area of your steel business? I'd like some elaboration on the approach as well as the areas in which the innovation will occur. And there's been foreign exchange rate hike and POSCO and POSCO Group are likely to either benefit or be disadvantaged from the FX hike. So I would like to know in detail how this will break down across the group. And on steel products, hot rolled coil products as well. There are some countervailing taxes and tariffs that are being imposed. So how will POSCO Group react to this? And in specific for electrodes, there's a lot to be gained in this market. So how do you intend to advance in this market? Will you be maybe spinning off this business or will you be absorbing that in your existing business structure?

So I'd like to ask Mr. [indiscernible], Head of Marketing at POSCO to answer that first question.

Regarding the industry outlook, market outlook, regardless of which experts we consult, they don't have a clear prospects. There is a lot of uncertainties regarding the Trump administration. So they all agree that there will be a weak hold on the current status in the market. What's the policies of the Trump administration becomes more clear and once we can find some stability in the market, we'll be able to say more. But for now, we are just monitoring this situation. But one thing that we are assessing is the fact that the fuel market is so slow is because of China. And because of the consumer trade-in policy that has been promoted by the Chinese government, this is one of their stimulus policies. There are various financial measures and easing of financial measures that the Chinese government is releasing. And I think this is going to have a positive impact on the steel industry, at least we hope. As the market tightens, regulations in China are also becoming stronger. And so due to these stimulus packages, as well as strengthening of its market, we hope that the market will recover a little bit in the second half of this year.

And the next question will be answered by Mr. [indiscernible], Head of Finance Office at POSCO.

So let me talk about how we intend to innovate price competitiveness. In our assessment, there are a lot of fixed costs in our production cost, and that takes a big part of our cost structure. From 2024 we have been making significant efforts to reduce this fixed cost. So this is what we've been focused on. As for specific measures, first of all, we will focus on the use of raw materials to reduce that amount. And we will try and purchase less expenses, raw materials, but squeeze out the same quality, of course. And one of the measures in this equation is on the fuel cost as well, reduction of fuel costs. And because maintenance cost is also quite high. These are some of the areas where we can try to reduce the total volume and energy costs have been rising significantly. So what we can do here is to enhance efficiency. That means enhancing facility efficiency. So this is what we are also focused on. And although this may not be production cost per se, there's also sales costs. So the raw materials costs that have increased. We want to be able to absorb some of that in the sales cost. And so we have created projects to focus on these specific items, and once all of these different pieces come together, we hope to be able to have something that is more systematic in terms of how we approach the cutting of production costs. So this is what we are engaged in and what we name cost innovation, and we are still exploring new ways to cut costs.

Next is about FX. And we'd like to ask Jinnyoung Yoo, Head of Finance and Trade to answer this question.

FX impact, let me address this by company. For POSCO, this is going to be a disadvantage. When FX hikes because -- although this is going to increase revenue and sales, because the import most of our raw materials from abroad, which is purchased using dollars, this acts as a disadvantage. But to state this off to offset this impact, we want to focus on value-added products so that we can improve the cost structure. So the impact of FX for POSCO, we want to be able to absorb this as much as possible through value-added products that will include HR products, as well as other premium products. Next, for POSCO International. High FX signified positive impact on revenues and operating income on short-term projects and trading business, export margins will expand, while profits will rise in energy, specifically in Myanmar Gas Field and LNG Power businesses. However, excessive cost hikes in steel and chemical products can lead to shrinking exports and sales as well. Hence, we must react with agility to the changing market environment. In POSCO E&C because domestic construction business comprises of a large share of our projects, FX impact is not likely to be significant. In POSCO DX, most of the revenues generate from domestic industries. So adequate margins are guaranteed in DX projects. Therefore, impact is not likely to be huge. In POSCO Argentina and POSCO Future M, because most of the volume is dedicated to exports, FX hikes are likely to have a positive impact on revenue and sales. Next is on trade affairs. So additional trade [remedies] (ph) are not being evaluated, but we are monitoring unfair trade practices for any low cost products that are flooding our markets and not playing by the rules, we will definitely consider invoking trade remedies. But we represent the Korean steel industry. We are more focused on stabilizing the economy and the market. So we take into consideration many variables before we take action. That is our position. Next is on the electrode rods. So this is something that is as attractive as the rechargeable battery materials business. And there is no domestic manufacturer. So POSCO has both the captive market as well as other markets that demand electrodes. So sales is likely to be very profitable and stable. And needle cokes are things that we produce ourselves, which is a raw material of electrodes. And so we have the full value chain in control. And so this is why we have assessed this business and researched this business in great detail and we participated in national projects as well. But we have not initiated the business just yet. The reason being because there is surplus production in China. And so even in Japan, they are seeing their market share shrinking because of Chinese manufacturers. So this requires high temperature that needs to be maintained at a consistent rate. And because of the power demand required in this business that we have not initiated business yet, but something that we can definitely jump into as soon as we see a market opportunity. And listing options, we don't have a company incorporated for the purpose of manufacturing electrodes. So I'm not sure I understood the question correctly. But if this is what you meant, this is something that we are considering with Mitsubishi, and we may, if we incorporate to list this company as well. And this is something that we will negotiate going forward.

Next question, please.

Next question will be from Kim Yoon Sang of iM Securities.

Hello, I'm Kim Yoon Sang from iM Securities. I would like to ask four questions. First question is about on-off losses. I would like to know if there could be additional one-off losses in the future, especially this year. You have a lot of restructuring goals, so you have cash coming in, but it is highly likely I would like to know if there is an additional accounting for the losses in your books. And regard you -- I would like to know about your business plans for each segment for 2025 as for the strategic direction. And I would like to also know about the strategic direction for the secondary battery materials and also bio materials, including the EBITDA margin? Will there be any changes with regards to that? And the third question is regarding CapEx for 2025. So there is the steel and also the secondary materials CapEx. Do you have any guidance on that? And when it comes to the EV market, there are a lot of volatility. So I would like to know if you have any guideline with regards to the capacity expansion for the secondary battery materials? Will there be any strategic direction changes occurring for 2025? And the last question is with the inauguration of Trump administration, I'd like to ask a question about the steel or the market in the North America. So there'll be 25% additional tariffs on Mexico imposed by the U. S. So of course, we export to ex-Mexico, but some of that is also exported to the U.S. As well. So I would like to know what kind of impact all of these tariffs would have on POSCO. And with regards to the upstreaming in the U.S., I heard that you have some plans for that. So I would like to know any update on the progress of the upstreaming business penetration in the U.S. With regards of course, there will be some advantages in terms of localization, but there are also ramp ups going up in the Americas as well and this could pose as a concern for you. So I would like to know if you have any updates on that matter.

