Posco International Corporation (047050.KS) Earnings Call Transcript & Summary

Good morning. Welcome to Posco International 2025 Q4 Earnings Call. The rule, first half presentation from Posco International and then we will entertain questions. [Operator Instructions] Now we would like to begin the Posco International 2025 Q4 earnings call.

Good morning. This is [indiscernible]. We will now begin the earnings call for Posco International Q4 of 2025. You can find the earnings release filed under the IR reports tab on our official website, www.postcointl.com. Today's earnings call is being held via conference call and with participants joining us from both Korea and overseas, simultaneous English interpretation is being provided. In particular, starting from this quarter, to ensure that all stakeholders, including members of the first and retail investors can listen to the conference in real time. We are live streaming via Microsoft Teams. Posco International will continue to work for more transparent and comp communication with our stakeholders. Now let me introduce the executives present for today's conference call. Our CFO, Kyung-Jin Chung, Head of Corporate Planning Group is present today. Along with Kim Dae-Yeon, Head of Corporate [indiscernible] Division; [indiscernible], Head of Business Management Division; [indiscernible], Head of Finance Division; [indiscernible], Head of [indiscernible] and [indiscernible] Division; and [indiscernible], Head of the Argo Business Development division. Also in attendance, our Head of Power Plant Operations Division, [indiscernible]; Head of Terminal Business Division, [indiscernible]; Head of LNG [indiscernible]; Acting Head of Power Business Development Division, [indiscernible]; Head of BMP Business Division; [indiscernible]; Senior Vice President of Low Carbon Energy Business Department, [indiscernible]; and Director of Energy Business Operations Department, [indiscernible]. And joining us on behalf of [indiscernible], Head of Mobility Business Division is [indiscernible], Senior Vice President of Motor Core Sales Department. As for the agenda, we will have a 2025 business performance and 2026 outlook, which will be provided by the CFO, Kyung-Jin Chung, after which I will present the overall 2025 earnings and key financial status. Following that, the heads of each division will share their respective business performance and outlook. To begin with, we will hear the opening remarks from our CFO.

Good morning. I am Kyung-Jin Chung, CFO and Head of Corporate Planning Group at Posco International. I would like to express my sincere gratitude to the participants for joining our 2025 Q4 and full year earnings call despite your busy schedules. We would also like to thank you for your unwavering support and trust over the past year. Year 2026 is the year of dynamism of the red horse, and we will show robust execution for even stronger performance. We would like to reflect upon performance of the past year and also share with you strategies going forward and also explore ways for further growth. I would like to once again thank everyone for joining us despite their busy schedules. And I hope all the best and help for your endeavors and your families. Now I will briefly outline the company's key achievements in 2025 and our plans for 2026. In 2025, the U.S.-China trade dispute, the restructuring of the multilateral trade order, increasing protectionism and persistent geopolitical risks led to increased volatility in energy raw materials and exchange rates, while global growth continued to stagnate, culminating in a year of severe or certain [indiscernible] on this challenging environment, Posco International focused on solidifying the profit of our existing businesses while concentrating on establishing a foundation for mid- to long-term growth revolving around energy and materials. The key outcomes of these efforts can be summarized into the following 4 areas. First is the expansion of the value chain in our core businesses and securing future growth foundations. By acquiring Indonesian Palm Oil Company procuring LNG dedicated vessels and the completion of our Motor Core plant in Poland, we strengthened the competitiveness of our existing businesses. And at the same time, accelerated our entry into future growth sectors, including the Alaska LNG project and groundbreaking of a graphite mine in Tanzania. Second, the structural transition to growth in our energy business. With the Phase 4 development of the Myanmar Gas Field and the production expansion at [indiscernible] reinforced us stable cash flow base. Furthermore, in the [indiscernible] #2 LNG terminal and establishing a trading corporation in Singapore, we built a foundation for LNG value chain synergies across the entire group. Third is global expansion of our materials and mobility business. By responding to external environmental changes, such as [indiscernible] and tariffs, we are redefining our global steel trading structure and creating high value-added demand. Also, by expanding our Motor Core production basis, overseas to locations such as Mexico and Poland, we are progressively establishing our production system of 7.5 million units by 2030. In addition, by beginning graphite mine [indiscernible] investments for used-battery recycling, we have actively pursued a diversification of our secondary battery raw material supply chain. Fourth is the improvement of our sustainable management fundamentals based on digital transformation, [ DS ], finance and ESG. To build a data-driven decision-making system, we established DS master plan have commenced the execution of key tasks. Furthermore, through disposal of noncore assets and asset streamlining, we secured KRW 223 billion in cash liquidity. In terms of profit and loss improvement. We also achieved significant results. In 2026, by completing a management system that continuously strengthen future growth capabilities based on DX and through internalization of sustainable management alongside mid- to long growth -- mid- to long-term growth, we will work to enhance and corporate value. In 2026, the company plans to further strengthen spread communication. With top management taking the lead, we will actively build on internal and external communication and transparently share the implementation data of our value programs while maintaining a shareholder return policy of around 50%, and we are committed to faithfully fulfilling our promises to the market. Furthermore, to further enhance corporate and shareholder value starting this year, we have carried out the organizational restructuring by integrating our IR and sustainable management units. In this decision, the valuable feedback provided by the investors played a significant role. When financial performance and sustainability indicators are aligned, corporate risk decreases and the quality of growth improves. Based on this understanding, we have further strengthened professional expertise and maximize synergy through this reorganization. Moving forward, regarding short-term results, mid- to long-term value, risk management and growth strategies, we will focus on communicating a single story with a single voice for the market. We ask for your continued interest and support as we challenge ourselves to make 2026 a year approving plans through execution. Next, Senior Vice President, [indiscernible] and the executives in charge of each business will walk you through the 2025 performance by division, key business status and this year's outlook, followed by Q&A session. Thank you for your attention.

