Good afternoon, ladies and gentlemen, the 2023 Q1 Earnings Release Conference Call will now begin. POSCO Holdings will first present, which will be followed by a Q&A session with the participants. [Operator Instructions] POSCO Holdings will now present. Good afternoon, ladies and gentlemen, I am Jeong Ki-Seop CSO of POSCO Holdings. First and foremost, I would like to extend my gratitude to all the investors for your keen and lasting interest in POSCO Holdings. Today's earnings call is joined by key executives from POSCO Holdings as well as from major subsidiaries including POSCO, POSCO International and POSCO Future M. Last September, POSCO Group underwent an unprecedented natural disaster as Pohang steel mill was hit with Typhoon Hinnamnor and was flooded as a result. But thanks to the efforts and hard work of the people at POSCO Holdings as well as the partners, vendors and customers, we miraculously completed recovery in 135 days and reopened for normal operation as of January 20th this year. Consequently, steel business returned to the black in Q1 from a deficit of KRW713.8 billion in Q4 last year. And on top of that, we lay the foundation for additional performance improvements for Q2. Even in times of recovery from the natural disaster, our investment for growth of POSCO Group did not stop. We invested in electric arc furnaces to roll out low carbon products from 2026 in order to transition to eco-friendly green production system. Furthermore, we spent at our product portfolio to include our Hyper and ON cylindrical battery materials for EVs to respond to the growth of the EV industry. Through these measures, we believe we can generate demand in the next and new future growth sectors. The secondary battery materials business also saw some positive developments. In Q1 this year green materials business…

Good afternoon, ladies and gentlemen, allow me to walk you through our business results from Q1 2023. POSCO Holdings' Q1 consolidated revenue rose 0.7% Q-o-Q two record KRW19.38 trillion and posted a surplus 7700 to KRW4.7 billion. Let me elaborate on each business. First is steel. Steel business recorded a deficit of KRW718.4 billion in Q4, but made a turnaround in Q1 to post a surplus of KRW337.9 billion. Pohang Steel works 100% resumed normal operation from January 20th, and as a result, the output and product mix are also recovering really fast. Despite an additional recovery costs of 60.9 billion in Q1, POSCO posted a surplus of 251.3 billion. Overseas steel also posted a modest surplus of KRW19.4 billion from a deficit of KRW166.2 billion in Q4 last year. If you do a deep dive into POSCO's monthly OP, up until January, the company was still in the red due to the lingering effects of the flood and steel price declines. But as of now it was normalized and steel prices started to trend upwards in February. POSCO quickly returned to the black will be improved further in March with additional price increases. So judging from this trend, we expect steel OP in Q2 will be clearly better than Q1 this year. Second is green infrastructure OP climbed 63% Q-o-Q. In January, POSCO International merged with POSCO Energy and recorded a quarterly OP of 280 billion despite the market downturn. And thanks to Sound Energy business, it was able to achieve a considerable OP. POSCO DX a listed company also posted a positive OP. Third is green materials. Thanks to increased CapEx sales. Green materials revenue jumped 44% Q-o-Q and posted the highest quarterly sales once again. OP also inched up compared to the previous quarter and is expected…

We will now open up the floor for Q&A. [Operator Instructions] The first question is from Hyundai Motor Securities. Mr. Pat, you have the floor.

Hello. Good afternoon. My name is Pat. First of all, I'd like to thank you for the opportunity to ask a question. I have three questions. First, regarding the steel market. Starting from early this year, I believe, that steel market has bottomed out. However, the demand of steel is quite sluggish and I understand that this will have a huge influence. But towards the end of this year, there are some market outlook that China construction market is going to recover. So from POSCO Holdings point of view in Q2 and also second half of this year, what is your position on the steel market outlook? Second question, with regard to new businesses, I think that there is a lot of interest in the market especially on lithium. In October, I understand that the lithium factory is going to be completed in October in Gwangyang. So when do you believe that it's going to commercialize and break even? And with regard to lithium, China's lithium spot prices tend to be independent from other factors. Now, POSCO Holdings' lithium subsidiary, when providing lithium to various clients, are you going to follow the spot prices of China or are you going to follow North America or European prices? Can you comment that that will be appreciated? For your information, the US and also European lithium prices are compared to those of China are quite high. So if the benchmark price is Europe or that of North America, then I think that you will be independent from the effects from the Chinese market. My third question has to do with IRA of the US. Now, what is the impact of this in your subsidiaries? Thank you.

First of all, with regard to steel market outlook. I would like to invite your marketing head and we will start with that.

