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Issuer Credit Research

Issuer Flash: POSCO Holdings / POSCO

Issuer: Posco Holdings | Document: Issuer Flash | Date: 2026-08-08 | Event: Q2 2026 Results

Report date: 2026-08-08 Event date: 2026-07-30 Event title: 2Q 2026 Results

Flash Conclusion

POSCO Holdings' unaudited 2Q 2026 results provide a constructive earnings update, but not enough evidence to change the cautious investment-grade view established after weak 2025 profitability and rising net debt through 1Q 2026. Consolidated revenue increased to KRW19.259 trillion and operating profit to KRW819 billion, from KRW17.876 trillion and KRW707 billion in 1Q 2026 and KRW17.556 trillion and KRW607 billion a year earlier. The implied operating margin improved to about 4.3% from about 4.0% in 1Q and 3.5% in 2Q 2025. Infrastructure earnings strengthened and Rechargeable Battery Materials returned to profit, reducing two of the group-level earnings drags identified in the May issuer summary.

The credit read-through is nevertheless qualified. POSCO Co., Ltd.'s separate operating profit rose sequentially to KRW274 billion but was substantially below KRW513 billion in 2Q 2025, so the core Korean steel business has not yet demonstrated a year-on-year margin recovery. More importantly, the results package does not disclose 2Q operating cash flow, capex, cash, interest-bearing debt, net debt, maturity profile or committed facilities. It therefore cannot establish whether better operating profit is translating into free cash flow or moderating investment-related leverage pressure. The existing view remains: POSCO has a strong steel franchise and diversified earnings sources, but narrow headroom requires evidence on cash generation, investment discipline and legal-entity liquidity, not only a better single-quarter profit result.

Results: Broad Group Recovery, but Uneven Core Steel Evidence

The 2Q results showed a second sequential increase in consolidated operating profit. Group revenue was KRW19.259 trillion, 7.7% above 1Q and 9.7% above 2Q 2025, while operating profit was KRW819 billion, 15.8% above 1Q and 34.9% above a year earlier. The increase was broad across reported business groups, but its quality varied.

Combined Steel operating profit increased to KRW403 billion from KRW345 billion in 1Q, although it remained well below KRW603 billion in 2Q 2025. At POSCO Co., Ltd. on a separate basis, revenue was KRW9.415 trillion and operating profit was KRW274 billion, compared with KRW8.935 trillion and KRW213 billion in 1Q. Separate production increased to 8.394mt and sales volume to 8.357mt, from 8.224mt and 8.285mt respectively in 1Q. This is positive evidence on quarterly volume and earnings momentum, but the year-on-year decline in separate operating profit from KRW513 billion means that the central steel spread remains a credit watch rather than a demonstrated recovery. Overseas steel also contributed KRW94 billion of operating profit, after KRW87 billion in 1Q and a KRW111 billion loss in 4Q 2025, although it is a smaller and more volatile component of the group.

Infrastructure generated KRW493 billion of operating profit, up from KRW405 billion in 1Q and KRW237 billion in 2Q 2025. POSCO International accounted for KRW429 billion, with both Energy and Materials contributions improving sequentially. POSCO E&C remained profitable at KRW44 billion after KRW53 billion in 1Q, which is materially better than the 2025 loss position but does not resolve the standing questions over construction order quality, contingencies and possible parent support. The quarter therefore improves the near-term non-steel earnings mix, while still requiring the businesses to be assessed separately rather than treated as a single stable infrastructure contribution.

Rechargeable Battery Materials moved to KRW41 billion of operating profit from a KRW7 billion loss in 1Q and a KRW144 billion loss a year earlier. POSCO Future M earned KRW27 billion, and POSCO Argentina generated KRW11 billion after an KRW18 billion 1Q loss. The result is a meaningful reduction in the immediate earnings drag from a business that had weakened the 2025 group profile. It should not yet be read as proof that the battery-materials and lithium investment cycle has become self-funding: the release does not provide cash-flow, capex, pricing, customer-demand, inventory-valuation or funding evidence needed to judge the durability of the turnaround.

Credit Read-Through: Earnings Support Is Not Yet a Cash-Flow Answer

For creditors, the improvement in consolidated operating profit is supportive because it broadens the earnings base beyond a single steel component. In particular, the return to profit in Rechargeable Battery Materials and continued profitability at POSCO E&C reduce the risk that the core franchise alone has to absorb large reported operating losses. POSCO International's KRW429 billion operating profit remains an important source of diversification, although its operating and legal position should continue to be distinguished from POSCO Holdings and POSCO Co., Ltd.

The limitations are equally important. The May issuer summary identified the combination of high investment requirements, thin profitability and rising net debt as the main constraint on credit headroom. The 2Q package is explicitly unaudited and provides no update on cash conversion, debt or liquidity. Consequently, the group cannot be said to have deleveraged, funded its investment programme from internal cash flow, or improved parent-level liquidity on the basis of this release. Better accounting profit may ease pressure if it persists and converts into cash, but that is an inference to be tested in subsequent disclosures, not a reported fact.

The legal-entity distinction remains material for bondholders. POSCO Holdings is the holding company and POSCO Co., Ltd. is the core steel operating company. Consolidated segment earnings and POSCO Co., Ltd. operating profit do not disclose POSCO Holdings' stand-alone cash, debt, subsidiary dividends, intragroup loans, guarantees or restrictions on fund transfers. They also do not establish the ranking, covenants or recovery position of any specific obligation. The current result thus does not resolve the outstanding HoldCo-versus-OpCo discussion; it supports a group-level earnings assessment only.

Key Quarterly Metrics

KRW bn unless stated 2Q 2026 1Q 2026 2Q 2025 Credit reading
Consolidated revenue 19,259 17,876 17,556 Increased sequentially and year on year
Consolidated operating profit 819 707 607 Better group profitability; still unaudited quarterly data
Combined Steel operating profit 403 345 603 Sequentially stronger but below prior-year level
POSCO separate operating profit 274 213 513 Core steel recovery is incomplete year on year
Infrastructure operating profit 493 405 237 Stronger contribution led by POSCO International
Rechargeable Battery Materials operating profit 41 (7) (144) Returned to profit; durability and cash effect remain unconfirmed
POSCO Co., Ltd. sales volume (mt) 8.357 8.285 8.169 Modest sequential volume growth

Source: POSCO Holdings, 2Q26 POSCO Holdings Datapack, 30 July 2026. Figures are based on unaudited financial statements.

The source does not disclose 2Q cash flow, capex, cash, interest-bearing debt, net debt or liquidity. Those omissions are central to credit interpretation and should not be filled by annualising the quarter or carrying forward 1Q financial-position metrics as though they were current.

Points to Look at Next

The next results review should test whether the Steel segment's sequential improvement is sustained in POSCO Co., Ltd.'s year-on-year margins, taking account of selling prices, raw-material costs, foreign exchange and freight. It should also confirm whether the Rechargeable Battery Materials profit reflects a durable improvement in utilisation and pricing rather than a quarter-specific movement, and whether POSCO E&C can sustain profitability without renewed losses, guarantees or support needs.

Most importantly, creditors need the financial-position bridge that is absent from the 2Q release: operating cash flow, capex, cash, debt, net debt, maturities, committed lines and the funding allocation for growth investments. Parent-only liquidity, upstream dividends and intragroup transfers remain necessary to assess POSCO Holdings obligations separately from POSCO Co., Ltd. obligations. Bond-specific guarantees, collateral, covenants, subordination and governing-law terms also remain unconfirmed, as does the original rationale for Moody's Negative outlook.

Sources