POSCO Earnings Call Signals Cautious Recovery Momentum
Posco ((PKX)) has held its Q2 earnings call. Read on for the main highlights of the call.
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POSCO’s latest earnings call struck a cautiously upbeat note, with management emphasizing broad-based improvements in revenue, operating profit and cash generation alongside visible progress in strategic projects. While cost inflation, energy and FX volatility, trade measures and operational risks remain significant, executives argued that gains in steel decarbonization, lithium and rare gases put the group on a stronger growth footing.
Solid Consolidated Growth and Heavy Investment
POSCO reported consolidated Q2 revenue of KRW 19.3 trillion, up KRW 1.4 trillion quarter on quarter, and operating profit of KRW 819 billion, a 16% sequential increase. Quarterly EBITDA reached KRW 1.9 trillion, underpinned by improved steel pricing and recovering materials businesses, while CapEx climbed to KRW 2.0 trillion in Q2, bringing first-half investment to KRW 3.7 trillion.
Lithium Turnaround in Argentina
The standout improvement came from POSCO Argentina, which posted its first ever quarterly operating profit of KRW 11 billion as the lithium operation turned the corner. Q2 sales volumes surged 160% quarter on quarter and revenue jumped 290%, with management expecting margins to strengthen further as Plant 2 is commissioned in October and certified product sales and a long-term supply agreement ramp from Q4.
Battery Materials Back in the Black
Rechargeable battery materials returned to surplus after nine quarters in the red, signaling a significant recovery in a key growth pillar. The RBM segment delivered operating profit of KRW 41 billion in Q2, helped by better utilization and margin management, and management framed this as an inflection point for the group’s broader battery supply-chain strategy.
Core Steel Business Shows Gradual Recovery
POSCO’s steel affiliate posted Q2 operating profit of KRW 274 billion, an increase of KRW 61 billion from the prior quarter as pricing improved. The average selling price of carbon steel rose from KRW 920,000 per ton to KRW 962,000 per ton, roughly a 4.6% sequential gain, and the company is targeting about 9 million tonnes of crude steel production in Q3, effectively running at maximum levels.
Restructuring Efforts Boost Cash Generation
Restructuring and divestments are emerging as a meaningful source of liquidity alongside operating cash flow. Twelve projects delivered KRW 475.4 billion of additional cash in the first half, and management expects these initiatives to generate roughly KRW 3.5 trillion by 2028, with completed divestments including PZSS and several Chinese subsidiaries adding one-off gains to this quarter’s bottom line.
Key Operational and Project Milestones
The group continued to advance its decarbonization and specialty-gas roadmap with several tangible milestones in Q2. POSCO completed a 2.5 Mt electric arc furnace in June and brought the POSCO Air Solutions high-purity rare gas plant online on June 17, while HyREX demo plant construction began and Gwangyang’s first EAF entered early operation, and POSCO Future M’s margin improved to 3.9%, up 1.6 percentage points.
Construction and Trading Affiliates Rebound
POSCO E&C staged a notable turnaround, posting KRW 44 billion of operating profit in Q2 and KRW 97 billion for the first half after a KRW 452 billion temporary deficit last year. POSCO International also delivered its best quarterly and half-year operating profits, with a 22% sequential rise reinforcing the contribution of trading and energy-related operations to group earnings.
Progress at Pilbara and HY Clean Metal
In ore-based lithium, POSCO Pilbara Lithium Solutions expanded certified product sales and sharply narrowed losses, recording Q2 revenue of KRW 102 billion and an operating loss of about KRW 1 billion. POSCO HY Clean Metal maintained nearly full plant utilization and steady monthly profit gains, demonstrating resilience despite feedstock challenges in a volatile commodity environment.
Mounting Input Costs and Macro Pressures
Management warned that rising input costs are eroding part of the recent profit recovery, keeping margins fragile. Key raw material prices increased around 6% quarter on quarter, while higher oil prices, a weaker Korean won, and elevated logistics and maintenance expenses linked to Middle East conflict and energy risks added further pressure to the cost base.
Steel Margins Still Below Historic Levels
Despite better pricing and higher volumes, POSCO’s steel profitability remains well below its historical norm, a key concern for investors. The steel affiliate’s operating margin was just 2.9% in Q2, underscoring continued sensitivity to cost inflation and suggesting that more structural efficiency and pricing power will be needed to restore legacy return levels.
Near-Term Headwinds in Lithium
Management flagged several near-term challenges for the lithium segment that could temper the pace of the recovery. Argentina’s winter season will reduce pond evaporation and, together with LP dryer replacement work, cut Q3 production, while uncertified lithium products command roughly a 10% discount until certified volumes ramp in Q4 and Pilbara margins remain squeezed by unfavorable spodumene-to-hydroxide spreads.
Trade Measures and Tariff Risks
POSCO faces rising trade-policy headwinds, especially in Europe, that could weigh on exports and product mix. EU quota reductions and anti-dumping investigations and tariffs covering hot-rolled and cold-rolled steel pose a tangible risk, with Europe representing about 10–15% of POSCO’s exports and potential remedies likely to reduce volumes or force shifts toward higher-value products.
Safety Incident Highlights Operational Risk
The company also addressed non-financial risks, most notably a fatality at POSCO E&C in June that raised serious safety concerns. Management said group-wide safety assessments and corrective actions are being rolled out across 33 affiliates, acknowledging both the operational and reputational impact and signaling greater focus on risk management alongside growth.
China Weakness and Strategic Exits
Persistent weak profitability in China continues to shape POSCO’s footprint and strategy in the region. The company has moved to divest loss-making assets such as Zhangjiagang, which has been excluded from consolidation, and while these exits improve reported earnings and free up cash, they underscore ongoing structural challenges in the Chinese steel market.
Early-Stage Risks Around New EAF Capacity
New low-carbon steel capacity is not yet contributing meaningfully to profit and carries typical ramp-up risks. The Gwangyang EAF is running at low utilization with higher costs, and management stressed that profitability depends on successful hot-metal mixing and development of a premium market for low-carbon steel, which remains nascent and could limit near-term returns from the investment.
Lithium Feedstock and Price Volatility
Hard-rock lithium economics remain volatile, and POSCO highlighted that ore-based profitability is tightly linked to spodumene prices. Current spreads have already pushed some producers into the red, and management cautioned that large-scale mine restarts or changes in Australian supply could materially impact margins, making disciplined cost and portfolio management critical in this segment.
Guidance and Outlook
Looking ahead, POSCO guided for continued quarter-on-quarter improvement but with a softer Q3 in rechargeable battery materials due to Argentina’s winter and planned LP dryer replacement, before a stronger Q4 as both lithium plants ramp and certified sales grow. The group expects crude steel production near 9 million tonnes, ongoing benefits from restructuring cash generation and equity monetization, and is signaling measured but positive earnings momentum across its steel and new-materials platforms.
POSCO’s earnings call painted a picture of a diversified industrial group steadily rebuilding profitability while investing heavily in decarbonized steel and battery materials. Revenue and operating profit are moving in the right direction, key loss-making units have turned or are close to breakeven, and cash from restructuring strengthens the balance sheet, though investors will need to watch margin resilience, trade-policy risks and safety performance in the quarters ahead.