Hello. I am Head of Marketing Strategy, Eom Gichen. As you rightfully commented, starting from early this year, the steel market started to pick up early this year and in China, it's the price for me was stayed and the real market did not really catch up. And so there is some sort of a fatigue in the market. So that's what we have seen so far. Now, you talked about the real estate market in China. The Chinese government had its government meetings and parliamentary meetings and we expected some countermeasures to be released, but it was not. So there is some discouragement, but it announced about KRW2,300 worth of market stimulus package. So it's quite positive. And also, if you look at tax revenue, according to the Chinese authority. It increased by about 1.3% and last month it was there was an increase of by about 18%. And if you look at the real estate prices in 70 cities. Yes, the degree is quite minimal. However, 0.2, 0.3 and 0.44, you can see that the market, the real estate market prices are increasing. So in quite some time you can see that the housing prices in China are increasing. So we believe that if they continue then in the second half of this year, we believe that the steel prices will pick up even further. But because of the limited real demand, that can also be a damper. Now for Q2 and second half, I think that IR team had commented briefly anyways global steel market in line with the global steel market, we also raised our steel prices in January, February and March. And for March we believe that we were able to achieve average and for Q2 and Q3. I think that we stayed HR for home appliances, shipbuilding. We are in the process of raising our prices for Q2. We were able to recover fully from the effects of Hinnamnor. So I think that we will be able to reach our normal business. And I think that we have to wait and see what will happen in the second half. Thank you.

Now, as for the second question, lithium related. And for question number three, the question was about the impact of IRA in our subsidiaries. Well, I think that this can be best answered by the Chief of lithium business -- battery materials business head.

Yes. Thank you very much. My name is Kyungsub Lee, Chief of lithium battery materials business. I understand that there were three questions. First had to do with lithium business, when the commercialization will begin and when the normal operation will begin. Well, all-in-all, if you look at our plans, as our team had elaborated. So far the construction is in progress without any major hiccups. So I believe that we will be able to complete the construction work according to the schedule. The ramp up period is going to be about one year, and in that one year period, we're going to work on normalization of operations and we will also work on receiving approvals and licenses or lithium or PPLS especially in the Gwangyang, we already have a demo plant. And together with OEMs, we are getting some feedbacks. So when it comes to certification, I think that we can speed up the process a little. So BEP plant or PPLS by 2025. I think that we will be able to achieve positive OP and for brine lithium I think that starting from 2024 we will break even. So that is our projection at the moment. You also talked about Gwangyang plant. In October, we will complete the construction and the progress is about 65%. The building the base construction work is completed, but we are currently working on M&E installation works. So by late September this year we will finish that and October we will do commissioning. So late October I think that we will be able to start producing products. The second question was lithium price deciding mechanism. Well, in the past, when it comes to Chinese lithium prices. Well I think that China, Japan and China. The prices of lithium were brought together and had…

Thank you very much. The next question will come from Hai Investment. Mr. Kim Hun Sung. You have the floor.

Yes, hello. My name is Kim Hun Sung. I have a question about lithium. I have two questions about that. And I will have one more question. First about lithium. So we talk about less production in China. So as we hear that so we say that the price will go even down or it will recover or rebound. Well, when we used to talk about the cost before, and the cash cost level, how do you expect that? And what -- how do you see the outlook for lithium? And also you have finalized that to invest 980,000 tons and you will add up about 300,000 going forward then, do you have any detailed investment plans that you want to disclose to the investors. And recently we have been hearing news about nationalization of lithium. Do you have any changes in your strategies or any elements that can push change in strategy? And also I have a question about the market itself, the market conditions. Then our market conditions was much better than that of China. And what drove that? That would be the question.

So by market conditions, do you mean steel or what exactly do you mean?

Yes, steel market conditions.

Then for lithium, the two questions will be addressed by the Head of the Secondary Battery material had, yes, so I think you had three questions there. So for the lithium price, as you said, in the early days of this year and late last year, it actually went up to 85,000. But then at the end of the year, because China had to secure more inventories and there was the issue with OEMs and also the battery providers. And we had all these players joining the race. And because of that, we saw this surge of lithium price. But earlier this year, China with TL reducing the carbon lithium, the lithium carbonate, and also they also reduced then scrapped their initial plan for subsidy. So as a result, we do see a change. And for now, lithium globally, if you look at the global projects. So against the demand, we do not have a lot of projects ongoing. So if you look at that trend, so in the mid-term, so it takes about four to five years for lithium projects to kick start and unless we have a one bolt project. It's not likely that the price will plunge. So in the mid-term, the current lithium price, I think there was some bubbles last year and I believe that the bubble has bursted. So we will see stabilized prices this year and we will see more stabilized market this year. And as a result the price will also rebound. So that is at least our outlook. And during the IR last year we said it would be like mid-40,000 range and we believe that it will be 60,000 mid-range this year. So maybe the market thinks between 40,000 to 50,000 and it will stay in that range. And the…

Yes, hello. I am Eom Gichen. So I would like to talk about Europe than China because you saw a price surge there and you, I think, talked about the outlook for H2 and the reason why the price surged is because the US and EU, they have a Section 232 and they have a quota. And because of that, in terms of supply, we have to meet that quota. And it was about 70% to 75% range in the US and in Europe, as you know, there is a war in Ukraine and there was still coming from those two countries, Russia and Ukraine. But then we lost that. And ArcelorMittal and the mills in France caught fire and there was an earthquake in Turkey as well and that actually brought down supply.

