UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2020

Commission File Number: 1-13368

 

 

POSCO

(Translation of registrant’s name into English)

 

 

POSCO Center, 440 Teheran-ro, Gangnam-gu, Seoul, Korea, 06194

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 

POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-language translated documents of Consolidated Financial Statements audited by independent auditors

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		POSCO
		(Registrant)
Date: March 13, 2020				By		/s/ Lim, Seung-Kyu
				(Signature)
				Name:		Lim, Seung-Kyu
				Title:		Executive Vice President

Exhibit 99.1

POSCO

and Subsidiaries

Consolidated Financial Statements

December 31, 2019 and 2018

(With Independent Auditors’ Report Thereon)

Table of Contents

 

		Page
Independent Auditors’ Report			1
Consolidated Financial Statements
Consolidated Statements of Financial Position			7
Consolidated Statements of Comprehensive Income			9
Consolidated Statements of Changes in Equity			10
Consolidated Statements of Cash Flows			12
Notes to the Consolidated Financial Statements			14

Independent Auditors’ Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Opinion

We have audited the consolidated financial statements of POSCO and its subsidiaries (“the Company”), which comprise the consolidated statements of financial position as of December 31, 2019 and 2018, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing (KSAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements as of and for the year ended December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(a) Assessment of impairment on goodwill

As described in note 15 to the consolidated financial statements, goodwill amounted to W1,097,809 million as of December 31, 2019, which are primarily allocated to the cash generating unit (“CGU”) of POSCO INTERNATIONAL Corporation in the amount of W951,434 million. The Company recognized impairment loss on goodwill allocated to the CGU of POSCO INTERNATIONAL Corporation of W55,445 million during the year ended December 31, 2019.

As described in note 15(c) to the consolidated financial statements, the Company performed goodwill impairment test for POSCO International CGU by estimating the value-in-use of the CGU. In estimating the value-in-use, management’s judgment is involved in determining the key assumptions such as estimated sales, discount rate and terminal growth rate that have a significant impact on the estimated value-in-use. Considering significant degree of judgment in estimating value-in-use and the likelihood of management bias, we identified assessment goodwill impairment related to POSCO INTERNATIONAL Corporation CGU as a key audit matter.

The primary procedures we performed to address this key audit matter included the following:

 

•

Testing certain internal controls over the Company’s goodwill impairment assessment process;

 

•

Evaluating the key assumptions used to determine the value in use which included the estimated sales by comparison with the latest financial budgets approved by the board of directors, historical performance or industry reports.

 

•

Comparing the future cash flows forecasts prepared in prior year with the current year’s performance to assess the Company’s ability to accurately forecast;

 

•

Performing sensitivity analysis on the discount rate, terminal growth rate and estimated sales applied to assess the impact of changes in these key assumptions on the conclusion reached in management’s impairment assessment;

 

•

Assess the qualification and objectivity of the external institution engaged by the Company to assess the value-in-use of the POSCO INTERNATIONAL Corporation CGU;

 

•

Evaluating estimated sales and terminal growth rate by comparing them with observable information for comparable entities; and

 

•

Engaging our valuation specialists to assist us in evaluating the discount rate used in the valuation by comparing it against a discount rate that was independently developed using observable information for comparable entities

 

2

(b) Estimation of percentage-of-completion by the input method

As described in note 3, 28 and 29 to the consolidated financial statements, sales in relation to production-to-order transactions are approximately 11% of consolidated sales for the year ended December 31, 2019. When the outcome of a construction contract can be estimated reliably, the Company including certain subsidiaries, which are engaged in production-to-order transactions, recognize contract revenues and contract costs over time based on the percentage-of-completion method. The percentage-of-completion is calculated based on the ratio of contract costs incurred for work performed to date to estimated total contract costs.

Construction contracts are generally performed for long term duration, and the total contract costs are estimated based on estimated future amounts such as material costs, labor costs, outsourcing costs and others which are expected to be incurred during construction period. The actual total contract costs can vary from the Company’s original estimates because of changes in condition. Total estimated contract costs changed by W526,072 million for the year ended December 31, 2019 (see note 29(d) to the consolidated financial statements). Considering possible impact from the uncertainty, we identified estimation of percentage-of-completion by the input method as a key audit matter.

The primary procedures we performed to address this key audit matter included the following:

 

•

Testing certain internal controls and computerized systems over the process of determination of accounting treatments in relation to revenue recognition by the input method.

