POSCO Sponsored ADR Stock

Greetings, everyone. Thank you for coming to attend the conference call for POSCO Holdings earnings release. Today, we will have a presentation from POSCO Holdings first, and then we will have a Q&A with all of you. [Operator Instructions]

So now I'd like to begin the POSCO Holdings 2026 Second Quarter Earnings Release.

Greetings, everyone. I'm Head of Finance and IR Division at POSCO Holdings. My name is Kim Seung-Jun. Despite the harsh heat, thank you for attending the second quarter earnings for POSCO Holdings. My sincere thanks go to the investors and the analysts.

In the second quarter, the Middle East conflict triggered energy supply risk intensified, while the Korean won continued to lose value, business faced headwinds. Nevertheless, POSCO Holdings recorded consolidated revenue of KRW 19.3 trillion and KRW 820 billion in OP, keeping the rising profit curve. Gains were recorded against previous quarter in all key sectors of steel, rechargeable battery materials and energy.

Most notable is our Argentina Lithium Business that turned a first-ever quarterly profit. So the general RBM sector transitioned to a surplus for the first time in 9 quarters. Our steelmaking affiliate, POSCO registered as separate OP of KRW 270 billion, a KRW 60 billion gain over the previous quarter.

On third quarter outlook, what is most notable is that POSCO will make more visible performance gains. While some raw material costs will climb, increased production will offset fixed costs. Through effort made to increase sales and sales price, we expect the rise to continue. In the rechargeable battery materials sector, following its first ever quarterly surplus in the second quarter, a temporary slowdown may be observed in the third quarter.

Located in the Southern Hemisphere, it is winter in Argentina. This seasonal factor causes pond evaporation to dwindle. By leveraging this off-season, we plan to replace the LP dryer equipment. Hence, a temporary drop in production volume seems inevitable. Starting in the fourth quarter, however, the plant will run at full operation. Additionally, in Q4, long-term supply agreement will kick in, allowing us to deliver certified products. Therefore, we anticipate a more meaningful level up in Q4.

Besides the performance gains, the first half of this year demonstrated marked progress in building for future growth. One is Gwangyang's first EAF operation and the other the HyREX demo plant construction start. POSCO Holdings is committed to upholding the 2 pillars of growth, which are profit enhancement by sector and strategic investment for future growth. We'll do our best to continue to grow our corporate value.

Now I will give the floor to our IR Office Head to offer more second quarter details.

Next, we will move on to Page 3 of the materials, and I will brief you on the business performance of the second quarter 2026. The consolidated revenue of the second quarter was KRW 19.3 trillion, which is a KRW 1.4 trillion increase on quarter. The operating profit stood at KRW 819 billion, a 16% increase on quarter. The quarterly EBITDA stood at KRW 1.9 trillion and CapEx of KRW 2 trillion was administered this quarter, totaling KRW 3.7 trillion of CapEx for the first half.

Now let me elaborate by business. First, steel business profits improved on quarter by KRW 58 billion. The Middle East conflict impacted logistics and energy costs and foreign exchange rate driving up short-term cost volatility. However, production and sales volume growth and partial price increase offset the headwinds that lowered profits at the end of last year to drive recovery. The RBM business had for the past 8 consecutive quarters operated in the red. However, this quarter, we recorded operating profit of KRW 41 billion swinging to an operating surplus. Until last year, there was a quarterly deficit of around KRW 50 billion at POSCO Argentina. But this quarter, the subsidiary swung to an operating profit.

In Infrastructure, highest recording quarterly profit was recorded by POSCO International, driving a profit growth of 22% on quarter. The divestment of PZSS and Chinese subsidiaries are now complete, registering a one-off divestment profit for this quarter's net profit.

Next, I'd like to report on our safety index. Every year and every half year, POSCO Holdings transparently releases updates on our safety metrics and progress made on our policies. In June, we suffered another fatality at POSCO E&C, our construction affiliate. The company takes this very seriously. They are putting all efforts into inspecting and strengthening their safety management system. POSCO Safety Solution in collaboration with [ DSS+ ], a global safety solution provider, we are assessing the safety of 33 group affiliates across 4 key areas. By October, we plan to sort safety risks and identify corrective action plans. You can find more detail on our safety initiatives on Page 4.

Now Page 5, the key business activities in the second quarter. With Australia-based Mineral Resources, we signed the investment agreement on April 30. The JV is planned to be established by October. For Lithium DLE demonstration, we are working with [ Ansen ] Resources. The demo plant cooperation contract was signed in June, and the plant is scheduled to come online in 2027. POSCO Future M's LFP CAM business is in motion. First, we have Future M's Pohang and CM CAM lines that are being recalibrated for LFP production with plans to be commercially ready by next January. Future M, [ Pino ] and CNGR's JV, CNP new materials began construction of a new LFP plant to begin commercial production by the end of 2027.

Next, Page 6. POSCO Holdings has 100% share of POSCO Air Solutions, whose high-purity rare gas plant was completed in June -- on June 17 in Gwangyang. To generate profit, it requires certification processes, which will take time. But by using materials from the steelworks oxygen plant, it can meet some of the rare gas demand for the chip industry with good prospects for profit.

At POSCO International, rare earth business partnership agreement was signed with the U.S.-based rare element technologies last May. Total project cost is estimated at $200 million for commercial production by 2028. POSCO's 2.5 million tonne EAF was completed by June. In its early operation stage, we plan to mix molten iron from the blast furnace and EAF to produce general purpose steel. At the same time, we will continue testing and development to produce high-grade steel. We aim to boost quality to the level of blast furnace-based products, developing refining and rolling technologies to ultimately produce automotive and electrical steel, which will help us -- this will help us respond to CBAM and other environmental regulations.

Next page is on updates about our restructuring projects. In the first half of this year, there were 12 restructuring projects that generated KRW 475.4 billion in additional cash. The largest impact was from divesting steel operations in China that made the bulk of our losses. They include PZSS, [ PSS ] and SCF Processing Center. Our restructuring effort targets underperforming businesses and noncore projects. By selling these assets, we seek to improve long-term performance and enhance our capital efficiency. By '28, we expect to generate KRW 3.5 trillion of [ FCF ] resulting from these projects.

Next, let's discuss earnings by each division. Show weak exchange rates and adverse export conditions countered with price increase and cost savings, and it remained largely unchanged. And please note that the sale of PZSS has been completed and is no longer included in the consolidated figures.

Page 10, POSCO Future M. Second quarter POSCO Future M OP margin rate was 3.9%, a 1.6 percentage point quarterly improvement. Owing to the rise in oil price-linked chemical product sale prices, the impact served as a tailwind for base materials profits. Energy Materials also registered a small profit.

Next is Page 11 on our lithium affiliates. At POSCO Argentina, sales volume rose 160% against the previous quarter and revenue by 290%. By registering quarterly OP of KRW 11 billion, this quarter became the first ever since the company was incorporated to achieve operating surplus. Multiple clients have signed supply agreements with us, and we are seeking certification procedures and new clients as well.

While this upward trend is projected to continue in the second half, as the CFO already mentioned, on a quarterly basis, we may see some shifts. POSCO Argentina in July is undergoing some interim repairs such as the replacement of the LP dryer. Once completed, we'll bring it back up to full operation in Q4. From Q4 also, the sale of certified products will phase in. Based on market circumstances, uncertified products can be sold at approximately 10% discounted prices. Therefore, once the certified products sales kick in, profits are likely to make additional gains. In the meantime, Plant 2 is an initial operating stage bracing for its full commissioning scheduled in October.

In summary, the third quarter may appear to be a slight slowdown. However, in the fourth quarter, Plant 1 will be able to not only offset Plant 2 initial ramp-up costs, it is also expected to outdo its second quarter performance by another notch.

POSCO Pilbara Lithium Solutions improved its margins owing to higher price and expanded sale of certified products. Second quarter revenue hit KRW 102 billion, an increase over the previous quarter. Operating losses were also reduced to around KRW 1 billion. As mentioned in the previous quarter, [ PPLF ] margins are highly impacted by the price spread of spodumene and lithium hydroxide. Currently, the price spread is not in our favor, so we face profit pressures in the second half. We will continue to monitor the market and take measures as necessary.

POSCO HY Clean Metal maintains plant operations close to 100% despite challenges in acquiring feedstock since December 2025, that has kept up steady monthly profit gains. Again, this is owing to an operational rate of almost 100%. And so it is able to keep up speed even with some headwinds.

Page 12, POSCO International. For POSCO International, Energy and Materials segments both grew, recording the highest quarterly and half year operating profit. In Energy, Myanmar gas field saw selling price rise along with higher FX. And the Senex gas field was expanded. And in materials, Indonesian pond production was newly acquired, and this helped improve performance.

Page 13, POSCO E&C. POSCO E&C recorded a surplus of KRW 44 billion this quarter. So it wrapped up the first half with operating profit of KRW 97 billion. And once again, this shows recovery from the KRW 452 billion temporary deficit it suffered last year. And this concludes the 2026 second quarter earnings briefing.

We will now move on to the Q&A.

[Operator Instructions] The first question comes from Hyundai Motor Insurance.

My name is Park Hyun-Wook. I have 3 questions. The first is regarding second half steel market outlook as well as the direction POSCO will be taking, especially in automotive shipbuilding and home electronics. And how will you negotiate price in the second half of this year?

Second question is starting in July, Europe will begin its quota system. So what will be the proportion of sales made to Europe against these trends? And of course, there are some temporary tariffs that are being imposed although temporary, this is something that will apply to hot-rolled products as well. So I wonder what your countermeasures are against these tariffs.

And third question is, this was also discussed in the Investor Day conference. For overseas investments as well as repairs that are going on in the steelworks, I think all of these are going to be happening in parallel. But PTKP 1 is not in a good situation. And of course, there are different stories being told about the automotive industry. But looking at the profits, how do you intend to generate profit?

My name is [indiscernible], Marketing Office Chief. So you asked for market outlook for the second half of this year. Due to fuel costs and raw materials costs that went up in the first half, of course, this impacted our prices, but this did also impact our own price. And so we will consider market situations and make sure to apply what needs to be applied to our price. But because of the Iran conflict, there are volatilities in the raw materials costs as well as external variables due to AD. So we will have to continue to closely monitor the client situation as well as the markets and our adjacent markets as well. Rather than take a rapid rise in price, I think we will be more gradual in our measures.

Looking at the automotive industry, we are negotiating based on Formula 1. Despite these oil price hikes and other volatilities, a lot of these did not actually were not applied to our price. So in the second half, we will gradually phase these variables into the price. And in shipbuilding, this is not based on formula index, but because we have a strong demand, we will continue to adjust and reflect these variables to our final price.

In Home Electronics, we continue to transfer our production base to Southeast or we -- the world continues to transition its production base to Southeast Asia. And so the prices remain very conservative. But there are costs that need to be applied to our final price.

