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Published: 2021-12-09 06:29:33 ET

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6-K 1 d613264d6k.htm FORM 6-K FORM 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of December, 2021

Commission File Number: 1-13368

POSCO

(Translation of registrant’s name into English)

POSCO Center, 440 Teheran-ro, Gangnam-gu, Seoul, Korea, 06194

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-translated documents of POSCO’s 3^rd Quarterly Report for the year 2021

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		POSCO
		(Registrant)

Date: December 9, 2021	By	/s/ Chung, Kyung-Jin
		(Signature)
		Name :	Chung, Kyung-Jin
		Title :	Head of Finance Office

Exhibit 99.1

LOGO

QUARTERLY REPORT

(From January 1, 2021 to September 30, 2021)

THIS IS AN ENGLISH TRANSLATION OF THE INTERIM REPORT ORIGINALLY PREPARED IN THE KOREAN LANGUAGE (IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION). THIS ENGLISH TRANSLATION IS NOT OFFICIAL AND IS PROVIDED FOR INFORMATION PURPOSES ONLY.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON BOTH CONSOLIDATED AND NON-CONSOLIDATED BASIS IN ACCORDANCE WITH THE KOREAN-INTERNATIONAL FINANCIAL REPORTING STANDARDS (K-IFRS) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

QUARTERLY REPORT

(From January 1, 2021 to September 30, 2021)

To:	Korean Financial Services Commission and Korea Exchange

TABLE OF CONTENTS


I.	Overview	4

II.	Business	13

III.	Financial Statements	39

IV.	Corporate Governance	44

ø	Attachment: Independent auditors’ review reports on consolidated and separate financial statements

I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

The Company’s business scope is as follows:

Business

(1) To manufacture, market, promote, sell and distribute iron, steel and rolled products;

(2) To engage in harbor loading and unloading, transportation and warehousing businesses;

(3) To engage in the management of professional athletic organizations;

(4) To engage in the supply of gas and power generation as well as in the distribution business thereof and in the resources development business;

(5) To engage in leasing of real estate and distribution businesses;

(6) To engage in the supply of district heating business;

(7) To engage in marine transportation, processing and sales of minerals within or outside of Korea;

(8) To engage in educational service and other services related to business;

(9) To engage in manufacture, process and sale of non-ferrous metal;

(10) To engage in technology license sales and engineering business; and

(11) To engage in all other conducts, activities or businesses which are related, directly or indirectly, to the attainment and continuation of the foregoing purposes

2. Business Organization

A. Highlights of the Company’s Business Organization

(1) Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyeongsangbuk -do, Korea

(2) Steel Works and Offices

(a) Pohang Steel Works: 6262 Donghaean-ro (Dongchon-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

(b) Gwangyang Steel Works: 20-26 Pokposarang-gil (Geumho-dong), Gwangyang-si, Jeollanam-do, Korea

(d) Overseas Offices: In order to support international businesses, the Company operates five overseas offices as follows:

United Arab Emirates(Dubai), Brazil(Rio de Janeiro), Argentina(Jujuy), European Union(Germany), and Australia(Perth).

(3) Major Changes in the Board of Directors


Date of Change	Type of General Meeting of Shareholders	Appointment		Expiration of Term
Date of Change	Type of General Meeting of Shareholders	New	Re-appointment	Expiration of Term
March 10, 2017	Ordinary	—	Representative Director Kwon, Oh-Joon	—
		—	Representative Director Oh, In-Hwan	—
		—	Representative Director Choi, Jeong-Woo	—
		Inside Director Chang, In-Hwa	—	—
		Inside Director Yu, Seong	—	—
		—	—	Inside Director Kim, Jin-Il
		—	—	Inside Director Lee, Young-Hoon
		Outside Director Kim, Shin-Bae	—	—
		Outside Director Chung, Moon-Ki	—	—
		Outside Director Chang, Seung-Wha	—	—
		—	—	Outside Director Kim, Il-Sup
		—	—	Outside Director Sunwoo, Young
March 9, 2018	Ordinary	—	Representative Director Oh, In-Hwan	—
		—	Representative Director Chang, In-Hwa	—
		—	Inside Director Yu, Seong	—
		Inside Director Chon, Jung-Son	—	—


Date of Change	Type of General Meeting of Shareholders	Appointment		Expiration of Term
Date of Change	Type of General Meeting of Shareholders	New	Re-appointment	Expiration of Term
		—	—	Representative Director Choi, Jeong-Woo
		Outside Director Kim, Sung-Jin	—	—
		—	Outside Director Bahk, Byong-Won	—
		—	Outside Director Kim, Joo-Hyun	—
		—	—	Outside Director Shin, Chae-Chol
July 27, 2018	Extraordinary	Representative Director Choi, Jeong-Woo	—	—
July 27, 2018	Extraordinary	—	—	Representative Director Kwon, Oh-Joon
March 15, 2019	Ordinary	—	Representative Director Chang, In-Hwa	—
		—	Inside Director Chon, Jung-Son	—
		Inside Director Kim, Hag-Dong	—	—
		Inside Director Jeong, Tak	—	—
		—	—	Representative Director Oh, In-Hwan
		—	—	Inside Director Yu, Seong
		Outside Director Pahk, Heui-Jae	—	—
		—	Outside Director Kim, Shin-Bae	—


Date of Change	Type of General Meeting of Shareholders	Appointment		Expiration of Term
Date of Change	Type of General Meeting of Shareholders	New	Re-appointment	Expiration of Term
		—	Outside Director Chung, Moon-Ki	—
		—	—	Outside Director Lee, Myoung-Woo
March 27, 2020	Ordinary	—	Representative Director Chang, In-Hwa	—
		—	Inside Director Chon, Jung-Son	—
		—	Inside Director Kim, Hag-Dong	—
		—	Inside Director Jeong, Tak	—
		—	Outside Director Chang, Seung-Wha	—
		Audit Committee Member Pahk, Heui-Jae *	—	—
March 12, 2021	Ordinary	—	Representative Director Choi, Jeong- Woo	—
		—	Representative Director Kim, Hag-Dong	—
		—	Representative Director Chon, Jung-Son	—
		—	Inside Director Jeong, Tak	—
		Inside Director Chung, Chang-Hwa	—	—
		—	—	Inside Director Chang, In-Hwa
		—	Outside Director Kim, Sung-Jin **	—
		Outside Director Yoo, Young-Sook	—	—
		Outside Director Kwon, Tae-Kyun	—	—
		—	—	Outside Director Kim, Joo-Hyun
		—	—	Outside Director Bahk, Byong-Won

*	The Outside Director Pahk, Heui-Jae was appointed as the Audit Committee Member at the General Meeting of Shareholders held on March 27, 2020.

**	The re-appointed Outside Director Kim, Sung-Jin was elected as an Outside Director to become an Audit Committee Member.

(4) Changes of the Largest Shareholder of POSCO

Since January 30, 2007, National Pension Service holds the largest number of common shares of POSCO.

(a) From SK Telecom to National Pension Service

(b) Date of Change: January 30, 2007

For further reference, please refer to the public disclosures of changes in common shares of the largest shareholder on Financial Supervisory Service website (http://dart.fss.or.kr).

B. POSCO’s Merger, Acquisition and Handover of Businesses

(1) January 2019 : Small scale merger of POSCO Processing & Service Co., Ltd. into POSCO

(2) September 2019 : Small scale merger of By-Product Hydrogen Generation Business from POSCO ENERGY into POSCO after spin-off

3. Changes in Share Capital

There has been no changes in share capital in the last 5 years.

(Unit : Share, KRW/Share, In millions of KRW)


Type	Details	As of June 30, 2021
Common Stock	Total number of issued shares	87,186,835
	Par value	5,000
	Share capital	482,403
Preferred Stock	Total number of issued shares	—
	Par value	—
	Share capital	—
Others	Total number of issued shares	—
	Par value	—
	Share capital	—
Sum	Share capital	482,403

4. Other Information Regarding Shares

A. Total Number of Shares

(As of June 30, 2021)


Authorized Shares		Issued Shares
200,000,000		87,186,835

B. Treasury Stock Acquisition and Disposal

(As of September 30, 2021)

(in shares.)


			Type of shares	Beginning balance		Change					Closing balance	Remarks
Methods of acquisition			Type of shares	Beginning balance	Acquisition (+)		Disposal (-)		Share retirement (-)		Closing balance	Remarks
Amount of shares acquired within profits available for dividends	Direct Acquisition	Direct acquisition in the exchange	Common stock	7,071,194		—		—		—	7,071,194	—
	Acquisition by trust contract	No. of shares indirectly held through trust contracts	Common stock	4,100,169		389,900		4,490,069		—	—	Note 1	)
	Acquisition by trust contract	No. of shares directly held	Common stock	—		4,490,069		—		—	4,490,069	Note 2	)
	Total		Common stock	11,171,363		4,879,969		4,490,069		—	11,561,263	—

Note1) Conclusion of treasury stock acquisition by trust contracts (on April 10, 2020), Termination of trust contract for acquisition of treasury stocks (on April 12, 2021), Decision on issuance of exchangeable bonds and disposal of treasury stock(on August 13, 2021) are disclosed on Financial Supervisory Service and Korea Exchange.

Note2) Treasury stocks include shares (2,932,480 shares) subject to conversion of exchangeable bonds which are issued on September 1, 2021. Disposal of treasury stocks subject to conversion of exchangeable bonds are confirmed when exchange right of exchangeable bonds is exercised and shares have been deposited into the Korea Securities Depository.

5. Voting Rights

(As of September 30, 2021)


Classification	Number of Common Shares	Remarks
(1) Number of Issued Shares	87,186,835	—
(2) Shares without Voting Rights	11,561,263	Treasury stock
(3) Shares with Voting Rights	75,625,572	—

*	The share repurchase contract was terminated on April 2021 due to completion of share repurchase equivalent to the contract amount and due to expiration of the contract term.

6. Earnings and Dividends

(In millions of KRW)


	2021.3Q	2020	2019
(Consolidated) Profit*	5,118,800	1,602,148	1,835,087
(Separate) Profit	4,110,403	965,863	1,175,712
Earnings per Share (Consolidated, KRW)	67,536	20,165	22,823
Cash Dividend Paid	907,507	620,287	801,156
Pay-out Ratio (Consolidated, %)	17.7	38.7	43.7
Dividend per Share (KRW)	12,000	8,000	10,000
Dividend Yield (%)	3.4	3.0	4.1

*	(Consolidated) Profit : Profit attributable to owners of the controlling company

7. Stock Prices and Trading Volumes

The stock prices and trading volumes of POSCO for the last 6 months are as follows.

A. The Korean Stock Market

(KRW/share, In thousands of shares)


			April 2021		May 2021		June 2021		July 2021		August 2021		September 2021
Common share	Highest Price		377,500		409,500		354,000		367,500		360,000		375,000
	Lowest Price		318,500		349,000		333,500		330,000		308,000		330,000
	Average Price		344,167		375,667		344,205		346,227		332,048		351,342
Trading volume	Daily highest		736		763		707		838		886		651
	Daily lowest		257		362		311		198		263		238
	Monthly		9,552		10,733		10,844		9,709		9,340		8,096

B. New York Stock Exchange
*(USD/ADS, In thousands of ADS)*
		April 2021		May 2021		June 2021		July 2021		August 2021		September 2021
American Depositary Share (ADS)	Highest Price		84.2		91.8		81.5		79.8		77.2		79.2
	Lowest Price		71.6		78.8		73.5		71.4		65.7		69.0
	Average Price		77.3		83.9		76.6		75.4		71.4		74.3
Trading volume	Daily highest		290.5		444.7		353.9		378.2		372.7		331.4
	Daily lowest		58.3		122.6		110.4		85.3		109.2		132.3
	Monthly		2,950		4,142		4,521		3,126		4,003		4,028

*	ADS : One American Depositary Share representing one-fourth of one of Common Share

II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Summary of Financial Status of Segment

(In millions of KRW)


Segment	2021.3Q				2020				2019
Segment	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		29,374,822		6,031,646		28,892,877		1,372,852		32,078,453		2,786,517
Trading		18,326,546		374,177		19,345,222		394,954		22,157,131		542,724
Engineering & Construction		4,555,585		343,282		6,576,170		385,048		6,944,629		338,865
Others		2,741,119		120,648		2,978,527		250,181		3,186,635		200,749
Total		54,998,072		6,869,753		57,792,796		2,403,035		64,366,848		3,868,855

2. Business Status of Segments

A. Steel

(1) Summary of Business

There are 63 consolidated companies in the steel segment, including 2 domestic companies including POSCO and POSCO C&C, and 61 overseas companies including POSCO (Zhangjiagang) Stainless Steel Co., Ltd. in China and overseas processing centers. POSCO produces steel materials such as hot rolled, cold rolled and stainless steel at Pohang Works and Gwangyang Works. POSCO C&C is a company specializing in manufacturing surface-treated steel products, POSCO (Zhangjiagang) Stainless Steel Co., Ltd., is a stainless steel sheet manufacturer and seller, and there are other overseas processing centers that process and sell steel materials.

The steel industry is a fundamental industry that has taken pivotal roles in the national economic development since the 1970s by supplying basic steel materials to steel-consuming industries such as automobiles, shipbuilding, home appliances, construction, etc. The steel industry is a capital and technology-intensive industry that requires enormous initial investments.

The Korean steel market is tariff-free, and especially within the Northeast Asian region, there is little difference in logistics costs among Korea, China and Japan, so it can be viewed as an almost open market.

All iron ore and coking coal that are the main raw materials for steel manufacturing, are imported. In order to secure stable raw materials sourcing, the company is continuously increasing purchases through raw material development investments by acquiring shares of overseas raw materials companies.

Environmental regulations for the steel industry are being strengthened. To protect the environment, POSCO has continuously invested in environmental facilities and has been actively responding to future environmental changes such as low-carbon and green growth by commercializing the world’s first eco-friendly steel manufacturing process, FINEX.

In the steel industry, automobiles, shipbuilding, and construction are the main demand industries, and steel products are used as raw materials for these demand industries. In terms of sales, the proportion of domestic sale is 60% of total sales and export sales are around 40%, and by export region, the proportion of China, Southeast Asia, and Japan is high. POSCO maintains order based production and sales system, and to secure stable sales, the proportion of direct sales to customers in domestic sales is maintained at about 60%.

The company will focus on the following management activities:

First, in order to maintain the leading position in the steel business, POSCO will secure a new competitive advantage. Second, in the group businesses, we will expand investment to focus on core growth businesses and accelerate the creation of business results. Third, POSCO will focus on fostering new businesses in Green & Mobility as the new growth business in the next-generation. Fourth, POSCO will promote structural and fundamental innovation for the company’s sustainable growth. Fifth, by putting safety as the top priority, POSCO will create the workplace as safe environment without industrial casualties, and actively respond to the low-carbon society as an exemplary company for sustainable growth.

(2) Market Share

(Millions of Tons, %)


Category		2021.3Q			2020			2019
Category			Production	Market share		Production	Market share		Production	Market share
Crude Steel Production			52.9	100		67.1	100		71.4	100
	POSCO		28.7	54.3		35.9	53.5		38.0	53.2
	Others		24.2	45.7		31.2	46.5		33.4	46.7

ø	Source: World Steel Association (www.worldsteel.org)

B. Trading

(1) Market Share

(Millions of US Dollars)


Category	2021.3Q	2020.3Q	Growth Rate
All Trading Companies in Korea	467,656	370,595	26.19	%
POSCO International Corp.	6,387	3,947	61.82	%

ø	Source: Korea International Trade Association

(2) Summary of Businesses

POSCO International and its consolidated subsidiaries engage in three major businesses: trading, energy and others. In addition, POSCO International maintains a global network of over 80 subsidiaries and branches in major overseas regions. In the case of the trading business, POSCO International has been actively developing and expanding new businesses in fields such as agro-commodities, LNG trading, and industrial materials based on the know-how accumulated over a long period of time in the traditional trading business and through its vast overseas networks. In the energy business, POSCO International conducts businesses such as natural gas and crude oil development, LNG infrastructure, natural resources and power generation infrastructure.

C. Engineering & Construction

POSCO E&C engages in primarily 4 businesses: construction, energy, civil engineering and plant.

In the construction business, based on its know-how in the construction of skyscrapers and commercial complexes, POSCO E&C involves in a new city and private complex development projects. In the energy business, it involves in various power generation plant projects including renewable energy projects. The civil engineering business is about constructing expressways, railroads and bridges. Plant business is the construction of integrated steel mills, EPC projects and industrial plants.

D. Others

(1) POSCO ENERGY

POSCO ENERGY started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 1990’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand for electricity in Korea. POSCO ENERGY acquired the LNG terminal business from POSCO in 2019, providing an opportunity to expand the LNG value chain. The LNG terminal business operates stable business structure through businesses such as tank rental, small scale LNG business, and ship trial run. POSCO ENERGY plans to secure stable profit base through the expansion of the LNG terminal in the future and grow into a general energy company focused on gas and power.

(2) POSCO ICT

Based on the competitiveness in ICT, POSCO ICT has expanded Smart Factory and provided IT solutions to POSCO and POSCO subsidiaries. POSCO ICT has expanded Smart Factory based on the world’s first continuous process platform “PosFrame” and next-generation production optimization system “MES 3.0”. POSCO ICT has been actively applying smart technology for strategic businesses in manufacturing, logistics, trade, and energy sectors, such as building MES at the POSCO CHEMICAL’s anode and cathode material factory, spreading the Smart Management of POSCO International, and spreading the Intelligent Power Plant of POSCO Energy in order to promote the digital transformation of POSCO subsidiaries and other businesses.

(3) POSCO CHEMICAL

POSCO CHEMICAL operates mainly 3 businesses: refractory, quicklime & chemical and energy material. In the refractory business, POSCO CHEMICAL produces and maintains refractories. In the quicklime & chemical business, POSCO CHEMICAL produces quicklime and chemical products such as coal tar and light oil. In the energy material business, POSCO CHEMICAL provides cathode and anode materials which are the main components for secondary cells: cathode, anode, electrolyte and separation membrane. Due to environment-friendly policy with less carbon emission worldwide, demands for Energy Storage System and Electric Vehicle are expected to grow continuously.

(4) POSCO M-TECH

POSCO M-TECH is a specialized supplier of steel products packaging and steel supplementary materials such as aluminum deoxidizers. In the case of steel products packaging, POSCO M-TECH continuously develops packaging automated molding machines and applies environment-friendly packaging materials. In addition, aluminum deoxidizers engage in primarily 3 types : Pellet, Mini-Pellet and Ingot. POSCO M-TECH has expanded the sales of aluminum deoxidizers in overseas markets.

3. Key Products

A. Sales of Key Products (2021.3Q)

(In hundred millions of KRW, %)


Business Area	Item	Specific Use	Total Sales			Ratio
Steel	Hot-rolled Product (HR)	Steel pipe, Shipbuilding, etc.		88,666			19.5	%
	Cold-rolled Product (CR)	Automobile , Home appliances, etc.		148,427			32.6	%
	Stainless Steel Products	Tableware, pipes, etc.		87,471			19.2	%
	Others	Plates, Wire rods, etc.		130,657			28.7	%
	Gross Sum			455,221			100.0	%
	Deduction of Internal Trade			(161,473	)
	Sub Total			293,748
Trading	Steel, Metal			265,393			80.2	%
	Chemical, Strategic Item, Energy			30,718			9.3	%
	Others			34,817			10.5	%
	Gross Sum			330,928			100.0	%
	Deduction of Internal Trade			(147,663	)
	Sub Total			183,265
Engineering & Construction	Domestic Construction	Architecture		26,340			50.5	%
		Plant		8,718			16.7	%
		Civil Engineering		4,607			8.8	%
		Others		1,222			2.3	%
	Overseas Construction			5,559			10.7	%
	Owned Construction			4,981			9.6	%
	Others			693			1.3	%
	Gross Sum			52,120			100.0	%
	Deduction of Internal Trade			(6,564	)
	Sub Total			45,556
Others	Electricity Sales, etc.			47,904
	Deduction of Internal Trade			(20,493	)
	Sub Total			27,411
	Total Sum			549,981

B. Price Movement Trends of Key Products

(In thousands of KRW/ Tons, KRW/kWh)


Business Area	Products	2021.3Q		2020		2019
Steel	Hot-rolled Product (HR)		908		622		695
Steel	Cold-rolled Product (CR)		983		759		800
Others	Electric Power		88		72		94
	Refractory		905		965		1,073
	Lime		105		106		111

ø	Trade and Engineering & Construction businesses are not reflected on the table above due to difficulties in measuring the price movement trend.

[Steel]

(1) Criteria for Calculation

(a) Subjects for Calculation: Unit sales prices of the standard hot-rolled product and cold-rolled product

(b) Calculation Method and Unit: The average price of each product based on its total sales including the freight costs during the given period.

(2) Factors of Price Changes

Key products prices slightly fell in 2019 due to worsened market condition of domestic and overseas steel industry. In 2020, due to COVID-19 the prices fell continuously. However, from the 4^th quarter of 2020, the steel related industries recovered and resultantly the steel prices have been increased sharply compared to previous year.

[Others]

(1) Criteria for Calculation

(a) Electric Power = Price of electric power / Total amount of power generated

(b) Refractory and lime: Average sales price including freight cost

4. Major Raw Materials

A. Current Status of Major Raw Materials

(In hundred millions of KRW)


Business Area	Type of Purchase	Item	Specific Use	Purchase Amount (Portion, %)	Remarks
Steel	Raw Materials	Materials for Iron-making	Iron Ore for Blast Furnaces	120,719 (61.7)	Iron Ore, Coal
		Sub-materials	Sub-materials for Iron-making, Steelmaking	39,377 (20.1)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	35,405 (18.1)	Nickel, Ferrochrome, STS Scrap Iron, etc.
Engineering & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	1,332 (16.7)
		Steel Reinforcement	Strengthening Concrete	1,581 (19.8)
		Cable	Electricity Transfer	153 (1.9)
		Steel Pile	Foundation of Structure	103 (1.3)
		Others	Construction of Pipe and Structure etc.	4,811 (60.3)
Others	Raw Materials	LNG	Material for Power Generation	8,697 (56.7)
		Limestone	Production of Lime	648 (4.2)
		Others	Engineering business etc.	5,987 (39.0)

B. Price Movement Trends of Major Raw Materials

(In thousands of KRW)


Business Area	Category	2021.3Q	2020	2019
Steel	Iron Ore(per ton)	186	120	102
	Coal(per ton)	199	147	207
	Scrap Iron(per ton)	543	348	347
	Nickel(per ton)	20,378	16,254	16,148
Engineering & Construction	Ready-mixed Concrete (per m³ )	68	65	63
	Steel Pile (per m)	265	102	136
	Steel Reinforcement (per kg)	1	1	1
	Cable (per m)	1	1	1
Others	LNG (per ton)	616	484	668
Others	Lime (per ton)	19	19	20

[Steel]

ø	Price Movement Trend of Major Raw Materials

(1) Iron Ore

(In US Dollars/ Tons)


	’21.3Q	’21.2Q	’21.1Q	’20.4Q	’20.3Q		’20.2Q		’20.1Q	’19.4Q	’19.3Q	’19.2Q	’19.1Q	’18.4Q
Trend of International Benchmark Price (Free On Board, “FOB”)	148	188	158	126		110		88	83	80	92	94	77	64

(2) Coal									(In US Dollars/ Tons)
	’21.3Q	’21.2Q	’21.1Q	’20.4Q	’20.3Q		’20.2Q		’20.1Q	’19.4Q	’19.3Q	’19.2Q	’19.1Q	’18.4Q
Trend of International Benchmark Price (FOB)	264	137	127	109		115		118	155	140	161	203	206	221

(3) Scrap Iron									(In US Dollars/ Tons)
	’21.3Q	’21.2Q	’21.1Q	’20.4Q	’20.3Q		’20.2Q		’20.1Q	’19.4Q	’19.3Q	’19.2Q	’19.1Q	’18.4Q
Trend of Purchase Price (Cost and Freight, “CFR”)	500	497	443	361		289		254	274	270	290	312	325	343

(4) Nickel

’21.3Q

’21.2Q

’21.1Q

’20.4Q

’20.3Q

’20.2Q

’20.1Q

’19.4Q

’19.3Q

’19.2Q

’19.1Q

’18.4Q

Trend of London

Metal Exchange ( “LME”)

Cash Price

USD

8.68 /lb

USD

19,125/ton

USD

7.87 /lb

USD

17,359/ton

USD

7.97 /lb

USD

17,570/ton

USD

7.23 /lb

USD

15,930/ton

USD

6.45 /lb

USD

14,210/ton

USD

5.54 /lb

USD

12,215/ton

USD

5.77 /lb

USD

12,723/ton

USD

7.01 /lb

USD

15,450/ton

USD

7.05 /lb

USD

15,540/ton

USD

5.56 /lb

USD

12,258/ton

USD

5.61 /lb

USD

12,369/ton

USD

5.22 /lb

USD

11,516/ton

ø	LME : London Metal Exchange

[Engineering and Construction]

(1) Criteria for Calculation


Products		Criteria for Calculation
Ready-mixed Concrete		Standard 25-210-15
Steel Pile		SPIRAL, 609.6, 12T, STP275, KS F 4602
Steel Reinforcement		SD400 10mm
Cable		TFR-3, 0.6/1KV, 2.5SQ, 2C

[Others]

(1) Criteria for Calculation

LNG: The average price between LNG purchased from Korea Gas Corporation and LNG purchased directly from foreign suppliers

Refractory and lime: Purchase prices including freight costs

5. Production and Facilities

A. Production Capacity

[Steel]

(Thousands of Tons)


Business Area	Products	2021.3Q	2020	2019
Steel	Crude Steel	33,914	45,330	47,534

[Others]

(Electric Power: MW/year, Lime: Thousands of Tons/year)


Business Area	Products		2021.3Q			2020		2019
Power Generation	Electric Power	Incheon		3,412			3,412		3,412
		Gwangyang		—			—		284
		Pohang		—			—		290
Lime	Lime			1,638	*		2,196		2,190

*	Production capacity of Lime is based on the 3^rd quarter of 2021

B. Production Result and Capacity Utilization Rate

[Steel]


(1) Production		(Thousands of Tons)


Products		2021.3Q		2020		2019
Crude Steel			32,312		40,579		42,948
Products	Hot-Rolled Steel		6,817		9,128		8,739
	Plate		5,154		7,009		7,191
	Wire Rod		2,042		2,666		2,756
	Pickled-Oiled Steel		2,203		2,432		2,967
	Cold-Rolled Products		6,427		6,795		7,416
	Coated Steel		5,632		6,316		6,526
	Electrical Steel		785		826		819
	Stainless Steel		3,101		3,900		3,850
	Others		2,543		4,691		5,761
	Total		34,703		43,763		46,025

ø	The amount of products is the aggregate amount of POSCO’s production and production of POSCO subsidiaries, which may include interested parties’ transactions.

