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 May, 2015

Commission File Number: 1-13368

POSCO

(Translation of registrant’s name into English)

POSCO Center, 892 Daechi 4-dong, Kangnam-gu, Seoul, Korea, 135-777

(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.)

Form20-F  x             Form 40-F  ¨

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No   x

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) : 82-                     .]

POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-language translation of documents with respect to 1Q 2015 Quarterly Report.

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: May 29, 2015

 By /s/ Noh, Min-Yong

(Signature)*

Name: Noh, Min-Yong

Title: Senior Vice President

 

* Print the name and title under the signature of the signing officer.


Exhibit 99.1

 

LOGO

QUARTERLY REPORT

(From January 1, 2015 to March 31, 2015)

THIS IS AN ENGLISH TRANSLATION OF THE INTERIM REPORT ORIGINALLY PREPARED IN THE KOREAN LANGUAGE (IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION). THIS ENGLISH TRANSLATION IS NOT OFFICIAL AND IS PROVIDED FOR INFORMATION PURPOSES ONLY.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON BOTH CONSOLIDATED AND NONCONSOLIDATED BASIS IN ACCORDANCE WITH THE KOREAN-INTERNATIONAL FINANCIAL REPORTING STANDARDS (K-IFRS) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

QUARTERLY REPORT

(From January 1, 2015 to March 31, 2015)

To: Korean Financial Services Commission and Korea Exchange

 

/s/ Yoon, Dong-Jun

Yoon, Dong-Jun

Senior Executive Vice President and Representative Director

POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si, Nam-gu, Gyungsangbuk-do, Korea
Telephone: +82-54-220-0114

 

/s/ Noh, Min-Yong

Noh, Min-Yong
Senior Vice President
POSCO
6261 Donghaean-ro (Goedong-dong), Pohang-si, Nam-gu, Gyungsangbuk-do, Korea
Telephone: +82-2-3457-0114

 

2

TABLE OF CONTENTS

 

I. Overview

   4   

II. Business

   10   

III. Financial Statements

   32   

IV. Corporate Governance and Company Affiliates

   36   

 

Attachment: Independent Auditors’ Review Report
     (Non-consolidated and consolidated)

 

3

I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

 

Business

  

Note

(1)    Production and sale of crude steel and stainless steel products

  

No engagement in this business

during the first quarter of fiscal year 2015

 

(2)    Port/harbor loading/unloading, warehousing and packaging

  

 

(3)    Management of professional athletic organizations

  

 

(4)    Power generation, renewable energy projects, liquefied natural gas logistics and exploration and other incidental businesses

  

 

(5)    Real property lease business

  

 

(6)    Public energy services and distribution system

  

 

(7)    Marine transportation of mineral resources; domestic and overseas processing and sales of mineral resources

  

 

(8)    Educational services and other incidental services

  

 

(9)    Production and sale of non-ferrous metals

  

 

(10)  Other businesses incidental or related, directly or indirectly, to the foregoing businesses

  

B. POSCO Business Group

 

  (1) Name of the Business Group: POSCO

 

  (2) Companies Belonging to the Business Group

POSCO, POSCO COATED & COLOR STEEL Co., Ltd., POSCO PLANTEC Co., Ltd., Daewoo International Corporation, POSCO ICT, POSCO CHEMTECH, POSCO M-TECH, POSCO ENGINEERING CO., Ltd., MegaAsset Co., Ltd., Busan E&E Co., Ltd., Suncheon Eco Trans Co., Ltd., SNNC, eNtoB Corporation, UITrans LRT Co. Ltd., POREKA Co., Ltd., POSMATE, POSCO Humans, POSCO ENGINEERING & CONSTRUCTION., LTD., POSCO Research Institute, POSCO A&C, POSCO AST, POSCO LED Co., Ltd., Poscoene, POSCO TMC Co., Ltd., POSCO Processing&Service, POSHIMETAL Co., Ltd., Pohang Scrap Recycling Distribution Center Co., Ltd., POSCO NIPPON STEEL RHF JOINT VENTURE CO., Ltd., Mapo Hibroad Parking co., Ltd., MTAPOLIS Co., Ltd., POSCO-TERMINAL Co., Ltd., POSCO ENERGY CO., LTD., POSFINE Co., Ltd., PSC Energy Global Co., Ltd., PONUTech Co., Ltd., New Altec Co., Ltd., Gale International Korea, LLC, POS-HiAL, Tamra Offshore Wind Power Co., Ltd., BLUE O&M Co., Ltd., POSCO Venture Capital Co., Ltd., POSCO ES MATERIALS, Pohang Special Welding Co., Ltd., Steel Processing and Fabricating Center Co., LTD., POSCO MITSUBISHI CARBON TECHNOLOGY, POSCO Green Gas Technology, POSPOWER CO., Ltd., Songdo Posco family Housing.

 

4

  (a) Changes in Companies Belonging to the Business Group

 

  •   Addition of a Subsidiary: Songdo Posco family Housing. (January 2, 2015)

 

  •   Name change from POSCO Specialty Steel Co., Ltd. to SeAH Changwon Integrated Special Steel (March 17, 2015)

 

  (b) Changes after March 31, 2015

 

  •   Addition of a Subsidiary: HOTEL LAONZENA CO., LTD. (April 1, 2015)

 

  •   Addition of a Subsidiary: POSCO Group University (April 1, 2015)

 

  •   Exclusion of a Subsidiary: SeAH Changwon Integrated Special Steel (May 12, 2015)

 

  (3) Related Laws and Regulations

The Korea Fair Trade Commission has designated POSCO as a company subject to the limitations on Cross Shareholding and Debt Guarantee for Affiliates under the Monopoly Regulation and Fair Trade Act (the “MRFTA”).

LOGO Details

 

  (a) Prohibition on Cross Shareholdings (Article 9 (1) of the MRFTA)

 

  (b) Prohibition on Debt Guarantees for Affiliated Corporations (Article 10-2 of the MRFTA)

 

  (c) Prohibition on Shareholding of Venture Capitals for Subsidiaries (Article 9 (3) of the MRFTA)

 

  (d) Limitation of Voting Rights of Financial or Insurance Companies (Article 11 of the MRFTA)

 

  (e) Resolution of the Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article11-2 of the MRFTA)

 

  (f) Disclosure of Important Facts such as Unlisted Shares (Article 11-3 of the MRFTA)

 

  (g) Disclosure of a corporate group (Article 11-4 of the MRFTA)

 

  (h) Report on Status of Shareholding (Article 13 of the MRFTA)

2. Business Organization

A. Highlights of the Company’s Business Organization

 

  (1) Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

 

5

  (2) Steel Works and Offices

 

  (a) Pohang Steel Works: 6262 Donghaean-ro (Dongchon-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

 

  (b) Gwangyang Steel Works: 20-26 Pokposarang-gil (Kumho-dong), Gwangyang-si, Jeollanam-do, Korea

 

  (c) Principal Executive Office: POSCO Center, 440 Teheran-ro (Daechi-dong), Gangnam-gu, Seoul, Korea

 

  (d) Overseas Offices: For the purpose of supporting international business transactions, the Company operates six overseas offices as follows:

United Arab Emirates (Dubai), European Union (Dusseldorf, Germany),

Brazil (Rio de Janeiro), Mongolia (Ulaanbaatar), Australia (Perth), and Argentina.

 

  (3) Major Changes in the Board of Directors (as of March 13, 2015)

 

  (a) Inside Directors

 

  •   New members: Oh, In-Hwan (2 years)

 

  (b) Outside Directors

 

  •   New members: Bahk, Byong-Won and Kim, Joo-Hyun (3 years)

 

  (c) Representative Directors

 

  •   Prior to March 13, 2015: Kwon, Oh-Joon, Kim, Jin-Il and Chang, In-Hwan

 

  •   As of March 13, 2015: Kwon, Oh-Joon, Kim, Jin-Il and Yoon, Dong-Jun

 

  (4) Changes of the Major Shareholders of POSCO

 

  (a) National Pension Service holds the largest number of shares of POSCO.

 

  (b) Date of Disclosure: January 30, 2007

(For further reference, please refer to the public disclosures regarding the change of the major shareholders on January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011, July 22, 2011, January 31, 2012, August 1, 2012, February 1, 2013, August 1, 2013, January 14, 2014, January 23, 2014, July 29, 2014 and January 23, 2015)

B. Merger, Acquisition and Handover of Businesses

[None]

C. Major Changes in Production Facilities

Refer to the ‘II. Business (5. Production and Facilities)’

 

6

3. Equity Capital

A. New Issuance of Registered Common Stock

There was no new issuance of registered common stock in the last five years.

B. Convertible Bonds

[None]

C. Bonds with Warrant

[None]

 

7

4. Other Information Regarding Shares

A. Total Number of Shares

 

   (As of March 31, 2015)

Authorized Shares

   

Outstanding Shares

200,000,000

    87,186,835

 

LOGO The currency of the Republic of Korea is Korean Won (“KRW”).
LOGO Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation

 

(As of March 31, 2015)   

Method of Purchase

   

Type

    Beginning*      Increased      Decreased      Cancelled      Balance  

Direct

    Registered Common      7,193,807         —           40         —           7,193,767   

Special Money Trust

         —           —           —           —           —     

Total

         7,193,807         —           40         —           7,193,767   

 

* Beginning Balance: as of December 31, 2014

LOGO Board of Directors approved the ‘Disposal of Treasury Stocks as Employee Award’ at the Meeting held on February 7, 2013, where the execution and responsibility of the disposal of the treasury stocks was delegated to the Executive Management Committee. On March 5, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 74 treasury stocks was completed on March 8, 2013. On April 2, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 387 treasury stocks was completed on April 9, 2013. On July 2, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the disposal of 150 treasury stocks was completed on July 8, 2013. On October 1, 2013, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 2,009 treasury stocks was completed on October 7, 2013. On January 7, 2014, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 139 treasury stocks was completed on January 9, 2014. On April 15, 2014, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 475 treasury stocks was completed on April 16, 2014. On July 15, 2014, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 30 treasury stocks was completed on July 16, 2014. On January 26, 2015, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 40 treasury stocks was completed on January 27, 2015.

 

8

LOGO Changes after March 31, 2015

On April 21, 2015, the Executive Management Committee resolved its plan to dispose the treasury stocks and the actual disposal of 390 treasury stocks was completed on April 22, 2015.

5. Voting Rights

 

(As of March 31, 2015)

Classification of Shares

   Number
of Shares		    

Remarks

(1) Number of Outstanding Shares

     87,186,835      —  

(2) Shares without Voting Rights *

     7,193,767      *Treasury Stock 7,193,767 shares

(3) Shares with Voting Rights

     79,993,068      —  

6. Earnings and Dividend

 

(In millions of KRW)   
     2015 1Q
(January 1, 2015
~ March 31, 2015)		      2014      2013  

(Consolidated) Net Profit

      338,584         626,099         1,376,396   

Earnings per Share (KRW)

      4,131         7,432         17,409   

Cash Dividend Paid

      —           639,527         633,192   

(Consolidated) Pay-out Ratio (%)

      —           102.1         46.0   

Dividend per Share (KRW)

      —           8,000         8,000   

Dividend Yield (%)

      —           2.90         2.45   

 

9

II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Segment Results

 

(In millions of KRW)   
     2015 1Q
(January 1, 2015 ~ March 31, 2015)		      2014      2013  

Category

    Sales      Operating
Income (Loss)		      Sales      Operating
Income (Loss)		      Sales      Operating
Income (Loss)		  

Steel

      7,346,619         539,306         31,841,748         2,267,825         31,794,574         2,363,377   

Trading

      4,844,768         62,734         21,165,806         284,892         18,307,888         81,696   

Engineering & Construction

      2,307,986         35,990         8,119,207         446,214         6,896,838         179,186   

Others

      871,539         93,211         3,971,684         214,599         4,865,350         371,875   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

   15,100,912      731,241      65,098,445      3,213,530      61,864,650      2,996,134   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

2. Current Situation

1) Steel

A. Domestic Market Share

 

(Millions of Tons, %)   
     2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013      2012  

Category

    Production      Market share      Production      Market share      Production      Market share      Production      Market share  

Crude Steel Production

      16.9         100         71.5         100         66.1         100         69.3         100   

POSCO

      9.2         54.4         37.7         52.7         36.4         55.2         38.0         54.6   

Others

      7.7         45.6         33.8         47.3         29.7         44.8         31.3         45.4   

 

LOGO Source: Korea Iron and Steel Association

 

10

B. Characteristics of the Steel Market

The steel industry supplies materials to major industries such as the automobile, shipbuilding and electronic appliance industries.

C. Summary and Prospect of New Businesses

 

  1) Establishment of Steelworks in India

 

  (a) Company entered into a memorandum of understanding with the Orissa state government for the development of iron ore captive mines and for the development and construction of an integrated steelworks facility with an annual production capacity of 12 million tons. (June, 2005)

 

  (1-1) Development of Iron Ore Captive Mines

 

  (a) POSCO-India filed applications for mining exploration licenses for certain iron ore mines in the region of Khandadhar, Orissa (the “Khandadhar Licenses”). (September, 2005)

 

  (b) Orissa State Government recommended the approval of the Khandadhar Licenses on behalf of POSCO-India to the Indian central government. (December, 2006)

 

  (c) Indian central government denied the approval for the Khandadhar Licenses and remanded the matter to the Orissa State Government for further consideration. (July, 2007)

 

  (d) Orissa State Government resubmitted its recommendation for the approval of the Khandadhar Licenses on behalf of POSCO-India to the Indian central government. (January, 2009)

 

  (e) Orissa High Court set aside the Orissa State Government’s recommendation to grant the approval of the Khandadhar Licenses to POSCO-India. (July, 2010)

 

  (f) Orissa State Government filed a special leave petition with the Indian Supreme Court. (November, 2010)

 

  (g) Orissa State Government and POSCO-India completed the submission of the counter affidavit and the rejoinder. (October, 2011)

 

  (h) Indian Supreme Court resumed the trial on the merit of the case. (May, 2012)

 

  (i) Indian Supreme Court decided on the merit of the case. (March, 2013)

 

  (j) Indian Supreme Court ordered to nullify judgment of the Orissa High Court regarding the right to explore the iron ore mines in the region of Kandahar; and the Indian central government reinitiated the approval procedures for right to explore Kandahar. (May, 2013)

 

  (k) India Government announced an Administrative Order of the auction system for assignment of mine. (January, 2015)

 

  (1-2) Establishment of Steelworks

 

  (a) Indian central government granted the approval for the environmental impact assessment for the construction of a captive port. (May, 2007)

 

11

  (b) Indian central government granted the approval for the environmental impact assessment for the construction of steel mills. (July, 2007)

 

  (c) Indian Supreme Court granted the transformation of the forest land with respect to 2,959 acres of the steel mill construction site. (August, 2008)

 

  (d) Indian central government granted the final approval for the deforestation of steel mill construction sites. (December, 2009)

 

  (e) Final plans for the rehabilitation and resettlement of indigenous population were approved by the Rehabilitation and Peripheral Development Advisory Committee (constituted by the Orissa state government). (July, 2010)

 

  (f) Forest Advisory Committee acting under the Ministry of Environment and Forest temporarily suspended activities at the construction site pending investigation into alleged violation of the Forest Regulation Act. (August, 2010)

 

  (g) Ministry of Environment and Forest of the Indian central government granted a conditional approval on the construction of the steel mills and the port. (January, 2011)

 

  (h) Ministry of Environment and Forest of the Indian central government granted the final approval on the construction of the steel mills and the port. (May, 2011)

 

  (i) Company cleared the crop fields designated for the construction of its steel mill site within the state owned property. (May, 2011).

 

  (j) An environmental organization filed a lawsuit to nullify the approval for the environmental impact assessment in the National Green Tribunal. (August, 2011)

 

  (k) National Green Tribunal dismissed the lawsuit of nullifying the approval for the environmental impact assessment and ruled that the Ministry of Environment and Forest should reassess the conditions on which clearance was permitted for the project. (March, 2012)

 

  (l) Procurement of the possessory right over 1,704 acres of the steel mill construction site. (March, 2013)

 

  (m) Ministry of Environment and Forest of the Indian central government approved to gain environmental license for building the steel mill (January, 2014)

 

  (2) Establishment of the Steelworks in Brazil

 

  (a) Board of Directors resolved to invest a 20% interest in CSP Joint Venture established by POSCO, VALE S.A. and DONGKUK STEEL MILL CO., LTD. (May, 2011)

 

  (b) CSP Joint Venture entered into an Engineering Procurement Construction contract with POSCO E&C. (December, 2011)

 

  (c) Construction of a steelwork with an annual capacity of 3 million tons initiated. (September, 2012)

 

  (d) Build 4 pillars sustaining the furnace (March, 2014)

 

  (3) Establishment of a Continuous Galvanizing Line in Thailand

 

  (a) Approval of the Board of Directors (November, 2013)

 

  (b) Contract of the Site Sales (March, 2014)

 

  (c) Acquisition of the Land Use Rights (June, 2014)

 

  (d) Construction of a steelwork with an annual capacity of 0.45 million tons commenced (September, 2014)

 

12

  (4) Establishment of no.7 Continuous Galvanizing Line at Gwangyang Works

 

  (a) Board of Directors resolved to construct a Continuous Galvanizing Line at Gwangyang Works (December, 2014)

2) Trading

A. Market Share

 

(Millions of Dollars, %)   

Category

    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014 1Q
(January 1, 2014 ~
March 31, 2014)		      Growth rate  

All Trading Companies in Korea

      133,568         137,536         -2.9   

Daewoo International

      1,733         1,905         -9.0   

 

LOGO Source: Korea International Trade Association

B. Summary and Prospect of New Businesses

Daewoo International Corporation (“Daewoo International”) is playing a leading role in Korean export industry as the number one trading company based on its wide range of trading network worldwide including about 100 overseas trading subsidiaries, overseas branches and representative offices through intermediary trading and exporting various products including steel, non-ferrous metals, and chemical products. Moreover, Daewoo International is making tangible progress in resource development through Myanmar gas field. Daewoo International has newly entered into the food and forestry development business to secure the future food resources and green energy resources. Daewoo International will aggressively drive this successful momentum of active investment and trading by establishing plantations for agro-resources such as rice, soybean, wheat and corn as well as oil palm and afforestation businesses.

3) Engineering & Construction

A. Summary and Prospect of New Businesses

POSCO Engineering & Construction Co. Ltd. (“POSCO Engineering & Construction”), established in February 1982, is currently expanding its business areas to civil engineering, architectural works, energy, urban development and low carbon & green growth businesses. In reference to the number of the overseas contracts signed by POSCO Engineering & Construction in 2011, the business performance of the POSCO Engineering & Construction in the global market has been satisfactory.

 

13

POSCO ENGINEERING COMPANY CO., LTD. succeeded in the development of a management system for the global market and the Engineering, Procurement & Construction (“EPC”) business. POSCO ENGINEERING COMPANY CO., LTD. planed out its global sales strategy and stabilized its global network through its local agencies and localization strategies. Recently, POSCO ENGINEERING COMPANY CO., LTD. expanded its business markets to the countries located in Central and South America, Africa and Europe.

4) Others

A. POSCO ENERGY CO., LTD

POSCO ENERGY CO., LTD. (“POSCO ENERGY”) started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 90’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand of electricity in Korea.

B. POSCO ICT

POSCO ICT has an expertise in IT and engineering, which was made in an effort to lead the trend of green growth and convergence. Based on its key technologies, POSCO ICT has been putting efforts to enhance competitiveness of the industries for 30 years, in areas such as steel, railroad/transportation, environment/energy.

POSCO ICT has selected Smart Grid energy efficiency business as the strategic business and focused to nurture it. Also the firm is pushing business to overseas, providing total solution to overseas steel mills and exporting railroad solution system. Based on its overseas network located in China India Vietnam, Indonesia, and Brazil, POSCO ICT will speed up the penetration to the local market and increase overseas order volume by expanding businesses.

C. POSCO CHEMTECH

POSCO CHEMTECH, founded in 1963, specializes in manufacturing of refractories, lime used in steel manufacturing processes as well as a wide range of chemical and environmentally friendly products. POSCO CHEMTECH provides refractories to a wide range of industries including steel, cement, and glass companies. To become a global company, POSCO CHEMTECH is currently expanding its markets to Japan, China and Indonesia. Now, POSCO CHEMTECH is preparing for the leap towards the future industries of the comprehensive chemical and carbon material

 

14

3. Key Products

A. Current Situation of Key Products

 

(In hundred millions of KRW, %)   

Business Area

  

Item

  

Specific Use

   Total Sales     Ratio  

Steel

   Hot-rolled Product (HR)   Steel pipe, Shipbuilding, etc     14,913        12.7   
  Cold-rolled Product (CR)   Automobile , Home appliances, etc     40,252        34.2   
  Stainless Steel Products   Western tableware, etc     24,081        20.5   
  By-Product   Plates, Wire rods, etc     38,390        32.6   
  Gross Sum     117,636        100.0   
  Deduction of Internal Trade     (44,170 )   
  Sub Total     73,466     

Trading

   Steel, Metal     39,294        56.2   
  Chemical, Strategic Item, Energy     1,178        1.7   
  Etc     29,557        42.1   
  Gross Sum     70,029        100.0   
  Deduction of Internal Trade     (21,581 )   
  Sub Total     48,448     

Engineering & Construction

   Domestic Construction   Architecture     4,834        19.9   
    Plant     4,093        16.8   
    Civil Engineering     1,576        6.5   
  Overseas Construction     11,401        46.8   
  Owned Construction     1,830        7.5   
  Etc     615        2.5   
  Gross Sum     24,349        100.0   
  Deduction of Internal Trade     (3,969 )      —     
  Sub Total     20,380     

Others

   Electricity Sales, etc     15,583        100.0   
  Deduction of Internal Trade     (6,868 )      —     
  Sub Total     8,715        —     

Total Sum

         151,009        —     

 

15

B. Price Fluctuation Trend of Key Products

 

(In thousands of KRW/ Tons, kWh)   

Business Area

   

Products

    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013      2012  

Steel

    Hot-rolled Product (HR)      625         686         728         828   
   Cold-rolled Product (CR)      773         822         877         999   

Others

    Electric Power      123         142         156         161   
   Lime      121         112         119         105   

 

LOGO Figures for the trading and engineering & construction businesses are not reflected on the table.

[Steel]

 

  (1) Criteria for Calculation

 

  (a) Subjects for Calculation: unit prices of the standard hot-rolled product and cold-rolled product

 

  (b) Calculation Method and Unit: The average price of each product based on its total sales including the freight during the given period.

 

  (2) Factors of Price Fluctuations

Due to the weakened global demand in steel consumption and oversupply from China, domestic and overseas steel price has decreased since the end of 2011.

[Others]

 

  (1) Criteria for Calculation

 

  (a) Electric Power = price of electric power/total amount of generated power

 

  (b) Lime: average sales price including shipping cost

 

16

4. Major Raw Materials

A. Current Status of Major Raw Materials

 

     (In hundred millions of KRW)

Business Area

    Type of Purchase    Item   

Specific Use

    Purchase Amount
(Portion)		   

Remarks

Steel

    Raw Materials    Materials for

Iron-making,

   

Iron Ore for Blast

Furnaces

    42,699(57.7%)    Iron Ore, Coal
      Sub-materials   

Sub-materials for

Iron-making,

Steelmaking

    18,228(24.6%)   

Iron Material,

Alloy Iron,

Non-ferrous Metal,

Limestone, etc.

      Stainless Steel
Materials		   

Key Materials for

STS Production

    13,057(17.6%)    Nickel, Ferrochrome, STS Scrap Iron, etc.

Engineering & Construction

    Raw Materials    Ready-mixed
Concrete		    Construction of Structure    1,291(15.3%)   
      Steel Pile    Foundation of Structure    52(0.6%)   
      Steel

Reinforcement

    Strengthening Concrete    1,500(17.8%)   
      Cable    Electricity Transfer    363(4.3%)   
      Etc.    -    5,228(62.0%)   

Others

    Raw Materials    LNG    Material for Power Generation    3,249(66.8%)   
      Limestone    Production of Lime    260(5.4%)   
      Etc.    -    1,357(27.9%)   

 

17

B. Price Fluctuation Trend of Major Raw Materials

 

(In thousands of KRW)   

Business Area

   

Category

   2015 1Q
(January 1, 2015 ~
March 31, 2015)		     2014     2013  

Steel

    Iron Ore(per ton)     64        93        148   
   Coal(per ton)     129        132        162   
   Scrap Iron(per ton)     295        382        428   
   Nickel(per ton)     15,776        17,769        16,455   

Engineering & Construction

    Ready-mixed Concrete (per m3)     59        59        57   
   Steel Pile (per m)     49        67        70   
   Steel Reinforcement (per kg)     1.0        1.0        1.0   
   Cable (per m)     1.0        1.0        1.0   

Others

    LNG (per ton)     910        1,056        979   
   Lime (per ton)     20        20        20   

 

18

[Steel]

 

LOGO Key Factors in Price Fluctuations

(1) Iron Ore

 

(In Dollars/ Tons)   
     ‘15 1Q      ‘14 4Q      ‘14 3Q      ‘14 2Q      ‘14 1Q      ‘13 4Q      ‘13 3Q      ‘13 2Q      ‘13 1Q      ‘12 4Q      ‘12 3Q      ‘12 2Q  

Trend of International Benchmark Price (Free On Board, “FOB”)

      58         66         82         94         111         123         123         118         141         113         105         134   

(2) Coal

 

(In Dollars/ Tons)   
     ‘15 1Q      ‘14 4Q      ‘14 3Q      ‘14 2Q      ‘14 1Q      ‘13 4Q      ‘13 3Q      ‘13 2Q      ‘13 1Q      ‘12 4Q      ‘12 3Q      ‘12 2Q  

Trend of International Benchmark Price (FOB)

      117         119         120         120         143         152         145         172         165         170         225         206   

(3) Scrap Iron

 

(In Dollars/ Tons)   
     ‘15 1Q      ‘14 4Q      ‘14 3Q      ‘14 2Q      ‘14 1Q      ‘13 4Q      ‘13 3Q      ‘13 2Q      ‘13 1Q      ‘12 4Q      ‘12 3Q      ‘12 2Q  

Trend of Purchase Price (Cost and Freight, “CFR”)

      268         331         376         365         379         396         367         379         421         379         400         444   

(4) Nickel

 

     ‘15 1Q    ‘14 4Q    ‘14 3Q    ‘14 2Q    ‘14 1Q    ‘13 4Q    ‘13 3Q    ‘13 2Q    ‘13 1Q    ‘12 4Q

Trend of London Metal Exchange
( “LME”) Cash Price

    USD

6.50/lb

USD

14,338/ton

    USD

7.17/lb

USD

15,799/ton

    USD

8.43/lb

USD

18,576/ton

    USD

8.37/lb

USD

18,463/ton

    USD

6.64/lb

USD

14,645/ton

    USD

6.31/lb

USD

13,904/ton

    USD

6.32/lb

USD

13,922/ton

    USD

6.78/lb

USD

14,952/ton

    USD

7.85/lb

USD

17,309/ton

    USD
7.70/lb

USD
16,983/ton

 

19

[Engineering and Construction]

 

(1) Criteria for Calculation

 

Products

   

Criteria for Calculation

Ready-mixed Concrete    Standard 25-210-15
Steel Pile    SPS400 406.4x7.9T
Steel Reinforcement    High Tensile Deformed Bar SD40 D10
Cable    TFR-CV, 0.6/1KV 2.5mm2 2core

[Others]

 

(1) Criteria for Calculation

 

  (a) Electric Power: purchase price of electricity from Korea Gas Corporation

* Increase in electricity price is due to the increase of raw material cost and foreign exchange rate.

 

  (b) Lime: purchase price of lime and transportation fees

 

20

5. Production and Facilities

A. Production Capacity

[Steel]

 

  (Thousands of Tons)  

Business Area

    Products      2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013  

Steel

      Crude Steel         11,725         43,500         40,428   

[Others]

 

          (MW, Thousands of Tons)  

Business Area

    Products    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013  

Power Generation

    Electric Power    Inchon      3,412         2,992         3,052   
      Gwangyang      284         284         284   
      Pohang      290         290         145   

Lime

    Lime      547.5         2,190         2,190   

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production

 

          (Thousands of Tons)  

Products

    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013  

Crude Steel

         10,148         41,428         38,261   

Products

    Hot-Rolled Products      2,271         8,124         8,109   
   Plate      1,498         6,433         5,649   
   Wire Rod      674         2,750         2,334   
   Pickled-Oiled Steel Sheets      675         2,785         2,640   
   Cold-Rolled Products      2,142         8,934         8,404   
   Coated Steel      1,542         6,164         5,762   
   Electrical Steel      314         1,253         1,125   
   Stainless Steel      553         2,453         2,372   
   Others      946         4,005         3,566   
     

 

 

     

 

 

     

 

 

  
Total   10,615      42,901      39,961   
     

 

 

     

 

 

     

 

 

  

 

LOGO The amount of products is the aggregate of the amount of products of POSCO and subsidiaries of POSCO, which may include interested party transactions.

 

21

(2) Capacity Utilization Rate for the first quarter of fiscal year of 2015

 

     (Thousands of Tons)  
     Company    Capacity      Production      Utilization
Rate		  

Crude Steel Production

    POSCO      10,457         9,183         87.8 % 
   Zhangjiagang Pohang Stainless Steel      275         296         107.6 % 
   PT.KRAKATAU POSCO      750         661         88.1 % 
   POSCO SS-VINA      243         8         3.3 % 
     

 

 

     

 

 

     

 

 

  
Total   11,725      10,148      86.6 % 
     

 

 

     

 

 

     

 

 

  

 

LOGO Trade and engineering & construction businesses are not reflected on the table due to difficulties in measuring capacity, production and utilization rate of such businesses.

[Others]

(1) Production Result

 

  (Gwh, Thousands of Tons)  
     Products    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013  

Power Generation

    Electric Power      3,300         15,442         15,983   

Lime

    Lime      564         2,383         2,364   

(2) Capacity Utilization Rate for the first quarter of fiscal year of 2015

 

     (hr, Thousands of Tons)  

Business Area

    Products    Capacity      Production      Utilization
Rate		  

Power Generation

    Electric Power    Inchon      2,160         1,028         47.6 % 
      Gwangyang      2,160         1,916         88.7 % 
      Pohang      2,160         1,976         91.5 % 

Lime

    Lime      547.5         564         103.1 % 

 

22

C. Production Facilities

[Land]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      2,019,939         24,371         (19,560 )      (1,472 )      2,023,278   

Trade

      61,169         —           (65 )      —          61,104   

Engineering & Construction

      191,881         —           (445 )      —          191,436   

Others

      528,299         13,461         (7,231 )      (45 )      534,484   

[Building]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      4,573,200         13,947         (40,100 )      (85,256 )      4,461,791   

Trade

      104,702         198         (124 )      (786 )      103,990   

Engineering & Construction

      147,278         6,891         (788 )      (1,591 )      151,790   

Others

      534,144         71,303         (4,125 )      (7,563 )      593,759   

[Structures]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      2,701,348         30,689         (424 )      (48,775 )      2,682,838   

Trade

      5,593         70         (—   )      (65 )      5,598   

Engineering & Construction

      68,293         1,407         (34 )      (771 )      68,895   

Others

      254,929         9,076         (2,193 )      (3,714 )      258,098   

[Machinery and Equipments]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      18,231,086         700,867         (19,778 )      (489,033 )      18,423,142   

Trade

      333,469         1,302         (3,229 )      (5,150 )      326,392   

Engineering & Construction

      56,416         5,376         (518 )      (3,423 )      57,851   

Others

      2,578,914         236,974         (37,435 )      (45,926 )      2,732,527   

 

23

[Vehicles]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      34,534         3,206         (550 )      (2,927 )      34,263   

Trade

      3,516         304         (74 )      (332 )      3,414   

Engineering & Construction

      13,003         169         (257 )      (744 )      12,171   

Others

      5,642         419         (11 )      (665 )      5,385   

[Tools and Fixtures]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      43,508         15,613         (1,423 )      (5,256 )      52,442   

Trade

      1,684         76         (8 )      (172 )      1,580   

Engineering & Construction

      5,759         557         —          (622 )      5,694   

Others

      13,118         3,851         —          (1,745 )      15,224   

[Equipment]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      89,535         3,499         (434 )      (7,923 )      84,677   

Trade

      10,081         1,476         (130 )      (1,262 )      10,165   

Engineering & Construction

      12,829         1,455         (521 )      (1,887 )      11,876   

Others

      31,337         8,616         (11 )      (5,085 )      34,857   

[Financial Lease Assets]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      896         19,013         (16 )      (2,002 )      17,891   

Trade

      22,470         —           (435 )      (265 )      21,770   

Engineering & Construction

      2,195         2,055         (580 )      (283 )      3,387   

Others

      54,520         2,597         (759 )      (369 )      55,989   

[Assets under Construction]

 

            (In millions of KRW)  

Business Area

    Beginning Book
Balance		      Increased      Decreased     Depreciation     Ending Book
Balance		  

Steel

      1,208,529         448,672         (691,264 )      (577 )      965,360   

Trade

      119,856         32,330         (13,201 )      —          138,985   

Engineering & Construction

      72,691         9,710         (48,545 )      —          33,856   

Others

      1,104,832         158,520         (239,758 )      —          1,023,594   

 

24

(2) Major Capital Expenditures

(a) Investments under Construction

[Steel]

 

             (In hundred millions of KRW)  

Company

   Date   

Project

   Total
Investment		     Invested
Amount		     Amount to
Be
Invested		  

POSCO

   Expansion   December, 2014

~ June, 2017

    G) Installation of no.7 CGL     2,554        2        2,552   
    July, 2008

~ December, 2016

    P, G) Expansion of the Capacity of the Raw Materials Treatment Facilities, etc.     27,660        18,077        9,583   
  Renovation /
Replacement		   October, 2014 ~
June, 2016		    G) Renovation of the Fifth Furnace, etc.     5,206        635        4,571   
    August, 2013

~ June, 2015

    P) Renovation of the Second Furnace, etc.     4,387        2,625        1,762   

POSCO Maharashtra Steel Private Limited

   Expansion   November, 2011 ~

January, 2015

   

Establishment of a Cold-Rolling Mill in India

(1.8 million ton)

     7,522        7,522        —     

POSCO(Suzhou) Automotive Processing Center Co., Ltd

   Expansion   January, 2015 ~
December, 2015		    Acquisition of SK Processing Center     100        —          100   

POSCO (Chongqing) Automotive Processing Center Co., Ltd

   Expansion   April, 2015 ~
December, 2015		    Establishment of #2 facility     110        —          110   

 

LOGO P stands for Pohang Steel Works.
LOGO G stands for Gwangyang Steel Works.

