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PKX Posco

Filed: 3 Jun 21, 6:07am
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of June, 2021

Commission File Number: 1-13368

 

 

POSCO

(Translation of registrant’s name into English)

 

 

POSCO Center, 440 Teheran-ro, Gangnam-gu, Seoul, Korea, 06194

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒                Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


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POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-translated documents of POSCO’s 1st Quarter Report for the year 2021


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   POSCO
   (Registrant)
Date: June 3, 2021  By 

/s/ Chung, Kyung-Jin

   (Signature)
   Name : Chung, Kyung-Jin
   Title : Head of Finance Office


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Exhibit 99.1

 

LOGO

QUARTERLY REPORT

(From January 1, 2021 to March 31, 2021)

THIS IS AN ENGLISH TRANSLATION OF THE QUARTERLY REPORT ORIGINALLY PREPARED IN THE KOREAN LANGUAGE (IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION). THIS ENGLISH TRANSLATION IS NOT OFFICIAL AND IS PROVIDED FOR INFORMATION PURPOSES ONLY.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON BOTH CONSOLIDATED AND NON-CONSOLIDATED BASIS IN ACCORDANCE WITH THE KOREAN-INTERNATIONAL FINANCIAL REPORTING STANDARDS (K-IFRS) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.


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QUARTERLY REPORT

(From January 1, 2021 to March 31, 2021)

 

To:

Korean Financial Services Commission and Korea Exchange

 

/s/ Kim, Hag-Dong

Kim, Hag-Dong
President and Representative Director
POSCO
6261 Donghaean-ro, Pohang-si, Nam-gu, Gyungsangbuk-do, Korea
Telephone: +82-54-220-0114

/s/ Chung, Kyung-Jin

Chung, Kyung-Jin
Head of Finance Office
POSCO
6261 Donghaean-ro, Pohang-si, Nam-gu, Gyungsangbuk-do, Korea
Telephone: +82-2-3457-0114

 

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TABLE OF CONTENTS

 

I.

 Overview  

II.

 Business  

III.

 Financial Statements  

IV.

 Corporate Governance  

 

LOGO

Attachment: Independent auditors’ review reports on consolidated and separate financial statements

 

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I. OVERVIEW

 

1.

Scope of Business

 

A.

POSCO (the “Company”)

The Company’s business scope is as follows:

Business

 

(1)

To manufacture, market, promote, sell and distribute iron, steel and rolled products;

 

(2)

To engage in harbor loading and unloading, transportation and warehousing businesses;

 

(3)

To engage in the management of professional athletic organizations;

 

(4)

To engage in the supply of gas and power generation as well as in the distribution business thereof and in the resources development business;

 

(5)

To engage in leasing of real estate and distribution businesses;

 

(6)

To engage in the supply of district heating business;

 

(7)

To engage in marine transportation, processing and sales of minerals within or outside of Korea;

 

(8)

To engage in educational service and other services related to business;

 

(9)

To engage in manufacture, process and sale of non-ferrous metal;

 

(10)

To engage in technology license sales and engineering business; and

 

(11)

To engage in all other conducts, activities or businesses which are related, directly or indirectly, to the attainment and continuation of the foregoing purposes

 

B.

POSCO Enterprise Group

 

(1)

Name of the Enterprise Group: POSCO

 

(2)

Companies Belonging to the Enterprise Group

POSCO, POSCO CHEMICAL CO., LTD, POSCO INTERNATIONAL Corporation, POSCO COATED & COLOR STEEL Co., Ltd., POSCO ICT, POSCO M-TECH, Busan E&E Co., Ltd., Suncheon Eco Trans Co., Ltd., SNNC, eNtoB Corporation, UITrans LRT Co. Ltd., POSCO O&M Co., Ltd., POSCO Humans, POSCO ENGINEERING & CONSTRUCTION., LTD., POSCO Research Institute, POSCO A&C, TANCHEON E&E, Pohang Scrap Recycling Distribution Center Co., Ltd., POSCO NIPPON STEEL RHF JOINT VENTURE CO., Ltd., POSCO-Terminal Co., Ltd., POSCO ENERGY CO., LTD., Gale International Korea, LLC, POSCO Venture Capital Co., Ltd., Pohang Special Welding Co., Ltd., POSCO MITSUBISHI CARBON TECHNOLOGY, Samcheok Blue Power Co.,Ltd., Songdo Posco-family Housing Co.,Ltd., POSCO Group University, POSCO Research & Technology, Songdo Development PMC (Project Management Company) LLC., Korea Fuel-Cell Co.,Ltd., POSCO SPS, P&O Chemical Co., Ltd.

 

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(3)

Related Laws and Regulations

The Korea Fair Trade Commission has designated POSCO as an Enterprise Group subject to the limitations on Cross Shareholding and Debt Guarantee for Affiliates under the Monopoly Regulation and Fair Trade Act (the “MRFTA”).

 

 LOGO

Details

 

 (a)

Prohibition on Cross Shareholdings (Article 9 (1) of the MRFTA)

 

 (b)

Prohibition on Debt Guarantees for Affiliated Corporations (Article 10-2 of the MRFTA)    

 

 (c)

Prohibition on Shareholding of Venture Capitals for Subsidiaries (Article 9 (3) of the MRFTA)

 

 (d)

Limitation of Voting Rights of Financial or Insurance Companies (Article 11 of the MRFTA)

 

 (e)

Resolution of the Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article11-2 of the MRFTA)

 

 (f)

Disclosure of Important Facts such as Unlisted Shares (Article 11-3 of the MRFTA)

 

 (g)

Disclosure of Enterprise Groups (Article 11-4 of the MRFTA)

 

 (h)

Report on Status of Shareholding (Article 13 of the MRFTA)

 

2.

Business Organization

 

A.

Highlights of the Company’s Business Organization

 

(1)

Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyeongsangbuk -do, Korea

 

(2)

Steel Works and Offices

 

 (a)

Pohang Steel Works: 6262 Donghaean-ro (Dongchon-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

 

 (b)

Gwangyang Steel Works: 20-26 Pokposarang-gil (Geumho-dong), Gwangyang-si, Jeollanam-do, Korea

 

 (c)

Seoul Office: POSCO Center, 440 Teheran-ro (Daechi-dong), Gangnam-gu, Seoul, Korea

 

 (d)

Overseas Offices: In order to support international businesses, the Company operates five overseas offices as follows:

United Arab Emirates(Dubai), Brazil(Rio de Janeiro), Argentina(Jujuy), European Union(Germany), and Australia(Perth).

 

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(3)

Major Changes in the Board of Directors (as of March 12, 2021)

 

 (a)

Inside Directors

 

  

Re-appointment : Choi, Jeong-Woo(Representative Director & CEO), Kim, Hag-Dong (Representative Director & President), Chon, Jung-Son (Representative Director & Senior Executive Vice President), and Jeong, Tak (Senior Executive Vice President)

 

  

New appointment : Chung, Chang-Hwa (Senior Executive Vice President)

 

  

Expiration of Term : Chang, In-Hwa

 

 (b)

Outside Directors

 

  

Re-appointment : Kim, Sung-Jin*

 

  

New appointment : Yoo, Young-Sook and Kwon, Tae-Kyun

 

  

Expiration of Terms : Kim, Joo-Hyun and Bahk, Byong-Won

 

 *

Mr. Kim, Sung-Jin was elected as an Outside Director to become an Audit Committee Member.

 

(4)

Changes of the Major Shareholders of POSCO

 

 (a)

Since January 30, 2007, National Pension Service holds the largest number of common shares of POSCO.

 

 (b)

For further reference, please refer to the public disclosures of changes in common shares of the largest shareholder on Financial Supervisory Service website (http://dart.fss.or.kr) with the filing dates given below:

January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011, July 22, 2011, January 31, 2012, August 1, 2012, February 1, 2013, August 1, 2013, January 14, 2014, January 23, 2014, July 29, 2014,January 23, 2015, August 5, 2015, January 6, 2016, January 26, 2016, March 15, 2016, April 12, 2016, July 4, 2016, July 5, 2016, July 21, 2016, October 7, 2016, October 11, 2016, January 10, 2017, April 10, 2017, July 12, 2017, October 13, 2017, January 10, 2018, April 11, 2018, July 9, 2018, October 10, 2018, January 9, 2019, April 9, 2019, July 9, 2019, October 8, 2019, January 8, 2020, February 10, 2020, March 11, 2020, April 7, 2020, May 8, 2020, June 3, 2020, July 7, 2020, August 6, 2020, September 7, 2020, and October 8, 2020, November 4, 2020, December 4, 2020, January 7, 2021, February 4, 2021, March 5, 2021, April 6, 2021, May 6, 2021)

 

B.

POSCO’s Merger, Acquisition and Handover of Businesses

 

(1)

January 2019 : Small scale merger of POSCO Processing & Service Co., Ltd into POSCO

 

(2)

September 2019 : Small scale merger of By-Product Hydrogen Generation Business from POSCO ENERGY into POSCO after spin-off

 

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C.

Major Changes in Production Facilities

Refer to the ‘II. Business (5. Production and Facilities)’    

 

3.

Equity Capital

 

A.

New Issuance of Registered Common Stock

[None]

 

4.

Other Information Regarding Shares

A. Total Number of Shares                

 

   (As of March 31, 2021) 

Authorized Shares

  Issued Shares 

200,000,000

   87,186,835 

 

LOGO

Currency of the Republic of Korea is Korean Won (“KRW”).

LOGO

Par Value: KRW 5,000 per share

 

B.

Treasury Stock Holding and Cancellation

 

                  (As of March 31, 2021) 

Method of Purchase

  Type  Beginning
Balance
   Increased   Decreased   Cancelled   Ending
Balance
 

Direct

  Common   7,071,194    —      —      —      7,071,194 

Trust Contract

  Stock   4,100,169    389,900    —      —      4,490,069 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     11,171,363    389,900    —      —      11,561,263 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

The number of common shares held by the Trust Contract is based on the traded and closed volume as of March 31, 2021.

*

POSCO terminated share repurchase trust contract on April 12, 2021 due to repurchase of treasury shares equivalent to the contract amount and expiration of the contract period. The ending balance as of April 12, 2021 is the same as in March 31, 2021.

 

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5.

Voting Rights

 

 

       (As of March 31, 2021)

Classification

  Number of Common Shares   Remarks

(1) Number of Issued Shares

   87,186,835   —  

(2) Shares without Voting Rights

   11,561,263   Treasury stock and

trust holding

(3) Shares with Voting Rights

   75,625,572   —  

 

*

The above “(3) Shares with Voting Rights” is the number of shares based on holding voting rights as of March 31, 2021.

 

6.

Earnings and Dividends

 

           (In millions of KRW) 
   2021.1Q   2020   2019 

(Consolidated) Profit*

   1,024,734    1,602,148    1,835,087 

(Separate) Profit

   952,176    965,863    1,175,712 

Earnings per Share (Consolidated, KRW)

   13,477    20,165    22,823 

Cash Dividend Paid

   226,877    620,287    801,156 

Pay-out Ratio (Consolidated, %)

   22.1    38.7    43.7 

Dividend per Share (KRW)

   3,000    8,000    10,000 

Dividend Yield (%)

   1.0    3.0    4.1 

 

LOGO

(Consolidated) Profit : Profit attributable to owners of the controlling company

 

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7.

Stock Prices and Trading Volumes

The stock prices and trading volumes of POSCO for the last 6 months are as follows.

 

A.

The Korean Stock Market

 

 

                  (KRW/share, In thousands of shares) 
      October
2020
   November
2020
   December
2020
   January
2021
   February
2021
   March
2021
 

Common share

  Highest Price   220,000    245,000    279,500    294,500    283,000    327,000 
  Lowest Price   200,500    216,000    245,500    245,500    253,000    285,000 
  Average Price   208,711    234,810    267,738    272,075    268,889    307,045 

Trading volume

  Daily highest   903    627    663    899    875    2,911 
  Daily lowest   191    222    252    340    232    361 
  Monthly   7,812    7,542    8,301    10,236    7,347    17,304 

 

B.

New York Stock Exchange

 

                  (USD/ADS*, In thousands of ADS*) 
      October
2020
   November
2020
   December
2020
   January
2021
   February
2021
   March
2021
 

American Depositary Share (ADS)

  Highest Price   48.7    56.3    64.3    67.2    62.5    72.2 
  Lowest Price   42.2    47.9    56.1    54.8    56.7    63.5 
  Average Price   45.1    52.8    61.2    62.1    60.6    67.7 

Trading volume

  Daily highest   246.1    212.9    246.9    317    319.9    613.8 
  Daily lowest   66.4    58.4    23.8    63.8    55.4    118.8 
  Monthly   3,519    2,527    2,774    3,094   2,549   6,080

 

*

ADS : One American Depositary Share representing one-fourth of one of Common Share

 

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II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Summary of Financial Status of Segment

 

                   (In millions of KRW) 

Segment

  2021.1Q   2020   2019 
  Sales   Operating
Income (Loss)
   Sales   Operating
Income (Loss)
   Sales   Operating
Income (Loss)
 

Steel

   8,476,513   1,262,373   28,892,877    1,372,852    32,078,453   2,786,517

Trading

   5,246,448   95,532   19,345,222    394,954    22,157,131   542,724

Engineering & Construction

   1,460,305   145,340   6,576,170    385,048    6,944,629   338,865

Others

   885,457   49,196   2,978,527    250,181    3,186,635   200,749

Total

   16,068,723   1,552,441   57,792,796    2,403,035    64,366,848   3,868,855

2. Business Status of Segments

A. Steel

(1) Summary of Business

There are 68 consolidated companies in the steel segment, including 4 domestic companies including POSCO and POSCO C&C, and 64 overseas companies including POSCO (Zhangjiagang) Stainless Steel Co., Ltd. in China and overseas processing centers. POSCO produces steel materials such as hot rolled, cold rolled and stainless steel at Pohang Works and Gwangyang Works. POSCO C&C is a company specializing in manufacturing surface-treated steel products, POSCO (Zhangjiagang) Stainless Steel Co., Ltd., is a stainless steel sheet manufacturer and seller, and there are other overseas processing centers that process and sell steel materials.

The steel industry is a fundamental industry that has taken pivotal roles in the national economic development since the 1970s by supplying basic steel materials to steel-consuming industries such as automobiles, shipbuilding, home appliances, construction, etc. The steel industry is a capital and technology-intensive industry that requires enormous initial investments.

 

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The Korean steel market is tariff-free, and especially within the Northeast Asian region, there is little difference in logistics costs among Korea, China and Japan, so it can be viewed as an almost open market.

All iron ore and coking coal that are the main raw materials for steel manufacturing, are imported. In order to secure stable raw materials sourcing, the company is continuously increasing purchases through raw material development investments by acquiring shares of overseas raw materials companies.

Environmental regulations for the steel industry are being strengthened. To protect the environment, POSCO has continuously invested in environmental facilities and has been actively responding to future environmental changes such as low-carbon and green growth by commercializing the world’s first eco-friendly steel manufacturing process, FINEX.

In the steel industry, automobiles, shipbuilding, and construction are the main demand industries, and steel products are used as raw materials for these demand industries. In terms of sales, the proportion of domestic sale is 57% of total sales and export sales are around 43%, and by export region, the proportion of China, Southeast Asia, and Japan is high. POSCO maintains order based production and sales system, and to secure stable sales, the proportion of direct sales to customers in domestic sales is maintained at about 60%.

The company will focus on the following management activities:

First, in order to maintain the leading position in the steel business, POSCO will secure a new competitive advantage. Second, in the group businesses, we will expand investment to focus on core growth businesses and accelerate the creation of business results. Third, POSCO will focus on fostering new businesses in Green & Mobility as the new growth business in the next-generation. Fourth, POSCO will promote structural and fundamental innovation for the company’s sustainable growth. Fifth, by putting safety as the top priority, POSCO will create the workplace as safe environment without industrial casualties, and actively respond to the low-carbon society as an exemplary company for sustainable growth.

(2) Market Share

 

                   (Millions of Tons, %) 

Category

  2021.1Q   2020   2019 
  Production   Market share   Production   Market share   Production   Market share 

Crude Steel Production

   17.6    100    67.1    100    71.4    100 

POSCO

   9.6    54.5    35.9    53.5    38.0    53.2 

Others

   8.0    45.5    31.2    46.5    33.4    46.7 

 

LOGO

Source: World Steel Association (www.worldsteel.org)

 

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B. Trading

(1) Market Share

 

       (Millions of US Dollars) 

Category

  2021.1Q   2020.1Q   Growth Rate 

All Trading Companies in Korea

   146,487    130,182    11.13

POSCO International Corp.

   1,860    1,400    24.73

 

LOGO

Source: Korea International Trade Association

(2) Summary of Businesses

POSCO International and its consolidated subsidiaries engage in three major businesses: trading, energy and others. In addition, POSCO International maintains a global network of over 80 subsidiaries and branches in major overseas regions. In the case of the trading business, POSCO International has been actively developing and expanding new businesses in fields such as agro-commodities, LNG trading, and industrial materials based on the know-how accumulated over a long period of time in the traditional trading business and through its vast overseas networks. In the energy business, POSCO International conducts businesses such as natural gas and crude oil development, LNG infrastructure, natural resources and power generation infrastructure.

C. Engineering & Construction

POSCO E&C engages in primarily 4 businesses: construction, energy, civil engineering and plant. In the construction business, based on its know-how in the construction of skyscrapers and commercial complexes, POSCO E&C involves in a new city and private complex development projects. In the energy business, it involves in various power generation plant projects including renewable energy projects. The civil engineering business is about constructing expressways, railroads and bridges. Plant business is the construction of integrated steel mills, EPC projects and industrial plants.

D. Others

(1) POSCO ENERGY

POSCO ENERGY started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 1990’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand for electricity in Korea. POSCO ENERGY acquired the LNG terminal business from POSCO in 2019, providing an opportunity to expand the LNG value chain. The LNG terminal business operates stable business structure through businesses such as tank rental, small scale LNG business, and ship trial run. POSCO ENERGY plans to secure stable profit base through the expansion of the LNG terminal in the future and grow into a general energy company focused on gas and power.

 

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(2) POSCO ICT

Based on the competitiveness in ICT, POSCO ICT has expanded Smart Factory and provided IT solutions to POSCO and POSCO subsidiaries. POSCO ICT has expanded Smart Factory based on the world’s first continuous process platform “PosFrame” and next-generation production optimization system “MES 3.0”. POSCO ICT has been actively applying smart technology for strategic businesses in manufacturing, logistics, trade, and energy sectors, such as building MES at the POSCO CHEMICAL’s anode and cathode material factory, spreading the Smart Management of POSCO International, and spreading the Intelligent Power Plant of POSCO Energy in order to promote the digital transformation of POSCO subsidiaries and other businesses.