Now regarding the one-off expenses. Mr. Kim Jun-Hyung, Head of Finance will give the answer.

So as you may well know, the one off expenses as it was mentioned in the presentation as well, regarding the asset impairment losses, there are about KRW1.2 trillion and about the asset valuation losses, KRW89 billion. So I think the question was whether we will have additional one-off expenses in the future. So there is a possibility subject to market conditions as well as the restructuring, but we believe that the impairment losses that should be accounted for have not been identified as of now. Regarding question number two and three, regarding the business plan, as well as the operating profit guidelines, we do not yet have the approval of the Board. So we cannot share everything. But the basic direction is that in 2025, the operating profit will be slightly better than 2024. So slightly better, this means is that the lithium prices and the steel prices, all of that are not taken into account. So -- and we do not take into account any specific anti-dumping issues. So even though the current market situation holds, we expect that we'll be able to achieve a slightly higher OP. But as for the Energy Materials business, as it was mentioned before, the new plants were established last year and commissioned this year. And we do not believe that there's going to be significant increase in profits. So Future M is a different story, but I'm talking about the newly established plants or newly established subsidiary. So overall speaking, so in 2025, the operating profit will be better than 2024, but we do not expect a significant expansion of the profits. As for the CapEx, last year we spent KRW9 trillion. We believe that CapEx will be reduced slightly this year, because the secondary materials CapEx will also be smaller than last year, but it will not be that big of a reduction because there is going to be continued investment in lithium. So – but the CapEx will be slightly lower than last year and we will continue to execute the CapEx. Now regarding the investment, I would like to add some comments. So the group's perspective is that as for the new business investment, including the secondary materials will be continued, but we will select and focus in order to improve the quality of our investments. Now there was a question about the steel market in North America. So Mr. Hung, our Head of the Marketing Strategy will give the answer.

Yes, [2025] (ph) tariffs imposed on Mexican products or products that are exported through Mexico will be implemented, but I think that we have to continue to closely monitor the developments. So there are products that go through Mexico to the U. S. About 100,000 ton. So that is not very much. It only represents about 0.01% of the sales -- overall sales. And Mexico and the U.S., if you look at their trade relations, actually the goods that we export to Mexico are 100% coated products, coated goods. And the coated goods from Mexico to U.S. is about 580,000 actually from us to Mexico is from -- 580,000 to from Mexico to U. S. To U.S. To Mexico, 480,000. So you can say that within -- it will provide maybe a better condition for us to send goods to Mexico and sell goods to Mexico. And in the worst of all cases, there could be the end product or end vehicles that are sent from Mexico to the U.S. There are about 250,000 vehicles that are concerned. And of course that could lead to increased consumer prices for the U.S. Consumers. So I don't know how much that additional cost will be transferred to the consumer prices, but we believe and we expect that there will not be a drastic decrease of sales on our part. Now regarding the upstream project consideration in the U.S., as you said in your presentation, yes, there will be high additional investment costs involved and the volatility is high. So we're currently looking into many different options. Thank you. Next question?

Next is from Daishin Securities, Mr. Lee Tae-Hwan. Please ask your question.

My name is Lee Tae-Hwan. Thank you for giving me this opportunity. Previous people asked questions have satisfied some of my desires as well. So I'll ask one more. How's the future end turn to red ink in fourth quarter? And looking into the specifics, we can see certain areas that suffered more than others. So in adjusting the production cost, was this already accounted for or did this hit a certain aspect of the project? In POSCO Argentina, you started recording some revenues and you are recording losses. At which point will you be able to shift to black ink at POSCO Argentina? Those are my questions.

For this question, I'd like to ask Mr. [indiscernible], Infrastructure Business Department Lead.

At POSCO E&C, the deficits are more ascribable to the plant projects rather than building construction. In construction, it was not significantly impacted. In adjusting the prices, were you able to account for these changes? Or was this after the fact? I think that was the question. In plant projects, the Malaysia LNG power plant construction suffered from LD issue, and so that's where the impairment was. So if you ask were there specific issues, we want to make sure that these specific issues don't happen and we are making every effort to make sure that they don't happen again. But yes, let me summarize. This is an issue that came up in one project alone. So this will disappear next year.

And on the second question, we will ask [indiscernible], Head of Energy Materials Business Department.

The plant has to operate first before we can generate some profits. When we look at our investments, HY Clean Metal has hit about 90% operation rate. And so based on cash cost, we believe that they will turn a profit this year. So operation rate is very important. In the lithium business rather than the plant operation rate, materials cost is more important. At the current materials cost, no company will be able to turn a profit. Even the miners in Australia are suffering from large deficits. So the prices have to come up first and plant operation at POSCO Argentina has to be 80% or higher before we can start hitting, black ink. So I think that's going to be next year. Next question please.

Next question will be from [indiscernible] DB Financial Investment.

Can you hear me?

Yes, we do.

I am [indiscernible] from DB Financial Investment. So I would like to ask a question about the shareholder return that you presented in December. So the ROIC as well as revenue growth targets were mentioned during the presentation. As for the revenue target, I would like to know what will be the contribution by each business segment to achieve that goal? And regarding the ROIC, I think the ROIC is the key. So you are now currently restructuring the underperforming assets. But not only that, each business division should also see improved profitability. So when it comes to the steel, you mentioned about some innovative cost restructuring. And as for the electric furnace, when that comes alive, there could be limitations and I think that we have to see more improved profitability from other business segments. So can you give us the overall picture of how you're going to meet the ROIC target?

Now Mr. [indiscernible] of the Business Strategy will give the answer.