(2) Capacity Utilization Rate

(Thousands of Tons, %)


	Company	Capacity		Production		Utilization Rate
Crude Steel Production	POSCO		30,426		28,709		94.4
	PT.KRAKATAU POSCO		2,250		2,407		107.0
	POSCO YAMATO VINA STEEL JOINT STOCK COMPANY		413		467		113.3
	POSCO (Zhangjiagang) Stainless Steel Co., Ltd.		825		729		88.3
	Total		33,914		32,312		95.3

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY had production capacity of crude steel 1,100 thousand tons/year: section steel 550 thousand tons/year and reinforcing bar 550 thousand tons/year. However, after the exit of the reinforcing bar business in November 2019, the current crude steel production capacity is 550 thousand tons/year.

ø	Trade and Engineering & Construction businesses are not reflected on the table due to difficulties in measuring capacity, production and utilization rate of such businesses.

[Others]

(1) Production Result

(Gwh, Thousands of Tons)


Business Area	Products	2021.3Q		2020		2019
Power Generation	Electric Power		10,656		13,998		15,928
Lime	Lime		1,829		2,345		2,542

(2) Capacity Utilization Rate

(Hour, %)

Business Area

Products

2021.3Q

Capacity

2021.3Q

Production

Utilization Rate

Power

Generation

Incheon Power Plant

6,552

4,369

66.7

(Thousands of Tons, %)


Business Area	Products	Capacity	Production	Utilization Rate
Lime	Lime	1,638	1,829	111.7

C. Production Facilities

(1) The current status of production facilities


[Land]		(In millions of KRW)


Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		2,013,822		14,794		(113,862	)		—			1,914,754
Trade		50,688		133,134		(220	)		—			183,602
Engineering & Construction		25,579		86		(13	)		—			25,652
Others		499,998		76,891		—			—			576,889

[Buildings]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		3,258,592		173,761		(20,914	)		(207,402	)		3,204,037
Trade		374,644		101,432		(6,030	)		(10,760	)		459,286
Engineering & Construction		81,702		23,320		(12,635	)		(1,676	)		90,711
Others		446,462		7,427		(754	)		(18,438	)		434,697

[Structures]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		2,433,141		90,706		(7,044	)		(149,958	)		2,366,845
Trade		2,071		25,292		(16	)		(1,281	)		26,066
Engineering & Construction		4,456		681		(261	)		(320	)		4,556
Others		585,558		11,492		(195	)		(20,785	)		576,070

[Machinery and Equipments]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		14,864,929		859,748		(246,304	)		(1,578,279	)		13,900,094
Trade		266,848		199,941		(59,997	)		(31,163	)		375,629
Engineering & Construction		5,071		6,606		(5,550	)		(745	)		5,382
Others		1,720,459		53,128		(21,758	)		(111,238	)		1,640,591


[Vehicles]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		22,881		15,445		(9,142	)		(7,250	)		21,934
Trade		5,469		2,777		(1,469	)		(1,216	)		5,561
Engineering & Construction		1,133		9,353		(8,756	)		(263	)		1,467
Others		7,673		3,413		(1,237	)		(2,360	)		7,489

[Tools and Fixtures]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		54,166		20,567		(22,657	)		(13,533	)		38,543
Trade		1,363		26,097		(3,594	)		(5,395	)		18,471
Engineering & Construction		1,027		395		(117	)		(318	)		987
Others		3,745		10,857		(1,542	)		(3,322	)		9,738

[Equipment]				(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		66,145		47,043		(13,005	)		(15,927	)		84,256
Trade		25,298		7,616		(2,723	)		(7,517	)		22,674
Engineering & Construction		3,532		8,523		(2,526	)		(6,420	)		3,109
Others		32,484		12,390		(9,024	)		(5,583	)		30,267


[Financial Lease Assets]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		490,290		182,600		(12,970	)		(31,271	)		628,649
Trade		95,191		97,545		(84,276	)		(33,449	)		75,011
Engineering & Construction		82,876		62,833		(42,407	)		(29,878	)		73,424
Others		105,343		34,764		(7,258	)		(30,116	)		102,733

[Biological Assets]						(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		—				—
Trade		149,965		41,626		(28,074	)		(6,956	)		156,561
Engineering & Construction		—				—
Others		—				—

[Assets under Construction]				(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		1,438,271		1,168,974		(806,388	)		—			1,800,857
Trade		58,150		41,333		(32,496	)		(25,624	)		41,363
Engineering & Construction		2,043		17,747		(16,192	)		—			3,598
Others		119,076		457,736		(74,237	)		—			502,575

(2) New Facility Establishment, Purchase, Etc.

(a) Investments under Construction


[Steel]		(In hundred millions of KRW)


Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO	Establishment/ Expansion	February 2020 ~ December 2023	P) Establishment of #6 Coke plant		8,767		1,191		7,575
	Establishment/ Expansion	June 2011 ~ December 2026	P) Establishment of by-product gas power plant facilities, etc.		7,386		4,544		2,842
	Maintenance/ Improvement	August 2020 ~ August 2022	G) The renovation of #4 furnace		3,364		601		2,762
	Maintenance/ Improvement	September 2015 ~ October 2028	P) Improvement of #2 Hot strip mill furnace		10,961		4,106		6,855
POSCO SPS	Expansion/ Establishment	October 2020 ~ November 2021	Machinery, etc.		101		37		65
		February 2021 ~ November 2021	Pohang factory		162		70		92
		February 2021 ~ October 2021	Cheonan factory		123		88		36
		June 2021 ~ March 2022	Machinery, etc.(Pohang)		152		0.3		151

ø	P stands for Pohang Steel Works.

ø	G stands for Gwangyang Steel Works.

ø	Ongoing investments over KRW 10 billion as of September 30, 2021 are listed on the table.


[Others]		(In hundred millions of KRW)


Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO CHEMICAL	Establishment/ Expansion	July 2020 ~ November 2022	The 3^rd stage of cathode material factory in Gwangyang		2,895		1,060		1,835
		November 2020 ~ March 2024	The 4^th stage of cathode material factory in Gwangyang		2,758		485		2,273
		November 2019 ~ December 2022	The 2^nd stage of production line up expansion in #2 anode material factory		1,651		1,173		478
		February 2020 ~ May 2024	Establishment of artificial graphite anode factory		2,177		838		1,339
		November 2019 ~ November 2021	Renovation of refractory factory for production increase in Pohang		496		245		251
		October 2020 ~ November 2022	Facilities improvement of refractory sintering plant in Pohang		327		2		325
POSCO ICT	Establishment/ Expansion	January 2021 ~ December 2021	Smart factory expansion and new business growth		194		10		184
POSCO ICT	Establishment/ Expansion	January 2021 ~ December 2021	Expansion of SM server, etc.		148		45		103
POSCO Energy	Establishment/ Expansion	March 2020 ~ December 2021	Expansion of evaporator in Gwangyang LNG Terminal		360		227		133
POSCO Energy	Establishment/ Expansion	January 2021 ~ May 2024	Establishment of #6 Tank in Gwangyang LNG Terminal		1,437		283		1,154
POSCO O&M	Establishment/ Expansion	January 2021 ~ December 2021	Fixed assets acquisitions and facilities replacement		1,083		938		145
PT. BIO INTI AGRINDO	Establishment/ Expansion	June 2021 ~ October 2022	CPO Mill		263		—		263
PT. KRAKATAU POSCO	Establishment/ Expansion	July 2021 ~ August 2022	SPM(Skin Pass Mill)		117		—		117

ø	Ongoing investments over KRW 10 billion as of September 30, 2021 are listed on the table.

6. Product Sales


[Steel]		(In hundred millions of KRW)


Items		2021.3Q			2020			2019
Domestic	Hot-Rolled Products		50,504			39,663			42,605
	Cold-Rolled Products		40,850			37,870			39,716
	Stainless Steel		24,751			23,746			21,167
	Others		66,671			63,111			77,026
Export	Hot-Rolled Products		38,162			37,368			41,064
	Cold-Rolled Products		107,577			101,808			125,658
	Stainless Steel		62,720			72,140			80,181
	Others		63,986			66,877			70,667
Total	Gross Sum		455,221			442,583			498,084
	Internal Transaction		(161,473	)		(153,654	)		(177,299	)
	Total		293,748			288,929			320,785


[Trading]		(In hundred millions of KRW)


Items		2021.3Q			2020			2019
Domestic	Merchandise		45,101			33,565			29,315
	Product		5,895			2,028			5,120
	Others		812			240			1,101
Export	Merchandise		109,264			75,922			69,347
	Product		626			528			205
	Others		412			1,191			638
Trades among the 3 countries			168,818			209,446			270,522
Gross Sum			330,928			322,920			376,248
Internal Transaction			(147,663	)		(129,468	)		(154,677	)
Total			183,265			193,452			221,571


[Engineering & Construction]		(In hundred millions of KRW)


Items		2021.3Q			2020			2019
Domestic	Building		26,340			42,761			44,681
	Plant		8,718			12,887			10,953
	Civil Engineering		4,607			6,177			6,098
	Others		1,222			—			—
Overseas			5,559			7,089			7,190
Own Construction			4,981			4,866			5,712
Other Subsidiary company sales			693			2,320			2,246
Gross Sum			52,120			76,100			76,880
Internal Transaction			(6,564	)		(10,338	)		(7,434	)
Total			45,556			65,762			69,446
[Others]			(In hundred millions of KRW)
Items		2021.3Q			2020			2019
Electric Power Sales			27,411			29,785			31,866

7. Derivatives

We use forward exchange contracts to hedge against the exchange rate risk for foreign currency loans.

As of September 30, 2021, we assessed the fair value of our currency swap contracts to be USD 0.5 billion(expiring August 2023), USD 0.5 billion(expiring July 2024), USD 0.5 billion(expiring November 2022), USD 0.5 billion(expiring January 2023), USD 0.44 billion(expiring January 2025), and EUR 0.5 billion(expiring January 2024).

We recognized KRW 16,300 million of gain on valuations of forward exchange contracts which was expired on April 2021. Also, we recognized KRW 278,065 million of valuation gain on currency swap contracts. The transaction gain of currency swap contracts is KRW 2,331 million.

8. Significant Contracts


Company	Contract	Date	Remarks
POSCO	Small scale merger of POSCO Processing & Service	August 2018	1) Purpose: To increase operational efficiency 2) Information: POSCO Processing & Service(POSCO P&S) is merged into POSCO • The merger ratio is 1 : 0.1456475 (POSCO : POSCO P&S) • POSCO will distribute its treasury shares to the shareholders of POSCO P&S, and new shares will not be issued. 3) Conclusion of a contract: August 23, 2018 4) Date of merger: January 1, 2019 5) Registration of merger: February 2, 2019
	Small scale merger with By-product Hydrogen Generation Business after spin-off from POSCO ENERGY	April 2019	1) Purpose: To increase operational efficiency 2) Information: By-product Hydrogen Generation Business of POSCO ENERGY will be merged into POSCO • The merger ratio is 1 : 0.1145836 (POSCO : POSCO ENERGY) 3) Conclusion of a contract: April 16, 2019 4) Date of merger: September 1, 2019 5) Registration of merger: September 9, 2019
	LNG Terminal Business Transfer Agreement	April 2019	1) Business transferee: POSCO ENERGY 2) Conclusion of a contract: April 16, 2019 3) Date of transfer: September 1, 2019 4) Transfer amount : KRW 608,019 million 5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY
POSCO Engineering & Construction	Small scale merger with POSCO ENGINEERING CO., LTD.	November 2016	1) Purpose: Achieving sustainable profit and growth by enhancing competitiveness 2) Information: POSCO E&C merges with POSCO Engineering at the merger ratio of 1:0, and POSCO E&C will not be issuing new shares 3) Conclusion of a contract: November 23, 2016 4) Date of merger: February 1, 2017 5) Registration of merger: February 14, 2017


POSCO International Corporation	Investment on the 2^nd stage development of A-1 / A-3 block in Myanmar gas field	June 2018	1) Investment amount: KRW 511,709,005,500 (USD 473,235,000) 2) Development period: August 1, 2017 ~ December 31, 2022 3) Gas production schedule: By additionally developing Shwe gas field and newly developing Shwe Phyu gas field, production will start in 2021 from Shwe and 2022 from Shwe Phyu 4) Other Information • Location: North-west offshore, Myanmar • This investment is the 2^nd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level by completing more drilling and adding more production wells to current Shwe platform. • In July 2018, facility design and construction began, and production is scheduled to start in 2021 in Shwe and in 2022 in She Phyu. But the development period includes the duration of feasibility test and basic design from August 2017 to May 2018. • POSCO International Corporation : 51.0% • ONGC VIDESH(Oil and Natural Gas Corporation Videsh Limited) : 17.0% • MOGE(Myanmar Oil and Gas Enterprise): 15.0% • GAIL (India) Limited : 8.5% • KOGAS(Korea Gas Corporation): 8.5% • Investment size of USD 473,235 thousand, applying the exchange rate of 1USD=1,081.30 KRW, was disclosed on the date of the BOD resolution (May 31, 2018). • Detailed information and future timeline on this resource development investment is subject to change. ø Disclosure date : May 31, 2018 (Decision on natural resources investment)
	Split-off of Domestic steel processing businesses	October 2019	1) Purpose : To specialize in steel processing business by splitting-off business division 2) Method : Split-off 3) Resolution date of Board of Directors : October 25, 2019 4) Shareholders’ meeting for approval : March 30, 2020 5) Date of Split-off : March 31, 2020 6) Registration date of Split-off : April 3, 2020
	Investment on the 3^rd stage development of A-1 / A-3 block in Myanmar gas field	June 2020	1) Investment amount: KRW 365,786,302,000 2) Development period: September 1, 2019 ~ December 31, 2024 3) Schedule : Installation Completion of low-pressure gas compression platform and commenced operation in 2024 4) Other Information • Location: North-west offshore, Myanmar • This investment is the 3^rd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level stably by installing low-pressure gas compression platform. • In the first quarter of 2021, the design and production of the equipment for this work will be started, and it is planned to start operation in 2024. The “(2) Development period” above is the period including the basic design progress period, September 2019 to September 2020. • Participation rate of each company in gas production and offshore pipeline transportation business • POSCO International Corporation : 51.0% • ONGC VIDESH(Oil and Natural Gas Corporation Videsh Limited) : 17.0% • MOGE(Myanmar Oil and Gas Enterprise): 15.0% • GAIL (India) Limited : 8.5% • KOGAS(Korea Gas Corporation): 8.5% • Investment size of USD 315,170 thousand, applying the exchange rate of 1USD=1,160.60 KRW, which is the date of the BOD resolution. • Detailed information and future timeline on this resource development investment is subject to change. ø POSCO International disclosure date : September 22, 2020 (Decision on natural resources investment)


POSCO O&M	Small scale merger with Blue O&M and MegaAsset	February 2019	1) Purpose: Enhancing foundation of growth by improving management efficiency and creating synergies among businesses 2) Information: POSCO O&M merges with Blue O&M and MegaAsset 3) Date of merger: February 1, 2019 4) Registration of merger: February 11, 2019
POSCO ENERGY	Contract of Shares Transfer	July 2018	1) Contract Parties: Nonghyup Bank(The third agent of KIAMCO PowerEnergy Private Special Assets Investment Trust), Doosan Heavy Industries & Construction, POSCO E&C, Industrial Bank of Korea(The first agent of Multi Asset POSPower Samcheok coal-fired private investment trust) 2) Signed Date: July, August, 2018 3) Contract Amount : KRW 343,706 million 4) Information: Contract of shares transfer for disposal of 68.5%(July) and 2.5%(August) POSPower shares
	Vertical Spin-off By-product Hydrogen Generation Business for merger into POSCO	April 2019	1) Contract counterpart: POSCO 2) Conclusion of a contract: April 16, 2019 3) Date of merger: September 1, 2019 4) Merger payment : KRW 1,163,692 million (No issuance of new shares from POSCO) 5) Information : POSCO merges with Hydrogen Generation Business of POSCO ENERGY at the merger ratio of 1:0.1145836
	LNG Terminal Business Transfer Agreement	April 2019	1) Business transferor: POSCO 2) Conclusion of a contract: April 16, 2019 3) Date of transfer: September 1, 2019 4) Transfer amount : KRW 608,019 million 5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY
	Merger	May 2020	1) Contract counterpart : PSC Energy Global Co., Ltd. 2) Signed date : May 26, 2020 3) Date of merger : August 1, 2020 4) Merger ratio : 1.0000000 : 0.0000000 5) Information : POSCO ENERGY merges PSC Energy Global Co., Ltd., a wholly owned subsidiary of POSCO ENERGY
POSCO YAMATO VINA STEEL JOINT STOCK COMPANY	Joint stock contract with YAMATO KOGYO CO., LTD. and SIAM YAMATO STEEL CO., LTD. to improve business structure	March 2020	1) Purpose: To improve business structure by collaborating with leading company in section steels 2) Information: POSCO’s 100% share of POSCO SS VINA changes to 51% YAMATO KOGYO CO., LTD. takes 30% of shares and SIAM YAMATO STEEL CO., LTD. takes 19% of shares. 3) Conclusion of a contract: March 18, 2020 4) Registration of joint stock company : April 28, 2020

9. Research and Development

A. Research and Development (“R&D”) Organization


Business Area	Company	Organization
Steel	POSCO	Steel Production and Technology Strategy Office
		Environmental Planning Office
		Technical Research Laboratories
		Steel Product Research Lab
		Process and Engineering Research Lab
		Automotive Steel Research Lab
		Steel Solution Research Lab
		LiB Materials Business Office
	POSCO COATED & COLOR STEEL Co,. Ltd.	R&D Center
	POSCO (Zhangjiagang) Stainless Steel Co., Ltd.	R&D Center
	POSCO SPS	TMC Business Group
	POSCO SPS	Stainless Quality Technology Group
Engineering & Construction	POSCO Engineering & Construction,. LTD.	R&D Center
Engineering & Construction	POSCO A&C	R&D Center
Others	POSCO ENERGY CO., LTD.	Power Generation Business Division
	POSCO ICT	R&D Center
	POSCO CHEMICAL	R&D Center
	POSCO CHEMICAL	Energy Material R&D Center
	POSCO M-TECH	R&D Center

B. R&D Expenses in 2021.3Q (In millions of KRW)


Category	Business Area
Category	Steel			Trade		Engineering & Construction		Others		Total
Selling and Administrative Cost		56,934			—		2,134		25,046		84,115
Manufacturing Cost		243,833			—		288		57		244,178
R&D Cost (Intangible Assets)		(22,146	)		—		1		513		(21,632	)
Total*		278,621			—		2,423		25,616		306,661
Government Subsidy		—			—		381		—		381
R&D/Sales Ratio (%)		0.95			—		0.05		0.93		0.56

*	Total includes government subsidy.

III. Financial Statements

1. Consolidated Financial Statements

A. Summary

(In millions of KRW)


Account	2021.3Q	2020	2019
	As of September 30, 2021	As of December 31, 2020	As of December 31, 2019
[Total current assets]	45,705,613	35,830,815	34,842,374
Cash and cash equivalents	5,480,045	4,754,644	3,514,872
Other receivables, net	1,984,589	1,494,239	1,581,517
Other short-term financial assets	13,179,186	11,709,209	8,996,049
Trade accounts and notes receivable, net	10,468,221	8,120,619	9,078,351
Inventories	13,809,620	9,051,790	10,920,320
Other current assets	783,952	700,314	751,265
[Total non-current assets]	44,429,444	43,256,158	44,216,287
Other receivables, net	1,340,277	1,195,962	1,140,878
Other long-term financial assets	2,395,620	1,561,807	1,669,389
Investments in associates and joint ventures	4,158,021	3,876,249	3,927,755
Property, plant and equipment, net	29,414,128	29,400,141	29,925,973


Intangible assets, net	4,304,997	4,449,432	4,908,473
Other non-current assets	2,816,401	2,772,567	2,643,819
Total assets	90,135,057	79,086,973	79,058,661
[Total current liabilities]	19,405,275	16,854,968	16,323,690
[Total non-current liabilities]	17,208,468	14,557,413	14,940,264
Total liabilities	36,613,743	31,412,381	31,263,954
[Equity attributable to owners of the controlling company]	49,171,491	44,331,350	44,471,873
Share capital	482,403	482,403	482,403
Capital surplus	1,354,533	1,310,547	1,376,251
Hybrid bonds	199,384	199,384	199,384
Retained earnings	50,348,461	46,111,457	45,080,118
Other equity attributable to owners of the controlling company	(3,213,290)	(3,772,441)	(2,666,283)
[Non-controlling Interests]	4,349,823	3,343,242	3,322,834
Total equity	53,521,314	47,674,592	47,794,707
	From January 1, 2021 to September 30, 2021	From January 1, 2020 to December 31, 2020	From January 1, 2019 to December 31, 2019
Revenue	54,998,072	57,792,796	64,366,848
Operating profit	6,869,753	2,403,035	3,868,855
Profit	5,573,570	1,788,152	1,982,637


[Profit attributable to owners of the controlling company]	5,118,800	1,602,147	1,835,086
[Profit attributable to non-controlling interests]	454,770	186,005	147,551
Total comprehensive Income	6,277,402	1,570,204	2,129,105
[Total comprehensive income attributable to owners of the controlling company]	5,784,574	1,415,132	1,997,731
[Total comprehensive income attributable to non-controlling interests]	492,828	155,072	131,374
Earnings per share(KRW)	67,536	20,165	22,823
Number of Consolidated Companies	167	167	164

B. The Standards Used for Reporting the Financial Statements

The Company prepared its financial statements in accordance with the Korean-International Financial Reporting Standards (the “K-IFRS”) and applied it to each Company’s final financial statements.

2. Separate Financial Statements

A. Summary

(In millions of KRW)


Account	2021.3Q	2020	2019
	As of September 30, 2021	As of December 31, 2020	As of December 31, 2019
[Total current assets]	24,842,656	19,579,954	18,216,066
Cash and Cash equivalents	2,423,235	1,822,660	978,139
Trade accounts and notes receivable, net	6,107,524	3,693,535	3,987,041
Other receivables, net	396,332	279,555	321,352
Other short-term financial assets	9,323,815	9,607,632	7,858,979
Inventories	6,528,001	4,093,829	4,988,530
Other current assets	63,749	82,743	82,025
[Total non-current assets]	38,510,944	37,215,015	37,494,700
Other receivables, net	285,703	84,037	56,468
Other long-term financial assets	1,678,509	1,072,817	1,257,896
Investments in Subsidiaries, associates, and joint ventures	15,988,631	14,883,152	15,069,857
Property, plant and equipment, net	19,774,324	20,216,932	20,132,199
Intangible assets, net	549,699	621,926	708,915
Other non-current assets	234,078	336,151	269,365
Total assets	63,353,600	56,794,969	55,710,766
[Total current liabilities]	6,270,412	5,089,111	3,331,446


Account	2021.3Q	2020	2019
[Total non-current Liabilities]	8,764,362	6,591,154	6,765,135
Total liabilities	15,034,774	11,680,265	10,096,581
[Share capital]	482,403	482,403	482,403
[Capital surplus]	1,339,289	1,339,289	1,252,220
[Hybrid bonds]	199,384	199,384	199,384
[Retained earnings]	48,997,388	45,781,777	45,372,411
[Other equity]	(2,699,638)	(2,688,149)	(1,692,233)
Total equity	48,318,826	45,114,704	45,614,185
	From January 1, 2021 to September 30, 2021	From January 1, 2020 to December 31, 2020	From January 1, 2019 to December 31, 2019
Revenue	28,392,523	26,509,920	30,373,511
Operating profit	4,976,652	1,135,197	2,586,359
Profit	4,110,403	965,863	1,175,712
Earnings per share(KRW)	54,218	12,123	14,592

B. The Standards Used for Reporting the Financial Statements

The company prepared its financial statements in accordance with the Korean - International Financial Reporting Standards (the “K-IFRS”).

IV. CORPORATE GOVERNANCE

1. Overview of Corporate Governance

A. Board of Directors (“BoD”)

(1) Board of Directors

The Board of Directors consists of five inside directors (Choi, Jeong-Woo, Kim, Hag-Dong, Chon, Jung-Son, Chung, Chang-Hwa and Jeong, Tak) and seven outside directors (Chang, Seung-Wha , Kim, Shin-Bae, Chung, Moon-Ki, Kim, Sung-Jin, Pahk, Heui-Jae Kim, Yoo, Young-Sook, and Kwon, Tae-Kyun).