(3) POSCO CHEMICAL

POSCO CHEMICAL operates mainly 3 businesses: refractory, quicklime & chemical and energy material. In the refractory business, POSCO CHEMICAL produces and maintains refractories. In the quicklime & chemical business, POSCO CHEMICAL produces quicklime and chemical products such as coal tar and light oil. In the energy material business, POSCO CHEMICAL provides cathode and anode materials which are the main components for secondary cells: cathode, anode, electrolyte and separation membrane. Due to environment-friendly policy with less carbon emission worldwide, demands for Energy Storage System and Electric Vehicle are expected to grow continuously.

(4) POSCO M-TECH

POSCO M-TECH is a specialized supplier of steel products packaging and steel supplementary materials such as aluminum deoxidizers. In the case of steel products packaging, POSCO M-TECH continuously develops packaging automated molding machines and applies environment-friendly packaging materials. In addition, aluminum deoxidizers engage in primarily 3 types : Pellet, Mini-Pellet and Ingot. POSCO M-TECH has expanded the sales of aluminum deoxidizers in overseas markets.

 

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3. Key Products

A. Sales of Key Products (2021.1Q)    

 

         (In hundred millions of KRW, %) 

Business Area

  

Item

  

Specific Use

  Total Sales  Ratio 

Steel

  Hot-rolled Product (HR)  Steel pipe, Shipbuilding, etc.   22,500  17.3
  Cold-rolled Product (CR)  Automobile , Home appliances, etc.   42,619  32.7
  Stainless Steel Products  Tableware, pipes, etc.   26,975  20.7
  Others  Plates, Wire rods, etc.   38,157  29.3
  Gross Sum   130,252  100.0
  Deduction of Internal Trade   (45,487 
      

 

 

  
  Sub Total   84,765 
      

 

 

  
Trading  Steel, Metal   70,522  76.5
  Chemical, Strategic Item, Energy   10,100  10.9
  Others   11,613  12.6
  Gross Sum   92,235  100.0
  Deduction of Internal Trade   (39,771 
      

 

 

  
  Sub Total   52,464 
      

 

 

  
Engineering & Construction  Domestic Construction  Architecture   8,231  49.7
  Plant   2,717  16.4
  Civil Engineering   1,253  7.6
  Others   0  0.0
  Overseas Construction   1,628  9.8
  Owned Construction   2,250  13.6
  Others   496  3.0
  Gross Sum   16,575  100.0
  Deduction of Internal Trade   (1,972 
      

 

 

  
  Sub Total   14,603 
      

 

 

  
Others  Electricity Sales, etc.   15,118 
  Deduction of Internal Trade   (6,263 
  Sub Total   8,855 
      

 

 

  
  

Total Sum 

     160,687 
      

 

 

  

 

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B. Price Movement Trends of Key Products

 

         (In thousands of KRW/ Tons, KRW/kWh) 

Business Area

  Products 2021.1Q   2020   2019 

Steel

  Hot-rolled Product (HR)  726    622    695 
  Cold-rolled Product (CR)  843    759    800 

Others

  Electric Power  80    72    94 
  Refractory  898    965    1,073 
  Lime  107    106    111 

 

LOGO

Trade and Engineering & Construction businesses are not reflected on the table above due to difficulties in measuring the price movement trend.

[Steel]

(1) Criteria for Calculation

 

 (a)

Subjects for Calculation: Unit sales prices of the standard hot-rolled product and cold-rolled product

 

 (b)

Calculation Method and Unit: The average price of each product based on its total sales including the freight costs during the given period.

(2) Factors of Price Changes

Key products prices slightly fell in 2019 due to worsened market condition of domestic and overseas steel industry. In 2020, due to COVID-19 the prices fell sharply. The prices increased in the 1st quarter of 2021 due to recovery of steel market demand.

[Others]

(1) Criteria for Calculation

 

 (a)

Electric Power = Price of electric power / Total amount of power generated

 

 (b)

Refractory and lime: Average sales price including freight cost

 

15


Table of Contents

4. Major Raw Materials

A. Current Status of Major Raw Materials

 

            (In hundred millions of KRW)

Business Area

  

Type of Purchase

  

Item

  

Specific Use

  Purchase Amount
(Portion, %)
  

Remarks

Steel  Raw Materials  

Materials for

Iron-making

  

Iron Ore for Blast

Furnaces

  34,146

(61.8)

  Iron Ore, Coal
    Sub-materials  

Sub-materials for

Iron-making,

Steelmaking

  10,379

(18.8)

  

Iron Material,

Alloy Iron,

Non-ferrous Metal,

Limestone, etc.

    Stainless Steel Materials  

Key Materials for

STS Production

  10,705

(19.4)

  

Nickel, Ferrochrome,

STS Scrap Iron, etc.

Engineering &

Construction

  Raw Materials  Ready-mixed Concrete  Construction of Structure  444

(15.1)

  
    

Steel

Reinforcement

  Strengthening Concrete  443

(15.1)

  
    Cable  Electricity Transfer  57

(2.0)

  
    Steel Pile  Foundation of Structure  21

(0.7)

  
    Others  Construction of Pipe and Structure etc.  1,977

(67.2)

  
Others  Raw Materials  LNG  Material for Power Generation  2,349

(52.4)

  
    Limestone  Production of Lime  232

(5.2)

  
    Others  Engineering business etc.  1,904

(42.5)

  

 

16


Table of Contents

B. Price Movement Trends of Major Raw Materials

 

          (In thousands of KRW) 

Business Area

  Category  2021.1Q   2020   2019 

Steel

  Iron Ore(per ton)   176    120    102 
  Coal(per ton)   141    147    207 
  Scrap Iron(per ton)   493    348    347 
  Nickel(per ton)   19,559    16,254    16,148 

Engineering & Construction

  Ready-mixed Concrete

(per m3)

   65    65    63 
  Steel Pile

(per m)

   144    102    136 
  Steel Reinforcement

(per kg)

   1    1    1 
  Cable

(per m)

   1    1    1 

Others

  LNG

(per ton)

   529    484    668 
  Lime

(per ton)

   19    19    20 

 

17


Table of Contents

[Steel]

 

LOGO

Price Movement Trend of Major Raw Materials

(1) Iron Ore

 

                                       (In US Dollars/ Tons) 
   ’21.1Q   ’20.4Q   ’20.3Q   ’20.2Q   ’20.1Q   ’19.4Q   ’19.3Q   ’19.2Q   ’19.1Q   ’18.4Q   ’18.3Q   ’18.2Q 

Trend of International Benchmark Price (Free On Board, “FOB”)

   158    126    110    88    83    80    92    94    77    64    57    58 

(2) Coal

 

                                       (In US Dollars/ Tons) 
   ’21.1Q   ’20.4Q   ’20.3Q   ’20.2Q   ’20.1Q   ’19.4Q   ’19.3Q   ’19.2Q   ’19.1Q   ’18.4Q   ’18.3Q   ’18.2Q 

Trend of International Benchmark Price (FOB)

   127    109    115    118    155    140    161    203    206    221    188    190 

(3) Scrap Iron

 

                                       (In US Dollars/ Tons) 
   ’21.1Q   ’20.4Q   ’20.3Q   ’20.2Q   ’20.1Q   ’19.4Q   ’19.3Q   ’19.2Q   ’19.1Q   ’18.4Q   ’18.3Q   ’18.2Q 

Trend of Purchase Price (Cost and Freight, “CFR”)

   443    361    289    254    274    270    290    312    325    343    350    364 

(4) Nickel

 

   

’21.1Q

  

’20.4Q

  

’20.3Q

  

’20.2Q

  

’20.1Q

  

’19.4Q

  

’19.3Q

  

’19.2Q

  

’19.1Q

  

’18.4Q

  

’18.3Q

  

’18.2Q

Trend of London Metal Exchange ( “LME”) Cash Price

  

USD

7.97 /lb

USD

17,570/ton

  

USD

7.23 /lb

USD

15,930/ton

  

USD

6.45 /lb

USD

14,210/ton

  

USD

5.54 /lb

USD

12,215/ton

  

USD

5.77 /lb

USD

12,723/ton

  

USD

7.01 /lb

USD

15,450/ton

  

USD

7.05 /lb

USD

15,540/ton

  

USD

5.56 /lb

USD

12,258/ton

  

USD

5.61 /lb

USD

12,369/ton

  

USD

5.22 /lb

USD

11,516/ton

  

USD

6.02 /lb

USD

13,266/ton

  

USD

6.56 /lb

USD

14,467/ton

 

LOGO

LME : London Metal Exchange

 

18


Table of Contents

[Engineering and Construction]

(1) Criteria for Calculation

 

Products

  

Criteria for Calculation

Ready-mixed Concrete  Standard 25-210-15
Steel Pile  SPIRAL, 609.6, 9T, STP275, KS F 4602
Steel Reinforcement  SD400 10mm
Cable  TFR-3, 0.6/1KV, 2.5SQ, 2C

[Others]

(1) Criteria for Calculation

<POSCO ENERGY>

LNG: The average price between LNG purchased from Korea Gas Corporation and LNG purchased directly from foreign suppliers

<POSCO CHEMICAL>

Refractory and lime: Purchase prices including freight costs

 

19


Table of Contents

5. Production and Facilities

A. Production Capacity

[Steel]

 

           (Thousands of Tons) 

Business Area

  Products   2021.1Q   2020   2019 

Steel

   Crude Steel    11,333    45,330    47,534 

[Others]

 

   (Electric Power: MW/year, Lime: Thousands of Tons/year) 

Business Area

  Products  2021.1Q  2020   2019 

Power Generation

  Electric Power  Incheon   3,412   3,412    3,412 
    Gwangyang          284 
    Pohang          290 

Lime

  Lime   540  2,196    2,190 

 

*

Production capacity of Lime is based on the 1st quarter of 2021

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

 

          (Thousands of Tons) 

Products

  2021.1Q   2020   2019 

Crude Steel

   10,760    40,579   42,948

Products

  Hot-Rolled Steel   2,128   9,128   8,739
  Plate   1,715   7,009   7,191
  Wire Rod   664   2,666   2,756
  Pickled-Oiled Steel   726   2,432   2,967
  Cold-Rolled Products   1,996   6,795   7,416
  Coated Steel   1,813   6,316   6,526
  Electrical Steel   221   826   819
  Stainless Steel   1,035   3,900   3,850
  Others   1,264   4,691   5,761
    

 

 

   

 

 

   

 

 

 
  Total   11,561   43,763   46,025
    

 

 

   

 

 

   

 

 

 

 

LOGO

The amount of products is the aggregate amount of POSCO’s production and production of POSCO subsidiaries, which may include interested parties’ transactions.

 

20


Table of Contents

(2) Capacity Utilization Rate

 

              (Thousands of Tons, %) 
   Company  Capacity   Production   Utilization Rate 

Crude Steel

Production

  POSCO   10,170   9,559   94.0 
  PT.KRAKATAU POSCO   750   810    108.0 
  POSCO YAMATO VINA
STEEL JOINT STOCK
COMPANY
   138   138   100.2 
  POSCO (Zhangjiagang)
Stainless Steel Co., Ltd.
   275   253   91.9 
    

 

 

   

 

 

   

 

 

 
  Total   11,333   10,760   94.9 
    

 

 

   

 

 

   

 

 

 

 

LOGO

Trade and Engineering & Construction businesses are not reflected on the table due to difficulties in measuring capacity, production and utilization rate of such businesses.

LOGO

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY had production capacity of crude steel 1,100 thousand tons/year: section steel 550 thousand tons/year and reinforcing bar 550 thousand tons/year. However, after the exit of the reinforcing bar business in November 2019, the current crude steel production capacity is 550 thousand tons/year.

[Others]

(1) Production Result

 

          (Gwh, Thousands of Tons) 

Business Area

  

Products

  2021.1Q   2020   2019 

Power Generation

  Electric Power   3,763    13,998    15,928 

Lime

  Lime   614    2,345    2,542 

(2) Capacity Utilization Rate

 

      

 

   (Hour, %) 

Business Area

  Products  2021.1Q
Capacity
   2020.1Q
Production
   Utilization Rate 

Power Generation

  Incheon Power Plant   2,160    1,420    65.7 

 

          (Thousands of Tons, %)     

Business Area

  Products  Capacity   Production   Utilization Rate 

Lime

  Lime   540    614    113.8 

 

21


Table of Contents

C. Production Facilities

(1) The current status of production facilities

[Land]

 

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation   Ending Book
Balance
 

Steel

   2,013,822   13,398   (17  —      2,027,203

Trade

   50,688   157   (154  —      50,691

Engineering & Construction

   25,579   —      (12  —      25,567

Others

   499,998   13   —     —      500,011

[Buildings]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   3,258,592   62,852   (9,376  (70,655  3,241,413

Trade

   374,644   12,898   —     (2,878  384,664

Engineering & Construction

   81,702   10,302   (12,635  (554  78,815

Others

   446,462   2,175   —     (6,178  442,459

[Structures]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   2,433,141   69,855   (3,303  (51,167  2,448,526

Trade

   2,071   62   —     (77  2,056

Engineering & Construction

   4,456   427   (0  (108  4,775

Others

   585,558   30   (38,864  (6,529  540,195

[Machinery and Equipments]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   14,864,929   373,507   (98,484  (534,657  14,605,295

Trade

   266,848   835   —     (5,634  262,049

Engineering & Construction

   5,071   3,001   (5,550  (245  2,277

Others

   1,720,459   16,624   —    (46,372  1,690,711

 

22


Table of Contents

[Vehicles]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   22,881   10,309   (4,490  (2,474  26,226

Trade

   5,469   418   (259  (397  5,231

Engineering & Construction

   1,133   4,596   (5,385  (19  325

Others

   7,673   1,353   (3,662  (794  4,570

[Tools and Fixtures]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   54,166   8,299   (4,030  (6,212  52,223

Trade

   1,363   47   (15  (82  1,313

Engineering & Construction

   1,027   77   (117  (13  974

Others

   3,745   8,484   (155  (1,121  10,953

[Equipment]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   66,145   9,662   (5,092  (5,274  65,441

Trade

   25,298   925   (365  (2,417  23,441

Engineering & Construction

   3,532   6,791   (860  (5,998  3,465

Others

   32,484   9,086     (1,790  39,780

[Financial Lease Assets]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation  Ending Book
Balance
 

Steel

   490,290   141,315   (1,732  (12,978  616,895

Trade

   95,191   26,827   (21,069  (11,671  89,278

Engineering & Construction

   82,876   22,379   (14,994  (10,303  79,958

Others

   105,343   9,885   (2,231  (9,825  103,172

 

23


Table of Contents

[Biological Assets]

               (In millions
of KRW)
 

Business Area

  Beginning Book
Balance
   Increased   Decreased   Depreciation   Ending Book
Balance
 

Steel

               
Trade  149,965   10,930      (2,250)   158,645 
Engineering & Construction               

Others

               

[Assets under Construction]

              (In millions of KRW) 

Business Area

  Beginning Book
Balance
   Increased   Decreased  Depreciation   Ending Book
Balance
 

Steel

   1,438,271   330,241   (179,700     1,588,812

Trade

   58,150   2,473   (7,831     52,792

Engineering & Construction

   2,043   17,528        19,571

Others

   119,076   102,743        221,819

 

24


Table of Contents

(2) New Facility Establishment, Purchase, Etc.

(a) Investments under Construction

 

[Steel]  

      (In hundred millions of  KRW)    

Company

  Date  

Project

  Total
Investment
   Invested
Amount
   Amount
to Be

Invested
 
POSCO  Expansion/
Establishment
  June 2011

~
November 2023

  

P) Establishment of #6 Coke plant

P) Establishment of

by-product gas Power

Plant

   14,806    5,275    9,532 
    September 2015

~ May 2024

  

G) The renovation of #4 furnace

P) Improvement of #3, #4 power plant, etc.

   11,787    5,131    6,656 
POSCO SPS  Expansion/
Establishment
  October
2020~August
2021
  Machinery, etc.   101    48    54 
    February 2021

~August 2021

  Cheonan factory   107    —      107 
    February 2021

~October 2021

  Pohang factory   109    —      109 

POSCO-Indonesia Jakarta

Processing Center

  Expansion/
Establishment
  May 2020

~May 2021

  New establishment of 3rd factory   293    252    41 

 

LOGO

P stands for Pohang Steel Works.

 

LOGO

G stands for Gwangyang Steel Works.

 

LOGO

Ongoing investments over KRW 10 billion as of March 31, 2021 are listed on the table.

 

[Others]  

          (In hundred millions of KRW)      

Company

  Date  

Project

  Total
Investment
   Invested
Amount
   Amount
to Be
Invested
 

POSCO ICT

  Establishment/

Expansion

  January 2021

~ December 2021

  Smart factory expansion and new business growth   194    2    192 
  Establishment/

Expansion

  January 2021

~ December 2021

  

Expansion of

SM server, etc.

   148    3    145 

POSCO O&M

  Establishment/

Expansion

  January 2021

~ December 2021

  Fixed assets acquisitions and facilities replacement   1,083    93    990 

 

25


Table of Contents

POSCO CHEMICAL

  

Establishment/
Expansion

  

July 2020
~ November 2022

  The 3rd stage of cathode material factory in Gwangyang   2,895    246    2,649 
  Establishment/

Expansion

  November 2020

~ March 2024

  The 4th stage of cathode material factory in Gwangyang   2,758    73    2,685 
  Establishment/

Expansion

  November 2019

~ December 2022

  The 2nd stage of production line up expansion in #2 anode material factory   1,651    775    876 
  Establishment/

Expansion

  February 2020

~ August 2020

  Establishment of artificial graphite anode factory site   130    125    5 
  Establishment/

Expansion

  February 2020

~May 2024

  Establishment of artificial graphite anode factory   2,177    212    1,965 
  Establishment/

Expansion

  November 2019

~ October 2021

  Renovation of refractory factory for production increase   483    135    348 
  Establishment/

Expansion

  October 2020

~ November 2022

  Facilities rationalization of refractory sintering plant in Pohang   319    —      319 

POSCO Energy

  Establishment/

Expansion

  March 2020

~ December 2021

  Expansion of evaporator in Gwangyang LNG Terminal   360    79    281 
  Establishment/

Expansion

  January 2021

~ May 2024

  Establishment of #6 Tank in Gwangyang LNG Terminal   1,437    2    1,435 

 

LOGO

Ongoing investments over KRW 10 billion as of March 31, 2021 are listed on the table.