Now I would like to give you the mid to long-term or mid-term for the revenue growth. It could be divided into three. So first is the steel infrastructure. So now we have to complete and commission the ongoing on plants and to seek mid-term revenue growth by doing so. So for example, as for steel, the EAC at Kwangyang will be completed in 2026 and CGR in 2027. As for the infrastructure, the Senex E&P, we will ramp up. And in the mid-stream, the Kwangyang LNG terminal number 7 and 8 will go through a ramp up in 2026. So all of these will contribute to increased revenue. And the second category is the energy materials. So there is the ongoing plants at our subsidiaries that was mentioned. So we will continue with the ramp up. So it is very important to accelerate the stabilization of the production system and the structure. We have to secure additional new materials and new resources so that we can drive revenue at the mid-term level. Now third, category is aligned with our group strategy to promote new businesses for the future. So in the mid-level – mid-term level, we are going to achieve KRW1 trillion revenue in these new businesses. Now the second question was regarding the ROIC improvement. We said that our target was 6% to 9%, during our value update. And as you mentioned in your presentation, yes, we have to improve the efficiency of our assets and that is why we are rebalancing or restructuring underperforming assets. But with the proceeds, we will reinvest them into the growth of our company or group. So as for the invested assets, we want to optimize that. And when it comes to the returns, we can see two factors. First of all, in the steel business, we want to go for a cost restructuring or cost innovation amounting to KRW1 trillion and we want to enhance leadership centering on high end products, so that we can seek our competitiveness and at the same time drive profitability. And second is in the Energy Materials sector, we want to stabilize our operations at the maximum. So we through these efforts, we want to respond to the demand in the [EV CASM] (ph) situation. So regarding the revenue growth, the steel and energy materials, we're thinking about a low single digit. And as for the energy, we have the CAGR 40% increase or more. And what is the relationship between ROIC? As for the secondary material, so we have made investments and we are not getting any revenue or profit yet. So that could have an impact on the asset turnover on our assets. So with everything combined as I said by Mr. [Cheo] (ph), our ROIC improve will improve the asset turnover, as well as the operating profit and naturally the ROIC will go up and the steel margin is currently abnormal and the secondary battery material in terms of the investment phase is now -- will now turn into the profitable stage in the next two to three years. We have a firm conviction and that is why we are sharing with you these targets. If there are additional price increase, then there could be upside as well compared to this very much conservative view of the shareholder return.

Next is from [DB Bank, Yi Yong Yang] (ph).

Thank you. I have a slightly different question in mind. First, POSCO International and Samcheok coal fired power plants. The Samcheok plant perhaps went into operation last year or perhaps it was imminent. In any case, it's about ready to begin operation. So what kind of impact does it have on the operating profit and on your overall performance? And I know that, POSCO Group reduced its equity shares in this power plant. So what is your strategy on this project? I know that a lot of CapEx was expended on this project. And are there any impairments that have hit the books on this project? If they haven't hit your books yet, should we anticipate any losses or impairments that will hit your books in the future? What are some of the impacts that we should anticipate in the future? And the steel market is very challenging. I am very surprised that POSCO was able to turn a profit. But from a short-term perspective, for example, in the first quarter that you were expecting some improvements in cost structure that will turn a profit as well. So can we expect an improvement over the previous quarter? So what are some of the short-term profit expectations? It's surprising to see that you're generating any kind of profit in the business under these market circumstances. And in the fourth quarter, I know that you elaborated on this already. POSCO International generated an operating profit, but why did it turn into a loss in the fourth quarter? And among the steel products, what are some of the products that are generating negative profits in your steel products that is?

First, on the second question about the steel market situation, we will ask [indiscernible], Head of the Marketing Department at POSCO Marketing Office, sorry.

So the steel market situation, everybody knows that it's not bright. But compared to our competition, yes, we have made some performance. The reason being because of the downstream process facilities that have been able to generate some profit. I think they've served as a main axis. It is in the automotive industry. And because there we have a lot of formula agreements, formula based agreements that is how we've turned a profit, but we are negotiating these contracts renegotiating these contracts. In the domestic market as well, for our domestic customers, because foreign exchange hikes the cost that we incur there is absorbed in customer prices, because we are making products based on raw materials that were purchased with the foreign exchange hikes, we believe that, profit wise, the fourth quarter of last year is going to be the lowest point. And that's why we think there will be an improvement over the last quarter. Again, we believe that the lowest profit point was hit already last -- in the last quarter. I think there is another question. Are there any products that are generating negative profits? It is quite variable by product, so it's difficult to pinpoint, which ones are profitable, which ones are not. But wire rods are negative and automotive and stainless products are relatively profitable. Next is on POSCO International and Samcheok Power Plant. Let's ask Mr. [indiscernible], Infrastructure Business Department Head.

I will respond to that question. Samcheok Power Plant has completed construction. It is in operation. It is not in deficit. However, the cost that went into building this plant is in the books. So how is this going to impact the overall group performance and how will it be improved in the future? I think that was just of your question. It's in operation, but the complete phase construction is not over. So there are some electricals and electrical transmission works that need to be completed in the next one or two years. And some of that remains a little bit ambiguous. So it is difficult to speak about the future of this project. But from a carbon neutrality perspective and to align with our carbon net zero strategy, we intend to reduce our shares further in this project. POSCO International's fourth quarter performance, I'm not sure that I understand the question fully. The reason it turned -- recorded a deficit in the fourth quarter at POSCO International is, I believe, because there was asset impairment involved. I would like to check on this before I respond to you. So Mongduoung power plant in Vietnam, this is also this also enters the POSCO International accounts. So Mongduoung plant in Vietnam and the Hotel in Myanmar, these are some tens of billions of one that hit the books and were recognized in the accounts. I think if I can elaborate on the Mongduoung project, we agreed to sell this in 2021, but we are awaiting government approval on this sale. And we are receiving dividends on this project. And because we have to pay this back, that has been entered into the books and that's what recorded the deficit. And on the Samcheok coal fired power plant, we have no official statement to give at the moment. But based on some of the recent progress that we've made on coal fired power plants, what is our group's position and our stance, I think that has been very clear. So that's why we'll take the next question now.

Next question will be from [Yu Jin Lee from Yu Jin Securities] (ph).

I'm Yu Jin Lee from Yu Jin Securities. I have three questions. Last year -- at the end of last year, China said that it's going to impose -- import quota on the U.S. regarding the battery. And after the Lithium Project #1, I know that it's also in partnership with China. So I would like to know how things are going to evolve in the future regarding this matter? And the second is regarding the electric steel plate import. So as for India as well as China, they are manufacturing a lot of electric steel plate. I know that they are very good, but I would like to know if that would have an impact on our profitability. And the third is regarding the steel plates. So if there is an AD filing again regarding steel plates, I think that there could be a room for us to increase our prices. I would like to know about the price negotiations ongoing with the shipbuilding sector. And I would like to -- I also know that there are some bonded areas for the shipbuilding as well that they do not pay taxes. So can you elaborate a little bit on that as well? Regarding the battery materials, so Mr. [Lee Jae Yong] (ph) from the Energy Materials business is going to give the answer. And regarding the second and the third, Mr. Hong from Marketing Strategy will give the answer.