 

•

For major projects, inspecting document such as construction contracts to assess whether the terms of the contract are consistent with those used in the Company’s determination of the use of input method.

 

•

Recalculating percentage-of-completion for major construction projects

 

•

Inquiring and inspecting documents as to the cause of significant differences between estimated total cost ratio and the actual total cost ratio for completed projects

 

•

Inspecting documents as to the cause of slow progress in the percentage of completion compared to the planned timeline of project

 

3

Other Matter

The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

 

•

Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management.

 

4

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

 

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

5

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Se Hong Choi.

 

Seoul, Korea

March 12, 2020

 

 

6

POSCO and Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2019 and 2018

 

 

 

(in millions of Won)		Notes				December 31, 2019				December 31, 2018
Assets
Cash and cash equivalents			4,5,23			W	3,514,872				2,643,865
Trade accounts and notes receivable, net			6,17,23,29,37				9,078,351				9,282,609
Other receivables, net			7,23,37				1,581,517				1,385,629
Other short-term financial assets			8,23				8,996,049				8,081,096
Inventories			9				10,920,320				11,499,928
Current income tax assets			35				45,930				51,557
Assets held for sale			10				74,158				21,854
Other current assets			16				631,177				684,464
Total current assets							34,842,374				33,651,002
Long-term trade accounts and notes receivable, net			6,23				198,785				427,125
Other receivables, net			7,23,37				1,140,879				863,240
Other long-term financial assets			8,23				1,669,389				1,647,898
Investments in associates and joint ventures			11				3,927,755				3,650,003
Investment property, net			13				878,227				928,615
Property, plant and equipment, net			14,33				29,925,973				30,018,273
Goodwill and other Intangible assets, net			15,33				4,908,473				5,170,825
Defined benefit assets, net			21				4,280				1,489
Deferred tax assets			35				1,237,285				1,381,031
Other non-current assets			16				325,241				508,764
Total non-current assets							44,216,287				44,597,263
Total assets						W	79,058,661				78,248,265

 

See accompanying notes to the consolidated financial statements

7

POSCO and Subsidiaries

Consolidated Statements of Financial Position, Continued

As of December 31, 2019 and 2018

 

 

 

(in millions of Won)		Notes				December 31, 2019				December 31, 2018
Liabilities
Trade accounts and notes payable			23,37			W	3,422,922				4,006,135
Short-term borrowings and current installments of long-term borrowings			4,17,23				8,548,212				10,289,619
Other payables			18,23				1,879,508				1,720,097
Other short-term financial liabilities			19,23,37				77,827				77,800
Current income tax liabilities			35				396,616				948,166
Liabilities directly associated with the assets held for sale							8				—
Provisions			20				360,495				301,280
Other current liabilities			22,29				1,638,102				1,594,888
Total current liabilities							16,323,690				18,937,985
Long-term trade accounts and notes payable			23,37				20,067				29,825
Long-term borrowings, excluding current installments			4,17,23				11,893,401				9,919,651
Other payables			18,23				585,129				148,868
Other long-term financial liabilities			19,23				31,494				64,162
Defined benefit liabilities, net			21				181,011				140,933
Deferred tax liabilities			35				1,691,498				1,688,893
Long-term provisions			20				458,154				431,036
Other non-current liabilities			22				79,510				127,361
Total non-current liabilities							14,940,264				12,550,729
Total liabilities							31,263,954				31,488,714
Equity
Share capital			24				482,403				482,403
Capital surplus			24				1,376,251				1,410,551
Hybrid bonds			25				199,384				199,384
Reserves			26				(1,157,980	)			(1,404,368	)
Treasury shares			27				(1,508,303	)			(1,532,728	)
Retained earnings							45,080,117				44,216,018
Equity attributable to owners of the controlling company							44,471,872				43,371,260
Non-controlling interests			25				3,322,835				3,388,291
Total equity							47,794,707				46,759,551
Total liabilities and equity						W	79,058,661				78,248,265

See accompanying notes to the consolidated financial statements.