[ ITO ], I will answer the second question on EU quota reductions. By bracing against these measures, there are some safeguards that were put in place. And of course, we cannot avoid all impact, but through government negotiations, we are trying to minimize the quota reduction for Korea. And so compared to our competition, we believe we have a much more favorable position. With quota reduced, we will be entering that market with more high-margin products. And through World Steel Association as well as fair trade agreement clauses, we want to be able to keep the European market favorable to us. If there is a reduction or a cut in our sales volume, we will make some transitions to be able to make up for these losses.

EU proportion for POSCO will vary by each year, but it's about 10% to 15% of our total exports. Japan, Southeast Asia and Europe make up our key exporting markets. In regards to Japan and the tariffs, as you mentioned, in August last year, we began an investigation and the investigation is still ongoing. So in June of this year, for Korean and Taiwan cold-rolled products, they made parallel -- launched parallel investigation on all products. So these are things that are still ongoing.

On coated products AD that was announced on July 24, because there was excessive intervention on the part of the investigating authority, we believe that the AD determined as a result of that assessment is what we are seeing today. So we will be very clearly looking into all of the unfair and irrational reasons for -- apply to these decisions, and we will make sure to make adjustments necessary for our operations.

POSCO Holdings CEO Management Office, I would like to respond to your question about PTKP in Indonesia. So PTKP Phase 1 is not profitable or the profits are very small. When it initially went into operation, most of the products were plates and semi-finished products, and we were devoid of customers when we began. So in the initial stage, yes, our profits were very slim.

But let's look at it in 5-year interim stage intervals. We are currently profitable, and we are able to generate cash flow. That is where we are now. About 90% of total invested CapEx has been recovered through EBITDA margin. And the reason we want to invest in Phase 2 is because this isn't something that came out of the blue. We've had an expansion plan from the very beginning, but we waited until situation would be more favorable because we have improved conditions now, we've been able to add more detail to our expansion plan. Exactly when we will begin to build or construct that has not been determined yet.

And Phase 2 is different from Phase 1 because we are targeting the automotive steel sheet market in Southeast Asia. In each Southeast Asian economy, I'm sure they have their own plans to supply their own automotive steel sheets. The hot-rolled products from PTKP is what differs because most of the Southeast Asian nations are producing cold-rolled products. So compared to the competition, ours will be much more profitable.

We will move on to the next question. The next question is from iM Securities, Mr. Kim Yoon Sang.

I am Kim Yoon Sang from iM Securities. I have 3 questions for you. First is related to lithium. You demonstrated good performance this quarter. Recently, at the Investor Day, you mentioned you gave us guidance for the expected profit for lithium in the next few years. And I would like to ask what is the profitability for brine and hard rock lithium. And if there are any plans to improve profitability, I'd like to hear about them.

And the last question related to lithium is the price outlook. Recently, there are about mines and all these various mines -- news of various mines coming from Australia, which have affected the prices. But with the reutilization of these mines, do you expect the price to fall? Or do you not expect it to impact the prices as much?

For the second question is related to the rare earth. Also at the Investor Day, you provided some guidance, but what is your plan regarding rare earths? And there, you will need technology and the raw materials to dive into this business. And I would like to ask what is going on with the preparation.

The third part is related to steel. And recently, the long products demand has been on the news quite often. It's not one of POSCO's major key products, but I would like to ask your plans regarding this.

I am [indiscernible] from Energy Materials Business Management Office. At the Investor Day, we provided long-term outlook, long-term vision. When we provide these visions, announced these visions, we -- many organizations predict the price to be over [ $30 ]. So for brine lithium we think we can achieve about 80% operating margin -- profit. And the second is plans for expansion for Phase 3 and Phase 4, and we have a performance projection for 2035. PPLS and Argentina Plant 1 will have depreciated by then. And so that's been applied there.

And for hard rock lithium, we made an investment in mineral resources. And so that CapEx is applied here. And because some of the mines are coming back into operation, how will that impact our prices? I think that's already been worked into this plan. Of course, you've seen these lithium prices fluctuate wildly in the past. And so those prices and those impacts have been worked into this formula. And this is based on LC. And based on our estimation, this estimates 100,000 tonnes per year production. And this is a large volume equivalent to about 5% of total demand. And because there's a lot of development going on in Australia, looking into the future, lithium price falls have already been worked into our plan. The only thing that we think could change is the price of spodumene, which could drop quite a bit. In Argentina, that is not positive for Argentina. But for the hard rock lithium business, this could be favorable.

I am [indiscernible] from Infrastructure Business Management Office. Regarding rare earths, the raw materials, we are reviewing -- sourcing them from Southeast Asia. And from U.S. and Southeast Asia, we are planning for a joint venture. And in the U.S., we are also reviewing another business there.

In rare earths, there is the mining, the processing in between and producing permanent magnets and all these sections -- all these links in the value chain require a lot of experience and technology. That's why in order to make sure that the business settles in rapidly or quickly, we are working with experts. And in this process, POSCO International will be working with us in raw materials and other partnerships. And we are also working with partners to create -- to establish JVs to acquire the technology to expand the business especially in technology, the important part is the separation and refining. Separation and refining technology needs to be internalized. And for this, we are currently conducting R&D at the POSCO [ NEXT hub ], the Research Institute. And with these partnerships, both inside and outside, we will be able to acquire the technology necessary.

I am [indiscernible] from Marketing Strategy Office at POSCO. Regarding the third question, yes, there is a -- there is a lot of demand around data centers, and this is leading to a lot of expectations in society.

Regarding the data centers, concrete and metal rods and structural steel used to be the demand in the past. But right now, what we are seeing is the data centers being built at scale. So we internally, we think that the structural steel related to thick plates may be more competitive. So regarding data centers and ESS the new demands, we are making various reviews. And to gain an upper hand in the market, we are making plans to make -- take the necessary actions. And going forward, not only the exterior steel products that needed to build buildings, [indiscernible], electrical steel and interior steel demand is also expected to increase. So we will systematically address these demands.

Next question is from [ Hanguek ] Investment Securities, [indiscernible].

My name is [indiscernible]. So this is finally a good result in a long time. I'd like to ask a question about the steel sector. Chinese security firms have reported today that the government has put out a supply policy. Why? Because profitable companies in China, a list of them show that steelmakers take up a very small portion. And so steelmakers continue to suffer in China. And that is the reason why we believe a new supply agreement may come out of the Chinese government. So in association with this piece of news, how do you project the market, the steel market?

My name is [indiscernible], POSCO Marketing Strategy Office. So China has continued to cut production. And I think they've also tried to put in some additional measures to deal with additional demand. So rather than cut production, I think they're going to focus on reducing low-grade steel and replacing them with high-grade premium steel. I think this is what the Chinese government is focused on exercising.

POSCO is the same, no different. Because of the construction industry slowdown, we are of course, challenged. But because of other industries that exist in Korea, such as the automotive and shipbuilding industries, we are able to focus more on premium steel. Overseas as well, there are some trade barriers. But despite these headwinds, we are inventing programs to be able to make up for those losses. We're not trying to cut exports anywhere. We want to sell and export as much as possible. That's our position.

The next question is from [ Meritz ] Securities.

I am [indiscernible] from [ Meritz ] Securities. At the CEO Investor Day, POSCO Argentina Phase 3 and 3.4 and there are also plans to expand hard rock lithium production to 30,000 tonnes. Are there already permits or decisions made on the expansion? If there are -- if the decisions haven't been made yet, when do you expect them to be made? And for hard rock lithium, the background for the business only mentioned partnership with OEM companies. I'd like to ask for more detail. And when you will be able to -- when do you expect to receive the approval for the business?

Another question is related to shareholder returns. So you -- so for shareholder returns, you've decided to fix that at 50% and that includes 10% shareholder returns and other percentages for other programs. Do you have a definitive principle for this rule? And you've decided to sell off the equities at your affiliates by the end of the year. How will this far into shareholder returns?

Okay. I'm [indiscernible] from Energy Materials Business Development Office. First, you asked about expanding the lithium business. At the Investor Day, we mentioned that the Argentine brine lithium will be increased to 100,000 tons. And there are Phase 3 and Phase 4 for the Argentine Lithium Business.

Regarding this expansion, up to now, we have been producing lithium hydroxide for -- as our final product. But for Phase 3 and Phase 4, our goal is to produce lithium carbonate. And the decision has not yet been made. We will be undergoing the PFS, the pre-feasibility study to decide what -- what process will be applied by the end of this year, and the FID will be done by the end of next year.

And expanding our lithium business using the hard rock lithium. To answer that question, as you have heard, because the spodumene prices are high, there is a profitability issue. So we will be considering the market conditions, our client positions and as well as our lithium producer partners. Though the decision will be made at the end of next year, we will be responding flexibly. That is our decision.

So the 10% adjustment ratio, I think you're asking why. Let me try and explain. First of all, as you mentioned, at CEO Investor Day, about a certain percentage of the equity shares that we own at affiliates, we will be selling that off and about 90% will go to CapEx. The other 10% will be will contribute to shareholder return. And we thought that would generate about KRW 3.5 trillion of cash, and that means about KRW 350 billion will be used for shareholder returns. But once we sell those equities off, we are selling off our controlling shares. And so this can lead to perhaps a decrease in dividend payment as well.

Each year, without seeing an increase in operating profits, we simulated what this would mean regarding shareholder returns. So what would happen to that reduction in equity that we have in affiliates, it amounts to about KRW 200 billion. And because we have set aside 35% to 40% of net profit of controlling interest, this means about KRW 80 billion reduction in dividend payment each year. So equity divestment, 10% of that will go into paying dividends and shareholder returns and measuring that against the losses incurred by selling off those equity shares, the simulation shows us that there is a difference that begins to appear -- a disparate that begins to appear in about 4 years.

So what are we going to do 4 years down the road? Based on our plant operation experience, it takes about 4 years for any plant to get to full scale operation. So by our estimation, we will have profits from the plants that we are building now. In summary, in 4 years, there will be profits that come from our affiliates as well as profits that come from our lithium business, which one will be bigger between the 2? It boils down to that question. And as we mentioned during Investor Day, when lithium is $20,000 per ton, our OP rate is about 40%. As the holding company, we have the authority to shift our portfolio and to realign our businesses. So from that perspective, 90% of the equity divestment will go into CapEx and 10% to shareholder returns. That is an informed decision that we made.

And liquidating or monetizing our equity stake in our affiliates, what is the rationale behind that? Of course, this has to go through the Board and the market is also reacting to this. So at the moment, we are not able to give you a definitive answer. But from our perspective, I think the market is aware and we are aware of the market situation. So once this is approved and it is put into action, we will be very careful. Once we make this decision, we will also follow all rules and regulations. So this will also go through public disclosure.

The next question is from [indiscernible] Securities.