[Engineering&Construction]

 

               (In hundred millions of KRW)  

Company

   

Date

   

Project

    Total
Investment		      Invested
Amount		      Amount
to be
Invested		  

Hunchun POSCO Hyundai International Logistics Complex Development Co., Ltd.

    Expansion   

July, 2012 ~

September, 2016

    Land lease for construction of logistics complex      79,441         52,361         27,080   
   Expansion   

September, 2012

~ April, 2015

    #1 Construction of logistics complex      35,106         32,177         2,928   
   Expansion    September, 2014 ~ December, 2015    #2-1 Construction of logistics complex      43,446         10,219         33,227   
   Expansion   

March, 2015 ~

December, 2016

    #2-2 Construction of logistics complex      45,214         9,043         36,171   

 

25

[Others]

 

             (In hundred millions of KRW)  

Company

  

Date

   

Project

    Total
Investment		      Invested
Amount		      Amount
to be
Invested		  

POSCO ICT

   Expansion  

January, 2015~

December, 2015

   

Expansion of

Smart Management Server

For Smart Management Operation Efficiency

      338         57         281   
  Expansion  

January, 2015 ~

December, 2015

    Engineering      290         6         284   

POSCO

Energy

   Expansion  

November 2012 ~

January, 2015

   

Incheon) Establishment of a LNG Combined Cycle Power

Plant #7, #8, and #9

      10,630         10,630         —     
   

March 2013 ~

June, 2015

    Construction of a Cell Manufacturing Plant Laboratory      1,029         887         142   
POSCO Green Gas Technology   Expansion  

April, 2014 ~

November, 2015

    Establishment of SNG Plant      10,500         8,175         2,325   

 

LOGO The investments over KRW 10 billion are listed on the table while equity investment is not reflected thereon.

(b) Future Investment Plans

 

               (In hundred millions of KRW)  
                    Planned Investments  

Business

   

Company

   

Project

    2015      2016      2017  

Steel

    POSCO    Expansion, Renovation and Replacement of Existing Facilities   

Renovation of

Existing Facilities

      8,766         10,170         14,930   
         Capacity Increase      448         1,956         930   
   SPFC    Expansion, Renovation and Replacement of Existing Facilities    Establishment of Facilities      —           120         —     
         Acquisition of Land and Buildings      243         —           —     
   POSCO Thainox Public Company Limited    Expansion, Renovation and Replacement of Existing Facilities    Manufacture Process      106         38         26   
              14         189         —     
E&C    Hunchun Posco Hyundai International Logistics Complex Development Co., Ltd    Expansion, Renovation and Replacement of Existing Facilities    Establishment of Facilities      —           —           6,970   
   POSCO PLANTEC    Expansion, Renovation and Replacement of Existing Facilities    Rationalization of existing facilities      —           —           100   
Others    POSCO ICT    Expansion, Renovation and Replacement of Existing Facilities    Investment      338         86         —     
         Development of Facilities      95         146         —     
         Discover new business opportunities-      99         93         —     
   POSMATE    Expansion, Renovation and Replacement of Existing Facilities    Renovation of Existing Facilities      88         71         80   
   DAEWOO TEXTILE FERGANA LLC    Expansion, Renovation and Replacement of Existing Facilities    Improvement of Productivity and Product Quality      46         49         11   

 

LOGO The investments over KRW 10 billion are listed on the table while equity investment is not reflected thereon.

 

26

6. Product Sales

[Steel]

 

          (In hundred millions of KRW)  

Items

    2015 1Q
(January 1, 2015
~ March 31,
2015)		     2014     2013  

Domestic

    Hot-Rolled Products      6,746        42,090        37,828   
  

Cold-Rolled Products

      11,925        41,939        60,509   
  

Stainless Steel

      6,270        27,024        29,042   
  

Others

      23,028        102,892        103,308   

Export

    Hot-Rolled Products      8,167        37,133        21,971   
  

Cold-Rolled Products

      28,327        104,078        110,668   
  

Stainless Steel

      17,811        79,856        71,356   
  

Others

      15,362        60,957        45,554   

Total

    Gross Sum      117,636        495,969        480,236   
  

Internal Transaction

      (44,170 )      (177,552 )      (162,290 ) 
  

Total

      73,466        318,417        317,946   

[Trading]

 

          (In hundred millions of KRW)  

Items

    2015 1Q
(January 1, 2015
~ March 31,
2015)		      2014      2013  

Domestic

    Merchandise      2,038         9,349         8,490   
   Product      —           —           —     
   Others      72         111         116   

Export

    Merchandise      20,425         88,947         86,296   
   Product      14         223         127   
   Others      174         596         145   

Trades among Korea, China & Japan

         47,306         213,383         164,020   

Gross Sum

         70,029         312,609         259,193   

Internal Transaction

         (21,581 )       (100,951 )       (76,114 ) 

Total

         48,448         211,658         183,079   

 

27

[Engineering & Construction]

 

                 (In hundred millions of KRW)  

Items

    2015 1Q
(January 1,
2015 ~
March 31,
2015)		     2014     2013  

Construction Contract Revenue

      Domestic    Architecture      4,834        19,514        16,185   
       

Plant

      4,093        24,785        41,670   
       

Civil Engineering

      1,576        7,378        6,969   
       

Others

      —          —          2   
    

Overseas

         11,401        42,980        32,039   

Own Construction

              1,830        6,976        7,060   

Other Subsidiary company sales

              615        1,404        3,895   

Gross Sum

              24,349        103,037        107,820   

Internal Transaction

              (3,969 )      (21,845 )      (38,852 ) 

Total

              20,380        81,192        48,653   

[Others]

 

     (In hundred millions of KRW)  

Items

    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013  

Electric Power

      8,715         39,717         48,653   

7. Derivatives - Currency Forward Contracts

[None]

 

28

8. Significant Contracts

 

Company

   

Contract

   

Date

   

Remarks

POSCO   

Cooperation

Agreement

with Roy Hill

Co., Ltd.

    January, 2010   

The purpose of the Cooperation Agreement was to obtain 15% stake in Roy Hill Holdings Pty. Ltd. which was pursuing the development of Roy Hill iron ore mine in Western Australia.

 

      January, 2012   

POSCO decided to acquire certain additional equity interest in Roy Hill Holdings Pty. Ltd. (2nd phase), which amounts to approximately KRW 1,779 billion.

 

      March, 2012   

POSCO entered into a contract in March 2012 to invest an additional A$ 1,495 million to increase its interest to 15% of the total outstanding and common stocks of Roy Hill Holdings Pty. Ltd.

 

      April, 2012   

POSCO entered into a contract to dispose its 2.5% interest in the total outstanding common stocks of Roy Hill Holdings Pty. Ltd. to China Steel Corporation for A$ 305 million.

 

   Sales of shares in POSCO Specialty Steel Co., Ltd.    March, 2015    POSCO entered into a contract to sell its 52.3% interest in the total outstanding common stocks of POSCO Specialty Steel Co., Ltd. to SeAH Besteel Corp., Shinyoung Securities Co., Ltd., and Shinhan Investment Corp, which amounts to approximately KRW 418.5 billion.
DAEWOO INTERNATIONAL CORPORATION   

Gas Sales and

Purchase

Agreement

(“GSPA”)

Regarding

Shwe, Shwe

Phyu and

Mya gas field

in Myanmar

    December, 2008   

1)      Contract Parties

 

•        Seller: Daewoo International (51%), ONGC Videsh Limited (17%), Myanmar Oil and Gas Enterprise (15%), GAIL (India) Limited (8.5%) and Korea Gas Corporation (8.5%)

 

•        Buyer: China National United Oil Company (“CNUOC”)

 

2)      Signed Date: December 24, 2008

 

3)      Summary of the GSPA

 

•        Gas produced from Shwe and Shwe Phyu gas field in Block A-1 and Mya field in Block A-3 in Myanmar will be transported via the offshore and onshore gas pipelines to CNUOC in China.

 

•        Gas production period is expected to be approximately 30 years.

 

•        Gas sales price will be fluctuated and recalculated quarterly in accordance with the contractual base price, averaged oil price and consumer price.

 

4)      Remarks

 

•        CNUOC is one of subsidiaries of China National Petroleum Corporation (“CNPC”) and CNPC guarantees CNUOC’s contractual obligations under gas sales and purchase agreement.

 

•        Related Public Announcements: December 2, 2008; December 3, 2008; July 23, 2008; June 4, 2008; December 5, 2007; June 5, 2007; December 7, 2006; June 8, 2006; December 8, 2005; June 9, 2005; December 10, 2004; and June 11, 2004

 

29

Investment for

Construction of

Facilities

(Offshore Gas

Production

Platform and

Onshore Gas

Pipelines, etc)

August,

2009

1)      Total Investment: KRW 2,095,727,800,000

 

2)      Purpose of Investment: construction of new facilities for gas production, processing and transportation

 

3)      Total Period of Investment: October 1, 2009 ~ September 30, 2014

 

4)      Remarks

 

•        Location: the north-western offshore and onshore in Myanmar

 

•        Main facilities: offshore platform (gas production capacity: 64,000ft3/day), offshore pipeline (diameter: 32inch, length: 110km), onshore pipeline (diameter: 40 inch, length: 825km)

 

•        Date of Gas Supply: May 1, 2013; daily gas production rate during the plateau period: 50,000ft3/day

 

•        The aforementioned investment is for the phase 1 development; the phase 2 ~ 4 developments will commence consequently approximately 10 years after the completion of the phase 1 development.

 

•        Main business areas: Upstream offshore business (offshore platform, subsea system), Middle stream offshore business (gas pipeline, onshore gas terminal)

 

•        Participants: Daewoo International (51%), ONGC Videsh Limited (17%), Myanmar Oil and Gas Enterprise (15%), GAIL (India) Limited (8.5%) and Korean Gas Corporation (8.5%)

Sale of Daewoo

Cement

(Shandong)

Company

Limited

 July, 2011

1)      Purpose of the Sale : sale of non-core business, divestiture and collection of long term debt

 

2)      Other information

 

•        The sale price of all of the shares of Daewoo Cement (Shandong) Company Limited has not been determined; the separate disclosure regarding the sale price of Daewoo Cement (Shandong) Company Limited will be made when such information is available.

 

•        The sale price of all of the shares of Daewoo Cement (Shandong) Company Limited is KRW 37,422,000,000 as of December 27, 2000. At the end of March, 2012, the book value of all of the shares of Daewoo Cement (Shandong) Company Limited was KRW 41,600 million under the K-IFRS.

 

•        The official sale date of all of the shares of Daewoo Cement (Shandong) Company Limited has not been determined; actual sale date of all of the shares of Daewoo Cement (Shandong) Company Limited shall be set when the condition precedents of the share purchase agreement between Daewoo Cement (Shandong) Company Limited and a purchaser are satisfied.

 

•        Sale agreement can be nullified when condition precedents of the contract (i.e. government approvals, etc) are not satisfied.

Sale of

Kyobo Life

Insurance

Co., Ltd. stake

 August, 2012

1)      Purpose of the sale was to strengthen financial structure and secure the core investment plan

 

2)      Other information

 

•        The board of Directors resolved to sell the Kyobo Life Insurance Co., Ltd.’s stake, which amounts to KRW 1,205,400 million on August 8, 2012.

 

30

  

Acquisition of NEATT

(North East Asia Trade Tower) in Songdo, Incheon

    July 2013   

1)      Building

 

•        Name: NEATT (North East Asia Trade Tower)

 

•        Location: Songdo, Incheon, Korea

 

2)      Purchase Price: KRW 207,600,000,000 (2.8% of the total assets on consolidated basis as of the end of year 2012)

 

3)      Closing Date: July 31, 2014 (tentative)

 

4)      Miscellaneous

 

•        Building is expected to be purchased by Daewoo International (60%) and POSCO E&C (40%)

POSCO ENERGY    Agreement of stock acquisition   

June,

2014

   

1)      Contract Parties: TONGYANG Cement & Energy Corp., TONGYANG Leisure, and TONGYANG Inc.

 

2)      Signed Date : June 25, 2014

 

3)      Amount : KRW 431,093 million

 

4)      Purpose : Agreement of stock acquisition in order to acquire 100% stake of TONGYANG Power

9. Research and Development

A. Research and Development (“R&D”) Organization

 

Business Area

   

Company

   

Organization

Steel

    POSCO    POSCO’s Relevant Departments   

Technical Research Laboratory

 

        

Engineering Solution Center

 

        

Pohang Research Laboratory

 

        

Gwangyang Research Laboratory

 

        

Steel Solution Center

 

     

Steel Planning Department

 

     

New Business Planning Department

 

     

Environment, Energy, Social responsibility Department

 

  

POSCO COATED & COLOR STEEL

 

   

Product Research Group

 

  

POSCO AST CO., LTD.

   

Product Research Team

 

   Zhangjiagang Pohang Stainless Steel Co., Ltd.   

Product Development Group

 

   POSCO Thainox Public Company Ltd.   

Product Development and Research

 

Engineering & Construction    POSCO Engineering & Construction   

R&D Center

 

   POSCO Engineering Company   

R&D group

 

   POSCO A&C   

R&D Center

 

   POSCO PLANTEC   

R&D Center

 

Others    POSCO ENERGY   

Technology Strategy Department, Fuel Cell Department

 

   POSCO ICT   

R&D Center

 

   POSCO CHEMTECH   

R&D Center

 

   POSCO M-TECH CO., LTD.   

R&D Center

 

   POS-HiMETAL CO., Ltd.   

Product Research Department

 

   PNR CO., Ltd.   

Quality Innovation Department

 

   PONUTech Co., Ltd.    Technology Center

 

31

B. R&D Expenses

 

     (In millions of KRW)  
     Business Area  

Category

    Steel     Trade     Engineering &
Construction		     Others     Total  

Selling and Administrative Cost

      15,728        588        1,438        7,068        24,822   

Manufacturing Cost

      79,645        —          1,036        1,263        81,944   

R&D Cost (Intangible Assets)

      2,877        —          139        1,591        4,607   

Total

      98,250        588        2,613        9,922        111,373   

R&D/Sales Ratio

      1.34 %      0.01 %      0.13 %      1.14 %      0.74 % 

III. Financial Statements

1. Non-consolidated Financial Statements

A. Summary of Fiscal Years 2013, 2014 and the First Quarter of 2015

 

 

     (In millions of KRW)  

Account

    2015 1Q
(January 1, 2015 ~
March 31,
2015)		      2014      2013  

[Current Assets]

      12,244,980         11,623,130         11,953,479   

Cash & Cash equivalents

      1,898,624         1,742,767         1,394,315   

Trade Accounts & Notes Receivable(net)

      2,767,120         3,157,266         3,393,444   

Other Current Financial Instruments

      2,128,695         1,256,659         2,599,977   

Inventories

      4,304,437         4,383,568         4,538,657   

Other Current Assets

      1,146,104         1,082,870         27,086   

[Non-current Assets]

      40,656,159         40,974,193         42,288,799   

Other Non-current Financial Instruments

      1,879,822         1,820,950         3,408,332   

Investment in Subsidiaries and Associates

      16,017,424         16,178,891         15,092,836   

Tangible Assets

      22,119,553         22,323,215         23,240,603   

Good Will & Other Intangible Assets

      391,327         403,907         438,783   

Other Non-current Assets

      248,034         247,230         108,245   

Total Assets

      52,901,139         52,597,323         54,242,278   

[Current Liabilities]

      4,284,047         3,516,052         3,704,520   

[Non-current Liabilities]

      6,140,245         6,605,840         8,226,296   

Total Liabilities

      10,424,292         10,121,892         11,930,816   

[Capital Stock]

      482,403         482,403         482,403   

[Capital Surplus]

      1,247,618         1,247,616         1,233,040   

[Hybrid bond]

      996,919         996,919         996,919   

[Retained Earnings]

      41,162,202         41,188,908         40,774,284   

[Other Equity]

      (1,412,295 )       (1,440,415 )       (1,175,184 ) 

Total Shareholders’ Equity

      42,476,847         42,475,431         42,311,462   

Total Sales

      6,787,607         29,218,854         30,543,545   

Operating Income

      621,707         2,350,035         2,215,133   

Net Income

      499,760         1,138,958         1,582,596   

Earnings per share(KRW)

      6,146         13,858         20,052   

 

32

B. The Standards Used for Reporting the Financial Statements

The company prepared its financial statements and its Certified Public Accountant’s audit opinions on financial statements in accordance with the Korean—International Financial Reporting Standards (the “K-IFRS”).

C. Non-consolidated Financial Statements

 

(1) Balance Sheet

Refer to the attached balance sheet for the first quarter of fiscal year of 2015.

 

(2) Income Statements

Refer to the attached income statement for the first quarter of fiscal year of 2015.

 

(3) The Note on the Financial Statement

Refer to the auditor’s note about the financial statement.

 

33

2. Consolidated Financial Statements

A. Summary of Fiscal Years 2013, 2014 and the First Quarter of 2015

 

 

     (In millions of KRW)  

Account

    2015 1Q
(January 1, 2015 ~
March 31, 2015)		      2014      2013  

[Current Assets]

      31,948,168         32,627,382         31,666,211   

Cash & Cash equivalents

      4,041,762         3,811,202         4,280,562   

Other Current Financial Instruments

      4,437,425         3,419,136         4,861,088   

Accounts Receivable

      11,652,966         11,786,055         11,492,601   

Inventories

      10,045,695         10,471,330         9,798,381   

Other Current Assets

      1,770,320         3,139,659         1,305,579   

[Non-current Assets]

      52,682,715         52,624,791         52,789,196   

Other Non-current Financial Instruments

      3,513,842         3,600,060         5,263,185   

Investment Securities

      4,026,241         4,060,507         3,808,693   

Tangible Assets

      35,209,553         35,241,195         35,760,119   

Good Will & Other Intangible Assets

      6,867,687         6,884,989         5,929,840   

Other Non-current Assets

      3,065,392         2,838,040         2,027,359   

Total Assets

      84,630,883         85,252,173         84,455,407   

[Current Liabilities]

      22,559,208         21,877,009         20,241,159   

[Non-current Liabilities]

      17,498,765         18,083,799         18,392,218   

Total Liabilities

      40,057,973         39,960,808         38,633,377   

[Controlling Interest]

      41,237,106         41,587,368         42,046,037   

Capital Stock

      482,403         482,403         482,403   

Capital Surplus

      1,087,192         1,083,718         1,078,266   

Hybrid bond

      996,919         996,919         996,919   

Retained Earnings

      40,762,080         40,967,558         41,090,649   

Other Controlling Interest

      (2,091,488 )       (1,943,230 )       (1,602,200 ) 

[Minority Interest]

      3,335,804         3,703,997         3,775,993   

Total Shareholders’ Equity

      44,572,910         45,291,365         45,822,030   

Total Sales

      15,100,912         65,098,445         61,864,650   

Operating Income

      731,241         3,213,530         2,996,134   

Consolidated Net Profit

      335,200         556,659         1,355,180   

[Controlling Interest]

      338,584         626,099         1,376,396   

[Minority Interest]

      (3,384 )       (69,440 )       (21,216 ) 

Consolidated Total Comprehensive Income

      118,083         101,077         1,369,450   

[Controlling Interest]

      137,628         174,918         1,444,262   

[Minority Interest]

      (19,545 )       (73,841 )       (74,812 ) 

Earning Per Share

      4,131         7,432         17,409   

Number of Consolidated Companies

      230         229         212   

 

34

B. The Standards Used for Reporting the Financial Statements

The Company prepared its financial statements in accordance with the Korean-International Financial Reporting Standards (the “K-IFRS”) and applied it to each Company’s final financial statements.

C. Consolidated Financial Statements

 

(1) Consolidated Balance Sheet

Refer to the attached consolidated balance sheet for the first quarter of fiscal year of 2015.

 

(2) Consolidated Income Statements

Refer to the attached consolidated financial report for the first quarter of fiscal year of 2015.

 

35

IV. CORPORATE GOVERNANCE AND COMPANY AFFILIATES

1. Overview of Corporate Governance

A. Board of Directors

(1) Board of Directors

Our board of directors has the ultimate responsibility for management of our business affairs. Under our Articles of Incorporation, the board shall consist of five directors who also act as the executive officers (the “Inside Directors”) and seven directors who are to be outside directors (the “Outside Directors”). Our shareholders elect both Inside Directors and Outside Directors at a general meeting of shareholders. Candidates for the Inside Directors are recommended to shareholders by the board of directors after the board reviews such candidates’ qualifications; candidates for the Outside Directors are recommended to the shareholders by a separate board committee consisted of three Outside Directors and one Inside Director (the “Director Candidate Recommendation Committee”) after the committee reviews such candidates’ qualifications. Any shareholder holding an aggregate of 0.5% or more of our outstanding shares with voting rights for at least six months may recommend candidates for Outside Directors to the Director Candidate Recommendation Committee.

Our board of directors maintains the following six special committees:

 

  (a) Director Candidate Recommendation Committee;

 

  (b) Evaluation and Compensation Committee;

 

  (c) Finance and Operation Committee;

 

  (d) Executive Management Committee;

 

  (e) Audit Committee; and

 

  (f) Related Party Transaction Committee.

 

36

LOGO Composition of the Special Committees under the Board of Directors and their Functions (as of March 31, 2015)

 

Category

   

Composition

    Directors   

Major Functions

Director Candidate Recommendation Committee   

3 Outside Directors;

1 Inside Director

    Ahn, Dong-Hyun

(Chairman)

Kim, Il-Sup

Kim, Joo-Hyun

Kim, Jin-Il

   

•       Reviews the qualifications of potential candidates for Directors

 

•       Proposes nominees for the Outside Directors

 

•       Advances the nomination process for the Inside Directors and members of the special committees

 

Evaluation and

Compensation

Committee

    4 Outside Directors    Sunwoo, Young

(Chairman)

Shin, Chae Chol

Lee, Myung-Woo

Bahk, Byong-Won

   

•       Executes management succession and development plans

 

•       Establishes evaluation procedures of directors

 

•       Reviews the retirement procedures and distribution of the allowance for directors

Finance and Operation Committee    3 Outside Directors;
2 Inside Directors		    Lee, Myung-Woo
(Chairman)

Ahn, Dong-Hyun

Bahk, Byong-Won

Yoon, Dong-Jun

Lee, Young-Hoon

   

•       Advances deliberation of new investments in other companies

 

•       Revises the internal regulations regarding the operation of the Board of Directors

 

•       Deliberates financial matters and donations from the range of KRW 100 million and KRW 1 billion

 

Audit Committee    3 Outside Directors    Kim, Il-Sup
(Chairman)

Sunwoo, Young

Kim, Joo-Hyun

   

•       Audits the accounting system and business operations

 

•       Examines the agenda for financial statements and other reports to be submitted by the Board of Directors at each general meeting of shareholders

Related Party Transactions Committee    3 Outside Directors    Kim, Il-Sup
(Chairman)

Sunwoo, Young

Kim, Joo-Hyun

   

•       Reviews matters related to the internal transactions under the MRFTA.-Holds preliminary review on internal transactions exceeding the amount of KRW 10 billion.

 

•       Holds a deliberation hearing on internal transactions exceeding KRW 3 billion but less than 10 billion.

Executive

Management Committee

    5 Inside Directors    Kwon, Oh-Joon
(Chairman)

Kim, Jin-Il

Yoon, Dong-Jun

Lee, Young-Hoon

Oh, In-Hwan

   

•       Oversees decisions with respect to our operational and management matters

 

•       Reviews management’s proposal for new strategic initiatives

•       Reviews deliberation over critical internal matters related to the organization structure and development of personnel

 

•       Reviews and revises work and welfare policies

 

(2) Establishment and Composition of the Director Candidate Recommendation Committee

 

  (a) Established the Director Candidate Recommendation Committee (March 17, 2000)

 

  (b) Changed the name from the Director Candidate Recommendation Committee to the Director Candidate Recommendation and Evaluation Committee (March 15, 2002)

 

  (c) Changed the name from the Director Candidate Recommendation and Evaluation Committee to the Director Candidate Recommendation Committee (March 12, 2004)

 

37

(3) List of Outside Directors (as of March 13, 2015)

 

Name

   

Experience

   

Relation with
Majority
Shareholder

   

Remarks

Shin, Chae-Chol   

•       President and Representative Director, LG CNS

 

•       President and Representative Director, IBM Korea

    None    Chairman Board of Directors
Lee, Myoung-Woo   

•       (Present) President and Representative Director, Dongwon Industry

 

•       Vice Chairman, Iriver

 

•       CEO, SONY Korea

    None   
Kim, Il-Sup   

•       (Present) President, Seoul School of Integrated Science and Technology

 

•       Chairman, Deloitte Anjin Accounting Corporation

 

•       Vice-Chairman, Samil PWC Accounting Corporation

    None   
Sunwoo, Young   

•       (Present) Managing Partner, Rhi & Partners

 

•       Chief Public Prosecutor, Seoul Eastern District Prosecutor’s Office

 

•       Chief Public Prosecutor, Cheongju District Prosecutor’s Office

    None   
Ahn, Dong-Hyun   

•       (Present) Professor, School of Economics, Seoul National University

 

•       Head of Quant Strategy, Royal Bank of Scotland

    None    Member of the Risk Management committee of the National Pension Services (Non-Executive Director)
Bahk, Byong-Won   

•       (Present) President, National Happiness Fund

 

•       Chairman, Korea Federation Bank

 

•       Senior Secretary to the President, Economic Policy

 

•       Chairman, Woori Finance Holdings Co., Ltd

    None   
Kim, Joo-Hyun   

•       (Present) Advisory, Hyundai Research Institute Chairman, Sub-Committee of Economy Presidential Committee, Unification Preparation

 

•       President & CEO, Hyundai Research Institute

 

•       Head, Business Strategy Division of Hyundai Research Institute

    None   

 

38

(4) List of Key Activities of the Board of Directors (January 1, 2015 ~ May 14, 2015)

 

Session

   

Date

   

Agenda

   

Approval

2015-1    January 29   

1. Approval of the financial statements for the 47th fiscal year and the convocation schedule for the 47th general meeting of shareholders

 

2. Performance evaluation of executive officers and improvement of indemnification

   

All 2 Cases

Approved

2015-2    February 16   

1. Agenda for the 47th general meeting of shareholders

 

2. Recommendation of candidates for the Inside Director position

   

All 2 Cases

Approved

2015-3    March 13   

1. Appointment of the chairman of the Board of Directors

 

2. Appointment of the special committee members

 

3. Approval of designation of Representative Directors and Inside Directors

 

4. Sale of shares in POSCO Engineering & Construction

    All 4 Cases Approved
2015-4    May 14   

1. Increase capability of Pohang non-oriented electrical steel

 

2. Contribution to POSCO Educational Foundation

 

3. FY 2015 Transaction Plans with affiliated person

 

4. Reporting the result of compliance control system and appointment of compliance officer

 

5. Contribution to Korea Council of Sport for all

    All 5 Cases Approved

 

LOGO Major Activities of the Outside Directors on the Board of Directors (January 1, 2015 ~ March 31, 2015)

 

Session

    Date    Participation of the Outside Directors
(the Number of total members)		   Remarks

2015-1

    January 29    7 (7)  

2015-2

    February 16    7 (7)  

2015-3

    March 13    7 (7)  

2015-4

    May 14    7 (7)  

 

(5) Composition of the Special Committees and their Activities

 

  (a) Major Activities of Director Candidate Recommendation Committee (January 1, 2015 ~ March 13, 2015)

 

Date

   

Agenda

    Approval
February 9    1. Qualification Assessment and Recommendation of Outside Director Candidates    Approved
February 16    1. Qualification assessment of Inside Director Candidates    —
March 13   

1. Appointment of Special Committee Members

 

2. Appointment of the Representative Directors and Position for the Inside Directors

    —

 

  (b) Major Activities of Evaluation and Compensation Committee (January 1, 2015 ~ March 13, 2015)

 

Date

   

Agenda

    Approval
January 29   

1. Performance evaluation of executive officers and improvement of indemnification

 

2. Evaluation of the management result for the fiscal year of 2014

    —

 

Approved

 

  (c) Major Activities of Finance and Operation Committee (January 1, 2014 ~ May 14, 2015)

 

Date

   

Agenda

    Approval
March 13    1. Sale of shares in POSCO Engineering & Construction    —  
May 14    1. Contribution to Korea Council of Sport for all   

 

39

  (d) Major Activities of Related Party Transaction Committee (January 1, 2014 ~ March 13, 2015)

 

Date

   

Agenda

    Approval
January 23    1. Review of the operation of the Fair Trading Program    —  
February 13   

1. Change in Director for voluntary compliance of Fair Trade

 

2. Investment increase of POSCO Group Academy

    Approved

 

Approved

 

LOGO Major Activities of Related Party Transaction Committee (March 13, 2014 ~ May 14, 2015)

 

Date

   

Agenda

    Approval
May 12    1. Contribution to POSCO Educational Foundation   

 

  (e) Major Activities of Executive Management Committee (January 1, 2015 ~ May 14, 2015)

 

Session

    Date   

Agenda

   

Approval

2015-1    January 26   

1. Replacement of H2 production facility for COG refinement in Pohang Works

 

2. Replacement of Scarfer in Gwangyang Works

 

3. Disposal of Treasury Stocks as Employee Award

   

Approved

 

Approved

 

Approved

2015-2    March 17    1. The third renovation of #3 furnace in Pohang Works    Approved
2015-3    April 21   

1. Increase capacity of Pohang non-oriented electrical steel

 

2. Replacement of old facilities in Pohang Works

 

3. Establishment of POSCO Vietnam and management plan

 

4. Disposal of Treasury Stocks as Employee Award

   

Approved

 

Approved

 

Approved

 

Approved

 

40

B. Audit Committee

Under the Korean laws and our Articles of Incorporation, we are required to have an audit committee (the “Audit Committee”). The Audit Committee may be composed of three or more directors; all members of the Audit Committee must be of Outside Directors. Members of the Audit Committee must also meet the applicable independent criteria set forth under the rules and regulations of the Financial Investment Services and Capital Markets Act. Members of the Audit Committee are elected by the shareholders at the general meeting of shareholders. Our current Audit Committee is composed of three Outside Directors.

The duties of the Audit Committee include:

 

•   Engaging independent auditors;

 

•   Approving independent audit fees;

 

•   Approving audit and non-audit services;

 

•   Reviewing annual financial statements;

 

•   Reviewing audit results and reports, including management comments and recommendations;

 

•   Reviewing our system of controls and policies, including those covering conflicts of interest and business ethics;

 

•   Reviewing and approving all related party transactions; and

 

•   Examining improprieties or suspected improprieties.

Moreover, in connection with the general meeting of shareholders, the Audit Committee examines the agenda, financial statements and other reports to be submitted by the Board of Directors at each general meeting of stockholders. Our internal and external auditors report directly to the Audit Committee. The committee holds its regular meetings at least once each quarter and more frequently if needed.

 

  (1) Composition of the Audit Committee (Auditors)

 

Name

   

Qualifications

    Remarks

Kim, Il-Sup

Sunwoo, Young

Kim, Joo-Hyun

    Satisfies the requirements stipulated in the Articles of Incorporation    Chairman

—  

—  

 

41

  (2) Major Activities of the Audit Committee (Auditors) (January 1, 2015 ~ May 14, 2015)

 

Session

    Date   

Agenda

    Approval
2015-1    January 23   

•       Report Agenda

 

•       Assessment of the operations of the internal accounting control system for the fiscal year of 2014

 

•       Reporting the consolidated internal control system for the fiscal year of 2014

 

•       Audit plans for the fiscal year of 2015

   

 

2015-2

   

 

February 13

   

 

•       Deliberation Agenda

 

•       Approval of designation of the director for internal auditary department

 

•       Assessment of the operations of the internal accounting control system for the fiscal year of 2014

 

•       Internal audit result for the fiscal year of 2014 (Consolidated)

 

•       Report Agenda

 

•       External audit result for the fiscal year of 2014 (Consolidated)

   

 

 

 

Approved

 

Approved

 

 

Approved

2015-3    March 27   

•       Deliberation Agenda

 

•       Approval of audit and non-audit services for POSCO and POSCO’s subsidiaries

    Approved
2015-4    April 24   

•       Report Agenda

 

•       Audit report of Form 20-F for the fiscal year 2014

   
2015-5    May 12   

•       Report Agenda

 

•       Internal audit result for the first quarter of 2015 (Consolidated)

 

•       External audit result for the first quarter of 2015 (Consolidated) and Audit result of Form 20-F for the fiscal year 2014

   

C. Voting Rights by Shareholders

 

  (1) The Cumulative Voting System: The cumulative voting system was introduced at the thirty sixth general meeting of shareholders on March 12, 2004.