Thank you for the opening remarks from our CFO. Now I'll explain our full year and Q4 2025 results. Please refer to Page 4 of the presentation material. In 2025, the company's operating profit on a full year basis amounted to KRW 1.1653 trillion. On a Y-o-Y basis, this represents an increase of 48.41 or roughly 4.3% once again achieving record high performance. If you look at the financial highlights by key business units shown in the upper right-hand section. First, in the Energy business unit, Gas E&P business recorded revenue of KRW 650.7 billion, and operating of KRW 356.1 billion. LNG terminal and power generation business recorded revenue of KRW 2.8923 trillion and operating profit of KRW 172.1 billion. Subsidiaries, including Senex Energy recorded sales of KRW 4.8 billion and operating profit of KRW 98.4 billion. As a result, total operating profit from the Energy business amounted to KRW 626.6 billion, delivering stable performance that accounts for 54% of the company's total operating profit. Next is the material business unit. In the Steel business, sales reached KRW 14.5465 trillion with operating profit of [ KRW 237.4 billion ]. The Materials and bio business recorded revenue of KRW 8.8307 trillion and operating profit of KRW 69.5 billion. subsidiaries, including Indonesia and Palm plantations recorded sales of KRW 5.0027 trillion and operating profit of KRW 231.9 billion. Total operating profit from the material business amounted to KRW 538.7 billion, accounting for 46% of company's total outlined operating profit particular with the energy business, it forms One of the 2 core pillars of the company's earnings structure. If you look at the key reasons behind the changes in the operating profit is shown in the lower right-hand section in the energy business, the increase in sales volumes in the Myanmar Gas Field and impact from the [indiscernible] fall production increase at the Senex Gas build in Australia contribute to the improvement in performance. In the materials business, the effect of acquisition of a new Palm oil company and foreign exchange gains driven by increased euro exchange gains in the Steel Trading segment were reflected into the results. Borrowing approximately KRW 180 billion year-on-year. However, the net debt ratio declined by 3 percentage points and EBITDA increased by 3.4% Y-o-Y further recording KRW 1.7 trillion, further strengthening our financial soundness. Next, I will move on to the detailed performance of the Energy business. Please refer to Page 5. In 2025, the Energy business maintained stable profitability supported by its value chain. If you look at the table on the left-hand side, in the Upstream Myanmar Gas Field, operating profit increased by KRW 21.3 billion year-on-year, driven by higher sales volume at the depreciate. In the case of the Australian Senex gas field, as a result of the threefold production capacity expansion system completed at the end of the last year, both sales volume and operating profit increased significantly. Sales increased by KRW 123.9 billion Y-o-Y to KRW 392.2 billion and operating profit rose by KRW 35.7 billion Y-o-Y to KRW 75.3 billion. The table on the right-hand side shows the performance of the midstream and downstream. In the midstream terminal business operating profit for the [indiscernible], the operation period was extended, so operating profit increased by KRW 1.7 billion year-on-year. On the other hand, in the power generation business, both the S&P and utilization declined significantly and operating profit also decreed accordingly. Please refer to Page 6. Now we are moving on to material business. In 2025, despite challenging market conditions, including a global economic slowdown and deterioration in the raw material market conditions, profit increase Y-o-Y. As shown in the table on the left-hand side, while sales from field trading declined Y-o-Y. Profits increased by approximately 7% Y-o-Y, driven by the expansion of new long-distance sales and the impact of increased euro foreign exchange gains. In the case of materials and bio business, despite deteriorating global market conditions and protection is trend, performance was maintained at a level comparable to the previous year. The table in the upper right-hand section shows the performance of the EV motor core business. Driven by diversification of the sales miss with a focus on hybrid vehicles and cost improvements, profits improved significantly on a Y-o-Y basis recording up KRW 19.2 billion. The palm oil business shown in the lower right-hand section recorded operating profit on a Y-o-Y basis, increase of 23% to KRW 101 billion, supported by strong crude oil market conditions. Next, I will move on to the status of the Chief Development on business units and forecast for 2026. Please refer to Page 8 of the presentation material. And first, for the Energy Upstream Head of the E&P business division, [indiscernible] will provide an overview.

