Posco reports 11.3% EBITDA growth in 2018 and 7.1% Revenue growth
30 Jan 2019 • About Posco (
$PIDD) • By InTwits
Posco reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Posco has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.2%. At the same time it's in pair with industry average of 5.9%
- CAPEX is quite volatile: 3,226,486 KRWm in 2018, 3,055,023 KRWm in 2017, 2,971,161 KRWm in 2016, 8,141,729 KRWm in 2015, 3,353,809 KRWm in 2014
- The company has business model with low profitability: ROIC is 8.0%
- It operates with high leverage: Net Debt/EBITDA is 2.0x while industry average is 1.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 7.1%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 0.50 pp from 13.1% to 13.6% in 2018. EBITDA Margin followed a growing trend at 1.1 pp per annum in the last 5 years.
Gross Margin decreased slightly on 1.5 pp from 13.8% to 12.3% in 2018. During 2014-2018 Gross Margin topped in 2017 at 13.8%. SG&A as a % of Revenue decreased on 2.1 pp from 5.3% to 3.1% in 2018. During the last 5 years SG&A as a % of Revenue topped in 2016 at 6.2% and was declining since that time.
Net Income margin decreased slightly on 2.0 pp from 4.6% to 2.6% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 Posco had CAPEX/Revenue of 3.3%. The company showed small CAPEX/Revenue decline of 1.1 pp from 4.4% in 2015 to 3.3% in 2018. It's average CAPEX/Revenue for the last three years was 3.8%. CAPEX as a % of Revenue stuck to a declining trend at -0.48 pp per annum in the last 5 years.
Return on investment
The company operates at low ROIC (8.0%) and ROE (3.8%). ROIC increased slightly on 1.4 pp from 6.6% to 8.0% in 2018. ROE decreased on 2.6 pp from 6.4% to 3.8% in 2018. During 2014-2018 ROIC bottomed in 2015 at 3.3% and was growing since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.0x and Debt / EBITDA is 2.3x. Net Debt / EBITDA dropped on 0.3x from 2.3x to 2.0x in 2018. Debt decreased on 4.0% while cash showed almost no change in 2018. Net Debt/EBITDA stuck to a declining trend at -0.5x per annum in 2014-2018.
Posco has good short term financial stability: Interest coverage ratio (ICR) is 7.5x. Posco has short term refinancing risk: cash is only 25.3% of short term debt.
Average interest expence charged on company's debt was 3.7% in 2018.
The company paid 42.8% of Net Income as dividends in 2018.
Management team
Choi Jeong-Woo is a the company's CEO. Choi Jeong-Woo has spent 1 year with the company. CEO total compensation was 2,147,483,647 KRW in 2018.
Financial and operational results
FY ended 31 Dec 2018
Posco ($PIDD) key annual financial indicators| mln. KRW | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 65,098,445 | 58,192,345 | 53,083,513 | 60,655,100 | 64,977,777 | 7.1% |
| Gross Profit | 7,283,404 | 6,534,247 | 6,689,551 | 8,355,911 | 7,972,381 | -4.6% |
| SG&A | 3,512,526 | 3,525,085 | 3,316,457 | 3,191,013 | 2,032,956 | -36.3% |
| EBITDA | 6,452,080 | 5,628,290 | 6,058,172 | 7,919,254 | 8,810,229 | 11.3% |
| EBIT | | | | | 5,542,600 | |
| Interest expence | | | | | 741,296 | |
| Tax | | | | | -1,670,757 | |
| Net Income | 626,100 | 180,646 | 1,363,310 | 2,790,110 | 1,690,610 | -39.4% |
Balance Sheet
|
|---|
| Cash | 3,811,202 | 4,870,185 | 2,447,619 | 2,612,530 | 2,601,718 | -0.4% |
| Inventory | | | | | 11,499,928 | |
| Accounts Payable | | | | | 4,006,135 | |
| Short Term Debt | 12,217,372 | 12,397,908 | 10,219,330 | 11,292,279 | 10,299,771 | -8.8% |
| Long Term Debt | 15,257,588 | 12,863,608 | 12,600,077 | 9,864,396 | 10,004,253 | 1.4% |
Cash flow
|
|---|
| Capex | 3,505,549 | 2,560,244 | 2,324,112 | 2,287,580 | 2,135,550 | -6.6% |
| Dividends | | | | | 723,934 | |
Ratios
|
|---|
| Revenue growth | 5.2% | -10.6% | -8.8% | 14.3% | 7.1% | |
| EBITDA growth | 13.6% | -12.8% | 7.6% | 30.7% | 11.3% | |
|
|---|