The Board of Directors manages the following six Special Committees:

(a) ESG Committee

(b) Director Candidate Recommendation Committee

(d) Finance Committee

(e) Audit Committee

(f) Executive Management Committee

ø	Composition of the Special Committees under the BoD and their Functions(as of November 15, 2021)

Category

Composition

Directors

Major Functions

ESG Committee

3 Outside Directors,

1 Inside Director

Kim, Shin-Bae

(Chairman)

Chang, Seung-Wha

Yoo, Young-Sook

Kim, Hag-Dong

(1) Review of low-carbon policies related to environment and climate change

(2) Preliminary review on safety and health plans

(3) Preliminary review of the operation of BoD and Special Committees

A. Development of agenda and establishment of operation standards for the BoD and Special Committees

B. Preliminary review of amendment or repeal of the Operational Regulations of the BoD

C. Preliminary review of establishment and operation of Special Committees within the BoD

(4) Execution monitoring and report publication related to ESG

(5) Deliberation and resolution on donations exceeding KRW 100 million and KRW 1 billion and less, as well as preliminary review on donations exceeding KRW 1 billion

(6) Matters related with internal transactions in accordance with the Monopoly Regulation and Fair Trade Act

A. Review of issues and improvement measures in relation to internal transactions

B. Preliminary review of internal transactions (KRW 100 billion or more in transaction amount)

C. Deliberation and resolution on internal transactions (KRW 5 billion or more and less than KRW 100 billion in transaction amount)

(7) Appointment of fair trade compliance officer


Director Candidate Recommendation Committee	3 Outside Directors	Chung, Moon-Ki (Chairman) Kim, Sung-Jin Kwon, Tae-Kyun	(1) Qualification assessment of Outside Director candidates and candidate nomination at the general meeting of shareholders (2) Pre-screening and qualification assessment of Inside Director candidates (3) Preliminary review of appointing the Committees members (4) Preliminary review of appointing the Representative Directors among Inside Directors (excluding the CEO) (5) Operation of the Outside Director Candidate Recommendation Advisory Group (6) Other matters necessary to nominate Outside Director candidates
Evaluation and Compensation Committee	4 Outside Directors	Pahk, Heui-Jae (Chairman) Chung, Moon-Ki Kim, Sung-Jin Yoo, Young-Sook	(1) Development of management succession and executive development plans (2) Establishment and execution of executive evaluation and compensation plans (3) Preliminary review on compensation and retirement allowance of Directors
Finance Committee	3 Outside Directors; 1 Inside Director	Kwon, Tae-Kyun (Chairman) Kim, Shin-Bae Chang, Seung-Wha Chon, Jung-Son	(1) Establishment of policies for company’s internal values and financial soundness (2) Preliminary review in case of filing in litigation or arbitration, or responding to reconciliation or mediation in the process of trial or taking any equivalent level of legal actions with the amount of KRW 100 billion or more (3) External Investments A. Preliminary review of new external investments, capital increase and disposal of share in the invested entity executed by a non-steel business division (KRW 100 billion or more. Investment and capital increase include borrowings and liabilities that the company takes) B. Approval of new external investments, capital increase and disposal of share in the invested entity executed by a non-steel business division (From KRW 10 billion to less than KRW 100 billion. Investment and capital increase includes borrowings and liabilities that the company takes) (4) Deliberation and resolution on bond issuance and important borrowings (including refinancing borrowings exceeding KRW 100 billion) (5) Preliminary review on bond issuance and important borrowings (new long-term borrowings exceeding KRW 100 billion) (6) Deliberation and resolution on offering non-current assets as collateral (7) Deliberation and resolution on takeover of debt such as collateral, guarantee, etc. from invested company (excluding the case involving steel investment)

Audit Committee

3 Outside Directors

Kim, Sung-Jin

(Chairman)

Chung, Moon-Ki

Pahk, Heui-Jae

(1) Setting the work scope of the committee

(2) Matters that the BoD or Representative Directors delegated

(3) Request for Extraordinary general meeting of shareholders

(4) Consulting of external experts

(5) Audit of the legitimacy of management’s business execution

(6) Review soundness and validity of the company’s financial activities and the appropriateness of financial reporting

(7) Review the validity of important accounting standards or changes in accounting estimates

(8) Evaluation of the operation status of the internal accounting management system

(9) Evaluation of the internal control system

(10) Agreement on appointment or dismissal of internal audit department representative

(11) Contract for appointment, remuneration and non-audit services of independent auditors

(12) Evaluation of independent auditors’ audit activities

(13) Report internal audit department’s annual audit plan and results

(14) Report on the evaluation results of the company’s ethical compliance

(15) An independent auditor reports on important facts of the company’s Directors’ misconduct or violation of laws or Articles of Incorporation

(16) Report that independent auditors violation of the company’s accounting standards

(17) Other matters deemed necessary by each committee member

Executive

Management Committee

5 Inside Directors

Choi, Jeong-Woo (Chairman)

Kim, Hag-Dong

Chon, Jung-Son

Kim, Hag-Dong

Chung, Chang-Hwa

Jeong, Tak

1. Business

(1) Important matters in the corporate employee hierarchy, development of human resources and adjustment

(2) Important changes in terms of working conditions and welfares

(3) New establishment plan for chair-professor

(4) Housing Policy Establishment (Housing fund support standard and plan for housing construction)

(5) Decision on closure of shareholders’ registry

2. Finance

(1) Preliminary review on in-house investment plan (New establishment or expansion investment of KRW 200 billion or more)

(2) Approval of in-house investment plan

• New establishment or expansion investment from KRW 10 billion to less than KRW 200 billion

• Investment other than new establishment or expansion: KRW 10 billion or more.(In the case of ordinary investment, the investment amount is for KRW 5 billion or more)

(3) Preliminary review on steel business division: New external investments, capital increase and disposal of shares in the invested entity (From KRW 100 billion or more, Investment and capital increase includes borrowings and liabilities that the company takes)

(4) Approval on steel business division: New external investment, capital increase, and disposal of shares in the invested entity (From KRW 10 billion to less than KRW 100 billion, investment and capital increase to includes borrowings and liabilities that the company takes)

(5) Acquisition or disposal of tangible· intangible fixed assets and important investment assets from KRW 10 billion to less than KRW 200 billion

(6) Approval technology application and technology sales contract over USD 1 million

(7) Acquisition of debt such as guarantee for invested company’s collateral involving steel investments

3. Other matters that the Chairman deems necessary or are deemed necessary by each committee member

*	In order to strengthen the roles of the Board of Directors regarding ESG related matters, the Special Committees were reorganized including new establishment of the ESG Committee at the General Meeting of Shareholders held on March 12, 2021.

*	In order to strengthen independence of the Director Candidate Recommendation Committee, on August 13, 2021, the Board of Directors amended the Operational Regulation of Board of Directors so that the Director Candidate Recommendation Committee consists of only Outside Directors.

(2) List of Key Activities of the Board of Directors

(January 1, 2021 ~ March 11, 2021)


No.	Date	Agenda	Approval
2021-1	January 20	1. Approval of participation in POSCO CHEMICAL’s capital increase with consideration	All 1 Case Approved
2021-2	January 28	• Deliberation Agenda 1. Approval of the 53rd financial statements and schedule for the general meeting of shareholders • Report Agenda 1. Business performance of the fiscal year of 2020 2. Report on internal control over financial reporting 3. Assessment on the effectiveness of internal control over financial reporting	All 1 Case Approved — — —
2021-3	February 18	1. Plans to strengthen roles of the Board of Directors in relation to ESG 2. Recommendation of Inside Directors candidates (other than the candidate for the Representative Director & CEO) 3. Agendas for the 53^rd general meeting of shareholders	All 3 Cases Approved

At the 53^rd General Meeting of Shareholders which was held on March 12, 2021, Outside Director Bahk, Byong-Won and Kim Joo-Hyun, and Inside Director Chang, In-Hwa retired due to expiration of the terms. Outside Directors Yoo, Young-Sook and Kwon, Tae-Kyun, and Inside Director Chung, Chang-Hwa were newly elected.

(March 12, 2021 ~ November 15, 2021)


No.	Date	Agenda	Approval
2021-4	March 12	1. Appointment of the Chairman of the BoD 2. Appointment of the Representative Director CEO 3. Appointment of Representative Directors and Inside Directors 4. Appointment of Special Committees members	All 4 Cases Approved
2021-5	April 9	1. Investment on commercial plant for hard rock lithium	All 1 Case Approved
2021-6	May 14	• Deliberation Agenda 1. Resolution on the dividend for the 1^st quarter of 2021 2. POSCO health and safety plan for 2021 3. Joint Venture company establishment with HBIS Group Co., Ltd. 4. Equity investment in an Australian nickel production company 5. Transaction Plans with affiliates for the fiscal year of 2021 • Report Agenda 1. Business performance of the 1^st quarter of 2021 2. Status of global steel growth strategy implementation 3. The performance and assessment of Board of Directors for 2020	All 5 Cases Approved — — —

2021-7	August 13	• Deliberation Agenda 1. Resolution on the dividend for the 2^nd quarter of 2021 2. Financing plan of 2021 3. Financial contribution to the joint labor welfare fund with partner companies 4. Amendment of the Operational Regulation of Board of Directors • Report Agenda 1. Implementation status of the BoD resolved agendas 2. Business performance of the 2^nd quarter of 2021 3. Group research center plan	All 4 Cases Approved — — —
2021-8	November 15	• Deliberation Agenda 1. Resolution on the dividend for the 3^rd quarter of 2021 2. Increase production capacity of eco-friendly electrical steel of Gwangyang Steel Works 3. Contributed acceptance of sculpture in Pohang Hwanho park • Report Agenda 1. Business performance of the 3^rd quarter of 2021	All 3 Cases Approved

(3) Major Activities of Outside Directors on the Board of Directors (January 1, 2021 ~ November 15, 2021)


No.	Date	Participation of the Outside Directors (the Number of total Outside Directors)	Remarks
2021-1	January 20	7 (7)	—
2021-2	January 28	7 (7)	—
2021-3	February 18	7 (7)	—
2021-4	March 12	7 (7)	—
2021-5	April 9	7 (7)	—
2021-6	May 14	7 (7)	—
2021-7	August 13	7(7)	—
2021-8	November 5	7(7)

(4) Special Committees under the BoD and Their Activities (From January 1, 2021 to November 15, 2021)

•

Director Candidate Recommendation and Management Committee (January 1, 2021~March 11, 2021)


Date	Agenda	Approval
January 28, 2021	Qualification review and recommendation of the Outside Directors candidates	Approved
February 18, 2021	• Deliberation Agenda 1. Recommendation of the Outside Directors candidates • Preliminary Review 1. Qualification review of the Inside Directors candidates 2. Plans to strengthen roles of the Board of Directors in relation to ESG	Approved — —

•

Finance and Related Party Transaction Committee (January 1, 2021~March 11, 2021)


Date	Agenda	Approval
January 28, 2021	Contribution to the Labor Welfare Fund	Approved

•

Evaluation and Compensation Committee (January 1, 2021 ~ March 11, 2021)


Date	Agenda	Approval
January 27, 2021	Evaluation of the business performance for the fiscal year of 2020	Approved

•

Evaluation and Compensation Committee (March 12, 2021 ~ November 15, 2021)

Date

Agenda

Approval

November 4, 2021

• Preliminary Review

Improvement of compensation system of executives and evaluation system of business performance

—

•

Director Candidate Recommendation Committee (March 12, 2021 ~ November 15, 2021)


Date	Agenda	Approval
August 13, 2021	Review on Outside Director candidate pool	—

•

ESG Committee (March 12, 2021 ~ November 15, 2021)


Date	Agenda	Approval
April 22, 2021	• Deliberation Agenda Plan for publishing Corporate Citizenship Report 2020 • Report Agenda 2050 Carbon Neutral Declaration and Implementation Status	Approved —
May 13, 2021	• Preliminary Review POSCO health and safety plan for 2021	—
August 13, 2021	• Preliminary Review 1. Amendment of the Operational Regulation of Board of Directors 2. Financial contribution to the joint labor welfare fund with partner companies • Deliberation Agenda 1. Venture fund investment for new growth businesses 2. The 2^nd investment in POSCO-HY Clean Metal • Report Agenda	— — Approved Approved


Date	Agenda	Approval
	Fair Trade Voluntary Compliance Program Operation Status in 201	—
November 4, 2021	• Preliminary Review 1. Contributed acceptance of sculpture in Pohang Hwanho park • Deliberation Agenda 1. Investment in kind on Dongho-an site for 2^nd LNG terminal(Internal Transaction) 2. Lease contract for lime calcination plant(Internal Transaction)	Approved Approved

•

Finance Committee (March 12, 2021 ~ November 15, 2021)


Date	Agenda	Approval
April 9, 2021	• Preliminary Review Investment on commercial plant for hard rock lithium	—
May 14, 2021	• Preliminary Review Equity investment in an Australian nickel production company	—
August 11, 2021	• Deliberation Agenda 1. Venture fund investment for new growth businesses 2. Payment Guarantee Plan for PT. Krakatau POSCO • Preliminary Review Financing plan of 2021	Approved Approved —
October 8, 2021	• Deliberation Agenda 1. Payment Guarantee Plan for developing Hardey mining area of API	Approved
November 4, 2021	• Deliberation Agenda 1. Investment in kind on Dongho-an site for 2^nd LNG terminal	Approved

•

Executive Management Committee (January 1, 2021 ~ November 15, 2021)


Date	Agenda	Approval
March 23, 2021	1. Exhaust gas purification facility replacement at Gwangyang #1 sintering factory 2. EIC facility replacement at Gwangyang #2-4 casting machine 3. Reclamation work for Gwangyang facility expansion site 4. Carbon credit trading plan	All 4 Cases Approved
April 20, 2021	• Preliminary Review 1. Joint Venture company establishment with HBIS Group Co., Ltd. • Deliberation Agenda 1. Pohang education center dormitory construction	—


Date	Agenda	Approval
	2. Gwangyang education center construction 3. Construction of Park1538 Gwangyang PR Hall	All 3 Cases Approved
May 25, 2021	Improvement of facilities in Gwangyang #2 power plant	Approved
June 15, 2021	Establishment of refrigeration facilities in Pohang #2 Chemical conversion factory to increase desulfurization capacity	Approved
July 20, 2021	1. Investment in high-purity nickel refining business for batteries 2. Replacement of air blowing facilities in Gwangyang #3, #4 and #5 blast furnace	All 2 Cases Approved
August 24, 2021	1. Improvement of #2 Hot strip mill furnace of Pohang Steel Works 2. Automization of #2 Hot strip mill HPL of Gwangyang Steel Works 3. Trading Plan of Certified Emission Reductions	All 3 Cases Approved
September 28, 2021	1. Improvement of Electrical substation of Gwangyang 2. Trial run of INNOVILT(Steel product for construction) used housing project 3. Establishment of oxygen and nitrogen tank	Approved Approved Correction Approval
October 19, 2021	• Preliminary Review 1. Increase production capacity of eco-friendly electrical steel of Gwangyang Steel Works • Deliberation Agenda 1. Increase abililty of dust collection machine of 3,4 Sintering factory of Pohang 2. Establishment of Smart integrated logistics system	All 2 Cases Approved

B.	Audit Committee

(1) Composition of the Audit Committee

Name

Qualifications

Remarks

Kim, Sung-Jin

Chung, Moon-Ki

Pahk, Heui-Jae

Satisfies the requirements stipulated in the Korean Commercial Act

Chairman

—

(2) Major Activities of the Audit Committee (January 1, 2021 ~ September 30, 2021)


Session	Date	Agenda	Approval
1	January 27	• Deliberation Agenda 1. Consent to appoint the head of the internal audit department 2. Assessment of internal control over financial reporting in 2020 3. Approval of audit and non-audit services for POSCO and subsidiaries • Report Agenda 1. Report of operation of internal control over financial reporting in 2020 2. Report on approval of POSCO E&C’s audit service contract 3. The result of internal audit for the fiscal year of 2020 and audit plans for the fiscal year of 2021 4. Audit Committee activities in 2020 5. The assessment on the executives’ and employees’ conformity to the code of ethics for the fiscal year of 2020	All 3 Cases Approved — — — — —
2	February 17	• Deliberation Agenda 1. Internal audit result for the year 2020 • Report Agenda 1. External audit result for the year 2020	Approved
3	February 18	Review of the agendas for the Ordinary General Meeting of Shareholders	Approved

- At the 53^rd General Meeting of Shareholders held on March 12, 2021, due to Bahk, Byong-Won’s expiration of term in the Audit Committee, a new Audit Committee member, Kim, Sung-Jin was elected.


Session	Date	Agenda	Approval
4	March 12	1. Appointment of the Chairman of Audit Committee	Approved


Session	Date	Agenda	Approval
5	April 23	• Report Agenda 1. POSCO E&C and POSCO ICT deficit projects status and management plans 2. Operation plan for Internal Accounting Management Policy in 2021 3. Results of internal audit on the consolidated financial statements for the 1st quarter of 2021 4. Review of the impact of amendments to the U.S. listed company regulations on independence of external auditors 5. The results of the 20-F audit for 2020 and the results of external reviews on the consolidated financial statements for the 1^st quarter of 2021	— — — — —
6	August 12	• Deliberation Agenda Approval on audit contract for POSCO Lithium Soliton and POSCO-HY Clean Metal • Report Agenda 1. Approval report for PT.KP audit service contract change 2. Approval report for POSCO non-audit service contract 3. Results of internal audit on the consolidated financial statements for the 2^nd quarter of 2021 4. Results of external review of the consolidated financial statements for the 2^nd quarter of 2021 5. External Auditor Audit Activity Evaluation Results for the year 2020 6. Internal audit performance in the 1^st half of 2021 and plans for the 2^nd half of 2021
7	October 8	• Report Agenda 1. Audit trends and issues including PCAOB Supervising case
8	November 11	• Deliberation Agenda 1. Approval of POSCO non-audit service contract 2. Approval of POSCO audit service contract 3. Results of interal audit on the consolidated financial statements for the 3^rd quarter of 2021 4. Internal audit performance of 2021 and plans for 2022 • Report Agenda 1. Result of external review of the consolidated financial statement for the 3^rd quarter of 2021 2. Result of inspection for core business checklist of overseas corporation	All 4 Cases Approved

C. Voting Rights of Shareholders

(1)	The Cumulative Voting System: The cumulative voting system was introduced at the 36th general meeting of shareholders on March 12, 2004.

(2)	Voting by Mail: The voting-by-mail system was introduced at the 36th general meeting of shareholders on March 12, 2004.

(3)	The Electronic Voting System: The electronic voting system was determined at the Board of Directors meeting on February 20, 2019.

D. Compensation of Directors and Officers

(1) The Salary of Directors and Audit Committee Members

(In millions KRW)


Category	No. of people	Total payment	Average payment (Per person)	Ceiling amount approved at the general meeting of shareholders	Remarks
Inside Director	5	5,296	932	10,000	—
Outside Director (Excluding Audit Committee Members)	4	241	51		—
Audit Committee Members	3	169	56		—

ø	No. of people : The number of Directors and the Audit Committee members who are in office as of September 30, 2021.

ø	Total payment : The total amount of remuneration paid to all Directors, including the Audit Committee members, who served from January 1 to September 30, 2021.

ø	Average payment per person is calculated based on the paid amount to the current Directors and Audit Committee members as of September 30, 2021.

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2021

(With Independent Auditors’ Review Report Thereon)

Table of Contents



	Page
Independent Auditors’ Review Report		1

Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Financial Position		3

Condensed Consolidated Interim Statements of Comprehensive Income		5

Condensed Consolidated Interim Statements of Changes in Equity		6

Condensed Consolidated Interim Statements of Cash Flows		8

Notes to the Condensed Consolidated Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of September 30, 2021, the condensed consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2021 and 2020, the condensed consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2021 and 2020, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to issue a report on the condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

The consolidated statement of financial position of the Company as of December 31, 2020, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 4, 2021, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2020, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Seoul, Korea

November 12, 2021

This report is effective as of November 12, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of September 30, 2021 and December 31, 2020

(Unaudited)


(in millions of Won)	Notes	September 30, 2021		December 31, 2020
Assets

Cash and cash equivalents	21	W	5,480,045		4,754,644
Trade accounts and notes receivable, net	4,21,26,27,34		10,468,221		8,120,619
Other receivables, net	5,21,34		1,984,589		1,494,239
Other short-term financial assets	6,21		13,179,186		11,709,209
Inventories	7		13,809,620		9,051,790
Current income tax assets			33,741		49,481
Assets held for sale	8		12,256		34,210
Other current assets	14		737,955		616,623

Total current assets			45,705,613		35,830,815

Long-term trade accounts and notes receivable, net	4,21		80,636		86,423
Other receivables, net	5,21		1,340,277		1,195,962
Other long-term financial assets	6,21		2,395,620		1,561,807
Investments in associates and joint ventures	9		4,158,021		3,876,249
Investment property, net	11		1,090,937		994,781
Property, plant and equipment, net	12		29,414,128		29,400,141
Intangible assets, net	13		4,304,997		4,449,432
Defined benefit assets, net	19		9,120		86,149
Deferred tax assets			1,410,323		1,335,154
Other non-current assets	14		225,385		270,060

Total non-current assets			44,429,444		43,256,158

Total assets		W	90,135,057		79,086,973

See accompanying notes to the condensed consolidated interim financial statement

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of September 30, 2021 and December 31, 2020

(Unaudited)


(in millions of Won)	Notes	September 30, 2021			December 31, 2020
Liabilities

Trade accounts and notes payable	21,34	W	5,216,238			3,755,513
Short-term borrowings and current installments of long-term borrowings	4,15,21		8,502,430			8,677,529
Other payables	16,21,34		1,746,273			1,845,266
Other short-term financial liabilities	17,21		136,346			141,404
Current income tax liabilities			1,634,024			366,476
Liabilities directly associated with the assets held for sale	8		7			25
Provisions	18,35		384,741			443,273
Other current liabilities	20,26,27		1,785,216			1,625,482

Total current liabilities			19,405,275			16,854,968

Long-term trade accounts and notes payable	21		2,305			22,323
Long-term borrowings, excluding current installments	15,21		14,338,622			11,820,078
Other payables	16,21		699,051			558,924
Other long-term financial liabilities	17,21		31,177			133,588
Defined benefit liabilities, net	19		216,877			141,785
Deferred tax liabilities			1,314,574			1,320,726
Long-term provisions	18,35		561,209			522,969
Other non-current liabilities	20,26		44,653			37,020

Total non-current liabilities			17,208,468			14,557,413

Total liabilities			36,613,743			31,412,381

Equity

Share capital	22		482,403			482,403
Capital surplus	22		1,354,533			1,310,547
Hybrid bonds	23		199,384			199,384
Reserves	24		(704,995	)		(1,380,918	)
Treasury shares	25		(2,508,294	)		(2,391,523	)
Retained earnings			50,348,460			46,111,457

Equity attributable to owners of the controlling company			49,171,491			44,331,350
Non-controlling interests	23		4,349,823			3,343,242

Total equity			53,521,314			47,674,592

Total liabilities and equity		W	90,135,057			79,086,973

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month and nine-month periods ended September 30, 2021 and 2020

(Unaudited)


		For the three-month period ended September 30						For the nine-month period ended September 30
(in millions of Won, except per share information)	Notes	2021			2020			2021			2020
Revenue	26,27,34,37	W	20,636,883			14,261,218			54,998,072			42,528,585
Cost of sales	7,27,31,34		(16,858,368	)		(13,054,079	)		(46,258,539	)		(39,277,221	)

Gross profit			3,778,515			1,207,139			8,739,533			3,251,364

Selling and administrative expenses	31,34
Reversal of (impairment loss) on trade accounts and notes receivable			(16,431	)		15,560			(8,908	)		(19,764	)
Other administrative expenses	28		(544,661	)		(466,257	)		(1,567,051	)		(1,399,864	)
Selling expenses	28		(100,700	)		(89,734	)		(293,821	)		(292,061	)

Operating profit			3,116,723			666,708			6,869,753			1,539,675

Share of profit of equity-accounted investees, net	9		287,056			88,894			552,925			109,028

Finance income and costs	21,29
Finance income			925,999			341,431			2,101,487			1,871,524
Finance costs			(897,663	)		(385,199	)		(2,197,640	)		(1,962,525	)

Other non-operating income and expenses	34
Reversal of (impairment loss) on other receivables			(3,001	)		18,224			(15,750	)		17,437
Other non-operating income	30		62,597			66,268			396,395			233,172
Other non-operating expenses	30,31		(132,298	)		(84,170	)		(390,359	)		(301,605	)

Profit before income tax	37		3,359,413			712,156			7,316,811			1,506,706
Income tax expense	32,37		(731,794	)		(198,110	)		(1,743,241	)		(453,134	)

Profit			2,627,619			514,046			5,573,570			1,053,572

Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans	19		(3,447	)		2,225			(6,225	)		(427	)
Net changes in fair value of equity investments at fair value through other comprehensive income	21		30,254			11,495			199,143			(154,471	)
Items that are or may be reclassified subsequently to profit or loss:
Capital adjustment arising from investments in equity-accounted investees			86,979			(12,539	)		159,691			69,157
Foreign currency translation differences			204,121			(29,387	)		350,890			36,755
Gains or losses on valuation of derivatives	21		108			111			333			(730	)

Other comprehensive income (loss), net of tax			318,015			(28,095	)		703,832			(49,716	)

Total comprehensive income		W	2,945,634			485,951			6,277,402			1,003,856

Profit attributable to:
Owners of the controlling company		W	2,429,721			465,457			5,118,800			901,132
Non-controlling interests			197,898			48,589			454,770			152,440

Profit		W	2,627,619			514,046			5,573,570			1,053,572

Total comprehensive income attributable to:
Owners of the controlling company		W	2,715,538			436,989			5,784,574			849,730
Non-controlling interests			230,096			48,962			492,828			154,126

Total comprehensive income		W	2,945,634			485,951			6,277,402			1,003,856

Earnings per share (in Won)	33
Basic earnings per share			32,106			5,854			67,536			11,232
Diluted earnings per share		W	31,571			5,854			67,115			11,232

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)	Attributable to owners of the controlling company																			Non-
	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Subtotal			controlling interests			Total
Balance as of January 1, 2020	W	482,403		1,376,251			199,384		(1,157,980	)		(1,508,303	)		45,080,117			44,471,872			3,322,835			47,794,707
Comprehensive income:
Profit		—		—			—		—			—			901,132			901,132			152,440			1,053,572
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(1,433	)		(1,433	)		1,006			(427	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		69,304			—			—			69,304			(147	)		69,157
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		(151,486	)		—			(2,985	)		(154,471	)		—			(154,471	)
Foreign currency translation differences, net of tax		—		—			—		35,888			—			—			35,888			867			36,755
Gains or losses on valuation of derivatives, net of tax		—		—			—		(690	)		—			—			(690	)		(40	)		(730	)

Total comprehensive income		—		—			—		(46,984	)		—			896,714			849,730			154,126			1,003,856

Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(320,462	)		(320,462	)		(60,517	)		(380,979	)
Interim dividends		—		—			—		—			—			(160,062	)		(160,062	)		—			(160,062	)
Changes in subsidiaries		—		—			—		—			—			—			—			24,197			24,197
Changes in ownership interest in subsidiaries		—		(27,716	)		—		—			—			—			(27,716	)		166,744			139,028
Repayment of redeemable convertible preferred shares		—		(33,581	)		—		—			—			—			(33,581	)		(245,000	)		(278,581	)
Interest of hybrid bonds		—		—			—		—			—			(6,906	)		(6,906	)		(5,496	)		(12,402	)
Acquisition of treasury shares		—		—			—		—			(329,677	)		—			(329,677	)		—			(329,677	)
Others		—		1,410			—		5,368			—			(13,173	)		(6,395	)		(3,292	)		(9,687	)

Total transactions with owners of the controlling company		—		(59,887	)		—		5,368			(329,677	)		(500,603	)		(884,799	)		(123,364	)		(1,008,163	)

Balance as of September 30, 2020	W	482,403		1,316,364			199,384		(1,199,596	)		(1,837,980	)		45,476,228			44,436,803			3,353,597			47,790,400

