Good afternoon. Thank you for joining us for the POSCO Holdings Earnings Call for the second quarter of 2024. We will start with a presentation from POSCO Holdings followed by a question and answer session with the participants. Now, we will begin the earnings call for Q2 2024.

Greetings. I'm Ki-Seop Jeong, CSO of POSCO Holdings. Earlier this month, we hosted events in Seoul, Hong Kong, and Singapore for POSCO Group's Rechargeable Battery Materials Business Day. In this uncertain business environment, how we plan to continue to grow and to achieve shareholder returns was the strategy we shared at these venues. The group's new management vision and the buyback and cancellation of treasury stocks comprised the shareholder policy message that was announced. Taking advantage of the market chasm, the Rechargeable Battery Materials business will take firm hold as the second growth engine for the group. This is the strong commitment that we communicated. In this process, investors have offered feedback from multiple perspectives. First, on the plan to buy back and cancel treasury stocks. We shared that going forward, treasury stocks would be canceled immediately upon buyback. On this principle, many investors mentioned that they heard a more shareholder-friendly policy from the Board and management. Next, on our restructuring plans, investors urge that the impact of restructuring will translate into substantive performance outcomes through additional funds that will speak into generating future growth and for shareholder returns. The industry of EV Battery Materials has faced challenges. During this time, we are closely monitoring demand fluctuations and adjusting the speed of our investments. For essential resources such as lithium, we will not lose out on the opportunity to invest. With this new strategy, the predominant share of investors offered their buy-in. Through this communication with shareholders, we firmed up our strategy and our management activities, and we intend to ensure we meet investor expectations with integrity and determination. Despite that only about two weeks have passed since our last Value Day event, large-scale events that impact the sentiment surrounding the EV industry have occurred and continue to arise. Changes are happening in the makeup of the U.S. presidential election. At the far end of the EV business value chain, major OEMs are shifting their strategies. These events are expanding the breadth of uncertainty and unpredictability, prompting us to reexamine our own strategies relentlessly. While we continue to examine and reexamine the specifics of our tactics, such as adjusting our investment schedule, the core essence of our strategy, which is to seek growth in the EV Battery Materials business, remains unchanged. We'll move forward undeterred. In steel, we have built the electric smelting furnace facility, which is an essential part of the hydrogen-based steelmaking technology. The first batch of molten iron was produced in April, which is clear proof that we are on schedule to be ready to produce future low-carbon steel. We are not alone in having to deliver on the mandate to offer decarbonized steel based on the belief that hydrogen-based steelmaking should be a national technology interest. We are making efforts to develop this technology with government partnership. Therefore, we are working with multiple ministries and other government agencies to seek close consultation. We must also work hard to generate more profit in steel by addressing the lackluster market. Through multiple efforts, we have hit the bottom in Q4 and now we're making a slow but steady recovery. In the Rechargeable Battery Materials business, for facilities that have been constructed or are close to completion, we continue to accelerate operational rates for reliable plant operations. In our Infrastructure business, we have businesses that are pulling the weight for the group by generating civil processes, which is natural gas production. We're on schedule to expand that facility. In particular, the Stage 4 Myanmar gas field development business is the first project where a Korean company is managing a deep-sea development project. We'll acquire our own and own our know-how gains, which we hope to have applications for in future projects. I'll stop here and allow the Head of IR to deliver more detail on our key business activities as well as our second-quarter performance.