 

8

POSCO and Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

 

 

 

(in millions of Won, except per share information)		Notes		2019				2018
Revenue		28,29,37		W	64,366,848				64,977,777
Cost of sales		29,31,34,37			(58,116,495	)			(57,005,396	)
Gross profit					6,250,353				7,972,381
Selling and administrative expenses		30,34
Reversal of (impairment loss) on trade accounts and notes receivable		23			28,105				(74,781	)
Other administrative expenses		31			(2,041,286	)			(1,985,755	)
Selling expenses					(368,318	)			(369,245	)
Operating profit					3,868,854				5,542,600
Share of profit of equity-accounted investees, net		11			273,741				112,635
Finance income and costs		23,32
Finance income					1,872,143				1,705,970
Finance costs					(2,242,063	)			(2,244,416	)
Other non-operating income and expenses		33
Impairment loss on other receivables		23			(80,323	)			(63,092	)
Other non-operating income					450,891				523,586
Other non-operating expenses		34			(1,089,965	)			(2,014,462	)
Profit before income tax					3,053,278				3,562,821
Income tax expense		35			(1,070,641	)			(1,670,757	)
Profit					1,982,637				1,892,064
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans		21			(117,152	)			(173,489	)
Net changes in fair value of equity investments at fair value through other comprehensive income		23			(10,541	)			(149,188	)
Items that are or may be reclassified subsequently to profit or loss:
Capital adjustment arising from investments in equity-accounted investees					66,134				(62,732	)
Foreign currency translation differences					208,117				(42,908	)
Gains or losses on valuation of derivatives		23			(90	)			(212	)
Other comprehensive income (loss), net of tax					146,468				(428,529	)
Total comprehensive income				W	2,129,105				1,463,535
Profit attributable to:
Owners of the controlling company				W	1,835,087				1,690,612
Non-controlling interests					147,550				201,452
Profit				W	1,982,637				1,892,064
Total comprehensive income attributable to:
Owners of the controlling company				W	1,997,731				1,271,495
Non-controlling interests					131,374				192,040
Total comprehensive income				W	2,129,105				1,463,535
Basic and diluted earnings per share (in Won)		36			22,823				20,911

See accompanying notes to the consolidated financial statements.

 

9

POSCO and Subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

 

 

 

(in millions of Won)		Attributable to owners of the controlling company																												Non-
		Share				Capital				Hybrid								Treasury				Retained								controlling
		capital				surplus				bonds				Reserves				shares				earnings				Subtotal				interests				Total
Balance as of January 1, 2018		W	482,403				1,412,565				996,919				(682,556	)			(1,533,054	)			43,056,600				43,732,877				3,731,131				47,464,008
Adjustment on initial application of K-IFRS No. 1115, net of tax			—				—				—				—				—				(76,199	)			(76,199	)			(63,708	)			(139,907	)
Adjustment on initial application of K-IFRS No. 1109, net of tax			—				—				—				(498,517	)			—				447,067				(51,450	)			(34,754	)			(86,204	)
Adjusted balance as of January 1, 2018			482,403				1,412,565				996,919				(1,181,073	)			(1,533,054	)			43,427,468				43,605,228				3,632,669				47,237,897
Comprehensive income:
Profit			—				—				—				—				—				1,690,612				1,690,612				201,452				1,892,064
Other comprehensive income (loss)																															—				—
Remeasurements of defined benefit plans, net of tax			—				—				—				—				—				(145,488	)			(145,488	)			(28,001	)			(173,489	)
Capital adjustment arising from investments in equity-accounted investees, net of tax			—				—				—				(76,587	)			—				—				(76,587	)			13,855				(62,732	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax			—				—				—				(104,293	)			—				(46,883	)			(151,176	)			1,988				(149,188	)
Foreign currency translation differences, net of tax			—				—				—				(45,650	)			—				—				(45,650	)			2,742				(42,908	)
Gain or losses on valuation of derivatives, net of tax			—				—				—				(216	)			—				—				(216	)			4				(212	)
Total comprehensive income			—				—				—				(226,746	)			—				1,498,241				1,271,495				192,040				1,463,535
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends			—				—				—				—				—				(279,999	)			(279,999	)			(54,240	)			(334,239	)
Interim dividends			—				—				—				—				—				(400,003	)			(400,003	)			—				(400,003	)
Changes in subsidiaries			—				—				—				—				—				—				—				(2,092	)			(2,092	)
Changes in ownership interests in subsidiaries			—				(1,497	)			—				—				—				—				(1,497	)			(654	)			(2,151	)
Repayment of hybrid bonds			—				(2,769	)			(797,535	)			—				—				—				(800,304	)			(359,018	)			(1,159,322	)
Interest of hybrid bonds			—				—				—				—				—				(24,443	)			(24,443	)			(18,448	)			(42,891	)
Disposal of treasury shares			—				133				—				—				326				—				459				—				459
Others			—				2,119				—				3,451				—				(5,246	)			324				(1,966	)			(1,642	)
Total transactions with owners of the controlling company			—				(2,014	)			(797,535	)			3,451				326				(709,691	)			(1,505,463	)			(436,418	)			(1,941,881	)
Balance as of December 31, 2018		W	482,403				1,410,551				199,384				(1,404,368	)			(1,532,728	)			44,216,018				43,371,260				3,388,291				46,759,551

See accompanying notes to the consolidated financial statements.

