Posco vows to fast track restructuring amid slumpPosco has made a New Year’s resolution to accelerate restructuring of scores of its units as part of efforts to get its financial health back on track.
The country’s largest steelmaker said yesterday it reduced its total number of subsidiaries from 70 to 51 on Tuesday by merging 24 units. Of the 51, five were newly created units. It said it plans to reduce the total to 30 by the end of the year.
In one of the more high-profile cases, Posmate and Seunggwang, both facility management and service providers, were merged into a bigger unit.
The steel group has been making restructuring moves since last year as its financial health came under threat from by the drawn-out economic slowdown and a slump in the global steel market.
The main point of the restructuring was to remove units with overlapping business areas.
Posco AST and Posco NST, which used to produce the same cold-rolled stainless, were merged into a bigger unit with a goal of becoming the country’s largest processor of stainless steel.
Posecohousing and Poswith, both social enterprises, have been incorporated into a bigger entity named Poshumans.
“By combining companies that overlap, the group’s management efficiency is expected to be improved,” a spokesperson for the steelmaker said.
Posco has come under fire for aggressively conducting M&As since CEO Chung Joon-yang took power in 2009. It was Chung’s long-term strategy for the group to maintain sustainable growth by expanding businesses, securing new growth engines and making global investments.
The steelmaker’s ambition toward resource development cost it a huge fortune when it acquired the country’s largest trading company, Daewoo International, in 2010.
Posco took over Sungjin Geotec in the same year with the intention of advancing into the plant construction business.
Posco responded to criticism that is growing its family of subsidiaries at too fast a clip as “a general misunderstanding.”
“Apart from the acquisition of Daewoo International and Sungjin Geotec, the other deals we’ve been involved in were all quite small,” the spokesperson said.
Financial analysts say the steelmaker was unfortunate because its M&A moves left it saddled with huge debts as the steel market slump outlasted expectations.
Fitch Ratings, one of three international credit-rating agencies, downgraded its credit level to ‘BBB+’ from ‘A-’ in November 2011, citing the massive debt it built up in funding its new investments, as well as lower profits.
The steelmaker said is not considering cutting its work force.
By Song Su-hyun [firstname.lastname@example.org]
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