So regarding lithium, China is not really the main player with regards to lithium going to the U. S. Because there is Chile and Argentina that are sufficiently meeting the demand of the U.S. So when it comes to the lithium and export control on lithium, it is not the impact is going to be minimal. But what is important is nickel and graphite. Are we going to regulate only the companies that are based in China or Chinese companies? It's very much a different story. For example, if China actually regulates the companies that are abroad, the nickel companies and the anode companies cannot export, so that could be a problem. But regarding this matter, the [AOC] (ph) regulations are not fully defined yet, so I think that it is too early to make any assumptions. Regarding the electric plates, steel plate operating profit, there are different types of electric plates. So there is a dual product that goes into transmitters, or converters, but there is also another type that is used for the EV vehicles. So compared to other carbon sales, they show higher profitability. But the thing is that when it comes to anode product, if we cannot only use it for the EVs or the vehicles. So as for the other types because of the oversupply from the China, the profitability is very low. So all of these three different types show different levels of profitability. And when it comes to the AD complaint filed for steel plate, can we increase the prices? We believe that the prices can be increased naturally. And of course, the AD filing naturally the price increase is not something that we should not we should be very sure of, because it could have also an impact on the upstream business as well. So I think that we can look forward to more normalization of the abnormal prices. And when it comes to negotiating prices with the shipbuilding sector, I think that this could give us an upper hand or more advantage. But as the shipbuilding sectors or shipbuilding companies did not pay taxes for the bonded areas, so the impact is also minimal as well. So everything is currently very much complicated, but the AD filing could I think will lead to increased prices. That is for sure.

Yes, are there any additional questions? If there are no further questions. I'd like to thank all the investors for participating today. And with this, I'd like to close the 2024 POSCO Holdings earnings call. Thank you.

Greetings. I'm CSO of POSCO Holdings. My name is Jeong Kiseop. We have closed third quarter revenues and operating profits at levels very similar to the second quarter. However, steel price fell slightly deeper than we anticipated. In rechargeable battery materials, key raw materials prices continue to decline, creating a challenging business environment. These challenges notwithstanding, we try to stretch profits as much as possible, especially in steel, WTP products, our high-end steel products that make up 32% of our sales, helped to secure a level of profit margin that sustained POSCO's operating profit. In battery materials, lithium hydroxide prices falling below $10,000 per ton. Rapid price decline is exacerbated by the reverse lag created by the time difference between when they are bought and sold. This creates added challenge and disadvantage. In addition, our brine and lithium production plants lined up to complete construct. Anytime a plant comes online, they entail initial investment and operation cost that add to the overall burden of expenditures. However, some have recently been commissioned. The fact that these new plants have been completed and initial pilot operation have gone into effect without a hitch gives us reason to be proud that our lithium production technology and facilities have arrived at commercial scale. Before I give you -- give the floor to the Head of IR for more detail on our earnings, I'd like to take a moment to strategic alliance struck between POSCO Group and JSW Group, which released yesterday. In your deck it pertains to slides 5 and 8. With JSW Group in India, POSCO Group has signed an MOU to cooperate not only in building an integrated steel mill in India, but also to extend that collaboration into rechargeable battery materials and renewable energy sectors. In steel, we're delving into the details of building an integrated mill in India with at least a 5 million ton capacity. The new upstream plant will have a 50-50 investment from POSCO and JSW Group, with plans to focus on premium automotive steel products. We have been proposed 2 potential plant sites that we are currently examining. In addition to the JV in steel, we're also discussing collaboration in rechargeable battery materials and renewable energy. While still early in our discussions, we're studying ways to collaborate on LFP-type EV battery materials, in which cost-efficient manufacturing is an essential condition. This business partnership with JSW Group and our entry into upstream business in India have three strategic implications for POSCO Group. First, it is our response to the formation of steel market blocks around the world. Given the geopolitical risks and protectionist trade tendencies, the global steel industry supply chains are grouping into blocks. Hence, we must address this shift through localization in key markets. By entering the upstream business in India, we plan to move away from previous business strategies that focus on seeking growth centered on downstream process. Instead, we wish to get to the growth market early and to build presence through upstream business. On Page 7, we provide a brief overview on the Indian steel market. India is one of the fastest steel demand growing economies in the world. Per capita steel consumption in India is 90 kilograms, which is a mere 40% of the global average. Moreover, it is a market that is growing with strong push from the Indian government's promotion policies. On the other hand, the market share of the top five Indian steelmakers is over 60%, signaling an oligopoly. Because the government protects its national mills, profit is relatively strong, too. Finally, abundance of iron ore reserves promise ample supply of inexpensive raw materials. In 2009, POSCO set up POSCO Maharashtra or PMH, a downstream plant. We've defined our position in the market as a key automotive steel sheet supplier. As of 2023, our market share in automotive coated steel was 28%, taking joint number one market position. Currently, more than 50% of our products are supplied to the auto industry. Because we've already acquired a good number of clients that use premium steel products, we hope that a new upstream facility in India will generate immediate synergy with existing networks and assets in the country. And this is the way we want to be able to build a larger market for our products. The second implication is partnership with a formidable local partner. On page of your handout, there's a brief description. JSW Group is ranked number one steelmaker in India by production volume. A joint venture with such a strong partner helps to mitigate local risk. Therefore, we believe our partner will help us to make our entry into the market faster and more efficient. So entering into an overseas market in a more efficient way helps us to generate more profit wherever we end up. The third implication is in battery materials and renewable energy, we have strategic alignment in these areas for collaboration. JSW is known as a steel maker. However, they have recently acquired shares of MG Motor India and built a recycling business, too. These actions signal aggressive investment into EVs. Through JSW Energy, the renewable energy business is expanding, too. From these perspectives, we find a great level of strategic alignment with POSCO Group's eco-friendly rechargeable battery materials business. Given the growing importance of manufacturing cost competence in the battery materials sector, India is rising in prominence, especially given its growing projections of EVs, and therefore all the more important to have a local partner in doing this business. To our investors and shareholders, I want to stress that due to a sluggish market, cost recovery continues to be delayed in both steel and the Battery Materials businesses. We're committed to continuing sound profit management and to seek growth trajectories in key businesses. This is how we promise to do our best to surmount the current crisis. While we expand in these business areas, we're also committed to simultaneous restructuring of nonessential businesses and nonperforming assets. Through these efforts, our long-term goal is to enhance capital efficiency. Now I'd like to hand the floor to the Head of IR, who will deliver our third quarter earnings.