Then what about the second half of this year?

Well, basically, when it comes to energy cost, the mills will recognize that. And they wanted to normalize the market. So CRU outlook is as follows. So HR, it's about 1200 to 1300. So it can pick up to 1500 down the bottom will be about 1000. So that is at least the projection for now.

Yes. Thank you very much.

Next question is from Yuanta Securities. Mr. Lee [HanZu] (ph), you have the floor.

Yes. Good afternoon. Yuanta Securities. My name is Lee HanZu. I have three questions. First, with regard to POSCO's earnings results. We believe that Q2, you're going to recover further and for the second half of this year we have to wait and see. When it comes to sales volume, POSCO did say that 8.16 million tonnes were sold in Q1. I understand that by quarter there were some differences, but 8 million to 9 million quarterly sales were recorded in the past. So throughout this year, Q1, Q2 and first half, second half, what do you see or how do you expect POSCO's sales volume will trend? Second, if you turn to page 19 from 2030 you talked about dividends and the dividend is going to be 101 per share. When it comes to shareholder return, regardless of the performance. You're saying that minimum dividend, so minimum dividend for a given year is going to be KRW10,000. Is that correct? And other question is this after the holding company was founded overseas are still subsidiaries were placed under POSCO? So from the POSCO group's point of view, you have a POSCO and green materials and green infrastructure. So do you have any further plans to reorganize, reshuffle the organization structure in the future? Thank you.

Yes, sir. With regard to the first question POSCO's future sales outlook. I would like to invite Mr. Kyung-Jin Chung, the Head of Finance Office of POSCO to answer.

In Q1, if you look at sales of steel, carbon, steel, assume it's still about 350K tons. And in Q2 in Q1. There were some production disruptions and in Q1, the production was not fully normalized by Q2, everything is going to be normal. So compared to Q1, we believe that there is going to be at least an uptick in sales volume by 5%. And in the second half, I believe that it's going to be much better. It's going to pick up even better compared to the second first half. So overall, for the year 2023, we believe that similar not as high as 2021 where the sales was stellar. I think that we will be able to go back to normal production.

A second question had to do with dividends. I'd like to ask the Head of IR team to take that question. And the third question had to do with an issue that I think Chon, Jung-Son could answer.

10K1: What that means is that we're going to pay the base dividend, but at the same time, the 50% to 60% of the cash flow is going to be used so that if there is an excess cash, we will pay out more to the shareholders. So we have this kind of structure because we want to continue with our investment to grow our business, but at the same time we want to evenly and in a balanced manner give out the dividends to our shareholders. So for the sake of predictability, we introduced a system. Thank you.

Yes, I am Chon, Jung-Son, Head of Corporate Strategy team. So after the launch of the holding company, the target or the objective that we established was to maximize our values of the business and also generate synergy effects. So for these two, we worked tirelessly. And their target was to achieve ESG. So these three were the targets that we aim to achieve with the launch of the holding company. And with that in mind, last year for steel, we made some efforts in order to maximize synergy and also for energy. An energy business. So we worked on some organizational reshuffle to make that happen. For others, we are going to study various options, but as of now, there is no or nothing that we can share. Thank you.

Thank you. Next NHG Securities and Investment. Mr. [indiscernible] will ask a question.

Yes, hello, I'm from NHG, N-H-G [indiscernible]. I will ask a few questions. First, you talked about the lithium price and it's a fast market, you said. And of course I guess the benchmark was Korea and Japan. And then we have China and Europe because we have the different categories. So what was your benchmark? I would like to double check that. And number two about Argentina. The contract period up to when will the contract last. If you can disclose that, please do. And also what about the structure? Well, depending on the price like what would be the share. So is that the business model that you have there and about for lithium? For now we have a Pilbara partnership and going forward you will also work with Pilbara. That's my understanding, but then it feels like maybe it's risky to invest with just one provider. So do you have plans to maybe work with another partner? And last but not least, about the electrical furnace. You will be investing in that, but then the scale will be quite large and it's I believe that the steel type is about 80 to 85%. So would that affect the current business practice?

Yes. For the lithium, Mr. Kyungsub Lee will answer that. And for the fourth question about the electric furnace Mr. [Seokkeun Oh] (ph) will answer that.

