Posco Debt decreased on 9.7% in 2016 and Revenue decreased on 8.8%
25 Jan 2017 • About Posco (
$PIDD) • By InTwits
Posco reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Posco is a company in decline: 2016 revenue growth was -8.8%, 5 years revenue CAGR was -5.1%
- Posco has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.2%. At the same time it's in pair with industry average of 10.1%.
- CAPEX is quite volatile: 2,324,112 in 2016, 2,560,244 in 2015, 3,505,549 in 2014, 6,569,613 in 2013, 7,054,543 in 2012
- The company has potentially unprofitable business model: ROIC is at 4.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.4x while industry average is 3.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Posco ($PIDD) key annual financial indicators
| mln. KRW | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 63,604,151 | 61,864,650 | 65,098,445 | 58,192,345 | 53,083,513 | -8.8% |
| Gross Profit | 7,461,259 | 6,860,059 | 7,283,404 | 6,534,247 | 6,689,551 | 2.4% |
| SG&A | 3,317,825 | 3,352,506 | 3,512,526 | 3,525,085 | 3,316,457 | -5.9% |
| EBITDA | 6,216,868 | 5,681,684 | 6,452,080 | 5,628,290 | 6,070,830 | 7.9% |
| Net Income | 2,462,080 | 1,376,390 | 626,100 | 180,646 | 1,363,310 | 654.7% |
Balance Sheet
|
|---|
| Cash | 4,680,526 | 4,208,562 | 3,811,202 | 4,870,185 | 2,447,619 | -49.7% |
| Short Term Debt | 10,525,392 | 10,727,864 | 12,217,372 | 12,397,908 | 10,219,330 | -17.6% |
| Long Term Debt | 14,445,046 | 15,572,216 | 15,257,588 | 12,863,608 | 12,600,077 | -2.0% |
Cash flow
|
|---|
| Capex | 7,054,543 | 6,569,613 | 3,505,549 | 2,560,244 | 2,324,112 | -9.2% |
Ratios
|
|---|
| Revenue growth | -7.7% | -2.7% | 5.2% | -10.6% | -8.8% | |
| EBITDA growth | -20.4% | -8.6% | 13.6% | -12.8% | 7.9% | |
| Gross Margin | 11.7% | 11.1% | 11.2% | 11.2% | 12.6% | 1.4% |
| EBITDA Margin | 9.8% | 9.2% | 9.9% | 9.7% | 11.4% | 1.8% |
| Net Income Margin | 3.9% | 2.2% | 1.0% | 0.3% | 2.6% | 2.3% |
| SG&A, % of revenue | 5.2% | 5.4% | 5.4% | 6.1% | 6.2% | 0.2% |
| CAPEX, % of revenue | 11.1% | 10.6% | 5.4% | 4.4% | 4.4% | -0.0% |
| ROIC | 5.3% | 4.2% | 4.4% | 3.3% | 4.0% | 0.7% |
| ROE | 6.3% | 3.3% | 1.4% | 0.4% | 3.2% | 2.8% |
| Net Debt/EBITDA | 3.3x | 3.9x | 3.7x | 3.6x | 3.4x | -0.3x |
Revenue and profitability
Posco's Revenue decreased on 8.8% in 2016. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.8 pp from 9.7% to 11.4% in 2016.
Gross Margin increased slightly on 1.4 pp from 11.2% to 12.6% in 2016. SG&A as a % of Revenue showed almost no change in 2016.
Net Income marign increased on 2.3 pp from 0.31% to 2.6% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 4.4% in 2016. Posco showed decline in CAPEX/Revenue of 6.2 pp from 10.6% in 2013 to 4.4% in 2016. It's average CAPEX/Revenue for the last three years was 4.7%.
Return on investment
The company operates at low ROIC (4.04%) and ROE (3.18%). ROIC increased slightly on 0.73 pp from 3.3% to 4.0% in 2016. ROE increased on 2.8 pp from 0.36% to 3.2% in 2016.
Leverage (Debt)
Debt level is 3.4x Net Debt / EBITDA and 3.8x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 3.6x to 3.4x in 2016. Debt decreased on 9.7% in 2016 while cash dropped on 49.7% in 2016.