Good afternoon. I'd like to share with you our earnings for the second quarter, which is on page 4 of the presentation. In Q2 of 2024, revenue increased 2.5% from the previous quarter to KRW 18.51 trillion, and operating profit increased 29% to KRW 752 billion, driven by higher profits at our steel subsidiary POSCO and improved infrastructure performance. If you look at the EBITDA in Q2, it was KRW 1.74 trillion, up by KRW 201 billion. CapEx invested amounted to KRW 2.6 trillion on a consolidated basis. Despite the continued investment with lowering working capital and sell-off of non-core assets, net borrowings increased by KRW 115 billion from the previous quarter end, resulting in a net debt-to-equity ratio of 15.9%, down 0.4 percentage points from Q1. Next, performance by key business segments. Operating profit of the steel business went from KRW 339 billion in Q1 to KRW 497 billion in Q2, up KRW 150 billion. POSCO improved by KRW 123 billion to record KRW 418 billion. As sales of high-margin products like automotive steel plates increased at its rolling mills and processing centers in Mexico, Thailand, and Turkey, overseas steel profits also improved. The Infrastructure business went up KRW 89 billion from Q1 to post KRW 429 billion. Recertification of Phase 3 and 4 reserves in Myanmar's gas field and higher selling prices resulted in improved energy profits. The Rechargeable Battery Materials segment posted a loss of KRW 28 billion. POSCO Future M's profit narrowed due to initial startup costs and inventory valuation losses for artificial graphite while expenses continued to be incurred for projects in its final construction phase, including ramp-up and so forth, including the lithium business in POSCO Argentina. Next, I'd like to briefly highlight key business activities by segment in Q2 of 2024. First is HyREX. The HyREX technology under development was designated as a national strategic technology in January this year and was selected for a prefeasibility study by the Ministry of Trade, Industry, and Energy in March. In May, the project to develop raw materials for HyREX was selected as a global R&D flagship project by the Ministry of Science and ICT. So we're promoting the technology development in earnest aligned with the National R&D demo program. In April, the first batch of molten iron from the electric smelting furnace, or ESS, a part of the HyREX facility was produced, leveraging the experience of operating two of the world's largest ESF subsidiaries, SNNC. POSCO completed the production capacity of achieving a maximum molten iron production capacity of 1 ton per hour over a 7-month period. So with this initial output from the test facility, we can say that POSCO has officially begun preparing for the demo of HyREX technology. Next is page 6, highlighting the progress of lithium and nickel production. POSCO Pilbara Lithium Solutions, which produces lithium hydroxide from ore, achieved a daily plant operation rate of up to 76% in June. And leveraging the experience from operating the demo plant, efforts are being made to shorten the ramp-up period and obtain certification. Plant 1 is targeting full operation by February next year, and Plant 2 by September next year. POSCO Argentina, which is based on brine, completed the construction of Phase I as scheduled this month. To train operations workers and stabilize the facility early, the operational know-how from POSCO Pilbara Lithium Solutions in Gwangyang is being utilized, targeting full-scale operation by April next year. As for recycling subsidiary, POSCO HY Clean Metal, following plant completion in July last year, achieved a 100% qualified product rate as of January this year and a 92% plant operation rate as of June. So you can say that currently, quality certification is underway with POSCO Future M, local cathode material, electrolyte manufacturers. The nickel business involves melting and refining operations with a capacity of about 20,000 tons that goes from SNNC to POSCO. The refinery plans successfully completed the trial run, and shipments are expected to begin in the third quarter. Indonesia nickel project reached 69% construction progress by the end of Q2 and is on track for completion by Q2 of next year. Next is the natural gas upstream expansion. The development of the Myanmar offshore gas field Stage 3 has been completed and finally began commercial production in April. Also, the Stage 4 expansion is underway. This year, the main construction began in July, and once drilling starts in January 2026, we expect full-scale gas production to begin in July 2027. The Stage 4 is the first deep-sea development project to be carried out by a Korean company as the main operator, which differs from other stages, and we believe this is significant in terms of enhancing and internalizing our capabilities in the natural gas upstream business. If you look on the right, in June of this year, in Australia, Senex obtained final approval, which is very good news. So it obtained final approval