 

  (2) Voting by Mail: The voting-by-mail system was introduced at the thirty sixth general meeting of shareholders on March 12, 2004.

D. Compensation of Directors and Officers

 

  (1) Directors’ (including Outside Directors) and the Audit Committee members’ (Auditors’) Salaries

 

 

(In millions KRW)  

Category

    Total
Numbers		      Total Payment      Average Payment      Ceiling Amount Approved at
the Shareholders Meeting		      Remarks  

Inside Director

      5         751         108         7,000         —     

Outside Director

      4         76         14            —     

Members of the Audit Committee

      3         60         13            —     

Total

      12         887         53            —     

 

LOGO Payment Period: January 1, 2015 ~ March 31, 2015
LOGO Outside Directors also serving as the members of the Audit Committee are excluded in the count for the Outside Director.

 

42

  (2) Individual remuneration amount

 

Name

   

Experience

    Total Payment  

—  

    —        —     

 

LOGO * None reported since there was no individual remuneration exceeding 500 million KRW

 

  (3) List of Stock Options Presented to the Executives (As of March 31, 2015)

 

  •   Exercise of the stock option ended on the final day of the stock options exercise period (April 28, 2012).

 

43

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

March 31, 2015

(With Independent Auditors’ Review Report Thereon)

Table of Contents

 

     Page  

Independent Auditors’ Review Report

      1   

Condensed Separate Interim Financial Statements

   

Condensed Separate Interim Statements of Financial Position

      3   

Condensed Separate Interim Statements of Comprehensive Income (Loss)

      5   

Condensed Separate Interim Statements of Changes in Equity

      6   

Condensed Separate Interim Statements of Cash Flows

      7   

Notes to the Condensed Separate Interim Financial Statements

      9   

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of March 31, 2015, the condensed separate interim statements of comprehensive income (loss), changes in equity and cash flows for the three-month periods ended March 31, 2015 and 2014, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed separate interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to issue a report on the condensed separate interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

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

The separate statement of financial position of the Company as of December 31, 2014, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated February 25, 2015, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2014, presented for comparative purposes, is consistent, in all material respects, with the audited separate financial statements from which it has been was derived.

Seoul, Korea

May 14, 2015

 

This report is effective as of May 14, 2015, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

2

POSCO

Condensed Separate Interim Statements of Financial Position

As of March 31, 2015 and December 31, 2014

(Unaudited)

 

 

(in millions of Won)    Notes      March 31, 2015      December 31, 2014  

Assets

         

Cash and cash equivalents

      20       ￦ 1,898,624         1,742,767   

Trade accounts and notes receivable, net

      4,14,20,31         2,767,120         3,157,266   

Other receivables, net

      5,20,31         370,833         562,930   

Other short-term financial assets

      6,14,20         1,757,862         693,729   

Inventories

      7,28         4,304,437         4,383,568   

Assets held for sale

      8         1,114,507         1,051,177   

Other current assets

      9         31,596         31,692   
     

 

 

     

 

 

  

Total current assets

   12,244,979      11,623,129   
     

 

 

     

 

 

  

Long-term trade accounts and notes receivable, net

   4,20      24,017      23,841   

Other receivables, net

   5,20      27,185      26,360   

Other long-term financial assets

   6,20      1,852,637      1,794,590   

Investments in subsidiaries, associates and joint ventures

   10      16,017,424      16,178,891   

Investment property, net

   11      91,371      90,137   

Property, plant and equipment, net

   12      22,119,553      22,323,215   

Intangible assets, net

   13      391,327      403,907   

Other long-term assets

   9      132,646      133,253   
     

 

 

     

 

 

  

Total non-current assets

   40,656,160      40,974,194   
     

 

 

     

 

 

  

Total assets

 ￦ 52,901,139      52,597,323   
     

 

 

     

 

 

  

See accompanying notes to the condensed separate interim financial statements.

 

3

POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of March 31, 2015 and December 31, 2014

(Unaudited)

 

 

(in millions of Won)    Notes      March 31, 2015     December 31, 2014  

Liabilities

        

Trade accounts and notes payable

      20,31       ￦ 813,543        777,401   

Short-term borrowings and current installments of long-term borrowings

      4,6,14,20         1,734,344        1,236,290   

Other payables

      15,20,31         1,304,015        1,032,496   

Other short-term financial liabilities

      16,20         10,131        9,236   

Current income tax liabilities

         331,573        304,362   

Provisions

      17         38,586        47,759   

Other current liabilities

      19         51,855        108,508   
     

 

 

    

 

 

  

Total current liabilities

   4,284,047      3,516,052   
     

 

 

    

 

 

  

Long-term borrowings, excluding current installments

   14,20      4,701,268      5,300,927   

Other payables

   15,20      77,672      88,807   

Other long-term financial liabilities

   16,20      77,587      50,574   

Defined benefit liabilities, net

   18      139,978      86,158   

Deferred tax liabilities

   1,120,558      1,047,666   

Long-term provisions

   17,32      20,671      31,474   

Other long-term liabilities

   19      2,511      234   
     

 

 

    

 

 

  

Total non-current liabilities

   6,140,245      6,605,840   
     

 

 

    

 

 

  

Total liabilities

   10,424,292      10,121,892   
     

 

 

    

 

 

  

Shareholders’ Equity

Share capital

   21      482,403      482,403   

Capital surplus

   21      1,247,618      1,247,616   

Hybrid bonds

   22      996,919      996,919   

Reserves

   23      122,154      94,042   

Treasury shares

   24      (1,534,449 )    (1,534,457 ) 

Retained earnings

   41,162,202      41,188,908   
     

 

 

    

 

 

  

Total shareholders’ equity

   42,476,847      42,475,431   
     

 

 

    

 

 

  

Total liabilities and shareholders’ equity

 ￦ 52,901,139      52,597,323   
     

 

 

    

 

 

  

See accompanying notes to the condensed separate interim financial statements.

 

4

POSCO

Condensed Separate Interim Statements of Comprehensive Income (Loss)

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won, except per share information)

    Notes      March 31, 2015     March 31, 2014  

Revenue

      31       ￦ 6,787,607        7,363,850   

Cost of sales

      7,28,31         (5,712,062 )      (6,393,438 ) 
     

 

 

    

 

 

  

Gross profit

   1,075,545      970,412   

Selling and administrative expenses

   25,28,31   

Administrative expenses

   (213,239 )    (225,551 ) 

Selling expenses

   (240,599 )    (227,157 ) 
     

 

 

    

 

 

  

Operating profit

   621,707      517,704   
     

 

 

    

 

 

  

Finance income and costs

   20,26   

Finance income

   358,842      244,002   

Finance costs

   (143,190 )    (219,889 ) 

Other non-operating income and expenses

   27,31   

Other non-operating income

   13,629      3,382   

Other non-operating expenses

   28      (118,785 )    (273,061 ) 
     

 

 

    

 

 

  

Profit before income tax

   732,203      272,138   

Income tax expense

   29      (232,443 )    (160,619 ) 
     

 

 

    

 

 

  

Profit

   499,760      111,519   

Other comprehensive income (loss)

Items that will never be reclassified subsequently to profit or loss :

Remeasurements of defined benefit plans, net of tax

   18      (35,807 )    (9,423 ) 

Items that are or may be reclassified subsequently to profit or loss :

Net changes in unrealized fair value of available-for-sale investments, net of tax

   6,20,23      28,112      (219,427 ) 
     

 

 

    

 

 

  

Total comprehensive income (loss)

 ￦ 492,065      (117,331 ) 
     

 

 

    

 

 

  

Basic and diluted earnings per share (in Won)

   30    ￦ 6,146      1,296   
     

 

 

    

 

 

  

See accompanying notes to the condensed separate interim financial statements.

 

5

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won)    Share
capital		      Capital
surplus		      Hybrid
bonds		      Reserves     Treasury
shares		     Retained
earnings		     Total  

Balance as of January 1, 2014

    ￦ 482,403         1,233,040         996,919         403,939        (1,579,123 )      40,774,284        42,311,462   

Comprehensive income :

                  

Profit

      —           —           —           —          —          111,519        111,519   

Other comprehensive loss

                  

Remeasurements of defined benefit plans, net of tax

      —           —           —           —          —          (9,423 )      (9,423 ) 

Net changes in unrealized fair value of available-for-sale investments, net of tax

      —           —           —           (219,427 )      —          —          (219,427 ) 

Transactions with owners of the Company, recognized directly in equity:

                  

Year-end dividends

      —           —           —           —          —          (478,702 )      (478,702 ) 

Interest of hybrid bonds

      —           —           —           —          —          (10,701 )      (10,701 ) 

Disposal of treasury shares

      —           11         —           —          30        —          41   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of March 31, 2014

    ￦   482,403         1,233,051         996,919         184,512        (1,579,093 )      40,386,977        41,704,769   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of January 1, 2015

    ￦   482,403         1,247,616         996,919         94,042        (1,534,457 )      41,188,908        42,475,431   

Comprehensive income :

                  

Profit

      —           —           —           —          —          499,760        499,760   

Other comprehensive income (loss)

                  

Remeasurements of defined benefit plans, net of tax

      —           —           —           —          —          (35,807 )      (35,807 ) 

Net changes in unrealized fair value of available-for-sale investments, net of tax

      —           —           —           28,112        —          —          28,112   

Transactions with owners of the Company, recognized directly in equity :

                  

Year-end dividends

      —           —           —           —          —          (479,958 )      (479,958 ) 

Interest of hybrid bonds

      —           —           —           —          —          (10,701 )      (10,701 ) 

Disposal of treasury shares

      —           2         —           —          8        —          10   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of March 31, 2015

    ￦ 482,403         1,247,618         996,919         122,154        (1,534,449 )      41,162,202        42,476,847   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

See accompanying notes to the condensed separate interim financial statements.

 

6

POSCO

Condensed Separate Interim Statements of Cash Flows

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won)    Notes    March 31, 2015     March 31, 2014  

Cash flows from operating activities

        

Profit

       ￦ 499,760        111,519   

Adjustments for :

        

Costs for defined benefit plans

         32,658        29,856   

Depreciation

         507,334        499,554   

Amortization

         17,323        18,515   

Finance income

         (317,678 )      (184,515 ) 

Finance costs

         104,228        164,011   

Loss on valuation of inventories

         14,504        5,377   

Gain on disposal of property, plant and equipment

         (1,679 )      (1,149 ) 

Loss on disposal of property, plant and equipment

         19,360        17,669   

Impairment loss on investments in subsidiaries, associates and joint ventures

         20,072        67,729   

Gain on disposal of assets held for sale

         (1,683 )      —     

Loss on disposal of assets held for sale

         20,133        14   

Impairment loss on assets held for sale

         11,996        —     

Income tax expense

         232,443        160,619   

Others

         5,226        26,257   

Changes in operating assets and liabilities

    33      431,648        396,584   

Interest received

         29,246        33,327   

Interest paid

         (57,424 )      (100,907 ) 

Dividends received

         413,277        14,758   

Income taxes paid

         (128,818 )      (88,496 ) 
     

 

 

    

 

 

  

Net cash provided by operating activities

 ￦ 1,851,926      1,170,722   
     

 

 

    

 

 

  

See accompanying notes to the condensed separate interim financial statements.

 

7

POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won)    Notes    March 31, 2015     March 31, 2014  

Cash flows from investing activities

        

Proceeds from disposal of short-term financial instruments

       ￦ 1,196,840        1,373,031   

Decrease in short-term loans

         4,234        —     

Decrease in long-term loans

         270        2,234   

Proceeds from disposal of intangible assets

         1,203        —     

Proceeds from disposal of assets held for sale

         355,524        1,291   

Acquisition of short-term financial instruments

         (2,261,681 )      (689,886 ) 

Acquisition of available-for-sale financial assets

         (688 )      (2,029 ) 

Increase in short-term loans

         (65,208 )      —     

Increase in long-term loans

         —          (126 ) 

Acquisition of investment in subsidiaries, associates and joint ventures

         (349,643 )      (388,564 ) 

Acquisition of investment property

         (146 )      —     

Acquisition of property, plant and equipment

         (429,430 )      (520,111 ) 

Payment for disposal of property, plant and equipment

         (12,207 )      (8,546 ) 

Acquisition of intangible assets

         (9,478 )      (5,165 ) 
     

 

 

    

 

 

  

Net cash used in investing activities

   (1,570,410 )    (237,871 ) 
     

 

 

    

 

 

  

Cash flows from financing activities

Proceeds from borrowings

   1,354      1,081,689   

Increase in long-term financial liabilities

   1,537      698   

Repayment of borrowings

   (116,705 )    (1,361,843 ) 

Decrease in long-term financial liabilities

   (1,074 )    (3,491 ) 

Payment of cash dividends

   (20 )    (253 ) 

Payment of interest of hybrid bonds

   (10,751 )    (10,751 ) 
     

 

 

    

 

 

  

Net cash used in financing activities

   (125,659 )    (293,951 ) 
     

 

 

    

 

 

  

Net increase in cash and cash equivalents

   155,857      638,900   

Cash and cash equivalents

Cash and cash equivalents at beginning of the period

   1,742,767      1,394,315   
     

 

 

    

 

 

  

Cash and cash equivalents at end of the period

 ￦ 1,898,624      2,033,215   
     

 

 

    

 

 

  

See accompanying notes to the condensed separate interim financial statements.

 

8

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of March 31, 2015

(Unaudited)

 

1. Reporting Entity

POSCO (the “Company”) is the largest steel producer in Korea which 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 overseas markets.

The shares of the Company have been listed on the Korea Exchange since 1988. The Company 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 March 31, 2015, the shares of the Company are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

2. Statement of Compliance

Statement of compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Corporations.

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2014. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements in accordance with K-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor in a subsidiary, an associate or a venture in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

Use of estimates and judgments

(a) Judgements, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

9

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the separate financial statements as of and for the year ended December 31, 2014.

(b) Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

The company reports the significant valuation matters to the Audit Committee.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

  •   Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.

 

  •   Level 2 – inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.

 

  •   Level 3 – inputs for the assets or liability that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in note 20.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2014. The accounting policy for emission rights below is also expected to be applied in the Company’s separate financial statements as of and for the year ending December 31, 2015.

 

10

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

Emission Rights

The Company accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission which became effective in 2015.

(a) Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

Emission rights held for the purpose of performing the obligation are classified as intangible asset and are initially measured at cost and subsequent to initial recognition, are carried at cost less accumulated impairment losses. Emission rights held for short-swing profits are classified as current asset and are measured at fair value with any changes in fair value recognized as profit or loss in the respective reporting period.

The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

(b) Emission liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when there is a high possibility of outflows of resources in performing the obligation and the costs required to perform the obligation are reliably estimable. Emission liability is an amount of estimated obligation for emission rights to be submitted to the government for the performing period. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession, and the unit price for such emission rights in the market as of the end of the reporting period.

The Company recognized emission liability amounting to ￦2,277 million as other liabilities for the three-month period ended March 31, 2015.

 

11

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Trade accounts and notes receivable

    ￦ 2,774,781         3,166,238   

Less: Allowance for doubtful accounts

      (7,661 )       (8,972 ) 
  

 

 

     

 

 

  
￦ 2,767,120      3,157,266   
  

 

 

     

 

 

  

Non-current

Trade accounts and notes receivable

 ￦ 33,239      32,247   

Less: Present value discount

   (7,202 )    (7,396 ) 

Less: Allowance for doubtful accounts

   (2,020 )    (1,010 ) 
  

 

 

     

 

 

  
￦ 24,017      23,841   
  

 

 

     

 

 

  

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ￦1,361 million as of March 31, 2015 were included in short-term borrowings (Note 14).

5. Other Receivables

Other receivables as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Short-term loans

    ￦ 66,300         4,748   

Other accounts receivable

      308,218         564,765   

Others

      6,850         3,950   

Less: Allowance for doubtful accounts

      (10,535 )       (10,533 ) 
  

 

 

     

 

 

  
￦ 370,833      562,930   
  

 

 

     

 

 

  

Non-current

Long-term loans

 ￦ 21,968      21,229   

Long-term other accounts receivable

   2,279      2,334   

Others

   2,938      2,797   
  

 

 

     

 

 

  
￦ 27,185      26,360   
  

 

 

     

 

 

  

 

12

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

6. Other Financial Assets

(a) Other financial assets as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Short term derivatives assets held for trading

    ￦ —           708   

Short-term financial instruments (*1,2)

      1,734,069         609,584   

Cash deposits (*3,4)

      23,793         83,437   
  

 

 

     

 

 

  
￦ 1,757,862      693,729   
  

 

 

     

 

 

  

Non-current

Long-term derivatives assets held for trading (*5)

 ￦ 54,274      9,525   

Available-for-sale securities (equity instruments)

   1,780,464      1,767,621   

Available-for-sale securities (others)

   17,863      17,408   

Cash deposits (*6)

   36      36   
  

 

 

     

 

 

  
￦ 1,852,637      1,794,590   
  

 

 

     

 

 

  

 

(*1) Short-term financial instruments amounting to ￦5,200 million are provided as collateral in relation to long-term borrowings from National Forestry Cooperative Federation as of March 31, 2015 and December 31, 2014.
(*2) Short-term financial instruments amounting to ￦1,384 million are levied in relation to pending litigations as of March 31, 2015 and December 31, 2014.
(*3) Deposits amounting to ￦5,844 million and ￦5,465 million as of March 31, 2015 and December 31, 2014, respectively, are restricted in relation to government assigned project.
(*4) Deposits amounting to ￦17,949 million and ￦77,972 million as of March 31, 2015 and December 31, 2014, respectively, have been provided as collateral for disposal of investments in subsidiaries.
(*5) The Company assessed the values of its put option and earn-out consideration in relation to the residual equity upon the Company’s disposal of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Co., Ltd). Accordingly, the Company has recognized derivatives assets amounting to ￦41,005 million and ￦2,879 million, respectively, as of March 31, 2015.
(*6) The Company is required to provide deposits to maintain checking accounts and accordingly the withdrawal of these deposits is restricted.

 

13

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Available-for-sale equity securities as of March 31, 2015 and December 31, 2014 are as follows:

 

    March 31, 2015     December 31, 2014  
(in millions of Won)   Number of
shares		     Ownership (%)     Acquisition
cost		     Fair
value		     Net changes
in fair value
of  available-
for-sale
investments		     Accumulated
impairment
loss		     Book
value		     Book
value		  

Marketable equity securities

                

Hana Financial group Inc.

     2,430,498        0.84      ￦ 15,633        69,877        54,244        —          69,877        77,776   

Nippon Steel & Sumitomo Metal Corporation

     238,352,000        2.51        719,622        663,521        (56,101 )      —          663,521        659,926   

Hyundai Heavy Industries Co., Ltd.

     1,477,000        1.94        343,506        180,194        10,339        (173,651 )      180,194        169,855   

Shinhan Financial group Inc.

     4,369,881        0.92        228,778        183,317        60,681        (106,142 )      183,317        194,241   

KB Financial group Inc.

     11,590,550        3.00        536,516        455,509        59,113        (140,120 )      455,509        418,998   

Seoul Semiconductor Co., Ltd. (*1)

     591,000        1.01        24,999        11,761        —          (13,238 )      11,761        11,938   

SAMWONSTEEL Co., Ltd.

     5,700,000        14.25        8,930        23,513        20,986        (6,403 )      23,513        23,513   

Others (11 companies) (*1)

         122,011        66,589        11,502        (66,924 )      66,589        64,143   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
        1,999,995        1,654,281        160,764        (506,478 )      1,654,281        1,620,390   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-marketable equity securities

                

Dongbu Metal Co., Ltd. (*1,3)

     3,000,000        10.00        98,242        —          —          (98,242 )      —          17,295   

Poongsan Special Metal Corp. (*4)

     315,790        5.00        7,657        7,657        —          —          7,657        7,657   

Intellectual Discovery (*4)

     1,000,000        14.27        5,000        5,000        —          —          5,000        5,000   

Tuwaurqi Steel Mill (*4)

     129,600,000        16.18        17,015        17,015        —          —          17,015        17,015   

Others (38 companies) (*2,4)

         111,611        96,511        249        (15,349 )      96,511        100,264   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
        239,525        126,183        249        (113,591 )      126,183        147,231   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
      ￦   2,239,520        1,780,464        161,013        (620,069 )      1,780,464        1,767,621   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) The Company has recognized ￦177 million, ￦311 million and ￦17,295 million of impairment loss on securities of Seoul Semiconductor Co., Ltd, PT. Krakatau Steel and Dongbu Metal Co., Ltd, respectively, since the fair values of these securities have decreased continuously during the three-month period ended March 31, 2015.
(*2) The Company has recognized ￦6,554 million of impairment loss on securities of Troika Foreign Resource Development Fund since the fair values of these securities have decreased significantly during the three-month period ended March 31, 2015.
(*3) Fair value is based on an analysis performed by an external professional evaluation agency.
(*4) These non-marketable equity securities are recorded at cost since its fair value cannot be reliably measured.

 

14

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

7. Inventories

Inventories as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Finished goods

    ￦ 874,581         901,524   

Semi-finished goods

      1,217,465         1,207,143   

By-products

      14,911         21,439   

Raw materials

      752,417         822,273   

Fuel and materials

      543,417         510,508   

Materials-in-transit

      915,577         944,966   

Others

      573         582   
  

 

 

     

 

 

  
  4,318,941      4,408,435   

Less: Allowance for inventories valuation

   (14,504 )    (24,867 ) 
  

 

 

     

 

 

  
￦ 4,304,437      4,383,568   
  

 

 

     

 

 

  

The amount of loss on valuation of inventories recognized within cost of goods sold during the three-month period ended March 31, 2015 and the year ended December 31, 2014 were ￦14,504 million and ￦24,867 million, respectively.

 

15

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

8. Assets Held for Sale

Assets held for sale as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Available-for-sale securities (*1)

    ￦ 568,066         580,062   

Investments in subsidiaries (*2,3,4)

      509,902         468,443   

Property, plant and equipment (*5)

      36,539         2,672   
  

 

 

     

 

 

  
￦ 1,114,507      1,051,177   
  

 

 

     

 

 

  

 

(*1) During the year ended December 31, 2014, the Company determined to dispose of its equity interests in Nacional Minerios S.A. in exchange for equity interests in the new entity as Nacional Minerios S.A. (which was an available-for-sale investment of the Company) entered into a merger agreement with another entity through share exchange. The merger transaction was approved by the Company’s Board of Directors on December 12, 2014. Accordingly, the Company classified its investment in Nacional Minerios S.A. as assets held for sale. The Company has recognized ￦11,996 million of impairment loss on Nacional Minerios S.A for the three-month period ended March 31, 2015 since the fair value less cost to sell was below carrying amount.
(*2) The Company determined to dispose of 52.2% of its shares of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Co., Ltd) to SeAH Besteel Corp. and classified the investment in subsidiaries of ￦454,943 million as assets held for sale during the year ended December 31, 2014. Disposal of the asset held for sale was completed during the three-month period ended March 31, 2015, and the Company has recognized ￦20,133 million of loss on disposal of asset held for sale.
(*3) The Company determined to dispose of 29.4% of its shares in POSCO ENGINEERING & CONSTRUCTION., LTD., a subsidiary of the Company, to a special purpose company established by PIF, Saudi Arabia National Fund, upon approval of the Company’s Board of Directors on March 13, 2015, and classified the investment in subsidiaries of ￦496,402 million as assets held for sale.
(*4) The Company determined to dispose of its shares in POSFINE Co., Ltd, an subsidiary of the Company, to Hahn & Company PRIVATE EQUITY FUND No.1, and entered into a disposal contract upon approval of the Company’s Board of Directors on November 7, 2014. Accordingly, the Company classified the accompanying investment in the subsidiary amounting to ￦13,500 million as assets held for sale.
(*5) The Company determined to make a contribution of 1 FINEX facilities in kind to a new joint venture, and has signed in MOA with Mideast Integrated Steel Ltd. in India. The Company has classified the relating facilities of ￦25,892 million as assets held for sale.

 

16

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

9. Other Assets

Other current assets and other long-term assets as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Advance payments

    ￦ 9,462         9,828   

Prepaid expenses

      22,134         21,864   
  

 

 

     

 

 

  
￦ 31,596      31,692   
  

 

 

     

 

 

  

Non-current

Long-term prepaid expenses

 ￦ 6,668      6,344   

Others (*1)

   125,978      126,909   
  

 

 

     

 

 

  
￦ 132,646      133,253   
  

 

 

     

 

 

  

 

(*1) As of March 31, 2015 and December 31 2014, the Company recognized assets amounting to ￦122,186 million and ￦123,110, respectively, in connection with the additional income tax payment for prior years as a result of tax audits that were finalized in 2014 based on the Company’s best estimate of the tax amounts to be paid when the result of the Company’s appeal is finalized.

 

17

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

10. Investments in Subsidiaries, Associates and Joint ventures

(a) Details of subsidiaries and carrying values as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)              March 31, 2015      December 31, 2014  
[Domestic]    Country    Principal operations    Ownership
(%)		      Book
value		      Book
value		  

Daewoo International Corporation

    Korea    Trading      60.31       ￦ 3,371,481         3,371,481   

POSCO ENGINEERING & CONSTRUCTION., LTD.

    Korea    Engineering and construction      89.53         1,014,314         1,510,716   

POSCO Green Gas Technology

    Korea    Gas production and sales      100.00         682,600         682,600   

POSCO ENERGY CO., LTD.

    Korea    Generation of electricity      89.02         658,176         658,176   

POSCO Processing & Service

    Korea    Steel sales and service      96.01         624,678         624,678   

POSCO PLANTEC Co., Ltd.

    Korea    Other structural metal
product manufacturing		      60.84         341,293         341,293   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) (*1)

    Korea    Manufacture and sale of
specialty steel		      —           —           173,899   

POSCO COATED & COLOR STEEL Co., Ltd.

    Korea    Coated steel manufacturing      56.87         108,421         108,421   

POSCO CAPITAL

    Korea    Investment in venture
companies		      95.00         103,780         103,780   

POSCO CHEMTECH

    Korea    Manufacturing and Sales      60.00         100,535         100,535   

POSMATE

    Korea    Business facility
maintenance		      57.30         73,374         72,804   

POSCO ICT

    Korea    Computer hardware and
software distribution		      65.38         70,990         70,990   

POSCO M-TECH (*2,3)

    Korea    Steel manufacturing and
Sales		      48.85         59,916         66,067   

POSCO Family Strategy Fund

    Korea    Investment in venture
companies		      71.30         45,273         40,000   

Busan E&E Co,. Ltd. (*4)

    Korea    Municipal solid waste fuel
and power generation		      70.00         30,148         30,148   

Others (12 companies)

               163,702         134,196   
           

 

 

     

 

 

  
￦ 7,448,681      8,089,784   
           

 

 

     

 

 

  

 

18

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(in millions of Won)              March 31, 2015      December 31, 2014  
[Foreign]    Country    Principal operations    Ownership
(%)		      Book
value		      Book
value		  
              

PT. KRAKATAU POSCO

    Indonesia    Steel manufacturing and sales      70.00       ￦ 854,195         855,110   

POSCO WA PTY LTD

    Australia    Mine development      100.00         614,366         611,248   

POSCO Maharashtra Steel Private Limited

    India    Steel manufacturing and sales      100.00         481,025         465,788   

POSCO AUSTRALIA PTY LTD

    Australia    Steel Sales and mine development      100.00         330,623         330,623   

POSCO Thainox Public Company Limited

    Thailand    Stainless steel manufacturing      84.93         329,756         329,756   

Zhangjiagang Pohang Stainless Steel Co., Ltd.

    China    Stainless steel manufacturing      58.60         284,303         284,392   

POSCO SS-VINA

    Vietnam    Steel manufacturing and sales      100.00         249,426         —     

POSCO-China Holding Corp.

    China    Investment management      100.00         240,430         240,430   

POSCO-India Private Limited

    India    Steel manufacturing and sales      99.99         184,815         184,815   

POSCO MEXICO S.A. DE C.V.

    Mexico    Plate steel manufacturing      84.84         181,917         182,110   

POSCO America Corporation

    USA    Trading-Steel      99.45         167,285         167,285   

POSCO-VIETNAM Co., Ltd.

    Vietnam    Steel manufacturing      85.00         162,527         156,778   

POSCO VST CO., LTD.

    Vietnam    Stainless steel manufacturing      95.65         144,945         145,049   

POSCO (Guangdong) Automotive Steel Co., Ltd.

    China    Plate steel manufacturing      83.64         131,007         131,051   

POSCO COATED STEEL (THAILAND) CO., LTD.

    Thailand    Plate steel manufacturing      100.00         121,592         90,012   

POSCO ASSAN TST STEEL INDUSTRY

    Turkey    Steel manufacturing and sales      60.00         95,085         95,213   

POSCO Investment Co., Ltd.

    Hong Kong    Finance      99.99         86,534         86,775   

POSCO JAPAN Co., Ltd.

    Japan    Trading-Steel      100.00         68,436         68,436   

Qingdao Pohang Stainless Steel Co., Ltd.

    China    Stainless steel manufacturing      70.00         65,982         65,982   

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

    China    Steel manufacturing and sales      90.00         62,494         62,494   

POSCO Electrical Steel India Private Limited

    India    Electrical steel manufacturing and
sales		      100.00         58,384         58,441   

POSCO AFRICA (PROPRIETARY) LIMITED

    South Africa    Trading      100.00         50,297         50,297   

POSCO-Malaysia SDN. BHD.

    Malaysia    Steel manufacturing and sales      81.79         45,479         45,479   

POSCO China Dalian Plate Processing Center Co., Ltd.

    China    Heavy plate processing and
marketing		      80.00         32,992         32,992   

POSCO Asia Co., Ltd.

    Hong Kong    Steel transit trade Plate steel sheet      100.00         32,189         32,189   

POSCO (Guangdong) Steel Co., Ltd.

    China    manufacturing      87.04         31,299         31,299   

POSCO-Uruguay S.A

    Uruguay    Wood manufacturing and sales      98.11         30,243         30,243   

Others (32 companies)

               349,453         333,211   
           

 

 

     

 

 

  
  5,487,079      5,167,498   
           

 

 

     

 

 

  
￦ 12,935,760      13,257,282   
           

 

 

     

 

 

  

 

(*1) During the three-month period ended March 31, 2015, the Company disposed of 52.2% of shares of SeAH Changwon Integrated Special Steel Corp. (formerly, POSCO Specialty Steel Co., Ltd), which resulted in the Company’s loss of control, and classified the investment as investment in an associate.
(*2) It was classified as an investment in a subsidiary as the Company has control over of more than half of the voting rights by virtue of an agreement with Postech, which has 4.72% of ownership in POSCO M-TECH Co., Ltd.
(*3) As of March 31, 2015, there is objective evidence of impairment due to the prolonged decline in the fair value of the investment below its cost. Recoverable amount was determined based on fair value less cost to sell, which was calculated by adding a 13.7% control premium and disposal cost to the stock price as of March 31, 2015. As a result, the Company recognized an impairment loss of ￦6,151 million as the carrying value was higher than its recoverable amount as of March 31, 2015.

 

19

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(*4) As of March 31, 2015, the investments in subsidiaries amounting to ￦30,148 million were provided as collateral in relation to the loan agreements of Busan E&E Co,. Ltd.

(b) Details of associates and carrying values as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)                     March 31, 2015      December 31, 2014  
[Domestic]   

Country

   

Principal operations

    Ownership
(%)		      Book
value		      Book
value		  

EQP POSCO Global No1 Natural Resources PEF

    Korea    Mine investment      26.97       ￦ 169,106         169,106   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) (*1,2,3)

    Korea    Manufacture and sale of specialty steel      19.94         159,977         —     

SNNC Co., Ltd.

    Korea    Storage of materials      49.00         100,655         100,655   

Others (5 companies)

               21,867         21,867   
           

 

 

     

 

 

  
  451,605      291,628   
           

 

 

     

 

 

  
[Foreign]

Nickel Mining Company
SAS

 New Caledonia Raw material manufacturing and Sales   49.00      189,197      189,197   

7623704 Canada Inc. (*1)

 Canada Mine investment   10.40      124,341      124,341   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

 China Tinplate manufacturing and sales   24.00      11,003      11,003   

Others (7 companies)

   31,800      31,804   
           

 

 

     

 

 

  
  356,341      356,345   
           

 

 

     

 

 

  
￦ 807,946      647,973   
           

 

 

     

 

 

  

 

(*1) As of March 31, 2015, it was classified as an associate in spite of its less than 20% of ownership since it is determined to have significant influence when considering its structure of the Board of Directors.
(*2) During the three-month period ended March 31, 2015, POSCO Specialty Steel Co., Ltd changed its corporate name to SeAH Changwon Integrated Special Steel Corp.
(*3) As of March 31, 2015, there is objective evidence of impairment including receipt of dividend upon disposal contract of SeAH Changwon Integrated Special Steel Corp. (formerly, POSCO Specialty Co., Ltd), and, accordingly, the impairment test was performed. Recoverable amount was determined based on value-in-use, which was calculated by applying a 7.9% discount rate and 1.0% growth rate. As a result, the Company recognized an impairment loss of ￦13,921 million as the carrying value was higher than its recoverable amount as of March 31, 2015.

