POSCO Holdings unveils aggressive value-up plan, hike cash dividends

POSCO’s headquarters in Seoul

South Korea’s steel-to-battery materials conglomerate POSCO Group on Monday unveiled a spate of corporate value-up measures, including a higher shareholder return ratio, a more frequent dividend payout and a share buyback and cancellation.

POSCO Holdings Inc. said in a regulatory filing It plans to achieve a revenue growth rate of 6-8% and a return on invested capital (ROIC) of 6-9% over the next three years, through continuous investments in the steel and secondary battery materials sectors.

ROIC is a financial metric used to determine how well a company allocates its capital to profitable projects or investments.

The holding company said it will retire 6% of its treasury shares over the next three years, starting this year, and pay a cash dividend of 2.3 trillion won ($1.6 billion) in total for three years to enhance shareholder value.

POSCO said the move is part of its mid-term value-up program.

Chang In-hwa, POSCO Holdings chairman and CEO

To achieve a target of 6-8% group revenue growth, the company said it will increase investments and apply high technology in its steel and battery materials businesses.

POSCO Future M Co. is in charge of the group’s battery materials business.

The group’s portfolio will be restructured around its core businesses – steel and secondary battery materials – while exploring opportunities in new growth sectors under the “2Core+New Engine” strategy.

“We plan to apply the ROIC indicator, which evaluates both profitability and capital investment for each business unit, not only in our structural reorganization but also in future business management,” said a company official.

TO BOLSTER SHAREHOLDER RETURN POLICY

POSCO Holdings said it also plans to drastically raise its shareholder return rates to bolster shareholder value.

POSCO International’s headquarters in Songdo, Incheon

In line with its mid-term share cancellation plan announced in July, POSCO Holdings will cancel 6% of treasury shares it already owns over the next three years, starting this year.

For cash dividends, the company will spend 50-60% of its free cash flow to pay a basic dividend of 10,000 won per share, plus additional dividends if it has remaining funds after the initial payout.

The company intends to maintain a dividend policy of paying out a minimum of 2.3 trillion.

So far this year, POSCO Holdings retired 2% of treasury shares it held and repurchased 100 billion won worth of shares and canceled them.

It paid 7,500 won in cash dividends per share for the first nine months of this year.

STRENGTHENED ESG STANDARDS

The company said it is strengthening its environment, society and governance (ESG) standards across its affiliates by improving the outside director appointment process and managing ESG risks groupwide.

POSCO International executives and government officials pose for a photo at the ceremony to mark the completion of Gwangyang LNG Terminal 1

POSCO International Corp., the group’s trade and energy subsidiary, said it will increase its total shareholder return (TSR) rate to 50% next year, double its TSR target of 25% set earlier this year.

TSR is a measure of financial performance, indicating the total amount an investor reaps from an investment – specifically, equities or shares of stock.

It is calculated by combining the amount spent on dividends and share buybacks and cancellations, divided by net income. TSR is a critical metric for stock investors.

The company said it will also introduce a mid-year interim dividend system to increase the frequency of dividend payouts.

It said it aims to achieve an annual pre-tax profit growth rate of 8% and an ROIC rate of more than 8%.

POSCO International said it also aims to aggressively expand its presence in the energy and food sectors through cooperation with its group affiliates.

By In-Soo Nam

isnam@hankyung.com

Jennifer Nicholson-Breen edited this article.

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