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. 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 the Pohang steel mill was hit by 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 operations as of January 20th this year. Consequently, the 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 laid the foundation for additional performance improvements for Q2. Even in times of recovery from the natural disaster, our investment for the 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 a more eco-friendly green production system. Furthermore, we expanded 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 sales jumped 44% Q-on-Q and posted record high quarterly sales once again. The Argentina brine project phase one is well underway with the plant and brine pond now complete, and mechanical and electric works initiating this April. A few days ago, with regard to the seawater lithium construction project phase two, we obtained approval and licenses from both the state of Salta and Catamarca. POSCO Pilbara Lithium Solution, a hard lithium mineral player, now has its headquarters building and subcenter completed, and M&A works commenced in April. It is moving forward in line with the timetable for scheduled commercial operation. POSCO Holdings is committed to doing its utmost to ensure growth as a leading green materials business and subsequently to enhance shareholder value. Next, I would like to share with the shareholders and investors our mid-term shareholder return policy, which will be effective for three years until 2025. The company first disclosed its medium-term dividend payout ratio in January 2020, and over the next three years, it paid out dividends and retired shares to return a total of KRW3.4 trillion to shareholders. The next three years shareholder return plan is as follows: As a leading eco-friendly materials company, POSCO Holdings seeks to boost corporate value and maintain a steady dividend payout by pushing for business growth. As POSCO Holdings shifted to a holding company in 2022, it unveiled its 2030 growth strategy to increase shareholder value. To this end, for the next three years, the company will build a global production system for its secondary battery materials business, such as lithium. Through years of hard work and experience, the management is confident that investing in these new growth businesses will further boost corporate value. During 2023 to 2025, for three years, the company will return 50% to 60% of its free cash flow to equity shareholders. Also, to ensure that dividends are highly predictable, a basic dividend policy of KRW10,000 per share will be introduced, allowing shareholders to receive steady dividends even in the midst of uncertainty. Quarterly dividends will be paid out as before, and during the general shareholders meeting in March, the Articles of Incorporation will be revised to preemptively adopt the dividend confirmation first record date later program to enhance shareholder value. Dear shareholders, uncertainty in the global economy remains, and the regulatory environment keeps changing rapidly, as can be seen from IRA and CBAM. To this end, POSCO Group launched emergency operations. The group will continue to focus on its strategic core business while responding to the changing business environment in a proactive and agile manner to meet the shareholders' expectations. Next, the Head of the IR team will report on the earnings release of Q1 2023.