 

20

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(C) Details of joint ventures and carrying values as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)                     March 31, 2015      December 31, 2014  
    

Country

   

Principal operations

    Ownership
(%)		      Book
value		      Book
value		  

Roy Hill Holdings Pty Ltd (*1)

    Australia    Mine development      10.00       ￦     1,225,464         1,225,464   

CSP-Compania Siderurgica do Pecem

    Brazil    Steel manufacturing      20.00         469,972         469,891   

POSCO-NPS Niobium LLC

    USA    Mine development      50.00         364,609         364,609   

KOBRASCO

    Brazil    Facilities lease      50.00         98,962         98,962   

Others (5 companies)

               114,711         114,710   
           

 

 

     

 

 

  
￦ 2,273,718      2,273,636   
           

 

 

     

 

 

  

 

(*1) As of March 31, 2015, the investments in joint ventures amounting to ￦1,225,464 million were provided as collateral in relation to loan from project financing of Roy Hill Holdings Pty Ltd.

11. Investment Property, Net

Changes in the carrying value of investment property for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Acquisitions      Depreciation (*1)      Transfer (*2)      Ending  

Land

    ￦ 36,020         —           —           695         36,715   

Buildings

      50,112         146         (605 )       962         50,615   

Structures

      4,005         —           (46 )       82         4,041   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
￦ 90,137      146      (651 )    1,739      91,371   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) The useful life and depreciation method of investment property are identical to those of property, plant and equipment.
(*2) Mainly includes assets transferred from property, plant and equipment in relation to change in rental ratio and the purpose of use.

2) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Disposals      Depreciation (*1)      Transfer (*2)      Ending  

Land

    ￦     36,020         —           —           —           —           36,020   

Buildings

      52,682         41         (18 )       (2,404 )       (189 )       50,112   

Structures

      4,177         —           —           (160 )       (12 )       4,005   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
￦ 92,879      41      (18 )    (2,564 )    (201 )    90,137   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) The useful life and depreciation method of investment property are identical to those of property, plant and equipment.
(*2) Mainly includes assets transferred to property, plant and equipment in relation to change in rental ratio and the purpose of use.

 

21

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

12. Property, Plant and Equipment, Net

Changes in the carrying value of property, plant and equipment for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Impairment (*1)     Others (*2)     Ending  

Land

    ￦ 1,420,994         —           —          —          —          (5,745 )      1,415,249   

Buildings

      2,760,842         283         (129 )      (60,573 )      —          7,916        2,708,339   

Structures

      2,612,553         —           (635 )      (48,772 )      —          17,531        2,580,677   

Machinery and equipment

      14,503,266         11,558         (6,012 )      (388,117 )      —          252,816        14,373,511   

Vehicles

      12,953         377         —          (1,499 )      —          16        11,847   

Tools

      23,324         300         —          (3,189 )      —          939        21,374   

Furniture and fixtures

      37,584         172         (9 )      (4,374 )      —          1,379        34,752   

Finance lease assets

      6,370         —           —          (159 )      —          —          6,211   

Construction-in-progress

      945,329         333,882         —          —          (577 )      (311,041 )      967,593   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  ￦22,323,215      346,572      (6,785 )    (506,683 )    (577 )    (36,189 )    22,119,553   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) The Company has recognized an impairment loss since recoverable amount on some of the facilities is less than the carrying value for the three-month period ended March 31, 2015.
(*2) Represents assets transferred from construction-in-progress to intangible assets, property, plant and equipment and investment property and assets held for sale.

2) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Impairment (*1)     Others (*2)     Ending  

Land

    ￦ 1,397,271         39         (392 )      —          —          24,076        1,420,994   

Buildings

      2,637,774         5,941         (1,912 )      (249,792 )      (3,681 )      372,512        2,760,842   

Structures

      2,469,046         11,239         (1,750 )      (194,088 )      (8,072 )      336,178        2,612,553   

Machinery and equipment

      13,202,710         125,297         (29,430 )      (1,574,903 )      (18,543 )      2,798,135        14,503,266   

Vehicles

      10,769         792         (8 )      (7,884 )      —          9,284        12,953   

Tools

      25,680         5,795         (54 )      (15,996 )      —          7,899        23,324   

Furniture and fixtures

      47,394         7,150         (5 )      (21,929 )      (38 )      5,012        37,584   

Finance lease assets

      7,007         —           —          (637 )      —          —          6,370   

Construction-in-progress

      3,442,952         1,628,325         —          —          —          (4,125,948 )      945,329   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦ 23,240,603      1,784,578      (33,551 )    (2,065,229 )    (30,334 )    (572,852 )    22,323,215   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) The Company has recognized an impairment loss since the recoverable amounts of FINEX 1 plant and STS 1 steelmaking plant were lower than their book value.
(*2) Represents assets transferred from construction-in-progress to investment to subsidiary (￦558,915 million), property, plant and equipment, from investment property, to intangible assets, and to assets held for sale.

 

22

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

13. Intangible Assets, Net

Changes in the carrying value of intangible assets for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Acquisitions •      Disposals     Amortization     Transfer (*2)     Ending  

Intellectual property rights

    ￦ 17,594         —           —          (623 )      848        17,819   

Membership (*1)

      53,154         837         (1,472 )      —          —          52,519   

Development expense

      127,941         —           —          (11,955 )      2,529        118,515   

Port facilities usage rights

      162,028         —           —          (2,426 )      —          159,602   

Construction-in-progress

      16,756         5,078         —          —          (3,327 )      18,507   

Other intangible assets

      26,434         2         —          (2,319 )      248        24,365   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
￦ 403,907      5,917      (1,472 )    (17,323 )    298      391,327   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Economic useful life of membership is indefinite.
(*2) Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment.

2) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions •      Disposals     Amortization     Impairment (*2)      Transfer (*3)     Ending  

Intellectual property rights

    ￦ 13,812         —           (217 )      (2,261 )      —           6,260        17,594   

Membership (*1)

      48,877         5,896         (2,209 )      —          590         —          53,154   

Development expense

      29,468         381         —          (48,766 )      —           146,858        127,941   

Port facilities usage rights

      172,209         —           —          (12,018 )      —           1,837        162,028   

Construction-in-progress

      153,719         16,414         —          —          —           (153,377 )      16,756   

Other intangible assets

      20,698         13,577         —          (11,067 )      —           3,226        26,434   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

    

 

 

  
￦ 438,783      36,268      (2,426 )    (74,112 )    590      4,804      403,907   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

    

 

 

  

 

(*1) Economic useful life of membership is indefinite.
(*2) The Company reversed the accumulated impairment loss up to the carrying value before recognition of any impairment loss since the recoverable amounts of some memberships exceeded the carrying value.
(*3) Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment.

 

23

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

14. Borrowings

(a) Borrowings as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Short-term borrowings

      

Short-term borrowings

    ￦ 1,361         —     

Current portion of long-term borrowings

      233,493         236,553   

Current portion of loans from foreign financial institutions

      374         418   

Current portion of debentures

      1,500,000         1,000,000   

Less : Current portion of discount on debentures issued

      (884 )       (681 ) 
  

 

 

     

 

 

  
￦ 1,734,344      1,236,290   
  

 

 

     

 

 

  

Long-term borrowings

Long-term borrowings

 ￦ 336,641      447,437   

Loans from foreign financial institutions

   375      627   

Debentures

   4,381,579      4,871,627   

Less : Discount on debentures issued

   (17,327 )    (18,764 ) 
  

 

 

     

 

 

  
￦ 4,701,268      5,300,927   
  

 

 

     

 

 

  

(b) Short-term borrowings as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)              

Lenders

    March 31, 2015      December 31, 2014  

Transfers of account receivables that do not qualify for derecognition

    ￦ 1,361         —     

(c) Current portion of long-term borrowings as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)   

Lenders

   Issuance date   Maturity date   Annual
interest rate (%)		   March 31, 2015     December 31, 2014  

Borrowings

   

Woori Bank and

others

   2006.10.31~
2011.04.28		   2017.03.15~
2024.06.15		   0.75~1.75   ￦ 15,532        15,532   

Borrowings

   

Export-Import Bank

of korea

   2010.02.18~
2011.03.23		   2015.09.23~
2017.07.26		   4.09~4.50     217,961        221,021   

Loans from foreign financial institutions

    NATIXIS (*1)   1986.03.31   2017.03.31   2.00     374        418   

Debentures

    Domestic debentures 294 and others   2010.08.04~
2011.03.04		   2015.08.04~
2016.03.04		   4.38~4.81     1,499,116        999,319   
          

 

 

    

 

 

  
￦ 1,732,983      1,236,290   
          

 

 

    

 

 

  

 

(*1) As of March 31, 2015, Korea Development Bank has provided guarantees to the Company for loans from foreign financial institutions.

 

24

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(d) Long-term borrowings excluding current portion, as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)  

Lenders

   Issuance date   Maturity date   Annual
interest rate (%)		   March 31, 2015     December 31, 2014  

Borrowings

   Woori Bank and others (*1)   2006.10.31~
2013.05.08		   2017.03.15~

2041.05.08

   0.75~1.75   ￦ 51,779        55,662   

Borrowings

  

Korea National Oil Corporation

   2007.12.27~
2013.12.30		   2022.06.25~
2026.12.29		   3 year

Government bond

     14,233        14,159   

Borrowings

   Export-Import Bank of Korea   2010.07.26~
2013.07.03		   2017.07.26~
2018.03.23		   4.09~4.50     270,628        377,616   

Loans from foreign financial institutions

  

NATIXIS (*2)

   1986.03.31   2017.03.31   2.00     375        627   

Debentures

  

Domestic debentures 299 and others

   2011.05.04~
2013.10.04		   2016.05.04~
2023.10.04		   3.35~4.28     1,796,425        2,295,585   

Debentures

  

Samurai Bond 11 and others

   2006.08.10~
2013.12.11		   2016.08.20~
2021.12.22		   0.93~5.88     2,567,828        2,557,278   
         

 

 

    

 

 

  
￦ 4,701,268      5,300,927   
         

 

 

    

 

 

  

 

(*1) Short-term financial instruments, amounting to ￦5,200 million as of March 31, 2015 and December 31, 2014 are collateralized for long-term borrowings from National Forestry Cooperative Federation.
(*2) As of March 31, 2015, Korea Development Bank has provided guarantees to the Company for loans from foreign financial institutions.

15. Other Payables

Other payables as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Accounts payable

    ￦ 440,564         627,337   

Accrued expenses

      363,363         386,014   

Dividend payable

      489,411         9,523   

Finance lease liabilities

      1,238         1,218   

Withholdings

      9,439         8,404   
  

 

 

     

 

 

  
￦ 1,304,015      1,032,496   
  

 

 

     

 

 

  

Non-current

Long-term accounts payable

 ￦ 48,415      54,131   

Accrued expenses

   17,916      22,767   

Finance lease liabilities

   3,710      4,006   

Long-term withholdings

   7,631      7,903   
  

 

 

     

 

 

  
￦ 77,672      88,807   
  

 

 

     

 

 

  

 

25

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

16. Other Financial Liabilities

Other financial liabilities as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Financial guarantee liabilities

    ￦     10,131         9,236   
  

 

 

     

 

 

  

Non-current

Derivative liabilities (*1)

 ￦ 22,196      —     

Financial guarantee liabilities

   55,391      50,574   
  

 

 

     

 

 

  
￦ 77,587      50,574   
  

 

 

     

 

 

  

 

(*1) The Company assessed the values of call option of SeAH Besteel Corp. in relation to the residual equity upon the Company’s disposal of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Co., Ltd). Accordingly, the Company has recognized derivatives liabilities amounting to ￦22,196 million as of March 31, 2015.

17. Provisions

 

(a) Provisions as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  
     Current      Non-current      Current      Non-current  

Estimated allowance (*1)

    ￦ 2,475         —           8,423         —     

Provision for restoration (*2)

      36,111         20,260         39,336         31,063   

Provision for litigation (*3)

      —           411         —           411   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦ 38,586      20,671      47,759      31,474   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) Represents the provision for bonuses for executives.
(*2) Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province, a provision has been recognized with a present value of estimated costs for recovery. In order to compute the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied a discount rate of 2.64% to assess present value of these costs.
(*3) The Company has recognized provisions for several litigations in which the Company is more likely than not to lose as of March 31, 2015.

 

26

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Changes in provisions for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Increase      Utilization      Ending  

Estimated allowance at the end of period

    ￦ 8,423         2,983         (8,931 )       2,475   

Provision for restoration at the end of period

      70,399         5,063         (19,091 )       56,371   

Provision for litigation at the end of period

      411         —           —           411   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦ 79,233      8,046      (28,022 )    59,257   
  

 

 

     

 

 

     

 

 

     

 

 

  

2) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Increase      Utilization      Ending  

Estimated allowance at the end of period

    ￦ 8,501         10,643         (10,721 )       8,423   

Provision for restoration at the end of period

      —           89,433         (19,034 )       70,399   

Provision for litigation at the end of period

      —           411         —           411   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦ 8,501      100,487      (29,755 )    79,233   
  

 

 

     

 

 

     

 

 

     

 

 

  

18. Employee Benefits

 

(a) Defined contribution plans

The expense related to post-employment benefit plans under defined contribution plans for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Expense related to post-employment benefit plans

    ￦ 5,813         4,463   

 

(b) Defined benefit plans

 

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Present value of funded obligations

    ￦ 1,070,597         1,017,164   

Fair value of plan assets

      (930,619 )       (931,006 ) 
  

 

 

     

 

 

  

Net defined benefit liabilities

 ￦ 139,978      86,158   
  

 

 

     

 

 

  

 

27

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

2) Changes in present value of defined benefit obligations for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Defined benefit obligation at the beginning of period

    ￦ 1,017,164         905,918   

Current service costs

      32,555         113,688   

Interest costs

      7,436         32,595   

Remeasurement

      46,874         47,604   

Transfer-in

      —           1,959   

Benefits paid

      (33,432 )       (84,600 ) 
  

 

 

     

 

 

  

Defined benefit obligation at the end of period

 ￦ 1,070,597      1,017,164   
  

 

 

     

 

 

  

 

3) Changes in the fair value of plan assets for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Fair value of plan assets at the beginning of period

    ￦ 931,006         805,268   

Interest on plan assets

      7,333         31,911   

Remeasurement of plan assets

      (366 )       (8,417 ) 

Contributions to plan assets

      15,000         146,000   

Transfer-in

      —           1,959   

Benefits paid

      (22,354 )       (45,715 ) 
  

 

 

     

 

 

  

Fair value of plan assets at the end of period

 ￦ 930,619      931,006   
  

 

 

     

 

 

  

 

4) The amounts recognized in the condensed separate interim statements of comprehensive income (loss) for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Current service costs

    ￦ 32,555         29,685   

Net interest costs

      103         171   
  

 

 

     

 

 

  
￦ 32,658      29,856   
  

 

 

     

 

 

  

 

28

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

19. Other Liabilities

Other liabilities as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Advances received

    ￦ 29,274         88,880   

Withholding

      20,214         18,417   

Unearned revenue

      2,367         1,211   
  

 

 

     

 

 

  
  51,855      108,508   
  

 

 

     

 

 

  

Non-current

Unearned revenue

   234      234   

Others

   2,277      —     
  

 

 

     

 

 

  
￦ 2,511      234   
  

 

 

     

 

 

  

20. Financial Instruments

 

(a) Classification of financial instruments

 

  1) Financial assets as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Financial assets at fair value through profit or loss Derivatives assets held for trading

    ￦ 54,274         10,233   

Available-for-sale financial assets

      1,798,327         1,785,029   

Loans and receivables

      6,712,711         6,024,798   
  

 

 

     

 

 

  
￦ 8,565,312      7,820,060   
  

 

 

     

 

 

  

 

  2) Financial liabilities as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Financial liabilities at fair value through profit or loss Derivatives liabilities held for trading

    ￦ 22,196         —     
  

 

 

     

 

 

  

Financial liabilities measured at amortized cost Trade accounts and notes payable

   813,543      777,401   

Borrowings

   6,435,612      6,537,217   

Financial guarantee liabilities (*1)

   65,522      59,810   

Others

   1,360,620      1,036,487   
  

 

 

     

 

 

  
  8,675,297      8,410,915   
  

 

 

     

 

 

  
￦ 8,697,493      8,410,915   
  

 

 

     

 

 

  

 

29

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(*1) Financial liabilities are recognized in connection with financial guarantee contracts as of March 31, 2015. The details of the amount of guarantees provided are as follows:

 

(in millions of Won)                          

Guarantee beneficiary

    Financial institution    Foreign currency      Won equivalent  

POSCO (Guangdong)

    SMBC      USD         35,000,000         38,675   

Automotive Steel Co., Ltd.

    BOA      USD         30,000,000         33,150   

Zhangjiagang Pohang

    Mizuho      USD         50,000,000         55,250   

Stainless Steel Co., Ltd.

    Credit Agicole      USD         50,000,000         55,250   
   BTMU      USD         30,000,000         33,150   

POSCO Maharashtra

    Citi      USD         60,000,000         66,300   

Steel Pvt. Ltd.

    DBS      USD         100,000,000         110,500   
   HSBC      USD         80,000,000         88,400   
   ING      USD         30,000,000         33,150   
   KDB      USD         30,000,000         33,150   
   Export-Import Bank of Korea      USD         193,000,000         213,265   
   SCB      USD         73,069,000         80,741   

POSCO ASSAN TST STEEL Industry

    KDB      USD         45,000,000         49,725   
   SMBC      USD         71,392,500         78,889   
   ING      USD         45,000,000         49,725   
   HSBC      USD         27,000,000         29,835   

POSCO Electrical Steel India Private Limited

    SCB      USD         33,784,000         37,331   
   ING      USD         50,000,000         55,250   

POSCO Investment Co., Ltd.

    HSBC      USD         50,000,000         55,250   
   JP Morgan      USD         50,000,000         55,250   
   ING      USD         30,000,000         33,150   
   BOA      USD         45,000,000         49,725   
   SMBC      USD         30,000,000         33,150   
   BTMU      USD         30,000,000         33,150   
   SCB      USD         45,000,000         49,725   
   BOC      CNY         350,000,000         62,307   
   Mizuho      USD         50,000,000         55,250   

POSCO-Mexico S.A. DE C.V

    BOA      USD         40,000,000         44,200   
   HSBC      USD         40,000,000         44,200   
   KDB      USD         50,000,000         55,250   
   Mizuho      USD         45,000,000         49,725   
   SMBC      USD         109,725,000         121,246   

POSCO-SS VINA

    BOA      USD         40,000,000         44,200   
   BTMU      USD         40,000,000         44,200   
   DBS      USD         24,400,000         26,962   
   Export-Import Bank of Korea      USD         249,951,050         276,196   

POSCO-Vietnam Co., Ltd.

    Export-Import Bank of Korea      USD         196,000,000         216,580   

POSCO-VST Co., Ltd.

    ANZ      USD         25,000,000         27,625   
   HSBC      USD         20,000,000         22,100   
   Mizuho      USD         20,000,000         22,100   

POSUK Titanium LLP

    Kookmin Bank      USD         15,000,000         16,575   

PT. KRAKATAU POSCO

    ANZ      USD         73,500,000         81,218   
   BOA      USD         35,000,000         38,675   
   BTMU      USD         119,000,000         131,495   
   Credit Suisse AG      USD         91,000,000         100,555   
   HSBC      USD         91,000,000         100,555   
   Export-Import Bank of Korea      USD         567,000,000         626,535   
   Mizuho      USD         105,000,000         116,025   
   SCB      USD         107,800,000         119,119   
   SMBC      USD         140,000,000         154,700   
   CTBC      USD         21,000,000         23,205   

CSP - Compania

    HSBC      USD         46,666,667         51,567   

Siderurgica do Pecem

    KDB      USD         56,666,667         62,617   
   Santander      USD         66,666,667         73,667   
   Nonghyup Bank      USD         10,000,000         11,050   
     

 

 

     

 

 

  
  USD      3,808,621,551      4,208,528   
  CNY      350,000,000      62,307   
     

 

 

     

 

 

  

 

30

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

3) Finance income and costs by category of financial instrument for the three-month periods ended March 31, 2015 and 2014 were as follows:

 For the three-month ended March 31, 2015

 

(in millions of Won)    Finance income and costs        
     Interest
income
(cost)		     Dividend
income		      Gain and loss
on foreign
currency		     Gain and
loss on
disposal		     Impairment
loss		     Others     Total     Other
comprehensive
income		  

Financial assets at fair value through profit or loss

    ￦ —          —           —          (438 )      —          157        (281 )      —     

Available-for-sale financial assets

      9        35,515         —          —          (24,337 )      —          11,187        28,112   

Loans and receivables

      32,645        —           11,053        —          —          (96 )      43,602        —     

Financial liabilities at amortized cost

      (63,284 )      —           (13,042 )      —          —          (26 )      (76,352 )      —     
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦   (30,630 )    35,515      (1,989 )    (438 )    (24,337 )    35      (21,844 )    28,112   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Financial income in the statement of comprehensive income (loss) includes the dividends from subsidiaries, associates and joint ventures of ￦237,496 million for the three-month period ended March 31, 2015.

‚ For the three-month ended March 31, 2014

 

(in millions of Won)    Finance income and costs        
     Interest
income
(cost)		     Dividend
income		      Gain and loss
on foreign
currency		     Gain and
loss on
disposal		     Impairment
loss		     Others     Total     Other
comprehensive
loss		  

Financial assets at fair value through profit or loss

    ￦ —          —           —          —          —          756        756        —     

Available-for-sale financial assets

      64        27,878         —          7,073        (1,264 )      -        33,751        (219,427 ) 

Loans and receivables

      30,797        —           32,580        (4 )      —          (328 )      63,045        —     

Financial liabilities at fair value through profit or loss

      —          —           —          5,278        —          33,086        38,364        —     

Financial liabilities at amortized cost

      (73,059 )      —           (108,792 )      1,500        —          (45 )      (180,396 )      —     
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦   (42,198 )    27,878      (76,212 )    13,847      (1,264 )    33,469      (44,480 )    (219,427 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Financial income in the statement of comprehensive income (loss) includes the dividends from subsidiaries, associates and joint ventures of ￦68,593 million for the three-month period ended March 31, 2014.

 

31

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Fair value

1) Fair value and book value

The carrying amount and the fair value of financial instruments as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  
     Book value      Fair value      Book value      Fair value  

Assets measured at fair value

            

Available-for-sale financial assets (*1)

    ￦     1,661,177         1,661,177         1,648,567         1,648,567   

Derivatives assets held for trading (*2)

      54,274         54,274         10,233         10,233   
  

 

 

     

 

 

     

 

 

     

 

 

  
  1,715,451      1,715,451      1,658,800      1,658,800   
  

 

 

     

 

 

     

 

 

     

 

 

  

Assets measured amortized cost (*3)

Cash and cash equivalents

   1,898,624      1,898,624      1,742,767      1,742,767   

Trade accounts and note receivable, net

   2,791,137      2,791,137      3,181,107      3,181,107   

Loans and other receivables

   2,022,950      2,022,950      1,100,924      1,100,924   
  

 

 

     

 

 

     

 

 

     

 

 

  
  6,712,711      6,712,711      6,024,798      6,024,798   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities measured at fair value

Derivatives liabilities held for trading (*2)

   22,196      22,196      —        —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities measured amortized cost (*3)

Trade accounts and notes payable

   813,543      813,543      777,401      777,401   

Borrowings

   6,435,612      6,995,648      6,537,217      6,918,972   

Financial guarantee liabilities

   65,522      65,522      59,810      59,810   

Others

   1,360,620      1,360,620      1,036,487      1,036,487   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦     8,675,297      9,235,333      8,410,915      8,792,670   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average cost of capital of evaluated companies are used as a discount rate. Available-for-sale financial assets which are not measured at fair value are excluded.
(*2) The fair value of derivatives is measured using valuation models such as Black-Scholes model, binominal lattice model and others in which the market yields on government bonds are used as a discount rate.
(*3) The fair value of financial assets and liabilities measured at amortized cost is determined at the present value of estimated future cash flows discounted at the current market interest rate. The fair value is calculated for the disclosures in the notes. On the other hand, the Company has not performed fair value measurement for the financial assets and liabilities measured at amortized cost except borrowings since the fair value is close to their carrying amounts.

 

32

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

2) The fair value hierarchy

The fair value of financial instruments by fair value hierarchy as of March 31, 2015 and December 31, 2014 are as follows:

 March 31, 2015

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

            

Available-for-sale financial assets

    ￦     1,654,281         —           6,896         1,661,177   

Derivatives assets held for trading

      —           10,390         43,884         54,274   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦     1,654,281      10,390      50,780      1,715,451   
  

 

 

     

 

 

     

 

 

     

 

 

  

Financial liabilities

Derivatives liabilities held for trading

 ￦ —        —        22,196      22,196   
  

 

 

     

 

 

     

 

 

     

 

 

  

‚ December 31, 2014

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

            

Available-for-sale financial assets

    ￦     1,620,390         —           28,177         1,648,567   

Derivatives assets held for trading

      —           10,233         —           10,233   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦     1,620,390      10,233      28,177      1,658,800   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

  3) Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the separate financial statements as of and for the year ended December 31, 2014.

 

33

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

21. Share Capital and Capital Surplus

(a) Share capital as of March 31, 2015 and December 31, 2014 are as follows:

 

(Share, Won)    March 31, 2015      December 31, 2014  

Authorized shares

      200,000,000         200,000,000   

Par value

    ￦ 5,000         5,000   

Issued shares (*1)

      87,186,835         87,186,835   

Shared capital (*2)

    ￦   482,403,125,000         482,403,125,000   

 

(*1) As of March 31, 2015, total shares of ADRs of 51,622,460 are equivalent to 12,905,615 of common stock.
(*2) As of March 31, 2015, the difference between the ending balance of common stock and the par value of issued common stock is ￦46,469 million due to retirement of 9,293,790 treasury stocks.

 

(b) Capital surplus as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Additional paid in capital

    ￦ 463,825         463,825   

Gain on disposal of treasury shares

      783,793         783,791   
  

 

 

     

 

 

  
￦ 1,247,618      1,247,616   
  

 

 

     

 

 

  

 

34

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

22. Hybrid Bonds

Hybrid bonds classified as equity as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    Date of issue      Date of maturity      Rate of interest
(%)		      March 31, 2015      December 31, 2014  

Hybrid bond 1-1 (*1)

      2013-06-13         2043-06-13         4.3       ￦ 800,000         800,000   

Hybrid bond 1-2 (*1)

      2013-06-13         2043-06-13         4.6         200,000         200,000   

Issuance cost

               (3,081 )       (3,081 ) 
           

 

 

     

 

 

  
￦ 996,919      996,919   
           

 

 

     

 

 

  

(*1) Details of hybrid bonds as of March 31, 2015 as follows:

 

(in millions of Won)   

Hybrid bond 1-1

   

Hybrid bond 1-2

Issue price    800,000    200,000
Maturity date    30 years (The Company has a right to extend the maturity date)    30 years (The Company has a right to extend the maturity date)
Interest rate    Issue date ~ 2018-06 -12 : 4.3%    Issue date ~ 2023 -06 -12 : 4.6%
   reset every 5 years as follows;    reset every 10 years as follows;
  

•    After 5 years : return on government bond (5 years) + 1.3%

   

•    After 10 years : return on government bond (10 years) + 1.4%

  

•    After 10 years : additionally + 0.25% according to Step-up clauses

   

•    After 10 years : additionally + 0.25% according to Step-up clauses

  

•    After 25 years : additionally + 0.75%

   

•    After 30 years : additionally + 0.75%

Interest payments    Quarterly    Quarterly
    condition    (Optional deferral of interest payment is available to the Company)    (Optional deferral of interest payment is available to the Company)
    Others    The Company can call the hybrid bond at year 5 and interest payment date afterwards    The Company can call the hybrid bond at year 10 and interest payment date afterwards

The Company holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, the Company cannot declare or pay dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments. The interest accumulated but not paid on the hybrid bonds as of March 31, 2015 amounts to ￦2,251 million.

23. Reserves

Reserves as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Accumulated changes in the unrealized fair value of available-for-sale investments, net of tax

    ￦ 122,154         94,042   

24. Treasury Shares

As of March 31, 2015, the Company holds 7,193,767 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

 

35

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

25. Selling and Administrative Expenses

 

(a) Administrative expenses

Administrative expenses for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Wages and salaries

    ￦ 55,608         52,368   

Expenses related to post-employment benefits

      10,202         7,835   

Other employee benefits

      14,322         12,042   

Travel

      3,090         3,021   

Depreciation

      5,098         5,932   

Amortization

      13,084         13,063   

Rental

      18,378         17,790   

Repairs

      1,387         3,676   

Advertising

      18,049         20,916   

Research & development •

      18,694         23,599   

Service fees

      41,528         46,764   

Supplies expense

      1,375         1,440   

Vehicles maintenance

      1,795         1,746   

Industry association fee

      1,579         3,540   

Training

      813         1,621   

Conference

      1,424         1,215   

Bad debt expenses (Reversal of bad debt expenses)

      (297 )       503   

Others

      7,110         8,480   
  

 

 

     

 

 

  
￦ 213,239      225,551   
  

 

 

     

 

 

  

 

36

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Selling expenses

Selling expenses for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Freight and custody expenses

    ￦ 219,005         206,075   

Operating expenses for distribution center

      2,519         2,469   

Sales commissions

      15,544         15,413   

Sales advertising

      618         260   

Sales promotion

      1,270         1,137   

Sample

      364         443   

Sales insurance premium

      1,279         1,360   
  

 

 

     

 

 

  
￦ 240,599      227,157   
  

 

 

     

 

 

  

 

37

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

26. Finance Income and Costs

Details of finance income and costs for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Finance income

      

Interest income

    ￦ 32,654         30,860   

Dividend income

      273,011         96,471   

Gain on foreign currency transactions

      41,097         53,386   

Gain on foreign currency translations

      11,856         9,499   

Gain on valuation of derivatives

      157         39,111   

Gain on derivative transactions

      67         6,102   

Gain on redemption of debentures

      —           1,500   

Gain on disposals of available-for-sale investment

      —           7,073   
  

 

 

     

 

 

  
￦ 358,842      244,002   
  

 

 

     

 

 

  

Finance costs

Interest expenses

 ￦ 63,284      73,058   

Loss on foreign currency transactions

   38,335      54,682   

Loss on foreign currency translations

   16,607      84,415   

Loss on valuation of derivatives

   —        5,269   

Loss on derivative transactions

   505      824   

Impairment loss on available-for-sale investment

   24,337      1,264   

Others

   122      377   
  

 

 

     

 

 

  
￦ 143,190      219,889   
  

 

 

     

 

 

  

 

38

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

27. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Other non-operating income

      

Gain on disposals of property, plant and equipment

    ￦ 1,679         1,149   

Gain on disposals of assets held for sale

      1,683         —     

Premium income

      4,988         35   

Others

      5,279         2,198   
  

 

 

     

 

 

  
  13,629      3,382   
  

 

 

     

 

 

  

Other non-operating expenses

Loss on disposals of property, plant and equipment

   19,360      17,669   

Other bad debt expenses

   1      25,704   

Donations

   14,304      18,958   

Idle tangible assets expenses

   3,453      238   

Impairment loss on investment in subsidiaries, associates and joint ventures

   20,072      67,729   

Impairment loss on assets held for sale

   11,996      —     

Loss on disposals of assets held for sale

   20,133      14   

Others (*1)

   29,466      142,749   
  

 

 

     

 

 

  
￦ 118,785      273,061   
  

 

 

     

 

 

  

 

(*1) As a result of Korea National Tax Service’s periodic audit of tax payments and refunds of the Company, the Company recognized additional tax payments amounting to ￦137,917 million, primarily related to VAT.

 

39

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

28. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month periods ended March 31, 2015 and 2014 were as follows (excluding financial costs and income tax expense):

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Changes in inventories (*1)

    ￦ 12,787         (178,276 ) 

Raw materials and consumables used

      3,848,860         4,751,825   

Employee benefits expenses

      377,131         374,939   

Outsourced processing cost

      543,957         541,322   

Depreciation (*2)

      507,334         499,554   

Amortization

      17,323         18,515   

Electricity and water expenses

      247,394         256,529   

Service fees

      53,847         60,161   

Rental

      23,496         23,076   

Advertising

      18,049         20,916   

Freight and custody expenses

      219,005         206,075   

Sales commissions

      15,544         15,413   

Loss on disposals of property, plant and equipment

      19,360         17,669   

Bad debt expenses (Reversal of bad debt expense)

      (296 )       26,207   

Impairment loss on investments in subsidiaries, associates and joint ventures

      20,072         67,729   

Contribution to provisions

      5,063         —     

Other expenses

      355,759         417,553   
  

 

 

     

 

 

  
￦   6,284,685      7,119,207   
  

 

 

     

 

 

  

 

(*1) Changes in inventories are the changes in product, semi-finished products and by-product.
(*2) Includes depreciation of investment property.

29. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax benefit/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and income tax recognized in other comprehensive income. The effective tax rate of the Company for the three-month periods ended March 31, 2015 and 2014 was 31.75% and 59.02%, respectively. The effective tax rate for the three-month period ended March 31, 2015 was higher than the statutory tax rate of 24% for the Company mainly due to increase in deferred tax liability related to the Company’s investments in POSCO ENGINEERING & CONSTRUCTION., LTD. as a result of changes in management’s expectations on repatriation of the investment. Effective tax rate for the three-month period ended March 31, 2014 was higher than the statutory tax rate of 24% for the Company due to the effect of additional income tax payment due to tax investigation and non-deductible expense primarily related to additional VAT payment (Note 27).

 

40

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

30. Earnings per Share

Basic and diluted earnings per share for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in Won except per share information)    March 31, 2015      March 31, 2014  

Profit for the period

    ￦   499,760,388,002         111,519,121,065   

Interests of hybrid bonds

      (8,111,100,867 )       (8,111,100,867 ) 

Weighted-average number of common shares outstanding (*1)

      79,993,057         79,783,754   

Basic and diluted earnings per share

      6,146         1,296   

 

(*1) The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

 

(in share)    March 31, 2015      March 31, 2014  

Total number of common shares issued

    ￦   87,186,835         87,186,835   

Weighted-average number of treasury shares

      (7,193,778 )       (7,403,081 ) 
  

 

 

     

 

 

  

Weighted-average number of common shares outstanding

 ￦   79,993,057      79,783,754   
  

 

 

     

 

 

  

Since there were no potential shares of common stock which had dilutive effects as of March 31, 2015 and 2014, diluted earnings per share is equal to basic earnings per share.

 

41

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

31. Related Party Transactions

 

(a) Significant transactions with related companies for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

  1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Sales and others (*1)      Purchase and others (*2)  
   Sales      Others      Total      Purchase of
material		      Purchase of
fixed assets		      Outsourced
processing cost		      Others      Total  

Subsidiaries (*3)

                        

POSCO E&C Co., Ltd.

    ￦ 925         64         989         19         157,537         1,286         22,005         180,847   

POSCO Processing & Service Co., Ltd.

      279,876         —           279,876         144,443         —           —           1,307         145,750   

POSCO Coated & Color Steel Co., Ltd.

      101,441         —           101,441         —           —           3,267         24         3,291   

POSCO ICT Co., Ltd. (*4)

      294         4         298         —           35,250         7,435         44,453         87,138   

POSMATE Co., Ltd.

      180         2,365         2,545         136         —           3,456         7,705         11,297   

eNtoB Co., Ltd.

      —           —           —           77,990         527         26         5,550         84,093   

POSCO Chemtech Company Ltd.

      128,365         11,800         140,165         133,444         1,733         74,784         372         210,333   

POSCO M-TECH Co., Ltd.

      50         12         62         24,758         570         46,756         7         72,091   

POSCO Energy Corp.

      47,602         302         47,904         —           —           —           13         13   

POSCO TMC Co., Ltd.

      54,534         —           54,534         —           —           259         279         538   

POSCO AST Co., Ltd.

      105,115         3         105,118         2,775         —           8,872         35         11,682   

POS-Himetal Co., Ltd.

      3,171         34         3,205         37,133         —           —           33         37,166   

Daewoo International Corp.

      897,936         34,335         932,271         11,713         —           —           —           11,713   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) (*5)

      2,811         176,904         179,715         8,239         —           515         75         8,829   

POSCO Plant Engineering Co., Ltd.

      2,373         18         2,391         878         27,827         5,626         5,655         39,986   

POSCO Thainox Public Company Limited

      71,957         10         71,967         1,869         —           —           —           1,869   

PT. KRAKATAU POSCO

      —           —           —           83,636         —           —           —           83,636   

POSCO America Corporation

      175,927         —           175,927         —           —           —           36         36   

POSCO Canada Ltd.

      —           —           —           32,997         —           —           —           32,997   

POSCO Asia Co., Ltd.

      465,146         —           465,146         50,819         —           —           92         50,911   

POSCO (Thailand) Company Limited

      13,633         8         13,641         —           —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

      36,729         —           36,729         —           —           —           —           —     

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

      29,506         —           29,506         —           —           —           —           —     

POSCO JAPAN Co., Ltd.

      266,240         9,383         275,623         5,223         957         —           269         6,449   

POSCO-India Pune Processing Center. Pvt. Ltd.

      16,461         —           16,461         —           —           —           4         4   

POSCO MEXICO S.A. DE C.V.

      77,743         152         77,895         —           —           —           —           —     

POSCO Maharashtra Steel Private Limited

      102,395         —           102,395         —           —           —           —           —     

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

      —           —           —           12,598         —           —           —           12,598   

Others

      167,321         2,958         170,279         24,879         24,629         3,202         16,065         68,775   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      3,047,731         238,352         3,286,083         653,549         249,030         155,484         103,979         1,162,042   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures (*3)

                        

SNNC Co., Ltd.

      638         206         844         97,176         —           —           —           97,176   

POSCHROME (PROPRIETARY) LIMITED

      —           —           —           13,933         —           —           —           13,933   

PT. POSMI Steel Indonesia

      830         —           830         —           —           —           —           —     

POSK (Pinghu) Steel Processing Center Co., Ltd.

      634         —           634         —           —           —           —           —     

CSP - Compania Siderurgica do Pecem

      3,358         —           3,358         —           —           —           —           —     

POSCO-SAMSUNG-Slovakia Processing Center

      6,306         —           6,306         —           —           —           —           —     

Others

      659         6,429         7,088         380         —           —           —           380   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     12,425         6,635         19,060         111,489         —           —           —           111,489   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   ￦ 3,060,156         244,987         3,305,143         765,038         249,030         155,484         103,979         1,273,531   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) Sales and others are mainly consist of sales of steel products to subsidiaries, associates and joint ventures. These are priced on an arm’s length basis.
(*2) Purchases and others are mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products. These are priced on an arm’s length basis.
(*3) As of March 31, 2015, the Company provided guarantees to related parties (note 20).
(*4) Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.
(*5) During the three-month period ended March 31, 2015, SeAH Changwon Integrated Special Steel Corp. (formerly, POSCO Specialty Steel Co., Ltd) was reclassified as an associate from subsidiary (Note 10).

 

42

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) For the three-month period ended March 31, 2014

 

(in millions of Won)    Sales and others      Purchase and others  
   Sales      Others      Total      Purchase of
material		      Purchase of
fixed assets		      Outsourced
processing cost		      Others      Total  

Subsidiaries

                        

POSCO E&C Co., Ltd.

    ￦ 1,505         16,583         18,088         —           427,486         2,090         10,972         440,548   

POSCO Processing & Service Co., Ltd.

      255,304         8,578         263,882         260,449         —           —           106         260,555   

POSCO Coated & Color Steel Co., Ltd.

      122,752         —           122,752         —           —           2,429         30         2,459   

POSCO ICT Co., Ltd.

      227         4         231         —           75,084         6,265         37,465         118,814   

POSMATE Co., Ltd.

      129         1         130         132         —           3,286         8,270         11,688   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      —           35         35         58,213         660         13         5,250         64,136   

POSCO Chemtech Company Ltd.

      129,572         4,941         134,513         132,202         1,450         75,916         386         209,954   

POSCO M-TECH Co., Ltd.

      20         535         555         36,970         493         50,426         56         87,945   

POSCO Energy Corp.

      36,133         299         36,432         —           1,592         —           20         1,612   

POSCO TMC Co., Ltd.

      49,887         —           49,887         —           —           277         421         698   

POSCO AST Co., Ltd.

      132,400         —           132,400         1,722         —           14,898         250         16,870   

POS-Himetal Co., Ltd.

      3,009         1,185         4,194         40,447         —           —           —           40,447   

Daewoo International Corp.

      890,600         20,604         911,204         47,077         —           —           1,552         48,629   

POSCO America Corporation

      169,609         2         169,611         —           —           —           5         5   

POSCO Canada Ltd.

      —           —           —           47,370         —           —           —           47,370   

POSCO Asia Co., Ltd.

      514,542         23         514,565         40,194         —           1,379         79         41,652   

POSCO (Thailand) Company Ltd.

      22,236         4         22,240         —           —           —           7         7   

Qingdao Pohang Stainless Steel Co., Ltd.

      14,084         —           14,084         —           —           —           —           —     

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

      62,811         —           62,811         —           —           —           —           —     

POSCO-Japan Co., Ltd.

      361,108         —           361,108         2,275         —           —           197         2,472   

POSCO-India Pune Processing Center. Pvt. Ltd.

      45,766         59         45,825         —           —           —           —           —     

POSCO-Mexico S.A. DE C.V.

      61,124         775         61,899         —           —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      64,467         214         64,681         —           —           —           —           —     

Daewoo International Singapore Pte. Ltd.

      —           —           —           28,578         —           —           —           28,578   

Others

      474,111         134         474,245         25,225         4,569         5,952         14,864         50,610   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     3,411,396         53,976         3,465,372         720,854         511,334         162,931         79,930         1,475,049   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures

                        

SNNC Co., Ltd.

      563         63         626         88,246         —           —           5         88,251   

POSCO Plant Engineering Co., Ltd.

      2,820         18         2,838         572         13,383         2,960         714         17,629   

POSCHROME (PROPRIETARY) LIMITED

      —           —           —           15,580         —           —           —           15,580   

PT. POSMI Steel Indonesia

      5,812         —           5,812         —           —           —           —           —     

POSK (Pinghu) Steel Processing Center Co., Ltd.

      4,270         —           4,270         —           —           —           —           —     

POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.

      2,539         —           2,539         —           —           —           —           —     

POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.

      319         —           319         —           —           —           —           —     

Others

      3         1         4         1,033         —           —           —           1,033   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     16,326         82         16,408         105,431         13,383         2,960         719         122,493   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   ￦ 3,427,722         54,058         3,481,780         826,285         524,717         165,891         80,649         1,597,542   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

43

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) The related account balances of significant transactions with related companies as of March 31, 2015 and December 31, 2014 are as follows:

 

  1) March 31, 2015

 

(in millions of Won)    Receivables      Payables  
   Trade accounts
and notes
receivable		      Others      Total      Trade accounts
and notes
payable		      Accounts
payable		      Others      Total  

Subsidiaries

                  

POSCO E&C Co., Ltd.

    ￦ 66         50,328         50,394         —           58,089         20         58,109   

POSCO Processing & Service Co., Ltd.

      82,491         23         82,514         13,442         818         —           14,260   

POSCO Coated & Color Steel Co., Ltd.

      69,848         16         69,864         —           —           1,549         1,549   

POSCO ICT Co., Ltd.

      —           46         46         983         32,249         6,260         39,492   

POSMATE Co., Ltd.

      227         3,926         4,153         123         2,239         3,864         6,226   

eNtoB Corp.

      —           —           —           12,472         13,414         14         25,900   

POSCO Chemtech Company Ltd.

      44,765         9,922         54,687         59,447         18,439         17,538         95,424   

POSCO M-TECH Co.,Ltd.

      —           22         22         7,278         8,038         17,331         32,647   

POSCO Energy Corp.

      18,407         784         19,191         —           —           1,336         1,336   

POSCO TMC Co., Ltd.

      37,526         8         37,534         —           16         100         116   

POSCO AST Co., Ltd.

      41,806         15         41,821         —           3,174         2,836         6,010   

POS-Himetal Co., Ltd.

      1,228         14         1,242         —           25,094         —           25,094   

Daewoo International Corp.

      143,049         34,341         177,390         3,817         46         —           3,863   

POSCO Plant Engineering Co., Ltd.

      370         8         378         8,335         6,250         17         14,602   

POSCO Thainox Public Company Limited

      71,957         —           71,957         607         —           —           607   

POSCO America Corp.

      45,269         —           45,269         —           —           —           —     

POSCO Canada Ltd.

      —           —           —           —           9,512         —           9,512   

POSCO Asia Co., Ltd.

      135,441         —           135,441         2,666         —           —           2,666   

POSCO (Thailand) Company Ltd.

      4,196         —           4,196         —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

      26,675         96         26,771         —           —           —           —     

POSCO-Japan Co., Ltd.

      18,357         —           18,357         935         —           —           935   

POSCO-India Pune Processing Center. Pvt. Ltd.

      5,726         —           5,726         —           —           —           —     

POSCO MEXICO S.A. DE C.V.

      104,824         —           104,824         —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      253,154         3,009         256,163         —           —           —           —     

Daewoo International Singapore Pte. Ltd.

      —           —           —           203         —           —           203   

Others

      69,764         2,999         72,763         5,760         24,906         3,507         34,173   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     1,175,146         105,557         1,280,703         116,068         202,284         54,372         372,724   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures

                     

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      1,440         —           1,440         3,959         77         187         4,223   

SNNC Co., Ltd.

      237         10         247         24,062         —           —           24,062   

CSP - Compania Siderurgica do Pecem

      —           69,658         69,658         —           —           —           —     

Others

      261         11         272         91         —           1         92   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     1,938         69,679         71,617         28,112         77         188         28,377   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   ￦ 1,177,084         175,236         1,352,320         144,180         202,361         54,560         401,101   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

44

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

2) December 31, 2014

 

     Receivables      Payables  
(in millions of Won)    Trade accounts and
notes receivable		      Others      Total      Trade accounts and
notes payable		      Accounts
payable		      Others      Total  

Subsidiaries

                  

POSCO E&C Co., Ltd.

    ￦ 42         71,967         72,009         —           41,878         —           41,878   

POSCO Processing & Service Co., Ltd.

      94,790         92         94,882         15,202         867         —           16,069   

POSCO Coated & Color Steel Co., Ltd.

      69,314         67         69,381         —           5         1,936         1,941   

POSCO ICT Co., Ltd.

      13         103         116         920         70,823         5,425         77,168   

POSMATE Co., Ltd.

      —           1,673         1,673         600         2,007         4,828         7,435   

eNtoB Corp.

      —           —           —           12,564         28,432         43         41,039   

POSCO Chemtech Company Ltd.

      49,456         4,283         53,739         57,610         9,890         17,864         85,364   

POSCO M-TECH Co.,Ltd.

      —           37         37         7,311         12,231         22,703         42,245   

POSCO Energy Corp.

      17,326         2,809         20,135         —           —           1,962         1,962   

POSCO TMC Co., Ltd.

      27,429         30         27,459         —           117         115         232   

POSCO AST Co., Ltd.

      44,281         54         44,335         —           2,458         3,364         5,822   

POS-Himetal Co., Ltd.

      1,269         14         1,283         —           12,846         —           12,846   

Daewoo International Corp.

      164,029         3,178         167,207         8         210         1         219   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      822         201,823         202,645         4,800         140         184         5,124   

POSCO America Corporation

      57,164         —           57,164         —           1,511         —           1,511   

POSCO Canada Ltd.

      —           —           —           —           4,534         —           4,534   

POSCO Asia Co., Ltd.

      197,104         221         197,325         10,995         —           —           10,995   

POSCO (Thailand) Company Ltd.

      7,407         266         7,673         —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

      14,748         41         14,789         —           —           —           —     

POSCO-Japan Co., Ltd.

      42,692         89         42,781         344         1,552         —           1,896   

POSCO-India Pune Processing Center. Pvt. Ltd.

      6,401         5         6,406         —           —           —           —     

POSCO MEXICO S.A. DE C.V.

      96,800         —           96,800         —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      364,899         7,714         372,613         —           —           —           —     

Others

      126,474         56,788         183,262         7,239         54,727         1,545         63,511   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     1,382,460         351,254         1,733,714         117,593         244,228         59,970         421,791   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures

                     

SNNC Co., Ltd.

      219         125         344         7,017         —           —           7,017   

POSCHROME (PROPRIETARY) LIMITED

      —           —           —           1,162         —           —           1,162   

LLP POSUK Titanium

      —           4,235         4,235         —           —           —           —     

Others

      258         18         276         234         —           —           234   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     477         4,378         4,855         8,413         —           —           8,413   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   ￦ 1,382,937         355,632         1,738,569         126,006         244,228         59,970         430,204   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(c) For the three-month periods ended March 31, 2015 and 2014 details of compensation to key management officers were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Short-term benefits

    ￦ 8,502         8,410   

Long-term benefits

      3,054         3,012   

Retirement benefits

      5,422         2,851   
  

 

 

     

 

 

  
￦ 16,978      14,273   
  

 

 

     

 

 

  

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

 

45

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

32. Commitments and Contingencies

 

(a) Commitments

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of March 31, 2015, 88 million tons of iron ore and 30 million tons of coal remained to be purchased under such long-term contracts.

The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

As of March 31, 2015, the Company entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 6.58 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. The Company is not liable for the repayment of full or part of the money borrowed if the respective projects fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.

 

(b) As of March 31, 2015, the Company has provided two blank checks to Korea Resources Corporation as collateral for long-term domestic borrowings, and has provided six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for long-term foreign currency borrowings.

 

(c) Litigation in progress

1) Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

During the April, 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of ￦907.4 billion. Through trials up to March 31, 2015, the Company has submitted its responses that the Japan court shall not have jurisdiction over this case but the judgment shall be based on the Korean law, and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of March 31, 2015, the Japan court has not made any judgments on this matter. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of March 31, 2015.

 

2) Other lawsuits and claims

The Company is involved in 45 other lawsuits and claims for alleged damages aggregating to ￦121 billion as defendant as of March 31, 2015, which arose in the ordinary course of business. The Company has recognized provisions amounting to ￦0.4 billion for 1 lawsuit based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for other 44 lawsuits and claims since the Company believes that it does not have a present obligation as of March 31, 2015.

 

46

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(d) The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO Energy Co., Ltd.

33. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Trade accounts and notes receivable

    ￦ 393,619         403,024   

Other accounts receivable

      116,491         (2,333 ) 

Advance payments

      366         (583 ) 

Prepaid expenses

      (161 )       (30,274 ) 

Inventories

      65,928         (441,524 ) 

Long-term guarantee deposits

      (169 )       (194 ) 

Other long-term assets

      (31 )       —     

Trade accounts payable

      38,988         388,978   

Other accounts payable

      (101,385 )       16,812   

Accrued expenses

      (36,515 )       87,454   

Advances received

      394         303   

Withholdings

      1,797         16,667   

Unearned revenue

      1,156         771   

Other short-term liabilities

      (25,029 )       (36 ) 

Derivatives liabilities

      —           (6,611 ) 

Payment of severance benefits

      (33,432 )       (33,383 ) 

Plan assets

      7,354         (2,487 ) 

Other long-term liabilities

      2,277         —     
  

 

 

     

 

 

  
￦ 431,648      396,584   
  

 

 

     

 

 

  

 

47

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2015

(With Independent Auditors’ Review Report Thereon)

Table of Contents

 

 

     Page  
Independent Auditors’ Review Report      1   
Condensed Consolidated Interim Financial Statements   

Condensed Consolidated Interim Statements of Financial Position

      3   

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

      5   

Condensed Consolidated Interim Statements of Changes in Equity

      6   

Condensed Consolidated Interim Statements of Cash Flows

      8   

Notes to the Condensed Consolidated Interim Financial Statements

      10   

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of March 31, 2015, the condensed consolidated interim statements of comprehensive income (loss), changes in equity and cash flows for the three-month periods ended March 31, 2015 and 2014, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to issue a report on the condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

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

The consolidated statement of financial position of the Company as of December 31, 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated February 25, 2015, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2014, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been was derived.

Seoul, Korea

May 14, 2015

 

This report is effective as of May 14, 2015, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

2

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of March 31, 2015 and December 31, 2014

(Unaudited)

 

 

(in millions of Won)    Notes    March 31, 2015      December 31, 2014  

Assets

         

Cash and cash equivalents

    21    ￦ 4,041,762         3,811,202   

Trade accounts and notes receivable, net

    4,21,32      11,652,966         11,786,055   

Other receivables, net

    5,21,32      1,902,206         1,956,216   

Other short-term financial assets

    6,21      2,535,219         1,462,920   

Inventories

    7      10,045,695         10,471,330   

Current income tax assets

         40,301         36,147   

Assets held for sale

    8      781,935         2,127,087   

Other current assets

    14      948,084         976,425   
     

 

 

     

 

 

  

Total current assets

   31,948,168      32,627,382   
     

 

 

     

 

 

  

Long-term trade accounts and notes receivable, net

 4,21   82,217      79,336   

Other receivables, net

 5,21   1,009,979      1,144,160   

Other long-term financial assets

 6,21   2,503,863      2,455,900   

Investments in associates and joint ventures

 9   4,026,241      4,060,507   

Investment property, net

 11   1,154,580      1,055,592   

Property, plant and equipment, net

 12   35,209,553      35,241,195   

Intangible assets, net

 13   6,867,687      6,884,989   

Deferred tax assets

   1,181,324      1,195,563   

Other long-term assets

 14   647,271      507,549   
     

 

 

     

 

 

  

Total non-current assets

   52,682,715      52,624,791   
     

 

 

     

 

 

  

Total assets

 ￦   84,630,883      85,252,173   
     

 

 

     

 

 

  

See accompanying notes to the condensed consolidated interim financial statements.

 

3

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of March 31, 2015 and December 31, 2014

(Unaudited)

 

 

(in millions of Won)    Notes    March 31, 2015     December 31, 2014  

Liabilities

        

Trade accounts and notes payable

    21,32    ￦ 3,640,269        3,950,786   

Short-term borrowings and current installments of long-term borrowings

    4,15,21      13,547,630        12,195,484   

Other payables

    16,21,32      2,638,485        2,194,713   

Other short-term financial liabilities

    17,21      134,523        111,637   

Current income tax liabilities

         436,964        453,613   

Liabilities of disposal group held for sale

    8      62,017        590,982   

Provisions

    18      94,929        150,030   

Other current liabilities

    20      2,004,391        2,229,764   
     

 

 

    

 

 

  

Total current liabilities

   22,559,208      21,877,009   
     

 

 

    

 

 

  

Long-term trade accounts and notes payable

 21   90,575      88,469   

Long-term borrowings, excluding current installments

 15,21   14,546,836      15,232,773   

Other payables

 16,21   165,766      169,986   

Other long-term financial liabilities

 17,21   116,537      91,095   

Defined benefit liabilities, net

 19   375,887      290,325   

Deferred tax liabilities

   1,853,050      1,832,260   

Long-term provisions

 18,33   217,670      223,239   

Other long-term liabilities

 20   132,444      155,653   
     

 

 

    

 

 

  

Total non-current liabilities

   17,498,765      18,083,800   
     

 

 

    

 

 

  

Total liabilities

   40,057,973      39,960,809   
     

 

 

    

 

 

  

Equity

Share capital

 22   482,403      482,403   

Capital surplus

 22   1,087,192      1,083,718   

Hybrid bonds

 23   996,919      996,919   

Reserves

 24   (557,039 )    (408,773 ) 

Treasury shares

 25   (1,534,449 )    (1,534,457 ) 

Retained earnings

   40,762,080      40,967,558   
     

 

 

    

 

 

  

Equity attributable to owners of the controlling company

   41,237,106      41,587,368   

Non-controlling interests

 23   3,335,804      3,703,996   
     

 

 

    

 

 

  

Total equity

   44,572,910      45,291,364   
     

 

 

    

 

 

  

Total liabilities and equity

 ￦   84,630,883      85,252,173   
     

 

 

    

 

 

  

See accompanying notes to the condensed consolidated interim financial statements.

 

4

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won, except per share information)    Notes    March 31, 2015     March 31, 2014  

Revenue

    32,35    ￦ 15,100,912        15,440,128   

Cost of sales

    7,29,32        (13,303,312 )      (13,752,157 ) 
     

 

 

    

 

 

  

Gross profit

   1,797,600      1,687,971   

Selling and administrative expenses

 26,29

Administrative expenses

   (627,559 )    (546,932 ) 

Selling expenses

   (438,801 )    (409,776 ) 
     

 

 

    

 

 

  

Operating profit

   731,240      731,263   

Share of loss of equity-accounted investees, net

 9   (62,927 )    (87,099 ) 

Finance income and costs

 21,27

Finance income

   608,686      518,106   

Finance costs

   (730,921 )    (653,629 ) 

Other non-operating income and expenses

 28

Other non-operating income

   196,119      57,457   

Other non-operating expenses

 29   (138,093 )    (298,024 ) 
     

 

 

    

 

 

  

Profit before income tax

 35   604,104      268,074   

Income tax expense

 30,35   (268,904 )    (212,428 ) 
     

 

 

    

 

 

  

Profit

   335,200      55,646   

Other comprehensive income (loss)

Items that will never be reclassified subsequently to profit or loss :

Remeasurements of defined benefit pension plans

 19   (54,562 )    (15,486 ) 

Items that are or may be reclassified subsequently to profit or loss :

Capital adjustment arising from investments in equity-accounted investees

   (117,388 )    64,288   

Net changes in the unrealized fair value of available-for-sale investments

 21   10,696      (204,457 ) 

Foreign currency translation differences

   (55,863 )    75,580   
     

 

 

    

 

 

  

Other comprehensive income (loss), net of tax

   (217,117 )    (80,075 ) 
     

 

 

    

 

 

  

Total comprehensive income (loss)

 ￦ 118,083      (24,429 ) 
     

 

 

    

 

 

  

Profit (loss) attributable to :

Owners of the controlling company

 ￦ 338,584      69,841   

Non-controlling interests

   (3,384 )    (14,195 ) 
     

 

 

    

 

 

  

Profit

 ￦ 335,200      55,646   
     

 

 

    

 

 

  

Total comprehensive income (loss) attributable to :

Owners of the controlling company

 ￦ 137,628      (24,980 ) 

Non-controlling interests

   (19,545 )    551   
     

 

 

    

 

 

  

Total comprehensive income (loss)

 ￦ 118,083      (24,429 ) 
     

 

 

    

 

 

  

Basic and diluted earnings per share (in Won)

 31   4,131      774   

See accompanying notes to the condensed consolidated interim financial statements.

 

5

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

    Attributable to owners of the controlling company     Non-        
(in millions of Won)   Share
capital		     Capital
surplus		     Hybrid
bonds		     Reserves     Treasury
shares		     Retained
earnings		     Sub
total		     controlling
interests		     Total  

Balance as of January 1, 2014

   ￦   482,403        1,078,266        996,919        (23,076 )      (1,579,124 )      41,090,649        42,046,037        3,775,993        45,822,030   

Comprehensive income:

                  

Profit

     —          —          —          —          —          69,841        69,841        (14,195 )      55,646   

Other comprehensive income

                  

Net changes in accumulated comprehensive income (loss) of investments in associates, net of tax

     —          —          —          63,109        —          —          63,109        1,179        64,288   

Net changes in the unrealized fair value of available-for-sale investments, net of tax

     —          —          —          (207,203 )      —          —          (207,203 )      2,746        (204,457 ) 

Foreign currency translation differences, net of tax

     —          —          —          64,715        —          —          64,715        10,865        75,580   

Remeasurements of defined benefit pension plans, net of tax

     —          —          —          —          —          (15,442 )      (15,442 )      (44 )      (15,486 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total comprehensive income (loss)

     —          —          —          (79,379 )      —          54,399        (24,980 )      551        (24,429 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Transactions with owners of the controlling company, Recognized directly in equity:

                  

Year-end dividends

     —          —          —          —          —          (478,702 )      (478,702 )      (30,590 )      (509,292 ) 

Changes in subsidiaries

     —          —          —          —          —          —          —          5,249        5,249   

Changes in ownership interests in subsidiaries

     —          (1,402 )      —          —          —          —          (1,402 )      26,853        25,451   

Interest of hybrid bonds

     —          —          —          —          —          (10,701 )      (10,701 )      (7,952 )      (18,653 ) 

Disposal of treasury shares

     —          11        —          —          30        —          41        —          41   

Others

     —          (551 )      —          3,182        —          8,475        11,106        (1,041 )      10,065   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total transactions with owners of the controlling company

     —          (1,942 )      —          3,182        30        (480,928 )      (479,658 )      (7,481 )      (487,139 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of March 31, 2014

   ￦ 482,403        1,076,324        996,919        (99,273 )      (1,579,094 )      40,664,120        41,541,399        3,769,063        45,310,462   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

See accompanying notes to the condensed consolidated interim financial statements.

 

6

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

    Attributable to owners of the controlling company     Non-        
    Share     Capital     Hybrid           Treasury     Retained     Sub     controlling        
(in millions of Won)   capital     surplus     bond     Reserves     shares     earnings     total     interests     Total  

Balance as of January 1, 2015

   ￦   482,403        1,083,718        996,919        (408,773 )      (1,534,457 )      40,967,558        41,587,368        3,703,996        45,291,364   

Comprehensive income:

                  

Profit

     —          —          —          —          —          338,584        338,584        (3,384 )      335,200   

Other comprehensive income

                  

Net changes in accumulated comprehensive income (loss) of investments in associates, net of tax

     —          —          —          (117,599 )      —          —          (117,599 )      211        (117,388 ) 

Net changes in the unrealized fair value of available-for-sale investments, net of tax

     —          —          —          13,679        —          —          13,679        (2,983 )      10,696   

Foreign currency translation differences, net of tax

     —          —          —          (46,585 )      —          —          (46,585 )      (9,278 )      (55,863 ) 

Remeasurements of defined benefit pension plans, net of tax

     —          —          —          —          —          (50,451 )      (50,451 )      (4,111 )      (54,562 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total comprehensive income (loss)

     —          —          —          (150,505 )      —          288,133        137,628        (19,545 )      118,083   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Transactions with owners of the controlling company, Recognized directly in equity:

                  

Year-end dividends

     —          —          —          —          —          (479,958 )      (479,958 )      (99,406 )      (579,364 ) 

Changes in subsidiaries

     —          —          —          —          —          —          —          (257,506 )      (257,506 ) 

Changes in ownership interests in subsidiaries

     —          3,859        —          —          —          —          3,859        13,067        16,926   

Interest of hybrid bonds

     —          —          —          —          —          (10,701 )      (10,701 )      (5,964 )      (16,665 ) 

Disposal of treasury shares

     —          2        —          —          8        —          10        —          10   

Others

     —          (387 )      —          2,239        —          (2,952 )      (1,100 )      1,162        62   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total transactions with owners of the controlling company

     —          3,474        —          2,239        8        (493,611 )      (487,890 )      (348,647 )      (836,537 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of March 31, 2015

   ￦ 482,403        1,087,192        996,919        (557,039 )      (1,534,449 )      40,762,080        41,237,106        3,335,804        44,572,910   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

See accompanying notes to the condensed consolidated interim financial statements.

 

7

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won)    Notes    March 31, 2015     March 31, 2014  

Cash flows from operating activities

        

Profit

       ￦ 335,200        55,646   

Adjustments for:

        

Depreciation

         720,859        680,922   

Amortization

         95,090        77,259   

Finance income

         (320,791 )      (274,192 ) 

Finance costs

         461,343        386,941   

Income tax expense

         268,904        212,428   

Gain on disposal of property, plant and equipment

         (6,858 )      (1,389 ) 

Loss on disposal of property, plant and equipment

         11,385        8,591   

Impairment loss on property, plant and equipment

         10,002        1,753   

Share of loss of equity-accounted investees

         62,927        87,099   

Costs for defined benefit plans

         67,172        59,018   

Bad debt expenses

         42,568        68,132   

Loss on valuation of inventories

         73,084        60,552   

Provision expense

         22,672        16,537   

Gain on disposal of assets held for sale

         (163,209 )      —     

Impairment loss on assets held for sale

         11,996        —     

Others, net

         16,311        (15,216 ) 
     

 

 

    

 

 

  
  1,373,455      1,368,435   
     

 

 

    

 

 

  

Changes in operating assets and liabilities

 34   (39,666 )    (1,649,108 ) 

Interest received

   61,489      64,800   

Interest paid

   (186,185 )    (163,962 ) 

Dividends received

   35,019      21,040   

Income taxes paid

   (205,691 )    (198,985 ) 
     

 

 

    

 

 

  

Net cash provided by (used in) operating activities

 ￦ 1,373,621      (502,134 ) 
     

 

 

    

 

 

  

See accompanying notes to the condensed consolidated interim financial statements.