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)	Attributable to owners of the controlling company																			Non-
	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Subtotal			controlling interests			Total
Balance as of January 1, 2021	W	482,403		1,310,547			199,384		(1,380,918	)		(2,391,523	)		46,111,457			44,331,350			3,343,242			47,674,592
Comprehensive income:
Profit		—		—			—		—			—			5,118,800			5,118,800			454,770			5,573,570
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(8,081	)		(8,081	)		1,856			(6,225	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		157,606			—			—			157,606			2,085			159,691
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		201,194			—			(2,067	)		199,127			16			199,143
Foreign currency translation differences, net of tax		—		—			—		316,855			—			—			316,855			34,035			350,890
Gains or losses on valuation of derivatives, net of tax		—		—			—		267			—			—			267			66			333

Total comprehensive income		—		—			—		675,922			—			5,108,652			5,784,574			492,828			6,277,402

Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(342,565	)		(342,565	)		(62,057	)		(404,622	)
Interim dividends		—		—			—		—			—			(529,379	)		(529,379	)		—			(529,379	)
Changes in subsidiaries		—		—			—		—			—			—			—			16,800			16,800
Changes in ownership interest in subsidiaries		—		49,514			—		—			—			—			49,514			566,539			616,053
Interest of hybrid bonds		—		—			—		—			—			(6,881	)		(6,881	)		(5,456	)		(12,337	)
Acquisition of treasury shares		—		—			—		—			(116,771	)		—			(116,771	)		—			(116,771	)
Others		—		(5,528	)		—		1			—			7,176			1,649			(2,073	)		(424	)

Total transactions with owners of the controlling company		—		43,986			—		1			(116,771	)		(871,649	)		(944,433	)		513,753			(430,680	)

Balance as of September 30, 2021	W	482,403		1,354,533			199,384		(704,995	)		(2,508,294	)		50,348,460			49,171,491			4,349,823			53,521,314

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)	Notes	September 30, 2021			September 30, 2020
Cash flows from operating activities
Profit		W	5,573,570			1,053,572
Adjustments for:
Depreciation			2,333,660			2,348,977
Amortization			332,988			336,624
Finance income			(1,109,407	)		(848,936	)
Finance costs			1,145,436			972,462
Income tax expense			1,743,241			453,134
Impairment loss on property, plant and equipment			44,536			21,684
Gain on disposal of property, plant and equipment			(8,406	)		(9,542	)
Loss on disposal of property, plant and equipment			56,389			105,440
Impairment loss on other intangible assets			27,997			1,225
Gain on disposal of investments in subsidiaries, associates and joint ventures			(26,655	)		(43,421	)
Loss on disposal of investments in subsidiaries, associates and joint ventures			7,878			13,659
Share of profit of equity-accounted investees			(552,925	)		(109,028	)
Impairment loss on assets held for sale			—			5,030
Gain on disposal of assets held for sale			(46,703	)		—
Expenses related to post-employment benefit			182,557			183,414
Impairment loss on trade and other receivables			24,658			2,327
Loss on valuation of inventories			44,936			65,575
Increase to provisions			115,351			33,787
Others, net			(60,054	)		(28,398	)

			4,255,477			3,504,013

Changes in operating assets and liabilities	36		(5,854,540	)		2,023,340

Interest received			201,958			286,899
Interest paid			(343,757	)		(463,028	)
Dividends received			523,564			149,159
Income taxes paid			(548,146	)		(566,782	)

Net cash provided by operating activities		W	3,808,126			5,987,173

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)	Notes	September 30, 2021			September 30, 2020
Cash flows from investing activities
Acquisitions of short-term financial instruments		W	(28,919,763	)		(32,406,269	)
Proceeds from disposal of short-term financial instruments			27,375,607			30,171,470
Increase in loans			(736,125	)		(589,994	)
Collection of loans			769,622			574,267
Acquisitions of securities			(188,670	)		(436,237	)
Proceeds from disposal of securities			236,447			478,633
Acquisitions of long-term financial instruments			(292,201	)		—
Acquisitions of investment in associates and joint ventures			(228,646	)		(103,176	)
Proceeds from disposal of investment in associates and joint ventures			46,178			11,841
Acquisitions of investment property			(91,737	)		(908	)
Proceeds from disposal of investment property			3,585			250
Acquisitions of property, plant and equipment			(1,906,519	)		(2,175,383	)
Proceeds from disposal of property, plant and equipment			(19,760	)		(28,412	)
Acquisitions of intangible assets			(236,668	)		(241,819	)
Proceeds from disposal of intangible assets			8,869			74,966
Proceeds from disposal of assets held for sale			59,320			36,514
Collection of lease receivables			79,460			45,805
Cash received from disposal of business, net of cash transferred			—			77,488
Others, net			776			(4,001	)

Net cash used in investing activities			(4,040,225	)		(4,514,965	)

Cash flows from financing activities
Proceeds from borrowings			3,650,451			3,686,119
Repayment of borrowings			(2,495,064	)		(1,648,402	)
Proceeds from short-term borrowings, net			262,380			918,477
Capital contribution from non-controlling interests			638,911			165,934
Payment of cash dividends			(934,029	)		(540,709	)
Acquisition of treasury shares			(116,771	)		(329,677	)
Payment of interest of hybrid bonds			(12,362	)		(12,407	)
Repayment of lease liabilities			(180,365	)		(150,822	)
Repayment of redeemable convertible preferred shares			—			(278,581	)
Others, net			11,973			(18,195	)

Net cash provided by financing activities			825,124			1,791,737

Effect of exchange rate fluctuation on cash held			132,376			(10,073	)

Net increase in cash and cash equivalents			725,401			3,253,872

Cash and cash equivalents at beginning of the period	8		4,755,578			3,515,246

Cash and cash equivalents at end of the period	8	W	5,480,979			6,769,118

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of September 30, 2021

(Unaudited)

1. General Information

General information about POSCO, its 35 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 131 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 129 associates and joint ventures are as follows:

(a)	The controlling company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea, to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of POSCO have been listed on the Korea Exchange since June 10, 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through five of its overseas liaison offices.

As of September 30, 2021, the shares of the POSCO are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchange.

(b)	Consolidated subsidiaries newly established during the nine-month period ended September 30, 2021, are as follows:


Company	Date of inclusion	Ownership (%)		Reason
Poland Legnica Sourcing Center Sp. z o.o	February 2021		100.00	New establishment
POSCO Lithium Solution Co., Ltd.	April 2021		100.00	New establishment
POSCO-HY Clean Metal Co., Ltd.	May 2021		65.00	New establishment

(c)	Subsidiaries for which the Company lost control during the nine-month period ended September 30, 2021, are as follows:


Company	Date of exclusion	Reason
POSCO E&C Mongolia	January 2021	Liquidation
Suncheon Eco Trans Co. LTD	May 2021	Loss of control due to bankruptcy petition
POSCO AMERICA COMERCIALIZADORA S DE RL DE CV	July 2021	Merged into POSCO INTERNATIONAL MEXICO S.A. DE C.V

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

2. Statement of Compliance

Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies, etc. in the Republic of Korea.

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2020. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

(a)	Judgments, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

(b)	Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

Significant valuation issues are reported to the Company’s Audit Committee.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

•

Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly.

•

Level 3 - inputs for the assets or liabilities that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2020.

Changes in Accounting Policies

The changes in accounting policies described below will be applied to the consolidated financial statements as of and for the year ended December 31, 2021.

(a)	K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments : Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1104 “Insurance Contracts” , K-IFRS No. 1116 “Lease” – Interest Rate Benchmark Reform

Market-wide interest rate benchmark reform requires disclosure of exceptions to practical expedients and discontinuation of hedge accounting in accordance with K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments : Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1104 “Insurance Contracts” , K-IFRS No. 1116 “Lease”. The effect of the amendments to the consolidated financial statements is not significant.

New and amended standards not yet adopted

A number of new and amended standards are effective for annual periods beginning after January 1, 2021 and earlier application is permitted but the Company has not early adopted the new or amended standards in preparing these condensed consolidated financial statements.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(a)	K-IFRS No. 1016 “Property, Plant and Equipment”

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the Company is preparing the asset for its intended use. Instead, the Company will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

(b)	K-IFRS No. 1103 “Business Combination”

The definition of assets and liabilities to be recognized is amended to refer to the revised Conceptual Framework for Financial Reporting. However, the amendments add an exception which allows K-IFRS No. 1037 “Provisions, Contingent Liabilities and Contingent Assets” and K-IFRS No. 2121 “Levies” to be applied to the liabilities and contingent liabilities included in the scope of these standards. The amendments also clarify that contingent assets should not be recognized at the acquisition date. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Current
Trade accounts and notes receivable	W	9,788,906			7,471,916
Finance lease receivables		110			41,841
Due from customers for contract work		1,030,089			948,879
Less: Allowance for doubtful accounts		(350,884	)		(342,017	)

	W	10,468,221			8,120,619

Non-current
Trade accounts and notes receivable	W	127,502			131,010
Finance lease receivables		—			46
Less: Allowance for doubtful accounts		(46,866	)		(44,633	)

	W	80,636			86,423

The Company sold trade accounts and notes receivable with recourse to financial institutions. These trade accounts and notes receivable have not been derecognized from the statement of financial position, because the Company retains substantially all of the risks and rewards associated with the transferred assets. The amounts received on transfer have been recognized as secured borrowings. As of September 30, 2021, and December 31, 2020, the carrying amounts of such secured borrowings are W349,322 million and W328,807 million, respectively, which are presented in the statements of financial position as the short-term borrowings.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

5. Other Receivables

Other receivables as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Current
Loans	W	284,674			258,735
Other accounts receivable		1,230,271			835,791
Accrued income		362,424			298,157
Deposits		126,596			82,884
Others		15,490			18,015
Lease receivables		48,263			68,198
Less: Allowance for doubtful accounts		(83,129	)		(67,541	)

	W	1,984,589			1,494,239

Non-current
Loans	W	901,493			798,287
Other accounts receivable		208,551			197,304
Accrued income		84,027			86,920
Deposits		324,006			284,588
Lease receivables		91,904			128,366
Less: Allowance for doubtful accounts		(269,704	)		(299,503	)

	W	1,340,277			1,195,962

6. Other Financial Assets

Other financial assets as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Derivatives assets	W	91,818		99,324
Debt securities		53,144		154,154
Deposit instruments(*1,2)		3,028,331		2,322,327
Short-term financial instruments(*2)		10,005,893		9,133,404

	W	13,179,186		11,709,209

Non-current
Derivatives assets	W	200,155		18,551
Equity securities(*3)		1,388,967		1,120,968
Debt securities		19,406		20,260
Other securities(*3)		459,297		364,404
Deposit instruments(*2)		35,594		37,624
Long-term financial instruments		292,201		—

	W	2,395,620		1,561,807

(*1)	As of September 30, 2021 and December 31, 2020, W3,599 million and W4,881 million, respectively, are restricted in use for government project.

(*2)	As of September 30, 2021 and December 31, 2020, financial instruments amounting to W87,317 million and W46,855 million, respectively, are restricted in use for financial arrangements, pledge and others.

(*3)	As of September 30, 2021 and December 31, 2020, W187,768 million and W113,674 million of equity and other securities, respectively, have been provided as collateral for borrowings, construction projects and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

7. Inventories

Inventories as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Finished goods	W	1,896,223			1,285,552
M erchandise		1,178,417			751,245
Semi-finished goods		2,381,455			1,626,855
Raw materials		3,403,100			1,980,518
Fuel and materials		906,202			876,593
Construction inventories		825,418			936,813
M aterials-in-transit		3,267,200			1,664,770
Others		80,988			61,086

		13,939,003			9,183,432

Less: Allowance for inventories valuation		(129,383	)		(131,642	)

	W	13,809,620			9,051,790

The amounts of loss on valuation of inventories recognized in cost of sales during the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were W44,936 million and W54,014 million, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

8. Assets Held for Sale

Details of assets held for sale as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021						December 31, 2020
	The controlling company *(1, 2, 3)**		Subsidiaries		Total		The controlling *company(3)**		Subsidiaries		Total
Asset
Cash and cash equivalents(*4)	W	—		934		934		—		934		934
Other financial assets		—		273		273		—		273		273
Property, plant and equipment		10,331		—		10,331		32,244		40		32,284
Others		—		718		718		—		719		719

	W	10,331		1,925		12,256		32,244		1,966		34,210

Liability
Others	W	—		7		7		—		25		25

(*1)	During the nine-month period ended September 30, 2021, the Company sold the land in the Yanghak Neighborhood Park development reserve area that was classified as held for sale and the Company recognized W43,760 million of gain on disposal.

(*2)	During the nine-month period ended September 30, 2021, the Company decided to sell the emission rights and reclassified the emission rights to assets held for sale. Upon the sale, the Company recognized W1,316 million loss on disposal.

(*3)

During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM plants, and classified the assets as held for sale. During the year ended December 31, 2020 the Company recognized W5,030 million of impairment loss for the difference between the fair value less cost to sell and the carrying amount of the assets. During the nine-month period ended September 30, 2021, the Company disposed of the assets held for sale for W20,793 million.

(*4)	Cash and cash equivalents in the statement of cash flows include cash and cash equivalents that are classified as assets held for sale.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

9. Investments in Associates and Joint ventures

(a)	Details of investments in associates as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021								December 31, 2020
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund		178,691,901,565		36.34	W	178,787	W	177,867		175,939
Samcheok Blue Power Co.,Ltd.(*1)		4,507,138		34.00		199,410		155,967		145,092
SNNC		18,130,000		49.00		90,650		174,741		160,332
QSONE Co.,Ltd.		200,000		50.00		84,395		86,209		86,004
Chun-cheon Energy Co., Ltd(*1)		17,308,143		49.10		86,541		20,161		23,913
Western Inland highway CO.,LTD.		10,988,115		26.55		53,967		52,423		45,070
NEXTRAIN Co., Ltd.(*2)		—		—		—		—		47,364
Metropolitan Outer Ring Expressway co., ltd.(*1)		5,878,095		23.27		30,364		30,691		13,721
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		2,008,000		29.53		10,040		19,811		17,137
Daesung Steel(*3)		108,038		17.54		14,000		18,185		16,990
PCC Amberstone Private Equity Fund 1(*3)		8,459,847,946		8.80		8,342		9,443		9,230
Others (59 companies)(*1)								110,453		103,472

								855,951		844,264

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		132,907		240,225		199,342
AES-VCM Mong Duong Power Company Limited(*1)		—		30.00		164,303		190,347		158,777
9404-5515 Quebec Inc.(*3)		114,452,000		10.40		124,341		136,922		123,296
FQM Australia Holdings Pty Ltd(*4)		186,000,030		30.00		106,621		106,641		—
Eureka Moly LLC		—		20.00		240,123		47,396		43,520
AMCI (WA) PTY LTD		49		49.00		209,664		68,609		71,732
NCR LLC		—		22.10		84,218		88,808		46,608
KOREA LNG LTD.		2,400		20.00		135,205		26,451		42,229
Nickel Mining Company SAS		3,234,698		49.00		157,585		47,370		40,890
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		134,400,000		40.00		22,423		22,940		22,147
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,200,000		34.00		9,517		18,098		15,181
PT. Wampu Electric Power(*1)		8,708,400		20.00		10,054		15,716		12,716
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		50		25.00		4,723		8,860		7,110
Others (25 companies)(*1)								126,810		105,021

								1,145,193		888,569

							W	2,001,144		1,732,833

(*1)	As of September 30, 2021 and December 31, 2020, investments in associates amounting to W424,050 million and W410,573 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2)	During the nine-month period ended September 30, 2021, investment in this associate was transferred to equity security at fair value through other comprehensive income due to decline in ownership upon capital increase in the associate in which the Company did not participate.

(*3)	As of September 30, 2021, it was classified as an associate even though the Company’s ownership percentage is less than 20% since the Company has significant influence over the investee when considering the structure of its Board of Directors and others.

(*4)	During the nine-month period ended September 30, 2021, the Company acquired shares of FQM Australia Holdings Pty Ltd and classified the investment as investment in an associate.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Details of investments in joint ventures as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021								December 31, 2020
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
POSCO MITSUBISHI CARBON TECHNOLOGY		11,568,000		60.00	W	115,680	W	166,381		153,457
Others (5 companies)								8,064		14,014

								174,445		167,471

[Foreign]
Roy Hill Holdings Pty Ltd(*1)		13,117,972		12.50		1,528,672		1,356,576		1,418,056
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		385,218		353,725
KOBRASCO		2,010,719,185		50.00		32,950		83,863		54,400
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		25.00		61,961		105,035		91,270
DMSA/AMSA(*1,2)		—		3.87		391,816		21,063		31,104
CSP - Compania Siderurgica do Pecem		1,578,377,432		20.00		676,060		—		—
Others (10 companies)								30,677		27,390

								1,982,432		1,975,945

							W	2,156,877		2,143,416

(*1)	As of September 30, 2021 and December 31, 2020, the investments in joint ventures are provided as collateral in relation to the joint ventures’ borrowings.

(*2)

All of the shareholders of the joint venture entered into supplemental funding agreement to extend the maturity of the loans to the joint venture by the lenders. However, the Company believed the shareholders’ supplemental funding agreement was invalid and was in arbitration process for annulment. Pursuant to the final judgement from the arbitration, the Company received a refund of the previously provided supplement funding which was subsequently converted to shares. Upon receipt of such capital distribution, the Company recognized decrease in the investment on joint venture, which also resulted in decrease in the Company’s ownership in the investee.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(c)	The movements of investments in associates and joint ventures for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)
Company	December 31, 2020 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase *(decrease)(1)**			September 30, 2021 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	175,939		—		—			1,928			—			177,867
Samcheok Blue Power Co., Ltd.		145,092		20,000		(206	)		(3,568	)		(5,351	)		155,967
SNNC		160,332		—		(18,243	)		32,652			—			174,741
QSONE Co., Ltd.		86,004		—		(1,140	)		1,345			—			86,209
Chun-cheon Energy Co., Ltd		23,913		—		—			(383	)		(3,369	)		20,161
Western Inland highway CO., LTD.		45,070		4,031		—			(1,255	)		4,577			52,423
NEXTRAIN Co., Ltd.		47,364		—		—			(127	)		(47,237	)		—
Metropolitan Outer Ring Expressway co., ltd.		13,721		13,954		—			(1,775	)		4,791			30,691
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		17,137		—		—			2,674			—			19,811
Daesung Steel		16,990		—		—			1,195			—			18,185
PCC Amberstone Private Equity Fund 1		9,230		—		(508	)		919			(198	)		9,443
POSCO MITSUBISHI CARBON TECHNOLOGY		153,457		—		—			12,924			—			166,381
Others (64 companies)		117,486		33,831		(5,956	)		(6,090	)		(20,754	)		118,517

		1,011,735		71,816		(26,053	)		40,439			(67,541	)		1,030,396

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		199,342		—		(12,544	)		34,545			18,882			240,225
AES-VCM Mong Duong Power Company Limited		158,777		—		(28,623	)		26,497			33,696			190,347
9404-5515 Quebec Inc.		123,296		—		(16,999	)		19,060			11,565			136,922
FQM Australia Holdings Pty Ltd		—		106,621		—			—			20			106,641
Eureka Moly LLC		43,520		—		—			—			3,876			47,396
AMCI (WA) PTY LTD		71,732		—		—			(4,379	)		1,256			68,609
NCR LLC		46,608		30,278		—			(1,264	)		13,186			88,808
KOREA LNG LTD.		42,229		—		(6,692	)		6,671			(15,757	)		26,451
Nickel Mining Company SAS		40,890		—		—			5,289			1,191			47,370
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		22,147		—		—			(1,273	)		2,066			22,940
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		15,181		—		—			1,134			1,783			18,098
PT. Wampu Electric Power		12,716		—		—			1,400			1,600			15,716
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,110		—		—			622			1,128			8,860
Roy Hill Holdings Pty Ltd		1,418,056		—		(480,130	)		379,002			39,648			1,356,576
POSCO-NPS Niobium LLC		353,725		—		(20,479	)		20,434			31,538			385,218
KOBRASCO		54,400		—		(7,422	)		33,888			2,997			83,863
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		91,270		—		—			5,290			8,475			105,035
DMSA/AMSA		31,104		—		—			(13,080	)		3,039			21,063
CSP - Compania Siderurgica do Pecem		—		19,176		—			(27,816	)		8,640			—
Others (35 companies)		132,411		755		(3,440	)		26,466			1,295			157,487

		2,864,514		156,830		(576,329	)		512,486			170,124			3,127,625

	W	3,876,249		228,646		(602,382	)		552,925			102,583			4,158,021

(*1)	Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments effect from translations of financial statements of foreign investees and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

For the year ended December 31, 2020


(in millions of Won)
Company	December 31, 2019 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2020 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	175,907		—		—			34			(2	)		175,939
Samcheok Blue Power Co., Ltd.		161,280		—		—			(5,262	)		(10,926	)		145,092
SNNC		142,602		—		(2,901	)		18,701			1,930			160,332
QSONE Co., Ltd.		85,887		—		(1,140	)		1,257			—			86,004
Chun-cheon Energy Co., Ltd		56,679		—		—			(33,173	)		407			23,913
Western Inland highway CO., LTD.		5,115		42,246		—			(2,294	)		3			45,070
NEXTRAIN Co., Ltd.		41,447		7,910		—			(2,786	)		793			47,364
Metropolitan Outer Ring Expressway co., ltd.		8,343		5,573		—			(195	)		—			13,721
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		17,824		—		—			(687	)		—			17,137
Daesung Steel		15,375		—		—			(514	)		2,129			16,990
PCC Amberstone Private Equity Fund 1		9,570		—		(715	)		589			(214	)		9,230
POSCO MITSUBISHI CARBON TECHNOLOGY		182,648		—		(19,401	)		(9,794	)		4			153,457
Others (65 companies)		135,890		22,145		(1,328	)		(28,128	)		(11,093	)		117,486

		1,038,567		77,874		(25,485	)		(62,252	)		(16,969	)		1,011,735

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		225,933		—		(56,760	)		45,941			(15,772	)		199,342
AES-VCM Mong Duong Power Company Limited		178,892		—		(16,053	)		37,092			(41,154	)		158,777
9404-5515 Quebec Inc.		131,529		—		(11,672	)		10,963			(7,524	)		123,296
Eureka Moly LLC		85,349		—		—			(39,801	)		(2,028	)		43,520
AMCI (WA) PTY LTD		72,937		—		—			(6,561	)		5,356			71,732
NCR LLC		46,391		4,196		—			(1,452	)		(2,527	)		46,608
KOREA LNG LTD.		46,557		—		(7,755	)		7,681			(4,254	)		42,229
Nickel Mining Company SAS		37,940		—		—			1,473			1,477			40,890
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		22,356		—		—			(384	)		175			22,147
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		15,128		—		—			(80	)		133			15,181
PT. Wampu Electric Power		13,363		—		(559	)		1,411			(1,499	)		12,716
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,755		—		—			279			76			7,110
Roy Hill Holdings Pty Ltd		1,235,682		—		(113,985	)		234,693			61,666			1,418,056
POSCO-NPS Niobium LLC		376,410		—		(11,244	)		11,449			(22,890	)		353,725
KOBRASCO		115,641		—		(37,922	)		8,443			(31,762	)		54,400
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,935		—		—			1,790			545			91,270
DMSA/AMSA		12,189		60,278		—			(33,305	)		(8,058	)		31,104
CSP - Compania Siderurgica do Pecem		—		62,711		—			(60,708	)		(2,003	)		—
Others (37 companies)		177,201		—		(12,114	)		(23,375	)		(9,301	)		132,411

		2,889,188		127,185		(268,064	)		195,549			(79,344	)		2,864,514

	W	3,927,755		205,059		(293,549	)		133,297			(96,313	)		3,876,249

(*1)	Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals, change in capital adjustments effect from translations of financial statements of foreign investees and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(d)	Summarized financial information of associates and joint ventures as of and for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 are as follows:

September 30, 2021


(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	463,280		560		462,720			—		6,372
Samcheok Blue Power Co., Ltd.		1,965,409		1,504,154		461,255			—		(3,637	)
SNNC		591,775		213,790		377,985			624,524		61,618
QSONE Co., Ltd.		251,190		78,773		172,417			13,412		2,690
Chun-cheon Energy Co., Ltd		606,961		519,179		87,782			224,051		(5,069	)
Western Inland highway CO., LTD.		234,421		32,900		201,521			—		(1,531	)
Metropolitan Outer Ring Expressway co., ltd.		191,235		68,067		123,168			—		(644	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		60,688		23,911		36,777			45,543		9,056
Daesung Steel		171,037		98,750		72,287			80,557		6,810
PCC Amberstone Private Equity Fund 1		107,356		—		107,356			8,825		10,447
POSCO MITSUBISHI CARBON TECHNOLOGY		464,505		185,430		279,075			112,063		23,297
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,620,063		660,709		959,354			328,175		137,954
AES-VCM Mong Duong Power Company Limited		1,766,927		1,149,039		617,888			285,157		88,322
9404-5515 Quebec Inc.		1,336,516		7,804		1,328,712			—		183,272
FQM Australia Holdings Pty Ltd		1,258,404		894,850		363,554			—		—
KOREA LNG LTD.		132,593		335		132,258			34,911		33,357
Nickel Mining Company SAS		472,172		316,976		155,196			217,245		15,073
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		130,982		73,982		57,000			20,246		(3,344	)
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		110,865		52,136		58,729			118,566		3,406
PT. Wampu Electric Power		205,956		130,394		75,562			14,512		7,001
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		79,610		45,110		34,500			80,303		2,386
Roy Hill Holdings Pty Ltd		10,517,930		3,873,916		6,644,014			7,138,591		3,194,345
POSCO-NPS Niobium LLC		770,233		—		770,233			—		35,862
KOBRASCO		219,311		51,585		167,726			108,588		68,048
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		627,186		233,913		393,273			1,588,495		21,160
DMSA/AMSA		2,612,473		2,073,889		538,584			362,965		(2,220,123	)
CSP - Compania Siderurgica do Pecem		3,720,116		3,809,008		(88,892	)		1,971,873		332,704

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

December 31, 2020


(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	473,415		575		472,840			—		8,534
Samcheok Blue Power Co., Ltd.		1,169,343		700,266		469,077			—		(5,994	)
SNNC		592,568		238,971		353,597			698,712		39,826
QSONE Co., Ltd.		251,190		79,182		172,008			17,075		2,513
Chun-cheon Energy Co., Ltd		609,815		516,963		92,852			222,066		(24,617	)
Western Inland highway CO., LTD.		158,679		2,534		156,145			—		(1,714	)
NEXTRAIN Co., Ltd.		303,359		74,738		228,621			—		(2,636	)
Metropolitan Outer Ring Expressway co., ltd.		98,510		34,360		64,150			—		(920	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd		54,832		27,111		27,721			6,672		(2,326	)
Daesung Steel		172,088		106,611		65,477			85,158		(2,930	)
PCC Amberstone Private Equity Fund 1		104,933		5		104,928			12,280		6,694
POSCO MITSUBISHI CARBON TECHNOLOGY		446,067		190,289		255,778			112,173		(15,603	)
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,515,828		719,745		796,083			458,806		183,465
AES-VCM Mong Duong Power Company Limited		1,599,095		1,086,440		512,655			336,174		121,644
9404-5515 Quebec Inc.		1,197,702		3		1,197,699			—		105,411
KOREA LNG LTD.		211,497		353		211,144			40,086		38,370
Nickel Mining Company SAS		445,140		308,885		136,255			223,427		(8,353	)
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		72,001		16,812		55,189			3,236		(1,086	)
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		71,805		21,486		50,319			104,537		(237	)
PT. Wampu Electric Power		199,841		139,264		60,577			20,272		7,057
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		68,036		38,843		29,193			78,954		1,156
Roy Hill Holdings Pty Ltd		9,271,788		2,161,353		7,110,435			5,993,950		2,299,529
POSCO-NPS Niobium LLC		707,247		—		707,247			—		25,406
KOBRASCO		118,676		9,875		108,801			32,854		16,887
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		873,174		534,961		338,213			1,252,189		7,856
DMSA/AMSA		4,924,371		2,294,881		2,629,490			204,820		(772,396	)
CSP - Compania Siderurgica do Pecem		3,142,831		3,657,314		(514,483	)		1,402,742		(623,381	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of September 30, 2021 are as follows:


Joint operations	Operation	Ownership (%)		Location
Myanmar A-1/A-3 mine	Mine development and gas production		51.00	Myanmar
Offshore Midstream	Gas transportation facility		51.00	Myanmar
Greenhills Mine	Mine development		20.00	Canada
Arctos Anthracite Coal Project	Mine development		50.00	Canada
Mt. Thorley J/V	Mine development		20.00	Australia
POSMAC J/V	Mine development		20.00	Australia
Hanam-Gamil package public housing project	Construction		7.70	Korea
Hanam-Gamil district B6, C2, C3 Block public housing lot development project	Construction		27.00	Korea
Yangsan-Sasong district public housing project(private-participation)	Construction		19.92	Korea
Yangsan-Sasong district public housing project	Construction		49.00	Korea
Sejong 2-1 P3 Block public housing project	Construction		37.00	Korea
Yongin-Giheung Station area city development project	Construction		61.00	Korea
Korean wave world complex land multi-purpose building development project	Construction		33.30	Korea
Sejong 4-1 P3 Block public housing project	Construction		60.00	Korea

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

11. Investment Property, Net

Changes in the carrying amount of investment property for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

(a)	For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Others(1)**			Ending
Land	W	279,397		83,497		(1,057	)		—			(19,977	)		341,860
Buildings		559,584		11,235		(2,077	)		(15,894	)		29,575			582,423
Structures		1,199		—		—			(453	)		198			944
Right-of-use assets		154,601		—		—			(3,405	)		14,514			165,710

	W	994,781		94,732		(3,134	)		(19,752	)		24,310			1,090,937

(*1)	Includes reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences, and others.