Good morning. I am [indiscernible], Head of E&P Business Division. Please look at the left side of the page. Last year, in upstream, we pursue development projects to expand our production. In the Myanmar Gas Field, the Phase 4 development to produce additional reserves discovered in both new and existing fields is going smoothly according to plan with a completion rate of 32%. At Senex in Australia, we have completed our production system 3x larger than acquisition and all new facilities are currently in normal operation, and we are producing LNG in a [indiscernible] phased manner. Next, on the right side is the 2026 forecast. Because of the 9-day shutdown, there is going to be a reduction in sales. However, with the production expansion effect of Senex, we expect overall sales from upstream assets to increase. In addition to secure additional growth engines, we are also actively reviewing the acquisition of new assets and will focus on building an optimized portfolio. These efforts are currently concentrated in the U.S. and Southeast Asia for the U.S., we aim to sign the contract within the first half of this year and for Southeast Asia by the end of the year. Next on the midstream sector, [indiscernible], Head of Terminal Business Division will present.

Good morning. I'm [indiscernible], Head of Terminal Business Division. For a terminal business, we focused on securing growth engines. To this end, the construction of the new #7 and 8 tanks at [indiscernible] LNG Terminal 2 is underway with a completion rate of over 80% as of the end of the last year. And as you can see on the right-hand side, in 2026, we plan to successfully complete all construction work for the #7 and 8 LNG storage tanks. LNG storage and supply capacity is close to grow significantly. And after the tanks are complete, we are going to build operation plans and connection. And next, we will be hearing from [indiscernible], Head of LNG business division.

Good morning. I'm [indiscernible], Head of LNG Business division. As you can see in the second bullet on the left, last year, we strengthened our business competitiveness by introducing the company's first LNG dedicated vessels and establishing an LNG trading corporation in Singapore. Confirming our [indiscernible] product is also One of our key achievements. And as you may well know, we are pursuing contract for 1 [ billion ] tons per year. We are also going to pursue the main contract for the Alaska LNG project, and we are also going to develop new business areas. For early establishment of the business, we are also going to quickly build a profit stream. And next for Energy Downstream business, over to Power Business Division Head, [indiscernible].

Good morning. I'm [indiscernible], Head of Power Business or Acting Head of Power Business Development Division. I will now disclose the progress on this year's plan for energy downstream sector. First, if you look at the left [indiscernible] on the left, in 2025, we obtained the permit for the [indiscernible] district integrated energy project. steadily preparing for the expansion of our energy value chain and the transition into a future energy business. On the right-hand side, our plans for 2026. This year, along with [indiscernible] District Integrated Energy project, our key task is to secure new power generation business rights, both domestically and abroad, such as the [ FinLab ] power project currently underway in Vietnam. This will provide the basis for our expiration of future growth engines and also solidifying the portfolio of power generation. And next, [indiscernible] department.

Hello. As introduced, I'm [indiscernible]. Please refer to Page 10. In 2025, our company focused on securing future demand and mobility business based on the expansion of the value chain. We completed construction of overseas production subsidiaries, including the second plant in Mexico and new plant in Poland and promoted an increase in EV motor core market share through expansion of global production infrastructure. In the rare earth business, we established the foundation for building a local production complex in the United States to diversify the supply chain. To this end, we signed a joint venture MOU with [ 3 ] element, a U.S.-based operation refining company and also completed an agreement on key terms of the offtake contract. Please refer to 2026 forecast shown in the upper right-hand section, First, with respect to Motor Core, we will view this period as a rapid industrial transition toward new mobility markets as an opportunity for transformation and concentrate all our capabilities on maximizing order intake. From the prospective process stabilization, we will strictly manage mass production projects with focus on overseas production subsidiaries so that defect rates do not exceed 3% to 5%. In addition to enhance productivity, we will focus on developing local manufacturing technologies such as room temperature bonding technology and establish a system that manages the efficient production of high-quality products. Next, with referred to rare earth and permanent magnets, we are prepared to answer the value chain in a phased manner based on promising partnerships. First for Rare Earth, we are strengthening the foundation for security raw materials centered in Southeast Asia, while pursuing investment in the separation of refining plants with local partners in the United States. In connection with this for permanent magnet with the goal of entering the U.S. market, we will aim on production base through local investment with manufacturers. Next, for our Head of the Palm Business Group Development division, [indiscernible] will present with the overview.