I am [indiscernible] from [indiscernible] Securities. Regarding steel business, I have a question. In the third quarter, you mentioned that it will continue -- it will improve compared to the second quarter does this include the cost from the EAF utilization? Does this include the projections regarding Gwangyang operation, the costs associated with it? Of course, it helps to reduce carbon emissions, but this also entails increased costs. So if there is any miss in your business projection, this could be quite fatal. So I wonder how the Gwangyang EAF is going to fare into your business projections in the future.

I am the Head of Finance Office. First, in the second half of 2026, the projections, of course, includes Gwangyang operations and the costs incurred from the EAF. And the second question is whether the well, there was a history -- there is a record of Gwangyang EAF showing low profits. Well, we are implementing a hot metal mixing technique to produce high-end or high-grade steel. This is our plan. And as of now, the utilization rate is low. But once this rate goes up and we can produce high-grade steel, we will be able to secure profitability.

I am [indiscernible] from the International Trade Affairs Office at POSCO. Let me add a little. From June, we began operation of the EAF to begin production of carbon-reduced steel. However, the carbon-reduced steel market is still in its initial stages. So we are currently focusing on promoting this product to the clients -- potential clients. In particular, there are global OEM companies and energy companies. And for them, we are currently doing a test supply for customer verification to expand potential -- expand our sales.

The cost increase due to EAF is something that can be addressed with the creation of a premium market. But right now, there isn't -- the market hasn't developed enough, and there isn't a global standard for it. So we believe that we will be able to make up for the costs. And beginning next year, we will continue to ramp up utilization rate to improve profitability and production volume.

Next is from DB Securities, [indiscernible].

My name is [indiscernible] from DB Securities. I'd like to ask a question about lithium. So your process is different from conventional method. I wonder what the margin rate is. And Pilbara Lithium is very much dependent on the price spread of spodumene and lithium hydroxide. So what are the cost and profit implications from -- in the ore lithium business?

Phase 1 has -- POSCO Argentina Phase 1 and PPLS Phase 1. Let me address Argentina first. Phase 1 is lithium hydroxide. Phase 2 is TGLC. These are all based on index prices. [ TGLC ] is industrial, but the price is the same as PPLC. Our cost is about $3 more than TGLC. So it's profitable. Once Phase 1 or Phase 2 completes, then our profitability is going to only get better. And in Phase 2, we have a new process, yes, but this is a pretty widely used process.

In Chile and Argentina, there is a standard profit structure that we are envisioning, projecting, and I don't think it's going to be too hard to achieve that. Whether the process is going to impact profitability, I don't think that's the variable we should be looking at. It's actually the demand for ESS that is impacting our profitability.

In ore lithium, as already mentioned, the price of spodumene, how much of the price of spodumene takes up the price of lithium hydroxide. That is the question. It should be between 4% to 5%. Let's say it's 5% and because the yield is about 85%, about 7x that is the raw materials cost. And so it ends up being about 35% of the total price being the cost of the raw materials. This is standard in the industry, and it was this way until a certain point in time, but this has come up to about 56%. The raw materials cost was as high as 56%.

Why is Pilbara having such a hard time this year? It's because it's gone up to about 70%. Even China is not profitable. When China says it is profitable, they are taking away certain parts in that cost structure. So at this price, no company can be profitable. This is the frank truth. Our current profit structure is dependent on whether large-scale massive mines begin -- rebegin operation and/or if Australia develops new and more mines. So these are some of the predictions that some expert agencies are making. If this pans out, then we will be profitable, and we will be able to increase our production, of course, in consultation with our automotive OEMs and client OEMs.

The next question is from Shinhan Investment Securities.

I am [indiscernible] from Shinhan Investment Securities. In China, there are -- people are saying that they will make sodium batteries commercially available by next year. And I'm curious if POSCO is also making efforts in that direction.

I'm [indiscernible] from Energy Materials Business Development Office. SID sodium-ion batteries have been quite crazy. But as you would probably know, the outlook is different for each organization. Some do look very optimistically, some are taking a very conservative projection.

Regarding sodium-ion batteries, we are considering the outlook and the uncertainties, and we are working closely with our partners to -- for research and development. We can't give you -- we can't talk about this in detail, but we will -- we do have plans to launch CAM and AAM alongside our customers' plans. And regarding the anodes, we have a list to -- we have an agenda to continue R&D.

Do you have any additional questions? It doesn't appear that we have any more. It's almost 1 year. And Barclays and [ DKM ] have given us online questions. I took a brief look, and it looks like we've answered most of them, but some parts remain unanswered. I wonder if we at the IR Office could reach out to you with that answer to that question.

So I'd like to close the earnings release meeting today. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello. I Head up the Finance and IR Division at POSCO Holdings. My name is Kim Seung-Jun.

First, I'd like to thank everyone participating in the 2026 first quarter earnings call. Thank you to the investors and analysts.

In the first quarter, the U.S.-Iran war disrupted the energy supply chain, which triggered greater fluctuations in the financial market that led to unstable exchange rates. So we witnessed aggravated challenges. Despite these headwinds, POSCO Holdings recorded consolidated revenue of KRW 17.9 trillion and KRW 710 billion in operating profits. Improvements are observed in both revenue and profit against the previous quarter.

Looking at each business sector. In rechargeable battery materials, lithium prices rose, helping lithium production subsidiaries to perform, significantly reducing losses. Particularly, in POSCO Argentina, plant operation has ramped up, while elevated lithium price continues to hold. As a result, in March, it recorded the first-ever monthly profit. We believe the strong performance will continue in the second quarter. And in the second quarter, we also anticipate POSCO Argentina's first ever quarterly profit.

In steel, despite volume growth in sales, rise in FX causes us to pay more for raw materials, squeezing profit. Nevertheless, improved performance in overseas subsidiaries helped register an overall rise in profit. Once geopolitical risk in the Middle East subsides and input costs pushed up by FX and oil price hike come down, taking into consideration time delay for cost impact accounting, we anticipate gradual profit gain starting in the second half.

In the infrastructure business, POSCO International saw its steel exports climb as well as demand recover in gas and energy sectors. Additionally, POSCO E&C has recovered its losses resulting from last year's accidents transitioning to black through sizable profit gains. What is notable this year is the strategic shift in our steel business that is coming to fruition. We finalized divestment of PZSS, the underperforming China subsidiary and to reduce the load of high-cost aging facilities to FINEX has been retired.

Beginning in June, with the goal to expand our low-carbon production system, the world's largest new 2.5 million ton capacity electrical furnace will go into operation. To validate POSCO's proprietary HyREX technology, a 300,000 ton capacity demo plant has broken ground. We've also acquired government permit for the Pohang HyREX plant site. These developments help us to set up the groundwork to build our sustainable business structure.

The integrated steelworks project in Odisha India is progressing. In October '24, we signed an MOU with JSW and an HOA in July '25. Most recently, a JV agreement has been signed. More detail regarding the recent agreement will be delivered in a few minutes by the Head of our Strategic Investment Division.

Finally, allow me to speak about the third interim shareholder return policy to go into effect this year. In our effort to offer a proactive shareholder return policy, we've been paying quarterly dividends since 2016. The first installment of our interim shareholder return policy was announced in 2020. This year, we delivered its third installment.

To enhance the ability of our shareholders to have better visibility into dividends, we wish to shift an earnings-based and performance-linked return policy. Based on net income attributable to controlling interest, we aim to deliver 35% to 40% shareholder return ratio. We will deliver a blended mix of cash dividends and share buyback and cancellations to boost shareholder value.

Looking forward, we'll continue to drive strategic investment for future growth and harmonize that with earnings and performance-linked shareholder returns. This is how POSCO Holdings will build a virtuous cycle that generates robust business growth that will feed into boosting shareholder value.

Now I would like to invite the Head of our Strategy and Investment division to discuss the JVA signing with JSW in India. Then Ms. Han Young-Ah, our IR Office Head, will offer more detail regarding our first quarter 2026 earnings.

Hello, everyone. I'm with the Strategic Investment division at POSCO. My name is Gwang-mu. On April 20, JSW and POSCO signed an agreement for a joint venture on an integrated steel mill. Let me deliver some more detail.

Looking at governance first, this is, first of all, a 50-50 joint venture. Each company will represent 3 directors on the Board, and the CEO will have a 5-year term, and each will alternate to appoint the CEO. POSCO's technology capability as well as JSW's operational capability and the cost competitiveness is what we are going on, on this joint venture project.

From a marketing perspective, JSW has a strong sales network and POSCO Maharashtra has a strong automotive steel sheet capacity. So we want to be able to mitigate some of the entry barriers and to be able to generate stable profits in a high-growth market.

For operational capability, this is not a market we enter alone. This is a joint venture. It is with the #1 steelmaker in India, JSW, and we'll be able to take advantage of their business capability. So local entry often triggers foreign risk, and we're able to eliminate that here.

Product capability, of course, POSCO has a lot of product prowess, and so we'll be taking advantage of that as well. And low-cost iron ore material use is one of our advantages.

Construction-wise, we will be completing this project by 2031.

Looking at the plant site and the infrastructure surrounding the site. First of all, the site is in the state of Odisha, which is an area that promises convenient supply of raw materials. Rail, shipping, power and water use offer some advantages as well. So there are some geographical advantages that we can accrue. The biggest advantage is because we've tried to do this before and had difficulties in procuring site as well as permits and licenses, this time around, because we've already acquired the site, a lot of the risk involved in this business has already been eliminated.

Business overview. This will be blast furnace-based 600 -- 6 million ton capacity for high premium steel products. High profit automotive steel products need customer certification. So first of all, we will be responding to construction steel demand in the beginning stages to be able to generate some profit before we move into automotive steel sheets. Initially, we will be taking some of the materials from Korea, exporting it to India to be processed there for final product. But this project is different because we want to be able to localize all sourcing. Previously, and facility-wise, this will be an integrated mill that is not too different from what we have here in Korea. But we've added a pellet plant. That is the big difference.

Investment overview. 30% of our own assets and 70% liability is what the funding is composed of. And so this is to ensure that we have the highest profitability. From a competitiveness perspective, CapEx competitiveness, first of all, we'll be able to cut costs on construction with cheap labor in India. And so there will be a lot more competitiveness that we can add to this investment project. And as mentioned earlier, we'll be able to use inexpensive iron ore available in India and of course, low-cost labor as well. And our high-tech capability will promise the production of premium steel products that will promise profitability. So cost-wise, profit-wise, from both perspectives, we can accrue advantages on this project. This is not a onetime investment project. I think we all know that India is a high-growth market. So we will be taking advantage of all growth opportunities in the market going forward. Thank you.

Questions regarding this project, please hold on to them until a little bit later. And next, we will talk about...

In Q1, consolidated revenue came in at KRW 7.9 trillion, up by around KRW 1 trillion Q-o-Q. OP was KRW 707 billion, improvement from the previous year. EBITDA of KRW 1.8 trillion, up KRW 721 billion Q-o-Q.