6. Product Sales

[Steel]

 

      (In hundred millions of KRW) 

Items

  2021.1Q   2020   2019 

Domestic

  Hot-Rolled

Products

   12,760   39,663   42,605
  Cold-
Rolled

Products

   11,267   37,870   39,716
  Stainless
Steel
   7,734   23,746   21,167
  Others   18,749   63,111   77,026

Export

  Hot-Rolled

Products

   9,740   37,368   41,064
  Cold-
Rolled

Products

   31,352   101,808   125,658
  Stainless
Steel
   19,242   72,140   80,181
  Others   19,408   66,877   70,667

Total

  Gross Sum   130,252   442,583   498,084
  Internal
Transaction
   (45,487   (153,654   (177,299
  Total   84,765   288,929   320,785

 

26


Table of Contents

[Trading]

 

      (In hundred millions of KRW) 

Items

  2021.1Q   2020   2019 

Domestic

  Merchandise   10,695   33,565   29,315
  Product   194   2,028   5,120
  Others   20   240   1,101

Export

  Merchandise   22,103   75,922   69,347
  Product   80   528   205
  Others   1   1,191   638

Trades among the 3 countries

   59,141   209,446   270,522

Gross Sum

   92,235   322,920   376,248

Internal Transaction

   (39,771   (129,468   (154,677
    

 

 

   

 

 

   

 

 

 

Total

   52,464   193,452   221,571
    

 

 

   

 

 

   

 

 

 

[Engineering & Construction]

 

      (In hundred millions of KRW) 

Items

  2021.1Q   2020   2019 

Domestic

  Building   8,231   42,761   44,681
  Plant   2,717   12,887   10,953
  Civil Engineering   1,253   6,177   6,098
  Others         

Overseas

   1,628   7,089   7,190

Own Construction

   2,250   4,866   5,712

Other Subsidiary company sales

   496   2,320   2,246

Gross Sum

   16,575   76,100   76,880

Internal Transaction

   (1,972   (10,338   (7,434
    

 

 

   

 

 

   

 

 

 

Total

   14,603   65,762   69,446
    

 

 

   

 

 

   

 

 

 

[Others]

 

   (In hundred millions of KRW) 

Items

  2021.1Q   2020   2019 

Electric Power Sales

   8,855   29,785   31,866

 

27


Table of Contents

7. Derivatives

We use forward exchange contracts to hedge against the exchange rate risk for foreign currency loans.

As of March 31, 2021, we assessed the fair value of our forward exchange contracts to be USD 0.55 billion (expiring April 2021), and a currency swap contracts to be USD 0.5 billion(expiring August 2023), USD 0.5 billion(expiring July 2024), USD 0.5 billion(expiring November 2022), USD 0.5 billion(expiring January 2023), USD 0.44 billion(expiring January 2025), and EUR 0.5 billion(expiring January 2024).

We recognized KRW 25,143 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 103,145 million of valuation gain on currency swap contracts. The transaction gain of currency swap contracts is KRW 326 million.

8. Significant Contracts

 

Company

  

Contract

  

Date

  

Remarks

POSCO  

Small scale merger of POSCO Processing &

Service

  

August

2018

  

1) Purpose: To increase operational efficiency

2) Information: POSCO Processing & Service(POSCO P&S) is merged into POSCO

-  The merger ratio is 1 : 0.1456475 (POSCO : POSCO P&S)

-  POSCO will distribute its treasury shares to the shareholders of POSCO P&S, and new shares will not be issued.

3) Conclusion of a contract: August 23, 2018

4) Date of merger: January 1, 2019

5) Registration of merger: February 2, 2019

  

 

Small scale merger with

By-product Hydrogen Generation Business after spin-off from POSCO ENERGY

  

 

April 2019

  

 

1) Purpose: To increase operational efficiency

2) Information: By-product Hydrogen Generation Business of POSCO ENERGY will be merged into POSCO

-  The merger ratio is 1 : 0.1145836 (POSCO : POSCO ENERGY)

3) Conclusion of a contract: April 16, 2019

4) Date of merger: September 1, 2019

5) Registration of merger: September 9, 2019

  

 

LNG Terminal Business Transfer Agreement

  

 

April 2019

  

 

1) Business transferee: POSCO ENERGY

2) Conclusion of a contract: April 16, 2019

3) Date of transfer: September 1, 2019

4) Transfer amount : KRW 608,019 million

5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to

POSCO ENERGY

 

28


Table of Contents
POSCO International Corporation  

Investment on the 2nd stage development of

A-1 / A-3 block

in Myanmar gas field

  June 2018  

1) Investment amount: KRW 511,709,005,500 (USD 473,235,000)

2) Development period: August 1, 2017 ~ December 31, 2022

3) Gas production schedule: By additionally developing Shwe gasfield and newly developing Shwe Phyu gasfield, production will start in 2021 from Shwe and 2022 from Shwe Phyu

4) Other Information

-  Location: North-west offshore, Myanmar

-  This investment is the 2nd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level by completing more drilling and adding more production wells to current Shwe platform.

-  In July 2018, facility design and construction began, and production is scheduled to start in 2021 in Shwe and in 2022 in She Phyu. But the development period includes the duration of feasibility test and basic design from August 2017 to May 2018.

•   POSCO International Corporation : 51.0%

•   ONGC VIDESH(Oil and Natural Gas Corporation Videsh Limited) : 17.0%

•   MOGE(Myanmar Oil and Gas Enterprise): 15.0%

•   GAIL (India) Limited : 8.5%

•   KOGAS(Korea Gas Corporation): 8.5%

-  Investment size of USD 473,235 thousand, applying the exchange rate of 1USD=1,081.30 KRW, was disclosed on the date of the BOD resolution (May 31, 2018).

-  Detailed information and future timeline on this resource development investment is subject to change.

LOGO     Disclosure date : May 31, 2018 (Decision on natural resources investment)

  

 

Split-off of Domestic steel processing businesses

  

 

October 2019

  

 

1) Purpose : To specialize in steel processing business by splitting-off business division

2) Method : Split-off

3) Resolution date of Board of Directors : October 25, 2019

4) Shareholders’ meeting for approval : March 30, 2020

5) Date of Split-off : March 31, 2020

6) Registration date of Split-off : April 3, 2020

  

Investment on the 3rd stage development of

A-1 / A-3 block

in Myanmar gas field

  June 2020  

1) Investment amount: KRW 365,786,302,000

2) Development period: September 1, 2019 ~ December 31, 2024

3) Schedule : Installation Completion of low-pressure gas compression platform and

commenced operation in 2024

4) Other Information

-  Location: North-west offshore, Myanmar

-  This investment is the 3rd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level stably by installing low-pressure gas compression platform.

-  In the first quarter of 2021, the design and production of the equipment for this work will be started, and it is planned to start operation in 2024. The “(2) Development period” above is the period including the basic design progress period, September 2019 to September 2020.

-  Participation rate of each company in gas production and offshore pipeline transportation business

•   POSCO International Corporation : 51.0%

•   ONGC VIDESH(Oil and Natural Gas Corporation Videsh Limited) : 17.0%

•   MOGE(Myanmar Oil and Gas Enterprise): 15.0%

•   GAIL (India) Limited : 8.5%

•   KOGAS(Korea Gas Corporation): 8.5%

-  Investment size of USD 315,170 thousand, applying the exchange rate of 1USD=1,160.60 KRW, which is the date of the BOD resolution.

-  Detailed information and future timeline on this resource development investment is subject to change.

LOGO POSCO International disclosure date :

September 22, 2020 (Decision on natural resources investment)

POSCO

O&M

  Small scale merger with Blue O&M and MegaAsset  

February

2019

  

1) Purpose: Enhancing foundation of growth by improving management efficiency and creating synergies among businesses

2) Information: POSCO O&M merges with Blue O&M and MegaAsset

3) Date of merger: February 1, 2019

4) Registration of merger: February 11, 2019

 

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POSCO ENERGY  Contract of Shares Transfer  

July

2018

  

1) Contract Parties: Nonghyup Bank(The third agent of KIAMCO PowerEnergy Private Special Assets Investment Trust), Doosan Heavy Industries & Construction, POSCO E&C, Industrial Bank of Korea(The first agent of Multi Asset POSPower Samcheok coal-fired private investment trust)

2) Signed Date: July, August, 2018

3) Contract Amount : KRW 343,706 million

4) Information: Contract of shares transfer for disposal of 68.5%(July) and 2.5%(August) POSPower shares

  

 

Spin-off

By-product Hydrogen Generation Business for merger into POSCO

  

 

April 2019

  

 

1) Contract counterpart: POSCO

2) Conclusion of a contract: April 16, 2019

3) Date of merger: September 1, 2019

4) Merger payment : KRW 1,163,692 million (No issuance of new shares from POSCO)

5) Information : POSCO merges with Hydrogen Generation Business of POSCO ENERGY at the merger ratio of 1:0.1145836

  LNG Terminal Business Transfer Agreement  April 2019  

1) Business transferor: POSCO

2) Conclusion of a contract: April 16, 2019

3) Date of transfer: September 1, 2019

4) Transfer amount : KRW 608,019 million

5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY

  

 

Merger

  

 

May 2020

  

 

1) Contract counterpart : PSC Energy Global Co., Ltd.

2) Signed date : May 26, 2020

3) Date of merger : August 1, 2020

4) Merger ratio : 1.0000000 : 0.0000000

5) Information : POSCO ENERGY merges PSC Energy Global Co., Ltd., a wholly owned subsidiary of POSCO ENERGY

POSCO

YAMATO VINA STEEL JOINT STOCK COMPANY

  Joint stock contract with YAMATO KOGYO CO., LTD. and SIAM YAMATO STEEL CO., LTD. to improve business structure  March 2020  

1) Purpose: To improve business structure by collaborating with leading company in section steels

2) Information: POSCO’s 100% share of POSCO SS VINA changes to 51%

YAMATO KOGYO CO., LTD. takes 30% of shares and SIAM YAMATO STEEL CO., LTD. takes 19% of shares.

3) Conclusion of a contract: March 18, 2020

4) Registration of joint stock company : April 28, 2020

 

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Table of Contents

9. Research and Development

A. Research and Development (“R&D”) Organization

 

Business Area

  

Company

  

Organization

Steel

  POSCO  Steel Production and Technology Strategy Office
  Environmental Planning Office
  Technical Research Laboratories
  Steel Product Research Lab
  Process and Engineering Research Lab
  Automotive Steel Research Lab
  Steel Solution Research Lab
  

 

POSCO COATED & COLOR STEEL Co,. Ltd.

  

 

R&D Center

  

POSCO (Zhangjiagang) Stainless Steel

Co., Ltd.

  R&D Center
  

 

POSCO SPS

  

 

TMC Business Group

  Stainless Quality Technology Group
Engineering & Construction  POSCO Engineering & Construction,. LTD.  R&D Center
  POSCO A&C  R&D Center
Others  POSCO ENERGY CO., LTD.  Power Generation Business Division
  POSCO ICT  R&D Center
  POSCO CHEMICAL  R&D Center
  Energy Material R&D Center
  POSCO M-TECH  R&D Center

B. R&D Expenses in 2021.1Q (In millions of KRW)

 

Category

  Business Area 
  Steel  Trade   Engineering &
Construction
   Others   Total 

Selling and Administrative Cost

   23,620  —     780   8,135   32,535

Manufacturing Cost

   76,386  —     57   10   76,453

R&D Cost (Intangible Assets)

   (31,796  —     —     241   (31,555

Total*

   68,210  —     837   8,386   77,433

Government Subsidy

   —    —     193   —      193

R&D/Sales Ratio (%)

   0.80   —     0.06    0.95    0.48 

 

*

Total includes government subsidy.

 

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Table of Contents

III. Financial Statements

1. Consolidated Financial Statements

A. Summary

 

   

(In millions of KRW)

 

Account

  2021.1Q   2020   2019 
   As of March 31, 2021   As of December 31, 2020   As of December 31, 2019 

[Total current assets]

   39,442,198   35,830,815   34,842,374

Cash and cash equivalents

   4,546,138   4,754,644   3,514,872

Other receivables, net

   1,736,992   1,494,239   1,581,517

Other short-term financial assets

   13,129,801   11,709,209   8,996,049

Trade accounts and notes receivable, net

   8,953,757   8,120,619   9,078,351

Inventories

   10,253,347   9,051,790   10,920,320

Other current assets

   822,163   700,314   751,265

[Total non-current assets]

   43,380,416   43,256,158   44,216,287

Other receivables, net

   1,186,717   1,195,962   1,140,878

Other long-term financial assets

   1,710,782   1,561,807   1,669,389

Investments in associates and joint ventures

   3,896,677   3,876,249   3,927,755

Property, plant and equipment, net

   29,471,591   29,400,141   29,925,973

Intangible assets, net

   4,348,672   4,449,432   4,908,473

Other non-current assets

   2,765,977   2,772,567   2,643,819

Total assets

   82,822,614   79,086,973   79,058,661

[Total current liabilities]

   18,289,089   16,854,968   16,323,690

[Total non-current liabilities]

   15,318,054   14,557,413   14,940,264

Total liabilities

   33,607,143   31,412,381   31,263,954

[Equity attributable to owners of the controlling company]

   45,262,153   44,331,350   44,471,873

Share capital

   482,403   482,403   482,403

 

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Capital surplus

   1,357,038   1,310,547   1,376,251

Hybrid bonds

   199,384   199,384   199,384

Retained earnings

   46,784,409   46,111,457   45,080,118

Other equity attributable to owners of the controlling company

   (3,561,081   (3,772,441   (2,666,283

[Non-controlling Interests]

   3,953,318   3,343,242   3,322,834

Total equity

   49,215,471   47,674,592   47,794,707
   

From January 1, 2021

to March 31, 2021

   

From January 1, 2020

to December 31, 2020

   

From January 1, 2019

to December 31, 2019

 

Revenue

   16,068,723   57,792,796   64,366,848

Operating profit

   1,552,441   2,403,035   3,868,855

Profit

   1,138,779   1,788,152   1,982,637

[Profit attributable to owners of the controlling company]

   1,024,736   1,602,147   1,835,086

[Profit attributable to non-controlling interests]

   114,043   186,005   147,551

Total comprehensive Income

   1,479,851   1,570,204   2,129,105

[Total comprehensive income attributable to owners of the controlling company]

   1,350,510   1,415,132   1,997,731

[Total comprehensive income attributable to non-controlling interests]

   129,341   155,072   131,374

Earnings per share(KRW)

   13,477   20,165   22,823

Number of Consolidated Companies

   167    167    164 

B. The Standards Used for Reporting the Financial Statements

The Company prepared its financial statements in accordance with the Korean-International Financial Reporting Standards (the “K-IFRS”) and applied it to each Company’s final financial statements.

 

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2. Separate Financial Statements

A. Summary

 

   

(In millions of KRW)

 

Account

  2021.1Q   2020   2019 
   As of March 31, 2021   As of December 31, 2020   As of December 31, 2019 

[Total current assets]

   20,397,788    19,579,954    18,216,066

Cash and Cash equivalents

   1,828,883    1,822,660    978,139

Trade accounts and notes receivable, net

   4,106,907    3,693,535    3,987,041

Other receivables, net

   472,246    279,555    321,352

Other short-term financial assets

   9,133,419    9,607,632    7,858,979

Inventories

   4,758,851    4,093,829    4,988,530

Other current assets

   97,482    82,743    82,025

[Total non-current assets]

   37,867,526    37,215,015    37,494,700

Other receivables, net

   86,491    84,037    56,468

Other long-term financial assets

   1,190,314    1,072,817    1,257,896

Investments in Subsidiaries, associates, and joint ventures

   15,609,637    14,883,152    15,069,857

Property, plant and equipment, net

   20,078,792    20,216,932    20,132,199

Intangible assets, net

   590,373    621,926    708,915

Other non-current assets

   311,919    336,151    269,365

Total assets

   58,265,314    56,794,969    55,710,766

[Total current liabilities]

   5,753,568    5,089,111    3,331,446

[Total non-current Liabilities]

   6,831,454    6,591,154    6,765,135

Total liabilities

   12,585,022    11,680,265    10,096,581

[Share capital]

   482,403    482,403    482,403

[Capital surplus]

   1,339,289    1,339,289    1,252,220

[Hybrid bonds]

   199,384    199,384    199,384

[Retained earnings]

   46,386,728    45,781,777    45,372,411

[Other equity]

   (2,727,512   (2,688,149   (1,692,233

 

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Account

  2021.1Q   2020   2019 

Total equity

   45,680,292    45,114,704    45,614,185
   

From January 1, 2021

to March 31, 2021

   

From January 1, 2020

to December 31, 2020

   

From January 1, 2019

to December 31, 2019

 

Revenue

   7,800,447    26,509,920    30,373,511

Operating profit

   1,072,884    1,135,197    2,586,359

Profit

   952,176    965,863    1,175,712

Earnings per share(KRW)

   12,522    12,123    14,592

B. The Standards Used for Reporting the Financial Statements

The company prepared its financial statements in accordance with the Korean - International Financial Reporting Standards (the “K-IFRS”).

 

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Table of Contents

IV. CORPORATE GOVERNANCE

1. Overview of Corporate Governance

A. Board of Directors (“BoD”)

(1) Board of Directors

The Board of Directors consists of five inside directors (Choi, Jeong-Woo, Kim, Hag-Dong, Chon, Jung-Son, Chung, Chang-Hwa and Jeong, Tak) and seven outside directors (Chang, Seung-Wha , Kim, Shin-Bae, Chung, Moon-Ki, Kim, Sung-Jin, Pahk, Heui-Jae Kim, Yoo, Young-Sook, and Kwon, Tae-Kyun).