from the Australian federal government for its project to triple production capacity. With this approval, development is expected to accelerate, and new contracts for the increased gas production have also been signed. Senex in Australia plans to secure an annual production capacity of 1 million tons by 2026 by progressively ramping up production. Lastly, let me update you on the ESG matters. If you go to our website, there is a Sustainability Management Report that was published at the end of June. The report includes climate change response strategies and measures to address physical and transitional risks required by global disclosure standards for major operating companies with high carbon emissions like POSCO, POSCO International, and POSCO Future M. Not only that, we have made efforts to transparently and comprehensively disclose the status of major controversies surrounding the group, and we expanded the scope of ESG data consolidation to include 10 Korean and major overseas group entities. So we have made such improvements. With regards to the ESG direction and performance of POSCO Group, please refer to this report. Our efforts to enhance information disclosure have been recognized by external agencies. We're seeing an uptick in our ratings. As a result, in April, we obtained an MSCI ESG rating of A, enabling us to achieve the highest levels in various domestic and international ESG evaluations. So if you have any inquiries, please let us know, and we'll get back to you. Next, I would like to share with you in detail our business performance by key areas. POSCO's crude steel output was significantly affected by the refurbishment of the long blast furnace, leading to a decrease of 650,000 tonnes quarter-over-quarter, recording a total of 8 million tonnes. Consequently, product sales also fell and the revenue also dropped to KRW 9.27 trillion. Despite the output cut, usually when the output is cut, the fixed cost goes up. However, the operating profit improved due to the rise in product sales prices and the decline in raw material input costs. So the operating profit increased by KRW 123 billion quarter-over-quarter, totaling KRW 418 billion. If you break down the increase, the unit price hike and FX impact contributed KRW 15,000 per ton, and changes in product composition also accounted for KRW 4,000 per ton. As for the raw material cost, it went slightly down. Therefore, raw materials cost dropped, compensated by the sales price increase. Looking ahead to Q3, the sales environment, and the prices appear to be challenging. However, there is the completion of the blast furnace and downstream refurbishment, expected to restore production levels to at least that of the first quarter. Second, the continued decline in the cost of major raw materials is anticipated to lower input costs in the third quarter. Considering these different factors, we are cautiously optimistic about achieving further profit improvement in Q3 compared to Q2. Regarding the overseas steel business, there's been an influx of cheap imports in East and Southeast Asia that have significantly impacted operations. Our major integrated mill subsidiaries, in Indonesia and Vietnam, recorded about a 6% decrease in sales, thus turning into the red. However, for our mill in India, sales saw a 3% decrease, but profits actually increased due to rising sales of high-margin products like automotive steel sheets at the rolling mills and processing centers in Mexico, Thailand, and Turkey. Overall profit from overseas steel has improved. POSCO International's revenue fell by about 7% quarter-over-quarter, but operating profit rose by 32%. In the energy sector, the E&P business experienced increased operating profit due to lower depreciation costs from the recertification of gas oil reserves and an increase in the cost recovery ratio. Meanwhile, in power generation, gas power plants entered the off-season. Due to this seasonal factor, operating profits have been affected. The trading business for major materials generated stable profits, thanks to strong sales of high-tensile steel bound for Europe and the Americas. Overall, POSCO E&C is maintaining stable revenue and operating profit despite challenges in the construction sector. We have secured adequate cash reserves of KRW 1.2 trillion to manage risk, conducting monthly reviews of all our projects. POSCO Future M saw its revenue and operating profit decrease by 20% and 92%, respectively, quarter-over-quarter. In the cathode materials segment, excluding the inventory valuation loss, the situation has improved. The low operating rate of the M65 production line led to decreased sales volume, although sales volume and margins for high nickel products increased. In the anode materials segment, revenue and profits remained stable compared to the previous quarter but the initial operational costs of artificial graphite led to a loss, concluding the brief overview of POSCO Holdings' Q2 earnings. We'll now proceed to the Q&A session. Thank you.