Now if you look at the steel business, profit increased by KRW 91 billion. At POSCO, higher FX rates, logistics costs and raw material prices have led to margins under pressure. That said, supported by the base effect from the Zhangjiagang operation, which had posted large loss in Q4 of last year and due to restructuring ahead of the sale as well as earnings recovery in India and Vietnam, the overall profit, including overseas steel, increased slightly.

In the rechargeable battery materials, losses narrowed significantly, recovering about KRW 150 billion Q-o-Q, and improvement was driven by higher operating rate at Argentina lithium plant. And at POSCO Pilbara Lithium Solution, the rebound in lithium prices and reversal of inventory valuation losses were also accounted for.

Now the profits in the infrastructure also increased by around KRW 415 billion Q-o-Q. POSCO International delivered solid profit growth and supported by favorable market conditions and POSCO E&C, which recorded large loss in previous quarter, also turned to profit posting KRW 53 billion in OP.

So in summary, profit levels, which had been weighed down in the previous quarter by several one-off factors, normalized overall. In particular, what is meaningful, structurally, is that from the recent rise in lithium prices and the start of full-scale commercial production at the Argentina operation, all of these factors combined have led this upside.

Now moving on to Page 6. Let me talk about advancing the structural transformation of steel business. POSCO is shifting business structure by reducing high-cost aging facilities, expanding its EAF-based low-carbon production system.

First of all, POSCO is moving forward with the closure of #2 FINEX at Pohang, which is about 1.5 million tons. So this is actually very crucial, which has been very much a plus for our operations, but it's a very old facility, and it is better for us to close it for its low operational efficiency. And we are currently planning to build a demo plant preparing to transition to a HyREX. And there was also approval from MOLED for the changes to the Pohang Industrial Complex plan. So POSCO is now able to utilize 1.35 million square meters of public water in Pohang steel works to create the site that can be used for a HyREX transition. And then there is Gwangyang EAF, which broke ground in January, February 2024 to begin operation in June with an annual capacity of 2.5 million tons and will be a key facility in POSCO's transition.

Now let me delve deeper into our lithium subsidiaries. First of all, POSCO Argentina is currently entering the commercial production phase of its Phase 1 plant. As of March, the operating rate had risen to around 70%. Now the utilization rate has gone up. And as for the January and February, there have been a depletion of the low-price contracts. And so with the signing, there was about KRW 50 billion of losses per quarter, but we were able to narrow that gap widely this time, and we'll be able to turn to profit in the near future. And in the third quarter and the fourth quarter, we expect to see earnings improved as well. And in the first quarter, there was a signing of a long-term supply agreement with SK On, about 25,000 tons. So the customer base is also expanding steadily, and we'll be able to secure more volumes.

Now with the increase in utilization rates, the costs are going down. But other than that, there is also a mid- to long-term efforts being made in order to reduce production cost. To give you an example, in April this year, when it comes to the downstream strategy or downstream contract, it was changed into a fixed format -- fixed form. And there is also additional PV efforts being made for the upstream contracts as well. So when it comes to the Phase 2 construction, it is progressing towards completion in October this year, and we are also securing additional brine resources, and there's also just commissioning that is underway. So we'll be able to bring in more profits for this plant. And as for this plant, it will create in a conventional way and also produce technical-grade lithium. So compared to Phase 1, it will be much easier for production. So we completed the Argentinian brine plant resources with the LIS 100%, and we believe that we'll be able to secure more additional brine resources in the future.

Now let me talk about POSCO Pilbara Lithium Solution. So there was about KRW 50 billion losses, but it was actually reduced to KRW 3 billion this time. So mostly, it was driven by increased sales and production, but it was also partially driven by the reversal of the inventory losses. And the biggest factor also was the higher lithium prices as well as the spodumene prices. So spodumene prices has gone up to 11% compared to lithium prices in terms of its percentage. And as for this Pilbara Lithium Solution, if the raw material costs go up, the spreads will squeeze and it could pose as a burden for the company in the short term. So going forward, it will be very much impacted by the spread that I talked about rather than lithium prices. So there are some uncertainties over there.

As for the Australia's Mineral Resources, once we complete the definitive agreement, there are merger control procedures that need to be done. So because of this merger control reviews, so we don't know when the exact timing of the joint venture establishment will be, but both companies are working towards establish a joint venture around the fourth quarter of this year. And since the time of investment, spodumene prices have risen sharply, so we expect this to significantly boost the new JV's ability to generate cash flow. And POSCO HY Clean Metal recorded its first ever quarterly profit since its commissioning. So as a non-Chinese recycling company, we can say that it has entered a phase of stable operations.

Now moving on to Page 8. From 2023 to 2025, we have implemented our second interim shareholder return policy. Over the past 3 years, we paid out KRW 2.3 trillion cash dividends and KRW 1.2 trillion in canceled treasury shares, all in all, KRW 3.5 trillion of shareholder return. Despite challenging business environment, we were -- we did our best to fulfill our promise to our shareholders. With regards to treasury stock cancellation, the policy that was announced in 2024, so it was -- it accumulated to KRW 1.2 trillion, and we completed about KRW 635.1 billion of cancellation that remained. So all in all, the future -- the treasury share cancellation plan was about KRW 1.8 trillion for the past 3 years, and we have completely succeeded it.

Now let me talk about the next 3 years. Now when it comes to our existing shareholder return policy, it was to make sure that the surplus cash flow can be used to pay out dividends as well. But as the strategic investments are rising on the rise, the dividend payout based on free cash flow in terms of growth could pose limitations. There were some voices about that. So we want to reinforce our high dividend market position and payout visibility. That is why we plan to shift toward a performance-linked shareholder return policy based on earnings. So we have set a target shareholder return ratio of 35% to 40% of adjusted net profit attributable to controlling interest. Now the -- when it comes to net profit, by using this adjusted net profit, excluding nonrecurring gains and losses as a baseline, we aim to -- for example, the restructuring and so forth will be excluded. So by doing so, we aim to secure both the payout visibility and stability. So we want to address the uncertainties of the dividend payout ratio payout policy based on free cash flow. So going forward, we will continue to maintain a balance between growth investments and shareholder returns by -- thereby enhancing our mid- to long-term corporate value.

Now let me brief you on the earnings by company in more detail. First, POSCO. POSCO's Q1 OP declined Q-o-Q to KRW 213 billion. Sales volume recovered from the previous quarter. Production and utilization rate normalized. Selling prices also remained broadly stable Q-o-Q. But due to higher raw material prices and because of their war in Iran, the FX rates and freight costs went up. So the cost burden for key raw materials increased. For example, when we source raw materials, because of the Iranian war, the logistics costs have gone up. So all of that is serving as a cost burden. So we will continue to make -- despite our efforts, this cost push pressure will remain as burden in the second quarter as well.

Now moving on to Page 11, overseas steel. Indonesia, India, Vietnam operations are showing improving results, and the Zhangjiagang operation has been divested.

And let's go to Page 12, POSCO Future M. POSCO Future M recorded both higher revenue and operating profit. So when it comes to cathode material, it continues to secure new customers and expand sales. As for anode, the impact of inventory adjustment is still going, but earnings improved due to base effect from the large loss recorded in the previous quarter.

Moving on to Page 13, POSCO International. POSCO International delivered solid results in both energy and trading businesses. In Energy, profit increased on higher power plant utilization rates and S&P rise. In trading as well, profits improved, thanks to higher sales of steel and materials as well as favorable market conditions. And the capacity expansion effect from Senex gas fields and the rise in the global commodity prices also had a positive impact for trading.

Now moving on to Page 14. POSCO E&C posted a sharp improvement in OP. Turning to profit. There were some one-off factors, but the projects are becoming normalized. And we want to also strengthen our cost control. So we will -- we expect to maintain such profitability level.

Now this concludes brief presentation on first quarter earnings of 2026. We will move on to the Q&A session. Thank you very much.

We'd like to begin the Q&A. [Operator Instructions] The first question is from Hyundai Motor Securities.

My name is Park Hyun-Wook. I have about 4 questions. The first is regarding the JV agreement in India. So you mentioned that this is part of your localization strategy. Once the JV goes into effect, in the past, you exported items to POSCO Maharashtra to be processed in India. What will happen to PMH after the JV agreement goes into effect?

Second question is about the steel market outlook. Hot-rolled products have been rising in price. What is the rationale behind that price hike? And how does this impact your business? From a distribution price perspective, hot-rolled price has increased, but relatively speaking, cold rolled has stayed stagnant. So what do you project for cold-rolled products going forward?

Third question regarding the Iran situation and the Strait of Hormuz. And because this is likely to become a prolonged event, in terms of your exports as well as your FX and other business decisions, how does this situation impact your business?

And the fourth question is regarding your lithium business. Lithium prices are rising. And I think it's very positive that performance has improved in the first quarter. But is this the result of rising lithium prices? Or is it a result of something else? And for each factor, what is the proportion you would apply as the influencing factors? POSCO Future M has turned a profit. So what do you project to be its operating profit this year? That is all of my questions.

My name is Kim Young-Joong, POSCO Marketing Strategy Office.

My name is Kim Gwang-mu, Strategy Investment division. I actually spoke to you about the JVA in India.

In terms of the export volume, we need to consider the volume going to POSCO Maharashtra and the other, the volume that goes from POSCO to India per se. So I think we have to separate this into 2 parts. Up until the JV goes into effect, I think the hot-rolled products will continue to export in the same volume that we've seen in the past. So once the JV goes into effect, because we will not be able to produce automotive steel sheets immediately, it will be something that we will gradually move on to. Initially, we'll be supplying non-automotive steel products. And I think our exports will not be impacted.

Second question, I would like to address the second question. Again, my name is [indiscernible], Marketing Strategy Office Head. So demand has been lackluster. And because of the price drops as well as hikes in oil price and other input prices, this has caused -- triggered a lot of pressure. But because demand is increasing, hot-rolled product prices have been increasing as well. So this price is likely to hold for some time. Even into the future, I believe because of the hot-rolled price, the cold-rolled product price will be impacted as well. And the antidumping cases that are being evaluated, this is going to impact future pricing as well. So there's still pressures on our cost. But given the situation in the Middle East as well as our own domestic market situation, we will continue to look at our price in consideration of these situations. We've had many factors that pushed the price in the past. But because our input cost is also increasing, our margin is being squeezed.

In the future, Southeast Asia and India will become new regions where we will have to identify different sources to -- for selling.

So Hormuz Strait closure as well as oil price hikes, this is something that POSCO is most impacted by. So I'd like to ask someone from POSCO to answer this question.

My is Ha [indiscernible], Finance Office Head. Because of the Iran war, I think the business that is most highly impacted among POSCO Group of companies is POSCO, first because of FX, the other because of oil price hikes and next price hikes in LNG. FX impact is probably self-explanatory because we spend more dollars than to buy dollars. That's where the impact is. And we do use a lot of oil. And so this causes a lot of pressure in our input costs.

LNG price is the same. Our response for the FX situation is we want to be able to bring in more dollars. So our settlement currency is being shifted, and we're seeing some impact there already.