Yes, please refer to the next -- left-hand side of the page. In addition to our existing PTBIA plantation, last year, we successfully completed the acquisition of PTPAR, a high-quality palm oil business in Indonesia. This acquisition goes beyond the simple expansion of business scale and is highly meaningful in that it completed the entire on value chain that's many from seeds plantations, milling and refining. In addition, by establishing a fully integrated business structure linking research, training and sales function, we have secured competitiveness across the pond business. In particular, the midstream business as well, we have laid the foundation for future business expansion for the completion of the refining subsidiary. Based on these achievements, this year, we will focus on value upgrade initiatives that actively leverage the assets and capabilities we have secured in order to elevate the fundamental value in the business at the next level. Specifically through PMI with PT PAR, we will seek to materialize the outcomes of value chain integration at an early stage. In addition, based on the stable procurement of feedstock for refined palm oil, we will promote the stabilization of refining operations and further build the foundation for entry to the biofuel business. Furthermore, leveraging our integrated assets and operational capabilities, we will build a premium Palm brand and continuously strengthen our positioning and brand value as a leading calm business group in the industry. This concludes my remarks, and I will now pass it on to the 2026 management strategy to the Head of Corporate Planning Office, [indiscernible]. Please refer to Page 12.

Hello, as introduced, I'm [indiscernible]. From now, I will outline the company's management strategy for 2026. In 2026, Posco International aims to make it a year of setting and we do believe that we have established a strong presence and we are planning to step up as a true global platform player. The platform player means that our company will serve as a platform to have more engagement with the overall markets globally, have more opportunities and business opportunity so that we could drive further growth. In order to achieve this goal, VX and VX are the 2 main pillars we are focusing on VX for steel. We do expect that oversupply issue will continue and trade issue and the supply chain reshaping, moving away from China, we do expect there will be significant changes in the overall landscape. And we do believe that this will present us for us as a trading company more opportunities. Posco International is a company that is most well positioned to be able to deal with such challenges. From a mobility, we have the steel plate from Posco and the production technology and also the sales and the marketing capabilities coming all together, which will give us good competitiveness. The global hub and the packaging and the marketing network that we have, we will be fully leveraging for our further competitiveness. In terms of supply chain, as we are in a very critical moment moving away from China, we have established strong partnerships and have a long-lasting partnership in refining separation for rare earth material. And also, we have entered into the overall value chain spanning from research to production. For Palm business, we did go into details before and just a little bit to add on that is we're not looking at simply as just operational plantation. But in the near future, when there is strengthening of ESG regulations, the palm plantation produce biofuels will become eco-friendly material with premium, so we do believe that this will be a future growth engine. For Energy EX, we did explain in detail in the previous part of the presentation. And as you well know, Posco International through the development of the Myanmar Gas Field. As an operator of good that base project, we have the track record of being able to do the project in full cycle and CCS and the thermal heating and the related technology are promising areas that we continue to look for opportunities into. And as LNG becomes more commoditized, we do believe that trading will present us with opportunities to get further profit. As we have captive from the company side. And as we have additional opportunities, we do believe that we are positioned well to be able to gain the optimal arbitrage. We have established a subsidiary in Singapore to further drive this business. For the power generation business, we are going to focus more on the development of the technology and the production sites. And we are going to also go on the global RPP projects after the M&A opportunities. So we will look at different levels of integration and synergy. And we have a new energy division and it will be covering the mid to downstream to maximize the synergy effect. Let's transition through [ AXTX ] is something that could be used as tools to drive this growth, so we will actively leverage that. And ESG, in order to have sustainable growth of the company is a prerequisite. And also ESG once standards are established, we actually believe that we will be creating entry barriers to build a strong presence. Thank you.

Thank you for the presentation. Now operator, we can begin with the Q&A session. [Operator Instructions]

[Operator Instructions] The first question will be from IBK Investment Securities, Mr. [indiscernible].