I'd like to discuss the consolidated results for the third quarter. Please go to Page 4 of the presentation deck. Overall, the third quarter ended at a similar level to second quarter. We recorded KRW18.321 trillion for the sales and operating income, KRW743 billion. We made a lot of [indiscernible], a lot of efforts, but because of rather sluggish performance in the steel and rechargeable batteries and the initial cost of subsidiaries being reflected that turned out to be a factor. For the third quarter, we have sales and operating income for the third quarter at KRW18.321 trillion and KRW743 billion. And that's EBITDA of KRW1.75 billion in the third quarter. And we have -- now going into the sectorial outcome. Please go to the steel side. On the operating profit, that was KRW466 billion, and that's down by KRW31 billion from the previous quarter. POSCO posted an improvement of KRW20 billion, recording KRW438 billion, but because of the deterioration in the profitability of the Chinese subsidies, including Jhanjiangang, we have seen the sluggish steel demand in China resulting to the results. Infrastructure segment posted operating profit of KRW449 billion, up KRW20 billion and the profit improved at POSCO International due to high power generation profit. For the Future M, because of the lower anode active material sales volume and losses in the cathode material, the profit shrunk and the POSCO Pillar lithium solution began to reflect the initial cost of production entities, including ramp-up of the POSCO [indiscernible] lithium solution and the completion of the POSCO Argentina. Next, I'd like to share with you the major activities in the third quarter. Mr. [Chung] spoke about the strategic alliance between POSCO and the JWS Group in India and our successful entry into the Indian market. Please go to Page 9 for the completion of the POSCO Argentina Brine Lithium Phase 1 plant construction. For the POSCO Argentina Brine Lithium Phase 1, this is upstream and downstream process with capacity of 25,000 tons of lithium hydroxide. It has been completed recently. Completion ceremony was held in Argentina. And the initial production of 200 tons of lithium hydroxide was successfully completed. We are currently going on with a ramp-up process from November, we start the product certification process for the POSCO Future M and battery companies. Next, on the upstream process of the POSCO Argentina Phase 2 with a capacity of 25,000 tons, this will be completed in the third quarter of next year. And if the downstream process in [indiscernible] is completed around that time, I think this will happen by the end of next year, and we'll have a system of 50,000 tons of sulphate-based lithium brine-based lithium hydroxide production. The POSCO Lithium [indiscernible] 1 plant in [indiscernible] height of its production ramp-up schedule by about one quarter and is expected to be completed by the end of this year. In the third quarter, the cumulative production will be 1,965 tons, and we are stabilizing the production. So we're inching closer to the stage of stable to mass production. This is the internal evaluation. And at the same time, the product validation is nearing completion. And we are pleased to announce that we recently signed a contract to supply 20,000 tons of lithium hydroxide for EVs in 2025, and this will be signed sometime in December of this year. For the full scope future battery companies, we are currently going on the certification procedure. And we believe that additional supply contracts will be added in the first half of next year. By the end of this year, as you know very well, we have a capacity of 21,500 tons, a second plant to be completed. We're working very hard to complete the completion. And currently, we're going -- undergoing commissioning. And this shows to be completed by December this year. So with this, the hard rock and the brine completed, we believe that we will have a production base of 68,000 tons and 89,500 tons by the end of next year. More recently, we have seen the lithium prices coming down below 10,000 levels. And by the end of this year and next year, we will have investments for the new plants, and the product certification will take a year or so. And we are not going to be able to enhance the utilization and the rate very rapidly. So we have some fixed cost coming in. So it will take time for us to come to the normalized the margin level. So we are trying to accumulate the mass production experience and also trying to make sure that we bring efficiency in the production. So we're setting our best efforts to come up with the best results. We're also trying to advance the normalization of lithium production, and we're also working to secure key mineral acids at the time of decline in lithium prices. And as reported by the media, you'll see that in the Chile, the Altoandinos lithium project is going on. We were included in the short list in August and negotiations are currently underway. We believe that by the end of first quarter, the final candidate will be selected. And also for the Maricunga Salt, the brine-based lithium project, we are participating in the bidding process. And in addition, we also have like the hard rock-based lithium. This is also what the Company is considering mainly in Australia and the United States. Secondly, I want to mention that POSCO International has made equity investment in Black Rock Mining, and this is going to be 60,000 tons of battery grade flake graphite. Next page, this is about the progress of restructuring program. The Company has added five more restructuring targets on top of what we announced in July. So there will be 55 -- a total of 55 on the low-margin business is 70 non-core assets. We have 21 businesses and assets. We have completed restructuring. This led to a freeing up of KRW625.4 billion in cash, and this is as of the end of September. You'll be very curious what we have sold off. So some of them include heavy oil plant in Papua New Guinea and the regional steel processing center in China. So these are some of the low margin, the production centers that we have owned in the overseas countries. So these are low margin, and these are not part of the core future businesses we have in mind. So we sold them. And for the noncore assets, I also want to mention the KB Financial Group was sold and Expressway, where we have like a simple minor equity stakes. And we also have [indiscernible] multipurpose commercial building, which is a noncore real estate assets that we held. So we sold these assets to secure more cash. And on these points, this relates to improving the efficiency of our asset management at the group level. And as I have announced before, by the end of 2026, we'll be able to arrive at the target that we have set. So we'll be able to come up with KRW2.6 trillion in cash, and this will be used for future investments. And we will make sure that there is like a stringent control of the management of these assets. Next, I'd like to talk about the Company results. Please go to Page 11. The first up is POSCO. POSCO's crude steel production in the second quarter turned out to be normalized. It has been reduced a bit and it's returned to normal levels. And that comes after the [Pang] number four blast furnace completion. This increased by 1.233 million tons from the previous quarter of 9.234 trillion tons. And correspondingly, our revenue has grown to KRW9.479 trillion. Although the profit improved due to the effect of lower fixed cost due to the increase in the production volumes, we have seen some improvements, and also, you can see the raw material prices has also dropped. But the sales price, this has reduced by KRW43,000 per ton. So this is a large decrease. And therefore, the margin is reduced slightly. And despite the difficulties, we believe that we have seen the sales improved slightly from the third quarter. For the fourth quarter, you see that the raw material prices are expected to decline further quarter-on-quarter and production sales volumes are expected to increase slightly compared to the third quarter. So in terms of the manufacturing cost, the fourth quarter turns out to be more positive than the third quarter. But we see that the real estate downturn in China continues, and there are no concrete signs of recovery. So the sales environment is expected to be -- continue to be challenging. The Company has -- compared to other competing companies, we have high proportion of long-term contracts with the higher-value products. And thus, we expect the profits in the fourth quarter to be in line with the third quarter. But we are making every effort to secure profits in case the decline in selling prices continue. Please go to Page 12. In the overseas steel business, we look at Indonesian mills, the upstream and also the short pressure mills in India and Mexico. They're improving their profitability by increasing the proportion of high-margin steel plates. In particular, for the POSCO Maharashtra, the Indian downstream subsidiary, is making structural progress in diversifying sales mix towards a high-end automotive steel. And the proportion of alternative steel sales is reaching 52%. So in terms of the mix, we are looking at structural improvement. However, I want to mention that if you look at the [indiscernible] and the Chinese subsidiaries, we are looking at lower selling prices caused by the deteriorating market conditions. And therefore, the overall profit from the overseas steel decreased quarter-on-quarter. Next is on the POSCO International sales and operating profit increased by 0.1 point, respectively, from the previous quarter. We have seen in the energy sector operating profit decreased due to a decrease in the cost recovery ratio of the gas fields, but we are able to result lead to a profit in the same level as the previous quarter. On the POSCO E&C, we look at the ongoing prices in the construction market. So we are prioritizing on securing financial stability, including cash flow-oriented management. We want to maintain this profitability level. In the third quarter, in line with the group restructuring plan, we sold noncore assets and that led to more than KRW100 billion in the cash and improving profit by KRW32.9 billion. Let's go to POSCO Future M now. Sales increased slightly from the previous quarter. But if you look at the sluggish business in the Energy side, we see that the operating profit fell 64%. In the cathode active materials, sales volume increased on a quarter-on-quarter basis, and this is due to strong sales in the high-nickel products, but because of the inventory valuation losses, operating profit turned to a loss. In the anode materials due to sluggish sales of the natural graphite, we have seen the overall decline in the profitability. For the Pohang number four blast furnace because it has been -- because of the changes incurred there, we see that things have been turned to the normalized level. And I think this includes a brief overview of our third quarter earnings. Now we'd like to proceed the Q&A session. Thank you.