 

10

POSCO and Subsidiaries

Consolidated Statements of Changes in Equity, Continued

For the years ended December 31, 2019 and 2018

 

 

 

(in millions of Won)		Attributable to owners of the controlling company																												Non-
		Share				Capital				Hybrid								Treasury				Retained								controlling
		capital				surplus				bonds				Reserves				shares				earnings				Subtotal				interests				Total
Balance as of January 1, 2019		W	482,403				1,410,551				199,384				(1,404,368	)			(1,532,728	)			44,216,018				43,371,260				3,388,291				46,759,551
Comprehensive income:
Profit			—				—				—				—				—				1,835,087				1,835,087				147,550				1,982,637
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax			—				—				—				—				—				(100,218	)			(100,218	)			(16,934	)			(117,152	)
Capital adjustment arising from investments in equity-accounted investees, net of tax			—				—				—				58,308				—				—				58,308				7,826				66,134
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax			—				—				—				10,228				—				(20,769	)			(10,541	)			—				(10,541	)
Foreign currency translation differences, net of tax			—				—				—				215,181				—				—				215,181				(7,064	)			208,117
Gain or losses on valuation of derivatives, net of tax			—				—				—				(86	)			—				—				(86	)			(4	)			(90	)
Total comprehensive income			—				—				—				283,631				—				1,714,100				1,997,731				131,374				2,129,105
Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends			—				—				—				—				—				(400,006	)			(400,006	)			(60,274	)			(460,280	)
Interim dividends			—				—				—				—				—				(480,694	)			(480,694	)			—				(480,694	)
Changes in subsidiaries			—				—				—				—				—				—				—				1,281				1,281
Changes in ownership interests in subsidiaries			—				(48,538	)			—				—				—				—				(48,538	)			(128,587	)			(177,125	)
Interest of hybrid bonds			—				—				—				—				—				(9,200	)			(9,200	)			(7,294	)			(16,494	)
Disposal of treasury shares			—				12,576				—				—				24,425				—				37,001				—				37,001
Others			—				1,662				—				(37,243	)			—				39,899				4,318				(1,956	)			2,362
Total transactions with owners of the controlling company			—				(34,300	)			—				(37,243	)			24,425				(850,001	)			(897,119	)			(196,830	)			(1,093,949	)
Balance as of December 31, 2019		W	482,403				1,376,251				199,384				(1,157,980	)			(1,508,303	)			45,080,117				44,471,872				3,322,835				47,794,707

See accompanying notes to the consolidated financial statements.

 

11

POSCO and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

 

 

 

(in millions of Won)		Notes				2019				2018
Cash flows from operating activities
Profit						W	1,982,637				1,892,064
Adjustments for:
Depreciation							3,029,868				2,911,048
Amortization							431,247				356,581
Finance income							(855,382	)			(737,745	)
Finance costs							1,197,705				1,168,225
Income tax expense							1,070,641				1,670,757
Impairment loss on property, plant and equipment							442,700				1,004,704
Gain on disposal of property, plant and equipment							(49,367	)			(53,139	)
Loss on disposal of property, plant and equipment							120,227				117,614
Impairment loss on goodwill and intangible assets							191,021				337,519
Gain on disposal of intangible assets							(1,896	)			(117,139	)
Gain on disposal of investments in subsidiaries, associates and joint ventures							(27,836	)			(45,241	)
Loss on disposal of investments in subsidiaries, associates and joint ventures							6,539				5,226
Share of profit of equity-accounted investees							(273,741	)			(112,635	)
Impairment loss on assets held for sale							38,328				50,829
Gain on disposal of assets held for sale							(37,461	)			(27,171	)
Expenses related to post-employment benefit							240,425				216,489
Impairment loss on trade and other receivables							52,218				137,873
Loss on valuation of inventories							96,201				141,799
Increase to provisions							76,538				240,146
Others, net							894				77,945
							5,748,869				7,343,685
Changes in operating assets and liabilities			39				(40,789	)			(2,052,531	)
Interest received							320,336				352,337
Interest paid							(760,175	)			(750,410	)
Dividends received							266,774				224,410
Income taxes paid							(1,512,997	)			(1,139,830	)
Net cash provided by operating activities						W	6,004,655				5,869,725

See accompanying notes to the consolidated financial statements.

