Posco's holding company plan gets pushback in Pohang

Industry

Published: 15 Feb. 2022, 19:13

Posco's holding company plan gets pushback in Pohang

Civic groups and politicians stage a protest in front of Posco's headquarters in Pohang, North Gyeongsang, on Feb. 8 to oppose Posco's plan to locate the headquarters of a new holding unit in Seoul. [YONHAP]

Posco is facing a number of challenges ahead of a planned shift in corporate structure next month.

The steelmaker plans to designate Seoul as the headquarters for a new holdings unit tentatively named Posco Holdings that will fully own the steel-making business of Posco and other subsidiaries including Posco International and Posco E&C. A new research center will be also built in the capital.

Politicians and civic groups in Pohang, where the steel manufacturer is headquartered, have lashed out at the plan.

Lee Kang-deok, mayor of Pohang, staged a single-person protest to demand the headquarters be stationed in Pohang. He worries that the shift might take resources from the port city, which is heavily reliant on the steel industry.

Posco played down those concerns, saying there will be no transfer of human or financial resources.

“The formation of Posco Holdings won’t trigger any outflow of people or reduction of taxes being collected in Pohang,” said Kim Hak-dong, Vice Chairman at Posco in a statement.
“We will also keep Posco’s headquarters in Pohang,” the vice chairman said.

Posco Holdings will officially come into existence on March 2. Shareholders approved the change last month.

A spokesperson for the steelmaker explained that the launch of the holdings unit doesn’t come with large-scale recruitment or even new offices. The company plans to reassign employees in Posco’s strategy division to Posco Holdings. The strategy division is already in Seoul.

Some Posco shareholders are worrying that Posco Holdings might split off Posco later and take it public.

To appease investors, Posco Chairman Choi Jeong-woo pledged not to list Posco and other subsidiaries in a letter to shareholders.
“Posco has made it clear that the split-off steel-making subsidiary won’t be listed,” Choi said. “The decision is intended to avoid inherent conflict of interests between shareholders of a holding company and its subsidiaries. The principle will remain the same when we split off other new businesses and set up a new corporation.”

In the letter released last month, Choi vowed to maintain Posco’s dividend ratio in the 30 percent range and keep the dividend payout above 10,000 won ($8.35) through 2022.

The steelmaker declared a total dividend payout of 17,000 won per share, a record high.

Still, the dividend ratio -- a measurement dividing a company's total dividends by its net income -- was short of what Choi indicated in the letter, 19 percent, prompting some investors to vent their anger on an online forum of Posco shareholders.

Posco reported 7.2 trillion won in consolidated net profit in 2021, up 302.4 percent jump over a year ago, thanks to strong demand for steel.

The steelmaker claims that revamping its corporate structure will take advantage of the stability and strengths of the steel-making business while allowing it to invest in more growth-oriented areas like hydrogen and future materials.

Posco stock has been in doldrums despite robust earnings. Shares of Posco declined 1.23 percent on Tuesday to close at 280,500 won.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]