Ailing Subsidiaries
Fully committed to improve profitability, POSCO is accelerating the disposal of non-core real estate assets and the restructuring of ailing subsidiaries.
According to POSCO and steel industry sources on May 10, POSCO signed a contract with Lotte Shopping last month to sell a Lotte Mart building and its site in Pohang, North Gyeongsang Province, at the price of 18 billion won (US$16.52 million). The group also sold a neighboring site for 20 billion won (US$18.35 million). Upon taking office last year, POSCO Chairman Kwon Oh-joon said, “We will dispose businesses unrelated to our core business, steel, and non-core businesses that we are not leading in the domestic market in order to improve profitability.”
POSCO P&S, the group’s marketing subsidiary, is planning to acquire 40.2 billion won (US$36.89 million) after it completes the sale of 40.1 percent among its 60.1 percent stake in its subsidiary, New Altec, to DaeChang Steel by the end of this month. POSCO Plantech, the group’s plant parts subsidiary, is focusing on its restructuring process. It has ended its ailing projects, changed its businesses into steel and maintenance, and recently reduced its labor force by 30 percent. POSCO M-Tech, the group’s material subsidiary, filed for court receivership for Pos-HiaL, the group’s alumina supplier, at the end of last month. This is the first time in POSCO history that one of its units has been put under court supervision.
The group is also accelerating the disposal of overseas assets. In February, the company sold 35 percent of its stake in United Spiral Pipe, an American steel pipe manufacturer that was set up by POSCO, to Russian steel group Evraz. It is also in the final stage of selling off POSCO Uruguay, a forestation company based in South America jointly established with Eagon Industrial, to a local company.
In addition, POSCO has completed the disposal of POSCO Specialty Steel, Posfine, Diamond Plaza Vietnam, and Daewoo Department Store in Masan City, which the company has pushed ahead from last year, as scheduled.
The group set a goal to secure an additional 1 trillion won (US$917.68 million) after it did 2 trillion won (US$1.84 billion) last year through business restructuring. Once POSCO Engineering & Construction achieves the sale in its stake to an overseas company, the scale of financing is expected to further increase.