Korea Investment Securities estimated on the 4th that POSCO FUTURE M's performance in the second quarter (April to June) is below market expectations. While the performance has passed its bottom, it maintains a 'neutral' investment opinion considering that time is needed.
Kim Ye-rim, a researcher at Korea Investment Securities, viewed that POSCO FUTURE M likely recorded sales of 744.7 billion won and an operating loss of 7.9 billion won in the second quarter. Contrary to the market expectation of an operating profit of 12 billion won, Kim explained that it will likely transition into a deficit. He noted, “Due to poor shipments from Stellantis, the shipment volume of cathodes is decreasing, and the anode utilization rate remains low at around 30%, predicting an operating loss of about 55 billion won.”
Kim noted that the background to the reduced shipment of nickel-cobalt-aluminum (NCA) cathodes to Stellantis is the U.S. tariff policy. Stellantis's Chrysler and Jeep models are produced in Mexico and Canada, and the poor sales are due to tariff burdens. The fixed costs incurred from the new operation of the Gwangyang precursor plant were also cited as a factor in the cost burden.
Kim, however, stated, “I believe the second quarter is the low point for performance,” and added, “From the second half of the year, there is a possibility that some production lines at Star Plus, a joint venture with Stellantis, will be converted for large-scale energy storage systems (ESS), so gradual improvements are expected.”
Kim projected that while POSCO FUTURE M has secured medium- to long-term growth drivers, it will take time to show these in performance. He remarked, “With a high proportion of revenue directed towards the United States, POSCO FUTURE M will face significant impacts if subsidies from the Inflation Reduction Act (IRA) are reduced, and with the production capacity (CAPA) for cathodes expected to expand to about 300,000 tons by 2026, it is likely to remain at a low utilization rate.” He further stated, “Time is needed until visibility into demand for General Motors (GM) increases.”