We will begin the Q&A. The first question is from Hyundai Motor Company, Park Hyun-Wook.

Hello. My name is Park. Thank you for this opportunity to pose a question. I have three questions. The first is about the steel market situation. You mentioned that you had hit rock bottom in terms of the global steel market. How do you expect the steel business to perform for POSCO? And how do you see customers behaving in the future? In Europe, the CSDD law was passed, which has intensified the requirements for carbon neutrality. What are the impacts for us? What countermeasures are you preparing? The third question is, during the EV battery materials value day, we heard about some of your strategies going forward. While HyREX development needs to succeed, there are other plans you are pursuing in parallel. I think this is a positive development. However, HyREX is happening in Korea, while in the United States and India, you're planning to take some upstream processes. Some of the upstream processes seem to be happening overseas. If you have more specifics on this, I would like to hear more about that. Something that is a concern for all of us is when will green product demand become more readily realized? The timing of this has to align with our ability to offer those green products. If they are out of sync, then the opportunity to earn from the green premium price to offset our development costs needs to match. But I am unsure if these timelines are aligned. Looking at projections, the demo plant will be completed in 2027 and commercialization begins in 2030. After that point, some products will begin rolling off the plant, while some of the EV plants have been pushed out to 2035. Of course, these are mid to long-term goals, but the schedules don't seem to be aligning. What are your thoughts on aligning these timelines and schedules? Thank you.

Regarding the question about the steel market, I would like Mr. Jeong, the Chief of Marketing at POSCO, to respond. The second question concerning the supply chain and Europe will be answered by Mr. Henri Do, the Head of ITA at POSCO. Lastly, Ms. will address POSCO's development strategies and schedules.

My name is Hong. I'm in charge of marketing strategy. In construction and many other industries, we are seeing a slowdown in some of the iron ore and coal prices, leading to a slow market. As some of these stringent measures become prolonged, there are projections that trade issues will intensify, suggesting that the market will continue to face challenges. However, there are chances that interest rates may come down in the United States and some steel policies may become more concrete, which are positive aspects we are looking forward to. In our strategies, for automotive companies, there are some differences between companies, but because our contracts rely on their EV rollout plans, we expect slight increases in some areas and slight declines in others. Looking at shipbuilding, demand and supply perspectives suggest differing opinions, so we need to observe the situation closely and take further time to devise strategies. In home electronics and other markets, we are currently negotiating prices for the third quarter but believe prices will not budge significantly from the current situation. I'd like to give you my thoughts about the European market. The CSDD was passed in May of 2024 and went into effect on July 25, 2024. It went through many stages and this policy will fully manifest its impacts in 2027. Some supply chains will be negatively impacted, and some processing systems will need to be adjusted to streamline interactions with our shareholders, necessitating more disclosure on our end. We, as a group, are preparing from 2027 to begin disclosures and revising some practices. To facilitate this, we will conduct due diligence at our own sites; France and Germany are currently performing their due diligence. We will be renegotiating contracts with BMW and Volkswagen, integrating our ESG principles and policies into the assessment as well. In October 2022, we were recognized by Responsible Steel as an exemplary steelmaking company, marking a start in the right direction towards certification as an exemplary player in steelmaking. Through internal controls and improvements, we will adhere to the new global trade policies. To respond to your third question, not only HyREX but also we are considering using the shaft method as an option. Additionally, eco-friendly materials such as HPI will be contemplated, especially from Australia and the Middle East where renewable energy sources are abundant. Customers desire decarbonized steel rather than exclusively green steel by 2030. Major customers, including automotive OEMs and energy companies, are key clients who are demanding this decarbonization. We are currently negotiating prices with various clients in Europe since premium pricing is feasible, and we are in the process of creating a green premium system.

Moving on to the next question. The next question will be from Kim Yoon Sang of HI Investment Securities.

Yes, I am Kim Yoon Sang. I would like to ask you three questions. First is regarding East Asia. There's a massive export coming from China, and it's increasingly difficult to export to Europe and Southeast Asia. What are your mid-to-long-term plans? As for this year, I would like to know if you have any guidance on profits or revenue. Regarding Nippon Steel, with the likelihood of Trump being elected in the U.S., what changes do you foresee in your steel strategy in the Americas? Finally, I want to understand your outlook on nickel prices as there is decreased investment in nickel due to recent developments. What is your outlook on stainless steel?