For LNG, we are diversifying our supply routes to other countries such as Indonesia. And so we're seeing impact here as well.

And third, by increasing efficiency of energy use, we are identifying various ways to cut energy use costs. And so we are making efforts to offset some of these price hikes but it's very difficult to offset all cost increases. Therefore, we will have to pass some of this on to the final price of our products. But we are an infrastructure business. We have our social responsibility to keep our prices rationalized. And so we will be very prudent in pushing up prices.

In relation to this issue, we talked about oil FX and even LNG and energy prices. In terms of FX impact, of course, there is negative impact on POSCO, but we also have POSCO International, which is an exporting company. And at POSCO Future M, they are positively impacted by FX fluctuations. So I think the positive impact is able to cover about 50% of the losses experienced at POSCO.

My name is [indiscernible], Energy Materials Business Management Office. So we have had continuous deficits, especially in brine lithium as well as in HY Clean Metal. However, we've seen profits registered this quarter. And so with these profit gains, we're able to offset some of the losses we've experienced in the past. Exactly what proportion has offset which parts of the losses, I can't tell you for sure. But what I can tell you is because our leading customer, GM, had canceled all of its contracts, we were unable to deliver what we had produced. So now we are transitioning some of our supplies to energy industries. And so our plant is at 70% utilization rate. And so I think all of these positive factors are mixed to say the least.

Infrastructure business, [indiscernible].

POSCO E&C's profit size projection was the question, I believe. Operating profit is projected to be KRW 120 billion, but there are some additional input cost risks, but some of the project value adjustments as well as other cost-cutting efforts will help us to push up our profit. And so our business plan is to achieve KRW 120 billion. I believe we will achieve that.

Next question is from Hana Securities, Park Song Bong.

I'm Park Song Bong from Hana Securities. I would like to ask 2 questions. First of all, regarding the direct employment of the subcontractors, we've heard about it on the news. So I believe there are about 7,000 of them. So if that is realized, SG&A cost could go up. So I would like to know how much of a hike in the SG&A cost that we can expect?

And the second question is, you mentioned about turning to profit in the second quarter, and probably in the latter half of the year, the utilization will go up. So I think that overall, we can look at profitability. When it comes to lithium prices or lithium business profits, what are your expectations for this year?

I am Head of Finance at POSCO. Regarding the direct employment of the subcontractors, employees and the cost increase, so, of course, partial increase in the cost or expenses will be inevitable because the benefit-related policy and measures need to be included. So when it comes to labor costs as well as employee benefits costs, that could be -- that could result in increased expenses. But we're going to complement the relevant policies as well as improve work efficiencies. So we want to complement the increase in costs with other measures. Of course, we cannot confirm the actual impact for the time being.

Now when it comes to the brine as well as the iron ore lithium businesses, we have to consider them separately. And as for the lithium brine, the Argentinian project, as our CFO mentioned, we believe that it is going to continue to see profits. But last year, there are some low-price contracts that will come to completion by the end of April. So that could have an impact on April. But from May, we will turn to profit.

When it comes to the overall volume, we have to -- it is subject to market conditions in the second half. When it comes to lithium concentrate, since it is a concentrate, it needs sodium as a raw material. So the average sodium price in March and if you compare it to now, the selling price has increased about 5%, but the sodium price has risen 20%. So if you make the calculation, the raw material prices, we expected it to be 70%, but it has gone up to 85% overall. So it continues to remain very high, but we have to see whether it continues to remain very high. And according to our estimation, at this raw material price level, even China without subsidy, they cannot turn to profit. So we believe that there is going to be a narrowing of the gap going forward. So in the second half, the brine lithium will be able to turn to profit, and the lithium concentrate, 80% of the selling price is sodium. So we have to really closely watch the prices of the sodium.

Now let me add some comments about the recruitment or employment of the subcontractor employees. So when it comes to POSCO subcontractor employees, we -- there are some costs that have incurred over the years. And once they are directly employed, so they will be translated into the labor cost as well as employee benefit cost. So the direct employment will not have a huge impact. However, when it comes to the level of -- if we are to include like additional employee benefits, including the communications costs as well as the in-house meal costs and so forth, that could lead to a slight increase in the labor cost as well as the employee benefit costs. But after the direct employment, we will see more streamlined control and supervision structure. So that will lead to enhanced work efficiency and productivity. So overall, it will contribute to enhancing competitiveness of the company. And in the long term, it is not going to have a huge impact in terms of costs.

Next question is DB Securities.

I have 2 questions. First, besides India, some of your overseas investments included Cleveland-Cliffs and the Whyalla Steelworks in Australia. So do you have any budgets set aside or time line set aside?

And in terms of HyREX investment, you once estimated KRW 40 trillion. In which areas would you continue to invest this? And can you divide this up into the different areas of investment that HyREX will need?

My name is Kim, Strategy Investment Division. Let me answer your first question. In 2025, in order to enter the U.S. market, we signed an MOU with Cleveland-Cliffs. For cooperation and business synergy, we wanted to be able to cooperate. So there's been a lot of negotiation ongoing, especially about corporate valuation. But there are a lot of differences in opinions that is making it difficult for us to reach an agreement. So at this point in time, I'm afraid I don't have any more update, and we do not have a scheduled date for completion of this agreement.

On the Whyalla Steelworks, it has gone into bankruptcy management, and this is under Australian government supervision. For POSCO, we are cooperating with BlueScope, Japan's NSC and India's JSW. We have submitted an [ N Bio ] to the government. By the second quarter of this year, they will be selecting priority candidates to take over this facility. Profitability schedule as well as investments will be determined at that point, and FS will continue into the third quarter. But at this point in time, the first step we have to pass is to be selected among those viable candidates.

I will answer your second question. My name is Kim Sun Jun. You mentioned KRW 40 trillion. This is inclusive of all costs relevant to HyREX transition. So looking at the different items, there is the cost for the transition of facilities, and there's also the cost related to hydrogen. So this includes all of the ancillary projects related to hydrogen development and production. And because the cost is increasing every time, I think I really couldn't give you specific numbers at this point. So this is all I can deliver at the moment.

Next question is Kim Securities, [indiscernible]. ;

I'm [indiscernible] from Securities. I have a question about lithium. Now in the slides, POSCO Argentina earnings have -- in terms of revenue increased by KRW 9 billion, but the OP by KRW 37 billion. So how were you able to achieve such a dramatic earnings improvement, especially the profit improvement? Can you elaborate more on that?

And the Phase 2 will be completed by October. So Phase 2, when will that have impact on the earnings? Since when? From when? And if that is accounted for? When will the overall lithium business turn to profit? I would like to ask about the timing of turning to profit.

I'm from Energy Materials Office. Yes, the OPs have improved drastically compared to revenue. That is thanks to utilization rate hike. And what is also more important is that the lithium prices last year, when they were very, very low, we had contracts that were very competitive that were signed. And we completed a ramp-up, and we will go for commercial production, but the certification is underway. So that is why we have gotten the prices at the index level from our customers. So our selling prices are very much close to the index level as well. So that has translated into improved profitability.

And when it comes to the Phase 2 and that's impacting our profitability, our depreciation cost will be reflected from October. So the depreciation level or the base line for reference for Latin America is about 25 years, but we consider that it will be about 10 years. So we believe that sales will be quite challenging for us because we don't have a lot of customers. So we want to consider the depreciation as a fixed cost. And as with the Phase 2, we will have about KRW 15 billion of losses. But Phase 1 and 2 combined, we believe that we will definitely turn to profits this year.

Now a similar question was made from JDB Partners and [indiscernible]. So I hope that this answer answers your questions as well.

Next question is from iM Securities, Kim Yoon Sang.

My name is Kim Yoon Sang. I have several questions. First, regarding lithium, let me add another question. So there are some plants that have closed and businesses that have gone out of business. So I think lithium supply is short. And so I'd like to know what your projections are about the lithium demand by the end of this year.

And I think you are at the turnaround point as projected because lithium business continues to experience difficulties. There are some businesses that are hard hit, and Albemarle is projecting this as well. So when will the deficits turn to profit in the market?

And third, CATL's sodium ion battery, how will this impact the lithium battery sector?

And fourth, about India. Through the JV agreement, I think what you are looking to capitalize on is low cost and the availability of input materials. And given the demand and supply projections, do you have enough to allocate to the JV in India?

Energy Materials Business Management Office. Lithium is in shortage, especially in the hard rock lithium. Because of the ESS demand, brine lithium is very difficult to add volumes. So we will have to replace this demand with -- or respond to this demand with hard rock. And because there are limitations to what we can take from China, we have to turn to Australia, and that's why spodumene prices have really soared.

And there are many announcements that we heard in February, which put the price at $20 to $26. UBS and JPMorgan have assessed this to be above $26. So what we believe is that we can achieve our operating profit at prices even lower than that. Our projection is between $24 to $25. So $25 is, I think, the standard being used by the industry. So compared to about 2 months ago, prices have gone up by about $2 to $3.

The second question. As I mentioned earlier, Pilbara Lithium Solution is very much dependent on the price of spodumene. So if we can add A&P and get to a positive territory, that would be great, but this is very difficult at the moment. So even with the spodumene prices at where they are, we want to be able to cut cost, and we are looking into other alternative mines as well. So there's a lot of effort we're making.

CATL's sodium-ion batteries, how does it impact our lithium battery business? Currently, the impact is small. But how much can this pervade the market is the question that we're trying to answer. According to experts, some will be looking at about 3% penetration in the ESS market. Others put it at about 3% to 4%. So there is a lot of advantages here because of price, because of stability, because of charging speed. So I think this will continue to pervade or make inroads into the market.

But how does it impact our lithium battery market? It will replace LFP, but it will not impact NCM market. We are also looking at the LH market. And so I think a calibration with the LH market is a little bit difficult at the moment.

My name is Kim, Strategy and Investment Division. Let me answer your question about the acquisition of iron ore. So iron ore price in India compared to the global iron ore price is quite different. The iron ore index price in the global market and the iron ore price used in India, if you compare the 2, it's -- the Indian price is about 50% to 60% lower. And the government actually applies 30% tariffs to impair to dissuade people from exporting this inexpensive iron ore outside India. So I think cost-wise, we have a definite advantage.

And stable supply of iron ore, looking at it from that perspective, most of the iron ore in India is in the Eastern region of India. Odisha is on the east side of India. So we are closer to these mines. And JSW has 45% self-sufficiency or so they claim. But because other steelmakers have lots of mines and they own them in the vicinity of our new plant, I don't think we will experience any difficulty in acquiring the needed iron ore.

Our plan is to set up by 2031 and then to put it into operation by 2032. Our iron ore acquisition selections have already been made. Once new schedule ends, some of the mines have sold rights that expire in 2032. So come 2032, I think we will have more mines that we can acquire. So we're looking forward to doing that.

Next question is from Samsung Securities, Baek Jae Seung.