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 to a record KRW19.38 trillion and posted a surplus of KRW4.7 billion. Let me elaborate on each business. First is steel. The 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 resumed normal operations 100% from January 20th, and as a result, the output and product mix are recovering rapidly. Despite an additional recovery cost of KRW60.9 billion in Q1, POSCO posted a surplus of KRW251.3 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 look into POSCO's monthly operating performance, up until January, the company was still in the red due to lingering effects of the flood and steel price declines. However, as of now, it has normalized, and steel prices started to trend upwards in February. POSCO quickly returned to the black, and we expect improvements to continue further in March with additional price increases. Regarding this trend, we expect steel operating profit in Q2 will be clearly better than Q1 this year. Second, the OP for green infrastructure climbed 63% Q-o-Q. In January, POSCO International merged with POSCO Energy and recorded a quarterly OP of KRW280 billion, despite the market downturn. Thanks to the sound energy business, it was able to achieve considerable OP. POSCO DX, a listed company, also posted a positive OP. Third is green materials. Thanks to increased CapEx investments, green materials revenue jumped 44% Q-o-Q, achieving the highest quarterly sales once again. The OP also improved compared to the previous quarter, and we expect it to maintain its upward trend into Q2. Next, I would like to brief you on major business activities in Q1. On page five, you can see the progress in lithium nickel recycling and next-generation lithium battery materials plants. POSCO Future M our capital and facility expansion, and POSCO International's LNG project can be found separately in the presentation deck for your reference. As for the brine project, phase one in Argentina is completed, with the factory and pond finished. Upstream mechanical and electrical works will begin this month, and downstream works will commence next month. The brine project's phase two approved late last year has upstream operations in Argentina and downstream in Korea. The detailed design for the two is currently underway. Hard lithium mineral producer POSCO Pilbara Lithium solution now has its headquarters and subcenter completed, and it has commenced M&E works. Of the total capacity of 43,000 tons, the number two plant will account for about half and is expected to be completed by October and start commissioning. The number one plant responsible for the remaining half will be completed by February 2024, and the progress is in line with the schedule. SNNC and POSCO's iron removal and nickel metal refining projects have completed their civil engineering works and commenced M&E installation works in Q1. They are progressing to be completed in Q4. You'll see Portland was completed last year, secured license and approval for waste treatment, and went into operation in March, shipping the initial black powder production. POSCO HYC recipient of this shipment completed its construction work late last year and obtained a business license in February. It finished the round of the leaching process to start rolling out products sometime in May. Once the initial batch of products become available, they will be tested for certification, and we expect regular operation will be achieved sometime in November this year. Finally, there was approval for the investment in POSCO Silicon Solution, which I will elaborate on further on the next page. As you may recall, POSCO Holdings in July 2022 acquired a 100% stake in a silicon anode producer Tera Technos. The company had been renamed as POSCO Silicon Solution. A decision was made in January this year to execute phase one investment of KRW59.1 billion to produce 450 tonnes of silicone oxide. Over the next six years, the company will have four rounds of investments, so that by 2030, the silicon oxide capacity can ramp up to 25,000 tonnes. Silicon oxide is high in energy density and thus helps to improve mileage. For this reason, we expect demand for it will grow rapidly going forward. POSCO Group is expanding its business into not just natural and artificial graphite but also silicon anodes. Also, for silicon carbonate, POSCO Future M is building a thermal plant with an annual capacity of 50 tonnes in Yeongil industrial complex, and for silicon oxide, POSCO Silicon Solution will take on the task of developing next-generation technologies. On the next page, you see the map of Yeongil industrial complex in Pohang. POSCO Holdings and POSCO Future M will invest here to build a silicon anode complex. Once POSCO Silicon Solution reaches its plant capacity of 25,000 tonnes, then its annual sales will exceed KRW1.5 trillion, and the OP margin is expected to be quite high. For your reference, POSCO Group also continues to invest in next-generation materials beyond the core materials for secondary batteries, such as cathodes and anodes, and core minerals like lithium and nickel. Examples include POSCO Silicon Solutions, solid electrolyte operator PJK Solid Solution, and Taiwanese solid battery maker ProLogium, with POSCO Holdings investing in these companies. To this end, the Next Top Lab was established to focus on manpower training and technology development. Next, during Q1 progress was made towards the transition to eco-friendly steelmaking, including investment decisions for the construction of new electric furnaces. Steelmaker POSCO is on track to transition into eco-friendly steelmaking. By 2030, POSCO plans to cut carbon emissions by 10% against the base year. To this end, in Q1, we initiated a detailed feasibility study of the HBI project in Western Australia to secure low-carbon eco-friendly raw materials. Additionally, approval was granted for new investment in a 2.5 million-ton electric furnace set to go live in 2026. Together with Primetals in the UK, design of a HyREX test facility began, focusing on hydrogen reducing steel. The test facility is scheduled to operate in 2026, and tests will be conducted to develop and complete HyREX commercial technologies. These investments will accelerate our plan to transition into an eco-friendly steelmaker by 2030, '40, and '50. So we have concrete plans. Next, I will tell you more about the performance by company. If you look at page ten, first and foremost, POSCO's production and sales volumes almost normalized during Q1 for both carbon steel and STS. As you can see on the slide, there were slight disruptions in early January. Therefore, Q2 production is expected to be slightly higher than Q1 with normalized downstream processes. As you can see at the center, the supply of semi-finished products, which exceeded 2 million tons at the end of last year, declined. The sales volume of low-cost products such as slabs went down from 740,000 tons in Q4 to 120,000 tons in Q1. On the other hand, sales of relatively more expensive SCS and WPP recovered, although it plunged in Q4. Now moving on to page 11. Accordingly, thanks to the volume and sales mix, Q1 OP was KRW251.3 billion. Therefore it turned around, and the figure returned to black, thanks to production recovery and reduction of recovery costs. Q1 OP accounted for the recovery cost of KRW60.7 billion, while inventory loss returned at KRW5.4 billion. Selling prices continued to decline until January this year; however, the price increase in January began to reflect in February and the upward trend continued until April. However, the unit price of steel in H2 2023 is still unclear, and we will have to wait and see the economy. Next, overseas still turned slack in Q1. After the new HR line went into operation at PT Krakataus, HR sales volume went up, and the price rebounded partially contributing to the turnaround. With regards to India's Maharashtra and Vietnam's operations, P&L improved as sales prices went up; however, China's Zhangjiagang stainless saw deteriorating P&L due to high SCS inventory. Next, POSCO International's revenue fell 9% Q-o-Q due to a decline in steel prices and the US dollar exchange rate, but profitability improved, driven by increased sales of high-margin, high-profit products in markets like Europe, and palm business profits also went up. Energy also showed strong overall profits with Q1 OP at KRW280 billion. Now moving on to page 14. The POSCO E&C business priority was profitability and posted a profit of KRW55 billion recovering from Q4. However, future market conditions remain conservative. It will thus maintain its profit-oriented strategy. Orders went down Q-o-Q and the order backlog as of the end of Q1 is KRW2.7 trillion. The share of orders for captive and urban renovation projects is growing. As for POSCO Future M cathode materials showed strong growth. Sales grew by 72% Q-o-Q, showing recovery, and new NCMA sales were posted starting March with revenue growing 85% Q-o-Q. However, the operating margin remained low at 1.8%, considering the initial operating costs of the new line. Raw material prices and sales prices, we expect improved profitability in Q2. That brings an end to the earnings release report of POSCO Holdings. We will now move on to a Q&A session.