 

8

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2015 and 2014

(Unaudited)

 

 

(in millions of Won)    Notes      March 31, 2015     March 31, 2014  

Cash flows from investing activities

        

Acquisitions of short-term financial instruments

       ￦ (2,620,929 )      (906,738 ) 

Proceeds from disposal of short-term financial instruments

         1,563,048        1,522,887   

Increase in loans

         (124,550 )      (63,501 ) 

Collection of loans

         46,919        3,362   

Acquisitions of available-for-sale investments

         (10,981 )      (89,236 ) 

Proceeds from disposal of available-for-sale investments

         5,371        5,346   

Acquisitions of investments of equity-accounted investees

         (573 )      (212,394 ) 

Proceeds from disposal of investments of equity-accounted investees

         947        —     

Acquisitions of investment property

         (56,645 )      (79 ) 

Acquisitions of property, plant and equipment

         (928,261 )      (1,073,102 ) 

Proceeds from disposal of property, plant and equipment

         23,736        28,312   

Acquisitions of intangible assets

         (81,413 )      (38,939 ) 

Proceeds from disposal of intangible assets

         3,913        774   

Cash paid in acquistion of business, net of cash acquired

         (49,818 )      (2,595 ) 

Cash received from disposal of business, net of cash transferred

         385,106        —     

Other, net

         13,192        (2,147 ) 
     

 

 

    

 

 

  

Net cash used in investing activities

   (1,830,938 )    (828,050 ) 
     

 

 

    

 

 

  

Cash flows from financing activities

Proceeds from borrowings

   476,307      862,945   

Repayment of borrowings

   (1,027,759 )    (1,811,906 ) 

Proceeds from short-term borrowings, net

   1,209,642      2,431,395   

Payment of cash dividends

   (148,406 )    (1,648 ) 

Payment of interest of hybrid bonds

   (16,348 )    (18,758 ) 

Capital contribution from non-controlling interests and proceeds from disposal of subsidiary while maintaining control

   13,065      17,174   

Other, net

   (9,408 )    (16,016 ) 
     

 

 

    

 

 

  

Net cash provided by financing activities

   497,093      1,463,186   
     

 

 

    

 

 

  

Effect of exchange rate fluctuation on cash held

   (15,625 )    17,388   
     

 

 

    

 

 

  

Net decrease in cash and cash equivalents

   24,151      150,390   

Cash and cash equivalents at beginning of the period

   8      4,022,136      4,208,562   
     

 

 

    

 

 

  

Cash and cash equivalents at end of the period

   8    ￦ 4,046,287      4,358,952   
     

 

 

    

 

 

  

See accompanying notes to the condensed consolidated interim financial statements.

 

9

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of March 31, 2015

(Unaudited)

 

1. General Information

General information about POSCO, its 46 domestic subsidiaries including POSCO Engineering & Construction Co., Ltd. 183 foreign subsidiaries including POSCO America Corporation (collectively, “the Company”) and its 100 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 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 March 31, 2015, the shares of the POSCO are listed on the Korea Exchange, while its depository receipts are listed on the New York, Tokyo and London Stock Exchanges.

 

(b) Consolidated subsidiaries acquired or reclassified during the three-month period ended March 31, 2015

 

  1) Consolidated subsidiaries acquired or reclassified during the three-month period ended March 31, 2015 are as follows:

 

Company

    Date of acquisition    Ownership (%)      Reason

POSCO GROUP UNIVERSITY

    February 2015      100.00       New establishment

POSCO India Ahmedabad Steel Processing Center Pvt.Ltd.

    February 2015      100.00       New establishment

HOTEL LAONZENA CO.,LTD

    February 2015      100.00       Acquisition

COINSA INGENIERIA Y PETROQUIMICA S.R.L

    February 2015      50.00       New establishment

 

  2) Cash outflows (inflows) from business acquisition

 

(in millions of Won)    Amounts  

Consideration transferred

    ￦ 49,819   

Less: Cash and cash equivalent acquired

      (1 ) 
  

 

 

  

Total

 ￦   49,818   
  

 

 

  

 

10

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(c) Subsidiaries that were excluded from consolidation during the three-month period ended March 31, 2015 are as follows:

 

Company

   

Date of disposal

   

Reason

SeAH Changwon Integrated Special Steel

  (formerly, POSCO Specialty Steel Co., Ltd.)

    March 2015   

Reclassification to associates due to decline in ownership

Keystone-HYUNDAI SECURITIES NO. 1.

  Private Equity Fund

    March 2015   

Reclassification to associates due to decline in ownership

Cheonsa wind power    March 2015   

Exclusion upon reclassification of parent company, ‘Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund’ to associates

2. Statement of Compliance

Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Corporations.

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2014. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

 

(a) Judgements, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2014.

 

11

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

The Company reports the significant valuation matters to the Audit Committee.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 – inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.
• Level 3 – inputs for the assets or liability that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in note 21.

 

12

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2014. The accounting policy for emission rights below is also expected to be applied in the Company’s consolidated financial statements as of and for the year ending December 31, 2015.

Emission Rights

The Company accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission which became effective in 2015.

 

(a) Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

Emission rights held for the purpose of performing the obligation are classified as intangible asset and are initially measured at cost and subsequent to initial recognition, are carried at cost less accumulated impairment losses. Emission rights held for short-swing profits are classified as current asset and are measured at fair value with any changes in fair value recognized as profit or loss in the respective reporting period.

The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

 

(b) Emission liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when there is a high possibility of outflows of resources in performing the obligation and the costs required to perform the obligation are reliably estimable. Emission liability is an amount of estimated obligation for emission rights to be submitted to the government for the performing period. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession, and the unit price for such emission rights in the market as of the end of the reporting period.

The Company recognized emission liability amounting to ￦2,277 million as other liabilities as of March 31, 2015.

 

13

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Trade accounts and notes receivable

    ￦ 10,460,031         10,814,600   

Finance lease receivables

      23,768         24,344   

Unbilled due from customers for contract work

      1,751,437         1,528,427   

Less: Allowance for doubtful accounts

      (582,270 )       (581,316 ) 
  

 

 

     

 

 

  
￦ 11,652,966      11,786,055   
  

 

 

     

 

 

  

Non-current

Trade accounts and notes receivable

 ￦ 69,910      60,583   

Finance lease receivables

   37,403      42,907   

Less: Allowance for doubtful accounts

   (25,096 )    (24,154 ) 
  

 

 

     

 

 

  
￦ 82,217      79,336   
  

 

 

     

 

 

  

The trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ￦1,837,277 million and ￦2,030,342 million as of March 31, 2015 and December 31, 2014, respectively, and are included in bank borrowings (Note 15).

 

14

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

5. Other Receivables

Other receivables as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Short-term loans

    ￦ 425,578         254,108   

Other accounts receivable

      1,382,526         1,523,659   

Accrued income

      80,619         76,393   

Deposits

      58,310         58,384   

Others

      171,641         227,192   

Less : Allowance for doubtful accounts

      (216,468 )       (183,520 ) 
  

 

 

     

 

 

  
￦ 1,902,206      1,956,216   
  

 

 

     

 

 

  

Non-current

Long-term loans

 ￦ 826,132      960,652   

Long-term other accounts receivable

   141,606      158,018   

Accrued income

   1,565      1,533   

Deposits

   178,926      189,120   

Less : Allowance for doubtful accounts

   (138,250 )    (165,163 ) 
  

 

 

     

 

 

  
￦ 1,009,979      1,144,160   
  

 

 

     

 

 

  

 

15

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

6. Other Financial Assets

(a) Other financial assets as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Derivatives assets held for trading

    ￦ 86,012         77,182   

Available-for-sale securities

      45,154         25,512   

Current portion of held-to-maturity securities (bonds)

      14,223         15,297   

Short-term financial instruments (*1,2)

      2,389,830         1,344,929   
  

 

 

     

 

 

  
￦ 2,535,219      1,462,920   
  

 

 

     

 

 

  

Non-current

Derivatives asstes held for trading (*3)

 ￦ 63,634      19,084   

Available-for-sale securities (equity instruments) (*4,5)

   2,284,860      2,294,244   

Available-for-sale securities (bonds)

   38,859      33,350   

Available-for-sale securities (others)

   63,616      67,135   

Held-to-maturity securities (bonds)

   2,420      1,796   

Long-term financial instruments (*2)

   50,474      40,291   
  

 

 

     

 

 

  
￦ 2,503,863      2,455,900   
  

 

 

     

 

 

  

 

(*1) As of March 31, 2015 and December 31, 2014, ￦5,844 million and ￦5,465 million, respectively, are restricted for the use in a government project.
(*2) As of March 31, 2015 and December 31, 2014, financial instruments amounting to ￦81,812 million and ￦177,014 million, respectively, are restricted for use in financial arrangements, pledge and others.
(*3) The Company assessed the values of its put option and earn-out consideration in relation to the residual equity upon the Company’s disposal of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Co., Ltd). Accordingly, the Company has recognized derivatives assets amounting to ￦41,005 million and ￦2,879 million, respectively, as of March 31, 2015.
(*4) During the three-month period ended March 31, 2015, there were objective evidences of impairment for listed equity securities such as PT.Krakatau Steel and others due to the significant decline in the fair value of the shares for a prolonged period and for non-listed equity securities such as Dongbu Metal Co., Ltd and others because the acquisition cost exceeded its fair value. As a result, an impairment loss of ￦24,536 million was recognized in profit or loss during the three-month period ended March 31, 2015.
(*5) As of March 31, 2015 and December 31, 2014, ￦166,192 million and ￦173,632 million of available-for-sale securities, respectively, have been provided as collateral for construction projects and borrowings.

 

16

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

7. Inventories

Inventories as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Finished goods

    ￦ 1,633,688         1,647,331   

Merchandise

      916,929         902,347   

Semi-finished goods

      1,714,249         1,654,556   

Raw materials

      2,162,011         2,334,992   

Fuel and materials

      803,668         759,193   

Construction inventories

      957,035         1,129,370   

Materials-in-transit

      1,934,274         2,109,207   

Others

      93,020         96,274   
  

 

 

     

 

 

  
  10,214,874      10,633,270   
  

 

 

     

 

 

  

Less: Allowance for inventories valuation

   (169,179 )    (161,940 ) 
  

 

 

     

 

 

  
￦ 10,045,695      10,471,330   
  

 

 

     

 

 

  

The amounts of loss on valuation of inventories recognized within cost of sales during the three-month period ended March 31, 2015 and the year ended December 31, 2014 were ￦73,084 million and ￦41,713 million, respectively.

8. Assets Held for Sale

Details of assets held for sale as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  
     The controlling
company (*1,5,6)		      Subsidiaries
(*2,3,4,6)		      Total      The controlling
company (*1,6)		      Subsidiaries
(*2,3,4,6,7)		      Total  

Assets

                  

Cash and cash equivalents (*8)

    ￦ —           4,525         4,525         —           210,934         210,934   

Trade accounts and notes receivable and other receivables

      —           4,305         4,305         —           90,811         90,811   

Other financial assets

      568,066         20,272         588,338         580,062         21,028         601,090   

Inventories

      —           1,544         1,544         —           289,716         289,716   

Investment property

      —           20,089         20,089         —           22,067         22,067   

Property, plant and equipment

      36,539         124,999         161,538         2,672         895,391         898,063   

Other assets

      —           1,596         1,596         —           14,406         14,406   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
￦ 604,605      177,330      781,935      582,734      1,544,353      2,127,087   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

Trade accounts and notes payable and other payables

 ￦ —        20,525      20,525      —        225,403      225,403   

Borrowings

   —        39,000      39,000      —        330,059      330,059   

Other liabilities

   —        2,492      2,492      —        35,520      35,520   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
￦ —        62,017      62,017      —        590,982      590,982   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

17

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(*1) During the year ended December 31, 2014, the Company determined to dispose of its equity interests in Nacional Minerios S.A. in exchange for equity interests in the new entity as Nacional Minerios S.A. (which was an available-for-sale investment of the Company) entered into a merger agreement with another entity through share exchange. The merger transaction was approved by the Company’s Board of Directors on December 12, 2014. Accordingly, the Company classified its investment in Nacional Minerios S.A. as assets held for sale. The Company has recognized ￦11,996 million of impairment loss on Nacional Minerios S.A for the three-month period ended March 31, 2015 since the fair value less cost to sell was below carrying amount.
(*2) The Company determined to dispose of its shares in POSFINE Co., Ltd, an associate of the Company, to Hahn & Company PRIVATE EQUITY FUND No.1, and entered into a disposal contract upon approval of the Company’s Board of Directors on November 7, 2014. Accordingly, the Company classified the accompanying investment in the subsidiary as assets and liabilities held for sale.
(*3) Daewoo International Corporation, a subsidiary of the Company, entered into a sales contract to dispose its Daewoo Department Store located in Masan in accordance with the Board of Directors’ resolution on August 18, 2014. Accordingly, the Company classified them as assets and liabilities held for sale.
(*4) POSCO M-TECH, a subsidiary of the Company, determined to dispose of its rare metal department and some of its assets in the Molybdenum factory in Yeongwol, and classified them as assets held-for-sale.
(*5) The Company determined to make a contribution of 1 FINEX facilities in kind after inception of joint venture, and has signed in MOA with Mideast Integrated Steel Ltd. in India. The Company has classified the relating facilities in of ￦25,892 million as assets held for sale.
(*6) The controlling company and subsidiaries of the Company (POSCO-VIETNAM Co., Ltd. and POSCO ICT) determined to dispose of some tangible assets including land and disused facilities and classified them as assets held for sale.
(*7) The Company determined to dispose of 52.2% of its shares in SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Co., Ltd) to SeAH Besteel Corp. and classified the accompanying investment in the subsidiary as assets and liabilities held for sale during the year ended December 31, 2014. Disposal of the asset held for sale was completed during the three-month period ended March 31, 2015, and the Company recognized ￦161,579 million of gain on disposal of asset held for sale.
(*8) Cash and cash equivalents classified as assets held for sale are included in the beginning and ending balance of statement of cash flows for the three-month period ended March 31, 2015.

 

18

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

9. Investments in Associates and Joint Ventures

 

(a) Details of investments in associates as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Company

    Number of shares      Ownership (%)      Acquisition cost      Book value      Book value  

[Domestic]

               

EQP POSCO Global NO1 Natural Resources PEF

      178,565         28.48       ￦ 178,566       ￦ 176,510         176,899   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) (*1,2,4)

      26,000,000         19.94         159,978         159,978         —     

SNNC Co., Ltd.

      18,130,000         49.00         90,650         133,918         131,671   

QSONE Co., Ltd.

      200,000         50.00         84,395         84,010         83,849   

Incheon-Gimpo Highway Co., Ltd (*3)

      9,032,539         25.11         45,163         42,999         43,045   

UITrans LRT co., Ltd. (*3)

      4,510,239         38.43         22,551         32,000         30,098   

BLUE OCEAN private Equity Fund

      333         27.52         33,300         31,828         31,439   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd. (*3)

      2,008,000         25.10         10,040         19,801         19,801   

KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund (*4)

      13,125,000         12.50         13,125         12,319         12,268   

Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund

      11,000,000         35.13         11,000         10,686         —     

KONES, Corp.

      3,250,000         41.67         6,893         5,924         5,430   

Others (32 companies) (*3)

               32,839         33,511   
           

 

 

     

 

 

  
  742,812      568,011   
           

 

 

     

 

 

  

[Foreign]

Eureka Moly LLC

   —        20.00      240,123      228,441      228,004   

South-East Asia Gas Pipeline Company Ltd.

   135,219,000      25.04      150,779      187,095      172,805   

7623704 Canada Inc. (*4)

   114,452,000      10.40      124,341      130,769      117,100   

Nickel Mining Company SAS

   3,234,698      49.00      157,585      90,085      107,408   

AES-VCM Mong Duong Power Company Limited

   —        30.00      74,161      88,619      93,021   

AMCI (WA) PTY LTD.

   49      49.00      209,664      81,073      88,050   

KOREA LNG LTD.

   2,400      20.00      135,205      73,177      72,089   

CAML RESOURCES PTY LTD.

   3,239      33.34      40,388      33,150      38,240   

NCR LLC

   —        29.41      32,348      33,019      32,598   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

   10,200,000      34.00      9,517      20,937      21,032   

PT. Batutua Tembaga Raya

   128,285      24.10      14,785      14,546      14,653   

PT. Wampu Electric Power (*3)

   7,800,000      20.00      9,028      7,183      7,611   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

   50      25.00      4,723      7,072      6,969   

Others (25 companies) (*3)

   52,275      59,210   
           

 

 

     

 

 

  
  1,047,441      1,058,790   
           

 

 

     

 

 

  
￦   1,790,253      1,626,801   
           

 

 

     

 

 

  

 

(*1) During the three-month period ended March 31, 2015, the Company disposed of 52.2% of shares of SeAH Changwon Integrated Special Steel Corp. (formerly, POSCO Specialty Steel Co., Ltd), which resulted in the Company’s loss of control, and the Company classified the investment as investment in an associate, which was initially recognized at its fair value based on external valuation report.
(*2) During the three-month period ended March 31, 2015, POSCO Specialty Steel Co., Ltd changed its corporate name to SeAH Changwon Integrated Special Steel Corp.
(*3) As of March 31, 2015, investment in associates amounting to ￦97,252 million is provided as collateral related to associates’ borrowings.
(*4) As of March 31, 2015, it was classified as an associate in spite of less than 20% of ownership percentage since the Company is determined to have significant influence over the investee when considering its structure of the Board of Directors.

 

19

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Details of investments in joint ventures as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Company

    Number of shares      Ownership (%)      Acquisition cost      Book value      Book value  

[Domestic]

               

POSCO MITSUBISHI CARBOND TECHNOLOGY

      11,568,000         60.00       ￦ 115,680       ￦ 111,613         112,837   

POSCO ES MATERIALS

      1,000,000         50.00         43,000         37,604         38,021   
           

 

 

     

 

 

  
  149,217      150,858   
           

 

 

     

 

 

  

[Foreign]

Roy Hill Holdings Pty Ltd. (*1)

   13,117,972      12.50      1,528,672      1,184,271      1,268,678   

POSCO-NPS Niobium LLC

   325,050,000      50.00      364,609      359,255      357,874   

CSP-Compania Siderurgica do Pecem

   827,771,230      20.00      469,891      165,195      260,906   

DMSA, AMSA (*2)

   —        4.00      193,182      161,514      165,094   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   —        25.00      61,961      99,442      98,893   

KOBRASCO

   2,010,719,185      50.00      32,950      78,896      99,787   

Others (11 companies)

   38,198      31,616   
           

 

 

     

 

 

  
  2,086,771      2,282,848   
           

 

 

     

 

 

  
￦   2,235,988      2,433,706   
           

 

 

     

 

 

  

 

(*1) As of March 31, 2015 and December 31, 2014, investment in joint ventures amounting to ￦1,184,271 million and ￦1,268,678 million, respectively, is provided as collateral in relation to loan from project financing of Roy Hill Holdings Pty Ltd.
(*2) As of March 31, 2015 and December 31, 2014, investment in joint ventures amounting to ￦161,514 and ￦165,094 million is provided as collateral for the joint venture’s guarantees.

 

20

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(c) The movements of investments in associates and joint ventures for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

  1) For the three-month period ended March 31, 2015

 

(in millions of Won)    December 31, 2014
Book value		      Acquisition      Dividend     Share of
profits (losses)		     Other increase
(decrease) (*1)		     March 31, 2015
Book value		  

Company

               

[Domestic]

               

EQP POSCO Global NO1 Natural Resources PEF

    ￦ 176,899         —           —          (389 )      —          176,510   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      —           159,978         —          —          —          159,978   

SNNC Co., Ltd.

      131,671         —           —          2,247        —          133,918   

QSONE Co., Ltd.

      83,849         —           —          161        —          84,010   

Incheon-Gimpo Highway Co., Ltd

      43,045         —           —          (100 )      54        42,999   

UITrans LRT co., Ltd.

      30,098         573         —          1,329        —          32,000   

BLUE OCEAN private Equity Fund

      31,439         —           —          389        —          31,828   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.

      19,801         —           —          —          —          19,801   

KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund

      12,268         —           —          51        —          12,319   

Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund

      —           11,000         —          (314 )      —          10,686   

KONES, Corp.

      5,430         —           —          494        —          5,924   

POSCO MITSUBISHI CARBOND TECHNOLOGY

      112,837         —           —          (1,224 )      —          111,613   

POSCO ES MATERIALS

      38,021         —           —          (417 )      —          37,604   

Others (32 companies)

      33,511         —           —          284        (956 )      32,839   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  718,869      171,551      —        2,511      (902 )    892,029   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

[Foreign]

Eureka Moly LLC

   228,004      —        —        (11 )    448      228,441   

South-East Asia Gas Pipeline Company Ltd.

   172,805      —        —        13,319      971      187,095   

7623704 Canada Inc.

   117,100      —        —        12,987      682      130,769   

Nickel Mining Company SAS

   107,408      —        —        (5,799 )    (11,524 )    90,085   

AES-VCM Mong Duong Power Company Limited

   93,021      —        —        235      (4,637 )    88,619   

AMCI (WA) PTY LTD.

   88,050      —        —        (1,780 )    (5,197 )    81,073   

KOREA LNG LTD.

   72,089      —        (5,087 )    5,094      1,081      73,177   

CAML RESOURCES PTY LTD.

   38,240      —        —        (643 )    (4,447 )    33,150   

NCR LLC

   32,598      —        —        (5 )    426      33,019   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

   21,032      —        —        (202 )    107      20,937   

PT. Batutua Tembaga Raya

   14,653      —        —        —        (107 )    14,546   

PT. Wampu Electric Power

   7,611      —        —        (453 )    25      7,183   

POSCO SeAH Steel Wire (Nantong) Co., Ltd.

   6,969      —        —        95      8      7,072   

Roy Hill Holdings Pty Ltd.

   1,268,678      —        —        (22,757 )    (61,650 )    1,184,271   

POSCO-NPS Niobium LLC

   357,874      —        (6,427 )    5,926      1,882      359,255   

CSP - Compania Siderurgica do Pecem

   260,906      —        —        (57,568 )    (38,143 )    165,195   

DMSA/AMSA

   165,094      —        —        (7,081 )    3,501      161,514   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   98,893      —        —        138      411      99,442   

KOBRASCO

   99,787      —        —        (4,155 )    (16,736 )    78,896   

Others (36 companies)

   90,826      —        (951 )    (2,778 )    3,376      90,473   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  3,341,638      —        (12,465 )    (65,438 )    (129,523 )    3,134,212   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
￦ 4,060,507      171,551      (12,465 )    (62,927 )    (130,425 )    4,026,241   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Other increase or decrease represents the changes in investments in associates and joint ventures due to capital adjustments arising from translations of financial statements of foreign investees and others.

 

21

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) For the year ended December 31, 2014

 

(in millions of Won)    December 31, 2013
Book value		      Acquisition      Dividend     Share of
profits (losses)		     Other increase
(decrease) (*1)		     December 31, 2014
Book value		  

Company

               

[Domestic]

               

EQP POSCO Global NO1 Natural Resources PEF

    ￦ 177,563         —           —          (664 )      —          176,899   

SNNC Co., Ltd.

      123,969         —           (5,149 )      13,873        (1,022 )      131,671   

QSONE Co., Ltd.

      84,096         —           —          (247 )      —          83,849   

Incheon-Gimpo Highway Co., Ltd

      37,759         8,331         —          (340 )      (2,705 )      43,045   

UITrans LRT co., Ltd.

      19,185         2,330         —          8,583        —          30,098   

BLUE OCEAN private Equity Fund

      29,391         —           —          2,193        (145 )      31,439   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.

      23,733         —           —          (3,714 )      (218 )      19,801   

KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund

      6,685         6,113         —          (530 )      —          12,268   

KONES, Corp.

      5,784         —           —          (378 )      24        5,430   

POSCO MITSUBISHI CARBOND TECHNOLOGY

      115,708         —           —          (2,835 )      (36 )      112,837   

POSCO ES MATERIALS

      40,386         —           —          (2,229 )      (136 )      38,021   

POSCO PLANTEC Co., Ltd.

      234,203         25,356         —          (210,616 )      (48,943 )      —     

Others (32 companies)

      57,757         12,875         —          (24,638 )      (12,483 )      33,511   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  956,219      55,005      (5,149 )    (221,542 )    (65,664 )    718,869   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

[Foreign]

Eureka Moly LLC

   217,513      —        —        (37 )    10,528      228,004   

South-East Asia Gas Pipeline Company Ltd.

   140,202      —        —        25,638      6,965      172,805   

7623704 Canada Inc.

   119,516      —        (5,505 )    (1,678 )    4,767      117,100   

Nickel Mining Company SAS

   135,178      —        —        (17,391 )    (10,379 )    107,408   

AES-VCM Mong Duong

Power Company Limited

   81,436      —        —        (3,845 )    15,430      93,021   

AMCI (WA) PTY LTD.

   98,467      —        —        (6,477 )    (3,940 )    88,050   

KOREA LNG LTD.

   64,453      —        (18,668 )    18,613      7,691      72,089   

CAML RESOURCES PTY LTD.

   43,820      —        —        (2,191 )    (3,389 )    38,240   

NCR LLC

   30,496      —        —        (3,984 )    6,086      32,598   

Zhongyue POSCO (Qinhuangdao)

Tinplate Industrial Co., Ltd

   20,600      —        (352 )    378      406      21,032   

PT. Batutua Tembaga Raya

   —        14,785      —        —        (132 )    14,653   

PT. Wampu Electric Power

   7,237      —        —        134      240      7,611   

POSCO SeAH Steel Wire (Nantong) Co., Ltd.

   6,083      —        —        679      207      6,969   

Roy Hill Holdings Pty Ltd.

   825,901      530,492      —        (14,783 )    (72,932 )    1,268,678   

POSCO-NPS Niobium LLC

   343,590      —        (16,414 )    16,370      14,328      357,874   

CSP - Compania Siderurgica do Pecem

   263,419      75,966      —        (57,127 )    (21,352 )    260,906   

DMSA/AMSA

   180,355      —        —        (21,793 )    6,532      165,094   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   96,309      —        —        943      1,641      98,893   

KOBRASCO

   95,233      —        (18,429 )    30,356      (7,373 )    99,787   

Others (35 companies)

   82,666      50,605      (2,708 )    (42,156 )    2,419      90,826   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  2,852,474      671,848      (62,076 )    (78,351 )    (42,257 )    3,341,638   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
￦ 3,808,693      726,853      (67,225 )    (299,893 )    (107,921 )    4,060,507   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Other increase or decrease represents the changes in investments in associates and joint ventures due to capital adjustments arising from translations of financial statements of foreign investees and others.

 

22

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(d) Summarized financial information of associates and joint ventures as of and for the three-month period March 31, 2015 and as of and for the year ended December 31, 2014 is as follows:

 

  1) March 31, 2015

 

(in millions of Won)                                   

Company

    Assets      Liabilities      Equity      Sales      Net income (loss)  

[Domestic]

               

EQP POSCO Global NO1 Natural Resources PEF

    ￦ 620,548         1,000         619,548         —           (1,369 ) 

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      1,190,487         494,203         696,284         269,014         (8,263 ) 

SNNC Co., Ltd.

      834,977         541,218         293,759         147,710         (4,592 ) 

QSONE Co.,Ltd.

      248,383         80,363         168,020         3,542         322   

Incheon-Gimpo Highway Co., Ltd

      447,530         278,272         169,258         —           (393 ) 

UITrans LRT co., Ltd.

      170,189         117,679         52,510         —           (197 ) 

BLUE OCEAN private Equity Fund

      363,225         247,573         115,652         95,746         1,415   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.

      256,207         208,960         47,247         —           —     

KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund

      99,540         989         98,551         1,001         406   

KONES, Corp.

      35,722         1,628         34,094         —           (1,158 ) 

POSCO MITSUBISHI CARBOND TECHNOLOGY

      404,138         219,066         185,072         —           (2,040 ) 

POSCO ES MATERIALS

      66,494         22,843         43,651         3,888         (835 ) 

[Foreign]

               

South-East Asia Gas Pipeline Company Ltd.

        2,061,032         1,313,853         747,179         120,519         53,191   

7623704 Canada Inc.

      1,269,556         2         1,269,554         74,019         124,876   

Nickel Mining Company SAS

      387,673         161,515         226,158         21,682         (10,998 ) 

KOREA LNG LTD.

      403,982         8,442         395,540         25,964         25,470   

CAML RESOURCES PTY LTD.

      148,151         36,525         111,626         48,060         (1,929 ) 

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

      148,563         81,244         67,319         36,460         (517 ) 

PT. Batutua Tembaga Raya

      170,747         156,386         14,361         —           —     

PT. Wampu Electric Power

      166,916         134,071         32,845         3,957         (2,267 ) 

POSCO SeAH Steel Wire (Nantong) Co., Ltd.

      60,756         32,797         27,959         18,021         307   

Roy Hill Holdings Pty Ltd.

      7,495,499         4,496,274         2,999,225         —           (182,058 ) 

POSCO-NPS Niobium LLC

      718,307         —           718,307         —           11,852   

CSP - Compania Siderurgica do Pecem

      2,951,577         1,880,410         1,071,167         —           (279,359 ) 

DMSA/AMSA

      8,923,126         5,998,243         2,924,883         223,344         (110,760 ) 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

      645,229         275,073         370,156         289,207         552   

KOBRASCO

      166,183         19,558         146,625         18,541         (8,310 ) 

 

23

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) December 31, 2014

 

(in millions of Won)                                  

Company

    Assets      Liabilities      Equity     Sales      Net income (loss)  

[Domestic]

              

EQP POSCO Global NO1 Natural Resources PEF

    ￦ 621,960         1,044         620,916        —           (576 ) 

SNNC Co., Ltd.

      826,597         528,246         298,351        345,836         41,117   

QSONE Co.,Ltd.

      247,590         79,891         167,699        13,674         (603 ) 

Incheon-Gimpo Highway Co., Ltd

      337,639         172,464         165,175        —           (1,148 ) 

UITrans LRT co., Ltd.

      169,574         117,996         51,578        —           (887 ) 

BLUE OCEAN private Equity Fund

      361,810         247,573         114,237        574,476         8,489   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.

      256,207         208,960         47,247        5,240         (14,798 ) 

KoFC POSCO HANHWA KB Shared Growth NO. 2. Private Equity Fund

      100,063         1,917         98,146        1,932         (4,238 ) 

KONES, Corp.

      3,756         3,155         601        7,269         (907 ) 

POSCO MITSUBISHI CARBOND TECHNOLOGY

      405,387         218,275         187,112        —           (4,725 ) 

POSCO ES MATERIALS

      64,088         19,602         44,486        13,403         (4,459 ) 

[Foreign]

              

South-East Asia Gas Pipeline Company Ltd.

      1,997,068         1,306,957         690,111        353,439         102,385   

7623704 Canada Inc.

      1,138,126         4         1,138,122        —           (612 ) 

Nickel Mining Company SAS

      410,230         140,860         269,370        133,975         (24,800 ) 

KOREA LNG LTD.

      393,581         45         393,536        94,936         93,067   

CAML RESOURCES PTY LTD.

      159,281         38,591         120,690        172,093         (6,570 ) 

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

      148,077         80,538         67,539        186,733         1,112   

PT. Batutua Tembaga Raya

      100,142         151,591         (51,449 )      1,309         (2,110 ) 

PT. Wampu Electric Power

      172,950         138,012         34,938        43,184         670   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

      66,097         38,572         27,525        80,059         2,636   

Roy Hill Holdings Pty Ltd.

      6,809,416         3,431,438         3,377,978        —           (118,264 ) 

POSCO-NPS Niobium LLC

      715,546         —           715,546        —           32,741   

CSP - Compania Siderurgica do Pecem

      3,060,008         1,467,004         1,593,004        —           (90,649 ) 

DMSA/AMSA

      8,938,860         5,918,665         3,020,195        695,505         (544,837 ) 

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

      816,813         448,854         367,959        1,290,490         3,771   

KOBRASCO

      234,595         35,021         199,574        99,677         60,712   

 

24

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of March 31, 2015 are as follows:

 

Joint operations

    Operation      Ownership (%)      Location

Myanmar A-1/A-3 mine

      Mine development         51.00       Myanmar

Offshore midstream

      Mine development         51.00       Myanmar

Greenhills mine

      Mine development         20.00       Canada

Actos Anthracite coal project

      Mine development         20.00       Canada

Mt. Thorley J/V

      Mine development         20.00       Australia

POSMAC J/V

      Mine development         20.00       Australia

CD J/V

      Mine development         5.00       Australia

Intergra Coal J/V

      Mine development         2.35       Australia

RUM J/V

      Mine development         10.00       Australia

Camberwell Coal J/V

      Mine development         8.39       Australia

11. Investment Property, Net

Changes in the carrying value of investment property for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

  (a) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Acquisitions      Depreciation     Others (*1)     Ending  

Land

    ￦ 415,512         —           —          (60,693 )      354,819   

Buildings

      591,647         51,394         (5,113 )      105,258        743,186   

Structures

      2,060         —           (62 )      69        2,067   

Construction-in-progress

      46,373         7,970         —          165        54,508   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

Total

 ￦ 1,055,592      59,364      (5,175 )    44,799      1,154,580   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

  

 

(*1) Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

 

  (b) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Business
combination		      Disposals     Depreciation (*1)     Others (*2)     Ending  

Land

    ￦ 161,502         97,883         13         (20,500 )      —          176,614        415,512   

Buildings

      239,193         195,722         208         (19,212 )      (12,858 )      188,594        591,647   

Structures

      3,599         —           —           —          (413 )      (1,126 )      2,060   

Construction-in-progress

      20,935         112,998         —           —          —          (87,560 )      46,373   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total

 ￦ 425,229      406,603      221      (39,712 )    (13,271 )    276,522      1,055,592   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Impairment losses of investment property amounting to ￦23 million are included.
(*2) Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

 

25

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

12. Property, Plant and Equipment, Net

Changes in the carrying value of property, plant and equipment for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

  (a) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation (*1)     Others (*2)     Ending  

Land

    ￦ 2,801,288         37,671         (793 )      (1,517 )      (26,347 )      2,810,302   

Buildings

      5,359,324         62,716         (1,317 )      (95,196 )      (14,197 )      5,311,330   

Structures

      3,030,163         13,239         (656 )      (53,325 )      26,008        3,015,429   

Machinery and equipment

      21,199,885         57,201         (21,772 )      (543,532 )      848,130        21,539,912   

Vehicles

      56,695         3,748         (85 )      (4,668 )      (457 )      55,233   

Tools

      64,069         5,534         (7 )      (7,795 )      13,139        74,940   

Furniture and fixtures

      143,782         11,804         (161 )      (16,157 )      2,307        141,575   

Capital lease assets

      80,081         154         (11 )      (2,919 )      21,732        99,037   

Construction-in-progress

      2,505,908         647,311         (3,461 )      (577 )      (987,386 )      2,161,795   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total

 ￦   35,241,195      839,378      (28,263 )    (725,686 )    (117,071 )    35,209,553   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Impairment losses of property, plant and equipment amounting to ￦10,002 million are included.
(*2) Includes reclassifications for changing purpose of use, adjustments of foreign currency translation differences and others.