The Board of Directors manages the following five Special Committees:

(a) ESG Committee

(b) Director Candidate Recommendation Committee

(c) Evaluation and Compensation Committee

(d) Finance Committee

(e) Audit Committee

(f) Executive Management Committee

LOGO     Composition of the Special Committees under the BoD and their Functions(as of March 4, 2021)

 

Category

  

Composition

  

Directors

  

Major Functions

ESG Committee  

3 Outside Directors,

1 Inside Director

  

Kim, Shin-Bae

(Chairman)

Chang, Seung-Wha

Yoo, Young-Sook

Kim, Hag-Dong

  

(1)   Review of low-carbon policies related to environment and climate change

(2)   Preliminary review on safety and health plans

(3)   Preliminary review of the operation of BoD and Special Committees

A. Development of agenda and establishment of operation standards for the BoD and Special Committees

B. Preliminary review of amendment or repeal of the Operational Regulations of the BoD

C. Preliminary review of establishment and operation of Special Committees within the BoD

(4)   Execution monitoring and report publication related to ESG

(5)   Deliberation and resolution on donations exceeding KRW 100 million and KRW 1 billion and less, as well as preliminary review on donations exceeding KRW 1 billion

(6)   Matters related with internal transactions in accordance with the Monopoly Regulation and Fair Trade Act

A. Review of issues and improvement measures in relation to internal transactions

B. Preliminary review of internal transactions (KRW 100 billion or more in transaction amount)

C. Deliberation and resolution on internal transactions (KRW 5 billion or more and less than KRW 100 billion in transaction amount)

(7)   Appointment of fair trade compliance officer

 

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Table of Contents
Director Candidate Recommendation Committee  

3 Outside Directors,

1 Inside Director

  

Chung, Moon-Ki

(Chairman)

Kim, Sung-Jin

Kwon, Tae-Kyun

Jeong, Tak

  

(1)   Qualification assessment of Outside Director candidates and candidate nomination at the general meeting of shareholders

(2)   Pre-screening and qualification assessment of Inside Director candidates

(3)   Preliminary review of appointing the Committees members

(4)   Preliminary review of appointing the Representative Directors among Inside Directors (excluding the CEO)

(5)   Operation of the Outside Director Candidate Recommendation Advisory Group

(6)   Other matters necessary to nominate Outside Director candidates

Evaluation and

Compensation

Committee

  4 Outside Directors  

Pahk, Heui-Jae

(Chairman)

Chung, Moon-Ki

Kim, Sung-Jin

Yoo, Young-Sook

  

(1)   Development of management succession and executive development plans

(2)   Establishment and execution of executive evaluation and compensation plans

(3)   Preliminary review on compensation and retirement allowance of Directors

Finance Committee  

3 Outside Directors;

1 Inside Director

  

Kwon, Tae-Kyun

(Chairman)

Kim, Shin-Bae

Chang, Seung-Wha

Chon, Jung-Son

  

(1)   Establishment of policies for company’s internal values and financial soundness

(2)   Preliminary review in case of filing in litigation or arbitration, or responding to reconciliation or mediation in the process of trial or taking any equivalent level of legal actions with the amount of KRW 100 billion or more

(3)   External Investments

A. Preliminary review of new external investments, capital increase and disposal of share in the invested entity executed by a non-steel business division (KRW 100 billion or more. Investment and capital increase include borrowings and liabilities that the company takes)

B. Approval of new external investments, capital increase and disposal of share in the invested entity executed by a non-steel business division (From KRW 10 billion to less than KRW 100 billion. Investment and capital increase includes borrowings and liabilities that the company takes)

(4)   Deliberation and resolution on bond issuance and important borrowings (including refinancing borrowings exceeding KRW 100 billion)

(5)   Preliminary review on bond issuance and important borrowings (new long-term borrowings exceeding KRW 100 billion)

(6)   Deliberation and resolution on offering non-current assets as collateral

(7)   Deliberation and resolution on takeover of debt such as collateral, guarantee, etc. from invested company (excluding the case involving steel investment)

 

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Table of Contents
Audit Committee  3 Outside Directors  

Kim, Sung-Jin

(Chairman)

Chung, Moon-Ki

Pahk, Heui-Jae

  

(1)   Setting the work scope of the committee

(2)   Matters that the BoD or Representative Directors delegated

(3)   Request for Extraordinary general meeting of shareholders

(4)   Consulting of external experts

(5)   Audit of the legitimacy of management’s business execution

(6)   Review soundness and validity of the company’s financial activities and the appropriateness of financial reporting

(7)   Review the validity of important accounting standards or changes in accounting estimates

(8)   Evaluation of the operation status of the internal accounting management system

(9)   Evaluation of the internal control system

(10)  Agreement on appointment or dismissal of internal audit department representative

(11)  Contract for appointment, remuneration and non-audit services of independent auditors

(12)  Evaluation of independent auditors’ audit activities

(13)  Report internal audit department’s annual audit plan and results

(14)  Report on the evaluation results of the company’s ethical compliance

(15)  An independent auditor reports on important facts of the company’s Directors’ misconduct or violation of laws or Articles of Incorporation

(16)  Report that independent auditors violation of the company’s accounting standards

(17)  Other matters deemed necessary by each committee member

 

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Table of Contents

Executive

Management Committee

  5 Inside Directors  

Choi, Jeong-Woo

(Chairman)

Kim, Hag-Dong

Chon, Jung-Son

Kim, Hag-Dong

Jeong, Tak

Chung, Chang-Hwa

  

1. Business

(1)   Important matters in the corporate employee hierarchy, development of human resources and adjustment

(2)   Important changes in terms of working conditions and welfares

(3)   New establishment plan for chair-professor

(4)   Housing Policy Establishment (Housing fund

support standard and plan for housing construction)

(5)   Decision on closure of shareholders’ registry

2. Finance

(1)   Preliminary review on in-house investment plan (New establishment or expansion investment of KRW 200 billion or more)

(2)   Approval of in-house investment plan

-   New establishment or expansion investment from KRW 10 billion to less than KRW 200 billion

-   Investment other than new establishment or expansion: KRW 10 billion or more.(In the case of ordinary investment, the investment amount is for KRW 5 billion or more)

(3)   Preliminary review on steel business division: New external investments, capital increase and disposal of shares in the invested entity (From KRW 100 billion or more, Investment and capital increase includes borrowings and liabilities that the company takes)

(4)   Approval on steel business division: New external investment, capital increase, and disposal of shares in the invested entity (From KRW 10 billion to less than KRW 100 billion, investment and capital increase to includes borrowings and liabilities that the company takes)

(5)   Acquisition or disposal of tangible· intangible fixed assets and important investment assets from KRW 10 billion to less than KRW 200 billion

(6)   Approval technology application and technology sales contract over USD 1 million

(7)   Acquisition of debt such as guarantee for invested company’s collateral involving steel investments

3. Other matters that the Chairman deems necessary or are deemed necessary by each committee member

(2) List of Key Activities of the Board of Directors

(January 1, 2021 ~ March 31, 2021)

 

No.

  

Date

  

Agenda

  

Approval

2021-1  January 20  1. Approval of participation in POSCO CHEMICAL’s capital increase with consideration  All 1 Case Approved
2021-2  January 28  

•   Deliberation Agenda

1. Approval of the 53rd financial statements and schedule for the general meeting of shareholders

•   Report Agenda

1.  Business performance of the fiscal year of 2020

2.  Report on internal control over financial reporting

3.  Assessment on the effectiveness of internal control over financial reporting

  

All 1 Case Approved

 

—  

—  

—  

2021-3  February 18  

1. Plans to strengthen roles of the Board of Directors in relation to ESG

2. Recommendation of Inside Directors candidates (other than the candidate for the Representative Director & CEO)

3. Agendas for the 53rd general meeting of shareholders

  

All 3 Cases

Approved

 

*

At the 53rd General Meeting of Shareholders which was held on March 12, 2021, Outside Director Bahk, Byong-Won and Kim Joo-Hyun, and Inside Director Chang, In-Hwa retired due to expiration of the terms. Outside Directors Yoo, Young-Sook and Kwon, Tae-Kyun, and Inside Director Chung, Chang-Hwa were newly elected.

 

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Table of Contents

(March 12, 2021 ~ May 14, 2021)

 

No.

  

Date

  

Agenda

  

Approval

2021-4  March 12  

1. Appointment of the Chairman of the BoD

2. Appointment of the Representative Director CEO

3. Appointment of Representative Directors and Inside Directors

4. Appointment of Special Committees members

  All 4 Cases Approved
2021-5  April 9  1. Investment on commercial plant for hard rock lithium  All 1 Case Approved
2021-6  May 14  

•   Deliberation Agenda

1. Resolution on the dividend for the 1st quarter of 2021

2. POSCO health and safety plan for 2021

3. Joint Venture company establishment with HBIS Group Co., Ltd.

4. Equity investment in an Australian nickel production company

5. Transaction Plans with affiliates for the fiscal year of 2021

•   Report Agenda

  

All 5 Cases

Approved

 

    1. Business performance of the 1st quarter of 2021  —  
    2. Status of global steel growth strategy implementation  —  
    3. The performance and assessment of Board of Directors for 2020    —  

LOGO      Major Activities of Outside Directors on the Board of Directors (January 1, 2021 ~ May 14, 2021)

 

No.

  

Date

  

Participation of the Outside Directors

(the Number of total Outside Directors)

  

Remarks

2021-1

  January 20  7 (7)  —  

2021-2

  January 28  7 (7)  —  

2021-3

  February 18  7 (7)  —  

2021-4

  March 12  7 (7)  —  

2021-5

  April 9  7 (7)  —  

2021-6

  May 14  7 (7)  —  

(4) Special Committees under the BoD and Their Activities (From January 1, 2021 to May 14, 2021)

 

  

Director Candidate Recommendation and Management Committee (January 1, 2021~March 11, 2021)

 

Date

  

Agenda

  

Approval

January 28, 2021  Qualification review and recommendation of the Outside Directors candidates  Approved
February 18, 2021  

•   Deliberation Agenda

1. Recommendation of the Outside Directors candidates

•   Preliminary Review

  Approved
  1. Qualification review of the Inside Directors candidates  —  
  2. Plans to strengthen roles of the Board of Directors in relation to ESG  —  

 

  

Finance and Related Party Transaction Committee (January 1, 2021~March 11, 2021)

 

Date

  

Agenda

  

Approval

January 28, 2021  Contribution to the Labor Welfare Fund  Approved

o Evaluation and Compensation Committee (January 1, 2021 ~ March 12, 2021)

 

Date

  

Agenda

  

Approval

January 27, 2021  Evaluation of the business performance for the fiscal year of 2020  Approved

 

  

ESG Committee (March 12, 2021 ~ May 14, 2021)

 

Date

  

Agenda

  

Approval

April 22, 2021  

•   Deliberation Agenda

Plan for publishing Corporate Citizenship Report 2020

•   Report Agenda

2050 Carbon Neutral Declaration and Implementation Status

  

Approved

—  

 

May 13, 2021  

•   Preliminary Review

POSCO health and safety plan for 2021

  —  

 

40


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Finance Committee (March 12, 2021 ~ May 14, 2021)

 

Date

  

Agenda

  Approval
April 9, 2021  

•   Preliminary Review

Investment on commercial plant for hard rock lithium

  —  
May 14, 2021  

•   Preliminary Review

Equity investment in an Australian nickel production company

  —  

 

  

Executive Management Committee (January 1, 2021 ~ May 14, 2021)

 

Date

  

Agenda

  

Approval

March 23, 2021  

1. Exhaust gas purification facility replacement at Gwangyang #1 sintering factory

2. EIC facility replacement at Gwangyang #2-4 casting machine

3. Reclamation work for Gwangyang facility expansion site

4. Carbon credit trading plan

  All 4 Cases Approved
April 20, 2021  

•   Preliminary Review

1. Joint Venture company establishment with HBIS Group Co., Ltd.

•   Deliberation Agenda

1. Pohang education center dormitory construction

2. Gwangyang education center construction

3. Contruction of Park1538 Gwangyang PR Hall

  

—  

 

All 3 Cases Approved

B. Audit Committee

(1) Composition of the Audit Committee

 

Name

  

Qualifications

  

Remarks

Kim, Sung-Jin

Chung, Moon-Ki

Pahk, Heui-Jae

  Satisfies the requirements stipulated in the Korean Commercial Act  

Chairman

(2) Major Activities of the Audit Committee (January 1, 2021 ~ May 14, 2021)

 

41


Table of Contents

Session

  

Date

  

Agenda

  

Approval

1  January 27  

•   Deliberation Agenda

1. Consent to appoint the head of the internal audit department

2. Assessment of internal control over financial reporting in 2020

3. Approval of audit and non-audit services for POSCO and subsidiaries

•   Report Agenda

  

All 3 Cases Approved

    1. Report of operation of internal control over financial reporting in 2020  —  
    2. Report on approval of POSCO E&C’s audit service contract  —  
    3. The result of internal audit for the fiscal year of 2020 and audit plans for the fiscal year of 2021  —  
    4. Audit Committee activities in 2020  —  
    5. The assessment on the executives’ and employees’ conformity to the code of ethics for the fiscal year of 2020  —  
2  February 17  

•   Deliberation Agenda

1. Internal audit result for the year 2020

•   Report Agenda

1. External audit result for the year 2020

  Approved
3  February 18  Review of the agendas for the Ordinary General Meeting of Shareholders  Approved

- At the 53rd general meeting of shareholders held on March 12, 2021, due to Bahk, Byong-Won’s expiration of term in the Audit Committee, a new Audit Committee member, Kim, Sung-Jin was elected.

 

Session

  

Date

  

Agenda

  

Approval

4  March 12  1. Appointment of the chairman of the audit committee  Approved
5

 

  

April 23

 

  

•   Report Agenda

 

  
    

1. POSCO E&C and POSCO ICT deficit projects status and management

plans

  —  
    2. Operation plan for Internal Accounting Management Policy in 2021  —  
    

3. Results of internal audit on the consolidated financial statements for

the 1st quarter of 2021

  —  
    

4. Review of the impact of amendments to the U.S. listed company

regulations on independence of external auditors

  —  
    

5. The results of the 20-F audit for 2020 and the results of external

reviews on the consolidated financial statements for the 1st quarter of 2021

  —  

C. Voting Rights of Shareholders

(1) The Cumulative Voting System: The cumulative voting system was introduced at the 36th general meeting of shareholders on March 12, 2004.

(2) Voting by Mail: The voting-by-mail system was introduced at the 36th general meeting of shareholders on March 12, 2004.

 

42


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(3) The Electronic Voting System: The electronic voting system was determined at the Board of Directors meeting on February 20, 2019.

D. Compensation of Directors and Officers

(1) Directors’ and the Audit Committee members’ Salaries

 

               (In millions KRW) 

Category

  No. of
people
   Total
payment
   Average
payment

(Per
person)
   Ceiling amount approved at
the general meeting of
shareholders
   Remarks 

Inside Director

   5    2,545    382      —   

Outside Director (Excluding Audit Committee Members)

   4    82    12    10,000    —   

Members of the Audit Committee

   3    52    17      —   

 

LOGO

No. of people : The number of Directors and the Audit Committee members who are in office as of March 31, 2021.

LOGO

Total payment : The total amount of remuneration paid to all Directors, including the Audit Committee members, who served from January 1 to March 31, 2021.

LOGO

Average payment per person is calculated based on the paid amount to the current Directors and Audit Committee members as of March 31, 2021.

 

43


Table of Contents

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2021

(With Independent Auditors’ Review Report Thereon)


Table of Contents


Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of March 31, 2021, the condensed consolidated interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2021 and 2020, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to issue a report on the condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.


Table of Contents

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

The consolidated statement of financial position of the Company as of December 31, 2020, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 4, 2021, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2020, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

 

LOGO

Seoul, Korea

May 14, 2021

 

This report is effective as of May 14, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

2


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POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of March 31, 2021 and December 31, 2020

(Unaudited)

 

 

(in millions of Won)  Notes   March 31, 2021   December 31, 2020 

Assets

      

Cash and cash equivalents

   21   W4,546,138    4,754,644 

Trade accounts and notes receivable, net

   4,21,26,27,34    8,953,757    8,120,619 

Other receivables, net

   5,21,34    1,736,992    1,494,239 

Other short-term financial assets

   6,21    13,129,801    11,709,209 

Inventories

   7    10,253,347    9,051,790 

Current income tax assets

     33,396    49,481 

Assets held for sale

   8    48,074    34,210 

Other current assets

   14    740,693    616,623 
    

 

 

   

 

 

 

Total current assets

     39,442,198    35,830,815 
    

 

 

   

 

 

 

Long-term trade accounts and notes receivable, net

   4,21    76,191    86,423 

Other receivables, net

   5,21    1,186,717    1,195,962 

Other long-term financial assets

   6,21    1,710,782    1,561,807 

Investments in associates and joint ventures

   9    3,896,677    3,876,249 

Investment property, net

   11    998,405    994,781 

Property, plant and equipment, net

   12    29,471,591    29,400,141 

Intangible assets, net

   13    4,348,672    4,449,432 

Defined benefit assets, net

   19    71,346    86,149 

Deferred tax assets

     1,356,921    1,335,154 

Other non-current assets

   14    263,114    270,060 
    

 

 

   

 

 

 

Total non-current assets

     43,380,416    43,256,158 
    

 

 

   

 

 

 

Total assets

    W82,822,614    79,086,973 
    

 

 

   

 

 

 

See accompanying notes to the condensed consolidated interim financial statements

 

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Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of March 31, 2021 and December 31, 2020

(Unaudited)

 

 

(in millions of Won)  Notes   March 31, 2021  December 31, 2020 

Liabilities

     

Trade accounts and notes payable

   21,34   W3,807,052   3,755,513 

Short-term borrowings and current installments of long-term borrowings

   4,15,21    9,198,919   8,677,529 

Other payables

   16,21,34    2,332,310   1,845,266 

Other short-term financial liabilities

   17,21    147,511   141,404 

Current income tax liabilities

     587,682   366,476 

Liabilities directly associated with the assets held for sale

   8    7   25 

Provisions

   18,35    356,656   443,273 

Other current liabilities

   20,26,27    1,858,952   1,625,482 
    

 

 

  

 

 

 

Total current liabilities

     18,289,089   16,854,968 
    

 

 

  

 

 

 

Long-term trade accounts and notes payable

   21    14,907   22,323 

Long-term borrowings, excluding current installments

   15,21    12,425,771   11,820,078 

Other payables

   16,21    698,123   558,924 

Other long-term financial liabilities

   17,21    51,773   133,588 

Defined benefit liabilities, net

   19    171,319   141,785 

Deferred tax liabilities

     1,361,099   1,320,726 

Long-term provisions

   18,35    551,287   522,969 

Other non-current liabilities

   20,26    43,775   37,020 
    

 

 

  

 

 

 

Total non-current liabilities

     15,318,054   14,557,413 
    

 

 

  

 

 

 

Total liabilities

     33,607,143   31,412,381 
    

 

 

  

 

 

 

Equity

     

Share capital

   22    482,403   482,403 

Capital surplus

   22    1,357,038   1,310,547 

Hybrid bonds

   23    199,384   199,384 

Reserves

   24    (1,052,788  (1,380,918

Treasury shares

   25    (2,508,294  (2,391,523

Retained earnings

     46,784,410   46,111,457 
    

 

 

  

 

 

 

Equity attributable to owners of the controlling company

     45,262,153   44,331,350 

Non-controlling interests

   23    3,953,318   3,343,242 
    

 

 

  

 

 

 

Total equity

     49,215,471   47,674,592 
    

 

 

  

 

 

 

Total liabilities and equity

    W82,822,614   79,086,973 
    

 

 

  

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

4


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won, except per share information)  Notes   March 31, 2021  March 31, 2020 

Revenue

   26,27,34,37   W16,068,723   14,545,813 

Cost of sales

   7,27,31,34    (13,930,948  (13,235,530
    

 

 

  

 

 

 

Gross profit

     2,137,775   1,310,283 

Selling and administrative expenses

   31,34    

Reversal of (impairment loss on) trade accounts and notes receivable

     6,155   (9,987

Other administrative expenses

   28    (506,321  (477,067

Selling expenses

   28    (85,168  (117,978
    

 

 

  

 

 

 

Operating profit

     1,552,441   705,251 

Share of profit of equity-accounted investees, net

   9    78,000   31,664 

Finance income and costs

   21,29    

Finance income

     795,544   1,319,425 

Finance costs

     (866,299  (1,345,277

Other non-operating income and expenses

   34    

Impairment loss on other receivables

     (6,606  (1,197

Other non-operating income

   30    129,971   64,301 

Other non-operating expenses

   30,31    (123,492  (113,764
    

 

 

  

 

 

 

Profit before income tax

   37    1,559,559   660,403 

Income tax expense

   32,37    (420,780  (225,745
    

 

 

  

 

 

 

Profit

     1,138,779   434,658 

Other comprehensive income (loss)

     

Items that will not be reclassified subsequently to profit or loss:

     

Remeasurements of defined benefit plans

   19    (1,725  (3,850

Net changes in fair value of equity investments at fair value through other comprehensive income

   21    92,006   (202,836

Items that are or may be reclassified subsequently to profit or loss:

     

Capital adjustment arising from investments in equity-accounted investees

     88,099   (61,206

Foreign currency translation differences

     162,706   (4,434

Gains or losses on valuation of derivatives

   21    (14  (57
    

 

 

  

 

 

 

Other comprehensive income (loss), net of tax

     341,072   (272,383
    

 

 

  

 

 

 

Total comprehensive income

    W1,479,851   162,275 

Profit attributable to:

     

Owners of the controlling company

    W1,024,736   395,393 

Non-controlling interests

     114,043   39,265 
    

 

 

  

 

 

 

Profit

    W1,138,779   434,658 
    

 

 

  

 

 

 

Total comprehensive income attributable to :

     

Owners of the controlling company

    W1,350,510   129,987 

Non-controlling interests

     129,341   32,288 
    

 

 

  

 

 

 

Total comprehensive income

    W1,479,851   162,275 
    

 

 

  

 

 

 

Basic and diluted earnings per share (in Won)

   33    13,477   4,915 

See accompanying notes to the condensed consolidated interim financial statements.