I have 2 brief questions. First is about investment in India. Now it is seeing increased structural demand. So it is attractive market, but there is also a domestic capacity expansion in India and also the global players have entered the Indian market to increase production. So the competition is going to become increasingly fierce in that market. So in that sense, we can consider ourselves as a latecomer in the market. So what kind of competitive edge do we have to be able to fare well in the market?

And the second is about electrical arc furnace, which will go operational from Q2. And when it comes to EAF, I would like to know about additional costs that could incur because of the operation of EAF. If that is the case, how much would that be?

I'm Kim Gwang-mu, Head of Strategic Investment Division. You mentioned about the mismatch between supply and demand in the Indian market. So as of 2024, India's steel demand is about 150 million tons and supply is about 140 million tons. So 10 million ton of shortage of supply. So what will be the demand in the Indian market for steel? So by 2035 to 2040, India is going to see an increased economic growth about 6% to 6.5%, and the steel demand is also going to see an increased 5% to 6%. So by 2035, we believe that about 250 million tons, 250 million and 260 million tons of demand for steel will be there.

But in terms of supply, the major -- 4 major players, according to their disclosure, will lack -- we're short of 20 million tons of steel. And even though the plan if the plan is -- actually goes ahead as planned. But if it doesn't, then we will have more shortage. So when it comes to capacity expansion in India, it's a little bit different from China because the major 4 represents 80% of the market share. So their influence is very big. And in that case, the capacity expansion will not be a problem. So we have to -- we believe that our competitive edge in the high end or premium steel will be our key differentiator -- differentiating point.

I am, Kim, Steel Business Management Office Head. You mentioned about the increasing cost due to EAS. Compared to the time of our investment decision, demand hasn't gone up very well much, but the EAF has been expanded, and we believe that the cost will go up than had expected. But even when we decided to invest, we didn't expect it to go fully operational. We were expecting about 10% to 20% of utilization. So we had a step-by-step plan for EAF in terms of going operational. So on an annual basis, if the utilization rate is about 10%, the cost will go up by about KRW 70 billion to KRW 80 billion. But of course, if the costs go up, then the prices -- selling prices can go up and there will be some premium that is formed. So I think that's going to have less of a negative impact.

Now is there any additional questions from the participants? There are no further questions. Thank you very much. We've received a lot of questions online as well for today's conference call. I think that they were pretty much covered during the conference call. And for additional questions, we'll get back to you through the IR team. Thank you for joining.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Greetings. I head up the Finance and IR Division at POSCO Holdings. My name is Kim Seung-Jun. This is POSCO Holdings 2025 Full Year Earnings Release. I'd like to welcome the participants, investors and analysts. Thank you.

In 2025, we experienced global trade policy shifts and economic slowdown. It was a challenging environment. We put our effort into protecting our short-term profits. At the same time, as a business group, we built the foundation for future growth. 2025 consolidated revenues declined 5% year-on-year, recording KRW 69.1 trillion. Operating profit declined 16% to KRW 1.8 trillion.

While POSCO's OP grew from 3.9% to 5%, we failed to meet our goals due to the accidents at POSCO E&C that led to construction halt as well as the ramp-up costs that entered the books for the new lithium and precursor plants that were commissioned at the end of 2024. The fourth quarter profits were especially weak.

The reason was communicated in last quarter's release. Pohang HR plant and other facilities have gone into major repair schedules, triggering production volume cuts. Also, large volume imports that flooded our market prior to the preliminary AD tariffs on HR products were still being consumed, causing a temporary drop in sales volume.

There's more, the divestment of PZSS plant in China caused employee compensation to enter our books, too. This is in addition to the loss incurred by construction stop issued at POSCO E&C. So sizable onetime costs were accounted for all at once.

In 2026, we will likely serve out some significant inflection points for POSCO Holdings. First, we have, for some time, studied various ways to go overseas in steel. This year, we'll see some specific actions. Last year, we identified strategic partners, signed MOUs with the U.S. and Indian JV partners to begin negotiations. With these partners, we're in final stages of discussing the terms of our action plan. So this year, we'll be able to witness some action on our long sought entry strategies into overseas markets.

In parallel, we intend to strengthen our core by focusing on high-margin products in the domestic market.

Secondly, asset-based lithium operations will begin to generate profit. Our Argentina Lithium Plant 1 will ramp up and begin commercial operation this year. Last year, we signed deals with Australia's Wodgina and Mt Marion mine. The acquisition procedures will complete in the second half of the year, making immediate contributions to group level profits.

In the past several years, we completed Phase 1 of our investments evolving the purchase of lithium resources and plant building and ramp-up. With commercial production around the corner, lithium prices have recovered just in time. We're excited to enter the next phase of our business when we will begin to generate real profits.

By business model, an examination of the sequence of benefits accrued to parties impacted by the lithium price hikes illustrate that lithium ores, a.k.a. spodumene, so Australian hard rock lithium producers will be the first to enjoy the benefits. Next will be the brine-based lithium business in Argentina. Then the lithium processors, namely PPLS, who process the imported raw materials will be the last to enjoy the impact.

Third, value chain expansion of the infrastructure business will drive up margins. Therefore, we believe 2026 will be -- see the impact of portfolio management. And as long as we can keep the price at our current levels, we'll be able to see more profit. As a result of the infrastructure business expansion, again, we'll see the impact of our portfolio management reflected in our financial statements this year.

Australia's Senex Energy built out its expansion facilities for gas production in October. And in November, we acquired new palm oil production farms in Indonesia. The return on these investments will be fully reflected in our '26 annual performance. Also last year, PZSS plant in China that registered KRW 200 billion in red ink recently was approved by the Chinese government for divestment. Once the procedure runs through, it will be removed from our consolidated books.

Please understand that we're also aware that regardless of the rosy picture, we also have other challenges to confront: Stagnant domestic steel demand, formation of global blocks, tariff wars that restrict trade and the weakening won currency that has the effect of driving up cost and the risk of lithium price fluctuation to name a few. This year, by taking advantage of the various positive factors on our doorstep, we hope to turn the tide that held us back in the past few years. So we hope this year will prove to be the inflection point.

Thank you. Now I'll invite the Head of IR to deliver our 2025 performance results and '26 business plan.

Page 3. 2025 consolidated OP decreased KRW 347 billion year-on-year, recording KRW 1.8 trillion with consolidated EBITDA of KRW 5.9 trillion. POSCO's OP grew -- from quarter 1 to quarter 3, quarterly OP was on the rise with a slight decline in quarter 4 to KRW 12.7 billion.

First, POSCO E&C had construction stoppage and bad debt expenses recording KRW 190 billion of quarterly deficit. Second, PZSS divestment is ongoing and employee compensation and other temporary costs were administered, deficit totaling KRW 131.9 billion. In end of December, Chinese merger approval was completed and the sale will be completed within Q1.

Third, POSCO's OP recorded KRW 337 billion, decreasing from Q3. Off-season is one factor, but another factor is stockpiling of cheap imports prior to the hot-rolled AD measures. And we decreased our sales volume by 6% quarter-on-quarter. Also, Pohang hot rolling line is under major maintenance, so production was adjusted by 4%. With these efforts, market inventory of low-priced imports are balancing out. And from quarter 1, we expect production and sales volume to return to previous levels.

In 2026, as our CFO mentioned, restructuring of businesses in the red will show the impact and Argentina Lithium Phase 1 will begin commercial production, and we can expect RBM profits to improve. Last year, we acquired a palm farm, expanded capacity of Australia Senex gas fields and these new investments will also contribute to profits.

Page 4. This year, group-wide serious injury cases increased to 9. POSCO Group is enhancing safety systems, increasing employee participation and boosting operability on the ground as priority goals, focusing our best efforts to foster a safe workplace. Last year, we established the group Safety Innovation TF team as CEO direct report and launched POSCO safety solution to strengthen safety expertise.

Furthermore, we applied world-class safety consulting techniques to supplier companies. Also, we have outside specialized organizations regularly perform unscheduled inspections. We will continue to share our safe workplace metrics, improvements and actions with you transparently each quarter.

Page 5. In 2026, I will describe the key business activities in steel. In 2026, for domestic steel, we will develop decarbonization technologies and promote high-margin products to strengthen our business. In overseas steel, we will establish JVs to drive our end-to-end localization growth strategy.

First, to address the carbon-reduced steel market, we will begin construction of the HyREX demo plant in Pohang. Also Gwangyang EAF will continue operation in June. To enhance our profit structure in the domestic market, we will pursue growth in premium steel and specialized products.

We will advance specialized capacity at each steelworks. Pohang Works will lead hydrogen, LNG and power grid innovation as leading mill of energy and Gwangyang Works will be specialized for future mobility markets. We will continue to manage these aspects to increase our mix. We will continue to leverage technology to structurally cut costs under Cost Innovation 2030.

Finally, 2026 will be the year we act on overseas expansion. In the U.S., we have the Hyundai Motor Group EAF integrated mill project for which we confirmed share participation. Cooperation with Cleveland-Cliffs and the India integrated steel mill project with JSW are also ongoing.

Page 6. First, POSCO Argentina's ramp-up is near its completion stage. Generally, South American brine-based plants take 2 to 3 years to ramp up, but we have worked with the goal of completing it within a year. Major parts that needed to be replaced had some supply issues, delaying normal operation for 2 to 3 months. But by March end, we will boost utilization rate to more than 60%. And from July to August, we will be in full operation, meaning it will be our first year of commercial production.

Recently, lithium prices increased substantially. Argentina plant owns brine assets, so we have a lot of operating leverage in face of lithium price hikes. In Q1, we still have volumes remaining for low-priced orders and the utilization rate is rather low, but it will rapidly increase thereafter and profit improvements are in sight.

Furthermore, in the first few years of commercial production, production efficiency improves gradually, boosting cost competitiveness. So we believe this can be the beginning of a positive cycle.

As for POSCO Argentina Phase 2, considering the brine charge and evaporation schedule, construction is planned to be completed by Q4. Once completed, technical-grade lithium carbonate production capacity will be at 25,000 tonnes per annum. Recently, we acquired LIS brine asset at a competitive price, which will serve as a valuable asset for future expansion.

Next, POSCO Lithium -- POSCO Pilbara Lithium Solution. PPLS' major clients include POSCO Future M and other domestic and North American customers in its sales structure. However, demand from these customer base has been slowing down, requiring the company to diversify its customers. European and global top-tier OEM companies are among the new customers that we are working to secure. And there are some positive developments.

Regarding the recent lithium price hike, PPLS imports spodumene from Australia to produce lithium. Recently, spodumene price increase has been higher than lithium price increase with the spodumene to lithium hydroxide price ratio reaching 11%. Therefore, the higher lithium price has not been an immediate positive factor, and there are some temporary difficulties with margin spread. But in the long term, we expect positive impacts.