 

  (b) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Business
combination		      Disposals     Depreciation (*1)     Others (*2)     Ending  

Land

    ￦ 2,708,010         92,645         146,755         (10,410 )      (1,839 )      (133,873 )      2,801,288   

Buildings

      4,888,835         97,701         72,483         (18,968 )      (372,445 )      691,718        5,359,324   

Structures

      2,784,587         42,341         15,525         (3,517 )      (223,487 )      414,714        3,030,163   

Machinery and equipment

      19,442,836         372,448         26,998         (45,777 )      (2,194,014 )      3,597,394        21,199,885   

Vehicles

      51,033         17,665         614         (2,136 )      (20,166 )      9,685        56,695   

Tools

      62,853         29,351         4,210         (578 )      (33,480 )      1,713        64,069   

Furniture and fixtures

      173,152         41,113         1,599         (2,291 )      (70,938 )      1,147        143,782   

Capital lease assets

      100,524         2,710         —           (31 )      (29,825 )      6,703        80,081   

Construction-in-progress

      5,548,289         2,804,568         19,156         (14,088 )      —          (5,852,017 )      2,505,908   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total

 ￦   35,760,119      3,500,542      287,340      (97,796 )    (2,946,194 )    (1,262,816 )    35,241,195   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Impairment losses of property, plant and equipment amounting to ￦64,833 million are included.
(*2) Includes reclassifications for changing purpose of use, adjustments of foreign currency translation differences and others.

 

26

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying value of goodwill and other intangible assets for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

  (a) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Amortization     Impairment
loss		     Others (*2)     Ending  

Goodwill

    ￦ 1,795,144         —           —          —          —          (1,221 )      1,793,923   

Intellectual property rights

      2,762,679         33,327         —          (43,201 )      —          (12,824 )      2,739,981   

Premium in rental (*1)

      130,942         1,977         (3,603 )      (46 )      (2 )      (20 )      129,248   

Development expense

      168,746         1,312         —          (14,952 )      (10 )      3,258        158,354   

Port facilities usage rights

      156,444         —           —          (2,415 )      —          —          154,029   

Exploratation and evaluation assets

      92,459         37,721         —          —          —          (69 )      130,111   

Customer relationships

      641,625         —           —          (13,731 )      —          981        628,875   

Power generation permit

      539,405         —           —          —          —          —          539,405   

Other intangible assets

      597,545         16,751         (642 )      (20,745 )      —          852        593,761   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦   6,884,989      91,088      (4,245 )    (95,090 )    (12 )    (9,043 )    6,867,687   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Premium in rental includes memberships with indefinite useful lives.
(*2) Includes translation adjustment and reclassifications.

 

(b) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Business
combination		      Disposals     Amortization     Impairment
loss		     Others (*3)     Ending  

Goodwill (*1)

    ￦ 1,615,938         —           187,285         —          —          (11,297 )      3,218        1,795,144   

Intellectual property rights

      1,474,859         199,850         32         (218 )      (143,548 )      (27,720 )      1,259,424        2,762,679   

Premium in rental (*2)

      131,267         8,775         1,661         (4,484 )      (265 )      (2,609 )      (3,403 )      130,942   

Development expense

      61,102         18,032         2,659         (3,484 )      (56,453 )      (9,366 )      156,256        168,746   

Port facilities usage rights

      167,111         433         —           —          (12,462 )      —          1,362        156,444   

Exploratation and evaluation assets

      359,748         32,191         —           —          —          (718 )      (298,762 )      92,459   

Mining development assets

      968,191         1,484         —           —          —          —          (969,675 )      —     

Customer relationships

      692,880         —           —           —          (53,969 )      —          2,714        641,625   

Power generation permit (*4)

      —           —           539,405         —          —          —          —          539,405   

Other intangible assets (*5)

      458,744         262,076         88,808         (665 )      (77,243 )      (717 )      (133,458 )      597,545   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦   5,929,840      522,841      819,850      (8,851 )    (343,940 )    (52,427 )    17,676      6,884,989   
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) During the year ended December 31, 2014, goodwill arising from business combination amounting to ￦180,418 million are included in relation to the acquisition of POSCO Plantec Co., Ltd.
(*2) Premium in rental includes memberships with indefinite useful lives.
(*3) Includes translation adjustment and reclassifications.
(*4) POSCO ENERGY CO., LTD. recognized other intangible assets and other provisions amounting to ￦539,405 million in relation to operation permit for electricity business when acquiring POSPOWER CO., Ltd.
(*5) During the year ended December 31, 2014, POSCO ENGINEERING & CONSTRUCTION., LTD. recognized other intangible assets and other provisions amounting to ￦169,000 million in relation to project financing agreements on the Urban Development Project in Gaepo-dong, Seoul.

 

27

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

14. Other Assets

Other current assets and other long-term assets as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Advance payment

    ￦ 792,283         845,114   

Prepaid expenses

      154,073         129,914   

Others

      1,728         1,397   
  

 

 

     

 

 

  
￦ 948,084      976,425   
  

 

 

     

 

 

  

Non-current

Long-term advance payment

 ￦ 3,457      3,454   

Long-term prepaid expenses

   403,064      243,933   

Others (*1)

   240,750      260,162   
  

 

 

     

 

 

  
￦ 647,271      507,549   
  

 

 

     

 

 

  

 

(*1) As of March 31, 2015 and December 31, 2014, the Company recognized tax assets amounting to ￦124,982 million and ￦132,060 million, respectively, in connection with the additional income tax payment for prior years as a result of tax audits that were finalized in 2014 based on the Company’s best estimate of the tax amounts to be paid when the result of the Company’s appeal is finalized.

 

28

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

15. Borrowings

 

(a) Short-term borrowings and current portion of long-term borrowings as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)   

Bank

    Interest (%)    March 31, 2015      December 31, 2014  

Short-term borrowings

            

Bank overdrafts

   

Bank of America and others

    0.1~6.0    ￦ 230,922         105,673   

Short-term borrowings

   

HSBC Bank and others

    0.2~12.3      9,830,512         9,138,804   
        

 

 

     

 

 

  
  10,061,434      9,244,477   
        

 

 

     

 

 

  

Current portion of long-term liabilities

Current portion of long-term borrowings

Export-Import Bank of Korea and others

 0.5~6.0   927,339      1,159,090   

Current portion of foreign loan (*1)

NATIXIS

   374      418   

Current portion of debentures

Korean Development Bank and others

 2.0   2,560,508      1,793,252   

Less : Current portion of discount on debentures issued

 1.0~6.0   (2,025 )    (1,753 ) 
        

 

 

     

 

 

  
  3,486,196      2,951,007   
        

 

 

     

 

 

  
￦ 13,547,630      12,195,484   
        

 

 

     

 

 

  

 

(*1) Korea Development Bank has provided guarantees related to the foreign loan.

 

(b) Long-term borrowings, excluding current portion as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)   

Bank

    Interest (%)    March 31, 2015      December 31, 2014  

Long-term borrowings

   

Export-Import Bank of Korea and others

    0.5~9.0    ￦ 7,523,575         7,359,773   

Less : Present value discount

            (102,061 )       (109,949 ) 

Foreign loan (*1)

   

NATIXIS

    2.0      375         627   

Bonds

   

Korean Development Bank and others

    0.9~6.3      7,149,579         8,009,547   

Less : Discount on debentures issued

            (24,632 )       (27,225 ) 
        

 

 

     

 

 

  
￦ 14,546,836      15,232,773   
        

 

 

     

 

 

  

 

(*1) Korea Development Bank has provided guarantees related to the foreign loan.

 

(c) Property, plant and equipment, trade accounts and notes receivable, financial assets, available-for-sale financial assets, inventories and other assets amounting to ￦6,555,305 million, ￦19,118 million (one hundred eighteen sheets of note receivable), ￦40,259 million, ￦6,259 million, ￦336,959 million and ￦154,406 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.

 

29

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

16. Other Payables

Other payables as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Accounts payable

    ￦ 1,027,548         1,082,676   

Accrued expenses

      724,259         740,250   

Dividend payable

      523,342         12,077   

Finance lease liabilities

      16,664         21,888   

Withholding

      346,672         337,822   
  

 

 

     

 

 

  
￦ 2,638,485      2,194,713   
  

 

 

     

 

 

  

Non-current

Accounts payable

 ￦ 66,303      81,344   

Accrued expenses

   21,763      25,886   

Finance lease liabilities

   27,625      24,815   

Long-term withholding

   50,075      37,941   
  

 

 

     

 

 

  
￦ 165,766      169,986   
  

 

 

     

 

 

  

17. Other Financial Liabilities

Other financial liabilities as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Current

      

Derivatives liabilities

    ￦ 103,441         84,146   

Financial guarantee liabilities

      31,082         27,491   
  

 

 

     

 

 

  
￦ 134,523      111,637   
  

 

 

     

 

 

  

Non-current

Derivatives liabilities (*1)

 ￦ 101,730      64,926   

Financial guarantee liabilities

   14,807      26,169   
  

 

 

     

 

 

  
￦ 116,537      91,095   
  

 

 

     

 

 

  

 

(*1) The Company assessed the values of call option of SeAH Besteel Corp. in relation to the residual equity upon the Company’s disposal of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Co., Ltd). Accordingly, the Company has recognized derivatives liabilities amounting to ￦22,196 million as of March 31, 2015.

 

30

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

18. Provisions

 

(a) Provisions as of March 31, 2015 and December 31, 2014 are as follows:

 

     March 31, 2015      December 31, 2014  
(in millions of Won)    Current      Non-current      Current      Non-current  

Provision for bonus payments

    ￦ 28,088         —           49,505         —     

Provision for construction warranties

      13,921         59,696         16,352         63,996   

Provision for legal contingencies and claims (*1)

      —           52,174         —           50,424   

Recovery provisons (*2)

      36,111         24,714         39,336         35,462   

Others (*3)

      16,809         81,086         44,837         73,357   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦   94,929      217,670      150,030      223,239   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) The Company recognized probable outflow of resources amounting to ￦45,957 million and ￦44,309 million as provisions for legal contingencies and asserted claims in relation to lawsuits against the Company as of March 31, 2015 and December 31, 2014, respectively.
(*2) Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province, a provision has been recognized with a present value of estimated costs for recovery. In order to compute the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied a discount rate of 2.64% to assess present value of these costs.
(*3) As of March 31, 2015 and December 31, 2014, the amount includes a provision of ￦23,600 million for expected resources outflow in connection with the subrogation and financial joint guarantee for the construction projects of POSCO ENGINEERING & CONSTRUCTION Co., Ltd.

 

(b) Changes in provisions for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Beginning      Increase      Utilization     Reversal     Others(*1)     Ending  

Provision for bonus payments

    ￦ 49,505         9,196         (28,891 )      (1,706 )      (16 )      28,088   

Provision for construction warranties

      80,348         6,032         (3,549 )      (1,729 )      (7,485 )      73,617   

Provision for legal contingencies and claims

      50,424         1,387         —          —          363        52,174   

Recovery provisons

      74,798         5,095         (19,092 )      —          24        60,825   

Others

      118,194         15,669         (31,014 )      (3,783 )      (1,171 )      97,895   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
￦   373,269      37,379      (82,546 )    (7,218 )    (8,285 )    312,599   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

(*1) Includes adjustments of foreign currency translation differences and others.

 

31

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

2) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Increase      Utilization     Reversal     Others (*1)      Ending  

Provision for bonus payments

    ￦ 52,377         45,071         (46,761 )      (1,646 )      464         49,505   

Provision for construction warranties

      55,696         34,410         (15,719 )      (4,677 )      10,638         80,348   

Provision for legal contingencies and claims

      30,330         15,289         —          (7,716 )      12,521         50,424   

Recovery provisons

      4,385         89,565         (19,328 )      —          176         74,798   

Others

      110,813         282,406         (258,571 )      (19,523 )      3,069         118,194   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  
￦   253,601      466,741      (340,379 )    (33,562 )    26,868      373,269   
  

 

 

     

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

 

(*1) Includes adjustments of foreign currency translation differences and others.

19. Employee Benefits

 

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Expense related to post-employment benefit plans under defined contribution plans

    ￦ 6,874         5,741   

 

(b) Defined benefit plan

 

  1) The amounts recognized in relation to defined benefit obligations in the statements of financial position as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Present value of funded obligations

    ￦ 1,780,454         1,713,074   

Fair value of plan assets

      (1,414,995 )       (1,427,918 ) 

Present value of non-funded obligations

      10,428         5,169   
  

 

 

     

 

 

  

Net defined benefit liabilities

 ￦ 375,887      290,325   
  

 

 

     

 

 

  

 

32

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) Changes in present value of defined benefit obligations for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Defined benefit obligation at the beginning of period

    ￦ 1,718,243         1,520,643   

Current service costs

      65,732         230,445   

Interest costs

      12,142         54,737   

Remeasurement

      72,291         85,166   

Business combinations

      —           48,695   

Benefits paid

      (78,319 )       (160,792 ) 

Others

      793         (60,651 ) 
  

 

 

     

 

 

  

Defined benefit obligation at the end of period

 ￦ 1,790,882      1,718,243   
  

 

 

     

 

 

  

 

  3) Changes in fair value of plan assets for the three-month period ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Fair value of plan assets at the beginning of period

    ￦ 1,427,918         1,247,483   

Interest on plan assets

      10,702         47,296   

Remeasurement of plan assets

      (889 )       (11,236 ) 

Contributions to plan assets

      41,085         273,867   

Business combinations

      —           30,863   

Benefits paid

      (57,421 )       (109,352 ) 

Others

      (6,400 )       (51,003 ) 
  

 

 

     

 

 

  

Fair value of plan assets at the end of period

 ￦ 1,414,995      1,427,918   
  

 

 

     

 

 

  

 

  4) The amounts recognized in condensed consolidated interim statements of comprehensive income (loss) for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Current service costs

    ￦ 65,732         57,218   

Net interest costs

      1,440         1,800   
  

 

 

     

 

 

  
￦ 67,172      59,018   
  

 

 

     

 

 

  

 

33

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

20. Other Liabilities

Other liabilities as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Other current liabilities

      

Due to customers for contract work

    ￦ 907,959         1,041,946   

Advances received

      710,504         763,168   

Unearned revenue

      23,660         21,627   

Withholdings

      182,323         167,002   

Others (*1)

      179,945         236,021   
  

 

 

     

 

 

  
￦ 2,004,391      2,229,764   
  

 

 

     

 

 

  

Other long-term liabilities

Advances received

 ￦ 80,001      108,496   

Unearned revenue

   1,104      1,170   

Others (*1)

   51,339      45,987   
  

 

 

     

 

 

  
￦ 132,444      155,653   
  

 

 

     

 

 

  

 

(*1) Includes other current liabilities amounting to ￦165,124 million, ￦214,731 million and other long-term liabilities amounting to ￦8,382 million and ￦8,819 million as of March 31, 2015 and December, 31 2014, respectively, due to proportionate consolidation of joint operations which are owned by POSCO’s subsidiaries.

21. Financial Instruments

 

(a) Classification of financial instruments

 

  1) Financial assets as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Financial assets at fair value through profit or loss Derivatives assets held for trading

    ￦ 149,646         96,266   

Available-for-sale financial assets

      2,432,489         2,420,241   

Held-to-maturity investments

      16,643         17,093   

Loans and receivables

      20,320,539         19,501,763   
  

 

 

     

 

 

  
￦ 22,919,317      22,035,363   
  

 

 

     

 

 

  

 

34

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

2) Financial liabilities as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Financial liabilities at fair value through profit or loss Derivatives liabilities held for trading

    ￦ 205,171         149,072   
  

 

 

     

 

 

  

Financial liabilities measured at amortized cost

Trade accounts payable

   3,730,844      4,039,255   

Borrowings

   28,094,466      27,428,257   

Financial guarantee liabilities

   45,889      53,660   

Others

   2,526,148      2,101,354   
  

 

 

     

 

 

  
  34,397,347      33,622,526   
  

 

 

     

 

 

  
￦   34,602,518      33,771,598   
  

 

 

     

 

 

  

 

3) Finance income and costs by category of financial instrument for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

   March 31, 2015

 

     Finance income and costs        
(in millions of Won)    Interest
income
(cost)		     Gain and
loss on
valuation		     Gain and loss
on foreign
currency		     Gain and
loss on
disposal		     Impairment
loss		     Others     Total     Other
comprehensive
income (loss)		  

Financial assets at fair value through profit or loss

    ￦ —          65,036        —          78,316        —          —          143,352        —     

Available-for-sale financial assets

      653        —          —          2,554        (24,536 )      37,972        16,643        10,696   

Held-to-maturity investments

      117        —          —          —          —          9        126        —     

Loans and receivables

          63,802        —          (25,078 )      (3,942 )      —          (40 )      34,742        —     

Financial liabilities at fair value through profit or loss

      —          (62,045 )      —          (50,179 )      —          —          (112,224 )      —     

Financial liabilities at amortized cost

      (214,344 )      —          16,077        —          —          (6,607 )      (204,874 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦ (149,772 )    2,991      (9,001 )    26,749      (24,536 )    31,334      (122,235 )    10,696   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

  ‚ March 31, 2014

 

     Finance income and costs        
(in millions of Won)    Interest
income
(cost)		     Gain and
loss on
valuation		      Gain and loss
on foreign
currency		     Gain and
loss on
disposal		     Impairment
loss		     Others     Total     Other
comprehensive
income (loss)		  

Financial assets at fair value through profit or loss

    ￦ —          22,819         —          44,902        —          —          67,721        —     

Available-for-sale financial assets

      64        —           —          8,705        (1,578 )      29,447        36,638        (204,457 ) 

Held-to-maturity investments

      10        —           —          —          —          22        32        —     

Loans and receivables

          60,941        —           133,971        (5,103 )      —          (38 )      189,771        —     

Financial liabilities at fair value through profit or loss

      —          21,573         —          (37,163 )      —          —          (15,590 )      —     

Financial liabilities at amortized cost

      (179,818 )      —           (232,905 )      1,500        —          (2,872 )      (414,095 )      —     
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
￦ (118,803 )    44,392      (98,934 )    12,841      (1,578 )    26,559      (135,523 )    (204,457 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

35

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Fair value

 

  1) Fair value and book value

The carrying amount and the fair value of financial instruments as of March 31, 2015 and December 31, 2014 are as follows:

 

     March 31, 2015      December 31, 2014  
(in millions of Won)    Book value      Fair value      Book value      Fair value  

Assets measured at fair value

            

Available-for-sale financial assets (*1)

    ￦ 1,987,627         1,987,627         1,963,289         1,963,289   

Derivatives assets held for trading (*2)

      149,646         149,646         96,266         96,266   
  

 

 

     

 

 

     

 

 

     

 

 

  
  2,137,273      2,137,273      2,059,555      2,059,555   
  

 

 

     

 

 

     

 

 

     

 

 

  

Assets measured amortized cost (*3)

Cash and cash equivalents

   4,041,762      4,041,762      3,811,202      3,811,202   

Trade accounts and notes receivable, net

   11,735,183      11,735,183      11,865,391      11,865,391   

Loans and other receivables, net

   4,543,594      4,543,594      3,825,170      3,825,170   

Held-to-maturity investments

   16,643      16,643      17,093      17,093   
  

 

 

     

 

 

     

 

 

     

 

 

  
  20,337,182      20,337,182      19,518,856      19,518,856   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities measured at fair value

Derivatives liabilities held for trading (*2)

   205,171      205,171      149,072      149,072   

Liabilities measured amortized cost (*3)

Trade accounts and notes payable

   3,730,844      3,730,844      4,039,255      4,039,255   

Borrowings

   28,094,466      28,729,734      27,428,257      27,756,615   

Financial guarantee liabilities

   45,889      45,889      53,660      53,660   

Others

   2,526,148      2,526,148      2,101,354      2,101,354   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦   34,397,347      35,032,615      33,622,526      33,950,884   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average cost of capital of evaluated companies are used as a discount rate. The book value of available-for-sale financial assets accounted for at cost is not included.
(*2) The fair value of derivatives is measured using valuation models such as Black-Scholes model, binominal lattice model and others in which the market yields on government bonds are used as a discount rate.
(*3) The fair value of financial assets and liabilities measured at amortized cost is determined at the present value of estimated future cash flows discounted at the current market interest rate. The fair value is calculated for the disclosures in the notes. On the other hand, the Company has not performed fair value measurement for the financial assets and liabilities measured at amortized cost except borrowings since the fair value is close to their carrying amounts.

 

36

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) The fair value hierarchy

The fair values of financial instruments by fair value hierarchy as of March 31, 2015 and December 31, 2014 are as follows:

 

   March 31, 2015

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

            

Available-for-sale financial assets

    ￦ 1,827,385         —           160,242         1,987,627   

Derivatives assets held for trading

      —           105,762         43,884         149,646   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦   1,827,385      105,762      204,126      2,137,273   
  

 

 

     

 

 

     

 

 

     

 

 

  

Financial liabilities

Derivatives liabilities held for trading

 ￦ —        182,975      22,196      205,171   

 

  ‚ December 31, 2014

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

            

Available-for-sale financial assets

    ￦ 1,808,384         —           154,905         1,963,289   

Derivatives assets held for trading

      —           96,266         —           96,266   
  

 

 

     

 

 

     

 

 

     

 

 

  
￦   1,808,384      96,266      154,905      2,059,555   
  

 

 

     

 

 

     

 

 

     

 

 

  

Financial liabilities

Derivatives liabilities held for trading

 ￦ —        149,072      —        149,072   

 

  (c) Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2014.

 

37

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

22. Share Capital and Capital Surplus

 

(a) Share capital as of March 31, 2015 and December 31, 2014 are as follows:

 

(Share, in Won)    March 31, 2015      December 31, 2014  

Authorized shares

      200,000,000         200,000,000   

Par value

    ￦ 5,000         5,000   

Issued shares (*1)

      87,186,835         87,186,835   

Shared capital (*2)

    ￦   482,403,125,000         482,403,125,000   

 

(*1) As of March 31, 2015, total shares of ADRs of 51,622,460 are equivalent to 12,905,615 of common stock.
(*2) As of March 31, 2015, the difference between the ending balance of common stock and the par value of issued common stock is ￦46,469 million due to retirement of 9,293,790 treasury stocks.

 

(b) Capital surplus as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Share premium

    ￦ 463,825         463,825   

Gain on disposal of treasury shares

      783,793         783,791   

Other capital surplus

      (160,426 )       (163,898 ) 
  

 

 

     

 

 

  
￦ 1,087,192      1,083,718   
  

 

 

     

 

 

  

23. Hybrid Bonds

(a) Hybrid bonds classified as equity as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    Date of issue      Date of maturity      Rate of interest (%)      March 31, 2015     December 31, 2014  

Hybrid bond 1-1 (*1)

      2013-06-13         2043-06-13         4.30       ￦ 800,000        800,000   

Hybrid bond 1-2 (*1)

      2013-06-13         2043-06-13         4.60         200,000        200,000   

Issuance cost

               (3,081 )      (3,081 ) 
           

 

 

    

 

 

  
￦ 996,919      996,919   
           

 

 

    

 

 

  

 

38

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(*1) Details of hybrid bonds as of March 31, 2015 is as follows:

 

(in millions of Won)   

Hybrid bond 1-1

   

Hybrid bond 1-2

Issue price

    800,000    200,000

Maturity date

    30 years (The Company has a right to extend the maturity date)    30 years (The Company has a right to extend the maturity date)
   Issue date ~ 2018-06-12 : 4.3%    Issue date ~ 2023-06-12 : 4.6%
   reset every 5 years as follows;    reset every 10 years as follows;

Interest rate

    • After 5 years : return on government bond (5 years) + 1.3%    • After 10 years : return on government bond (10 years) + 1.4%
   • After 10 years : additionally +0.25% according to Step-up clauses    • After 10 years : additionally +0.25% according to Step-up clauses
   • After 25 years : additionally +0.75%    • After 30 years : additionally +0.75%

Interest payments condition

   

Quarterly

(Optional deferral of interest payment is available to the Company)

   

Quarterly

(Optional deferral of interest payment is available to the Company)

Others

    The Company can call the hybrid bond at year 5 and interest payment date afterwards    The Company can call the hybrid bond at year 10 and interest payment date afterwards

The Company holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, the Company cannot declare or pay dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments. The interest accumulated but not paid on the hybrid bonds as of March 31, 2015 amounts to ￦2,251 million.

(b) POSCO ENERGY Co., Ltd., a subsidiary of the Company, issued hybrid bonds during the year ended December 31, 2014, the entire amount of which is classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    Date of issue      Date of maturity      Rate of interest (%)      March 31, 2015     December 31, 2014  

Hybrid bond 1-1 (*1)

      2013-08-29         2043-08-29         4.66       ￦ 165,000        165,000   

Hybrid bond 1-2 (*1)

      2013-08-29         2043-08-29         4.72         165,000        165,000   

Hybrid bond 1-3 (*1)

      2013-08-29         2043-08-29         4.72         30,000        30,000   

Hybrid bond 1-4 (*1)

      2013-08-29         2043-08-29         5.21         140,000        140,000   

Issuance cost

               (1,532 )      (1,532 ) 
           

 

 

    

 

 

  
￦ 498,468      498,468   
           

 

 

    

 

 

  

 

39

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(*1) Details of hybrid bonds of POSCO ENERGY Co., Ltd. as of March 31, 2015 are as follows :

 

(in millions of Won)   

Hybrid bond 1-1

   

Hybrid bond 1-2 and 1-3

   

Hybrid bond 1-4

Issue price    165,000    195,000    140,000
Maturity date    30 years (The Company has a right to extend the maturity date)    30 years (The Company has a right to extend the maturity date)    30 years (The Company has a right to extend the maturity date)
Interest rate    Issue date ~ 2018-08-29 : 4.66%    Issue date ~ 2018-08-29 : 4.72%    Issue date ~ 2018-08-29 : 5.21%
   reset every 5 years as follows;    reset every 5 years as follows;    reset every 5 years as follows;
   • After 5 years : return on government bond (5 years) + 1.39%    • After 5 years : return on government bond (5 years) + 1.45%    • After 5 years : return on government bond (5 years) + 1.55%
   • After 10 years : additionally +0.25% according to Step-up clauses    • After 10 years : additionally +0.25% according to Step-up clauses    • After 10 years : additionally +0.25% according to Step-up clauses
   • After 30 years : additionally +0.75%    • After 30 years : additionally +0.75%    • After 30 years : additionally +0.75%
Interest payments condition   

Quarterly

(Optional deferral of interest payment is available to the Company)

   

Quarterly

(Optional deferral of interest payment is available to the Company)

   

Quarterly

(Optional deferral of interest payment is available to the Company)

Others    The Company can call the hybrid bond at year 5 and interest payment date afterwards    The Company can call the hybrid bond at year 5 and interest payment date afterwards    The Company can call the hybrid bond at year 5 and interest payment date afterwards

POSCO ENERGY Co., Ltd., a subsidiary, holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, POSCO ENERGY Co., Ltd., cannot declare or pay dividends attributable to common stock. Since the subsidiary has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity (non-controlling interests) in the Company’s consolidated financial statements. The interest accumulated but not paid on the hybrid bonds as of March 31, 2015 amounts to ￦2,000 million.

24. Reserves

Reserves as of March 31, 2015 and December 31, 2014 are as follows:

 

(in millions of Won)    March 31, 2015      December 31, 2014  

Accumulated comprehensive loss of investments in associates and joint ventures

    ￦ (460,290 )       (344,942 ) 

Changes in the unrealized fair value of available-for-sale investments

      158,471         144,783   

Currency translation differences

      (234,724 )       (187,740 ) 

Others

      (20,496 )       (20,874 ) 
  

 

 

     

 

 

  
￦ (557,039 )    (408,773 ) 
  

 

 

     

 

 

  

25. Treasury Shares

As of March 31, 2015, the Company holds 7,193,767 shares of treasury stock for price stabilization in accordance with the Board of Director’s resolution.

 

40

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

26. Selling and Administrative Expenses

 

(a) Administrative expenses

Administrative expenses for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Wages and salaries

    ￦ 213,730         195,834   

Expenses related to defined benefit plan

      30,351         18,061   

Other employee benefits

      60,698         42,371   

Travel

      11,156         10,768   

Depreciation

      34,119         24,219   

Amortization

      51,841         44,517   

Communication

      3,146         3,556   

Electric power

      2,721         4,377   

Taxes and public dues

      19,796         13,250   

Rental

      33,461         35,347   

Repairs

      2,608         2,873   

Entertainment

      4,455         4,478   

Advertising

      21,756         25,032   

Research & development

      24,822         35,249   

Service fees

      78,413         50,954   

Supplies

      2,588         2,448   

Vehicles maintenance

      3,011         2,858   

Industry association fee

      3,631         5,346   

Training

      2,319         3,077   

Conference

      4,536         4,236   

Warranty expense

      3,846         5,148   

Bad debt allowance

      6,594         5,762   

Others

      7,961         7,171   
  

 

 

     

 

 

  
￦ 627,559      546,932   
  

 

 

     

 

 

  

 

41

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) Selling expenses

Selling expenses for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Freight and custody expenses

    ￦ 399,162         363,962   

Operating expenses for distribution center

      2,692         2,717   

Sales commissions

      14,636         17,626   

Sales advertising

      558         291   

Sales promotion

      4,781         5,000   

Sample

      751         872   

Sales insurance premium

      7,872         10,177   

Contract cost

      6,950         6,212   

Others

      1,399         2,919   
  

 

 

     

 

 

  
￦ 438,801      409,776   
  

 

 

     

 

 

  

27. Finance Income and Costs

Details of finance income and costs for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Finance income

      

Interest income

    ￦ 64,571         61,015   

Dividend income

      37,972         29,447   

Gain on foreign currency transactions

      209,662         192,613   

Gain on foreign currency translations

      140,950         103,853   

Gain on derivatives transactions

      78,233         51,711   

Gain on valuations of derivatives

      73,938         69,173   

Gain on disposals of available-for-sale investment

      2,564         8,834   

Others

      796         1,460   
  

 

 

     

 

 

  
￦ 608,686      518,106   
  

 

 

     

 

 

  

Finance costs

Interest expenses

 ￦ 214,343      179,818   

Loss on foreign currency transactions

   208,653      214,946   

Loss on foreign currency translations

   150,960      180,454   

Loss on derivatives transactions

   50,096      43,970   

Loss on valuation of derivatives

   70,947      23,623   

Impairment loss on available-for-sale investment

   24,536      1,578   

Others

   11,386      9,240   
  

 

 

     

 

 

  
￦ 730,921      653,629   
  

 

 

     

 

 

  

 

42

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

28. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Other non-operating income

      

Gain on disposals of assets held for sale

    ￦ 163,209         —     

Gain on disposals of investment in subsidiaries, associates and joint ventures

      57         7,664   

Gain on disposals of property, plant and equipment

      6,858         1,389   

Gain on disposals of intangible assets

      269         801   

Premium income

      4,988         35   

Rental income

      316         435   

Outsourcing income

      11         5,591   

Gain on disposals of waste

      1,085         13,639   

Gain from claim compensation

      170         5,105   

Penalty income from early termination of contracts

      1,673         5,554   

Others

      17,483         17,244   
  

 

 

     

 

 

  
￦ 196,119      57,457   
  

 

 

     

 

 

  

Other non-operating expenses

Impairment losses on assets held for sale

 ￦ 11,996      —     

Loss on disposals of property, plant and equipment

   11,385      8,591   

Impairment losses on property, plant and equipment

   10,002      1,753   

Loss on disposals of intangible assets

   601      801   

Contribution to provisions

   8,045      —     

Other bad debt expenses

   35,974      62,370   

Donations

   16,576      19,842   

Loss on disposals of wastes

   23      16,510   

Penalty and additional tax payments (*1)

   24,799      167,856   

Others

   18,692      20,301   
  

 

 

     

 

 

  
￦ 138,093      298,024   
  

 

 

     

 

 

  

 

(*1) As a result of Korea National Tax Service’s periodic audit of tax payments and refunds of the Company, the Company recognized additional tax payments amounting to ￦137,917 million, primarily related to VAT, in the three-month period ended March 31, 2014.