 

12

POSCO and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2019 and 2018

 

 

 

(in millions of Won)		Notes				2019				2018
Cash flows from investing activities
Acquisitions of short-term financial instruments						W	(36,063,406	)			(32,173,134	)
Proceeds from disposal of short-term financial instruments							35,415,822				31,105,544
Increase in loans							(450,638	)			(627,783	)
Collection of loans							398,838				941,962
Acquisitions of securities							(296,827	)			(321,916	)
Proceeds from disposal of securities							62,492				221,646
Acquisitions of investment in associates and joint ventures							(160,404	)			(47,355	)
Proceeds from disposal of investment in associates and joint ventures							16,458				88,852
Acquisitions of investment property							(19,344	)			(44,106	)
Proceeds from disposal of investment property							12,057				70,817
Acquisitions of property, plant and equipment							(2,519,219	)			(2,135,550	)
Proceeds from disposal of property, plant and equipment							51,800				90,412
Acquisitions of intangible assets							(299,587	)			(447,616	)
Proceeds from disposal of intangible assets							24,161				77,654
Proceeds from disposal of assets held for sale							67,246				93,338
Payment for acquisition of business, net of cash acquired							(37,345	)			—
Cash received from disposal of business, net of cash transferred							45,360				447,917
Collection of lease receivables							56,889				—
Others, net							12,788				11,348
Net cash used in investing activities							(3,682,859	)			(2,647,970	)
Cash flows from financing activities			39
Proceeds from borrowings							5,646,977				2,762,446
Repayment of borrowings							(3,746,845	)			(3,136,308	)
Repayment of short-term borrowings, net							(2,194,727	)			(854,554	)
Capital contribution from non-controlling interests							29,475				5,808
Payment of cash dividends							(946,218	)			(723,934	)
Payment of interest of hybrid bonds							(16,494	)			(46,166	)
Repayment of hybrid bonds							—				(1,160,000	)
Repayment of lease liabilities							(167,427	)			(30,481	)
Others, net							(116,920	)			(11,859	)
Net cash used in financing activities							(1,512,179	)			(3,195,048	)
Effect of exchange rate fluctuation on cash held							61,764				4,628
Net increase in cash and cash equivalents							871,381				31,335
Cash and cash equivalents at beginning of the period			5				2,643,865				2,612,530
Cash and cash equivalents at end of the period			5,10			W	3,515,246				2,643,865

See accompanying notes to the consolidated financial statements.

 

13

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2019 and 2018

 

 

1. General Information

General information about POSCO, its 32 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 131 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 131 associates and joint ventures are as follows:

 

(a)

The controlling company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of POSCO have been listed on the Korea Exchange since June 10, 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through six of its overseas liaison offices.

As of December 31, 2019, POSCO’s shareholders are as follows:

 

Shareholder’s name		Number of shares				Ownership (%)
National Pension Service			10,291,670				11.80
BlackRock Fund Advisors(*1,2,3)			5,429,071				6.23
Nippon Steel Corporation(*1)			2,894,712				3.32
Samsung Group Inc. and subsidiaries(*2)			2,401,789				2.75
GIC Private Limited			1,777,316				2.04
Others			64,392,277				73.86
			87,186,835				100

 

(*1)	Includes American Depository Receipts (ADRs) of POSCO, each of which represents 0.25 share of POSCO’s common share which has par value of W5,000 per share.

(*2)	Includes shares held by subsidiaries and others.

(*3)	The number of shares held by the shareholder based on the information in the status report of large-scale shareholders filed with Korea Exchange on April 16, 2019.

As of December 31, 2019, the shares of POSCO are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchange.