We will now open up the floor for Q&A. 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 the steel market has bottomed out. However, the demand for 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 outlooks that the Chinese construction market is going to recover. So from POSCO Holdings' point of view in Q2 and also the 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 Gwangyang. So when do you believe that it's going to commercialize and break even? And with regard to lithium, when providing lithium to various clients, are you going to follow the spot prices of China or are you going to follow North American or European prices? Can you comment on that? That would be appreciated. For your information, the US and European lithium prices are quite high compared to those of China. So if the benchmark price is Europe or that of North America, then I think that you will be independent from the effects of the Chinese market. My third question has to do with IRA of the US. Now, what is the impact of this on your subsidiaries? Thank you.

First of all, regarding the steel market outlook, I would like to invite your marketing head to start with that.

Hello. I am Eom Gichen, Head of Marketing Strategy. As you rightfully commented, the steel market started to pick up early this year in China. However, the real market did not catch up, leading to some fatigue in the market. You talked about the real estate market in China. The Chinese government had its meetings and we expected some countermeasures to be released, but it was not. So there is some discouragement. However, it announced about KRW2,300 worth of market stimulus package. So that's quite positive. Additionally, if you look at tax revenue, according to the Chinese authority, it increased by about 1.3%, and last month saw an increase of about 18%. Real estate market prices in 70 cities are increasing, although the degree is minimal. We believe that if this continues, in the second half of this year steel prices will pick up further. But because of limited real demand, that can also be a damper. For Q2 and second half, I think that the IR team had commented. In line with the global steel market, we have raised our steel prices in January, February, and March. For Q2 and Q3, we stayed HR for home appliances and shipbuilding, and we are in the process of raising our prices. We have fully recovered from the effects of Typhoon Hinnamnor and will reach normal business soon. Let me wait and see what will happen in the second half. Thank you.

Now, as for the second question regarding lithium, and for question number three, the IRA impact in our subsidiaries, I think these questions can best be answered by the Chief of Lithium Battery Materials business.

Yes, thank you very much. My name is Kyungsub Lee, Chief of Lithium Battery Materials Business. I understand that there were three questions. The first had to do with lithium business: when will commercialization begin and when will normal operations start? Overall, our construction is progressing smoothly without any major hiccups, so I believe we will complete the construction work according to schedule. The ramp-up period will be about one year, during which we will work on normalizing operations and receiving approvals and licenses for lithium or PPLS, especially in Gwangyang. We already have a demo plant, and together with OEMs, we are getting feedback. Regarding certification, we think we can accelerate the process a little. For the BEP plant or PPLS by 2025, I think we will achieve positive OP. Regarding brine lithium, I think we may break even starting from 2024. Currently, the construction is about 65% complete. The base construction work is finished, and we are currently working on M&E installation works. By late September this year, we will finish that, and once we do, we will begin commissioning. Hence, we expect to start producing products by late October. The second question was about the lithium price-deciding mechanism. Earlier, lithium prices in China, Japan, and South Korea had a weighted average. Now, we see the listing prices nosediving recently. Seawater lithium prices are also moving independently from brine prices, and I believe that the test market will become the benchmark for procurement and sales in the future. Now with regard to IRA, there are many speculations surrounding cathodes and anodes. They are now part of essential components and are not strictly required to invest in North America. For cathodes and anodes where OEMs require local investment, we can do so; if not, we can produce from Korea or the most suitable country, given investment and operating costs. Overall, it's working in our favor. Most of our lithium minerals are procured from Australia. Thus, we should benefit from the IRA since we meet the requirements. And regarding brine lithium, while Argentina does not have a free trade agreement with the US, we can produce some there and some in Korea, and the value-added will differ significantly. IRA-related matters are still under discussion, as are FTA-related discussions about Argentina's inclusion as a beneficiary. The SNNC has nickel refining and will meet IRA requirements, while Indonesia, currently not a beneficiary of the IRA, is expected to become one as significant nickel production comes from there. We're diversifying our minerals procurement and production across North America, Europe, and Asia to align ourselves with different regulations. Thus, the impact of IRA will be minimal on our operations. Thank you.