 

43

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

29. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month periods March 31, 2015 and 2014 were as follows (excluding finance costs and income tax expense):

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Changes in inventories

    ￦ 2,025,092         2,325,629   

Cost of merchandises sold

      7,018,626         7,200,809   

Employee benefits expenses

      844,469         823,040   

Outsourced processing cost

      2,241,933         2,440,817   

Electricity expenses

      327,669         347,600   

Depreciation expenses (*1)

      720,859         680,922   

Amortization expenses

      95,090         77,259   

Freight and custody expenses

      399,162         363,962   

Sales commissions

      14,636         17,626   

Loss on disposals of property, plant and equipment

      11,385         8,591   

Donations

      16,576         19,842   

Other expenses

      792,268         700,792   
  

 

 

     

 

 

  
￦   14,507,765      15,006,889   
  

 

 

     

 

 

  

 

(*1) Includes depreciation expense of investment property.

30. Income Taxes

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax benefit/expenses by origination and reversal of deferred assets/liabilities and temporary differences, and income tax recognized in other comprehensive income. The effective tax rate of the Company for the three-month periods ended March 31, 2015 and 2014 was 44.51% and 79.24%, respectively. The effective tax rate for the three-month period ended March 31, 2015 was higher than the statutory tax rate of 24% for the controlling company mainly due to the increase in deferred tax liabilities related to controlling company’s investment in POSCO ENGINEERING & CONSTRUCTION., LTD. as a result of changes in management’s expectations on repatriation of the investment. Effective tax rate for the three-month period ended March 31, 2014 is higher than the statutory tax rate of 24% for the controlling company due to the effect of additional income tax payment due to tax investigation and non-deductible expense primarily related to additional VAT payment (Note 28).

 

44

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

31. Earnings per Share

 

(a) Basic and diluted earnings per share for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in Won except per share information)    March 31, 2015      March 31, 2014  

Profit attributable to controlling interest

    ￦   338,584,368,962         69,841,295,973   

Interests of hybrid bonds

      (8,111,100,867 )       (8,111,100,867 ) 
  

 

 

     

 

 

  
  330,473,268,095      61,730,195,106   

Weighted-average number of common shares outstanding (*1)

   79,993,057      79,783,754   
  

 

 

     

 

 

  

Basic and diluted earnings per share

 ￦ 4,131      774   
  

 

 

     

 

 

  

 

(*1) The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

 

(Share)    March 31, 2015      March 31, 2014  

Total number of common shares issued

    ￦ 87,186,835         87,186,835   

Weighted-average number of treasury shares

      (7,193,778 )       (7,403,081 ) 
  

 

 

     

 

 

  

Weighted-average number of common shares outstanding

 ￦   79,993,057      79,783,754   
  

 

 

     

 

 

  

Since there were no potential shares of common stock which had dilutive effects as of March 31, 2015 and 2014, diluted earnings per share is equal to basic earnings per share.

 

45

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

32. Related Party Transactions

 

(a) Significant transactions with related companies for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

  1) For the three-month period ended March 31, 2015

 

     Sales and others (*1)      Purchase and others (*2)  
(in millions of Won)    Sales      Others      Total      Purchase of
material		      Purchase of
fixed assets		      Outsourced
processing cost		      Others      Total  

Subsidiaries (*3)

                        

POSCO ENGINEERING & CONSTRUCTION Co., LTD.

    ￦ 925         64         989         19         157,537         1,286         22,005         180,847   

POSCO Processing & Service Co., Ltd.

      279,876         —           279,876         144,443         —           —           1,307         145,750   

POSCO COATED & COLOR STEEL Co., Ltd.

      101,441         —           101,441         —           —           3,267         24         3,291   

POSCO ICT (*4)

      294         4         298         —           35,250         7,435         44,453         87,138   

POSMATE Co., Ltd.

      180         2,365         2,545         136         —           3,456         7,705         11,297   

eNtoB Corporation

      —           —           —           77,990         527         26         5,550         84,093   

POSCO CHEMTECH

      128,365         11,800         140,165         133,444         1,733         74,784         372         210,333   

POSCO M-TECH

      50         12         62         24,758         570         46,756         7         72,091   

POSCO Energy CO., LTD

      47,602         302         47,904         —           —           —           13         13   

POSCO TMC Co., Ltd.

      54,534         —           54,534         —           —           259         279         538   

POSCO AST

      105,115         3         105,118         2,775         —           8,872         35         11,682   

POS-HIMETAL Co., Ltd.

      3,171         34         3,205         37,133         —           —           33         37,166   

Daewoo International Corporation

      897,936         34,335         932,271         11,713         —           —           —           11,713   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) (*5)

      2,811         176,904         179,715         8,239         —           515         75         8,829   

POSCO PLANTEC Co., Ltd.

      2,373         18         2,391         878         27,827         5,626         5,655         39,986   

POSCO Thainox Public Company Limited

      71,957         10         71,967         1,869         —           —           —           1,869   

PT. KRAKATAU POSCO

      —           —           —           83,636         —           —           —           83,636   

POSCO America Corporation

      175,927         —           175,927         —           —           —           36         36   

POSCO Canada Ltd.

      —           —           —           32,997         —           —           —           32,997   

POSCO Asia Co., Ltd.

      465,146         —           465,146         50,819         —           —           92         50,911   

POSCO (Thailand) Company Ltd.

      13,633         8         13,641         —           —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

      36,729         —           36,729         —           —           —           —           —     

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

      29,506         —           29,506         —           —           —           —           —     

POSCO-Japan Co., Ltd.

      266,240         9,383         275,623         5,223         957         —           269         6,449   

POSCO-India Pune Processing Center. Pvt. Ltd.

      16,461         —           16,461         —           —           —           4         4   

POSCO-MEXICO S.A. DE C.V.

      77,743         152         77,895         —           —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      102,395         —           102,395         —           —           —           —           —     

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

      —           —           —           12,598         —           —           —           12,598   

Others

      167,321         2,958         170,279         24,879         24,629         3,202         16,065         68,775   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     3,047,731         238,352         3,286,083         653,549         249,030         155,484         103,979         1,162,042   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures (*3)

                        

SNNC Co., Ltd.

      638         206         844         97,176         —           —           —           97,176   

POSCHROME (PROPRIETARY) LIMITED

      —           —           —           13,933         —           —           —           13,933   

PT. POSMI Steel Indonesia

      830         —           830         —           —           —           —           —     

POSK (PingHu) Steel Processing Center Co., Ltd.

      634         —           634         —           —           —           —           —     

CSP-Compania Siderurgica do Pecem

      3,358         —           3,358         —           —           —           —           —     

POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.

      6,306         —           6,306         —           —           —           —           —     

Others

      659         6,429         7,088         380         —           —           —           380   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     12,425         6,635         19,060         111,489         —           —           —           111,489   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   ￦ 3,060,156         244,987         3,305,143         765,038         249,030         155,484         103,979         1,273,531   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(*1) Sales and others include sales and insignificant other non-operating income. Sales are mainly sales of steel products and these are priced on an arm’s length basis.
(*2) Purchases and others include purchases and overhead costs. Purchases and others are mainly related to purchases of construction services and purchases of raw materials to manufacture steel products. These are priced on an arm’s length basis.
(*3) As of March 31, 2015, the Company provided guarantees to related parties (Note 33).
(*4) Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.
(*5) During the three-month period ended March 31, 2015, SeAH Changwon Integrated Special Steel Corp. (formerly, POSCO Specialty Steel Co., Ltd) was reclassfied as an associate from subsidiary (Note 9).

 

46

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) For the three-month period ended March 31, 2014

 

     Sales and others      Purchase and others  
(in millions of Won)    Sales      Others      Total      Purchase of
material		      Purchase of
fixed assets		      Outsourced
processing cost		      Others      Total  

Subsidiaries

                        

POSCO ENGINEERING & CONSTRUCTION Co., LTD.

    ￦ 1,505         16,583         18,088         —           427,486         2,090         10,972         440,548   

POSCO Processing & Service Co., Ltd.

      255,304         8,578         263,882         260,449         —           —           106         260,555   

POSCO COATED & COLOR STEEL Co., Ltd.

      122,752         —           122,752         —           —           2,429         30         2,459   

POSCO ICT

      227         4         231         —           75,084         6,265         37,465         118,814   

POSMATE Co., Ltd.

      129         1         130         132         —           3,286         8,270         11,688   

eNtoB Corporation

      —           35         35         58,213         660         13         5,250         64,136   

POSCO CHEMTECH

      129,572         4,941         134,513         132,202         1,450         75,916         386         209,954   

POSCO M-TECH

      20         535         555         36,970         493         50,426         56         87,945   

POSCO Energy CO., LTD

      36,133         299         36,432         —           1,592         —           20         1,612   

POSCO TMC Co., Ltd.

      49,887         —           49,887         —           —           277         421         698   

POSCO AST Co., Ltd.

      132,400         —           132,400         1,722         —           14,898         250         16,870   

POS-HIMETAL Co., Ltd.

      3,009         1,185         4,194         40,447         —           —           —           40,447   

Daewoo International Corporation

      890,600         20,604         911,204         47,077         —           —           1,552         48,629   

POSCO America Corporation

      169,609         2         169,611         —           —           —           5         5   

POSCO Canada Ltd.

      —           —           —           47,370         —           —           —           47,370   

POSCO Asia Co., Ltd.

      514,542         23         514,565         40,194         —           1,379         79         41,652   

POSCO (Thailand) Company Ltd.

      22,236         4         22,240         —           —           —           7         7   

Qingdao Pohang Stainless Steel Co., Ltd.

      14,084         —           14,084         —           —           —           —           —     

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

      62,811         —           62,811         —           —           —           —           —     

POSCO-Japan Co., Ltd.

      361,108         —           361,108         2,275         —           —           197         2,472   

POSCO-India Pune Processing Center. Pvt. Ltd.

      45,766         59         45,825         —           —           —           —           —     

POSCO-MEXICO S.A. DE C.V.

      61,124         775         61,899         —           —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      64,467         214         64,681         —           —           —           —           —     

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

      —           —           —           28,578         —           —           —           28,578   

Others

      474,111         134         474,245         25,225         4,569         5,952         14,864         50,610   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     3,411,396         53,976         3,465,372         720,854         511,334         162,931         79,930         1,475,049   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures

                        

SNNC Co., Ltd.

      563         63         626         88,246         —           —           5         88,251   

POSCO PLANTEC Co., Ltd.

      2,820         18         2,838         572         13,383         2,960         714         17,629   

POSCHROME (PROPRIETARY) LIMITED

      —           —           —           15,580         —           —           —           15,580   

PT. POSMI Steel Indonesia

      5,812         —           5,812         —           —           —           —           —     

POSK (PingHu) Steel Processing Center Co., Ltd.

      4,270         —           4,270         —           —           —           —           —     

POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.

      2,539         —           2,539         —           —           —           —           —     

POSCO SAMSUNG Suzhou Steel Processing Center Co., Ltd.

      319         —           319         —           —           —           —           —     

Others

      3         1         4         1,033         —           —           —           1,033   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     16,326         82         16,408         105,431         13,383         2,960         719         122,493   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   ￦   3,427,722         54,058         3,481,780         826,285         524,717         165,891         80,649         1,597,542   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

47

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(b) The related account balances of significant transactions with related companies as of March 31, 2015 and December 31, 2014 are as follows:

 

  1) March 31, 2015

 

     Receivables      Payables  
(in millions of Won)    Trade accounts and
notes receivable		      Others      Total      Trade accounts and
notes payable		      Accounts
payable		      Others      Total  

Subsidiaries

                     

POSCO ENGINEERING & CONSTRUCTION Co., LTD.

    ￦ 66         50,328         50,394         —           58,089         20         58,109   

POSCO Processing & Service Co., Ltd.

      82,491         23         82,514         13,442         818         —           14,260   

POSCO COATED & COLOR STEEL Co., Ltd.

      69,848         16         69,864         —           —           1,549         1,549   

POSCO ICT

      —           46         46         983         32,249         6,260         39,492   

POSMATE Co., Ltd.

      227         3,926         4,153         123         2,239         3,864         6,226   

eNtoB Corporation

      —           —           —           12,472         13,414         14         25,900   

POSCO CHEMTECH

      44,765         9,922         54,687         59,447         18,439         17,538         95,424   

POSCO M-TECH

      —           22         22         7,278         8,038         17,331         32,647   

POSCO Energy CO., LTD

      18,407         784         19,191         —           —           1,336         1,336   

POSCO TMC Co., Ltd.

      37,526         8         37,534         —           16         100         116   

POSCO AST Co., Ltd.

      41,806         15         41,821         —           3,174         2,836         6,010   

POS-HIMETAL Co., Ltd.

      1,228         14         1,242         —           25,094         —           25,094   

Daewoo International Corp.

      143,049         34,341         177,390         3,817         46         —           3,863   

POSCO PLANTEC Co., Ltd.

      370         8         378         8,335         6,250         17         14,602   

POSCO Thainox Public Company Limited

      71,957         —           71,957         607         —           —           607   

POSCO America Corporation

      45,269         —           45,269         —           —           —           —     

POSCO Canada Ltd.

      —           —           —           —           9,512         —           9,512   

POSCO Asia Co., Ltd.

      135,441         —           135,441         2,666         —           —           2,666   

POSCO (Thailand) Company Ltd.

      4,196         —           4,196         —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

      26,675         96         26,771         —           —           —           —     

POSCO-Japan Co., Ltd.

      18,357         —           18,357         935         —           —           935   

POSCO-India Pune Processing Center. Pvt. Ltd.

      5,726         —           5,726         —           —           —           —     

POSCO MEXICO S.A. DE C.V.

      104,824         —           104,824         —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      253,154         3,009         256,163         —           —           —           —     

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

      —           —           —           203         —           —           203   

Others

      69,764         2,999         72,763         5,760         24,906         3,507         34,173   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  1,175,146      105,557      1,280,703      116,068      202,284      54,372      372,724   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

   1,440      —        1,440      3,959      77      187      4,223   

SNNC Co., Ltd.

   237      10      247      24,062      —        —        24,062   

CSP-Compania Siderurgica do Pecem

   —        69,658      69,658      —        —        —        —     

Others

   261      11      272      91      —        1      92   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  1,938      69,679      71,617      28,112      77      188      28,377   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
￦ 1,177,084      175,236      1,352,320      144,180      202,361      54,560      401,101   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

48

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) December 31, 2014

 

     Receivables      Payables  
(in millions of Won)    Trade accounts and
notes receivable		      Others      Total      Trade accounts and
notes payable		      Accounts
payable		      Others      Total  

Subsidiaries

                     

POSCO ENGINEERING & CONSTRUCTION Co., LTD.

    ￦ 42         71,967         72,009         —           41,878         —           41,878   

POSCO Processing & Service Co., Ltd.

      94,790         92         94,882         15,202         867         —           16,069   

POSCO COATED & COLOR STEEL Co., Ltd.

      69,314         67         69,381         —           5         1,936         1,941   

POSCO ICT

      13         103         116         920         70,823         5,425         77,168   

POSMATE Co., Ltd.

      —           1,673         1,673         600         2,007         4,828         7,435   

eNtoB Corporation

      —           —           —           12,564         28,432         43         41,039   

POSCO CHEMTECH

      49,456         4,283         53,739         57,610         9,890         17,864         85,364   

POSCO M-TECH

      —           37         37         7,311         12,231         22,703         42,245   

POSCO Energy CO., LTD

      17,326         2,809         20,135         —           —           1,962         1,962   

POSCO TMC Co., Ltd.

      27,429         30         27,459         —           117         115         232   

POSCO AST Co., Ltd.

      44,281         54         44,335         —           2,458         3,364         5,822   

POS-HIMETAL Co., Ltd.

      1,269         14         1,283         —           12,846         —           12,846   

Daewoo International Corp.

      164,029         3,178         167,207         8         210         1         219   

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)

      822         201,823         202,645         4,800         140         184         5,124   

POSCO America Corporation

      57,164         —           57,164         —           1,511         —           1,511   

POSCO Canada Ltd.

      —           —           —           —           4,534         —           4,534   

POSCO Asia Co., Ltd.

      197,104         221         197,325         10,995         —           —           10,995   

POSCO (Thailand) Company Ltd.

      7,407         266         7,673         —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

      14,748         41         14,789         —           —           —           —     

POSCO-Japan Co., Ltd.

      42,692         89         42,781         344         1,552         —           1,896   

POSCO-India Pune Processing Center. Pvt. Ltd.

      6,401         5         6,406         —           —           —           —     

POSCO MEXICO S.A. DE C.V.

      96,800         —           96,800         —           —           —           —     

POSCO Maharashtra Steel Pvt. Ltd.

      364,899         7,714         372,613         —           —           —           —     

Others

      126,474         56,788         183,262         7,239         54,727         1,545         63,511   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  1,382,460      351,254      1,733,714      117,593      244,228      59,970      421,791   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Associates and joint ventures

SNNC Co., Ltd.

   219      125      344      7,017      —        —        7,017   

POSCHROME (PROPRIETARY) LIMITED

   —        —        —        1,162      —        —        1,162   

LLP POSUK Titanium

   —        4,235      4,235      —        —        —        —     

Others

   258      18      276      234      —        —        234   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  477      4,378      4,855      8,413      —        —        8,413   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
￦ 1,382,937      355,632      1,738,569      126,006      244,228      59,970      430,204   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(c) For the three-month periods ended March 31, 2015 and 2014, details of compensation to key management officers were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Short-term benefits

    ￦ 32,228         32,655   

Retirement benefits

      9,136         9,195   

Long-term benefits

      6,702         4,751   
  

 

 

     

 

 

  
￦ 48,066      46,601   
  

 

 

     

 

 

  

 

49

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

33. Commitments and Contingencies

(a) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of March 31, 2015, are as follows:

 

(in millions of Won)                             

Guarantor

   

Guarantee beneficiary

   

Financial institution

    Foreign currency      Won equivalent  

[The Company]

               

POSCO

   

Zhangjiagang Pohang Stainless Steel Co., Ltd.

   

MIZUHO and others

    USD      130,000,000         143,650   
  

POSCO (Guangdong) Automotive Steel Co., Ltd.

   

SMBC and others

    USD      65,000,000         71,825   
  

POSCO Investment Co., Ltd.

   

BOA and others

    USD      330,000,000         364,650   
     

BOC

    CNY      350,000,000         62,307   
  

POSCO-VIETNAM Co., Ltd.

   

Export-Import Bank of Korea and others

    USD      196,000,000         216,580   
  

POSCO MEXICO S.A. DE C.V.

   

HSBC and others

    USD      284,725,000         314,621   
  

POSCO VST CO., LTD.

   

ANZ and others

    USD      65,000,000         71,825   
  

POSCO Maharashtra Steel Private Limited

   

Export-Import Bank of Korea and others

    USD      566,069,000         625,506   
  

POSCO SS-VINA

   

Export-Import Bank of Korea and others

    USD      354,351,050         391,558   
  

PT. KRAKATAU POSCO

   

Export-Import Bank of Korea and others

    USD      1,350,300,000         1,492,082   
  

POSCO Electrical Steel India Private Limited

   

ING and others

    USD      83,784,000         92,581   
  

POSCO ASSAN TST STEEL INDUSTRY

   

SMBC and others

    USD      188,392,500         208,174   

Daewoo International Corporation

   

PT. Bio Inti Agrindo

   

Export-Import Bank of Korea

    USD      56,000,000         61,880   
  

DAEWOO TEXTILE BUKHARA LLC

   

Export-Import Bank of Korea

    USD      16,000,000         17,680   
  

Daewoo Paper Manufacturing Co., Ltd.

   

HSBC

    USD      12,500,000         13,813   
  

DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.

   

NOVA SCOTIA

    USD      30,000,000         33,150   
  

Daewoo International INDIA Private Ltd.

   

Shinhan Bank

    USD      49,271,000         54,444   
  

Brazil Sao Paulo Steel Processing Center

   

HSBC and others

    USD      52,000,000         57,460   
  

POSCO ASSAN TST STEEL INDUSTRY

   

ING and others

    USD      18,839,250         20,817   

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   

POSCO E&C Vietnam Co., Ltd.

   

Export-Import Bank of Korea

    USD      16,500,000         18,233   
  

POSCO Engineering and Construction India Private Limited

   

Shinhan Bank

    INR      383,201,941         6,775   
  

SANTOSCMI S.A.

   

CITI Equador and others

    USD      55,000,000         60,775   
  

POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.

   

HSBC

    USD      100,000,000         110,500   
  

HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.

   

Woori Bank and others

    USD      110,000,000         121,550   

POSCO Processing&Service

   

POSCO Gulf SFC LLC

   

KEB Bank and others

    USD      30,000,000         33,150   

POSCO ENERGY CO., LTD.

   

PT. KRAKATAU POSCO ENERGY

   

Export-Import Bank of Korea and others

    USD      185,888,942         205,407   

POSCO Engineering CO., Ltd

   

PT PEN INDONESIA

   

POSCO Investment

    USD      6,000,000         6,630   
  

POSCO ENGINEERING (THAILAND) CO., LTD.

   

CITI Bank

    USD      15,300,000         16,907   
     

POSCO Investment

    USD      7,986,947         8,826   

POSCO COATED & COLOR STEEL Co., Ltd.

   

Myanmar POSCO C&C Company, Limited.

   

KEB Bank

    USD      3,000,000         3,315   

POSCO ICT

   

VECTUS LIMITED

   

KEB Bank

    GBP      3,500,000         5,727   
  

PT.POSCO ICT INDONESIA

   

POSCO Investment

    USD      2,700,000         2,984   

POSCO-Japan Co., Ltd.

   

POSCO-JWPC Co., Ltd.

   

Higo Bank and others

    JPY      974,000,000         8,963   
  

POSCO-JEPC Co., Ltd.

   

MIZUHO and others

    JPY      1,021,811,730         9,403   
  

Xenesys Inc.

   

Aozora Bank

    JPY      250,000,000         2,301   

DAEWOO TEXTILE FERGANA LLC

   

DAEWOO TEXTILE BUKHARA LLC

   

Bukhara TEX

    USD      2,618,231         2,893   

DAEWOO TEXTILE BUKHARA LLC

   

DAEWOO TEXTILE FERGANA LLC

   

NBU

    USD      6,127,060         6,770   

POSCO-China Holding Corp.

   

DONG FANG JIN HONG

   

Bank of Communications and others

    CNY      1,300,000,000         231,426   

POSCO CHEMTECH

   

PT.Krakatau Posco Chemtech Calcination

   

KEB Bank

    USD      33,600,000         37,128   
  

KRAKATAU POS-CHEM DONG-SUH CHEMICAL

   

Hana Bank

    USD      5,883,750         6,502   
     

BOA and others

    USD      148,000,000         163,540   

POSCO Investment Co., Ltd.

   

Zhangjiagang Pohang Stainless Steel Co., Ltd.

   

BOC

    CNY      350,000,000         62,307   

POSCO PLANTEC Co., Ltd.

   

POSCO PLANTEC Thailand CO. LTD

   

Woori Bank

    THB      45,000,000         1,526   

SANTOSCMI S.A.

   

COMPANIADEAUTOMATIZACION &CONTROL, GENESYS S.A.

   

Banco de Guayaquil and others

    USD      400,000         442   

POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.

   

SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA

   

MILLS ESTRUTURAS E SERVICOS DE ENGENHARIA S.A

    BRL      2,000,000         685   

 

50

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(in millions of Won)                             

Guarantors

   

Guarantee beneficiary

   

Financial institution

    Foreign Currency      Won Eequivalent  

[Associates and joint ventures]

               

POSCO

   

LLP POSUK Titanium

    KB Bank    USD      15,000,000         16,575   
  

CSP - Compania Siderurgica do
Pecem

    KDB Bank    USD      180,000,001         198,901   

Daewoo International Corporation

   

DMSA/AMSA

    Export-Import Bank of Korea and others    USD      165,133,333         182,472   
  

GLOBAL KOMSCO Daewoo LLC

    Export-Import Bank of Korea and others    USD      11,112,500         12,279   

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   

Posco e&c Songdo International
Building

    Others    KRW      356,600         356,600   
  

New Songdo International City
Development, LLC

    Others    KRW      340,000         340,000   

POSCO Processing & Service

   

Sebang Steel

    Shinhan Bank    JPY      245,000,000         2,255   

POSCO Engineering CO., Ltd

   

PT. Wampu Electric Power

    Export-Import Bank of Korea and others    USD      7,996,848         8,837   
  

PT. Tanggamus Electric Power

    Woori Bank and others    USD      4,700,341         5,194   

POSCO ICT

   

UITrans LRT Co., Ltd.

    KB Bank    KRW      76,000         76,000   
  

Incheon-Gimpo Expressway Co., Ltd.

    KDB Bank    KRW      100,000         100,000   

Daewoo (China) Co., Ltd.

   

SHANGHAI LANSHENG
DAEWOO CORP.

    Bank of Communications    CNY      100,000,000         17,802   

POSCO CHEMTECH

   

PT.INDONESIA POS CHEMTECH
CHOSUN Ref

    KEB Bank    USD      6,000,000         6,630   

[Others]

               

Daewoo International Corporation

   

Ambatovy Project Investments Limited

    Export-Import Bank of korea    USD      65,454,545         72,327   
  

Sherritt International Corporation

    Export-Import Bank of korea    USD      21,818,182         24,109   

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

   

The union of City environment improvement for Kukje building and others

    Others    KRW      745,350         745,350   
  

THE GALE INVESTMENTS COMPANY, L.L.C.

    Others    USD      50,000,000         55,250   

POSCO Engineering CO., Ltd

   

Samjin Solar Energy and others

    Hana Bank and others    KRW      57,430         57,430   

POSCO ICT

   

BTL business and others

    Kyobo Life Insurance Co., Ltd and others    KRW      2,063,966         2,063,966   
  

SMS Energy and others

    Hana Bank and others    KRW      158,860         158,860   

POSCO PLANTEC Co., Ltd.

   

SKY Calabria Co., Ltd.

    NH Investment & Securities Co., Ltd. and others    KRW      161,980         161,980   
  

POSCO PLANTEC Taiwan Branch

    Hana Bank    TWD      303,500,000         10,726   

POSCO AUSTRALIA PTY LTD

   

Department of Trade and Investment (NSW Government)

    Woori Bank    AUD      8,023,765         6,785   

POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.

   

SEIL DO BRASIL CONSTRUCAO LTDA

    MILLS ESTRUTURAS E SERVICOS DE ENGENHARIA S.A    BRL      1,100,000         376   

HUME COAL PTY LTD

   

Department of Trade and Investment (NSW Government)

    Woori Bank    AUD      804,000         680   
         USD      487,500         539   

POSCO (Suzhou) Automotive Steel Co., Ltd.

   

POS Infra auto

    Shinhan Bank    CNY      2,925,000         521   

BLUE O&M Co., Ltd.

   

Korea Electric Power Corporation

    Seoul Guarantee Insurance Co., Ltd.    KRW      2         2   

POS-HiAL

   

Kumho Rent-a-car Co., Ltd.

    Seoul Guarantee Insurance Co., Ltd.    KRW      11         11   
           

 

 

     

 

 

  
         USD      5,104,939,980         5,640,961   
         KRW      4,060,199         4,060,199   
         CNY      2,102,925,000         374,363   
         THB      45,000,000         1,526   
         JPY      2,490,811,730         22,922   
         TWD      303,500,000         10,726   
         AUD      8,827,765         7,465   
         INR      383,201,941         6,775   
         GBP      3,500,000         5,727   
         BRL      3,100,000         1,061   
           

 

 

     

 

 

  

 

(b) POSCO ENGINEERING & CONSTRUCTION Co., Ltd. has provided completion guarantees for Samsung C&T Corporation amounting to ￦1,154,593 million while Samsung C&T Corporation has provided construction guarantees or payment guarantees on customers’ borrowings on behalf of POSCO ENGINEERING & CONSTRUCTION Co., Ltd. amounting to ￦801,823 million as of March 31, 2015.

 

51

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(c) Other commitments

Details of other commitments of the Company as of March 31, 2015, are as follows:

 

POSCO POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of March 31, 2015, 88 million tons of iron ore and 30 million tons of coal remained to be purchased under such long-term contracts.
POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.
As of March 31, 2015, POSCO entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 6.58 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. POSCO is not liable for the repayment of full or part of the money borrowed if the respective projects fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.
POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to POSCO Energy Co., Ltd. under construction of new power plant.

POSCO ENGINEERING & CONSTRUCTION Co., LTD.

 As of March 31, 2015, POSCO ENGINEERING & CONSTRUCTION Co., LTD. has comprehensive loan agreements of up to W283.5 billion and USD 268 million with Woori Bank and W98 billion and USD 843 million with Korea Exchange Bank. Also, POSCO E&C Co., Ltd. has bank overdraft agreements of up to W20 billion with WooriBank which is included in the limit of comprehensive loan agreements and W3 billion with Korea Exchange Bank.
POSCO ICT As of March 31, 2015, in relation to contract enforcement, POSCO ICT Co., Ltd. was provided with W64,692 million and W35,687 million guaranties from Korea Software Financial Cooperative and Seoul Guarantee Insurance, respectively.

 

52

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

(d) Litigation in progress

As of March 31, 2015, the Company and certain subsidiaries are defendants in legal actions arising from the normal course of business.

 

1) Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

During the April, 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of ￦907.4 billion. Through trials up to March 31, 2015, the Company has submitted its responses that the Japan court shall not have jurisdiction over this case but the judgment shall be based on the Korean law, and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of March 31, 2015, the Japan court has not made any judgments on this matter. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of March 31, 2015.

 

2) Other lawsuits and claims

The Company is involved in 214 other lawsuits and claims for alleged damages aggregating to ￦451.7 billion as defendant as of March 31, 2015, which arose in the ordinary course of business. The Company has recognized provisions amounting to ￦46 billion for four lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company believes that it does not have a present obligation as of March 31, 2015.

 

(e) Other contingencies

 

Company

   

Description

POSCO    POSCO has provided two blanks check to Korea Resources Corporation and six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for outstanding loans.

POSCO ENGINEERING & CONSTRUCTION Co., LTD.

    As of March 31, 2015, POSCO E&C Co., Ltd. has provided thirty-five blank checks and eight blank promissory notes as collateral for agreements and outstanding loans.

Daewoo International Corporation

    As of March 31, 2015, Daewoo International Corporation has provided forty-five blank promissory notes and seventeen blank checks to Korea National Oil Corporation as collateral for the guarantee on performance for contracts and others.
POSCO ICT    As of March 31, 2015, POSCO ICT has provided two blank promissory notes and sixteen blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

 

53

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

34. Cash Flows from Operating Activities

Adjustments for operating cash flows for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Trade accounts and notes receivable

    ￦ (119,481 )       (834,306 ) 

Other financial assets

      375,770         210,579   

Inventories

      290,255         (1,015,565 ) 

Other current assets

      (20,608 )       (122,189 ) 

Other long-term assets

      (7,038 )       (24,359 ) 

Trade accounts payable

      (266,876 )       74,714   

Other financial liabilities

      (82,562 )       102,149   

Other current liabilities

      (61,490 )       25,963   

Provisions

      (76,373 )       (6,141 ) 

Payment of severance benefits

      (78,319 )       (63,300 ) 

Plan assets

      16,336         3,645   

Other long-term liabilities

      (9,280 )       (298 ) 
  

 

 

     

 

 

  
￦ (39,666 )    (1,649,108 ) 
  

 

 

     

 

 

  

35. Operating Segments

 

(a) The Company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments — steel, construction, trading and other. The steel segment includes production of steel products and revenue of such products. The engineering and construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segment includes power generation, liquefied natural gas production, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements.

 

(b) Information about reportable segments for the three-month periods ended March 31, 2015 and 2014 was as follows:

 

  1) For the three-month period ended March 31, 2015

 

(in millions of Won)    Steel      Trading      Construction     Others      Total  

External revenues

    ￦   7,346,619         4,844,768         2,037,986        871,539         15,100,912   

Internal revenues

      4,416,959         2,158,138         396,957        686,770         7,658,824   

Including inter segment revenue

      2,370,895         1,122,252         334,248        661,073         4,488,468   

Total revenues

      11,763,578         7,002,906         2,434,943        1,558,309         22,759,736   

Segment profits

      351,597         94,840         (81,599 )      62,024         426,862   

 

54

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of March 31, 2015

(Unaudited)

 

 

  2) For the three-month period ended March 31, 2014

 

(in millions of Won)    Steel      Trading      Construction      Others      Total  

External revenues

    ￦   7,299,181         5,126,718         1,974,765         1,039,464         15,440,128   

Internal revenues

      4,655,173         2,211,504         706,742         735,457         8,308,876   

Including inter segment revenue

      2,500,922         1,123,940         656,975         698,963         4,980,800   

Total revenues

      11,954,354         7,338,222         2,681,507         1,774,921         23,749,004   

Segment profits

      92,489         29,427         41,876         51,866         215,658   

 

(c) Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the three-month periods ended March 31, 2015 and 2014 were as follows:

 

(in millions of Won)    March 31, 2015      March 31, 2014  

Total profit for reportable segments

    ￦ 426,862         215,658   

Corporate fair value adjustments

      (31,453 )       (20,725 ) 

Elimination of inter-segment profits

      (60,209 )       (139,287 ) 

Income tax expense

      268,904         212,428   
  

 

 

     

 

 

  

Profit before income tax expense

 ￦ 604,104      268,074   
  

 

 

     

 

 

  

 

55

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