 

14

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2019 and 2018

 

 

 

(b)	Consolidated subsidiaries

Details of consolidated subsidiaries as of December 31, 2019 and 2018 are as follows:

 

				Ownership (%)
				December 31, 2019												December 31, 2018
		Principal operations		POSCO				Subsidiaries				Total				POSCO				Subsidiaries				Total				Region
[Domestic]
POSCO ENGINEERING & CONSTRUCTION., CO., LTD.		Engineering and construction			52.80				—				52.80				52.80				—				52.80			Pohang
POSCO COATED & COLOR STEEL Co., Ltd.		Coated steel manufacturing			56.87				—				56.87				56.87				—				56.87			Pohang
POSCO ICT		Computer hardware and software distribution			65.38				—				65.38				65.38				—				65.38			Pohang
POSCO Research Institute		Economic research and consulting			100.00				—				100.00				100.00				—				100.00			Seoul
POSCO O&M CO., Ltd. (formerly, POSMATE)		Business facility maintenance			47.17				52.83				100.00				59.80				40.20				100.00			Seoul
POSCO A&C		Architecture and consulting			45.66				54.34				100.00				100.00				—				100.00			Seoul
POSCO Venture Capital Co., Ltd.		Investment in venture companies			95.00				—				95.00				95.00				—				95.00			Pohang
eNtoB Corporation		Electronic commerce			7.50				53.63				61.13				7.50				53.63				61.13			Seoul
POSCO CHEMICAL CO., LTD. (formerly, POSCO CHEMTECH)		Refractories manufacturing and sales			61.26				—				61.26				60.00				—				60.00			Pohang
POSCO-Terminal Co., Ltd.		Transporting and warehousing			51.00				—				51.00				51.00				—				51.00			Gwangyang
POSCO M-TECH		Packing materials manufacturing and sales			48.85				—				48.85				48.85				—				48.85			Pohang
POSCO ENERGY CO., LTD.		Generation of electricity			100.00				—				100.00				89.02				—				89.02			Seoul
PNR		Steel byproduct manufacturing and sales			70.00				—				70.00				70.00				—				70.00			Pohang
Future Creation Fund Postech Early Stage account		Investment in venture companies			—				40.00				40.00				—				40.00				40.00			Seoul
POSCO WOMAN’S FUND		Investment in venture companies			—				40.00				40.00				—				40.00				40.00			Seoul
SPH Co, LTD.		House manufacturing and management			—				100.00				100.00				—				100.00				100.00			Incheon
Posco Group University		Education service and real estate business			100.00				—				100.00				100.00				—				100.00			Incheon
Growth Ladder POSCO K-Growth Global Fund		Investment in venture companies			—				50.00				50.00				—				50.00				50.00			Pohang
2015 POSCO New technology II Fund		Investment in venture companies			—				25.00				25.00				—				25.00				25.00			Pohang
POSCO Research & Technology		Intellectual Property Services and consulting			100.00				—				100.00				100.00				—				100.00			Seoul
TANCHEON E&E (formerly, POSCO E&E)		Refuse derived fuel and power generation			—				100.00				100.00				—				100.00				100.00			Seoul
POSCO Humans		Construction			75.49				24.51				100.00				90.30				—				90.30			Pohang
Mapo Hibroad Parking Co., Ltd.		Construction			—				71.00				71.00				—				71.00				71.00			Seoul
Busan E&E Co., Ltd.		Refuse derived fuel and power generation			70.00				—				70.00				70.00				—				70.00			Busan
POSCO Family Strategy Fund		Investment in venture companies			69.91				30.09				100.00				69.91				30.09				100.00			Pohang
POSCO INTERNATIONAL Corporation (formerly, POSCO DAEWOO Corporation)		Trading, energy & resource development and others			62.91				0.03				62.94				62.90				0.04				62.94			Seoul
Pohang Scrap Recycling Distribution Center Co., Ltd.		Steel processing and sales			—				51.00				51.00				—				51.00				51.00			Pohang
PSC Energy Global Co., Ltd.		Investment in energy industry			—				100.00				100.00				—				100.00				100.00			Pohang
Suncheon Eco Trans Co. LTD		Train manufacturing and management			100.00				—				100.00				100.00				—				100.00			Suncheon
Songdo Development PMC (Project Management Company) LLC.		Housing business agency			—				100.00				100.00				—				100.00				100.00			Incheon
Korea Fuel Cell		Fuel cell			—				100.00				100.00				—				—				—			Pohang
POSCO GEM fund no1		Investment in venture companies			98.81				1.19				100.00				—				—				—			Pohang
POSCO Processing&Service		Steel sales and trading			—				—				—				93.95				0.45				94.40			Seoul
MegaAsset Co., Ltd.		Real estate rental and sales			—				—				—				—				100.00				100.00			Incheon
HOTEL LAONZENA		Hotel business			—				—				—				—				100.00				100.00			Daegu
Posco e&c Songdo International Building		Non-residental building rental			—				—				—				—				100.00				100.00			Seoul
POSCO ES MATERIALS CO., LTD.		Secondary and storage battery manufacturing			—				—				—				90.00				—				90.00			Gumi
BLUE O&M Co.,Ltd.		Engineering service			—				—				—				—				100.00				100.00			Pohang