Third, the JV investment with Australia's mineral resources. Currently, foreign investment approval and merger filing is currently underway. Once they are complete, the final contract will take place near March and the payment will take place within Q2. Therefore, profits from this mine will be included from the second half through gains on equity method valuation. Once investment is approved for the next 4 years, the spodumene concentrate price we estimated was around $1,000 per tonne, but currently, the price rose to more than $2,000. Considering the market situation, we expect the mine to immediately begin contributing to gain on equity method valuation. And next year, the impact of the price hike will be bigger. For production volume, cash costs and other basic details, please refer to MinRes website.

Meanwhile, to verify lithium DLE direct lithium extraction technology, we are investing in the technology. POSCO HY Clean Metal was the first to begin normal operation. And since October 2025, it has sustained EBITDA surplus. Black mass price is on the rise and the supply and demand is tight, but it has confidence in its stable production technology and is discussing opportunities to expand business with global companies.

Now for solid-state battery, we are also active on the scene with robust technology development. POSCO Future M is working with the U.S. solid-state battery maker, Factorial, making strategic investment. And POSCO JK SS recently developed commercialization technology for sulfide solid-state electrolyte mass synthesis method, which gained recognition.

Page 7, portfolio management update. 2025 was the second year of restructuring. Including the divestment of all NSC shares, 28 projects were completed, generating cash of KRW 1.1 trillion. Thus, since 2024, we have generated cash cumulative of KRW 1.8 trillion. We aim to continue restructuring 55 additional projects by 2028. This will generate KRW 1 trillion of cash.

Page 8, CapEx administration and plan for this year. Last year, RBM Phase 1 investment was nearly completed. Thus, the total consolidated CapEx administered fell to KRW 7 trillion from KRW 9 trillion in 2024. This year, in addition to the lithium investment, we have also reflected the budget for upstream investment overseas, which will temporarily increase the CapEx size.

Next, performance by operating companies. First, POSCO. POSCO's operating profit improved from the previous year, with an operating margin ratio of 5.1%. So we believe that our profitability enhancement has taken place. Q4 price increased from Q3, but coal unit price rose, leading to high raw material prices. So the mill margin fell moderately on quarter. The low-price import market inventory adjustment efforts led to sales volume falling to 7.7 million tonnes, putting pressure on profits. But this year's Q1 will see sales volume return to previous level years, and we plan to raise the selling price of some products. The effect of price increase will show from Q2.

In 2026, we expect EU and other countries to strengthen protectionist policies and challenges will continue. But by expanding sales of high-margin strategic products, and accelerating global expansion strategies, we will do our best to continue to turn profits.

Page 9, overseas steel. As for overseas steel profits, despite a weak global market, we optimized our marketing strategy and cut costs, improving our profitability. PTKP in Indonesia expanded export to high-margin European markets, which improved profit structure. And POSCO Maharashtra in India increased ratio of auto sheet sales. And PY VINA in Vietnam also shifted to profits in 2025. But if you look at Q4, it showed KRW 135.9 billion of deficit. This is mainly from PZSS, which is undergoing divestment. It will be excluded from consolidated data in 2026, which will lead to decrease in deficits.

Page 10, POSCO Future M. Last year, energy materials, including CAM and AAM saw revenue decline from slowdown in EV demand. But by boosting efficiency and cost cutting, we kept the level of operating loss similar to the previous year.

And next, POSCO International. In 2025, energy and materials trading both demonstrated higher OP recording strong performance. Last October, Australia Senex Energy production expansion was completed. And in November, Indonesia palm farm was acquired, which will contribute to additional profits this year with forecast for profit growth.

Next, Page 14, POSCO E&C. Last year, the POSCO E&C had the [ Shin-Ansan ] accident loss recognition, additional costs from suspension of construction and losses from overseas projects. These one-off costs and bad debt expenses were reflected recording a sizable deficit. However, we anticipate a turnaround to profit in 2026.

This concludes the overview of POSCO Holdings performance. We will now have Q&A. Thank you.

[Operator Instructions] The first question is from Hyundai Motor Securities, Mr. Park Hyun-Wook.

My name is Park. According to your presentation, POSCO's performance is looking pretty good this year. I have 3 questions. The first one is regarding the steel market outlook. In the first half in automotive and shipbuilding, major demand industries, what are some of the negotiations that you're looking forward to? What do you expect? And some of the Japanese and Chinese HR products have posed some challenges last year and some of the impact of those products will manifest in the first half of this year. So when will we begin to see POSCO's market share increase?

Secondly, lithium prices have been rising significantly. So it's about $18,000. How do you forecast the lithium prices for the rest of this year? And based on current price levels, Argentina salt lake as well as hard rock lithium, what do you think about their prospects? And this year, I think some of the construction is continuing. Currently, when can we expect to hit BEP?

Third question. You have invested as POSCO Holdings in lithium mines. You're also investing in India and North America. So there are a lot of sizable investments being made. But I think there's still lingering concern about HMM acquisition in the market. So we are watching this. We'd be really curious to hear what your position is? That's all of my questions.

My name is [indiscernible] Marketing Strategy Officer at POSCO. So in the demand industry such as automotive and shipbuilding, you asked about the market outlook. Here's my answer. The steel market this year, first on global steel market, we'll see some appeasement from China. And because of some of the other expansion plans, I think we'll see some improvement, but we'll see some differences by region.

In China, real estate market is still in a recession. So this year, steel demand is likely to continue to decrease. So they will experience a negative growth. But in Europe and the United States, they have already hit their base point. So we believe that they will be recovering. But because of the policy uncertainties, whether demand will actually increase that we'll have to wait and see.

In the emerging economies in India and the ASEAN countries, we will see some strong demand increases. In India, in particular, because they're increasing manufacturing as well as infrastructure building, I think we'll see strong growth signals in '26 as well.

In domestic market, we'll see some disparities by industry as well. In shipbuilding and defense as well as power industries, we'll see some strong growth continue. But in home electronics and construction, we will continue to experience recession.

In automobiles, tariffs and some of the sharp demand decreases will continue to pose challenges on them. And so there will be a little bit more -- there will have to be a little bit more time before we can see recovery. On price negotiations with the auto OEMs, since last year, tariffs have become an issue. So against the negotiation formula, they are asking for additional discounts. We are going to try to stick to the formula as much as possible.

For shipbuilding companies, because they have a stable supply of orders and because they are trying to dominate or take a larger share of the market, we will take that into consideration when we negotiate with them.

For the hot-rolled AD tariffs, what kind of impact can we expect was your question, I believe. I believe the flat products have seen a decrease of about 300,000 tonnes in the fourth quarter against the third quarter of last year. But we believe that the flooding of these products into our market has come to an end. And by March or April, we'll be increasing our selling prices. And the impact of these raised prices will begin to see them in the second quarter and beyond. So we'll continue to make these kinds of efforts.

My name is [indiscernible], Energy Materials Business Management Office. On lithium price, IBs have refrained from publishing prices. But one has forecast $20. So it will be similar to the current price. And Chinese inventory, it's not increasing. So to -- this price doesn't reflect an effort to increase that inventory. It's actually reflecting actual demand. So for about 2 years, lithium prices have fluctuated. And so we went through a pretty harsh cycle. I think the lowest point was in 2018, and then we saw it go up continuously.

So in -- sorry, in '18, we hit a high point and then it began to fall. And then it began to rise again for about 2 years. And took that up to about $80. And by the end of last year, we saw those prices drop. And so this rise is only about 3 months old. So based on past lessons, I think we will see it continue to rise. We have to be very careful here. We have past lessons to reflect on. But I think very gingerly, I make the forecast that we will see it rise.

In Gwangyang and Argentina, we were deep into ramp-up in both locations. So no profits there. But we will go into commercial production this year, in particular, in Argentina, in January and February, we had some issues. The membrane component was in short supply. So in January and February, our volume did not hit our goal. And because we will be shipping out orders, filling orders for which we offered a lower price, that will not be generating too much profit either.

So because of the component that was in short supply and because we're still delivering on low-priced agreements, we will not be generating profit anytime soon. But as all plants do, we have to certify the plants. And so our clients and automakers will be making a visit out to our plant in Argentina. they have scheduled that. And so our hope is that we will be turning this tide this year.

Let me now speak about Pilbara, their hard rock lithium. Ore lithium price is important, but the price of the raw material is just as important. Spodumene price was about 4% of spodumene at lithium price. Because we need 7 tonnes of hard rock spodumene to make lithium, 30% -- 40% of raw materials price was the formula we use. But recently, we've seen that price go up.

So LH is $19,500 and spodumene is $24,000. So it went up by about 17%. So if we use 7 tonnes, the cost of our raw materials will be about 80% of our total cost structure. So this price increase needs to hit our books in a timely manner for us to be able to generate meaningful profit. So exactly how this will reflect in our books, it will depend a lot on the spread of the price of spodumene and hard rock lithium. But what we can predict is that our loss will be much smaller than last year. So we will be engaged in diverse activities in order to enhance our profit.

On HMM acquisition, I will answer that inquiry. We've already made some public disclosures on our position, and we've consistently said that this is in preliminary review stage. There are no specific decisions that have been made. Since then, there has been no progress. So this is the clear answer to your question.

The next question will be from iM Securities, Kim Yoon Sang.

I am Kim Yoon Sang from iM Securities. I have a few questions for you. The first question I'd like to ask is regarding steel and also infrastructure, POSCO International and E&C and [ bisector ], I would like to ask about the business plan. And specifically, what kind of market situation you are referring to?

And the second question is it more detailed questions about your business plans in RBM. There are some parts, for example, canceling of orders and difficulties with the hard rock lithium -- compared to this year, do you expect things to improve this year? I would like to ask -- I would like you to specify.

And for the third question, you provided more than KRW 6 trillion in terms of CapEx. And I wonder if this needs to be adjusted downward.

And finally, Cleveland-Cliffs, you mentioned partnerships. And recently, the strategic investment, are there any considerations that you're making?

I will answer the second question first. What will improve is the lithium price increase and the negative factors are maintaining the North American customers, but the orders have been on the decline. So we are currently exploring other customers. And spodumene prices are also factors that are on the negative. But whether or not this will lead to improvements will depend on our operating profit, and we expect things to improve greatly compared to the previous year. Especially POSCO Argentina is expected to perform very well and the operating profits to improve sizably.

You've also asked about the profit guidance. I would like to mention a few things. In steel, we expect POSCO to do a bit better than last year because there are a few factors. Exports are -- can be a little bit challenging, but the domestic market is improving. So compared to the overall operating profit in the previous year, we expect it to improve.

In overseas steel compared to last year, around KRW 200 billion of deficit will be taken out because PZSS will be excluded. So we expect it to improve as well.

In infrastructure, compared to last year, there are 2 factors that we would like to ask you to consider. First is the acquisition of palm oil, more than KRW 100 billion of profit occurs from the palm firm. And the effect of the investment -- so the incremental profits may drop a little bit below KRW 100 billion. And then we had KRW 540 billion in losses in construction, but we are hoping to see about KRW 100 billion profit this year. So the size of the profit that will gain in infrastructure should be meaningful in rechargeable battery materials.