| Gross Margin | 11.2% | 11.2% | 12.6% | 13.8% | 12.3% | -1.5% |
| EBITDA Margin | 9.9% | 9.7% | 11.4% | 13.1% | 13.6% | 0.5% |
| EBIT Margin | | | | | 8.5% |
| SG&A, % of revenue | 5.4% | 6.1% | 6.2% | 5.3% | 3.1% | -2.1% |
| Net Income Margin | 1.0% | 0.3% | 2.6% | 4.6% | 2.6% | -2.0% |
| CAPEX, % of revenue | 5.4% | 4.4% | 4.4% | 3.8% | 3.3% | -0.5% |
|
|---|
| ROIC | 4.4% | 3.3% | 4.0% | 6.6% | 8.0% | 1.4% |
| ROE | 1.4% | 0.4% | 3.2% | 6.4% | 3.8% | -2.6% |
| Net Debt/EBITDA | 3.7x | 3.6x | 3.4x | 2.3x | 2.0x | -0.3x |
| Interest coverage ratio (ICR) | | | | | 7.5x |
| Interest expence / Average debt | | | | | 3.7% | |
Peers in Industrial Metals & Mining
Below we provide Posco benchmarking against other companies in Industrial Metals & Mining industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ezz Steel ($AEZD) | -8.9% | -14.2% | 39.3% | 80.0% | |
| Zibao Metals Recycling Hldgs Ltd ($ZBO) | | -9.0% | 23.1% | 62.8% | 6.0% |
| Magnitogorsk Iron & Steel Works ($MMK) | | -26.6% | -3.6% | 34.0% | |
| Norsk Hydro Asa ($NHY) | 20.1% | 12.6% | -6.5% | 33.3% | |
| Severstal PJSC ($SVST) | -12.1% | -22.9% | -7.5% | 32.7% | |
| |
|---|
| Median (13 companies) | 3.3% | -14.2% | -3.6% | 31.6% | 14.2% |
|---|
| Posco ($PIDD) | | -10.6% | -8.8% | 14.3% | 7.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 52.2% | 55.7% | 49.9% | 49.7% | |
| Severstal PJSC ($SVST) | 34.4% | 40.4% | 39.6% | 39.7% | |
| Base Resources Ltd ($BSE) | 11.8% | 21.2% | 21.0% | 35.9% | 39.7% |
| Novolipetsk Iron And Steel Corp ($NLMK) | 28.3% | 31.4% | 33.6% | 32.5% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 21.9% | 30.6% | 32.2% | 30.2% | |
| |
|---|
| Median (11 companies) | 19.5% | 20.5% | 21.0% | 27.9% | 20.4% |
|---|
| Posco ($PIDD) | 11.2% | 11.2% | 12.6% | 13.8% | 12.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Base Resources Ltd ($BSE) | -2.0% | 37.7% | 35.8% | 50.9% | 54.9% |
| Mmc Norilsk Nickel ($MNOD) | 46.8% | 47.0% | 46.5% | 41.2% | |
| Severstal PJSC ($SVST) | 26.4% | 32.4% | 31.2% | 32.6% | |
| First Quantum Minerals ($FQM) | 39.9% | 17.8% | 36.1% | 32.5% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 19.5% | 28.3% | 34.5% | 26.5% | |
| |
|---|
| Median (13 companies) | 13.0% | 17.3% | 20.7% | 24.0% | 27.7% |
|---|
| Posco ($PIDD) | 9.9% | 9.7% | 11.4% | 13.1% | 13.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| First Quantum Minerals ($FQM) | 81.7% | 72.5% | 56.0% | 60.9% | |
| Aluminium Bahrain Bsc ($ALBH) | 6.2% | 6.3% | 16.1% | 54.2% | |
| Mmc Norilsk Nickel ($MNOD) | 10.8% | 19.0% | 20.2% | 21.2% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 6.3% | 6.0% | 8.2% | 8.8% | |
| Severstal PJSC ($SVST) | 8.4% | 6.4% | 8.4% | 7.1% | |
| |
|---|
| Median (13 companies) | 6.4% | 6.3% | 6.7% | 6.3% | 27.9% |
|---|
| Posco ($PIDD) | 5.4% | 4.4% | 4.4% | 3.8% | 3.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Severstal PJSC ($SVST) | 17.7% | 30.3% | 29.7% | 38.8% | |
| Cheliabinsk Elektrolit Zink Plant ($CHZN) | 25.6% | 24.4% | 24.3% | 31.0% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 9.1% | 18.1% | 26.7% | 24.4% | |
| Mmc Norilsk Nickel ($MNOD) | 34.1% | 31.7% | 28.7% | 23.8% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 12.0% | 15.7% | 17.5% | 22.3% | |
| |
|---|
| Median (14 companies) | 9.0% | 6.8% | 5.5% | 10.1% | 2.7% |
|---|
| Posco ($PIDD) | 4.4% | 3.3% | 4.0% | 6.6% | 8.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| First Quantum Minerals ($FQM) | 4.0x | 10.5x | 4.5x | 5.2x | |
| OAO TMK ($TMKS) | 3.8x | 4.3x | 5.2x | 4.8x | |
| Ezz Steel ($AEZD) | 19.4x | 13.3x | 7.8x | 4.5x | |
| Aluminium Bahrain Bsc ($ALBH) | 0.4x | -0.2x | -0.1x | 2.5x | |
| Mmc Norilsk Nickel ($MNOD) | 0.6x | 1.0x | 1.2x | 2.2x | |
| |
|---|
| Median (13 companies) | 0.8x | 1.0x | 0.6x | 0.7x | -1.5x |
|---|
| Posco ($PIDD) | 3.7x | 3.6x | 3.4x | 2.3x | 2.0x |