 

15

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2019 and 2018

 

 

 

				Ownership (%)
				December 31, 2019												December 31, 2018
		Principal operations		POSCO				Subsidiaries				Total				POSCO				Subsidiaries				Total				Region
[Foreign]
POSCO America Corporation		Steel trading			99.45				0.55				100.00				99.45				0.55				100.00			USA
POSCO AUSTRALIA PTY LTD		Raw material sales & mine development			100.00				—				100.00				100.00				—				100.00			Australia
POSCO Canada Ltd.		Coal sales			100.00				—				100.00				—				100.00				100.00			Canada
POSCAN Elkview		Coal sales			—				100.00				100.00				—				100.00				100.00			Canada
POSCO Asia Co., Ltd.		Steel and raw material trading			100.00				—				100.00				100.00				—				100.00			China
POSCO-CTPC Co., Ltd.		Steel manufacturing and sales			100.00				—				100.00				61.91				38.09				100.00			China
POSCO E&C Vietnam Co., Ltd.		Steel structure manufacturing and sales			—				100.00				100.00				—				100.00				100.00			Vietnam
Zhangjiagang Pohang Stainless Steel Co., Ltd.		Stainless steel manufacturing and sales			58.60				23.88				82.48				58.60				23.88				82.48			China
POSCO (Thailand) Company Limited		Steel manufacturing and sales			100.00				—				100.00				88.58				11.42				100.00			Thailand
POSCO-MKPC SDN BHD		Steel manufacturing and sales			70.00				—				70.00				44.69				25.31				70.00			Malaysia
Qingdao Pohang Stainless Steel Co., Ltd.		Stainless steel manufacturing and sales			70.00				30.00				100.00				70.00				30.00				100.00			China
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		Steel manufacturing and sales			90.00				10.00				100.00				90.00				10.00				100.00			China
POSCO-China Qingdao Processing Center Co., Ltd.		Steel manufacturing and sales			100.00				—				100.00				—				100.00				100.00			China
POS-ORE PTY LTD		Iron ore sales and sales			—				100.00				100.00				—				100.00				100.00			Australia
POSCO-China Holding Corp.		Holding company			100.00				—				100.00				100.00				—				100.00			China
POSCO JAPAN Co., Ltd.		Steel trading			100.00				—				100.00				100.00				—				100.00			Japan
POS-CD PTY LTD		Coal sales			—				100.00				100.00				—				100.00				100.00			Australia
POS-GC PTY LTD		Coal sales			—				100.00				100.00				—				100.00				100.00			Australia
POSCO-India Private Limited		Steel manufacturing and sales			100.00				—				100.00				100.00				—				100.00			India
POSCO-India Pune Processing Center. Pvt. Ltd.		Steel manufacturing and sales			65.00				—				65.00				65.00				—				65.00			India
POSCO Japan PC CO., LTD		Steel manufacturing and sales			—				86.12				86.12				—				86.12				86.12			Japan
POSCO-CFPC Co., Ltd.		Steel manufacturing and sales			39.60				60.40				100.00				39.60				60.40				100.00			China
POSCO E&C CHINA Co., Ltd.		Civil engineering and construction			—				100.00				100.00				—				100.00				100.00			China
POSCO MPPC S.A. de C.V.		Steel manufacturing and sales			21.02				75.29				96.31				21.02				75.29				96.31			Mexico
Zhangjigang Pohang Port Co., Ltd.		Loading and unloading service			—				100.00				100.00				—				100.00				100.00			China
POSCO-VIETNAM Co., Ltd.		Steel manufacturing and sales			100.00				—				100.00				100.00				—				100.00			Vietnam
POSCO MEXICO S.A. DE C.V.		Automotive steel sheet manufacturing and sales			83.28				14.88				98.16				83.28				14.88				98.16			Mexico
POSCO-Poland Wroclaw Processing Center Sp. z o. o.		Steel manufacturing and sales			60.00				—				60.00				60.00				—				60.00			Poland
POS-NP PTY LTD		Coal sales			—				100.00				100.00				—				100.00				100.00			Australia
