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| POSCO Group Chairman Choi Jeong-woo |
POSCO Group will strengthen its group-wide risk management, in a move to better respond to tightening demand, cost overruns and supply chain disruptions, its holding company, POSCO Holdings, said Sunday.
The directive seeks to preempt employee complacency, after robust second-quarter earnings were announced last week.
POSCO Holdings' sales in the April-June period on a consolidated basis stood at 23 trillion won ($17.5 billion), up 25.7 percent from a year earlier. Operating profit came in at 2.1 trillion won, down 4.5 percent. Net income was 1.8 trillion won, the same as seen in last year's second quarter.
The sales growth was driven by an increase in steel prices and the strong performance of its subsidiaries. But market watchers say the group's outlook in the months to come will not be as rosy, due to falling steel product prices, a moderate increase in supply and economic recession fears.
POSCO Group Chairman Choi Jeong-woo presided over a meeting attended by key executives of the group and its affiliates, July 21, reiterating the need for increased preparedness against the sharp depreciation of the Korean won, surging borrowing costs and accelerating inflation.
The risk factors that require closer monitoring include reduced global steel demand and subsequently increased inventory costs. Also among them are the rising costs of raw input materials, energy and borrowing, as well as uncertainties in the raw material and energy supply chains.
In response, the group will seek to fortify its profit models and lower raw input costs through streamlining purchases, production and sales.
Risks to the group's overseas entities will be reviewed more thoroughly, and the group's overall financial soundness will be enhanced via the revision of its investment plans.
The profitability of the group's core steel business will be sustained by closer review and monitoring of price fluctuations in input materials and sales prices.
"Weakening demand, surging costs and supply chain complications can and will be preemptively managed with our group-wide efforts," Choi said during the meeting.
"Key executives at all group subsidiaries should be prepared against a possible cash crunch. We will place greater weight on cash-oriented management strategies."