Yes. So we'll entertain your question for the lithium market. Yes, that was based on the three countries of Korea, Japan and China as of customs clearance. So that was the benchmark price that I talked about. And number two, about the Argentina, well, we do not have a contract. We actually acquired all the assets. So it's permanent. So it's different from Chile and there Argentina, we actually well, it's our asset. And for royalties. If we look at the Argentina, if we look at the business model or royalty business model, it's about 3.5% against the sales or revenue, and that was the deal with the central government. And about Pilbara partnership. You asked whether we had plans to strike other partnerships as well. Well, other than Pilbara, we also for 300K up to 2030. Well let's say if Pilbara is 1 million then lithium LH would be, how much would it be. About one eighth. About 150,000 tons. So we have a good we are on a good term with Pilbara, so they're a good supplier. And of course we plan to scale up the partnership. But then for other regions we have actually projects with other partners as well. That would be all for me.

Hello. My name is [indiscernible] from Posco Materials. I will ask you about the scrap. So now the steelmakers are expanding the electric furnaces. So how are we going to secure the scrapping process? So I guess that was the question. And I would like to briefly talk about the current status. So 27 million tons is the volume and we have about 4 million imported and the rest is here in Korea. And the plan is to while we have already set the scrapping volume as a target and to secure that, we will collect and also process and we will actually take that approach. And also we have a ferrous scrapping from the customers and we also have another option, which is to have a partnership with overseas companies and invest in their shares. So we have these three options, so please do not be concerned. Thank you.

Thank you. So that's all for questions. [Operator Instructions] Next question is from Citi Group, Mr. Lee SangHun. You have the floor.

Thank you very much for the opportunity. I would like to ask about page eight Carbon Neutrality roadmap. Now, if you look at the roadmap, the Korean government makes a certain proposal, and I understand that your roadmap is in line with that. And compared to Europe or the US, do you think that your roadmap is in line with their guidelines? If not from a business point of view, or they're going to be any disadvantages or from the investors point of view, don't you think that there can be some concerns? What's your point or position on that?

With regard to that question, I would like to invite Mr. Kyung-han Kim, Head of the International Trade Affairs Office of POSCO, to answer.

Yes, I am. And the head of International Trade Affairs Office. Now, if you look at the carbon neutrality roadmap, this is in line with Paris Agreement. So by we have to lower the global average temperature, the limit, the global average temperature increase by 1.5°C, and we have a certain carbon reduction goals. I think that different countries have different regulations like CBAM in Europe and they're trying to reduce carbon and they're trying to accelerate the process and I believe that all businesses, not just Korean businesses are going to bear a burden accordingly. So national government on utility roadmap and businesses roadmap may differ. For steelmakers in Korea. We also are trying to develop roadmaps and trying to comply with them. Thank you.

Can you please check whether we have more questions?

We do not have any more questions.

And I ask a question.

Yes, please go ahead. You have the floor.

Yes. About the international. You said that the raw materials export went up. So is that the same with Korea as well? And the US and EU? You talked about the quota and measures, regulations, any signs of easement. And also now you said that last time you will invest in North America and with IRA, any plans to invest in Korea or elsewhere. So any plans for that? That would be my question.

Yes. For the first question, post marketing strategic team, Mr. Eom Gichen will answer.

Yes. We talked about international and the revenue went up and the IR Head said that export volume went up. But if you look at the POSCO's volume, our International takes the largest share. And in Q1, the reason why export exceeded the domestic is because the domestic market recovery was slower and the US and EU we do have quota and we wanted to really deplete all the inventories. So which is why you saw that number. And number two was about the quota, right? Whether any signs of easement or so. Well that up to the US, the government and the European Union as well. So not in the foreseeable future. And about the brine treatment. Mr. Kyungsub Lee, Chief of LiB Materials Business, will answer that question.

For Argentina, the brine lithium, phase three and four. Well, I wouldn't say domestic investment, but I said, well, we will follow IRA going forward. When it comes to core minerals. It's not a processing based, but it's origin of country based. Country of origin based. So that's for our primary. And then processing is for secondary. So we haven't decided yet whether to take this project to North America or not. Whether we can actually kick start a project within North America and also for brine phase three and four in Argentina. Next year we will complete phase one. And once that takes place, we will choose which specific technologies or process we want to use. And then whether we want the LH process there or in Korea, we will make such a decision at the latter half of next year so that we can invest in 2025. That is the plan. Thank you very much.

Ladies and gentlemen, thank you once again for your participation, despite your busy schedules. We will take your inputs and suggestions so that we can better prepare at POSCO Group. With that we would like to finish the earnings call for Q1 2023 of POSCO Holdings. Thank you.