POSCO DAEWOO WAIGAOQIAO SHANGHAI CO., LTD		Intermediary trade & bonded warehouse operation			—				100.00				100.00				—				100.00				100.00			China
PT. Bio Inti Agrindo		Forest resources development			—				85.00				85.00				—				85.00				85.00			Indonesia
POSCO ENGINEERING AND CONSTRUCTION AUSTRALIA (POSCO E&C AUSTRALIA) PTY LTD		Construction and engineering service			—				100.00				100.00				—				100.00				100.00			Australia
POSCO-TISCO (JILIN) PROCESSING CENTER Co., Ltd.		Steel manufacturing and sales			50.00				10.00				60.00				50.00				10.00				60.00			China
POSCO Thainox Public Company Limited		STS cold-rolled steel manufacturing and sales			84.39				—				84.39				84.66				—				84.66			Thailand
Hunchun Posco Hyundai Logistics		Logistics			—				80.00				80.00				—				80.00				80.00			China
POSCO INTERNATIONAL VIETNAM COMPANY LIMITED		Trading business			—				100.00				100.00				—				100.00				100.00			Vietnam
POSCO(Chongqing) Automotive Processing Center Co., Ltd.		Steel manufacturing and sales			90.00				10.00				100.00				90.00				10.00				100.00			China
SUZHOU POSCO-CORE TECHNOLOGY CO., LTD.		Component manufacturing and sales			84.85				15.15				100.00				—				100.00				100.00			China
PT.Krakatau Posco Chemtech Calcination		Quicklime manufacturing and sales			—				80.00				80.00				—				80.00				80.00			Indonesia
POSCO AFRICA (PROPRIETARY) LIMITED		Mine development			100.00				—				100.00				100.00				—				100.00			South Africa
POSCO ICT BRASIL		IT service and engineering			—				100.00				100.00				—				100.00				100.00			Brazil
LA-SRDC		Scrap manufacturing			—				100.00				100.00				—				100.00				100.00			USA
POSCO Center Beijing		Real estate development, rental and management			—				100.00				100.00				—				100.00				100.00			China
POSCO AMERICA COMERCIALIZADORA S DE RL DE CV		Steel sales			—				100.00				100.00				—				100.00				100.00			Mexico
POSCO(Guangdong) Automotive Steel Co., Ltd.		Steel manufacturing and sales			83.64				10.00				93.64				83.64				10.00				93.64			China
POSCO-Malaysia SDN. BHD.		Steel manufacturing and sales			81.79				13.63				95.42				81.79				13.63				95.42			Malaysia
PT KRAKATAU BLUE WATER		Wastewater treamtment facilities operation and maintenance			—				67.00				67.00				—				67.00				67.00			Indonesia
POSCO INTERNATIONAL MYANMAR CORPORATION LIMITED		Trading business			—				100.00				100.00				—				100.00				100.00			Myanmar
POSCO-Italy Processing Center		Stainless steel sheet manufacturing and sales			88.89				11.11				100.00				80.00				10.00				90.00			Italy
Myanmar POSCO C&C Company, Limited.		Steel manufacturing and sales			—				70.00				70.00				—				70.00				70.00			Myanmar
POSCO ICT VIETNAM		IT service and electric control engineering			—				100.00				100.00				—				100.00				100.00			Vietnam
Daewoo Global Development. Pte., Ltd		Real estate development			—				81.51				81.51				—				81.51				81.51			Singapore
Myanmar POSCO Engineering & Construction Company, Limited.		Construction and engineering service			—				100.00				100.00				—				100.00				100.00			Myanmar
POS-Minerals Corporation		Mine development management and sales			—				100.00				100.00				—				100.00				100.00			USA
POSCO(Wuhu) Automotive Processing Center Co., Ltd.		Steel manufacturing and sales			68.57				31.43				100.00				68.57				31.43				100.00			China
POSCO Engineering and Construction India Private Limited		Civil engineering and construction			—				100.00				100.00				—				100.00				100.00			India
POSCO COATED STEEL (THAILAND) CO., LTD.		Automotive steel sheet manufacturing and sales			100.00				—				100.00				100.00				—				100.00			Thailand

 

16