[Operator Instructions] The first question is from Hyundai Motor Securities, Mr. Park.

I have about three questions. The first is regarding the market -- steel market that is. In automobiles and shipbuilding, what kind of price negotiations are ongoing? And how is it going? And there have been some announcements regarding EVs and there are mixed signals. From POSCO Holdings perspective, looking at the stimulus package that's been released in China, how does that relate to our own steel market? How do you view that? The second question is regarding nonessential assets and underperforming businesses. These are onetime expenditures that are usually consolidated at the end of the year. And I totally understand why you would want to do that. Is this something we should be expecting this year as well? So on certain onetime expenditures, will we see all of this being consolidated towards the end of the year? And third is something that was mentioned by the CSO. So the fact that POSCO is investing in India, I think that's practical and reasonable. However, I do have some questions. You did mention an integrated mill. Is this blast furnace based or is this based on hydrogen steelmaking? And I also have a question about the size. it's probably going to be one blast furnace, but it's probably not going to end there. So does it have expandability? And the location of Odisha, there's quite a distance between Odisha and Maharashtra. So if you produce in Odisha and other sheets are produced in PMH, there's quite a distance and transportation that's required. So how will you calibrate what gets produced where? And about 20 years ago, I believe you had contemplated building an integrated mill in Odisha but failed. And I believe there was a lot of opposition from the community, and that was part of the reason why you failed. What is different this time? And I believe it was in 2022 with [Adani], there was an MOU signed to invest $5 billion into some eco-friendly facility. Now that you have held hands with JSW, what happens with Adani? Has that been canceled? Or are you doing both in parallel? And if this is an investment into a blast furnace, I believe POSCO has already announced its carbon-neutral strategy. If it's blast furnace based, then how does this fare into your carbon neutrality road map? That's all of my questions.

So you asked three key questions. The first is regarding the steel market. And we will have Mr. [indiscernible] from the Head of Marketing Strategy Office. And on the second question, I'd like to ask Mr. [indiscernible], Chief of Corporate Strategy. And on the question regarding the investment in India, we will ask Mr. [indiscernible], Chief of Steel business.

My name is Yoo Young-Sook. The second half of this year, we had mixed signals about either a rebound or a prolonged recession. And it was very much dependent on the stimulus package that was released in China. Since the announcement of the stimulus package, we did see a huge rebound in the Chinese domestic steel prices. But because there were lingering questions about how much impact this was going to have, the prices began to fall again. In shipbuilding and automobile industries, you asked about the impact in those industries. We have half year contracts with the OEMs. And so when we have these half year contracts, of course, the third quarter and fourth quarter run on the same prices. But in the beginning of next year, we may see some prices negotiated upward and downward. Currently, in shipbuilding, we have not negotiated the full price for the fourth quarter. So that is upcoming. And we are trying to up our price with some of the shipbuilding companies, but we are up against some resistance. Since the Chinese stimulus package, what are some projections that we are making? I think that was part of your question. As mentioned before, since the stimulus package, yes, we did see a huge rebound in prices. And rather than thinking that demand was going to follow suit, we did think that there -- the prices had already reflected future stimulus packages. And so at some point, the price went above $100 per ton. But I think thereafter, the price began to reflect some disappointment, and so it began to fall again. But I don't think it's going to fall too low. A lot of the steelmakers in China are already in red ink. And the Chinese government is likely to announce another stimulus package in December. And so we believe it's going to hit another rebound pretty soon.