 

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Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won)  Attributable to owners of the controlling company  Non-
controlling
interests
    
   Share
capital
   Capital
surplus
  Hybrid
bonds
   Reserves  Treasury
shares
  Retained
earnings
  Subtotal  Total 

Balance as of January 1, 2020

  W482,403    1,376,251   199,384    (1,157,980  (1,508,303  45,080,117   44,471,872   3,322,835   47,794,707 

Comprehensive income:

            

Profit

   —      —     —      —     —     395,393   395,393   39,265   434,658 

Other comprehensive income (loss)

            

Remeasurements of defined benefit plans, net of tax

   —      —     —      —     —     (4,084  (4,084  234   (3,850

Capital adjustment arising from investments in equity-accounted investees, net of tax

   —      —     —      (67,770  —     —     (67,770  6,564   (61,206

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

   —      —     —      (201,529  —     (1,307  (202,836  —     (202,836

Foreign currency translation differences, net of tax

   —      —     —      9,338   —     —     9,338   (13,772  (4,434

Gains or losses on valuation of derivatives, net of tax

   —      —     —      (54  —     —     (54  (3  (57
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income

   —      —     —      (260,015  —     390,002   129,987   32,288   162,275 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Transactions with owners of the controlling company, recognized directly in equity:

            

Year-end dividends

   —      —     —      —     —     (320,462  (320,462  (59,655  (380,117

Changes in ownership interest in subsidiaries

   —      (2,792  —      —     —     —     (2,792  125,410   122,618 

Repayment of redeemable convertible preferred shares

   —      (33,581  —      —     —     —     (33,581  (245,000  (278,581

Interest of hybrid bonds

   —      —     —      —     —     (2,294  (2,294  (1,838  (4,132

Others

   —      (39  —      —     —    ��(8,051  (8,090  5,707   (2,383
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total transactions with owners of the controlling company

   —      (36,412  —      —     —     (330,807  (367,219  (175,376  (542,595
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of March 31, 2020

  W482,403    1,339,839   199,384    (1,417,995  (1,508,303  45,139,312   44,234,640   3,179,747   47,414,387 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

6


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won)  Attributable to owners of the controlling company  Non-
controlling
interests
    
   Share
capital
   Capital
surplus
  Hybrid
bonds
   Reserves  Treasury
shares
  Retained
earnings
  Subtotal  Total 

Balance as of January 1, 2021

  W482,403    1,310,547   199,384    (1,380,918  (2,391,523  46,111,457   44,331,350   3,343,242   47,674,592 

Comprehensive income:

            

Profit

   —      —     —      —     —     1,024,736   1,024,736   114,043   1,138,779 

Other comprehensive income (loss)

            

Remeasurements of defined benefit plans, net of tax

   —      —     —      —     —     (254  (254  (1,471  (1,725

Capital adjustment arising from investments in equity-accounted investees, net of tax

   —      —     —      90,686   —     —     90,686   (2,587  88,099 

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

   —      —     —      94,108   —     (2,102  92,006   —     92,006 

Foreign currency translation differences, net of tax

   —      —     —      143,370   —     —     143,370   19,336   162,706 

Gains or losses on valuation of derivatives, net of tax

   —      —     —      (34  —     —     (34  20   (14
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive income

   —      —     —      328,130   —     1,022,380   1,350,510   129,341   1,479,851 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Transactions with owners of the controlling company, recognized directly in equity:

            

Year-end dividends

   —      —     —      —     —     (342,565  (342,565  (57,375  (399,940

Changes in ownership interest in subsidiaries

   —      52,182   —      —     —     —     52,182   539,053   591,235 

Interest of hybrid bonds

   —      —     —      —     —     (2,268  (2,268  (1,799  (4,067

Acquisition of treasury shares

   —      —     —      —     (116,771  —     (116,771  —     (116,771

Others

   —      (5,691  —      —     —     (4,594  (10,285  856   (9,429
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total transactions with owners of the controlling company

   —      46,491   —      —     (116,771  (349,427  (419,707  480,735   61,028 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of March 31, 2021

  W482,403    1,357,038   199,384    (1,052,788  (2,508,294  46,784,410   45,262,153   3,953,318   49,215,471 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to the condensed consolidated interim financial statement

 

7


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won)  Notes   March 31, 2021  March 31, 2020 

Cash flows from operating activities

     

Profit

    W1,138,779   434,658 

Adjustments for:

     

Depreciation

     788,318   770,170 

Amortization

     110,780   114,287 

Finance income

     (517,135  (914,256

Finance costs

     601,541   993,094 

Income tax expense

     420,780   225,745 

Impairment loss on property, plant and equipment

     16,892   78 

Gain on disposal of property, plant and equipment

     (3,323  (4,835

Loss on disposal of property, plant and equipment

     18,657   40,671 

Impairment loss on other intangible assets

     7,183   423 

Gain on disposal of investments in subsidiaries, associates and joint ventures

     (3,842  (3,969

Loss on disposal of investments in subsidiaries, associates and joint ventures

     1,104   4,952 

Share of profit of equity-accounted investees

     (78,000  (31,664

Expenses related to post-employment benefit

     62,493   62,608 

Impairment loss on trade and other receivables

     451   11,184 

Loss on valuation of inventories

     26,977   97,504 

Increase to provisions

     (2,502  17,009 

Others, net

     (23,156  5,243 
    

 

 

  

 

 

 
     1,427,218   1,388,244 
    

 

 

  

 

 

 

Changes in operating assets and liabilities

   36    (1,883,160  123,104 

Interest received

     51,813   73,960 

Interest paid

     (119,697  (139,460

Dividends received

     90,685   35,927 

Income taxes paid

     (134,770  (191,110
    

 

 

  

 

 

 

Net cash provided by operating activities

    W570,868   1,725,323 
    

 

 

  

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

8


Table of Contents

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2021 and 2020

(Unaudited)

 

 

(in millions of Won)  

Notes

  March 31, 2021  March 31,
2020
 

Cash flows from investing activities

     

Acquisitions of short-term financial instruments

    W(10,444,413  (9,143,509

Proceeds from disposal of short-term financial instruments

     8,993,223   7,807,693 

Increase in loans

     (160,590  (401,063

Collection of loans

     235,136   479,949 

Acquisitions of securities

     (90,882  (199,977

Proceeds from disposal of securities

     170,646   211,015 

Acquisitions of investment in associates and joint ventures

     (26,897  (54,564

Proceeds from disposal of investment in associates and joint ventures

     4,421   3,347 

Acquisitions of investment property

     —     (3,115

Acquisitions of property, plant and equipment

     (537,878  (937,795

Proceeds from disposal of property, plant and equipment

     (3,940  17,837 

Acquisitions of intangible assets

     (43,161  (109,420

Proceeds from disposal of intangible assets

     3,357   10,463 

Proceeds from disposal of assets held for sale

     29   590 

Collection of lease receivables

     16,202   14,990 

Others, net

     528   (503
    

 

 

  

 

 

 

Net cash used in investing activities

     (1,884,219  (2,304,062
    

 

 

  

 

 

 

Cash flows from financing activities

     

Proceeds from borrowings

     559,981   1,822,765 

Repayment of borrowings

     (488,762  (383,099

Proceeds from short-term borrowings, net

     574,287   877,646 

Capital contribution from non-controlling interests

     597,356   125,410 

Payment of cash dividends

     (1,567  (1,363

Acquisition of treasury shares

     (116,771  —   

Payment of interest of hybrid bonds

     (4,087  (4,132

Repayment of lease liabilities

     (63,340  (46,443

Repayment of redeemable convertible preferred shares

     —     (278,581

Others, net

     (5,067  123 
    

 

 

  

 

 

 

Net cash provided by financing activities

     1,052,030   2,112,326 
    

 

 

  

 

 

 

Effect of exchange rate fluctuation on cash held

     52,815   32,737 
    

 

 

  

 

 

 

Net increase(decrease) in cash and cash equivalents

     (208,506  1,566,324 

Cash and cash equivalents at beginning of the period

  8   4,755,578   3,515,246 
    

 

 

  

 

 

 

Cash and cash equivalents at end of the period

  8  W4,547,072   5,081,570 
    

 

 

  

 

 

 

See accompanying notes to the condensed consolidated interim financial statements.

 

9


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of March 31, 2021

(Unaudited)

 

1. General Information

General information about POSCO, its 34 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 132 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 131 associates and joint ventures are as follows:

 

(a)

The controlling company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of POSCO have been listed on the Korea Exchange since June 10, 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through five of its overseas liaison offices.

As of March 31, 2021, the shares of the POSCO are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchange.

 

(b)

Consolidated subsidiaries acquired or newly established during the three-month period ended March 31, 2021, were as follows:

 

Company

  Date of inclusion  

Ownership (%)

  Reason

Poland Legnica Sourcing Center Sp. z o.o

  February 2021  100.00  New establishment

 

(c)

Subsidiaries for which the Company has lost control during the three-month period ended March 31, 2021, are as follows:

 

Company

  

Date of exclusion

  

Reason

POSCO E&C Mongolia  January 2021  Liquidation

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

2. Statement of Compliance

Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies, etc. in the Republic of Korea.

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2020. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

 

(a)

Judgments, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

 

(b)

Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

Significant valuation issues are reported to the Company’s Audit Committee.

 

11


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

•  Level 1

  -  unadjusted quoted prices in active markets for identical assets or liabilities.

•  Level 2

  -  inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly.

•  Level 3

  -  inputs for the assets or liabilities that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2020. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2021.

(a) K-IFRS No. 1116 “Lease”- COVID-19 Related Rent Concessions

The amendment introduces an optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of COVID-19. A lessee that applies the practical expedient is not required to assess whether eligible rent concessions are lease modifications. The Company is required to disclose the amount recognized in profit or loss for the reporting period arising from application of the practical expedient. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

(b) K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments : Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1104 “Insurance Contracts” , K-IFRS No. 1116 “Lease” – Interest Rate Benchmark Reform

Market-wide interest rate benchmark reform requires disclosure of exceptions to practical expedients and discontinuation of hedge accounting in accordance with K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments : Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1104 “Insurance Contracts” , K-IFRS No. 1116 “Lease”. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Current

    

Trade accounts and notes receivable

  W8,334,832    7,471,916 

Finance lease receivables

   42,180    41,841 

Due from customers for contract work

   919,346    948,879 

Less: Allowance for doubtful accounts

   (342,601   (342,017
  

 

 

   

 

 

 
  W 8,953,757    8,120,619 
  

 

 

   

 

 

 

Non-current

    

Trade accounts and notes receivable

  W120,830    131,010 

Finance lease receivables

   —      46 

Less: Allowance for doubtful accounts

   (44,639   (44,633
  

 

 

   

 

 

 
  W 76,191    86,423 
  

 

 

   

 

 

 

The Company sold trade accounts and notes receivable with recourse to financial institutions. These trade accounts and notes receivable have not been derecognized from the statement of financial position, because the Company retains substantially all of the risks and rewards associated with the transferred assets. The amounts received on transfer have been recognized as secured borrowings. As of March 31, 2021, and December 31, 2020, the carrying amounts of such secured borrowings areW 231,407 million andW 328,807 million, respectively, which are presented in the statements of financial position as the short-term borrowings.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

5. Other Receivables

Other receivables as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Current

    

Loans

  W 256,651    258,735 

Other accounts receivable

   1,019,123    835,791 

Accrued income

   374,600    298,157 

Deposits

   75,539    82,884 

Others

   14,380    18,015 

Lease receivables

   65,747    68,198 

Less: Allowance for doubtful accounts

   (69,048   (67,541
  

 

 

   

 

 

 
  W 1,736,992    1,494,239 
  

 

 

   

 

 

 

Non-current

    

Loans

  W805,557    798,287 

Other accounts receivable

   192,379    197,304 

Accrued income

   68,551    86,920 

Deposits

   307,795    284,588 

Lease receivables

   123,905    128,366 

Less: Allowance for doubtful accounts

   (311,470   (299,503
  

 

 

   

 

 

 
  W 1,186,717    1,195,962 
  

 

 

   

 

 

 

6. Other Financial Assets

Other financial assets as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Current

    

Derivatives assets

  W 107,849    99,324 

Debt securities

   84,026    154,154 

Deposit instruments(*1,2)

   3,945,376    2,322,327 

Short-term financial instruments(*2)

   8,992,550    9,133,404 
  

 

 

   

 

 

 
  W 13,129,801    11,709,209 
  

 

 

   

 

 

 

Non-current

    

Derivatives assets

  W42,921    18,551 

Equity securities(*3)

   1,229,005    1,120,968 

Debt securities

   18,701    20,260 

Other securities(*3)

   385,130    364,404 

Deposit instruments(*2)

   35,025    37,624 
  

 

 

   

 

 

 
  W 1,710,782    1,561,807 
  

 

 

   

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020,W5,967 million andW4,881 million, respectively, are restricted in use for government project.

(*2)

As of March 31, 2021 and December 31, 2020, financial instruments amounting toW101,122 million andW46,855 million, respectively, are restricted in use for financial arrangements, pledge and others.

(*3)

As of March 31, 2021 and December 31, 2020,W138,263 million andW113,674 million of equity and other securities, respectively, have been provided as collateral for borrowings, construction projects and others.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

7. Inventories

Inventories as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021  ��December 31, 2020 

Finished goods

  W1,463,696    1,285,552 

Merchandise

   753,944    751,245 

Semi-finished goods

   1,833,102    1,626,855 

Raw materials

   2,459,076    1,980,518 

Fuel and materials

   847,433    876,593 

Construction inventories

   859,837    936,813 

Materials-in-transit

   2,080,200    1,664,770 

Others

   65,852    61,086 
  

 

 

   

 

 

 
   10,363,140    9,183,432 
  

 

 

   

 

 

 

Less: Allowance for inventories valuation

   (109,793   (131,642
  

 

 

   

 

 

 
  W 10,253,347    9,051,790 
  

 

 

   

 

 

 

The amounts of loss on valuation of inventories recognized in cost of sales during the three-month period ended March 31, 2021 and the year ended December 31, 2020 wereW26,977 million andW54,014 million, respectively.

8. Assets Held for Sale

Details of assets held for sale as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 
   The controlling
company(*1)
   Subsidiaries   Total   The controlling
company(*1)
   Subsidiaries   Total 

Asset

            

Cash and cash equivalents(*2)

  W—      934    934    —      934    934 

Other financial assets

   —      273    273    —      273    273 

Property, plant and equipment

   36,308    —      36,308    32,244    40    32,284 

Intangible Assets

   9,841    —      9,841    —      —      —   

Others

   —      718    718    —      719    719 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 46,149    1,925    48,074    32,244    1,966    34,210 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liability

            

Others

  W—      7    7    —      25    25 

 

(*1)

During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM plants, and classified the assets as held for sale. During the year ended December 31, 2020 the Company recognizedW5,030 million of impairment loss for the difference between the fair value less cost to sell and the carrying amount of the assets.

(*2)

Cash and cash equivalents in the statement of cash flows include cash and cash equivalents that are classified as assets held for sale.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

9. Investments in Associates and Joint ventures

 

(a)

Details of investments in associates as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Company

  Number of shares   Ownership
(%)
   Acquisition
cost
   Book value   Book value 

[Domestic]

          

EQP POSCO Global NO1 Natural Resources

          

Private Equity Fund

   178,691,901,565    36.34   W178,787   W175,604    175,939 

Samcheok Blue Power Co.,Ltd.(*1)

   4,507,138    34.00    179,410    140,934    145,092 

SNNC

   18,130,000    49.00    90,650    162,325    160,332 

QSONE Co.,Ltd.

   200,000    50.00    84,395    85,169    86,004 

Chun-cheon Energy Co., Ltd(*1)

   17,308,143    49.10    86,541    24,519    23,913 

Western Inland highway CO.,LTD.

   9,533,364    29.40    47,667    44,866    45,070 

Nextrain Co., Ltd.(*1)

   9,904,000    20.01    49,520    47,442    47,364 

Metropolitan Outer Ring Expressway co., ltd.(*1)

   3,545,306    21.46    17,727    16,979    13,721 

CHUNGJU ENTERPRISE CITY

          

DEVELOPMENT Co.,Ltd

   2,008,000    29.53    10,040    16,353    17,137 

Daesung Steel(*2)

   108,038    17.54    14,000    17,333    16,990 

PCC Amberstone Private Equity Fund 1(*2)

   8,570,603,277    8.80    8,453    9,172    9,230 

Others (59 companies)(*1)

         91,047    103,472 
        

 

 

   

 

 

 
         831,743    844,264 
        

 

 

   

 

 

 

[Foreign]

          

South-East Asia Gas Pipeline Company Ltd.

   135,219,000    25.04    132,907    214,778    199,342 

AES-VCM Mong Duong Power

          

Company Limited(*1)

   —      30.00    164,303    174,705    158,777 

9404-5515 Quebec Inc.(*2)

   114,452,000    10.40    124,341    130,784    123,296 

Eureka Moly LLC

   —      20.00    240,123    45,340    43,520 

AMCI (WA) PTY LTD

   49    49.00    209,664    72,858    71,732 

NCR LLC

   —      22.10    62,116    56,396    46,608 

KOREA LNG LTD.