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, 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 cash cost level, how do you expect that? And how do you see the outlook for lithium? Also, you have finalized that you're investing 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? Recently, we also have been hearing news about nationalization of lithium. Do you have any changes in your strategies or any elements that can push a change in strategy? And my last question has to do with the market conditions. Our market conditions were much better than those of China. What drove that?

For 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 Team, yes, so I think you had three questions there. So for the lithium price, as you said, at the end of last year, it surged to 85,000. However, at the end of the last year, because China had to secure more inventories, the issue with OEMs and battery providers surfaced. With all these players joining the race, we saw a surge in lithium prices. This year in China, however, with TL reducing carbon lithium and scrapping their initial subsidy plan, we see some change. Now for lithium globally, if you consider the active projects against demand, we do not have many ongoing projects. Given this trend, it takes about four to five years for such projects to materialize. Unless we have one major project, the price isn't likely to plunge significantly. In the mid-term, the current lithium prices may have seen bubbles last year that have since burst. Prices should stabilize this year, and if trends are favorable, rebound is likely. Overall, our outlook suggests it would be in the mid-40,000 range, expecting between 40,000 to 50,000 to stabilize. The second question was about the 300,000 lithium concept we disclosed. However, specific project details cannot be disclosed currently. This concerns our mid- to long-term business strategies and intentions, and we plan to expand the volume and scale the project, so please trust us on that. Regarding nationalization of lithium in Chile, it’s important to clarify that this does not involve the seizure of private properties or assets; instead, there will be a lithium association responsible for overseeing lithium projects. As for Argentina, while we do have ongoing projects there, it should not affect our operations. In Chile, the mining rights cannot completely privatize, so when licenses expire, uncertainties arise. Hence, nationalization means there will be no seizure of private assets. Your third question regarding steel market conditions will be answered by Mr. Eom Gichen, the Head of Marketing Strategy.

Yes, hello. I am Eom Gichen. I would like to talk about the European market rather than China. Recently, we have seen price surge, and it can be attributed to US and EU tariff quotas. Due to this, we need to meet quotas, which range around 70% to 75% for the US. Meanwhile, the Ukrainian war has also impacted supply with various factors like fires at ArcelorMittal’s mills in France and the earthquake in Turkey contributing to decreases in supply. Currently, the focus is on energy costs that producers will recognize, aiming for normalization in the market. Our outlook indicates that hot-rolled prices could increase from about 1200 to 1300, potentially up to 1500, but the lower limits are about 1000.

Next question is from Yuanta Securities. Mr. Lee HanZu, you have the floor.

Yes, good afternoon. Yuanta Securities. My name is Lee HanZu. I have three questions. First, regarding POSCO's earnings results. We believe that in Q2, you're going to recover further and for the second half of this year, we will 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 historically, 8 to 9 million quarterly sales were recorded. So, for the year 2023, Q1, Q2, first half, and second half, what do you see or how do you expect POSCO's sales volume to trend? Second, if you turn to page 19 from 2030, you talked about dividends, projecting a dividend of KRW10,000 per share. Is that correct? Lastly, after the holding company was founded abroad, are all subsidiaries still placed under POSCO? Do you have any further plans to reorganize the organizational structure in the future?

Yes, sir. Regarding your first question on POSCO’s future sales outlook, I would like to invite Mr. Kyung-Jin Chung, the Head of the Finance Office of POSCO to answer.