(b)	For the year ended December 31, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			*Depreciation(1)**			*Others(2)**			Ending
Land	W	278,465		2,814		(183	)		—			(1,699	)		279,397
Buildings		598,159		385		—			(9,681	)		(29,279	)		559,584
Structures		1,178		—		—			(610	)		631			1,199
Right-of-use assets		425		—		(56	)		(3,206	)		157,438			154,601

	W	878,227		3,199		(239	)		(13,497	)		127,091			994,781

(*1)	Includes reversal of impairment loss on investment property recognized by POSCO(Dalian) IT Center Development Co., Ltd., a subsidiary, in relation to its office lease amounting to W14,953 million.

(*2)	Includes reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences, and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

12. Property, Plant and Equipment, Net

(a)	Changes in the carrying amount of property, plant and equipment for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment loss(*1,3)			*Others(2)**			Ending
Land	W	2,590,087		60,872		(116	)		—			—			50,054			2,700,897
Buildings		4,161,400		6,122		(2,907	)		(237,681	)		(595	)		262,392			4,188,731
Structures		3,025,226		11,664		(1,183	)		(172,340	)		(4	)		110,174			2,973,537
Machinery and equipment		16,857,307		136,525		(14,366	)		(1,703,112	)		(18,313	)		663,655			15,921,696
Vehicles		37,156		7,694		(585	)		(11,089	)		—			3,275			36,451
Tools		60,301		16,241		(150	)		(22,568	)		—			13,915			67,739
Furniture and fixtures		127,459		16,897		(1,096	)		(35,447	)		—			32,493			140,306
Lease assets		773,700		169,913		(7,976	)		(124,714	)		—			68,894			879,817
Bearer plants		149,965		—		(24,596	)		(6,956	)		—			38,148			156,561
Construction-in-progress		1,617,540		1,651,089		(4,627	)		—			(25,624	)		(889,985	)		2,348,393

	W	29,400,141		2,077,017		(57,602	)		(2,313,907	)		(44,536	)		353,015			29,414,128

(*1)	During the nine-month period ended September 30, 2021, the Company recognized impairment losses on individual assets for which operations were discontinued due to fire or other loss.

(*2)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

(*3)

During the nine-month period ended September 30, 2021, evidence of impairment has occurred due to changes in the quality of bituminous coal and changes in production plans at Narrabri Coal Mine where POSCO INTERNATIONAL AUSTRALIA HOLDINGS PTY. LTD, a subsidiary of the Company, participates as a non-operating party. The Company recognized an impairment loss of W27,643 million since recoverable amounts are less than their carrying amounts.

For the year ended December 31, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment loss(*1)			*Others(2)**			Ending
Land	W	2,526,059		29,639		(2,633	)		—			3,490			33,532			2,590,087
Buildings		4,215,454		13,825		(6,296	)		(319,774	)		(3,778	)		261,969			4,161,400
Structures		2,904,506		85,958		(6,661	)		(231,737	)		(883	)		274,043			3,025,226
Machinery and equipment		17,218,264		138,533		(27,966	)		(2,298,951	)		(8,080	)		1,835,507			16,857,307
Vehicles		32,285		6,475		(546	)		(14,599	)		—			13,541			37,156
Tools		70,751		20,230		(211	)		(38,838	)		—			8,369			60,301
Furniture and fixtures		130,132		23,352		(2,908	)		(43,832	)		(519	)		21,234			127,459
Lease assets		774,582		204,699		(9,300	)		(172,029	)		—			(24,252	)		773,700
Bearer plants		124,193		118		(155	)		(7,971	)		—			33,780			149,965
Construction-in-progress		1,929,747		2,835,921		(7,001	)		—			(17,270	)		(3,123,857	)		1,617,540

	W	29,925,973		3,358,750		(63,677	)		(3,127,731	)		(27,040	)		(666,134	)		29,400,141

(*1)

The Company estimated the recoverable amount of individual assets that it ceased their use due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2020. During the year ended December 31, 2020, the Company recognized impairment losses on damaged assets due to fire.

(*2)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Land	W	371,719		6,008		(11,006	)		30,444			397,165
Buildings and structures		171,760		19,817		(47,458	)		8,392			152,511
Machinery and equipment		239,181		10,856		(31,153	)		37,540			256,424
Vehicles		11,456		9,050		(5,295	)		(1,590	)		13,621
Ships		106,555		120,217		(12,536	)		—			214,236
Others		27,630		3,965		(20,671	)		646			11,570

	W	928,301		169,913		(128,119	)		75,432			1,045,527

For the year ended December 31, 2020


(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Land	W	341,767		18,962		(16,397	)		27,387			371,719
Buildings and structures		171,112		47,374		(57,593	)		10,867			171,760
Machinery and equipment		215,828		86,373		(38,909	)		(24,111	)		239,181
Vehicles		14,105		6,186		(9,486	)		651			11,456
Ships		24,082		111,537		(29,064	)		—			106,555
Others		8,113		45,803		(23,786	)		(2,500	)		27,630

	W	775,007		316,235		(175,235	)		12,294			928,301

(c)	The amounts recognized in profit or loss related to leases for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2021		2020		2021		2020
Interest on lease liabilities	W	7,386		9,720		24,519		27,550
Expenses relating to short-term leases		4,317		2,672		14,247		11,522
Expenses relating to leases of low-value assets		5,822		2,035		13,567		9,959

	W	17,525		14,427		52,333		49,031

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill and other intangible assets for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

(a)	For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment loss(*2,4)			*Others(3)**			Ending
Goodwill	W	903,893		—		—			—			—			2,996			906,889
Intellectual property rights		2,170,738		174,994		(485	)		(201,495	)		(19,985	)		58,650			2,182,417
Membership(*1)		138,703		5,711		(3,619	)		(101	)		57			591			141,342
Development expense		227,111		822		—			(55,033	)		(480	)		(26,856	)		145,564
Port facilities usage rights		236,272		—		—			(16,881	)		—			328			219,719
Exploratation and evaluation assets		57,140		2,809		—			—			258			1,079			61,286
Customer relationships		330,247		—		—			(33,359	)		—			(92	)		296,796
Other intangible assets		385,328		45,696		(14,834	)		(26,111	)		(7,180	)		(31,915	)		350,984

	W	4,449,432		230,032		(18,938	)		(332,980	)		(27,330	)		4,781			4,304,997

(*1)	Economic useful life of membership is indefinite.

(*2)	During the nine-month period ended September 30, 2021, the Company decided to sell a portion of emission rights and recognized W7,180 million of impairment loss since book value exceeded fair value less costs to sell.

(*3)	Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

(*4)

During the nine-month period ended September 30, 2021, evidence of impairment has occurred due to changes in the quality of bituminous coal and changes in production plans at Narrabri Coal Mine where POSCO INTERNATIONAL AUSTRALIA HOLDINGS PTY. LTD, a subsidiary of the Company, participates as a non-operating party. The Company recognized an impairment loss of W19,985 million since recoverable amounts are less than their carrying amounts.

(b)	For the year ended December 31, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment loss(*2)			*Others(3)**			Ending
Goodwill	W	1,097,809		—		—			—			(189,379	)		(4,537	)		903,893
Intellectual property rights		2,279,210		136,195		(3,617	)		(282,594	)		(7,727	)		49,271			2,170,738
Membership(*1)		148,078		3,416		(12,340	)		(107	)		244			(588	)		138,703
Development expense		94,339		1,315		(16	)		(56,329	)		(206	)		188,008			227,111
Port facilities usage rights		281,398		—		—			(44,893	)		—			(233	)		236,272
Exploratation and evaluation assets		77,271		14,886		—			—			—			(35,017	)		57,140
Customer relationships		374,875		—		—			(44,478	)		—			(150	)		330,247
Other intangible assets		555,493		159,590		(61,692	)		(37,157	)		—			(230,906	)		385,328

	W	4,908,473		315,402		(77,665	)		(465,558	)		(197,068	)		(34,152	)		4,449,432

(*1)	Economic useful life of membership is indefinite.

(*2)

During the year ended December 31, 2020, the Company recognized W188,619 million of impairment loss on goodwill allocated to POSCO INTERNATIONAL Corporation CGU, a subsidiary included in trading segment since the recoverable amount calculated on the basis of value in use is less than the carrying amount of the CGU.

(*3)	Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

14. Other Assets

Other assets as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Advance payments	W	458,214		348,753
Prepaid expenses		210,584		181,985
Firm commitment asset		23,098		23,506
Others		46,059		62,379

	W	737,955		616,623

Non-current
Advance payments	W	22,068		21,587
Prepaid expenses		78,843		92,774
Others(*1)		124,474		155,699

	W	225,385		270,060

(*1)

As of September 30, 2021 and December 31, 2020, the Company recognized tax assets amounting to W67,464 million and W121,225 million, respectively, based on the Company’s best estimate of the tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years’ tax audits and claim for rectification are finalized.

15. Borrowings

(a)	Short-term borrowings and current portion of long-term borrowings and others as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	Lenders	Interest rate (%)		September 30, 2021			December 31, 2020
Short-term borrowings
Bank overdrafts	JP Morgan and others		0.51 ~ 6.00	W	125,209			146,762
Short-term borrowings	HSBC and others		0.17 ~ 19.00		5,602,479			5,047,633

					5,727,688			5,194,395

Current portion of long-term liabilities
Current portion of long-term borrowings	Export-Import Bank of Korea and others		0.19 ~ 8.50		960,103			1,067,338
Current portion of debentures	Merrill Lynch and others		0.90 ~ 4.30		1,815,942			2,417,339
Less: Current portion of discount on debentures issued					(1,303	)		(1,543	)

					2,774,742			3,483,134

				W	8,502,430			8,677,529

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Long-term borrowings, excluding current portion and others as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	Lenders	Interest rate (%)	September 30, 2021			December 31, 2020
Long-term borrowings	Export-Import Bank of Korea and others	0.45 ~ 4.50	W	3,993,877			3,366,400
Less: Present value discount				(14,215	)		(16,058	)
Bonds	KB Securiest Co., Ltd. and others	0.50 ~ 4.00		8,880,270			8,505,485
Less: Discount on debentures issued				(29,459	)		(35,749	)
Exchangeable bonds(*1)	Foreign currency exchangeable bonds	—		1,508,149			—
			W	14,338,622			11,820,078

(*1)	The major conditions of the exchangeable bonds issued by the Company on September 1, 2021 are as follows.


		Foreign currency exchangeable bonds
Type of bond		Exchangeable bonds

Aggregate principal amount		EUR 1,065,900,000

Interest rate		- Coupon rate : - - Yield to maturity : (0.78%)

Maturity date		September 1, 2026

Redemption		- Redemption at maturity: Outstanding bond principal, which is not repaid early or which call option is not exercised on, is repaid at maturity as a lump sum - Prepayment: The issuer has call option and the bondholders have put option

Exchange rate		100%

Exchange price (Won/share)		494,450

Underlying shares		Registered common shares(treasury shares)

Exchange period		From October 12, 2021 to August 22, 2026

Adjustments for exchange price		Adjusting the exchange price according to the terms and conditions of the bond in the events of reason for adjusting the exchange price such as, bonus issue, share split, share consolidation, change of share type, issuance of options or warranties to shareholders, share dividend, cash dividend, rights issue under the market price

Put option by bondholders		- 3 years(September 1, 2024) from the closing date - In the event of a change of control of the Company - Where the shares issued by the Company are delisted (or suspended for more than 30 consecutive trading days)

Call option by the issuer		- Share price (based on closing price) is higher than 130% of exchange price for more than 20 trading days during 30 consecutive trading days in a row, after 3 years (September 1, 2024) from the closing day to 30 business days before the maturity of bonds - When the outstanding balance of outstanding bonds is less than 10% of the total issuance(Clean Up Call) - Where additional reasons for tax burden arise due to the amendment of relevant laws and regulations, etc

The Company has designated exchangeable bonds listed on the Singapore Stock Exchange as financial liabilities measured at fair value through profit or loss. The quoted transaction price is used in fair value valuation, and changes in fair value are recognized in profit or loss.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(c)	Assets pledged as collateral in regard to the borrowings as of September 30, 2021 are as follows:


(in millions of Won)	Lenders	Book value		Pledged amount
Cash and cash equivalents	Shinhan Bank and others	W	39,619		39,817
Property, plant and equipment and Investment property	Korea Development Bank and others		4,463,168		5,300,893
Trade accounts and notes receivable	Korea Development Bank and others		350,218		349,851
Inventories	Export-Import Bank of Korea and others		106,231		12,650
Financial instruments	KB Kookmin Bank and others		25,638		25,637

		W	4,984,874		5,728,848

16. Other Payables

Other payables as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Accounts payable	W	728,800		800,439
Accrued expenses		731,158		697,087
Dividend payable		2,650		2,703
Lease liabilities		157,317		244,548
Withholdings		126,348		100,489

	W	1,746,273		1,845,266

Non-current
Accounts payable	W	19,445		5,572
Accrued expenses		5,000		4,953
Lease liabilities		621,072		495,127
Withholdings		53,534		53,272

	W	699,051		558,924

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

17. Other Financial Liabilities

Other financial liabilities as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Derivative liabilities	W	116,786		82,859
Financial guarantee liabilities		19,560		58,545

	W	136,346		141,404

Non-current
Derivative liabilities	W	23,722		129,505
Financial guarantee liabilities		7,455		4,083

	W	31,177		133,588

18. Provisions

(a)	Provisions as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021				December 31, 2020
	Current		Non-current		Current		Non-current
Provision for bonus payments	W	58,601		54,763		73,441		48,510
Provision for construction warranties		13,232		223,678		9,662		217,435
Provision for legal contingencies and claims(*1)		26,116		73,657		24,275		63,175
Provision for the restoration(*2)		6,492		149,353		5,307		134,438
Others(3,4)		280,300		59,758		330,588		59,411

	W	384,741		561,209		443,273		522,969

(*1)	The Company recognized probable outflow of resources amounting to W69,424 million and W59,211 million as provisions for legal contingencies and asserted claim in relation to lawsuits against the Company as of September 30, 2021 and December 31, 2020, respectively.

(*2)

Due to contamination of lands near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery, W14,141 million as provisions for restoration as of September 30, 2021. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied a discount rate of 1.73%~2.01% to measure present value of these costs.

(*3)	As of September 30, 2021 and December 31, 2020, POSCO ENERGY CO., LTD., and Korea Fuel Cell recognized W75,438 million and W80,842 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources.

(*4)	The Company has recognized emission liabilities of W73,888 million and W78,646 million for greenhouse gas emissions exceeding the quantity of free quota emission rights expected to be submitted as of September 30, 2021 and December 31, 2020, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Changes in provisions for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Increase		Utilization			Reversal			*Others(1)**			Ending
Provision for bonus payments	W	121,951		71,073		(76,341	)		(2,454	)		(865	)		113,364
Provision for construction warranties		227,097		56,438		(44,010	)		(2,821	)		206			236,910
Provision for legal contingencies and claims		87,450		34,234		(22,757	)		(2,913	)		3,759			99,773
Provision for the restoration		139,745		25,996		(4,729	)		(10,813	)		5,646			155,845
Others		389,999		224,671		(174,393	)		(102,600	)		2,381			340,058

	W	966,242		412,412		(322,230	)		(121,601	)		11,127			945,950

(*1)	Includes adjustments of foreign currency translation differences and others.

For the year ended December 31, 2020


(in millions of Won)	Beginning		Increase		Utilization			Reversal			*Others(1)**			Ending
Provision for bonus payments	W	123,669		106,855		(109,835	)		(6,334	)		7,596			121,951
Provision for construction warranties		170,428		86,691		(23,916	)		(5,311	)		(795	)		227,097
Provision for legal contingencies and claims		84,484		30,894		(16,444	)		(9,087	)		(2,397	)		87,450
Provision for the restoration		87,303		67,501		(6,525	)		(15,811	)		7,277			139,745
Others		352,765		349,639		(142,440	)		(133,294	)		(36,671	)		389,999

	W	818,649		641,580		(299,160	)		(169,837	)		(24,990	)		966,242

(*1)	Includes adjustments of foreign currency translation differences and others.

19. Employee Benefits

(a)	Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:

For the three-month periods
ended September 30

For the nine-month periods
ended September 30

(in millions of Won)

2021

2020

2021

2020

Expense related to post-employment benefit plans under defined contribution plans

13,212

10,682

37,762

35,729

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Defined benefit plans

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Present value of funded obligations	W	2,477,916			2,439,938
Fair value of plan assets(*1)		(2,276,352	)		(2,397,717	)
Present value of non-funded obligations		6,193			13,415

Net defined benefit liabilities	W	207,757			55,636

(*1)	As of September 30, 2021 and December 31, 2020, the Company recognized net defined benefit assets amounting to W9,120 million and W86,149 million respectively, since there are consolidated entities whose fair value of plan assets exceeded the present value of defined benefit obligations.

Changes in present value of defined benefit obligations for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Defined benefit obligation at the beginning of period	W	2,453,353			2,431,880
Current service costs		182,339			245,047
Interest costs		38,576			47,485
Remeasurements		2,679			(52,732	)
Benefits paid		(194,468	)		(225,293	)
Others		1,630			6,966

Defined benefit obligation at the end of period	W	2,484,109			2,453,353

Changes in fair value of plan assets for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Fair value of plan assets at the beginning of period	W	2,397,717			2,255,149
Interest on plan assets		38,358			44,208
Remeasurement of plan assets		(7,004	)		(600	)
Contributions to plan assets		26,306			307,367
Benefits paid		(178,530	)		(213,246	)
Others		(495	)		4,839

Fair value of plan assets at the end of period	W	2,276,352			2,397,717

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month and nine-month period ended September 30, 2021 and 2020 were as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2021		2020		2021		2020
Current service costs	W	61,934		58,693		182,339		181,204
Net interest costs		28		733		218		2,211

	W	61,962		59,426		182,557		183,415

20. Other Liabilities

Other liabilities as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Due to customers for contract work	W	883,604		807,465
Advances received		443,986		416,960
Unearned revenue		55,949		24,433
Withholdings		374,696		332,327
Firm commitment liability		16,378		35,993
Others		10,603		8,304

	W	1,785,216		1,625,482

Non-current
Unearned revenue	W	22,779		17,953
Others		21,874		19,067

	W	44,653		37,020

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

21. Financial Instruments

(a)	Classification and fair value of financial instruments

The carrying amount and fair values of financial assets and financial liabilities by fair value hierarchy as of September 30, 2021 and December 31, 2020 are as follows:

①

September 30, 2021


(in millions of Won)			Fair value
	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	251,009		—		251,009		—		251,009
Short-term financial instruments		10,005,893		—		10,005,893		—		10,005,893
Long-term financial instruments		292,201		—		292,201		—		292,201
Debt securities		8,361		—		—		8,361		8,361
Other securities		459,297		43,969		1,898		413,430		459,297
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments(*2)		40,964		—		40,964		—		40,964
Fair value through other comprehensive income
Equity securities		1,388,967		1,223,602		—		165,365		1,388,967
Debt securities		13,044		—		—		13,044		13,044
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		5,480,045		—		—		—		—
Trade accounts and notes receivable		9,593,618		—		—		—		—
Other receivables		2,829,439		—		—		—		—
Debt securities		51,145		—		—		—		—
Deposit instruments		3,063,925		—		—		—		—

	W	33,479,908		1,267,571		10,591,965		602,200		12,461,736

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	109,558		—		109,558		—		109,558
Borrowings		1,508,149		1,508,149		—		—		1,508,149
Derivative hedging instruments(*2)		30,950		—		30,950		—		30,950
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		5,218,543		—		—		—		—
Borrowings		21,332,903		—		21,483,857		—		21,483,857
Financial guarantee liabilities		27,015		—		—		—		—
Others		2,178,628		—		—		—		—

	W	30,405,746		1,508,149		21,624,365		—		23,132,514

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

(*2)

The Company applies hedge accounting which uses forward contracts as hedging instrument in order to hedge the risk of changes in fair value of product prices regarding firm commitments or purchase commitments. Also, the Company applies cash flow hedge accounting which uses currency swap as hedging instrument in order to hedge the risk of interest rate and foreign exchange rate changes in foreign currency which influences cash flow from borrowings.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

②

December 31, 2020


(in millions of Won)			Fair value
	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	79,995		—		79,995		—		79,995
Short-term financial instruments		9,133,404		—		9,133,404		—		9,133,404
Debt securities		20,797		—		—		20,797		20,797
Other securities		364,404		47,321		2,242		314,841		364,404
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments		37,880		—		37,880		—		37,880
Fair value through other comprehensive income
Equity securities		1,120,968		729,342		—		391,626		1,120,968
Debt securities		2,471		—		—		2,471		2,471
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		4,754,644		—		—		—		—
Trade accounts and notes receivable		7,332,890		—		—		—		—
Other receivables		2,300,515		—		—		—		—
Debt securities		151,146		—		—		—		—
Deposit instruments		2,359,951		—		—		—		—

	W	27,661,065		776,663		9,253,521		731,735		10,761,919

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	180,773		—		180,773		—		180,773
Derivative hedging instruments		31,591		—		31,591		—		31,591
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		3,777,836		—		—		—		—
Borrowings		20,497,607		—		20,821,353		—		20,821,353
Financial guarantee liabilities		62,629		—		—		—		—
Others		2,347,244		—		—		—		—

	W	26,897,680		—		21,033,717		—		21,033,717

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

Finance income and costs by category of financial instrument for the nine-month periods ended September 30, 2021 and 2020 were as follows:

①

For the nine-month period ended September 30, 2021


(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income(loss)
Financial assets at fair value through profit or loss	W	106,930			(7,961	)		—			10,788			13,085			122,842			—
Derivatives assets		—			148,865			—			253,494			—			402,359			—
Financial assets at fair value through other comprehensive income		—			—			—			—			30,247			30,247			199,143
Financial assets measured at amortized cost		101,534			—			649,801			(11,096	)		(199	)		740,040			—
Financial liabilities at fair value through profit or loss		—			15,311			(1,141	)		—			(15,876	)		(1,706	)		—
Derivatives liabilities		—			108,154			—			(323,390	)		—			(215,236	)		333
Financial liabilities measured at amortized cost		(324,159	)		—			(856,068	)		(15	)		5,543			(1,174,699	)		—

	W	(115,695	)		264,369			(207,408	)		(70,219	)		32,800			(96,153	)		199,476

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

②

For the nine-month period ended September 30, 2020


(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	127,564			33,765			—			10,591			985			172,905			—
Derivatives assets		—			185,405			—			195,304			—			380,709			—
Financial assets at fair value through other comprehensive income		—			—			—			—			31,075			31,075			(154,471	)
Financial assets measured at amortized cost		168,721			—			229,538			(12,309	)		(203	)		385,747			—
Derivatives liabilities		—			(29,170	)		—			(255,418	)		—			(284,588	)		(730	)
Financial liabilities measured at amortized cost		(505,797	)		—			(265,300	)		—			(5,752	)		(776,849	)		—

	W	(209,512	)		190,000			(35,762	)		(61,832	)		26,105			(91,001	)		(155,201	)

Finance income and costs by category of financial instrument for the three-month periods ended September 30, 2021 and 2020 were as follows:

①

For the three-month period ended September 30, 2021


(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation		Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income(loss)
Financial assets at fair value through profit or loss	W	30,036			2,131		—			8,954			5,251			46,372			—
Derivatives assets		—			62,568		—			74,268			—			136,836			—
Financial assets at fair value through other comprehensive income		—			—		—			—			8,556			8,556			30,254
Financial assets measured at amortized cost		62,041			—		421,940			(4,679	)		(110	)		479,192			—
Financial liabilities at fair value through profit or loss		—			15,311		(1,141	)		—			(15,876	)		(1,706	)		—
Derivatives liabilities		—			63,654		—			(93,104	)		—			(29,450	)		108
Financial liabilities measured at amortized cost		(88,546	)		—		(514,814	)		(15	)		(8,089	)		(611,464	)		—

	W	3,531			143,664		(94,015	)		(14,576	)		(10,268	)		28,336			30,362

②

For the three-month period ended September 30, 2020


(in millions of Won)	Finance income and costs
	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	45,561			25,961			—			7,737			(13	)		79,246			—
Derivatives assets		—			(79,082	)		—			57,127			—			(21,955	)		—
Financial assets at fair value through other comprehensive income		—			—			—			—			5,507			5,507			11,495
Financial assets measured at amortized cost		46,722			—			(67,335	)		(2,689	)		(43	)		(23,345	)		—
Derivatives liabilities		—			9,899			—			(78,551	)		—			(68,652	)		111
Financial liabilities measured at amortized cost		(158,998	)		—			150,310			—			(5,882	)		(14,570	)		—

	W	(66,715	)		(43,222	)		82,975			(16,376	)		(431	)		(43,769	)		11,606

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2020.