   2,400    20.00    135,205    25,293    42,229 

Nickel Mining Company SAS

   3,234,698    49.00    157,585    46,821    40,890 

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

   134,400,000    40.00    22,423    22,743    22,147 

Zhongyue POSCO (Qinhuangdao) Tinplate

          

Industrial Co., Ltd

   10,200,000    34.00    9,517    15,900    15,181 

PT. Wampu Electric Power(*1)

   8,708,400    20.00    10,054    14,041    12,716 

PT. Batutua Tembaga Raya

   128,285    22.00    21,824    126    15 

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

   50    25.00    4,723    7,701    7,110 

Others (25 companies)(*1)

         113,446    105,006 
        

 

 

   

 

 

 
         940,932    888,569 
        

 

 

   

 

 

 
        W 1,772,675    1,732,833 
        

 

 

   

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020, investments in associates amounting toW430,113 million andW410,573 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2)

As of March 31, 2021, it was classified as an associate even though the Company’s ownership percentage is less than 20% of ownership percentage since the Company has significant influence over the investee when considering its structure of the Board of Directors and others.

 

16


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(b) Details of investments in joint ventures as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31,
2020
 

Company

  Number of
shares
   Ownership
(%)
   Acquisition
cost
   Book value   Book value 

[Domestic]

          

POSCO MITSUBISHI CARBON TECHNOLOGY

   11,568,000    60.00   W115,680  W157,825    153,457 

Others (6 companies)

         9,746    14,014 
        

 

 

   

 

 

 
         167,571    167,471 
        

 

 

   

 

 

 

[Foreign]

          

Roy Hill Holdings Pty Ltd(*1)

   13,117,972    12.50    1,528,672    1,377,846    1,418,056 

POSCO-NPS Niobium LLC

   325,050,000    50.00    364,609    368,512    353,725 

KOBRASCO

   2,010,719,185    50.00    32,950    56,443    54,400 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   —      25.00    61,961    95,264    91,270 

DMSA/AMSA(*1,2)

   ���      4.27    406,556    29,721    31,104 

CSP - Compania Siderurgica do Pecem

   1,581,419,343    20.00    676,060    —      —   

Others (10 companies)

         28,645    27,390 
        

 

 

   

 

 

 
         1,956,431    1,975,945 
        

 

 

   

 

 

 
        W2,124,002    2,143,416 
        

 

 

   

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020, the investments in joint ventures are provided as collateral in relation to the joint ventures’ borrowings.

(*2)

All of the shareholders of the joint venture entered into financial support agreement with lenders on behalf of the joint venture to extend the maturity of the loans granted to the joint venture by the lenders. However, the Company believes the shareholders’ financial support agreement is invalid and is currently in arbitration process for annulment. The Company’s obligation to provide financial support is currently on hold and may change depending on the result of the arbitration.

 

17


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(c)

The movements of investments in associates and joint ventures for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

 1)

For the three-month period ended March 31, 2021

 

(in millions of Won)                     

Company

  December 31, 2020
Book value
   Acquisition   Dividends  Share of
profits (losses)
  Other increase
(decrease)(*1)
  March 31, 2021
Book value
 

[Domestic]

         

EQP POSCO Global NO1 Natural Resources

         

Private Equity Fund

  W 175,939    —      —     (335  —     175,604 

Samcheok Blue Power Co.,Ltd.

   145,092    —      —     (1,536  (2,622  140,934 

SNNC

   160,332    —      (1,469  3,462   —     162,325 

QSONE Co.,Ltd.

   86,004    —      (1,140  305   —     85,169 

Chun-cheon Energy Co., Ltd

   23,913    —      —     790   (184  24,519 

Western Inland highway CO.,LTD.

   45,070    —      —     (243  39   44,866 

Nextrain Co., Ltd.

   47,364    —      —     (53  131   47,442 

Metropolitan Outer Ring Expressway co., ltd.

   13,721    3,616    —     (358  —     16,979 

CHUNGJU ENTERPRISE CITY

         

DEVELOPMENT Co.,Ltd

   17,137    —      —     (784  —     16,353 

Daesung Steel

   16,990��   —      —     343   —     17,333 

PCC Amberstone Private Equity Fund 1

   9,230    —      (171  200   (87  9,172 

POSCO MITSUBISHI CARBON TECHNOLOGY

   153,457    —      —     4,368   —     157,825 

Others (65 companies)

   117,486    4,105    (327  —     (20,471  100,793 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
   1,011,735    7,721    (3,107  6,159   (23,194  999,314 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

[Foreign]

         

South-East Asia Gas Pipeline Company Ltd.

   199,342    —      (5,656  12,548   8,544   214,778 

AES-VCM Mong Duong Power Company Limited

   158,777    —      —     9,253   6,675   174,705 

9404-5515 Quebec Inc.

   123,296    —      (3,798  6,001   5,285   130,784 

Eureka Moly LLC

   43,520    —      —     —     1,820   45,340 

AMCI (WA) PTY LTD

   71,732    —      —     (998  2,124   72,858 

NCR LLC

   46,608    8,176    —     (303  1,915   56,396 

KOREA LNG LTD.

   42,229    —      (1,713  1,719   (16,942  25,293 

Nickel Mining Company SAS

   40,890    —      —     6,300   (369  46,821 

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

   22,147    —      —     (117  713   22,743 

Zhongyue POSCO (Qinhuangdao) Tinplate

         

Industrial Co., Ltd

   15,181    —      —     138   581   15,900 

PT. Wampu Electric Power

   12,716    —      —     400   925   14,041 

PT. Batutua Tembaga Raya

   15    —      —     (21  132   126 

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

   7,110    —      —     220   371   7,701 

Roy Hill Holdings Pty Ltd

   1,418,056    —      (145,095  51,246   53,639   1,377,846 

POSCO-NPS Niobium LLC

   353,725    —      (6,640  6,539   14,888   368,512 

KOBRASCO

   54,400    —      —     5,663   (3,620  56,443 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   91,270    —      —     1,235   2,759   95,264 

DMSA/AMSA

   31,104    —      —     (6,180  4,797   29,721 

CSP—Compania Siderurgica do Pecem

   —      19,176    —     (27,815  8,639   —   

Others (36 companies)

   132,396    —      (223  6,013   3,905   142,091 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
   2,864,514    27,352    (163,125  71,841   96,781   2,897,363 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
  W 3,876,249    35,073    (166,232  78,000   73,587   3,896,677 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments effect from translations of financial statements of foreign investees and others.

 

18


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

 2)

For the year ended December 31, 2020

 

(in millions of Won)                     

Company

  December 31, 2019
Book value
   Acquisition   Dividends  Share of
profits (losses)
  Other increase
(decrease)(*1)
  December 31, 2020
Book value
 

[Domestic]

         

EQP POSCO Global NO1 Natural Resources

         

Private Equity Fund

  W175,907    —      —     34   (2  175,939 

Samcheok Blue Power Co.,Ltd.

   161,280    —      —     (5,262  (10,926  145,092 

SNNC

   142,602    —      (2,901  18,701   1,930   160,332 

QSONE Co.,Ltd.

   85,887    —      (1,140  1,257   —     86,004 

Chun-cheon Energy Co., Ltd

   56,679    —      —     (33,173  407   23,913 

Western Inland highway CO.,LTD.

   5,115    42,246    —     (2,294  3   45,070 

Nextrain Co., Ltd.

   41,447    7,910    —     (2,786  793   47,364 

Metropolitan Outer Ring Expressway co., ltd.

   8,343    5,573    —     (195  —     13,721 

CHUNGJU ENTERPRISE CITY

         

DEVELOPMENT Co.,Ltd

   17,824    —      —     (687  —     17,137 

Daesung Steel

   15,375    —      —     (514  2,129   16,990 

PCC Amberstone Private Equity Fund 1

   9,570    —      (715  589   (214  9,230 

POSCO MITSUBISHI CARBON TECHNOLOGY

   182,648    —      (19,401  (9,794  4   153,457 

Others (65 companies)

   135,890    22,145    (1,328  (28,128  (11,093  117,486 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
   1,038,567    77,874    (25,485  (62,252  (16,969  1,011,735 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

[Foreign]

         

South-East Asia Gas Pipeline Company Ltd.

   225,933    —      (56,760  45,941   (15,772  199,342 

AES-VCM Mong Duong Power Company Limited

   178,892    —      (16,053  37,092   (41,154  158,777 

9404-5515 Quebec Inc.

   131,529    —      (11,672  10,963   (7,524  123,296 

Eureka Moly LLC

   85,349    —      —     (39,801  (2,028  43,520 

AMCI (WA) PTY LTD

   72,937    —      —     (6,561  5,356   71,732 

NCR LLC

   46,391    4,196    —     (1,452  (2,527  46,608 

KOREA LNG LTD.

   46,557    —      (7,755  7,681   (4,254  42,229 

Nickel Mining Company SAS

   37,940    —      —     1,473   1,477   40,890 

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

   22,356    —      —     (384  175   22,147 

Zhongyue POSCO (Qinhuangdao) Tinplate

         

Industrial Co., Ltd

   15,128    —      —     (80  133   15,181 

PT. Wampu Electric Power

   13,363    —      (559  1,411   (1,499  12,716 

PT. Batutua Tembaga Raya

   14,717    —      —     (14,883  181   15 

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

   6,755    —      —     279   76   7,110 

Roy Hill Holdings Pty Ltd

   1,235,682    —      (113,985  234,693   61,666   1,418,056 

POSCO-NPS Niobium LLC

   376,410    —      (11,244  11,449   (22,890  353,725 

KOBRASCO

   115,641    —      (37,922  8,443   (31,762  54,400 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   88,935    —      —     1,790   545   91,270 

DMSA/AMSA

   12,189    60,278    —     (33,305  (8,058  31,104 

CSP—Compania Siderurgica do Pecem

   —      62,711    —     (60,708  (2,003  —   

Others (36 companies)

   162,484    —      (12,114  (8,492  (9,482  132,396 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
   2,889,188    127,185    (268,064  195,549   (79,344  2,864,514 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
  W 3,927,755    205,059    (293,549  133,297   (96,313  3,876,249 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals, change in capital adjustments effect from translations of financial statements of foreign investees and others.

 

19


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(d)

Summarized financial information of associates and joint ventures as of and for the three-month period ended March 31, 2021 and the year ended December 31, 2020 are as follows:

 

 1)

March 31, 2021

 

(in millions of Won)                   

Company

  Assets   Liabilities   Equity
(deficit)
  Sales   Net
income
 

[Domestic]

         

EQP POSCO Global NO1 Natural Resources Private Equity Fund

  W472,464    548    471,916   —      (924

Samcheok Blue Power Co.,Ltd.

   1,312,044    851,879    460,165   —      (1,196

SNNC

   594,468    232,830    361,638   160,075    11,038 

QSONE Co.,Ltd.

   251,407    81,069    170,338   4,070    611 

Chun-cheon Energy Co., Ltd

   618,093    524,179    93,914   76,384    1,063 

Western Inland highway CO.,LTD.

   164,586    6,618    157,968   —      (459

Nextrain Co., Ltd.

   315,804    73,232    242,572   —      (549

Metropolitan Outer Ring Expressway co., ltd.

   114,467    34,365    80,102   —      (221

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

   54,408    29,340    25,068   —      (2,653

Daesung Steel

   170,068    102,640    67,428   22,614    1,951 

PCC Amberstone Private Equity Fund 1

   104,936    670    104,266   3,200    2,269 

POSCO MITSUBISHI CARBON TECHNOLOGY

   455,880    192,050    263,830   35,151    8,052 

[Foreign]

         

South-East Asia Gas Pipeline Company Ltd.

   1,560,514    702,784    857,730   109,335    50,111 

AES-VCM Mong Duong Power Company Limited

   1,742,931    1,177,182    565,749   101,645    30,842 

9404-5515 Quebec Inc.

   1,271,926    2,228    1,269,698   —      57,698 

KOREA LNG LTD.

   126,773    307    126,466   9,128    8,596 

Nickel Mining Company SAS

   449,973    312,686    137,287   54,199    2,024 

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

   95,593    38,915    56,678   2,482    (291

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

   77,940    25,589    52,351   29,069    406 

PT. Wampu Electric Power

   202,071    134,910    67,161   4,715    2,002 

PT. Batutua Tembaga Raya

   406,282    404,091    2,191   —      —   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

   71,159    40,273    30,886   23,397    749 

Roy Hill Holdings Pty Ltd

   9,555,573    2,856,625    6,698,948   1,219,082    522,547 

POSCO-NPS Niobium LLC

   736,821    —      736,821   —      10,861 

KOBRASCO

   120,970    8,084    112,886   19,699    11,326 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   839,252    485,063    354,189   464,171    4,940 

DMSA/AMSA

   5,151,259    2,582,834    2,568,425   2,457    (168,759

CSP-Compania Siderurgica do Pecem

   3,168,026    3,687,716    (519,690  518,256    191,309 

 

20


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

 2)

December 31, 2020

 

(in millions of Won)                   

Company

  Assets   Liabilities   Equity
(deficit)
  Sales   Net income
(loss)
 

[Domestic]

         

EQP POSCO Global NO1 Natural Resources Private Equity Fund

  W473,415    575    472,840   —      8,534 

Samcheok Blue Power Co.,Ltd.

   1,169,343    700,266    469,077   —      (5,994

SNNC

   592,568    238,971    353,597   698,712    39,826 

QSONE Co.,Ltd.

   251,190    79,182    172,008   17,075    2,513 

Chun-cheon Energy Co., Ltd

   609,815    516,963    92,852   222,066    (24,617

Western Inland highway CO.,LTD.

   158,679    2,534    156,145   —      (1,714

Nextrain Co., Ltd.

   303,359    74,738    228,621   —      (2,636

Metropolitan Outer Ring Expressway co., ltd.

   98,510    34,360    64,150   —      (920

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

   54,832    27,111    27,721   6,672    (2,326

Daesung Steel

   172,088    106,611    65,477   85,158    (2,930

PCC Amberstone Private Equity Fund 1

   104,933    5    104,928   12,280    6,694 

POSCO MITSUBISHI CARBON TECHNOLOGY

   446,067    190,289    255,778   112,173    (15,603

[Foreign]

         

South-East Asia Gas Pipeline Company Ltd.

   1,515,828    719,745    796,083   458,806    183,465 

AES-VCM Mong Duong Power Company Limited

   1,599,095    1,086,440    512,655   336,174    121,644 

9404-5515 Quebec Inc.

   1,197,702    3    1,197,699   —      105,411 

KOREA LNG LTD.

   211,497    353    211,144   40,086    38,370 

Nickel Mining Company SAS

   445,140    308,885    136,255   223,427    (8,353

ZHEJIANG HUAYOU-POSCO ESM CO., LTD

   72,001    16,812    55,189   3,236    (1,086

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

   71,805    21,486    50,319   104,537    (237

PT. Wampu Electric Power

   199,841    139,264    60,577   20,272    7,057 

PT. Batutua Tembaga Raya

   389,973    387,870    2,103   36,587    (29,714

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

   68,036    38,843    29,193   78,954    1,156 

Roy Hill Holdings Pty Ltd

   9,271,788    2,161,353    7,110,435   5,993,950    2,299,529 

POSCO-NPS Niobium LLC

   707,247    —      707,247   —      25,406 

KOBRASCO

   118,676    9,875    108,801   32,854    16,887 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   873,174    534,961    338,213   1,252,189    7,856 

DMSA/AMSA

   4,924,371    2,294,881    2,629,490   204,820    (772,396

CSP-Compania Siderurgica do Pecem

   3,142,831    3,657,314    (514,483  1,402,742    (623,381

 

21


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of March 31, 2021 are as follows:

 

Joint operations

  

Operation

  Ownership (%)   Location

Myanmar A-1/A-3 mine

  Mine development and gas production   51.00   Myanmar

Offshore Midstream

  Gas transportation facility   51.00   Myanmar

Greenhills Mine

  Mine development   20.00   Canada

Arctos Anthracite Coal Project

  Mine development   50.00   Canada

Mt. Thorley J/V

  Mine development   20.00   Australia

POSMAC J/V

  Mine development   20.00   Australia

RUM J/V

  Mine development   10.00   Australia

Hanam-Gamil package public housing project

  Construction   7.70   Korea

Hanam-Gamil district B6, C2, C3 Block public housing lot development project

  Construction   27.00   Korea

Yangsan-Sasong district public housing project(private-participation)

  Construction   19.92   Korea

Yangsan-Sasong district public housing project

  Construction   49.00   Korea

Sejong 2-1 P3 Block public housing project

  Construction   37.00   Korea

Yongin-Giheung Station area city development project

  Construction   61.00   Korea

Korean wave world complex land multi-purpose building development project

  Construction   33.30   Korea

Sejong 4-1 P3 Block public housing project

  Construction   60.00   Korea

 

22


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

11. Investment Property, Net

Changes in the carrying amount of investment property for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

(a)

For the three-month period ended March 31, 2021

 

(in millions of Won)  Beginning   Acquisitions  Depreciation  Others(*1)  Ending 

Land

  W279,397    (1  —     (4,280  275,116 

Buildings

   559,584    —     (5,285  10,181   564,480 

Structures

   1,199    —     (150  (72  977 

Right-of-use assets

   154,601    —     (1,103  4,334   157,832 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
  W994,781    (1  (6,538  10,163   998,405 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference, and others.

 

(b)

For the year ended December 31, 2020

 

(in millions of Won)  Beginning   Acquisitions   Disposals  Depreciation(*1)  Others(*2)  Ending 

Land

  W278,465    2,814    (183  —     (1,699  279,397 

Buildings

   598,159    385    —     (9,681  (29,279  559,584 

Structures

   1,178    —      —     (610  631   1,199 

Right-of-use assets

   425    —      (56  (3,206  157,438   154,601 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
  W878,227    3,199    (239  (13,497  127,091   994,781 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Includes reversal of impairment loss on investment property recognized by POSCO(Dalian) IT Center Development Co., Ltd., a subsidiary, in relation to its office lease amounting toW14,953 million.