In Q1, if you look at sales of steel, carbon steel, it stood at about 350,000 tons. In Q2, we will have seen some production disruptions. However, in Q2, everything is expected to normalize, leading to an uptick in sales volumes by 5%. For the second half of the year, we believe it will pick up further when compared to the first half, so while not as high as 2021, we should return to normal production levels.

Regarding the second question about dividends, I would like to ask the Head of the IR team to take that question. The third question relates to an issue that I think Chon, Jung-Son could address.

What that means is that we will pay the base dividend, but at the same time, 50% to 60% of free cash flow will be used, so if there is excess cash, we will pay out more to shareholders. This structure balances our continued investment to grow our business while also ensuring equitable dividend returns to shareholders. For predictability, we introduced this system.

Yes, I am Chon, Jung-Son, Head of Corporate Strategy Team. After the launch of the holding company, our aim was to maximize business value and generate synergy effects. Hence, we worked tirelessly towards that goal, while establishing our target objectives around ESG matters. To that end, last year, we made efforts to maximize synergy in the steel and energy sectors. We are considering various options; however, nothing can be shared at this time.

Thank you. Next, NHG Securities and Investment. Mr. you have the floor.

Yes, hello, I'm from NHG. I will ask a few questions. First, you talked about the lithium price. Based on the benchmark that was Korea and Japan, we have China and Europe. What was your benchmark? I'd like to check that. Secondly, about Argentina. Until when is the contract valid? Please disclose. Furthermore, regarding structure, depending upon the price, what would be the share? So is that the business model you have there? And for lithium, we have a partnership with Pilbara but relying on a single provider may seem risky. Do you plan to work with another partner? Lastly, about the electric furnace. Your investment is substantial, but does it affect the current business practice?

Yes. For the lithium concerns, Mr. Kyungsub Lee will address this, and for the question about the electric furnace, Mr. Seokkeun Oh will answer.

Yes, regarding the lithium market, the benchmark I referred to was based on Korea, Japan, and China for customs clearance. This information refers to prices in Argentina, where we have acquired all assets, making it a permanent operation rather than a contract. Regarding royalties, our business model in Argentina consists of about 3.5% of sales revenue, which is the deal with the central government. Considering Pilbara partnership, in addition to Pilbara, we also are exploring additional projects complemented by good partnerships in regions outside of Australia. We plan to scale partnerships gradually.

Hello. My name is from POSCO Materials. I will ask you about scrap. Many steelmakers are expanding their electric furnaces. How are we planning to secure the scrapping process? Currently, we have a volume of 27 million tons, about 4 million of which is imported, with the rest produced in Korea. Our plan is to secure that scrapping volume as a target through collection and processing. Additionally, we will enhance partnerships with overseas companies and invest in their shares.

Thank you. So that's all for questions. The 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 of the Carbon Neutrality roadmap. I understand that your roadmap aligns with the Korean government’s proposals. Compared to Europe or the US, do you think your roadmap is in line with their guidelines? If not, are there any disadvantages for your business, or do you foresee concerns from investors?

Regarding 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 the head of the International Trade Affairs Office. The carbon neutrality roadmap is aligned with the Paris Agreement. We need to lower the global average temperature, thus limiting the global average temperature increase to 1.5°C, while achieving specific carbon reduction goals. Different regulations like CBAM in Europe could impact other global businesses as governments aim for acceleration towards reducing carbon emissions. Not just Korean businesses, all industries face this burden based on their adaptation to national goals.

Can you please check whether we have more questions?

We do not have any more questions. Thank you.

I have a question. You mentioned that raw material exports increased. Is that the same for Korea as well? Any signs of easing measures regarding quotas in the US and EU? Furthermore, you said you would invest in North America, and with IRA, are there any plans to invest in Korea or elsewhere?

Regarding the first question, the marketing strategy team will answer that question.

Indeed, our export volumes have risen due to the slower recovery of the domestic market. The US and EU quotas necessitated inventory depleting, which explains the higher export numbers. As for easing measures, that is dependent upon upcoming evaluations from the US and EU governments. Not probable in the near future, as we see it.

For Argentina's brine lithium in phases three and four, while it isn’t a domestic investment per se, it’s important for us to adhere to the IRA in principle. The origin of minerals matters significantly for our operations. While no decisions have been made on launching projects in North America, our planning for phase one in Argentina should complete within the next year. At that point, we can finalize our processing methodologies and whether to proceed with the LH process in Korea or not before making any investment decisions for 2025.

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