Lithium price fluctuations define a lot of our business, but the deficit that we experienced in Argentina last year was about KRW 100 billion. Although impacted by lithium prices, if the price is maintained, I think we can definitely get to BEP, perhaps a little bit more, perhaps not in the first quarter, but with some of these assumptions, I think we can look forward to an improvement.

At Pilbara Lithium Solutions, in 2024 or '25, we had a KRW 2 billion loss there as well, but we'll be able to compensate for that as well. So when these pan out, I think we'll definitely be able to turn the tide. Add all of these numbers up, and you will see that there will be some pluses and some minuses. But generally speaking, I think you'll be able to get to a good number.

For the third question, we mentioned that more than KRW 6 trillion will be invested in steel, and you asked about this. Regarding steel, the India integrated steel mill project will take up around 400 -- KRW 400 billion and then the U.S. blast furnace will be another sizable amount.

And HyREX plant and other investment will total KRW 6.8 trillion. Additionally, in steel investment, this is our budget. But basically, we have included all of the overseas investment that we have planned. And with the progress, this can be adjusted. In the KRW 11.8 trillion, this includes -- in the KRW 11.8 trillion, all of this is included. Last year, we talked about KRW 8.8 trillion, but our execution is at KRW 7 trillion. So as we continue with the negotiations, we have reason to prove that there can be adjustments made.

I am [indiscernible] from Corporate Strategy Office. Third question regarding the rare earth and other considerations with Cleveland-Cliffs. We are cooperating with Cleveland-Cliffs focusing on steel. So Cleveland-Cliff at the last IR, they announced -- they made announcements regarding rare earth. Regarding rare earth cooperation, we have not made any reviews.

Next question is from HSBC, Park Yushin.

This is Park Yushin at HSBC. I have 2 questions. The first one is on lithium business. U.S. automotive OEMs are electrifying. So POSCO's lithium business, are there some target clients in the U.S. as well as the business targets in the lithium business for the U.S. market?

Next is on steel. This Saturday, I believe there were some proposals made by BlueScope and NSC was involved. If you have any updates on this, I'd like to hear some more. And any strategies regarding the steel business you can share?

On the automotive OEMs, yes, there is a slowdown in electrification in the U.S. This year, LFP will see about a 30% increase. NCM will likely stay. So in terms of client base for cathodes and Pilbara Lithium Solution because their client base is mostly predominantly in the U.S., we are trying to make a shift to Europe. So we are deeply involved in the marketing activities that are bound for Europe. So we also need to diversify our portfolio.

For POSCO Future M, we will focus on LFP. And in the lithium business, we will focus on LC or lithium carbonate. And so these are some of the shifts that we are planning. Mid- to long-term strategy, lithium capacity is 100,000 tonnes. So we want to be able to establish our client base to be able to exhaust this capacity. And because we've made new investments in hard rock lithium, we will definitely review expansion of facility, but no decisions have been made on any schedules.

Additionally, I made a brief comment about our profitability outlook, and I want to add to that. So the lithium mine that we acquired, that will be entered into our books based on the equity method. In 2027, we are planning additional production volume. So please have a look. With that in consideration, I think you will be able to accrue more meaning.

And next, we will address the question about steel. Australia's BlueScope equity shares proposal is, I think, the question. Currently, POSCO and NSC have a consortium with BlueScope to acquire the Whyalla Steelworks in Australia. So we already have a consortium. We have not had any discussions about acquiring BlueScope.

On China's steel restructuring, my name is [indiscernible] again. The Chinese market on the oversupply in order to respond to criticism from other economies about the oversupply decided to embark on restructuring.

So they have decided to abolish the tax refund on exports as one measure, and they're making adjustments to certain country-bound steel products. In January of this year, they announced a new policy for low-priced, low value-added cheap products and to constrain exports of these kinds of products. But because the Chinese domestic market is in a recession, we believe some of this will continue. It will not be in large volumes, and we are going to be able to see some positive signs on this end.

That concludes my comments.

The next question will be from [ Hana ] Securities, [indiscernible].

I'm [indiscernible] from [ Hana ] Securities. I also have 3 questions. First question, EU's CBAM and other global export regulations will be in place. how much impact will POSCO take? And how will you address this? And I also have a question about lithium. You mentioned that you expect profits for lithium business to improve. Are there any specific volumes that you have forecasted for sales and production?

And finally, there were a lot of safety accidents within the group. These investments and costs related to safety, do you expect it to go up in the future? And will it have meaningful impact on profitability? And can we believe that safety has been secured?

Regarding EU CBAM and quarter, I will tell you about our response measures. EU CBAM will be -- will come into force from October. And currently, we are talking with EU commissions regarding the national quotas. And we are doing our best to make sure that we can have an advantage in this aspect. But we will have to assume that the quota will decrease. And therefore, we will have to take out the low-priced products from our export mix and take that volume into Central and South America and other markets. And next year's steel sales policy focuses on the domestic market. So we will focus on premium products overseas to be able to complement some of these losses to be able to maintain similar levels this year.

For the second question, the sales volume is expected to be 55,000 to 60,000. Our plan is to secure enough customers to sell this volume. And this volume is twice that of last year. Our basic plan is 55,000 to 60,000. But depending on the market conditions in the second half, we will review whether we can increase this volume.

I am [ Yoo In-jong ] from POSCO's Group Safety Special Assessment Task Force. Regarding investment and costs for safety and whether it will increase in the future, the facility and other investments that are being made into improving our group safety, I looked into it and I believe that the amount that we invested into safety is not low compared to other companies and putting -- and enhancing the facilities and putting safety equipments in place will not -- we don't need to do mass scale improvements.

So we may need to improve bit by bit, but it will not impact the profitability of our company as a safety officer. And whether safety levels increase with more investment the efforts to improve safety, the technology and other measures, the level of safety investment that we have is much higher than other companies. I don't believe that accidents happened here because we didn't make enough investments.

Regarding smart safety technology, this is being talked not only in Korea, but all across the world. The technologies that actually help improve safety hasn't been applied on the ground. We are actually leading the industry in this front. But technology that can actually save time and effort to enhance safety, we are making the efforts to apply this. So making -- we don't believe that making the investment itself will significantly impact.

DB securities, Ahn Hoe Soo.

My name is Ahn Hoe Soo. I have about 2 to 3 questions. First, the steel business rationalization and restructuring have been discussed. Do you have any specific plans on these grounds for the future?

Next is on lithium. You talked about brine-based lithium plant 2 and technical grade production. If you want to make the shift to battery-grade lithium, what kind of CapEx -- additional CapEx do you need to expand? And the lithium price increase, what is the reason, rationale behind that? If you have more information on why it's rising, that would be very helpful?

The third question, you're investing HyREX and you are going to soon operate the electrical furnace. Looking at the group-wide energy mix, what is your plan? And POSCO International, has plans to import 1 million tonnes of gas from Alaska. So what implications does this have on the group-wide business?

I'll answer the second question first. So price is rising sharply. The reason behind that is about threefold. First, the abolishment of the export refund tax. So I think there was some excess demand because of that. And the recent growth of the ESS market. So the actual demand is manifesting here. And the third is the expansion of production in China, there are salt lakes in China, too, but they cannot. They have some structural issues in expanding that. And in the middle of last year, some of the mines had to be closed. And so these are the 3 key reasons that I would provide as rationale for the sharp rise in lithium price.

And our lithium is technical grade. Brine-based lithium is all technical grade. It's not just us. So to make that shift to better grade, we need to adopt equipment. So technical grade is 99% purity, battery grade is 99.5%. So we need to be able to reduce impurities by about 0.5% and equipment is required here.

So we are studying some of our options. One is in Gwangyang to bring LC from Argentina and to convert that to LH. And so we have a plant called PLS, which is being built now. It's almost completed. So we will refine to produce LH. If we inject CO2 in the process, then it can convert to LC. So this is the very back end that needs to be refined. It's not a huge investment. It's a tweaking of the last part of the process here. So it's going to be a small investment if we decide to invest. And so within the first quarter, we will be reviewing to make a decision.

I will address the first question, steel industry restructuring. My name is [indiscernible]. I'm in charge of Steel Business Management. For steel pipes and long products, I think we're hearing also some restructuring efforts and efforts made to downsize, but no one is really closing down blast furnaces or making new ones. So there is no oversupply. And so this is not an urgent need. But yes, we do need to consider this for the future.

So we are in negotiations with [ KOSA and K-Steel ] to forecast when or if this needs to happen. And in line with the changes in the steel industry, we will be aging out some of our older facilities. And we've already done our own equipment restructuring. If we see more facilities that are inferior against the current market trends, then we could consider other investment decisions such as maybe additional HyREX as well.

Let me address the third question. I'm Kim [indiscernible] Carbon Neutral Strategy Office. We have announced NDC 2035. NDC 2030 was a 5.3% reduction for steel. And so this is achievable with the current technology. But for NDC 2035, we need to reduce more, and so we need to transition some of our equipment.

At POSCO, blast furnace-based CO2 reduction and EAF-based CO2 reduction are the 2-pronged reduction efforts that we'll be making. In 2030, we will read the situation to assess what will be most efficient, most effective. And so that ratio will change based on what we assess then. In 2028, we will complete the HyREX pilot plant and the energy that will be used is cracked LNG and pink hydrogen is something that we want to be able to make possible there. After 2030, we are in discussions with the government to use nuclear energy.

My name is [ Oh Youngdal ], Infrastructure Business Management Office. Let me address the Alaska project. 1 million tonne LNG import volume, the volume has been agreed to, but we haven't signed any contract. And the conditions, the terms of the agreement are very favorable. But we do have an NDC NDA, that is. And so I cannot share any more detail. But how will this impact the energy mix in the country? I can't answer that effectively because for POSCO International, it imports LNG to generate power.

And for POSCO, it has its own LNG demand. So just because POSCO International imports LNG, will that impact POSCO's LNG price? Not necessarily because POSCO will buy its own LNG from other channels. And so the bidding conditions could change numbers, but we are 2 different entities. The cost required to reach carbon net zero, whether this will help POSCO achieve that, I don't think that's an appropriate statement to make. And by importing inexpensive LNG, POSCO International will be able to add efficiency to their power generation. So I think it will assist POSCO International in a meaningful way. That's what I can say.

Energy Materials business management, I think I misspoke. [ CP2 ] has not yet completed construction. So 67,000 tonnes is our cap. And this year, we can sell -- we plan to sell 50,000 tons. And so this is still twice the volume that we did last year. I'd like to make a correction.

The next question is from KB Securities, Choi Yong Hyun.

I'm from KB Securities, Choi Yong Hyun. I would like to ask about lithium. And you mentioned 50,000 as the lithium volume. Does this include Pilbara? The margin spread is a bit big. So I'd like to ask about your final figures.

It will be half and half Pilbara and Argentina.

No additional questions. Since we don't have any additional questions, I'd like to conclude the earnings release for 2025. Thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]