(*2)

Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

 

23


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

12. Property, Plant and Equipment, Net

 

(a)

Changes in the carrying amount of property, plant and equipment for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

 1)

For the three-month period ended March 31, 2021

 

(in millions of Won)  Beginning   Acquisitions   Disposals  Depreciation  Impairment
loss(*1)
  Others(*2)  Ending 

Land

  W2,590,087    159    (15  —     —     13,241   2,603,472 

Buildings

   4,161,400    2,015    (1,974  (79,670  (595  66,175   4,147,351 

Structures

   3,025,226    2,753    (149  (57,877  (4  25,603   2,995,552 

Machinery and equipment

   16,857,307    20,887    (3,541  (570,615  (16,293  272,587   16,560,332 

Vehicles

   37,156    2,810    (328  (3,684  —     398   36,352 

Tools

   60,301    2,216    (54  (7,428  —     10,428   65,463 

Furniture and fixtures

   127,459    4,414    (368  (15,479  —     16,101   132,127 

Lease assets

   773,700    154,530    (3,803  (44,777  —     9,653   889,303 

Bearer plants

   149,965    —      (17  (2,250  —     10,947   158,645 

Construction-in-progress

   1,617,540    476,451    (4,407  —     —     (206,590  1,882,994 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  W29,400,141    666,235    (14,656  (781,780  (16,892  218,543   29,471,591 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

During the three-month period ended March 31, 2021, the Company recognized impairment losses on individual assets that were shut down due to the fire or other loss.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

 

 2)

For the year ended December 31, 2020

 

(in millions of Won)   Beginning   Acquisitions   Disposals  Depreciation  Impairment
loss(*1)
  Others(*2)  Ending 

Land

  W2,526,059    29,639    (2,633  —     3,490   33,532   2,590,087 

Buildings

   4,215,454    13,825    (6,296  (319,774  (3,778  261,969   4,161,400 

Structures

   2,904,506    85,958    (6,661  (231,737  (883  274,043   3,025,226 

Machinery and equipment

   17,218,264    138,533    (27,966  (2,298,951  (8,080  1,835,507   16,857,307 

Vehicles

   32,285    6,475    (546  (14,599  —     13,541   37,156 

Tools

   70,751    20,230    (211  (38,838  —     8,369   60,301 

Furniture and fixtures

   130,132    23,352    (2,908  (43,832  (519  21,234   127,459 

Lease assets

   774,582    204,699    (9,300  (172,029  —     (24,252  773,700 

Bearer plants

   124,193    118    (155  (7,971  —     33,780   149,965 

Construction-in-progress

   1,929,747    2,835,921    (7,001  —     (17,270  (3,123,857  1,617,540 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  W29,925,973    3,358,750    (63,677  (3,127,731  (27,040  (666,134  29,400,141 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

The Company estimated the recoverable amount of individual assets that it ceased their use due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2020. During the year ended December 31, 2020, the Company recognized impairment losses on damaged assets caused by the fire.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

 

24


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(b)

Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

 1)

For the three-month period ended March 31, 2021

 

(in millions of Won)  Beginning   Acquisitions   Depreciation  Others  Ending 

Land

  W371,719    5,330    (3,479  10,408   383,978 

Buildings and structures

   171,760    15,477    (18,368  (1,733  167,136 

Machinery and equipment

   239,181    2,187    (9,953  3,451   234,866 

Vehicles

   11,456    4,340    (2,177  (1,347  12,272 

Ships

   106,555    126,361    (4,255  —     228,661 

Others

   27,630    835    (7,648  (595  20,222 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
  W928,301    154,530    (45,880  10,184   1,047,135 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 

 2)

For the year ended December 31, 2020

 

(in millions of Won)  Beginning   Acquisitions   Depreciation  Others  Ending 

Land

  W341,767    18,962    (16,397  27,387   371,719 

Buildings and structures

   171,112    47,374    (57,593  10,867   171,760 

Machinery and equipment

   215,828    86,373    (38,909  (24,111  239,181 

Vehicles

   14,105    6,186    (9,486  651   11,456 

Ships

   24,082    111,537    (29,064  —     106,555 

Others

   8,113    45,803    (23,786  (2,500  27,630 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 
  W775,007    316,235    (175,235  12,294   928,301 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

 

(c)

The amounts recognized in profit or loss related to leases for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Interest on lease liabilities

  W8,954    9,008 

Expenses relating to short-term leases

   5,294    5,004 

Expenses relating to leases of low-value assets

   3,827    4,330 
  

 

 

   

 

 

 
  W18,075    18,342 
  

 

 

   

 

 

 

 

25


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill and other intangible assets for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

(a) For the three-month period ended March 31, 2021

 

(in millions of Won)  Beginning   Acquisitions   Disposals  Amortization  Impairment
loss
  Others(*2)  Ending 

Goodwill

  W903,893    —      —     —     —     1,242   905,135 

Intellectual property rights

   2,170,738    38,260    (279  (64,819  —     17,065   2,160,965 

Membership(*1)

   138,703    28    (59  (36  (3  212   138,845 

Development expense

   227,111    245    —     (20,331  —     (31,547  175,478 

Port facilities usage rights

   236,272    —      —     (5,230  —     154   231,196 

Exploratation and evaluation assets

   57,140    1,124    —     (4  —     805   59,065 

Customer relationships

   330,247    —      —     (11,120  —     (8  319,119 

Other intangible assets

   385,328    8,273    (5,388  (9,240  (7,180  (12,924  358,869 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  W4,449,432    47,930    (5,726  (110,780  (7,183  (25,001  4,348,672 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

 

(b)

For the year ended December 31, 2020

 

(in millions of Won)  Beginning   Acquisitions   Disposals  Amortization  Impairment
loss
  Others(*2)  Ending 

Goodwill

  W1,097,809    —      —     —     (189,379  (4,537  903,893 

Intellectual property rights

   2,279,210    136,195    (3,617  (282,594  (7,727  49,271   2,170,738 

Membership(*1)

   148,078    3,416    (12,340  (107  244   (588  138,703 

Development expense

   94,339    1,315    (16  (56,329  (206  188,008   227,111 

Port facilities usage rights

   281,398    —      —     (44,893  —     (233  236,272 

Exploratation and evaluation assets

   77,271    14,886    —     —     —     (35,017  57,140 

Customer relationships

   374,875    —      —     (44,478  —     (150  330,247 

Other intangible assets

   555,493    159,590    (61,692  (37,157  —     (230,906  385,328 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  W4,908,473    315,402    (77,665  (465,558  (197,068  (34,152  4,449,432 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

 

26


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

14. Other Assets

Other assets as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31,
2021
   December 31,
2020
 

Current

    

Advance payments

  W385,233    348,753 

Prepaid expenses

   270,406    181,985 

Firm commitment asset

   26,745    23,506 

Others

   58,309    62,379 
  

 

 

   

 

 

 
  W740,693    616,623 
  

 

 

   

 

 

 

Non-current

    

Long-term advance payments

  W22,084    21,587 

Long-term prepaid expenses

   90,535    92,774 

Others(*1)

   150,495    155,699 
  

 

 

   

 

 

 
  W263,114    270,060 
  

 

 

   

 

 

 

 

 (*1)

As of March 31, 2021 and December 31, 2020, the Company recognized tax assets amounting toW94,086 million andW121,225 million, respectively, based on the Company’s best estimate of the tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years’ tax audits and claim for rectification are finalized.

 

27


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

15. Borrowings

 

(a)

Short-term borrowings and current portion of long-term borrowings and others as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  

Lenders

  Interest rate (% )   March 31, 2021   December 31, 2020 

Short-term borrowings

        

Bank overdrafts

  JP Morgan and others   0.52 ~ 4.71   W161,833    146,762 

Short-term borrowings

  HSBC and others   0.17 ~ 9.00    5,791,907    5,047,633 
      

 

 

   

 

 

 
       5,953,740    5,194,395 
      

 

 

   

 

 

 

Current portion of long-term liabilities

        

Current portion of long-term borrowings

  Export-Import Bank of Korea and others   0.19 ~ 8.50    861,894    1,067,338 

Current portion of debentures

  The Goldman Sachs Group, Inc. and others   1.73 ~ 5.25    2,384,250    2,417,339 

Less: Current portion of discount on debentures issued

       (965   (1,543
      

 

 

   

 

 

 
       3,245,179    3,483,134 
      

 

 

   

 

 

 
      W 9,198,919    8,677,529 
      

 

 

   

 

 

 

 

(b)

Long-term borrowings, excluding current portion and others as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  

Lenders

  Interest rate (%)   March 31, 2021   December 31, 2020 

Long-term borrowings

  Export-Import Bank of Korea and others   0.45 ~ 4.50   W3,611,478    3,366,400 

Less: Present value discount

       (15,586   (16,058

Bonds

  KB Securities co., Ltd. and others   0.17 ~ 4.00    8,864,375    8,505,485 

Less: Discount on debentures issued

       (34,496   (35,749
      

 

 

   

 

 

 
      W 12,425,771    11,820,078 
      

 

 

   

 

 

 

 

(c)

Assets pledged as collateral in regards to the borrowings as of March 31, 2021 are as follows:

 

(in millions of Won)  

Lenders

  Book value   Pledged amount 

Cash and cash equivalents

  Shinhan Bank and others  W23,255    23,501 

Property, plant and equipment

  Korea Development Bank    

and Investment property

  and others   4,491,779    4,922,751 

Trade accounts and notes receivable

  Korea Development Bank and others   277,074    273,545 

Inventories

  Export-Import Bank of Korea and others   92,527    12,650 

Financial instruments

  KB Kookmin Bank and others   25,716    25,716 
    

 

 

   

 

 

 
    W 4,910,351    5,258,163 
    

 

 

   

 

 

 

 

28


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

16. Other Payables

Other payables as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Current

    

Accounts payable

  W912,748    800,439 

Accrued expenses

   683,265    697,087 

Dividend payable

   401,055    2,703 

Lease liabilities

   228,123    244,548 

Withholdings

   107,119    100,489 
  

 

 

   

 

 

 
  W 2,332,310    1,845,266 
  

 

 

   

 

 

 

Non-current

    

Accounts payable

  W13,006    5,572 

Accrued expenses

   4,874    4,953 

Lease liabilities

   626,114    495,127 

Long-term withholdings

   54,129    53,272 
  

 

 

   

 

 

 
  W 698,123    558,924 
  

 

 

   

 

 

 

17. Other Financial Liabilities

Other financial liabilities as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Current

    

Derivative liabilities

  W87,242    82,859 

Financial guarantee liabilities

   60,269    58,545 
  

 

 

   

 

 

 
  W 147,511    141,404 
  

 

 

   

 

 

 

Non-current

    

Derivative liabilities

  W47,051    129,505 

Financial guarantee liabilities

   4,722    4,083 
  

 

 

   

 

 

 
  W 51,773    133,588 
  

 

 

   

 

 

 

 

29


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

18. Provisions

 

(a)

Provisions as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 
   Current   Non-current   Current   Non-current 

Provision for bonus payments

  W42,887    47,335    73,441    48,510 

Provision for construction warranties

   11,334    216,076    9,662    217,435 

Provision for legal contingencies and claims(*1)

   19,688    69,677    24,275    63,175 

Provision for the restoration(*2)

   4,626    129,839    5,307    134,438 

Others(*3,*4)

   278,121    88,360    330,588    59,411 
  

 

 

   

 

 

   

 

 

   

 

 

 
  W356,656    551,287    443,273    522,969 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company recognized probable outflow of resources amounting toW65,451 million andW59,211 million as provisions for legal contingencies and asserted claim in relation to lawsuits against the Company as of March 31, 2021 and December 31, 2020, respectively.

(*2)

Due to contamination of lands near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery,W16,225 million as provisions for restoration as of March 31, 2021. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials presently available to recover the land. In addition, the Company has applied a discount rate of 1.26~1.59% to measure present value of these costs.

(*3)

As of March 31, 2021 and December 31, 2020, POSCO ENERGY CO., LTD., and Korea Fuel Cell recognizedW79,737 million andW80,842 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources.

(*4)

The Company has recognized emission liabilities ofW 86,039 million for greenhouse gas emissions exceeding the quantity of free quota emission rights expected to be submitted as of March 31, 2021.

 

30


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

(b)

Changes in provisions for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

 1)

For the three-month period ended March 31, 2021

 

(in millions of Won)  Beginning   Increase   Utilization  Reversal  Others(*1)  Ending 

Provision for bonus payments

  W121,951    22,045    (51,233  (1,517  (1,024  90,222 

Provision for construction warranties

   227,097    5,288    (4,846  (949  820   227,410 

Provision for legal contingencies and claims

   87,450    7,080    (6,086  (385  1,306   89,365 

Provision for the restoration

   139,745    1,220    (1,689  (10,146  5,335   134,465 

Others

   389,999    70,443    (44,133  (50,034  206   366,481 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
  W966,242    106,076    (107,987  (63,031  6,643   907,943 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Includes adjustments of foreign currency translation differences and others.

 

 2)

For the year ended December 31, 2020

 

(in millions of Won)  Beginning   Increase   Utilization  Reversal  Others(*1)  Ending 

Provision for bonus payments

  W123,669    106,855    (109,835  (6,334  7,596   121,951 

Provision for construction warranties

   170,428    86,691    (23,916  (5,311  (795  227,097 

Provision for legal contingencies and claims

   84,484    30,894    (16,444  (9,087  (2,397  87,450 

Provision for the restoration

   87,303    67,501    (6,525  (15,811  7,277   139,745 

Others

   352,765    349,639    (142,440  (133,294  (36,671  389,999 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
  W818,649    641,580    (299,160  (169,837  (24,990  966,242 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 

(*1)

Includes adjustments of foreign currency translation differences and others.

 

31


Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

19. Employee Benefits

 

(a)

Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Expense related to post-employment benefit plans under defined contribution plans

  W12,181    13,202 

 

(b)

Defined benefit plan

 

 1)

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Present value of funded obligations

  W2,421,290    2,439,938 

Fair value of plan assets(*1)

   (2,336,282   (2,397,717

Present value of non-funded obligations

   14,964    13,415 
  

 

 

   

 

 

 

Net defined benefit liabilities

  W99,972    55,636 
  

 

 

   

 

 

 

 

(*1)

As of March 31, 2021 and December 31, 2020, the Company recognized net defined benefit assets amounting toW71,346 million andW86,149 million respectively, since there are consolidated entities whose fair value of plan assets exceeded the present value of defined benefit obligations.

 

 2)

Changes in present value of defined benefit obligations for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Defined benefit obligation at the beginning of period

  W2,453,353    2,431,880 

Current service costs

   62,339    245,047 

Interest costs

   12,593    47,485 

Remeasurements

   1,630    (52,732

Benefits paid

   (95,599   (225,293

Others

   1,938    6,966 
  

 

 

   

 

 

 

Defined benefit obligation at the end of period

  W2,436,254    2,453,353 
  

 

 

   

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 3)

Changes in fair value of plan assets for the three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Fair value of plan assets at the beginning of period

  W2,397,717    2,255,149 

Interest on plan assets

   12,439    44,208 

Remeasurement of plan assets

   (1,474   (600

Contributions to plan assets

   151    307,367 

Benefits paid

   (72,429   (213,246

Others

   (122   4,839 
  

 

 

   

 

 

 

Fair value of plan assets at the end of period

  W2,336,282    2,397,717 
  

 

 

   

 

 

 

 

 4)

The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Current service costs

  W62,339    61,309 

Net interest costs

   154    1,299 
  

 

 

   

 

 

 
  W62,493    62,608 
  

 

 

   

 

 

 

20. Other Liabilities

Other liabilities as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Current

    

Due to customers for contract work

  W 926,056    807,465 

Advances received

   451,634    416,960 

Unearned revenue

   41,345    24,433 

Withholdings

   394,539    332,327 

Firm commitment liability

   36,927    35,993 

Others

   8,451    8,304 
  

 

 

   

 

 

 
  W1,858,952    1,625,482 
  

 

 

   

 

 

 

Non-current

    

Unearned revenue

  W 23,997    17,953 

Others

   19,778    19,067 
  

 

 

   

 

 

 
  W43,775    37,020 
  

 

 

   

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

21. Financial Instruments

 

(a)

Classification and fair value of financial instruments

 

 1)

The carrying amount and fair values of financial assets and financial liabilities by fair value hierarchy as of March 31, 2021 and December 31, 2020 are as follows:

 

 

March 31, 2021

 

       Fair value 
(in millions of Won)  Book value   Level 1   Level 2   Level 3   Total 

Financial assets

          

Fair value through profit or loss

          

Derivative assets

  W114,889    —      114,889    —      114,889 

Short-term financial instruments

   8,992,550    —      8,992,550    —      8,992,550 

Debt securities

   20,856    —      —      20,856    20,856 

Other securities

   385,130    39,052    2,348    343,730    385,130 

Other receivables

   2,000    —      —      2,000    2,000 

Derivative hedging instruments(*2)

   35,881    —      35,881    —      35,881 

Fair value through other comprehensive income

          

Equity securities

   1,229,005    1,085,371    —      143,634    1,229,005 

Debt securities

   726    —      —      726    726 

Financial assets measured at amortized cost(*1)

          

Cash and cash equivalents

   4,546,138    —      —      —      —   

Trade accounts and notes receivable

   8,181,380    —      —      —      —   

Other receivables

   2,489,835    —      —      —      —   

Debt securities

   81,146    —      —      —      —   

Deposit instruments

   3,980,401    —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 30,059,937    1,124,423    9,145,668    510,946    10,781,037 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities

          

Fair value through profit or loss

          

Derivative liabilities

  W101,114    —      101,114    —      101,114 

Derivative hedging instruments(*2)

   33,179    —      33,179    —      33,179 

Financial liabilities measured at amortized cost(*1)

          

Trade accounts and notes payable

   3,821,959    —      —      —      —   

Borrowings

   21,624,690    —      22,003,462    —      22,003,462 

Financial guarantee liabilities

   64,991    —      —      —      —   

Others

   2,945,773    —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 28,591,706    —      22,137,755    —      22,137,755 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

(*2)

The Company applies hedge accounting which uses forward contracts as hedging instrument in order to hedge the risk of changes in fair value of product prices regarding firm commitments or purchase commitments. Also, the Company applies cash flow hedge accounting which uses currency swap as hedging instrument in order to hedge the risk of interest rate and foreign exchange rate changes in foreign currency which influences cash flow from borrowings.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

 

December 31, 2020

 

(in millions of Won)  Fair value 
   Book value   Level 1   Level 2   Level 3   Total 

Financial assets

          

Fair value through profit or loss

          

Derivative assets

  W79,995    —      79,995    —      79,995 

Short-term financial instruments

   9,133,404    —      9,133,404    —      9,133,404 

Debt securities

   20,797    —      —      20,797    20,797 

Other securities

   364,404    47,321    2,242    314,841    364,404 

Other receivables

   2,000    —      —      2,000    2,000 

Derivative hedging instruments

   37,880    —      37,880    —      37,880 

Fair value through other comprehensive income

          

Equity securities

   1,120,968    729,342    —      391,626    1,120,968 

Debt securities

   2,471    —      —      2,471    2,471 

Financial assets measured at amortized cost(*1)

          

Cash and cash equivalents

   4,754,644    —      —      —      —   

Trade accounts and notes receivable

   7,332,890    —      —      —      —   

Other receivables

   2,300,515    —      —      —      —   

Debt securities

   151,146    —      —      —      —   

Deposit instruments

   2,359,951    —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W27,661,065    776,663    9,253,521    731,735    10,761,919 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities

          

Fair value through profit or loss

          

Derivative liabilities

  W180,773    —      180,773    —      180,773 

Derivative hedging instruments

   31,591    —      31,591    —      31,591 

Financial liabilities measured at amortized cost(*1)

          

Trade accounts and notes payable

   3,777,836    —      —      —      —   

Borrowings

   20,497,607    —      20,821,353    —      20,821,353 

Financial guarantee liabilities

   62,629    —      —      —      —   

Others

   2,347,244    —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W26,897,680    —      21,033,717    —      21,033,717 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

 

 2)

Finance income and costs by category of financial instrument for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

 

For the three-month period ended March 31, 2021

 

(in millions of Won)  Finance income and costs 
   Interest
income
(expense)
  Gain and
loss on
valuation
  Gain and loss
on foreign
currency
  Gain
and loss
on
disposal
  Others  Total  Other
comprehensive
loss
 

Financial assets at fair value through profit or loss

  W35,335   (4,851  —     (462  70   30,092   —   

Derivatives assets

   —     101,315   —     65,846   —     167,161   —   

Financial assets at fair value through other comprehensive income

   —     —     —     —     22,269   22,269   90,892 

Financial assets measured at amortized cost

   19,287   —     237,962   (3,370  (38  253,841   —   

Derivatives liabilities

   —     28,515   —     (72,981  —     (44,466  (14

Financial liabilities measured at amortized cost

   (129,317  —     (363,852  —     (6,483  (499,652  —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  W(74,695  124,979   (125,890  (10,967  15,818   (70,755  90,878 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

For the three-month period ended March 31, 2020

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(in millions of Won)  Finance income and costs 
   Interest
income
(expense)
  Gain and
loss on
valuation
  Gain and loss
on foreign
currency
  Gain
and loss
on
disposal
  Others  Total  Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

  W41,122   333   —     305   230   41,990   —   

Derivatives assets

   —     310,227   —     55,791   —     366,018   —   

Financial assets at fair value through other comprehensive income

   —     —     —     —     25,306   25,306   (202,836

Financial assets measured at amortized cost

   51,732   —     484,455   (5,986  (90  530,111   —   

Derivatives liabilities

   —     (72,290  —     (90,302  —     (162,592  (57

Financial liabilities measured at amortized cost

   (175,127  —     (652,206  —     648   (826,685  —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  W(82,273  238,270   (167,751  (40,192  26,094   (25,852  (202,893
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(b)

Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2020.