22. Share Capital and Capital Surplus

(a)	Share capital as of September 30, 2021 and December 31, 2020 are as follows:


(in Won, except share information)	September 30, 2021		December 31, 2020
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835

Shared capital(*2)	W	482,403,125,000		482,403,125,000

(*1)	As of September 30, 2021, total shares of ADRs of 25,453,740 outstanding in overseas stock market are equivalent to 6,363,435 of common stock.

(*2)	As of September 30, 2021, the difference between the ending balance of common stock and the par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

(b)	Capital surplus as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Share premium	W	463,825		463,825
Gain on disposal of treasury shares.		796,623		796,623
Other capital surplus		94,085		50,099

	W	1,354,533		1,310,547

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

23. Hybrid Bonds

(a)	Hybrid bonds classified as equity as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		September 30, 2021			December 31, 2020
Hybrid bond 1-2(*1)		2013-06-13		2043-06-13		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)

							W	199,384			199,384

(*1)	Details of issuance of hybrid bonds as of September 30, 2021 are as follows:


		Hybrid bond 1-2
Maturity date		30 years (POSCO has a right to extend the maturity date)

Interest rate		Issue date ~ 2023-06-12 : 4.60% Reset every 10 years as follows; • After 10 years: return on government bond of the Republic of Korea (10 years) + 1.40% • After 10 years: additionally +0.25% according to Step-up clauses • After 30 years: additionally +0.75%

Interest payments condition		Quarterly (Optional deferral of interest payment is available to POSCO)

Others		POSCO can call the hybrid bond at year 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common stockholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of September 30, 2021 amounts to W454 million.

(b)	POSCO ENERGY CO., LTD., a subsidiary of the Company, issued hybrid bonds which are classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		September 30, 2021			December 31, 2020
Hybrid bond 1-4(*1)		2013-08-29		2043-08-29		5.21	W	140,000			140,000
Issuance cost								(429	)		(429	)

							W	139,571			139,571

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(*1)	Details of hybrid bonds of POSCO ENERGY CO., LTD. as of September 30, 2021 are as follows:


		Hybrid bond 1-4
Maturity date		30 years (The issuer has a right to extend the maturity date)

Interest rate		Issue date ~ 2023-08-29 : 5.21% Reset every 10 years as follows; • After 10 years: return on government bond of the Republic of Korea (10 years) + 1.55% • After 10 years: additionally + 0.25% according to Step-up clauses • After 30 years: additionally +0.75%

Interest payments condition		Quarterly (Optional deferral of interest payment is available to the issuer)

Others		The issuer can call the hybrid bond at year 10th anniversary of issurance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common stock holders, but subordinated to other creditors. The interest accumulated but not paid on the hybrid bonds as of September 30, 2021 amounts to W679 million.

24. Reserves

Reserves as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Accumulated comprehensive loss of investments in associates and joint ventures	W	(535,570	)		(693,176	)
Changes in fair value of equity investments at fair value through other comprehensive income		(158,089	)		(359,283	)
Foreign currency translation differences		(22,850	)		(339,707	)
Gains or losses on valuation of derivatives		(433	)		(699	)
Others		11,947			11,947

	W	(704,995	)		(1,380,918	)

25. Treasury Shares

Based on the Board of Directors’ resolution, the Company holds treasury shares for business purposes including price stabilization. The changes in treasury shares for nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows.


(shares, in millions of Won)	September 30, 2021				December 31, 2020
	Number of shares		Amount		Number of shares		Amount
Beginning		11,171,363	W	2,391,523		7,071,194	W	1,508,303
Acquisition of treasury shares		389,900		116,771		4,100,169		883,220

Ending		11,561,263	W	2,508,294		11,171,363	W	2,391,523

The trust contract of acquiring treasury shares contracted during the year ended December 31, 2020, was ended as of April 12, 2021, due to completion of acquiring treasury share and expiration of contract term.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

26. Revenue

(a)	Disaggregation of revenue

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the nine-month periods ended September 30, 2021 and 2020 were as follows:

①

For the nine-month period ended September 30, 2021


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	28,800,196		17,757,155		—		1,046,321		47,603,672
Revenue from services		482,432		369,646		44,187		1,530,349		2,426,614
Revenue from construction contract		—		—		4,509,743		24,770		4,534,513
Others		92,194		199,745		1,656		139,678		433,273

	W	29,374,822		18,326,546		4,555,586		2,741,118		54,998,072

Timing of revenue recognition
Revenue recognized at a point in time	W	28,892,390		17,956,900		51,746		1,185,999		48,087,035
Revenue recognized over time		482,432		369,646		4,503,840		1,555,119		6,911,037

	W	29,374,822		18,326,546		4,555,586		2,741,118		54,998,072

②

For the nine-month period ended September 30, 2020


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	20,545,012		14,108,407		—		611,217		35,264,636
Revenue from services		343,393		293,983		33,882		1,377,614		2,048,872
Revenue from construction contract		—		—		4,878,088		20,467		4,898,555
Others		26,812		118,301		5,143		166,266		316,522

	W	20,915,217		14,520,691		4,917,113		2,175,564		42,528,585

Timing of revenue recognition
Revenue recognized at a point in time	W	20,571,824		14,226,708		120,754		777,483		35,696,769
Revenue recognized over time		343,393		293,983		4,796,359		1,398,081		6,831,816

	W	20,915,217		14,520,691		4,917,113		2,175,564		42,528,585

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month periods ended September 30, 2021 and 2020 were as follows:

①

For the three-month period ended September 30, 2021


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	10,750,980		6,769,589		—		379,043		17,899,612
Revenue from services		217,227		133,574		17,199		617,056		985,056
Revenue from construction contract		—		—		1,562,608		5,064		1,567,672
Others		66,685		62,386		650		54,822		184,543

	W	11,034,892		6,965,549		1,580,457		1,055,985		20,636,883

Timing of revenue recognition
Revenue recognized at a point in time	W	10,817,665		6,831,975		30,990		433,865		18,114,495
Revenue recognized over time		217,227		133,574		1,549,467		622,120		2,522,388

	W	11,034,892		6,965,549		1,580,457		1,055,985		20,636,883

②

For the three-month period ended September 30, 2020


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	7,317,057		4,370,071		—		243,250		11,930,378
Revenue from services		110,529		102,730		11,034		492,283		716,576
Revenue from construction contract		—		—		1,509,453		6,260		1,515,713
Others		8,213		31,269		1,124		57,945		98,551

	W	7,435,799		4,504,070		1,521,611		799,738		14,261,218

Timing of revenue recognition
Revenue recognized at a point in time	W	7,325,270		4,401,340		16,216		301,194		12,044,020
Revenue recognized over time		110,529		102,730		1,505,395		498,544		2,217,198

	W	7,435,799		4,504,070		1,521,611		799,738		14,261,218

(b)	Details of contract assets and liabilities from contracts with customers as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Receivables
Account receivables	W	9,593,618		7,332,890
Contract assets
Due from customers for contract work		955,239		874,152
Contract liabilities
Advance received		445,612		418,777
Due to customers for contract work		883,604		807,465
Unearned revenue		78,431		42,040

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

27. Revenue – Contract Balances

(a)	Details of outstanding contracts as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021						December 31, 2020
	Construction segment			Others			Construction segment			Others
Accumulated cost	W	32,008,638			113,160			30,780,560			247,737
Accumulated contract profit		3,196,483			22,404			3,034,148			49,692
Accumulated contract loss		(1,232,781	)		(17,276	)		(1,260,451	)		(2,482	)
Accumulated contract revenue		33,972,340			118,288			32,554,257			294,947

(b)	Details of due from customers for contract work and due to customers for contract work as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021						December 31, 2020
	Construction segment			Others			Construction segment			Others
Due from customers for contract	W	987,760			42,329			915,285			33,594
Due to customers for contract work		(835,271	)		(48,333	)		(765,818	)		(41,647	)

	W	152,489			(6,004	)		149,467			(8,053	)

(c)	Details of the provisions of construction loss as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Construction segment	W	31,440		70,818
Others		16,942		437

	W	48,382		71,255

(d)

Due to the factors causing the variation of costs for the nine-month period ended September 30, 2021, the estimated total contract costs have changed. Details of changes in estimated total contract costs and the impact on profit before income taxes for the nine-month period ended September 30, 2021 and future periods are as follows:


			Changes in profit (loss) of contract
(in millions of Won)	Changes in estimated total contract costs		Net income (loss)		Future income (loss)			Total
Construction segment	W	235,795		93,685		94,489			188,174
Others		9,696		2,160		(10,667	)		(8,507	)

	W	245,491		95,845		83,822			179,667

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contract to September 30, 2021. The estimation is evaluated for the total contract costs and expected total contract revenue as of the end of the period. Also, it may change during future periods.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(e)	Uncertainty of estimates

Total contract revenues

Total contract revenues are measured based on contractual amount initially agreed. However, the contract revenues can increase due to additional contract work, claims and incentive payments, or decrease due to penalty when the completion of contract is delayed due to the Company’s fault. Therefore, this measurement of contract revenues is affected by the uncertainty of the occurrence of future events.

Total contract costs

Contract revenues are recognized based on the percentage of completion, which is measured on the basis of the gross cost amount incurred to date. Total contract costs are estimated based on estimates of future material costs, labor costs, outsourcing cost and others. There is uncertainty in estimates on future contract costs due to various internal and external factors such as fluctuation of market, the risk of business partner and the experience of project performance and others. The significant assumptions including uncertainty of the estimate of total contract costs are as follows:


		Method of significant assumption
Material cost		Assumption based on recent purchasing price and quoted market price

Labor cost		Assumption based on standard monthly and daily labor cost

Outsourcing cost		Assumption based on the past experience rate of similar project and market price

Management reviews the assumptions used in estimated contract costs at each reporting period end and adjusts them, if necessary.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

28. Selling and Administrative Expenses

(a)	Other administrative expenses

Other administrative expenses for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month period ended September 30				For the nine-month period ended September 30
	2021		2020		2021		2020
Wages and salaries	W	260,416		210,874		691,564		621,394
Expenses related to post-employment benefits		23,335		18,197		94,483		60,078
Other employee benefits		52,358		43,253		145,647		129,004
Travel		4,136		3,719		12,873		13,609
Depreciation		36,881		36,393		107,484		109,250
Amortization		18,963		26,113		68,711		80,746
Communication		3,202		2,305		7,544		7,106
Electricity		1,845		2,055		5,476		6,085
Taxes and public dues		15,638		11,311		62,440		43,386
Rental		7,731		6,733		19,983		22,998
Repairs		3,425		2,463		8,446		5,701
Entertainment		2,280		1,911		6,636		5,456
Advertising		22,593		16,842		59,103		51,495
Research & development		23,362		29,083		83,734		78,354
Service fees		46,625		36,957		132,507		113,732
Vehicles maintenance		1,304		1,179		3,805		3,678
Industry association fee		1,582		1,502		7,366		7,541
Conference		3,241		2,922		9,361		8,247
Increase to provisions		1,926		1,728		4,747		3,610
Others		13,818		10,717		35,141		28,394

	W	544,661		466,257		1,567,051		1,399,864

(b)	Selling expenses

Selling expenses for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month period ended September 30				For the nine-month period ended September 30
	2021		2020		2021		2020
Freight and custody expenses	W	45,720		49,434		140,542		135,537
Operating expenses for distribution center		1,860		1,589		5,399		5,276
Sales commissions		21,483		13,795		59,245		81,714
Sales advertising		1,700		64		2,089		634
Sales promotion		1,108		1,897		4,232		5,133
Sample		454		318		1,442		1,190
Sales insurance premium		10,411		6,735		29,629		22,364
Contract cost		14,625		11,420		41,727		27,170
Others		3,339		4,482		9,516		13,043

	W	100,700		89,734		293,821		292,061

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

29. Finance Income and Costs

Details of finance income and costs for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month period ended September 30					For the nine-month period ended September 30
	2021		2020			2021		2020
Finance income
Interest income(*1)	W	92,078		92,283			208,464		296,285
Dividend income		13,807		5,494			43,332		32,060
Gain on foreign currency transactions		331,943		174,109			732,908		810,396
Gain on foreign currency translations		159,796		35,923			363,662		255,900
Gain on derivatives transactions		80,452		67,552			279,496		212,192
Gain on valuations of derivatives		213,899		(72,513	)		402,134		208,687
Others		34,024		38,583			71,491		56,004

	W	925,999		341,431			2,101,487		1,871,524

Finance costs
Interest expenses	W	88,547		158,998			324,159		505,797
Loss on foreign currency transactions		279,631		206,255			659,932		691,009
Loss on foreign currency translations		306,123		(79,198	)		644,046		411,049
Loss on derivatives transactions		99,288		88,976			349,392		272,306
Loss on valuation of derivatives		87,677		(3,330	)		145,115		52,452
Loss on disposal of trade accounts and notes receivable		4,678		2,689			11,096		12,345
Others		31,719		10,809			63,900		17,567

	W	897,663		385,199			2,197,640		1,962,525

(*1)	Interest income calculated using the effective interest method for the nine-month period ended September 30, 2021 and 2020 were W101,534 million and W168,721 million, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

30. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month period ended September 30				For the nine-month period ended September 30
	2021		2020		2021		2020
Other non-operating income
Gain on disposals of assets held for sale	W	960		—		46,703		299
Gain on disposals of investments in subsidiaries, associates and joint ventures		600		2,082		26,655		43,421
Gain on disposals of property, plant and equipment		1,467		2,196		8,406		9,542
Gain on valuation of firm commitment		30,099		17,396		148,752		55,062
Gain on disposals of emission rights		—		285		567		24,851
Gain on insurance claim		1,611		3,490		22,159		10,623
Reversal of other provisions		160		2,735		2,559		3,574
Others(*1)		27,700		38,084		140,594		85,800

	W	62,597		66,268		396,395		233,172

Other non-operating expenses
Impairment loss on assets held for sale	W	—		—		—		5,030
Loss on disposals of investments in subsidiaries, associates and joint ventures		310		3,586		7,878		13,659
Loss on disposals of property, plant and equipment		20,242		26,451		56,389		105,440
Impairment loss on property, plant and equipment		27,643		284		44,536		21,684
Impairment loss on intangible assets		20,776		41		27,997		1,225
Loss on valuation of firm commitment		15,387		21,154		92,705		57,229
Idle tangible asset expenses		6,030		4,181		18,699		14,866
Increase to provisions		10,682		6,452		21,158		7,676
Donations		21,087		8,137		36,615		24,845
Others		10,141		13,884		84,382		49,951

	W	132,298		84,170		390,359		301,605

(*1)	During the nine-month period ended September 30, 2021, the Company recognized W48,773 million of non-operating income for refund of other than corporate tax as a result of administrative litigation for tax audits.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

31. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses, impairment loss on other receivables and other non-operating expenses in the statements of comprehensive income for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows (excluding finance costs and income tax expense):


(in millions of Won)	For the three-month period ended September 30				For the nine-month period ended September 30
	2021		2020		2021		2020
Raw material used, changes in inventories and others	W	11,721,604		8,809,612		32,237,738		25,757,893
Employee benefits expenses		1,084,421		906,728		2,926,612		2,678,926
Outsourced processing cost		1,950,052		1,771,108		5,472,262		5,857,897
Electricity and water expenses		177,309		168,788		539,525		482,046
Depreciation(*1)		776,604		793,940		2,333,660		2,348,977
Amortization		112,514		106,230		332,988		336,624
Freight and custody expenses		425,999		376,397		1,143,220		1,058,528
Sales commissions		21,483		13,795		59,245		81,714
Loss on disposal of property, plant and equipment		20,242		26,451		56,389		105,440
Impairment loss on property, plant and equipment		27,644		284		44,536		21,684
Impairment loss on intangible assets		20,777		41		27,997		1,225
Donations		21,087		8,137		36,615		24,845
Other expenses		1,301,539		695,987		3,329,915		2,543,443

	W	17,661,275		13,677,498		48,540,702		41,299,242

(*1)	Includes depreciation expense of investment property.

32. Income Taxes

The effective tax rates of the Company for the nine-month periods ended September 30, 2021 and 2020 were 23.83% and 30.07%, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

33. Earnings per Share

(a)	Basic earnings per share for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in Won except per share information)	For the three-month period ended September 30						For the nine-month period ended September 30
	2021			2020			2021			2020
Profit attributable to controlling interest	W	2,429,720,200,212			465,457,487,777			5,118,799,676,088			901,132,036,554
Interests of hybrid bonds		(1,681,205,479	)		(1,681,205,479	)		(4,988,794,519	)		(5,007,068,492	)
Weighted-average number of common shares outstanding (*1)		75,625,572			79,230,216			75,719,934			79,784,098

Basic earnings per share	W	32,106			5,854			67,536			11,232

(*1)	The weighted-average number of common shares used to calculate basic earnings per share are as follows:


(shares)	For the three-month period ended September 30						For the nine-month period ended September 30
	2021			2020			2021			2020
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(11,561,263	)		(7,956,619	)		(11,466,901	)		(7,402,737	)

Weighted-average number of common shares outstanding		75,625,572			79,230,216			75,719,934			79,784,098

(b)	Diluted earnings per share for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in Won, except share information)	For the three-month period ended September 30						For the nine-month period ended September 30
	2021			2020			2021			2020
Profit for the period	W	2,429,720,200,212			465,457,487,777			5,118,799,676,088			901,132,036,554
Interests of hybrid bonds, net of tax		(1,681,205,479	)		(1,681,205,479	)		(4,988,794,519	)		(5,007,068,492	)
Gain or loss from exchange rate on and revaluation of exchangeable bonds		(10,273,058,805	)		—			(10,273,058,805	)		—
Adjusted weighted-average number of common shares(*1)		76,581,815			79,230,216			76,042,185			79,784,098

Diluted earnings per share	W	31,571			5,854			67,115			11,232

(*1)	The weighted-average number of common shares used to calculate diluted earnings per share are as follows:


(shares)	For the three-month period ended September 30				For the nine-month period ended September 30
	2021		2020		2021		2020
Weighted-average number of common shares outstanding		75,625,572		79,230,216		75,719,934		79,784,098
Weighted-average number of potential common share		956,243		—		322,251		—

Adjusted weighted-average number of common shares		76,581,815		79,230,216		76,042,185		79,784,098

As of September 30, 2021, the Company holds exchangeable bonds as dilutive potential common shares. As of December 31, 2020, diluted earnings per share is equal to basic earnings per share as the Company does not have dilutive potential common shares.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

34. Related Party Transactions

(a)	Significant transactions between the controlling company and related companies for the nine-month periods ended September 30, 2021 and 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	*Sales and others(1)**				*Purchase and others(2)**
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
*Subsidiaries(3)**
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,315		11,094		—		286,992		109		26,431
POSCO COATED & COLOR STEEL Co., Ltd.		500,645		2,085		—		—		28,782		506
POSCO ICT(*4)		1,266		4,992		—		159,334		32,213		134,074
eNtoB Corporation		11		—		236,803		37,730		69		15,298
POSCO CHEMICAL CO., LTD		216,689		26,579		341,790		7,836		223,159		2,799
POSCO ENERGY CO., LTD.		4,184		1,426		6,992		—		—		20,512
POSCO SPS		570,632		—		—		—		32,355		635
POSCO INTERNATIONAL Corporation		6,962,982		54,331		867,793		—		541		5,241
POSCO Thainox Public Company Limited		228,192		—		—		—		—		20
POSCO Canada Ltd.		—		796		148,558		—		—		—
POSCO Asia Co., Ltd.		19,142		50		417		—		—		1,539
Qingdao Pohang Stainless Steel Co., Ltd.		131,173		—		—		—		—		—
POSCO JAPAN Co., Ltd.		1,130,531		1		20,315		287		—		2,959
POSCO-VIETNAM Co., Ltd.		307,224		339		—		—		—		27
POSCO MEXICO S.A. DE C.V.		320,811		111		—		—		—		506
POSCO Maharashtra Steel Private Limited		646,802		259		—		—		—		132
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		118,655		—		—		—		—		—
POSCO VST CO., LTD.		152,119		—		—		—		—		20
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		853		1,212,212		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		194,535		183		8		—		—		10
Others		1,017,908		53,865		157,818		42,778		193,551		95,205

		12,527,816		156,964		2,992,706		534,957		510,779		305,914

*Associates and joint ventures(3)**
SNNC		50,311		2,342		519,658		—		—		107
POSCO-SAMSUNG-Slovakia Processing Center		54,594		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		383,689		1,630,448		—		—		—
Others		32,442		25,239		76,194		—		—		33,194

		137,347		411,270		2,226,300		—		—		33,301

	W	12,665,163		568,234		5,219,006		534,957		510,779		339,215

(*1)	Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)	Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)	As of September 30, 2021, the Company provided guarantees to related parties (Note 35).

(*4)	Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

For the nine-month period ended September 30, 2020


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	5,168		11,107		15		543,484		60		17,773
POSCO COATED & COLOR STEEL Co., Ltd.		309,338		1,819		—		—		21,466		249
POSCO ICT		2,088		4,992		—		248,039		30,951		131,887
eNtoB Corporation		11		60		160,906		24,852		55		17,884
POSCO CHEMICAL CO., LTD		200,730		29,911		342,948		16,219		226,595		4,551
POSCO ENERGY CO., LTD.		2,196		2,117		12,374		3		—		16,709
POSCO SPS		258,464		—		—		—		20,994		715
POSCO INTERNATIONAL Corporation		4,246,418		55,558		233,450		—		11,371		3,293
POSCO Thainox Public Company Limited		226,231		137		3,454		—		—		—
POSCO Canada Ltd.		—		978		129,666		—		—		—
POSCO Asia Co., Ltd.		1,161,489		1,002		114,796		3,229		1,174		2,765
Qingdao Pohang Stainless Steel Co., Ltd.		105,037		66		—		—		—		196
POSCO JAPAN Co., Ltd.		776,819		—		29,582		4,947		—		2,428
POSCO-VIETNAM CO., Ltd.		182,844		239		—		—		—		59
POSCO MEXICO S.A. DE C.V.		107,763		158		—		—		—		304
POSCO Maharashtra Steel Private Limited		210,679		1,543		—		—		—		282
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		82,663		—		—		—		—		—
POSCO VST CO., LTD.		163,085		204		—		—		—		123
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		1,039		395,961		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		180,043		213		2,314		—		—		18
Others		595,485		20,180		53,327		33,263		176,502		91,337

		8,816,551		131,323		1,478,793		874,036		489,168		290,573

Associates and joint ventures
SNNC		4,333		4,103		372,068		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		29,429		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		940,725		—		—		—
Others		25,714		61,990		47,704		84,839		4,086		36,145

		59,476		105,205		1,360,497		84,839		4,086		36,145

	W	8,876,027		236,528		2,839,290		958,875		493,254		326,718

(b)	Significant transactions between the controlling company and related companies for the three-month periods ended September 30, 2021 and 2020 were as follows:

For the three-month period ended September 30, 2021


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	1,519		12		—		84,257		40		12,950
POSCO COATED & COLOR STEEL Co., Ltd.		209,472		—		—		—		11,436		75
POSCO ICT		429		—		—		65,204		11,385		43,657
eNtoB Corporation		4		—		100,009		16,123		48		5,695
POSCO CHEMICAL CO., LTD		87,944		5,133		115,469		2,281		75,739		503
POSCO ENERGY CO., LTD.		970		460		3,454		—		—		9,313
POSCO SPS		232,942		—		—		—		10,950		196
POSCO INTERNATIONAL Corporation		2,740,847		—		443,365		—		—		2,402
POSCO Thainox Public Company Limited		78,008		—		—		—		—		—
POSCO Canada Ltd.		—		115		66,813		—		—		—
POSCO Asia Co., Ltd.		5		18		—		—		—		834
Qingdao Pohang Stainless Steel Co., Ltd.		49,771		—		—		—		—		—
POSCO JAPAN Co., Ltd.		408,035		—		5,993		—		—		1,915
POSCO-VIETNAM Co., Ltd.		119,680		—		—		—		—		27
POSCO MEXICO S.A. DE C.V.		123,634		40		—		—		—		420
POSCO Maharashtra Steel Private Limited		268,945		79		—		—		—		31
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		52,008		—		—		—		—		—
POSCO VST CO., LTD.		55,872		—		—		—		—		12
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		—		465,531		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		73,591		73		—		—		—		—
Others		359,051		1,275		97,692		17,567		71,322		41,583

		4,862,727		7,205		1,298,326		185,432		180,920		119,613

Associates and joint ventures
SNNC		30,259		—		224,001		—		—		54
POSCO-SAMSUNG-Slovakia Processing Center		23,401		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		127,551		589,980		—		—		—
Others		10,102		1,664		29,022		—		—		13,361