Second question on nonessential assets that is regarding restructuring. And I think the question was, will all of these costs be consolidated in one quarter towards the end of the year? In the second quarter, during our earnings release, we did release about 120 restructuring projects and our plans to restructure these assets or businesses. But now after some time has transpired in the third quarter, in particular, the restructuring that was scheduled is on schedule and proceeding as planned. So some of the divestments as well as sales. In some of these cases, we can generate a profit. In other cases, we may suffer some losses. And that is exactly what happened, but profits outweighed the losses, and that's why we turned a general profit. In the past, when we sold off our nonperforming assets, yes, we did generate a lot of losses. And so I think a lot of people remember those numbers. And I want to remind you that during this restructuring, we are going to suffer some losses. But according to what we've seen so far and what we plan in the future, there will be more profits than losses. But again, there will be some impairments, but I think they will be overweighted by the profits, and so the impact is not going to be hugely negative.

I'd like to respond to the third question. Regarding hydrogen-based steelmaking and blast furnace and which part will be implemented in India. The hydrogen-based steelmaking is not yet commercial scale. So of course, we are going to install blast furnace and a shaft method, and this will have to go through discussions with our partner. In the first stage, we will do 5 million tons. And what we contemplate at the moment is the first plant site is about 1,600 acres. And so yes, there is expandability to Phase 2. In addition to that site, we could be looking at other sites, too, and that is under consideration. The location of Odisha, there's quite a bit of distance between Odisha and PMH. In Odisha, there are many rolling mills from where we get our supplies. So the upstream process, if we place that in Odisha, we will have no shortage of supplies from the local mills. And so keeping our production site here in Odisha, we have plans to go all the way from upstream to downstream. Yes, about 20 years ago, we failed to acquire the land on which we would be able to build the integrated mill. It was not just the acquisition of land, but also mining rights that became the issue at the time. But this time, yes, we are working with a local partner, so they will take care of the mining rights. The MOU with Adani Group, that MOU was signed at the end of 2022. I think it was in the beginning of 2023 that Adani was languishing in the Hindenburg report. And so we could not carry on that partnership. And that's why JSW and Adani will not go in parallel. In India, carbon net zero goal is by 2070. Ours is by 2050. So in India, we intend to follow local rules. For example, if we invest in a blast furnace, there are many technologies that are under development, such as hydrogen mix technology as well as CCS. And so there are many advanced technologies that are being developed by POSCO Group right now that will all be put to the test and applied there. That's how we will try to get to carbon net zero in India. I hope that answered your question. We'll go to the next question.

The next question is from iM Securities, Mr. Kim.

I have three questions, three very short questions. My first question pertains to India. On India, what is the demand situation, demand to supply situation? What is POSCO's view? If you look at the demand growth, I think it could be quite positive. But if you look at the supply side, I think there's a rapid increase in the supply as well. So if you look at India, it may not be like quite like the Chinese market. But what about -- how do you address the concerns you have the India market, given the market and demand situation? Secondly, if you look at the overseas penetration, you gave us good explanations about Indian experience. What about the United States? China also the Southeast Asia, there is a lot of overflow of Chinese products. So give us an update on what you're doing in this region as well. And for the [indiscernible] steel plates for the Hyundai, and there's been some investigation for the antidumping for the low-cost Chinese steel products, what is your position on the Chinese products? And how do you intend to respond to that situation?

Talk about the demand and supply situation. If you look at this demand, I think it's about 150 million. And by 2030, the government intend to make it to 300 million tons or 200 million tons from our forecast, depending on where we see it. And also, I'd like to say that if you look at the demand itself, if you compare to China and India, I don't think there's a substantive increase in the India side. There's like a 6% or 7% increase every year. If you look at the past experiences in 2000 or right before 2000, if you look at demand increase in China, there was an increase of 20% to 30% every year. So if you look at the situation, and of course, the concerns -- there could be concerns about the oversupply, but even if there is an oversupply situation, partially there could be oversupplied, but POSCO believes that given the portfolio of our products, we focus on the high-end products. So I don't think there will be much of a problem there. And for the steel demand, if you look at the increase in steel demand, you see a slight increase in the Chinese side as well. But in India, there's an increase by 10 million to 15 million tons every year. And if you look at the demand and supply, I still believe that there is a lot more demand than supply. The second point about the U.S. and Southeast Asia, the upstream strategy for the United States, 2026 or 2027 will be the year that we have been considering the upstream process. For the electric furnace, we are continuing to make efforts. That's what I can tell you for now on the United States side. On the third point, for the steel plate AD, the Southeast Asia for the upstream, the AD products, PYV in Vietnam is going on pretty well. And I think we're considering further expansion in the future. For the Indonesia, 3 million tons, we believe that we need to actively consider expanding in the future, Indonesia as well. In Indonesia, I don't think we have anything quite concrete right now. We don't have any concrete plan going on for Indonesia right now. On the third point, for the steel plates, on how we will respond for that POSCO, Mr. [indiscernible] is going to respond.

On steel plate AD filing and what are our responses, I'll give you the answer on that. On steel plates and the antidumping filing, there are inquiries that have been sent out by the Korean government to industries that deal in the same products. And so we will be responding to those inquiries. Our deadline is by mid-November, and I think we may be able to get an extension on that. So we will respond to those inquiries. And of course, there's a lot of cheap Chinese products that are flooding our market. Of course, AD filing is a right protected by international law as a means to address unfair trade practices. So, key steel making economies, in an effort to protect their domestic steel makers often use AD rules as trade remedies. Recently, Chinese and Japanese hot roll steel sheets are under investigation or subject to AD ruling in the EU, Turkey and Vietnam, and Canada, Mexico, Indonesia, Taiwan, Thailand, Australia and UK, AD rulings are being practices on HR steel sheets. So, despite strong protectionist measures undertaken by steel producing economies, the Korean steel industry is so defenseless to imports in an essentially open market, devoid of any protectionist mechanism. Unfair trade practices are flooding the domestic market, and so POSCO has to take some action, as well. Therefore, we intend to strengthen our monitoring activities on steel imports and to address unfair trade practices, we are actively reviewing diverse means of remedy, including AD filing. Thank you.

Next question is from Yin Securities, Eugene Lee.

Can you hear me? I would also like to ask about three questions. First is about the steel market and steel price that -- where recovery is delayed. I feel there are some investments that are being planned, but the cost seems a little bit high. What are your plans here? And regarding CapEx for your Indian project, can you make some comparisons? And regarding PMH, I think you are planning about 40 million tons. What is the feedstock that has been secured for this production volume? I'd like your analysis on that. Silicon Solution is my next question. I wonder if you've acquired some good number of clients, customers.