22. Share Capital and Capital Surplus

(a) Share capital as of March 31, 2021 and December 31, 2020 are as follows:

 

(in Won, except share information)  March 31, 2021   December 31, 2020 

Authorized shares

   200,000,000    200,000,000 

Par value

  W5,000    5,000 

Issued shares(*1)

   87,186,835    87,186,835 

Shared capital(*2)

  W482,403,125,000    482,403,125,000 

 

(*1)

As of March 31, 2021, total shares of ADRs of 26,528,728 outstanding in overseas stock market are equivalent to 6,632,182 of common stock.

(*2)

As of March 31, 2021, the difference between the ending balance of common stock and the par value of issued common stock isW46,469 million due to retirement of 9,293,790 treasury stocks.

 

(b)

Capital surplus as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Share premium

  W463,825    463,825 

Gain on disposal of treasury shares

   796,623    796,623 

Other capital surplus

   96,590    50,099 
  

 

 

   

 

 

 
  W1,357,038    1,310,547 
  

 

 

   

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

23. Hybrid Bonds

 

(a)

Hybrid bonds classified as equity as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  Date of issue   Date of maturity   Interest rate (% )   March 31, 2021  December 31, 2020 

Hybrid bond 1-2(*1)

   2013-06-13    2043-06-13    4.60   W200,000   200,000 

Issuance cost

         (616  (616
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
        W199,384   199,384 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

 

(*1)

Details of issuance of hybrid bonds as of March 31, 2021 are as follows:

 

   

Hybrid bond 1-2

Maturity date  30 years (POSCO has a right to extend the maturity date)
Interest rate  

Issue date ~ 2023-06-12 : 4.60% Reset every 10 years as follows;

•     After 10 years: return on government bond of the Republic of Korea (10 years) + 1.40%

•     After 10 years: additionally +0.25% according to Step-up clauses

•     After 30 years: additionally +0.75%

Interest payments condition  Quarterly (Optional deferral of interest payment is available to POSCO)
Others  POSCO can call the hybrid bond at year 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common stockholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of March 31, 2021 amounts toW479 million.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(b)

POSCO ENERGY CO., LTD., a subsidiary of the Company, issued hybrid bonds which are classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  Date of issue   Date of maturity   Interest rate (%)   March 31, 2021  December 31, 2020 

Hybrid bond 1-4(*1)

   2013-08-29    2043-08-29    5.21   W140,000   140,000 

Issuance cost

         (429  (429
         

 

 

 
        W139,571   139,571 
         

 

 

 

 

(*1)

Details of hybrid bonds of POSCO ENERGY CO., LTD. as of March 31, 2021 are as follows:

 

   

Hybrid bond 1-4

Maturity date

  30 years (The issuer has a right to extend the maturity date)
Interest rate  

Issue date ~ 2023 -08-29 : 5.21% Reset every 10 years as follows;

•  After 10 years: return on government bond of the Republic of Korea (10 years) + 1.55%

•  After 10 years: additionally + 0.25% according to Step-up clauses

•  After 30 years: additionally +0.75%

Interest payments condition  Quarterly (Optional deferral of interest payment is available to the Company)
Others  The issuer can call the hybrid bond at year 10th anniversary of issurance and interest
  payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common stockholders, but subordinated to other creditors. The interest accumulated but not paid on the hybrid bonds as of March 31, 2021 amounts toW659 million.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

24. Reserves

Reserves as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Accumulated comprehensive loss of investments in associates and joint ventures

  W (602,489   (693,176

Changes in fair value of equity investments at fair value through other comprehensive

   (265,176   (359,283

Foreign currency translation differences

   (196,336   (339,707

Gains or losses on valuation of derivatives

   (733   (699

Others

   11,946    11,947 
  

 

 

   

 

 

 
  W(1,052,788   (1,380,918
  

 

 

   

 

 

 

25. Treasury Shares

Based on the Board of Directors’ resolution, POSCO holds treasury shares for business purposes including price stabilization. The changes in treasury shares for three-month period ended March 31, 2021 and the year ended December 31, 2020 were as follows.

 

(shares, in millions of Won)  March 31, 2021   December 31, 2020 
   Number of shares   Amount   Number of shares   Amount 

Beginning

   11,171,363   W2,391,523    7,071,194   W1,508,303 

Acquisition of treasury shares

   389,900    116,771    4,100,169    883,220 
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending

   11,561,263   W2,508,294    11,171,363   W2,391,523 
  

 

 

   

 

 

   

 

 

   

 

 

 

During the year ended December 31, 2020, the Company entered into a trust contract of acquiring treasury shares following approval of the Board of Directors. The amount committed to purchase treasury shares by this trust contract isW1,000 billion, and the contract period is from April 13, 2020 to April 12, 2021

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

26. Revenue

 

(a)

Disaggregation of revenue

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

 1)

March 31, 2021

 

(in millions of Won)  Steel   Trading   Construction   Others   Total 

Types of revenue

          

Revenue from sales of goods

  W8,334,495    5,085,746    —      317,943    13,738,184 

Revenue from services

   126,860    98,955    12,380    493,142    731,337 

Revenue from construction contract

   —      —      1,447,417    12,896    1,460,313 

Others

   15,158    61,747    508    61,476    138,889 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W8,476,513    5,246,448    1,460,305    885,457    16,068,723 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Timing of revenue recognition

          

Revenue recognized at a point in time

  W8,349,653    5,147,493    18,622    379,419    13,895,187 

Revenue recognized over time

   126,860    98,955    1,441,683    506,038    2,173,536 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W8,476,513    5,246,448    1,460,305    885,457    16,068,723 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 2)

March 31, 2020

 

(in millions of Won)  Steel   Trading   Construction   Others   Total 

Types of revenue

          

Revenue from sales of goods

  W6,971,276    4,914,643    —      191,324    12,077,243 

Revenue from services

   124,473    83,139    12,060    516,927    736,599 

Revenue from construction contract

   —      —      1,605,763    6,620    1,612,383 

Others

   9,704    57,893    1,101    50,890    119,588 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W7,105,453    5,055,675    1,618,924    765,761    14,545,813 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Timing of revenue recognition

          

Revenue recognized at a point in time

  W6,980,980    4,972,536    10,955    242,213    12,206,684 

Revenue recognized over time

   124,473    83,139    1,607,969    523,548    2,339,129 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W7,105,453    5,055,675    1,618,924    765,761    14,545,813 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(b)

Details of contract assets and liabilities from contracts with customers as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Receivables

    

Account receivables

  W8,181,380    7,332,890 

Contract assets

    

Due from customers for contract work

   848,568    874,152 

Contract liabilities

    

Advance received

   453,055    418,777 

Due to customers for contract work

   926,056    807,465 

Unearned revenue

   65,095    42,040 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

27. Revenue – Contract Balances

 

(a)

Details of outstanding contracts as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 
   Construction
segment
   Others   Construction
segment
   Others 

Accumulated cost

  W30,405,094    197,384    30,780,560    247,737 

Accumulated contract profit

   3,023,458    39,015    3,034,148    49,692 

Accumulated contract loss

   (1,242,662   (1,934   (1,260,451   (2,482

Accumulated contract revenue

   32,185,890    234,465    32,554,257    294,947 

 

(b)

Details of due from customers for contract work and due to customers for contract work as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   

 

   December 31, 2020 
   Construction
segment
   Others   Construction
segment
   Others 

Due from customers for contract

  W879,471    39,875    915,285    33,594 

Due to customers for contract work

   (878,784   (47,272   (765,818   (41,647
  W 687    (7,397   149,467    (8,053

 

(c)

Details of the provisions of construction loss as of March 31, 2021 and December 31, 2020 are as follows:

 

(in millions of Won)  March 31, 2021   December 31, 2020 

Construction segment

  W50,671    70,818 

Others

   431    437 
  W51,102    71,255 

 

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POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

(d)

Due to the factors causing the variation of costs for the three-month period ended March 31, 2021, the estimated total contract costs have changed. Details of changes in estimated total contract costs and the impact on profit before income taxes for the three-month period ended March 31, 2021 and future periods are as follows:

 

       Changes in profit (loss) of contract 
(in millions of Won)  Changes in estimated
total contract costs
   Net income (loss)   Future income (loss)   Total 

Construction segment

  W104,340    47,464    73,456    120,920 

Others

   (3,901   892    4,304    5,196 
  

 

 

   

 

 

   

 

 

   

 

 

 
  W100,439    48,356    77,760    126,116 
  

 

 

   

 

 

   

 

 

   

 

 

 

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contract to March 31, 2021. The estimation is evaluated for the total contract costs and expected total contract revenue as of the end of the period. Also, it may change during future periods.

 

(e)

Uncertainty of estimates

 

 1)

Total contract revenues

Total contract revenues are measured based on contractual amount initially agreed. However, the contract revenues can increase due to additional contract work, claims and incentive payments, or decrease due to penalty when the completion of contract is delayed due to the Company’s fault. Therefore, this measurement of contract revenues is affected by the uncertainty of the occurrence of future events.

 

 2)

Total contract costs

Contract revenues are recognized based on the percentage of completion, which is measured on the basis of the gross cost amount incurred to date. Total contract costs are estimated based on estimates of future material costs, labor costs, outsourcing cost and others. There is uncertainty in estimates on future contract costs due to various internal and external factors such as fluctuation of market, the risk of business partner and the experience of project performance and others. The significant assumptions including uncertainty of the estimate of total contract costs are as follows:

 

   

Method of significant assumption

Material cost  Assumption based on recent purchasing price and quoted market price
Labor cost  Assumption based on standard monthly and daily labor cost
Outsourcing cost  Assumption based on the past experience rate of similar project and market price

Management reviews the assumptions used in estimated contract costs at each reporting period end and adjusts them, if necessary.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

28. Selling and Administrative Expenses

 

(a)

Other administrative expenses

Other administrative expenses for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Wages and salaries

  W221,427    213,496 

Expenses related to post-employment benefits

   32,919    22,379 

Other employee benefits

   46,348    45,458 

Travel

   4,283    6,353 

Depreciation

   36,624    34,952 

Amortization

   27,648    27,282 

Communication

   2,151    2,392 

Electricity

   1,887    2,181 

Taxes and public dues

   21,759    12,356 

Rental

   4,938    6,633 

Repairs

   2,348    1,927 

Entertainment

   2,174    2,108 

Advertising

   16,074    17,357 

Research & development •

   32,342    23,866 

Service fees

   35,006    39,433 

Vehicles maintenance

   1,263    1,370 

Industry association fee

   3,368    3,666 

Conference

   2,887    2,843 

Increase to provisions

   327    1,527 

Others

   10,548    9,488 
  

 

 

   

 

 

 
  W506,321    477,067 
  

 

 

   

 

 

 

 

(b)

Selling expenses

Selling expenses for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Freight and custody

  W39,596    45,463 

Operating expenses for distribution center

   1,746    2,026 

Sales commissions

   18,680    47,725 

Sales advertising

   136    258 

Sales promotion

   1,526    1,843 

Sample

   514    541 

Sales insurance premium

   9,253    8,177 

Contract cost

   11,099    7,632 

Others

   2,618    4,313 
  

 

 

   

 

 

 
  W85,168    117,978 
  

 

 

   

 

 

 

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

29. Finance Income and Costs

Details of finance income and costs for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Finance income

    

Interest income(*1)

  W54,622    92,854 

Dividend income

   22,339    25,536 

Gain on foreign currency transactions

   211,935    345,432 

Gain on foreign currency translations

   214,996    447,527 

Gain on derivatives transactions

   68,470    60,024 

Gain on valuations of derivatives

   212,849    341,973 

Others

   10,333    6,079 
  

 

 

   

 

 

 
  W795,544    1,319,425 
  

 

 

   

 

 

 

Finance costs

    

Interest expenses

  W129,317    175,127 

Loss on foreign currency transactions

   180,270    248,523 

Loss on foreign currency translations

   372,551    712,187 

Loss on derivatives transactions

   75,605    94,535 

Loss on valuation of derivatives

   83,019    104,036 

Loss on disposal of trade accounts and notes receivable

   3,370    5,986 

Others

   22,167    4,883 
  

 

 

   

 

 

 
  W866,299    1,345,277 
  

 

 

   

 

 

 

 

(*1)

Interest income calculated using the effective interest method for the three-month periods ended March 31, 2021 and 2020 wereW19,287 million andW51,732 million, respectively.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

30. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in millions of Won)  March 31,
2021
   March 31,
2020
 

Other non-operating income

    

Gain on disposals of assets held for sale

  W797    299 

Gain on disposals of investment

    

in subsidiaries, associates and joint ventures

   3,842    3,969 

Gain on disposals of property, plant and equipment

   3,323    4,835 

Gain on valuation of firm commitment

   50,596    20,118 

Others(*1)

   71,413    35,080 
  

 

 

   

 

 

 
  W129,971    64,301 
  

 

 

   

 

 

 

Other non-operating expenses

    

Loss on disposals of investment

    

in subsidiaries, associates and joint ventures

  W1,104    4,952 

Loss on disposals of property, plant and equipment

   18,657    40,671 

Impairment loss on property, plant and equipment

   16,892    78 

Impairment loss on intangible assets

   7,183    423 

Loss on valuation of firm commitment

   43,765    34,333 

Idle tangible assets expenses

   5,192    5,355 

Increase to provisions

   6,301    852 

Donations

   5,641    12,155 

Others

   18,757    14,945 
  

 

 

   

 

 

 
  W123,492    113,764 
  

 

 

   

 

 

 

 

(*1)

During the three-month period ended March 31, 2021, the Company recognizedW 28,366 million of non-operating income for refund of other than income tax as a result of administrative litigation for tax audits.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

31. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses, impairment loss on other receivables and other non-operating expenses in the statements of comprehensive income for the three-month periods ended March 31, 2021 and 2020 were as follows (excluding finance costs and income tax expense):

 

(in millions of Won)  March 31, 2021   March 31, 2020 

Raw material used, changes in inventories and others

  W9,564,810    8,648,277 

Employee benefits expenses

   943,053    920,039 

Outsourced processing cost

   1,714,478    2,030,299 

Electricity and water

   173,898    170,696 

Depreciation(*1)

   785,185    770,170 

Amortization

   110,787    114,287 

Freight and custody

   339,624    352,344 

Sales commissions

   18,680    47,725 

Loss on disposal of property, plant and equipment

   18,657    40,671 

Impairment loss on property, plant and equipment

   16,892    78 

Donations

   7,183    12,155 

Others

   952,967    858,483 
  

 

 

   

 

 

 
  W14,646,214    13,965,224 
  

 

 

   

 

 

 

 

(*1)

Includes depreciation expense of investment property.

32. Income Taxes

The effective tax rates of the Company for the three-month periods ended March 31, 2021 and 2020 were 26.98% and 34.18%, respectively.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

 

33. Earnings per Share

Basic earnings per share for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

(in Won, except share information)  March 31, 2021   March 31, 2020 

Profit attribute to controlling interest

  W1,024,735,682,380    395,392,696,009 

Interests of hybrid bonds

   (1,644,657,534   (1,662,931,507

Weighted-average number of common shares outstanding (*1)

   75,911,805    80,115,641 
  

 

 

   

 

 

 

Basic earnings per share

  W13,477    4,915 
  

 

 

   

 

 

 

 

(*1)

The weighted-average number of common shares used to calculate basic earnings per share are as follows:

 

(shares)  March 31, 2021   March 31, 2020 

Total number of common shares issued

   87,186,835    87,186,835 

Weighted-average number of treasury shares

   (11,275,030   (7,071,194
  

 

 

   

 

 

 

Weighted-average number of common shares outstanding

   75,911,805    80,115,641 
  

 

 

   

 

 

 

Since there were no potential shares of common stock which had dilutive effects as of March 31, 2021 and 2020, diluted earnings per share is equal to basic earnings per share.

 

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Table of Contents

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2021

(Unaudited)

 

 

34. Related Party Transactions

 

(a)

Significant transactions between the controlling company and related companies for the three-month periods ended March 31, 2021 and 2020 were as follows:

 

 1)

For the three-month period ended March 31, 2021

 

(in millions of Won)  Sales and others(*1)   Purchase and others(*2) 
   Sales   Others   Purchase of
material
   Purchase of
fixed assets
   Outsourced
processing cost
   Others 

Subsidiaries(*3)

            

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

  W1,614    11,069    —      88,862    60    6,463 

POSCO COATED & COLOR STEEL Co., Ltd.

   123,426    2,034    —      —      7,447    161 

POSCO ICT(*4)

   447    4,990    —      34,290    10,706    49,422 

eNtoB Corporation

   4    —      60,190    9,647    14    4,507 

POSCO CHEMICAL CO., LTD

   57,959    16,280    114,065    1,389    74,295    1,426 

POSCO ENERGY CO., LTD.

   760    689    2,129    —      —      5,605 

POSCO SPS CORPORATION

   148,773    —      —      —      10,694    206 

POSCO INTERNATIONAL Corporation

   1,898,357    54,331    166,152    —      347    536 

POSCO Thainox Public Company Limited

   60,873    —      —      —      —      20 

POSCO Canada Ltd.

   —      491    34,796    —      —      —   

POSCO Asia Co., Ltd.

   18,289    32    417    —      —      272 

Qingdao Pohang Stainless Steel Co., Ltd.

   40,948    —      —      —      —      —   

POSCO JAPAN Co., Ltd.

   357,971    1    7,601    4    —      480 

POSCO-VIETNAM Co., Ltd.