SEOUL (Reuters) - POSCO’s (005940.KS) new chief executive said the South Korean steelmaker will restructure non-steel businesses and not make any major investment in increasing steelmaking capacity, in a marked break from the strategy of his predecessor.
Incoming CEO Kwon Oh-joon, a former POSCO chief technology officer, will sell non-core assets and list affiliates after a wave of investment and acquisitions left the world’s fifth-biggest steelmaker with high debt and credit-rating downgrades.
POSCO, once one of the industry’s star performers, posted its third straight year of profit decline last year as it continued to grapple with steel oversupply and reduced customer demand brought about by recent global economic downturn.
“POSCO’s biggest task is to improve its financial structure,” Kwon said at a news briefing after starting a three-year term as chief executive and chairman. “First of all, we have to improve our core competitiveness in steel and generate profit.”
To that end, POSCO will restructure its materials and energy businesses, and focus on lithium, nickel, fuel cells and clean coal, Kwon said.
POSCO will also seek mergers and acquisitions in non-steel businesses such as clean coal, and “take the bold step of shedding non-core” operations, he said at an annual meeting of shareholders before the briefing without specifying any units.
Subsidiary POSCO Specialty Steel in 2012 decided against listing $424 million of shares because of tepid investor demand.
Shares of POSCO were down 0.7 percent at 0515 GMT after the comments, similar to the 0.6 percent fall in the broader market
“Unlike his predecessor, chairman Kwon has taken a realistic and detailed approach. If he lives up to his promise, this will help improve POSCO’s balance sheet,” said Hi Investment & Securities analyst Bang Min-jin.
The steelmaker could sell such non-core assets as a department store owned by POSCO trading unit Daewoo International Corp (047050.KS), said Bang.
POSCO, backed by billionaire U.S. investor Warren Buffett, in January said it would reduce investment by 14 percent this year as it does not see any revenue growth.
On Friday, Kwon said POSCO will continue trying to build steel mills in India after years of delays.
Reporting by Hyunjoo Jin; Editing by Edwina Gibbs, Kenneth Maxwell and Christopher Cushing