On the CapEx, we will ask Mr. Kim Seung-Jun in charge of Finance and IR. On PMH and feedstock, we will ask Mr. [indiscernible], and the third question on silicon solution production plans, that question will be answered by the Head of Nickel and Next-generation business team, Mr. [indiscernible].

So first on how to secure the funding. In India, the investor is POSCO. So POSCO is going to make the investment. And our plant capacity is 5 million tons. So it's going to be about KRW8 billion. But this is a joint investment with a partner, a 50-50 investment. So we will be investing maybe about KRW5 trillion. Each year, about KRW4.5 trillion EBITDA should be generated. And this is going to happen over a period of four to five years, not happening all in one year. So with that EBITDA, I think it's something we can definitely manage and accommodate. In lithium, POSCO Holdings will be making the investment here. This is also not 100% from POSCO Holdings. We will have local partners. And so there will be some calibration of how much will be expended. If we look at cash reserves, we have about KRW4.5 billion in cash reserves and the convertible bonds that have recently been cash, that generated about KRW3 trillion as well. So we have sufficient funds. Looking at our financials, these -- this CapEx is not a huge burden.

PMH, so full hards and HR products that are supplied to PMH from POSCO, it's about 1 million tons per year. If we should make this investment, the hot-rolled products will not be removed immediately. It will go through a phased reduction. So about 1 million tons of hot-rolled products will, over time, be removed. And so we will have to find other markets. And downstream capacity is something that we would like to acquire additionally. And so that's how we intend to adjust our demand and supply.

Let me address Silicon Solutions. Our Silicon Solution plant will be commissioned next week. So prior to full capacity production, we will have to go through product certification, of course, through domestic refineries as well as Company P in Japan, cCompany M in Europe and other companies in the U.S. We are in negotiations with a number of companies. Our certification samples have been submitted to these companies. And we have also signed MOUs with a certain part of these clients for a certain volume uptake. And so samples have been submitted and progress is being made so that we will be able to get certified as soon as possible.

Next question is from DBF, Jae Heon Jeong.

I'd like to ask you a question about your investments in India. You said that it is a 50-50% stake investment. And if you do a joint venture based on 50-50 equity, then this may lead to a number of issues, for example, shareholding rights. And so there could be a possible conflict in the future. So we have concerns about that as well because this is an Indian venture. So do you have any like a call option, any special provisions to protect the shareholders? Do you have anything reflected in the shareholder structure? And JSW, as I understand, has sought 10 million ton of the capacity expansion on its own before it entered into a joint venture with the POSCO. So JSW has its plan for the capacity expansion. And with this investment with the POSCO, it looks like that it has a strategy to arrive at the high-end product, as well. So I have concerns that they may abuse you in the future. If you think about the 5 million tons, on what the production process is going to be, how you intend to produce them? You said that nothing concrete has been finalized yet. But this 5 million tons, is that targeting purely the Indian market? Is it your -- is my understanding correct that you are just targeting the Indian market with the 5 million tons of products? And also concerned about carbon neutrality because carbon neutrality is not something you implement just for the POSCO India or POSCO Korea or the United States, it's going to be on a consolidated basis, and you have to look at the carbon emission level as a whole. I think that's what shareholders were looking for. So if you have this 50-50 venture, financial outcome is going to be very important, but you said to be thinking about the carbon emissions level, where would the emissions be calculated? Would it be at the joint venture or the POSCO as a whole? So I'd like to ask you about the questions, ask you to explain that as well. And you're going to begin lithium production and the lithium prices has come down quite substantively. And if you think about the cost competitiveness, if you think about what you have in Argentina, you said that your competitiveness is very high. But if you think about amortization and depreciation cost and the production cost, all considered what would be the BP for the POSCO? You're at the initial stages of production, of course, you can't reach the breakeven point. But let's say the utilization rate rises to 70%, 80% levels. What will be the production cost, which we can realize the breakeven point? If you think about the brines and also the hard rocks, what will be the cost structure? I'd like to ask you to explain on that as well.

Well, we make 50%, 50% investment. We may -- you said that we may enter into some conflicting situation. But we have 50% equity, and we have a BOD that is structured with 50%, 50% from both sides. I don't think we're going to enter into major conflicting relationship. we are trying to secure the site and come up with the FS. And so it will take some time for us to achieve at a certain level. So it's a call options. In the future, we will certainly make considerations for that in the future. 10 million ton, I think to try to secure on their own side is already done. So if you think about the Odisha site, there could be further expansion made so that by 2030, this will be risen to 25 million levels. So what they are trying to negotiate with us is part of the 25 million they have in their plan. And the joint venture with POSCO is not an integrated steel mill. They want to come up with the high-end mill. So that is what has been currently being discussed with the Indian partner. And India has 150 million tons in size in the market size. And the export ratio is relatively very small compared to Indian or the Korean's market size. So this will be purely an Indian market that we are targeting with this joint venture. With the carbon neutrality, I think we need to be very realistic in our purchase. Of course, they need to be consolidated. We need to make public disclosures, but we need to be realistic in our purchase. If we make the reduction efforts in India, I think the market would understand our position in looking at the realities of the market situation in India. On the lithium side, Mr. Lee, who is responsible for the lithium business, Mr. [indiscernible] is going to respond.

On the BP, breakeven point, for the Salt Lake, the brines, I think lithium producers all over the world are suffering because the price of the lithium is less than 10,000. So even if they do a salt lake-based brime business, they're not making good profits. We're still at the early stages. So I'm not really sure what to say as of now. But compared with our competition, competitors, I think the Salt Lake quality is very high. The lithium content is very high. And therefore, we are not very concerned about that, but we have made quite a lot of investments. So there could be quite high amortization cost. But as we enter into full mass production, we believe that I don't think there's going to be a significant difference between what we make and what other competitors do. So I think we can make a good profit with this Salt Lake brine-based business. And if you look at the cost difference between the hard rocks and the brines, first, as we purchase Salt Lake, we make a massive investment for the hard rocks or the lithium solutions, we make monthly investments because import from Australia on a monthly basis. And therefore, this -- there is like raw material cost, feedstock cost. If you think about the process, the processing, I think there's not going to be a great difference, but the difference comes from the feedstock from the raw materials. And the hard rocks are more costly than the Salt Lake as of now compared to the price, it's a lot more costly.

Do we have any other questions? No one has requested to ask a question yet.

So let me speak. I'd like to thank everyone who participated today. The third quarter 2024 earnings release presentation ends now. Thank you very much for your participation.