Regarding the three questions, I think they can be addressed by Ki-Seop Jeong of the Marketing Strategy Office. The situation in Southeast Asia is challenging, and it is becoming difficult to export to Europe as well. Also, there may be oversight regarding Chinese sales potentially shifting focus toward Southeast Asia. However, there remain trade barriers and prices are already low, limiting the overflow in Southeast Asia. We foresee progressive increases in volume coming to South Korea with active measures to address unfair trading. Regarding your second question about the American region and possible Trump reelection, although we are cautious confirming this, the trade barriers in the U.S. are elevated, and we are limiting our direct supplies to the U.S. and are promoting our sales through Mexico and other countries. Despite that, direct supplies to the U.S. remain limited, which mitigates potential impacts on POSCO. If Trump is reelected, our exports will be affected, requiring us to be proactive in managing import risks while fostering organic collaboration with overseas entities to counter these trade risks. Finally, regarding the outlook for nickel prices, it is challenging to predict. Nickel prices have dipped below USD 16,000 with inventory turnover exceeding 30 months. Although there was improved stainless prices in the first half, we anticipate slight declines ahead, with nickel prices stabilizing around $16,000. We expect Q3 to be lackluster, but stabilization of nickel prices and improvements in stainless prices in Q4 are projected. Regarding the IRA, AMP in Australia has ceased operations, leaving only one company still functioning. The nickel sources associated with the IRA remain limited. In Indonesia, however, Chinese players have engaged in many projects, particularly relating to nickel. Projects in Indonesia are substantial, with ongoing ventures exceeding a million tonnes.

I hope that answered your questions. We'll wait for the next question. Next is from Eugene Securities. Ms. Eugene, please proceed.

My name is Eugene Lee from Eugene Securities. I have a few questions. Firstly, with the EV demand industry slowing, how are you addressing the impact on steel? Additionally, China has faced energy-related regulations; how are you responding to that? I also want to ask about the nickel market. You mentioned the IRA premium; how might risks from Indonesia and the United States affect us? Lastly, regarding iron ore and coking coal, do you have any investment plans for coking coal? Thank you for the opportunity.

To address the question about the EV market slowdown, it should be noted that whether it's Tesla, Volkswagen, GM, or Ford, they have recently delayed some timelines for investments, including Altium, which has faced a slowdown in both cathodes and anodes. When constructing new plants, we ensure we have customer orders in place, including our lithium and nickel plants. While we maintain concerns about market slowdowns, our facilities are based on existing orders, alleviating some worry. However, as asset prices are declining, we see it as an opportunity to acquire new blue-chip assets for next-gen battery materials, so we want to be better prepared. Regarding the second question about steel in China and energy efficiency regulations, in May, the Chinese government announced its decarbonization strategy. This strategy spans 14 phases over five years, with the next phase due soon. By GDP, they need to calculate energy saved, which impacts their carbon emissions reduction. They target a reduction of 53 million tons of CO2 emissions next year, which equals approximately 10 million tons of crude steel production. The feasibility of achieving this without adjusting production capacity is in question. Therefore, we need continued observation of developments in the Chinese market. What's more important is to see what types of products are being exported from China, adjusting our regulations to block cheaper steel entry into Korea while remaining vigilant on developments.

If the FTA agreement is established between Indonesia and the U.S., it would enable an increase in traded volumes. However, much of the Indonesian market, particularly for nickel, is predominantly controlled by Chinese players. Many ongoing projects are primarily in Chinese hands, with limited collaboration with our company. In terms of nickel production, arduous conditions aren't limited to quantities available under IRA compliance, and production volumes tend to be inadequate.

Next question is Yeonsoo from Yuanta Securities.

Hello, I am Yeonsoo from Yuanta Securities. I would like to ask you two questions. First, I read that Hyundai Steel has filed an anti-dumping complaint against China. I would like to know if there were prior negotiations between different entities and if POSCO discussed with Hyundai Steel not to file a complaint. I would like to understand the process regarding the anti-dumping complaint for steel plates as well as for hot-rolled and low-priced steel. My second question is, during the Town Hall meeting in July, the chairman mentioned the importance of steel and secondary battery materials for the business portfolio, but also referred to new growth industries. Can you elaborate on the definition of new or advanced materials?

Regarding the two questions, the first question will be addressed by Kyung-Han Kim, who is the Head of the International Trade Affairs Office, concerning the steel plate anti-dumping complaints. The second question regarding advanced materials will be addressed by Lee Ju-tae, Head of Business Strategy.

