Posco Holdings to pour 90% of subsidiary stake sale proceeds into lithium, growth businesses

Posco Holdings plans to reinvest 90% of the proceeds from selling stakes in its listed subsidiaries into lithium and other high-growth businesses, while using the remaining 10% for share buybacks and cancellations to offset any dividend reduction that may result from the stake sales. The broader aim is to shift the company's earnings base — currently centered on steel and listed subsidiaries — toward high-margin resource businesses.

At its second-quarter 2026 earnings conference call held Thursday, Posco Holdings said it expects to raise approximately 3.5 trillion won ($2.41 billion) from the planned stake sales in listed subsidiaries.

Posco Group Chairman Jang In-hwa announced at the CEO Investor Day on July 2 a plan to sell down stakes in listed subsidiaries to just above the 50% threshold — the minimum needed to retain management control — by the end of 2027.

The strategy is to convert excess shareholdings into cash while maintaining control over subsidiaries, reducing the holding company discount and securing funding for 16.7 trillion won in planned future growth investments through 2028. POSCO International, in which Posco Holdings holds a 70.71% stake, has been cited as a candidate for liquidating roughly 20 percentage points of that holding.

Of the funds raised through the stake sales, 90% — approximately 3.15 trillion won — will be reinvested in growth businesses that Posco Holdings operates directly, such as lithium. The remaining 10%, about 350 billion won, will be returned to shareholders through share buybacks and cancellations.

"We plan to reinvest 90% of the proceeds from selling listed subsidiary stakes into high-margin growth businesses — such as lithium — that Posco Holdings operates directly and that carry no dual-listing discount, and to return 10% to shareholders through share buybacks and cancellations," said Kim Seung-jun, head of Posco Holdings' finance and investor relations division.

Given that Posco Holdings' shareholder return policy targets 35 to 40 percent of controlling shareholders' net profit, the annual dividend reduction from the stake sales is estimated at approximately 80 billion won. The 350 billion won allocated for share buybacks and cancellations is sized to cover roughly four years of that dividend shortfall at once.

Kim said selling listed subsidiary stakes would reduce controlling shareholders' net profit by about 200 billion won annually, cutting dividends by roughly 80 billion won per year. "The 350 billion won in shareholder returns is equivalent to making up about four years of dividend reductions all at once," he said.

After that four-year period, the company plans to rebuild dividend capacity using profits from the lithium business. Posco Holdings believes that investing in phases 3 and 4 of its brine lithium project in Argentina would enable meaningful profit generation roughly four years out, accounting for the time needed to build facilities and ramp up utilization rates.

Posco Holdings projected that if lithium prices hold at around $20,000 per ton, the brine lithium business could achieve an operating profit margin in the mid-40 percent range.

Posco Holdings is also preparing follow-on investments to expand lithium production capacity. The company plans to raise its Argentina brine lithium output capacity to a total of 100,000 tons by adding a 50,000-ton phases 3 and 4 expansion on top of the 50,000 tons already being developed in phases 1 and 2. The final production method for phases 3 and 4, however, has not yet been determined.

On further expansion of hard-rock lithium, the company said it will proceed flexibly depending on market conditions. Profitability in hard-rock lithium hinges on the spread between the price of spodumene feedstock and the price of finished lithium hydroxide, so the company said it will assess market dynamics before committing.

"Expanding the hard-rock lithium business requires a comprehensive assessment of lithium market conditions, the situation of our customers, and the circumstances of partners including automakers," said Lee Seong-won, head of Posco Holdings' energy materials investment division. "Our target is the end of next year, but we will proceed flexibly depending on market conditions."

The company did not disclose the specific targets, timing or method for the stake sales. Given concerns that releasing a large block of shares onto the market could create an overhang weighing on the share price, Posco Holdings said it will adopt an approach that minimizes the impact on market supply-demand dynamics and the stock price.

Posco Holdings is also divesting non-core and low-margin assets in parallel. In the first half of this year, the company completed 12 restructuring transactions, raising 475.4 billion won. Since 2024, it has completed 85 such transactions cumulatively, generating 2.2 trillion won in cash.

In the near term, the lithium business is expected to pause briefly in the third quarter before recovering profitability from the fourth quarter onward. Posco Argentina said output may temporarily decline in the third quarter due to reduced brine evaporation during the Southern Hemisphere winter and the impact of equipment replacements.

"The profit margin may temporarily soften somewhat in the third quarter," Kim said, "but once full production resumes in the fourth quarter and sales of certified products ramp up in earnest, operating profit should level up to a meaningful scale." Currently, uncertified products are sold at roughly a 10 percent discount, meaning profitability is expected to improve as the share of certified products rises.

The steel division is also targeting further earnings improvement in the third quarter through higher output. Posco has completed a major overhaul of its hot-rolling facilities and has no significant maintenance scheduled, and plans to push crude steel production to approximately 9 million tons in the third quarter. The share of domestic sales, which had fallen to around 51 percent, recovered to 55.5 percent in the second quarter.

Posco has identified AI data centers, ESS and power grids as new demand sources for steel. As data centers grow larger, the company expects demand for steel-frame construction using thick plates to increase relative to conventional rebar-and-concrete methods.

On global trade barriers, the company plans to focus on high-margin customers and the domestic market. The EU has cut its total steel import quota by 47 percent from previous levels. Posco's EU sales volume varies by year but accounts for 10 to 15 percent of its total exports.

"We plan to prioritize filling country-specific quotas with high-margin strategic customers in the EU and to additionally utilize the shared quota available under free trade agreements," said Song Yun-young, head of Posco's trade and commerce division. "Any unavoidable sales shortfall will be redirected to the domestic market and third markets where we can better secure margins."

The new electric arc furnace at Gwangyang steelworks is another key variable for second-half earnings. Posco brought the furnace — with an annual capacity of 2.5 million tons — online last month and has begun producing low-carbon steel. Initially, the company will produce general-grade steel by blending molten iron from the electric arc furnace with that from blast furnaces, while gradually building the technology to produce premium grades such as automotive steel sheet and electrical steel sheet.

Securing sales channels for low-carbon products is proceeding in parallel. "We are supplying test materials for product approval this year to global automakers and wind energy customers that require low-carbon steel," said Hong Jun-young, head of Posco's trade and commerce division. "Starting next year, we plan to gradually increase the electric arc furnace utilization rate and expand both production and sales."

The company flagged as a challenge the fact that international standards and price premiums for low-carbon steel have yet to be sufficiently established.