		63,762		129,215		843,003		—		—		13,415

	W	4,926,489		136,420		2,141,329		185,432		180,920		133,028

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

For the three-month period ended September 30, 2020


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	1,620		11		—		101,179		—		4,938
POSCO COATED & COLOR STEEL Co., Ltd.		103,572		124		—		—		6,290		41
POSCO ICT		659		1		—		63,729		10,010		44,219
eNtoB Corporation		4		—		47,528		6,004		27		5,391
POSCO CHEMICAL CO., LTD		56,264		5,141		113,227		3,389		72,171		189
POSCO ENERGY CO., LTD.		643		901		2,379		—		—		5,599
POSCO SPS		125,566		—		—		—		10,578		293
POSCO INTERNATIONAL Corporation		1,450,981		1,227		122,652		—		—		1,210
POSCO Thainox Public Company Limited		119,514		—		—		—		—		—
POSCO Canada Ltd.		—		162		38,861		—		—		—
POSCO Asia Co., Ltd.		441,511		37		33,125		957		12		1,346
Qingdao Pohang Stainless Steel Co., Ltd.		34,269		—		—		—		—		20
POSCO JAPAN Co., Ltd.		227,977		—		13,162		1,988		—		1,340
POSCO-VIETNAM Co., Ltd.		81,739		16		—		—		—		39
POSCO MEXICO S.A. DE C.V.		39,189		59		—		—		—		—
POSCO Maharashtra Steel Private Limited		56,925		696		—		—		—		97
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,018		—		—		—		—		—
POSCO VST CO., LTD.		30,869		148		—		—		—		103
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		235		104,312		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		59,984		—		—		—		—		—
Others		179,113		2,209		14,535		7,683		58,361		33,709

		3,035,417		10,967		489,781		184,929		157,449		98,534

Associates and joint ventures
SNNC		1,432		625		153,008		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		12,275		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		315,180		—		—		—
Others		11,317		7,016		17,834		—		—		10,366

		25,024		46,753		486,022		—		—		10,366

	W	3,060,441		57,720		975,803		184,929		157,449		108,900

(c)	The related account balances from significant transactions between the controlling company and related companies as of September 30, 2021 and December 31, 2020 are as follows:

September 30, 2021


(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	4,269		4		4,273		—		38,461		314		38,775
POSCO COATED & COLOR STEEL Co., Ltd.		110,729		—		110,729		—		6		6,246		6,252
POSCO ICT		166		—		166		2,999		48,750		24,970		76,719
eNtoB Corporation		—		—		—		649		24,717		—		25,366
POSCO CHEMICAL CO., LTD		29,433		4,093		33,526		12,596		49,911		17,810		80,317
POSCO ENERGY CO., LTD.		1,092		8		1,100		—		2,051		11,288		13,339
POSCO SPS		127,313		—		127,313		14		1,343		4,911		6,268
POSCO INTERNATIONAL Corporation		1,215,427		10		1,215,437		5,047		523		502		6,072
POSCO Thainox Public Company Limited		57,404		—		57,404		—		—		—		—
POSCO Asia Co., Ltd.		—		718		718		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		27,134		—		27,134		—		—		—		—
POSCO MEXICO S.A. DE C.V.		151,673		791		152,464		—		—		—		—
POSCO Maharashtra Steel Private Limited		420,910		1,606		422,516		—		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		266,356		1,478		267,834		—		—		—		—
Others		589,136		18,938		608,074		114,754		37,832		82,586		235,172

		3,001,042		27,646		3,028,688		136,059		203,594		148,627		488,280

Associates and joint ventures
SNNC		3,772		60		3,832		50,612		7		—		50,619
Roy Hill Holdings Pty Ltd		—		127,551		127,551		413,548		—		—		413,548
Others		665		23,585		24,250		4,998		973		—		5,971

		4,437		151,196		155,633		469,158		980		—		470,138

	W	3,005,479		178,842		3,184,321		605,217		204,574		148,627		958,418

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

December 31, 2020


(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	6,010		11		6,021		—		81,608		394		82,002
POSCO COATED & COLOR STEEL Co., Ltd.		63,520		—		63,520		—		180		3,709		3,889
POSCO ICT		245		1		246		2,820		118,720		31,411		152,951
eNtoB Corporation		—		—		—		1,361		35,846		18		37,225
POSCO CHEMICAL CO., LTD		19,406		3,434		22,840		13,066		55,515		18,531		87,112
POSCO ENERGY CO., LTD.		261		122		383		—		2,995		12,508		15,503
POSCO SPS		72,009		—		72,009		—		2,352		4,175		6,527
POSCO INTERNATIONAL Corporation		534,531		—		534,531		2,713		—		—		2,713
POSCO Thainox Public Company Limited		39,920		—		39,920		—		—		—		—
POSCO Asia Co., Ltd.		239,847		898		240,745		3,958		258		—		4,216
Qingdao Pohang Stainless Steel Co., Ltd.		25,838		—		25,838		—		—		—		—
POSCO MEXICO S.A. DE C.V.		71,307		397		71,704		—		—		—		—
POSCO Maharashtra Steel Private Limited		173,285		2,006		175,291		—		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		258,563		1,845		260,408		—		—		—		—
Others		227,288		28,117		255,405		41,564		30,433		82,716		154,713

		1,732,030		36,831		1,768,861		65,482		327,907		153,462		546,851

Associates and jointventures
SNNC		106		228		334		33,380		—		—		33,380
Roy Hill Holdings Pty Ltd		—		52,076		52,076		201,924		—		—		201,924
Others		818		17,882		18,700		6,704		—		—		6,704

		924		70,186		71,110		242,008		—		—		242,008

	W	1,732,954		107,017		1,839,971		307,490		327,907		153,462		788,859

(d)	Significant transactions between the Company, excluding the controlling company, and related companies for the nine-month periods ended September 30, 2021 and 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
New Songdo International City Development, LLC	W	211,118		266		—		123
SNNC		51,163		267		17,485		25,869
Noeul Green Energy Co., Ltd.		4,595		—		—		1,374
CSP - Compania Siderurgica do Pecem		4,583		—		54,667		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		37,288		—		19,183		6,736
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		11,976		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		27,361		—		147		—
DMSA/AMSA		—		—		10,084		—
South-East Asia Gas Pipeline Company Ltd.		—		18,651		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		42,992		10		3,120		144
Samcheok Blue Power Co., Ltd.		178,984		206		—		—
TK CHEMICAL CORPORATION(*1)		14,906		—		2,292		—
Metropolitan Outer Ring Expressway Co., ltd		41,429		—		—		—
UITrans LRT Co., Ltd.		10,700		—		—		—
Roy Hill Holdings Pty Ltd		—		96,441		—		—
Others(*2)		131,155		59,421		10,746		13,674

	W	768,250		175,262		117,724		47,920

(*1)	TK CHEMICAL CORPORATION was excluded from the association due to the sale of its shares during the nine-month period ended September 30, 2021.

(*2)	PT. Batutua Tembaga Raya was excluded from the association due to the sale of its shares during the nine-month period ended September 30, 2021.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

For the nine-month period ended September 30, 2020


(in millions of Won)	Sales and others					Purchase and others
	Sales			Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	2,558			—		5		—
New Songdo International City Development, LLC		81,806			26,451		—		107
SNNC		44,485			—		35,684		118,925
Chuncheon Energy Co., Ltd.		(2,656	)		211		—		—
Noeul Green Energy Co., Ltd.		4,587			—		—		582
CSP - Compania Siderurgica do Pecem		21,943			6,883		141,883		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		35,696			—		32,147		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—			—		4,555		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		5,909			—		—		—
PT. Batutua Tembaga Raya		—			1,111		23,379		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		19,578			—		210		—
DMSA/AMSA		—			—		29,198		—
South-East Asia Gas Pipeline Company Ltd.		7			51,793		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		24,154			19,475		2,704		602
Samcheok Blue Power Co., Ltd.		153,824			—		—		—
TK CHEMICAL CORPORATION		82,834			—		23,339		—
Others		108,943			54,438		29,890		27,193

	W	583,668			160,362		322,994		147,409

(e)	Significant transactions between the Company, excluding the controlling company, and related companies for the three-month periods ended September 30, 2021 and 2020 were as follows:

For the three-month period ended September 30, 2021


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Others
Associates and joint ventures
New Songdo International City Development, LLC	W	83,074		—		—		42
SNNC		18,143		214		2,229		10,703
Noeul Green Energy Co., Ltd.		1,550		—		—		333
CSP - Compania Siderurgica do Pecem		26		—		24,098		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		12,894		—		2,536		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		4,851		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		9,379		—		17		—
DMSA/AMSA		—		—				—
South-East Asia Gas Pipeline Company Ltd.		—		8,635		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		19,925		3		1,070		34
Samcheok Blue Power Co., Ltd.		71,416		206		—		—
TK CHEMICAL CORPORATION		—		—		—		—
Metropolitan Outer Ring Expressway Co., ltd		18,949		—		—		—
UITrans LRT Co., Ltd.		257		—		—		—
Roy Hill Holdings Pty Ltd		—		31,888		—		—
Others		48,222		39,844		89		4,639

	W	288,686		80,790		30,039		15,751

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

For the three-month period ended September 30, 2020


(in millions of Won)	Sales and others					Purchase and others
	Sales			Others		Purchase of material		Others
Associates and joint ventures
New Songdo International City Development, LLC	W	29,943			1		—		61
SNNC		17,283			—		10,402		11,418
Chuncheon Energy Co., Ltd.		(2,943	)		—		—		—
Noeul Green Energy Co., Ltd.		1,548			—		—		582
CSP - Compania Siderurgica do Pecem		3,632			1,958		18,515		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		16,768			—		7,365		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—			—		2,162		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		2,615			—		—		—
PT. Batutua Tembaga Raya		—			—		6,804		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,447			—		45		—
South-East Asia Gas Pipeline Company Ltd.		—			13,276		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		8,193			37		816		150
Samcheok Blue Power Co., Ltd.		63,914			—		—		—
TK CHEMICAL CORPORATION		23,082			—		4,596		—
Others		47,244			24,665		12,176		10,340

	W	218,726			39,937		62,881		22,551

(f)	The related account balances from significant transactions between the Company, excluding the controlling company, and related companies as of September 30, 2021 and December 31, 2020 are as follows:

September 30, 2021


(in millions of Won)	Receivables								Payables
	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes payable		Others		Total
Associates and joint ventures
New Songdo International City Development, LLC	W	42,759		—		18,263		61,022		—		22,070		22,070
Chuncheon Energy Co., Ltd.		—		—		—		—		238		—		238
Samcheok Blue Power Co., Ltd.		154,190		—		—		154,190		—		—		—
Nickel Mining Company SAS		—		64,102		147		64,249		—		—		—
CSP - Compania Siderurgica do Pecem		46		—		—		46		27,380		—		27,380
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		13,264		—		—		13,264		434		—		434
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		13,542		—		—		13,542		—		38		38
South-East Asia Gas Pipeline Company Ltd.		—		60,326		—		60,326		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		7,585		—		—		7,585		1,032		2		1,034
Metropolitan Outer Ring Expressway Co., ltd		14,454		—		—		14,454		—		—		—
UITrans LRT Co., Ltd.		7,012		27,388		—		34,400		—		—		—
Others		46,302		148,124		148,312		342,738		3,907		7,909		11,816

	W	299,154		299,940		166,722		765,816		32,991		30,019		63,010

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

December 31, 2020


(in millions of Won)	Receivables								Payables
	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes receivable		Others		Total
Associates and joint ventures
New Songdo International City Development, LLC	W	23,866		—		20,592		44,458		—		3		3
Chuncheon Energy Co., Ltd.		—		—		—		—		444		—		444
Samcheok Blue Power Co., Ltd.		92,715		—		—		92,715		—		40,536		40,536
Nickel Mining Company SAS		—		62,420		143		62,563		—		—		—
CSP - Compania Siderurgica do Pecem		19,704		—		—		19,704		—		—		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		6,534		—		—		6,534		1,023		150		1,173
PT. Batutua Tembaga Raya		—		35,355		—		35,355		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		13,889		—		—		13,889		193		—		193
South-East Asia Gas Pipeline Company Ltd.		—		91,003		—		91,003		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		2,799		—		—		2,799		783		—		783
TK CHEMICAL CORPORATION		21,916		—		—		21,916		429		—		429
Others		78,752		166,572		111,083		356,407		7,035		11,446		18,481

	W	260,175		355,350		131,818		747,343		9,907		52,135		62,042

(g)	Significant financial transactions between the Company, excluding the controlling company, and related companies for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

September 30, 2021


(in millions of Won)	Beginning		Lend		Collect			*Others(1)**			Ending
Associates and joint ventures
UITrans LRT Co., Ltd.	W	23,452		3,963		—			(27	)		27,388
South-East Asia Gas Pipeline Company Ltd.		91,003		—		(34,616	)		3,939			60,326
PT. Batutua Tembaga Raya(*2)		35,355		—		(9,722	)		(25,633	)		—
PT. Tanggamus Electric Power		4,304		—		—			384			4,688
PT. Wampu Electric Power		5,186		—		—			462			5,648
PT. POSMI Steel Indonesia		2,176		-		-			194			2,370
Nickel Mining Company SAS		62,420		—		—			1,682			64,102
KRAKATAU POS-CHEM DONG-SUH CHEMICAL		5,440		—		—			(700	)		4,740
POS-SeaAH Steel Wire (Thailand) Co., Ltd.		6,528		—		—			581			7,109
AMCI (WA) PTY LTD		83,291		3,380		—			1,339			88,010
POS-AUSTEM YANTAI AUTOMOTIVE CO., LTD		5,440		—		—			485			5,925
POS-AUSTEM WUHAN AUTOMOTIVE CO., LTD		8,704		—		—			775			9,479
Hyo-chun Co., Ltd.		2,382		—		—			—			2,382
POS-AUSTEM Suzhou Automotive Co., Ltd		16,320		—		—			1,453			17,773
CAML RESOURCES PTY LTD		3,312		—		(3,312	)		—			—
Shinahn Wind Power Generation(*3)		37		60		—			(97	)		—

	W	355,350		7,403		(47,650	)		(15,163	)		299,940

(*1)	Includes adjustments of foreign currency translation differences and others.

(*2)

PT. Batutua Tembaga Raya was excluded from the association due to the sale of its shares during the nine-month period ended September 30, 2021. Meanwhile, the uncollected loan was offset and written off from the loan loss provisions set in the previous period, and these effects are included in Others.

(*3)	Shinahn Wind Power Generation was excluded from the association due to the sale of its shares during the nine-month period ended September 30, 2021.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

December 31, 2020


(in millions of Won)	Beginning		Lend		Collect			*Others(2)**			Ending
Associates and jointventures
UITrans LRT Co., Ltd.	W	10,579		12,873		—			—			23,452
DMSA/AMSA(*1)		57,999		—		—			(57,999	)		—
South-East Asia Gas Pipeline Company Ltd.		147,367		—		(47,539	)		(8,825	)		91,003
PT. Batutua Tembaga Raya		36,291		—		—			(936	)		35,355
PT. Tanggamus Electric Power		4,580		—		—			(276	)		4,304
PT. Wampu Electric Power		5,519		—		—			(333	)		5,186
PT. POSMI Steel Indonesia		2,316		—		—			(140	)		2,176
Nickel Mining Company SAS		60,516		—		—			1,904			62,420
KRAKATAU POS-CHEM DONG-SUH CHEMICAL		6,947		—		(1,239	)		(268	)		5,440
POS-SeAH Steel Wire (Thailand) Co., Ltd.		6,947		—		—			(419	)		6,528
AMCI (WA) PTY LTD		78,553		5,550		—			(812	)		83,291
POS-AUSTEM YANTAI AUTOMOTIVE CO.,LTD		5,789		—		—			(349	)		5,440
POS-AUSTEM WUHAN AUTOMOTIVE CO.,LTD		9,262		—		—			(558	)		8,704
Hyo-chun Co., Ltd.		2,382		—		—			—			2,382
Chun-cheon Energy Co., Ltd.		8,234		—		(8,234	)		—			—
POS-AUSTEM Suzhou Automotive Co., Ltd		5,789		11,805		—			(1,274	)		16,320
CAML RESOURCES PTY LTD		—		3,219		—			93			3,312
Shinahn Wind Power Generation		—		37		—			—			37

	W	449,070		33,484		(57,012	)		(70,192	)		355,350

(*1)	During the year ended September 30, 2020, loans amounting to W60,278 million have been converted to common shares of DMSA/AMSA, which is presented in others.

(*2)	Includes adjustments of foreign currency translation differences and others.

(h)	For the nine-month periods ended September 30, 2021 and 2020, details of compensation to key management officers were as follows:


(in millions of Won)	September 30, 2021		September 30, 2020
Short-term benefits	W	81,055		80,244
Long-term benefits		13,680		11,936
Retirement benefits		16,711		11,031

	W	111,446		103,211

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influences and responsibilities in the Company’s business and operations.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

35.

Commitments and Contingencies

(a)	Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of September 30, 2021 are as follows:


(in millions of Won)			Guarantee limit					Guarantee amount
Guarantor	Guarantee beneficiary	Financial institution	Foreign currency			Won equivalent		Foreign currency		Won equivalent
[The Company]
POSCO	POSCO Asia Co., Ltd.	Credit Agricole and others		USD	100,000,000		118,490		100,000,000		118,490
	POSCO-VIETNAM Co., Ltd.	SMBC and others		USD	156,000,000		184,844		140,000,000		165,886
	POSCO MEXICO S.A. DE C.V.	BOA and others		USD	120,000,000		142,188		120,000,000		142,188
	POSCO COATED STEEL (THAILAND) CO., LTD.	SMBC and others		THB	5,501,000,000		192,040		5,021,000,000		175,283
	POSCO Maharashtra Steel Private Limited	SMBC and others		USD	139,784,000		165,630		139,784,000		165,630
	PT. KRAKATAU POSCO	BTPN and others		USD	1,960,300,000		2,322,759		1,132,366,261		1,341,741
	POSCO ASSAN TST STEEL INDUSTRY	SOCIETE GENERALE and others		USD	146,527,500		173,620		131,874,750		156,258
POSCO INTERNATIONAL Corporation	POSCO INTERNATIONAL GLOBAL DEVELOPMENT PTE. LTD.	Export-Import Bank of Korea and others		USD	180,000,000		213,282		180,000,000		213,282
	POSCO INTERNATIONAL POWER (PNGLAE) LIMITED	KDB bank		USD	53,517,000		63,412		37,917,000		44,928
	GOLDEN LACE POSCO INTERNATIONAL CO., LTD.	Shinhan Bank and others		USD	11,000,000		13,034		11,000,000		13,034
	PT. Bio Inti Agrindo	BTPN and others		IDR	2,057,400,000,000		170,558		1,940,600,000,000		160,876
		POSCO Asia Co., Ltd.		USD	10,000,000		11,849		10,000,000		11,849
	POSCO ASSAN TST STEEL INDUSTRY	ING		USD	14,652,750		17,362		14,652,750		17,362
	POSCO INTERNATIONAL Deutschland GmbH	Bank Mendes Gans		USD	50,000,000		59,245		9,268,255		10,982
	POSCO INTERNATIONAL AMERICA Corp.								—		—
	POSCO INTERNATIONAL JAPAN Corp.								8,771,562		10,393
	POSCO INTERNATIONAL SINGAPORE Pte. Ltd.								—		—
	POSCO INTERNATIONAL Malaysia SDN BHD								—		—
	POSCO INTERNATIONAL Italia S.R.L.								—		—
	POSCO INTERNATIONAL MEXICO S.A. de C.V.								—		—
	GRAIN TERMINAL HOLDING PTE. LTD.	Export-Import Bank of Korea and others		USD	27,000,000		31,992		27,000,000		31,992
	Songdo Posco family Housing	Shinyoung securities		KRW	10,000		10,000		2,550		2,550
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	POSCO E&C Vietnam Co., Ltd.	POSCO Asia Co., Ltd. and others		USD	36,000,000		42,656		36,000,000		42,656
	Songdo Posco family Housing	Shinyoung securities		KRW	10,000		10,000		2,550		2,550
	JB CLARK HILLS	HSBC and others		USD	51,000,000		60,430		37,800,000		44,789
	PT.POSCO E&C INDONESIA	POSCO Asia Co., Ltd.		USD	25,900,000		30,689		25,900,000		30,689
POSCO ICT	PT.POSCO ICT INDONESIA	POSCO Asia Co., Ltd.		USD	1,500,000		1,777		900,000		1,066
POSCO CHEMICAL CO., LTD	PT.Krakatau Posco Chemical Calcination	POSCO Asia Co., Ltd.		USD	15,200,000		18,010		7,000,000		8,294
POSCO COATED & COLOR STEEL Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO Asia Co., Ltd.		USD	13,986,947		16,573		13,986,947		16,573
POSCO ENERGY CO., LTD	PT. KRAKATAU POSCO ENERGY	POSCO Asia Co., Ltd.		USD	82,953,123		98,291		82,953,123		98,291
[Associates and joint ventures]
POSCO	CSP - Compania Siderurgica do Pecem	Export-Import Bank of Korea and others		USD	420,000,000		497,658		366,440,809		434,196
		BNDES		BRL	464,060,000		101,532		464,060,000		101,532
	LLP POSUK Titanium	SMBC		USD	13,500,000		15,996		13,500,000		15,996
	Nickel Mining Company SAS	SMBC		EUR	46,000,000		63,218		46,000,000		63,218
POSCO INTERNATIONAL Corporation	GLOBAL KOMSCO Daewoo LLC	Hana Bank		USD	8,225,000		9,746		7,350,000		8,709
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	New Songdo International City Development, LLC	Others		KRW	686,000		686,000		548,000		548,000
	POHANG E&E Coi., LTD	Heungkuk Life Insurance Co., Ltd.		KRW	71,930		71,930		56,034		56,034
	UITrans LRT Co., Ltd.	Kookmin Bank and others		KRW	125,845		125,845		93,620		93,620
	RPSD	Plan-up Sinsajeilcha Co., Ltd		KRW	45,000		45,000		37,000		37,000
	Metropolitan Outer Ring Expressway Co., ltd	Woori Bank and others		KRW	276,033		276,033		27,776		27,776
	Pureun Tongyeong Enviro Co., Ltd.	KDB Bank and others		KRW	22,714		22,714		14,318		14,318
	Pure Gimpo.Co.,Ltd	KDB Bank and others		KRW	44,740		44,740		29,627		29,627
	Clean Iksan Co.,Ltd	SAMSUNG FIRE & MARINE INSURANCE CO.,LTD and others		KRW	44,054		44,054		29,058		29,058
	Chun-cheon Energy Co., Ltd.	Kookmin Bank and others		KRW	149,200		149,200		145,900		145,900
	Western Inland Highway Co.,LTD	Kookmin Bank and others		KRW	672,496		672,496		8,820		8,820
POSCO ICT	UITrans LRT Co., Ltd.	Kookmin Bank		KRW	50,249		50,249		37,209		37,209
	Metropolitan Outer Ring Expressway Co., Ltd	Woori Bank		KRW	24,920		24,920		1,308		1,308
	Western Inland Highway Co.,LTD	Kookmin Bank		KRW	47,348		47,348		600		600
[Others]
POSCO INTERNATIONAL Corporation	SHERRITT INTERNATIONAL CORP.	Export-Import Bank of Korea		USD	21,818,182		25,852		2,587,818		3,066
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Incheon - Gimpo Expressway Co., Ltd. and others	Kookmin Bank and others		KRW	5,121,668		5,121,668		2,451,776		2,451,776
POSCO ICT	BTL Enterprise and others	Hana Bank and others		KRW	236,547		236,547		135,965		135,965
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government) and others	Woori Bank and others		AUD	14,665,087		12,470		14,665,087		12,470
PT. Bio lnti Agrindo	KSU Mandob	Bank Muamalat		IDR	80,000,000,000		6,632		80,000,000,000		6,632
POSCO Maharashtra Steel Private Limited	MAHARASHTRA STATE ELECTRICITY and others	HSBC and others		INR	441,618,747		7,044		441,618,747		7,044

				USD	3,658,864,502		4,335,385		2,657,053,275		3,148,340
				KRW	7,638,744		7,638,744		3,622,111		3,622,111
				IDR	2,137,400,000,000		177,190		2,020,600,000,000		167,508
				INR	441,618,747		7,044		441,618,747		7,044
				THB	5,501,000,000		192,040		5,021,000,000		175,283
				EUR	46,000,000		63,218		46,000,000		63,218
				AUD	14,665,087		12,470		14,665,087		12,470
				BRL	464,060,000		101,532		464,060,000		101,532

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Other commitments

Details of other commitments of the Company as of September 30, 2021 are as follows:


Company		Description
POSCO		POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of September 30, 2021, 41 million tons of iron ore and 6 million tons of coal remained to be purchased under such long-term contracts.

		POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

		POSCO has a long-term service contract for the transportation of raw material. As of September 30, 2021, there are 38 vessels under contract, and the average remaining contract period is about 9 years.

		As of September 30, 2021, POSCO entered into a commitment with KOREA ENERGY AGENCY for long-term foreign currency borrowings, which are limited up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowings depends on the success of the projects. POSCO is not liable for the repayment of full or part of the amount borrowed if the respective projects fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements. As of September 30, 2021, the ending balance of the borrowing amounts to USD 1.02 million.

		POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to POSCO ENERGY Co., Ltd., a subsidiary of the Company, under construction of new power plant.

		POSCO has deposited 2,932,480 treasury shares for exchange with the Korea Securities Depository in relation to foreign currency exchangeable bonds as of September 30, 2021.

POSCO INTERNATIONAL Corporation		POSCO INTERNATIONAL Corporation operates a ship-to-ship business in which ships are chartered from ship’s owners and leased out to shippers. The Company has entered into a ship purchase agreement with the ship owners and the shippers, which obliges the shippers to pay the agreed amount either at the end of the contract terms or at the agreed termination and to take over the ownership of the vessel from the ship owners. Only if the shipper fails to fulfill its obligation including payment obligation for the purchase of the vessel, the Company is obliged to take over the ship based on the condition that the shipper’s contractual obligations and rights are transferred to the Company. As of September 30, 2021, the amount which is exposed to the ship purchase agreements entered into is USD 170 million.

		The Company invested in the Ambatovy Nickel Project (DMSA/AMSA) in Madagascar through the Korea Ambatovy Consortium (KAC) formed with Korea Mineral Resources Corporation (KORES) and STX Corporation. SHERRITT INTERNATIONAL CORP., the operator, transferred a portion of the project’s interests to Sumitomo and AHL (Ambatovy Holdings Limited) in November 2017, and transferred the remaining interests of the project to Sumitomo and AHL2 (Ambatovy Holdins II Limited) in August 2020. KAC has the rights and obligations to the 15.47% stake held by AHL and AHL2.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.		As of September 30, 2021, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has foreign currency guarantees of up to USD 2,354 million provided by financial institutions and uses USD 826 million with Woori Bank and others.

		As of September 30, 2021, according to the project agreements related to redevelopment and reconstruction projects, the Company has an agreement to compensate the Korea Housing and Urban Guarantee Corporation for damages of principal and interest amounting to W1,294,108 million (limited to W2,505,609 million). Futhermore, the Company provides agreements of construction completion (compensation for non-performance) in connection with a number of implementation and union business projects.

