NEWSMAKER-POSCO’s Chung likes to talk, now he’s listening, too

By Kim Yeon-hee

SEOUL, May 21 (BestGrowthStock) – Chung Joon-yang, CEO of POSCO
(005490.KS: )(PKX.N: ), the world’s fourth-largest steelmaker,
likes to talk — to employees, clients and, unusually for
corporate South Korea, to rivals.

The 62-year-old uses his blog to share his management
philosophy and holds monthly staff meetings. To speed up
decision making, he’s kitted out managers and sales staff with
smartphones and encourages email as a reporting channel.

Now, after a dash to expansion through deals both at home
and as far afield as Australia, India, Thailand and Ukraine,
Chung seems to be listening, too.

POSCO shareholders, who include billionaire investor Warren
Buffett, have become leery of the steel giant’s acquisitive
rush — last week, it moved closer to buying energy developer
and trader Daewoo International (047050.KS: ) for $3 billion in
its biggest ever acquisition. [ID:nSEO178990]

Investors have dumped POSCO stock since early April,
knocking about $16 billion off its market value as the shares
dropped by more than a fifth. The broader Seoul market (.KS11: )
has fallen 7 percent over that time.

“We were a little worried about Chung’s expansionary moves,
which looked too much,” said Hyun Kyoung-woo, a senior
strategist at Daishin Investment Trust Management, which holds
POSCO shares.

“But now he seems to have recognised the reason why it has
been undervalued compared with other steelmakers.”

Buffett’s Berkshire Hathaway (BRKa.N: )(BRKb.N: ), which owns
an estimated 4.5 percent of POSCO, and other foreign investors
have expressed concerns about South Korea’s shipbuilding
industry, [ID:nTOE62M09F] and Chung is thought to have quietly
dropped plans to bid for Daewoo Shipbuilding & Marine
Engineering (042660.KS: ), an earlier buyout target valued at
over $3 billion.

Chung, a 35-year POSCO veteran, took the helm at POSCO
early last year and, in a marked departure from his
predecessor, paid an early visit major client Hyundai Heavy
Industries (009540.KS: ), the world’s biggest shipbuilder, a
gesture aimed at strengthening relations between the firms.

Last month, he attended the opening ceremony of a new steel
mill at Hyundai Steel (004020.KS: ), a local rival challenging
POSCO’s dominance in high-end steel.

As well as fraternising with the enemy, Chung, a gourmet
who enjoys restaurants serving the best in Korean food, also
makes a point of dining with his employees — though he gets to
pick the restaurant.

POSCO, a former state-run monopoly and now South Korea’s
second-biggest stock, needs Chung’s tact to perform a delicate
dance with a disparate shareholder base where foreign investors
own 49 percent of the shares.

Fund managers want POSCO to use its 6.6 trillion won ($5.5
billion) in cash to focus on its core business and speed up
overseas steel projects, including a $12 billion steel plant in
eastern India. [ID:nSGE64E02M]

And investors are not the only ones clamouring to be heard.

Ratings agency Moody’s last week placed POSCO on review for
a possible downgrade, citing the company’s ambitious capacity
expansion plans and appetite for acquisitions.

“(POSCO) needs to think about cashflows when planning to
expand. If it pursues a strategy requiring additional cash
outflows, we wouldn’t see it as positive,” said Kim Young-chan,
head of equity at Shinhan BNP Paribas Asset Management.

Stock Market Investing

(Editing by Valerie Lee)

NEWSMAKER-POSCO’s Chung likes to talk, now he’s listening, too