Moody’s bumps up Posco rating

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Moody’s bumps up Posco rating

Moody’s Investors Service on Thursday raised Posco’s rating to Baa1 from Baa2 with a stable outlook, as its financial status is expected to improve in coming years.

“The upgrade reflects our expectation that the improving trend in Posco’s financial profile will be sustained over the next 1-2 years, driven by continued debt reductions and robust earnings,” Sean Hwang, a Moody’s analyst, said in a statement.

The Korean steelmaker is expected to post robust earnings over the next 12-18 months on increasing sales of high-end products and recovering demand from shipbuilders and carmakers, it said.

In the January-March quarter, Posco posted a net profit of 1.084 trillion won ($977 million), up 11 percent from 976.9 billion won a year earlier. Operating income rose 9 percent on-year to 1.488 trillion won on sales of 15.862 trillion won.

“Posco plans to increase investments to about 4 trillion won annually over the next 1-2 years from the low levels seen between 2015 and 2017. Nonetheless, its robust operating cash flow and moderate level of dividend payments should allow the company to continue generating positive free cash flow,” Hwang said.

Moody’s said Posco’s rating could be upgraded over time if it enhances its business profile by diversifying its geographical and product mix, continues to boost earnings and curtails large-scale investments.

Meanwhile, the steelmaker also released a shortlist of five candidates for the position of chairman who will lead the world’s fifth-biggest steelmaker.

The company said its board of directors is set to hold a meeting on Friday to begin in-depth interviews of the five contenders to select a final candidate.

The successful candidate is subject to approval at a shareholders meeting and a board of directors meeting. In April, CEO Kwon Oh-joon offered to step down to lay the groundwork for the next 50 years of growth at Posco.

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