Yes, regarding Hyundai's anti-dumping complaint for steel plates, we certainly discuss matters among different countries. This complaint made it to the media and stemmed solely from Hyundai Steel's decision. However, responses to these steel plate imports will be conveyed to the government. POSCO will also express its opinions to the government regarding this matter. Regarding new materials, I would now like to pass to my colleague. During the panel meeting, our chairman mentioned how to promote new materials. POSCO aims to enhance competitiveness in steelmaking and advance the business in EV materials. Our vision is to create the future through materials. While steel and EV materials are emphasized, we are exploring additional materials that could be associated with these fields. This review is ongoing, and we cannot elaborate further at this time, but we are focusing on advanced materials in relation to mobility, green energy, and green infrastructure. Although it may sound abstract, we aim to explore new materials in these areas, positioning them as future business domains.

Next question will be from Park Yoo Shin from HSBC. Please proceed.

Thank you for this opportunity. I have two questions. First is about CapEx; how much of it has been administered this year? Are there any adjustments based on the guidance released earlier and updates on next year's CapEx plans? Secondly, you mentioned during the value day about cash reserves; how does this change your CapEx? On lithium, with the market flooded leading to falling prices, when do you plan to achieve breakeven point (BEP)?

Regarding CapEx and investments, our plans this year are influenced by market conditions and steel market outlook, which are significantly more depressed than projected. Thus, we have reduced our original CapEx by approximately KRW 200 million, while about KRW 100 billion has already been executed. Infrastructure received about 0.5%, and EV battery materials received more than 30%. Typically, we execute less CapEx than originally planned. We anticipate a similar pattern for this year as well. For the next year, we have not yet formulated a business plan. That will take shape around September to October. However, steel, infrastructure, and EV battery materials investments, which have been planned, will proceed, albeit with minor adjustments. We expect to execute around KRW 10 trillion next year. Regarding cash made available through restructuring—yes, we explained at our value day event that shareholder return will be our first allocation. Most available cash will, of course, go toward investments, some of which are substantial, including EV Battery Materials and other growth businesses, including steel. Regarding lithium prices, particularly hard rock lithium prices are driven largely by the raw material itself, which makes it challenging to project timelines. We feel lithium prices have hit rock bottom. Perspectives on when they might rebound vary; some forecast 2028, while others suggest 2026. Breakeven (BEP) will hinge on price recovery. A positive point is that Argentina and PPLS in Argentina have each moved into ramp-up stages, incrementally increasing production volume. While prices remain low, we aim to solidify our facilities and grow operational rates and certify our products, waiting for prices to rebound to increase our output. Next question, please.

Hello, I have a question about the iron ore industry. Sales are expected to rise in the latter half. What is your sales outlook for this period? Regarding steel prices recovering, do you believe profits will align with the increases seen in the second half? I’d also like to understand how your restructuring of non-core assets might generate losses and increase volatility in the short term; is this a concern of yours?

Regarding the overall sales and operating profit outlook for the steel business, we’re looking at an increase of about 1 million tons in the second half due to a restructuring of operations while also pushing the sale of high-margin products. We believe this will reduce fixed costs and increase sales prices, substantially contributing to overall profit increases. However, in Q3, we expect a decline in global steel prices alongside a decrease in raw material costs. Consequently, steel prices are expected to drop in Q3 but could rise in Q4 as a result of scheduled production cuts from China. Mill margins will be affected, but likely could allow for slight profit increases. Regarding potential restructuring-related losses, we are restructuring 120 assets not aligned with our strategy over the next few years. While this may include underperforming assets leading to temporary losses, these will be spread evenly over multiple years. In the long run, this restructuring process will generate cash and improve consolidated earnings. So while there may be short-term impacts, we expect long-term benefits from the restructuring. To add some comments, once the restructuring is complete, the losses would be counterbalanced by improvements in operating profits, converting these losses into profits over time. Is there an additional question?

No other questions have come up. I believe all the questions have been asked. I'd like to wrap this up. Thank you everyone for participating, and I hereby close the second quarter earnings release reporting session. Thank you very much.