Valuation
The company's trades at EV/EBITDA 3.4x and P/E 0.0x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 5.4x with the industry average at 19.0x.
Appendix 1: Peers in Industrial Metals & Mining
Below you can find Posco benchmarking vs. other companies in Industrial Metals & Mining industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Base Resources Ltd ($BSE) | | | | 399.7% | 16.2% |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 2.4% | -0.1% | 26.4% | 45.5% | |
| Norsk Hydro Asa ($NHY) | -10.2% | 1.1% | 20.1% | 12.6% | |
| Afarak Group ($AFRK) | -19.2% | 5.4% | 27.4% | 8.7% | |
| Vimetco Nv ($VICO) | -13.4% | -6.5% | -12.8% | -5.3% | |
| |
|---|
| Median (15 companies) | -10.2% | 0.3% | 0.7% | -14.2% | 19.6% |
|---|
| Posco ($PIDD) | | -2.7% | 5.2% | -10.6% | -8.8% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 49.1% | 43.4% | 52.2% | 55.7% | |
| Severstal PJSC ($SVST) | 23.5% | 29.9% | 34.4% | 40.4% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 23.8% | 19.4% | 28.3% | 31.4% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 15.5% | 14.9% | 21.9% | 30.6% | |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 17.7% | 15.1% | 28.6% | 24.8% | |
| |
|---|
| Median (13 companies) | 16.6% | 15.1% | 19.5% | 20.5% | 11.3% |
|---|
| Posco ($PIDD) | 11.7% | 11.1% | 11.2% | 11.2% | 12.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 38.6% | 29.2% | 46.8% | 47.0% | |
| Base Resources Ltd ($BSE) | | | -1.8% | 37.7% | 35.8% |
| Severstal PJSC ($SVST) | 14.9% | 19.3% | 26.4% | 32.4% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 13.1% | 14.0% | 19.5% | 28.3% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 15.6% | 13.8% | 21.8% | 24.3% | |
| |
|---|
| Median (15 companies) | 13.3% | 13.8% | 13.0% | 17.3% | 18.0% |
|---|
| Posco ($PIDD) | 9.8% | 9.2% | 9.9% | 9.7% | 11.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| First Quantum Minerals ($FQM) | 46.5% | 73.2% | 81.7% | 72.5% | |
| Mmc Norilsk Nickel ($MNOD) | 22.3% | 17.1% | 10.8% | 19.0% | |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 7.0% | 7.9% | 9.9% | 8.1% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 12.0% | 6.9% | 5.4% | 7.7% | |
| Ezz Steel ($AEZD) | 2.3% | 3.9% | 6.4% | 6.8% | |
| |
|---|
| Median (15 companies) | 6.7% | 7.6% | 6.4% | 6.3% | 1.5% |
|---|
| Posco ($PIDD) | 11.1% | 10.6% | 5.4% | 4.4% | 4.4% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 21.8% | 14.2% | 34.1% | 31.7% | |
| Severstal PJSC ($SVST) | 10.3% | 9.6% | 17.7% | 30.3% | |
| Zibao Metals Recycling Hldgs Ltd ($ZBO) | 41.7% | 56.6% | 55.8% | 26.6% | 0.9% |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 6.2% | -2.7% | 25.6% | 24.4% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 1.8% | 1.4% | 9.1% | 18.1% | |
| |
|---|
| Median (15 companies) | 6.2% | 4.8% | 9.1% | 8.1% | 1.8% |
|---|
| Posco ($PIDD) | 5.3% | 4.2% | 4.4% | 3.3% | 4.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Vimetco Nv ($VICO) | 7.7x | | 10.9x | 14.6x | |
| Ezz Steel ($AEZD) | 4.8x | 3.6x | 19.4x | 13.3x | |
| First Quantum Minerals ($FQM) | 0.0x | 2.5x | 4.0x | 10.5x | |
| Base Resources Ltd ($BSE) | | | | 4.4x | 3.7x |
| OAO TMK ($TMKS) | 3.6x | 3.9x | 3.8x | 4.3x | |
| |
|---|
| Median (14 companies) | 1.9x | 2.0x | 0.8x | 1.0x | 0.2x |
|---|
| Posco ($PIDD) | 3.3x | 3.9x | 3.7x | 3.6x | 3.4x |