I have 3 questions. First is the palm yield is quite strong, and palm planting and [indiscernible] plan. Could you please share your plans on that? And also, could you also answer in conjunction with [indiscernible]?And second of all, the palm companies are actively trying to acquire data centers. And I believe that, that would be a very strong endeavor in terms of platform. Do you have any plans for that area? And also, there is a question about refining margin. The refining margins prospects are not very bright. So I would like to have some guidance on the profitability of establishing the JV?

My name is [indiscernible]. I'd like to answer PBR about the palm oil per hectare, we have around 8 tons, and so this would be top of the market. And this production volume actually fluctuates based on the food and how much is planted. And so we have replanting plans. And of course, the farm doesn't have uniform planting across its whole acreage, and we have to have solid replanting plans. And it's very important what kind of seeds that we plant prime agri resources that we have acquired includes the top 2 seed companies in Indonesia. So in terms of Indonesian market share, they are the top 2 company. So we are going to leverage that strength for our replanting plans. And we are also planning to enhance use of technology to increase production and technical. Some companies like [ IOIR ] advancing into the data center business, that kind of transition is being very much in evidence in Malaysia. However, in Indonesia, there are such narratives being suggested. However, it's not really being put into practice because there's the real estate parties in Indonesia are going up. And also low-performance land. There is some -- there are some businesses that are trying to move them into more eco-friendly businesses, and that would also impact the palm of its oil business. However, this trend is not yet quite prominent in Indonesia, and we are basically going to focus on palm oil business. But in the long term, we would look at our excess land and review possibility of using that land for that purpose, but we don't have specific plans as of now. And third of all, about the refining entity across the entire value chain, this redefining entity is a node in the understood as a node in the value chain, which would add quite a lot of added value in the past. And the CPO prices that are used for that refining entity would determine the margins of the refining company. And of course, the CPO price closely relates to the export price and the government policies for the export tax would also impact the margins very much. So to safeguard the margin in general, the refining margins have to be closely managed. And if there's low margin, then a lot of margin would be coming from the upstream. However, if there are adverse effects of taxation, then exports will have to absorb that kind of margin. So we're not just looking only at the margins of their refining company, but we also have to look at the balance between either end of the value chain. So we're just regarding this as one of the tools that we have at our disposal.

I kindly ask for you to keep your questions subsistent and only up to 2 questions.

The next question will be from Mirae Asset Securities, Jae-Hyun Ryu.

I would like to know a little bit more about the time line and details for Alaska. The SPA and such are way down the time line. I think, I would like to know more details in terms of the investment required, the time line for that, the investment structure, the equity structure. If you could provide some overview and details of that, that would be much appreciated. And the LNG terminal, the utilization rate is not that high. And it is going to be completed in terms of construction. Is there a long-term strategy to increase the utilization rate?

Yes. Thank you for the question. With regards to Alaska -- [indiscernible] from the LNG business division will answer. And for the terminal related question. Head of the Terminal business, Mr. [indiscernible] will answer. For Alaska LNG, allow me to provide an answer. The time line for Alaska LNG for the first phase, as you probably well know, the pipeline crossing Alaska, we have to have the FID decided. The original plan was for the FID to be done at the end of December, but it seems to be slightly delayed. The reason behind that is as we gather our side of the information is in order to do FID, the feed gas from the gas pipe. The developer needs to have the purchase contracts signed. And the purchase contracts have to have been also supplied as the demand contracts, sales contracts as well and that is currently underway. The feed gas contract, as you well know, there are [indiscernible], Troy Thompson, [ Prude Bay ], the gas field, [indiscernible] are the major shareholders. And for under our HOA, Head of agreement, the main conditions, price -- the main terms have been determined. It's not the main contract signed yet, but that's the progress so far. And in terms of the sales contract, the Alaska government, there is a distributor, [indiscernible]. And it was announced that they have signed an LOI. So previously, FID for January has been pushed back to March. The pipeline FID once completed, after a year from that, there will be liquefied plant, planned. So first, the pipeline FID, the next time line, I think we can try to refer from that. And for the Alaska project, we have made investments into the project. So the investment that we have already made, the amount isn't really full-fledged investment into the project yet, but more for the steel supply and HOA to -- there is a minor share that we acquired to secure such contracts. So it's not yet that we are a major part of the project development at this phase. Moving on to the next question. Yes. I am -- I'm sorry, from the terminal business. So with regards to utilization rate decrease in 2024 -- compared to 2024 and 2025 is because there was maintenance for securing the maintenance safety and stability. And external factors, excluding the weather and such, if we look at the effective utilization rate, it is above 95%. And also think lease, we are maintaining a rate of over 100%. So the terminal utilization rate does not have a significant impact on the operating profit or sales at this moment.

[Operator Instructions] The next question will be from Samsung Securities, [indiscernible].