POSCO ICT		As of September 30, 2021, in relation to contract enforcement, POSCO ICT is provided with a guarantee of W140,434 million, W23,653 million from Software credit union and Seoul guarantee insurance, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(c)	Litigation in progress

Request for Arbitration of NSC Investment and TGC

In March 2019, NSC Investment and TGC (“Applicant”), a former joint venture partner of POSCO ENGINEERING & CONSTRUCTION CO., LTD., in connection with the Songdo International City Development Project in Incheon, filed an arbitration (mediation price: approximately USD 2 billion) for alleged violations of contract by POSCO ENGINEERING & CONSTRUCTION CO., LTD. As of September 30, 2021, the Company has determined that the applicant’s claim is without merit, and did not recognize a provision.

Other litigation

The Company is involved in 316 lawsuits aggregating to W1,388.1 billion as defendant as of September 30, 2021, which arise from the ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting to W69.4 billion for 70 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company believes that it does not have a present obligation as of September 30, 2021.

(d)	Other contingencies


Company		Description

POSCO		POSCO has provided 3 blank checks to Korea Energy Agency as collateral for long-term foreign currency borrowings.

POSCO INTERNATIONAL Corporation		As of September 30, 2021, POSCO INTERNATIONAL Corporation has provided 30 blank promissory notes and 17 blank checks to Korea Energy Agency and others as collateral for the guarantee on performance for contracts and others.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.		As of September 30, 2021, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided 35 blank checks and 4 blank promissory notes as collateral for agreements and outstanding loans, and has provided joint guarantee of W8,766,977 million for guarantee that partners had issued from Korea Housing & Urban Guarantee Corporation and others.

POSCO ICT		As of September 30, 2021, POSCO ICT has provided 6 blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

36. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	September 30, 2021			September 30, 2020
Trade accounts and notes receivable	W	(2,028,833	)		119,743
Other receivables		(156,811	)		203,637
Inventories		(4,537,739	)		2,026,615
Other current assets		(110,904	)		(74,404	)
Other non-current assets		(161,327	)		(74,021	)
Trade accounts and notes payable		1,130,509			(145,465	)
Other payables		(157,128	)		(119,043	)
Other current liabilities		317,055			342,705
Provisions		(137,676	)		(174,100	)
Payments of severance benefits		(194,468	)		(174,151	)
Plan assets		152,224			76,381
Other non-current liabilities		30,558			15,443

	W	(5,854,540	)		2,023,340

37. Operating Segments

The Company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments - steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segments include power generation, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2020.

Segment assets, liabilities and profit (loss) are generally measured based on separate financial statements in accordance with K-IFRS of the subsidiaries that constitute reportable operating segments.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(a)	Information about reportable segments for the nine-month periods ended September 30, 2021 and 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	29,374,822		18,326,546		4,555,585		2,741,119		54,998,072
Internal revenues		16,147,310		14,766,211		656,448		2,049,280		33,619,249
Inter segment revenue		10,676,368		7,763,264		600,888		1,911,292		20,951,812
Total revenues		45,522,132		33,092,757		5,212,033		4,790,399		88,617,321
Segment profits		5,290,635		276,691		167,109		260,078		5,994,513

For the nine-month period ended September 30, 2020


(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	20,915,217		14,520,691		4,917,113		2,175,564		42,528,585
Internal revenues		11,295,551		9,410,203		711,221		1,932,408		23,349,383
Inter segment revenue		7,902,278		4,575,959		658,178		1,818,184		14,954,599
Total revenues		32,210,768		23,930,894		5,628,334		4,107,972		65,877,968
Segment profits		341,083		207,849		272,740		308,403		1,130,075

(b)	Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	September 30, 2021			September 30, 2020
Total profit for reportable segments	W	5,994,513			1,130,075
Corporate fair value adjustments		(45,430	)		(56,976	)
Elimination of inter-segment profits		(375,513	)		(19,527	)
Income tax expense		1,743,241			453,134

Profit before income tax expense	W	7,316,811			1,506,706

38. Events after the Reporting Period

Pursuant to the resolution of the Board of Directors on November 5, 2021, the Company decided to pay interim cash dividends of W5,000 per common share (total dividend: W378.1 billion).

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2021

(With Independent Auditors’ Review Report Thereon)

Table of Contents


	Page
Independent Auditors’ Review Report		1

Condensed Separate Interim Financial Statements

Condensed Separate Interim Statements of Financial Position		3

Condensed Separate Interim Statements of Comprehensive Income		5

Condensed Separate Interim Statements of Changes in Equity		6

Condensed Separate Interim Statements of Cash Flows		7

Notes to the Condensed Separate Interim Financial Statements		9

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of September 30, 2021, the condensed separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2021 and 2020, the condensed separate interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2021 and 2020, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed separate interim financial statements free of material misstatements due to error or fraud.

Auditor’s review responsibility

Our responsibility is to issue a report on the condensed separate interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

The separate statement of financial position of the Company as of December 31, 2020, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 4, 2021, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2020, presented for comparative purposes, is consistent, in all material respect, with the audited separate financial statements from which it has been derived.

Seoul, Korea

November 12, 2021

This report is effective as of November 12, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO

Condensed Separate Interim Statements of Financial Position

As of September 30, 2021 and December 31, 2020

(Unaudited)


(in millions of Won)	Notes		September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents		20	W	2,423,235		1,822,660
Trade accounts and notes receivable, net		4,14,20,25,32		6,107,524		3,693,535
Other receivables, net		5,20,32		396,332		279,555
Other short-term financial assets		6,20		9,323,815		9,607,632
Inventories		7,29		6,528,001		4,093,829
Assets held for sale		8		10,331		32,244
Other current assets		13		53,418		50,498

Total current assets				24,842,656		19,579,953

Long-term trade accounts and notes receivable, net		4,20		7,610		2,456
Other receivables, net		5,20		285,703		84,037
Other long-term financial assets		6,20		1,678,509		1,072,817
Investments in subsidiaries, associates and joint ventures		9		15,988,631		14,883,152
Investment property, net		10		147,290		149,617
Property, plant and equipment, net		11		19,774,324		20,216,932
Intangible assets, net		12		549,699		621,926
Defined benefit assets, net		18		—		76,501
Other non-current assets		13		79,179		107,578

Total non-current assets				38,510,945		37,215,016

Total assets			W	63,353,601		56,794,969

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of September 30, 2021 and December 31, 2020

(Unaudited)


(in millions of Won)	Notes		September 30, 2021			December 31, 2020
Liabilities

Trade accounts and notes payable		20,32	W	2,096,900			1,258,470
Short-term borrowings and current installments of long-term borrowings		4,14,20		1,657,031			2,408,392
Other payables		15,20,32		889,614			1,127,323
Other short-term financial liabilities		16,20		16,585			12,788
Current income tax liabilities				1,423,817			137,858
Provisions		17		72,945			63,604
Other current liabilities		19,25		113,520			80,676

Total current liabilities				6,270,412			5,089,111

Long-term borrowings, excluding current installments		14,20		7,414,557			5,346,944
Other payables		15,20		402,981			220,612
Other long-term financial liabilities		16,20		23,422			122,154
Defined benefit liabilities, net		18		22,559			—
Deferred tax liabilities				848,961			848,317
Long-term provisions		17,33		51,381			52,602
Other non-current liabilities		19,25		502			525

Total non-current liabilities				8,764,363			6,591,154

Total liabilities				15,034,775			11,680,265

Equity

Share capital		21		482,403			482,403
Capital surplus		21		1,339,289			1,339,289
Hybrid bonds		22		199,384			199,384
Reserves		23		(191,343	)		(296,626	)
Treasury shares		24		(2,508,294	)		(2,391,523	)
Retained earnings				48,997,387			45,781,777

Total equity				48,318,826			45,114,704

Total liabilities and equity			W	63,353,601			56,794,969

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Comprehensive Income

For the three-month and nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won, except per share informations)			For the three-month periods						For the nine-month periods
			ended September 30						ended September 30
	Notes		2021			2020			2021			2020
Revenue		25,32	W	11,314,724			6,577,887			28,392,523			19,432,566
Cost of sales		7,29,32		(8,712,578	)		(6,064,351	)		(22,591,516	)		(18,037,570	)

Gross profit				2,602,146			513,536			5,801,007			1,394,996
Selling and administrative expenses		29,32
Reversal of (impairment loss) on trade accounts and notes receivable				(5	)		31			(11	)		(4,936	)
Other administrative expenses		26		(237,813	)		(196,051	)		(655,124	)		(587,582	)
Selling expenses		26		(68,632	)		(55,653	)		(169,220	)		(190,979	)

Operating profit				2,295,696			261,863			4,976,652			611,499

Finance income and costs		20,27
Finance income				586,860			90,469			1,426,600			875,321
Finance costs				(375,804	)		(28,342	)		(777,081	)		(526,062	)

Other non-operating income and expenses		32
Reversal of (impairment loss) on other receivables				(420	)		208			(741	)		(119	)
Other non-operating income		28		16,863			8,840			128,754			114,563
Other non-operating expenses		28,29		(48,772	)		(52,782	)		(143,207	)		(228,726	)

Profit before income tax				2,474,423			280,256			5,610,977			846,476
Income tax expense		30		(634,354	)		(99,446	)		(1,500,574	)		(206,000	)

Profit				1,840,069			180,810			4,110,403			640,476

Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans		18		(2,528	)		(437	)		(13,890	)		(830	)
Net changes in fair value of equity investments at fair value through other comprehensive income		6,20,23		(16,756	)		6,396			103,205			(154,254	)

Total comprehensive income			W	1,820,785			186,769			4,199,718			485,392

Earnings per share (in Won)		31
Basic earnings per share				24,309			2,261			54,218			7,965
Diluted earnings per share			W	23,871			2,261			53,854			7,965

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)	Share		Capital		Hybrid					Treasury			Retained
	capital		surplus		bonds		Reserves			shares			earnings			Total
Balance as of January 1, 2020	W	482,403		1,252,220		199,384		(183,930	)		(1,508,303	)		45,372,411			45,614,185
Total comprehensive income:
Profit		—		—		—		—			—			640,476			640,476
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—		—		—			—			(830	)		(830	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—		—		(151,351	)		—			(2,903	)		(154,254	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(320,462	)		(320,462	)
Interim dividends		—		—		—		—			—			(160,062	)		(160,062	)
Interest of hybrid bonds		—		—		—		—			—			(6,906	)		(6,906	)
Acquisition of treasury shares		—		—		—		—			(329,677	)		—			(329,677	)
Others		—		87,069		—		—			—			—			87,069

Balance as of September 30, 2020	W	482,403		1,339,289		199,384		(335,281	)		(1,837,980	)		45,521,724			45,369,539

Balance as of January 1, 2021	W	482,403		1,339,289		199,384		(296,626	)		(2,391,523	)		45,781,777			45,114,704
Total comprehensive income:
Profit		—		—		—		—			—			4,110,403			4,110,403
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—		—		—			—			(13,890	)		(13,890	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—		—		105,283			—			(2,078	)		103,205
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(342,565	)		(342,565	)
Interim dividends		—		—		—		—			—			(529,379	)		(529,379	)
Interest of hybrid bonds		—		—		—		—			—			(6,881	)		(6,881	)
Acquisition of treasury shares		—		—		—		—			(116,771	)		—			(116,771	)

Balance as of September 30, 2021	W	482,403		1,339,289		199,384		(191,343	)		(2,508,294	)		48,997,387			48,318,826

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Cash Flows

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)			September 30,			September 30,
	Notes		2021			2020
Cash flows from operating activities
Profit			W	4,110,403			640,476
Adjustments for :
Expenses related to post-employment benefit				91,145			93,872
Depreciation				1,712,811			1,698,104
Amortization				82,233			74,002
Impairment loss on trade and other receivables				752			5,055
Finance income				(1,133,963	)		(573,676	)
Finance costs				466,722			315,516
Loss on valuation of inventories				1,015			7,236
Gain on disposal of property, plant and equipment				(7,029	)		(7,211	)
Loss on disposal of property, plant and equipment				70,218			125,031
Impairment loss on property, plant and equipment				3,113			22,997
Impairment loss on intangible assets				7,180			—
Gain on disposal of investments in subsidiaries, associates and joint ventures				—			(24,354	)
Gain on disposal of assets held for sale				(46,697	)		(22,488	)
Loss on disposal of assets held for sale				—			5,383
Impairment loss on assets held for sale				—			9,093
Gain on disposal of emission rights				—			(24,566	)
Loss on disposal of emissions rights				5,843			—
Increase to provisions				35,771			45,626
Income tax expense				1,500,574			206,000
Others				6,755			(1,815	)

Changes in operating assets and liabilities		34		(4,115,413	)		1,792,321

Interest received				99,669			156,619
Interest paid				(151,398	)		(161,098	)
Dividends received				538,198			163,905
Income taxes paid				(201,099	)		(316,862	)

Net cash provided by operating activities			W	3,076,803			4,229,166

See accompanying notes to the condensed separate interim financial statements

POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2021 and 2020

(Unaudited)


(in millions of Won)	Notes	September 30, 2021			September 30, 2020
Cash flows from investing activities
Decrease in deposits		W	1,884,031			2,923,219
Proceeds from disposal of short-term financial instruments			23,877,869			26,654,572
Proceeds from disposal of long-term financial instruments			4			—
Collection of short-term loans			5,041			1,798
Proceeds from disposal of debt security			150,070			426,214
Proceeds from disposal of long-term debt security			1,742			—
Proceeds from disposal of equity securities			12,868			7,938
Proceeds from disposal of other securities			2,534			8,183
Proceeds from disposal of investments in subsidiaries, associates and joint ventures			1,020			21,820
Proceeds from disposal of intangible assets			727			1,016
Proceeds from disposal of emissions rights			5,503			66,143
Proceeds from disposal of assets held for sale			59,291			224,546
Proceeds from disposal of derivatives			1,482			—
Increase in deposits			(2,042,750	)		(2,939,354	)
Acquisition of short-term financial instruments			(23,538,704	)		(28,773,711	)
Acquisition of long-term financial instruments			(272,825	)		—
Acquisition of equity securities			(8,385	)		—
Increase in long-term loans			(193,048	)		(19,127	)
Acquisition of debt securities			(50,033	)		(361,599	)
Acquisition of other securities			(24,729	)		(13,107	)
Acquisition of investment in subsidiaries, associates and joint ventures			(1,107,671	)		(204,601	)
Acquisition of property, plant and equipment			(1,198,496	)		(1,817,307	)
Payment for disposal of property, plant and equipment			(45,612	)		(64,431	)
Acquisition of intangible assets			(34,434	)		(119,000	)

Net cash used in investing activities		W	(2,514,505	)		(3,976,788	)

Cash flows from financing activities
Proceeds from borrowings			5,096,059			3,045,576
Increase in long-term financial liabilities			1,362			251
Proceeds from disposals of derivatives			3,195			—
Receipt of government grants			398			897
Repayment of borrowings			(4,053,496	)		(414,574	)
Decrease in long-term financial liabilities			(1,297	)		(330	)
Repayment of lease liabilities			(34,466	)		(46,913	)
Payment of cash dividends			(871,971	)		(480,541	)
Acquisition of treasury shares			(116,771	)		(329,677	)
Payment of interest of hybrid bonds			(6,906	)		(6,932	)

Net cash provided by financing activities		W	16,107			1,767,757

Effect of exchange rate fluctuation on cash held			22,170			(11,368	)
Net increase in cash and cash equivalents			600,575			2,008,767
Cash and cash equivalents at beginning of the period			1,822,660			978,139

Cash and cash equivalents at end of the period		W	2,423,235			2,986,906

See accompanying notes to the condensed separate interim financial statements.

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of September 30, 2021

(Unaudited)

1. Reporting Entity

POSCO (the “Company”) is the largest steel producer in Korea which was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of the Company have been listed on the Korea Exchange since June 10, 1988. The Company owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea, and it also operates internationally through five of its overseas liaison offices.

As of September 30, 2021, the shares of the Company are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchanges.

2. Statement of Compliance

Statement of compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies, etc. in the Republic of Korea.

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2020. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.

Use of estimates and judgments

(a)	Judgments, assumptions and estimation uncertainties

The preparation of the condensed interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Measurement of fair value

Significant valuation issues are reported to the Company’s Audit Committee.

•

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly.

•

Level 3 – inputs for the assets or liabilities that are not based on observable market data.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2020.

New and amended standards not yet adopted

(a)	K-IFRS No. 1016 “Property, Plant and Equipment”

The amendment prohibits deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the Company is preparing the asset for its intended use. Instead, the Company will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Company does not expect the effect of the amendments to the financial statements to be significant.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Current
Trade accounts and notes receivable	W	6,121,866			3,707,860
Less: Allowance for doubtful accounts		(14,342	)		(14,325	)

	W	6,107,524			3,693,535

Non-current
Trade accounts and notes receivable	W	10,198			3,780
Less: Present value discount		(1,878	)		(344	)
Less: Allowance for doubtful accounts		(710	)		(980	)

	W	7,610			2,456

The Company sold trade accounts and notes receivable with recourse to financial institutions. These trade accounts and notes receivable have not been derecognized from the statement of financial position because the Company retains substantially all of the risks and rewards associated with the transferred assets. The amounts received on transfer have been recognized as secured borrowings. As of September 30, 2021, and December 31, 2020, the carrying amounts of such secured borrowings are W384,376 million and W520,310 million, respectively, which are presented in the statements of financial position as the short-term borrowings.

5. Other Receivables

Other receivables as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Current
Loans	W	2,950			2,950
Other accounts receivable		364,834			231,051
Others		33,836			50,822
Less: Allowance for doubtful accounts		(5,288	)		(5,268	)

	W	396,332			279,555

Non-current
Loans	W	243,648			52,760
Long-term other accounts receivable		47,432			35,638
Others		3,706			4,001
Less: Allowance for doubtful accounts		(9,083	)		(8,362	)

	W	285,703			84,037

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

6. Other Financial Assets

(a)	Other financial assets as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Debt securities	W	50,000		153,370
Deposit instruments(* 1)		1,496,599		1,337,881
Short-term financial instruments		7,777,216		8,116,381

	W	9,323,815		9,607,632

Non-current
Long-term derivative assets	W	188,620		18,549
Equity securities		1,121,925		980,706
Debt securities		4,750		6,367
Other securities		90,359		67,161
Deposit instruments(* 2)		30		34
Long-term financial instruments		272,825		—

	W	1,678,509		1,072,817

(*1)	As of September 30, 2021 and December 31, 2020, W3,599 million and W4,881 million, respectively, are restricted in use in relation to government assigned projects.

(*2)	The Company is required to provide deposits to maintain checking accounts and accordingly the withdrawal of these deposits is restricted.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Equity securities as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)														December 31,
	September 30, 2021													2020
									Net changes in
	Number of		Ownership		Acquisition		Fair		fair value of			Book		Book
	shares		(% )		cost		value		equity securities			value		value
Marketable equity securities
Nippon Steel Corporation		15,698,500		1.65	W	473,962		337,885		(136,077	)		337,885		219,788
KB Financial group Inc.		3,863,520		0.93		178,839		213,653		34,814			213,653		167,677
Woori Financial Group Inc.		20,280,000		2.81		244,447		236,262		(8,185	)		236,262		197,324
CSN Mineracao S.A.(* 1)		102,186,675		1.83		206,265		142,417		(63,848	)		142,417		—
SAMWONSTEEL Co., Ltd.		5,700,000		14.25		8,930		19,067		10,137			19,067		15,020
DONGKUK INDUSTRIES COMPANY		2,611,989		4.82		11,911		9,978		(1,933	)		9,978		8,868
Others (9 companies)(* 2)						71,190		76,889		5,699			76,889		35,939

						1,195,544		1,036,151		(159,393	)		1,036,151		644,616

Non-marketable equity securities
CSN Mineracao S.A.(* 1, 3)		—		—		—		—		—			—		246,158
POSCO PLANTEC Co., Ltd.		18,337,912		10.99		19,437		19,437		—			19,437		19,437
Korea Nickel CO. LTD		75,600		14.00		10,194		10,194		—			10,194		10,194
Poongsan Special Metal Corp.		315,790		5.00		7,657		7,657		—			7,657		7,657
HANKUM.CO. LTD		21,000		4.99		4,599		4,599		—			4,599		4,599
Core-Industry Co., Ltd.		490,000		19.84		4,214		4,214		—			4,214		4,214
AJUSTEEL CO., LTD(* 2)		—		—		—		—		—			—		4,165
Others (29 companies)						144,202		39,673		(104,529	)		39,673		39,666

						190,303		85,774		(104,529	)		85,774		336,090

					W	1,385,847		1,121,925		(263,922	)		1,121,925		980,706

(*1)	During the nine-month period ended September 30, 2021, CSN Mineracao S.A. was listed on the Brazilian stock market, and a stock split of 1:30 was carried out at the same time as the listing. On the other hand, the Company sold 7,565,145 shares in the current quarter after stock split.

(*2)	During the nine-month period ended September 30, 2021, AJUSTEEL CO., LTD was listed on the Korea Stock Exchange and classified as marketable equity securities.

(*3)	As of December 31, 2020, fair value is based on an analysis performed by an external professional evaluation agency.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

7. Inventories

Inventories as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Finished goods	W	1,027,999			709,323
Semi-finished goods		1,819,086			1,167,330
By-products		7,208			3,460
Raw materials		1,397,067			885,222
Fuel and materials		469,418			518,151
Materials-in-transit		1,807,590			814,397
Others		648			681

		6,529,016			4,098,564
Less: Allowance for inventories valuation		(1,015	)		(4,735	)

	W	6,528,001			4,093,829

The amount of loss on valuation of inventories recognized in cost of sales during the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were W1,015 million and W4,735 million, respectively.

8. Assets Held for Sale

Assets held for sale as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	*September 30, 2021(1, 2)**		December 31, 2020
Assets
Property, plant and equipment(* 3)	W	10,331		32,244

(*1)	During the nine-month period ended September 30, 2021, the Company sold the land in the Yanghak Neighborhood Park development reserve area that was classified as held for sale and recognized W43,760 million of gain on disposal.

(*2)	During the nine-month period ended September 30, 2021, the Company decided to sell the emission rights and reclassified the emission rights to assets held for sale. Upon the sale, the Company recognized W1,316 million loss on disposal of assets held for sale.

(*3)

During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM Plants, and classified the assets as held for sale. During the year ended December 31, 2020, the Company recognized an impairment loss of W5,030 million for the difference between the fair value less costs to sell and the carrying amount of the assets. During the nine-month period ended September 30, 2021, the Company disposed of the assets held for sale for W 20,793 million.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

9. Investments in Subsidiaries, Associates and Joint ventures

(a)	Details of subsidiaries and their carrying amounts as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)							December 31,
			September 30, 2021				2020
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
POSCO INTERNATIONAL Corporation	Korea	Trading		62.91	W	3,223,759		3,223,759
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	Korea	Engineering and construction		52.80		1,014,314		1,014,314
POSCO ENERGY CO., LTD.	Korea	Power generation		89.02		658,176		658,176
POSCO COATED & COLOR STEEL Co., Ltd.	Korea	Coated steel manufacturing and sales		56.87		108,421		108,421
POSCO Capital	Korea	Investment in venture companies		95.00		103,780		103,780
POSCO CHEMICAL CO., LTD(* 1)	Korea	Refractory manufacturing and sales		59.72		895,707		207,631
POSCO O&M Co., Ltd(* 2)	Korea	Business facility maintenance		47.17		73,374		73,374
POSCO ICT	Korea	Computer hardware and software distribution		65.38		70,990		70,990
POSCO M-TECH(* 2)	Korea	Packing materials manufacturing and sales		48.85		107,278		107,278
Busan E&E Co., Ltd.(* 3)	Korea	Municipal solid waste fuel and power generation		70.00		30,148		30,148
POSCO Lithium Solution Co., Ltd.(* 4)	Korea	Lithium manufacturing and sales		100.00		150,000		—
Others (12 companies)						232,254		110,995

						6,668,201		5,708,866

[Foreign]
PT. KRAKATAU POSCO	Indonesia	Steel manufacturing and sales		70.00		633,421		633,421
POSCO WA PTY LTD	Australia	Iron ore sales and mine development		100.00		646,574		645,830
POSCO Maharashtra Steel Private Limited	India	Steel manufacturing and sales		100.00		722,569		722,569
POSCO Canada Ltd.	Canada	Coal mine development		100.00		560,879		560,879
POSCO AUSTRALIA PTY LTD	Australia	Iron ore sales and mine development		100.00		330,623		330,623
POSCO (Zhangjiagang) Stainless Steel Co.,Ltd.	China	Stainless steel manufacturing and sales		58.60		283,845		283,845
POSCO Thainox Public Company Limited	Thailand	Stainless steel manufacturing and sales		74.56		178,785		178,785
POSCO-China Holding Corp.	China	Investment management		100.00		593,841		593,841
POSCO-India Private Limited	India	Steel manufacturing and sales		99.99		75,567		75,567
POSCO MEXICO S.A. DE C.V.	Mexico	Plate steel manufacturing and sales		83.28		180,072		180,072
POSCO America Corporation	USA	Steel trading		99.45		192,156		192,156
POSCO-VIETNAM Co., Ltd.	Vietnam	Steel manufacturing and sales		100.00		160,572		160,572
POSCO VST CO., LTD.	Vietnam	Stainless steel manufacturing and sales		95.65		144,573		144,573
POSCO(Guangdong) Automotive Steel Co., Ltd.	China	Plate steel manufacturing and sales		83.64		52,936		52,936
POSCO COATED STEEL (THAILAND) CO., LTD.	Thailand	Plate steel manufacturing and sales		100.00		121,592		121,592
POSCO Asia Co., Ltd.	Hong Kong	Steel and raw material trading		100.00		117,710		117,710
POSCO ASSAN TST STEEL INDUSTRY	Turkey	Steel manufacturing and sales		60.00		71,707		71,707
POSCO JAPAN Co., Ltd.	Japan	Steel trading		100.00		68,436		68,436
Qingdao Pohang Stainless Steel Co., Ltd.	China	Stainless steel manufacturing and sales		70.00		65,982		65,982
POSCO(Suzhou) Automotive Processing Center Co., Ltd.	China	Steel manufacturing and sales		90.00		62,494		62,494
POSCO AFRICA (PROPRIETARY) LIMITED	South Africa	Mine development		100.00		50,297		50,297
POSCO-Malaysia SDN. BHD.	Malaysia	Steel manufacturing and sales		81.79		45,479		45,479
POSCO Argentina S.A.U.	Argentina	Mineral exploration, manufacturing and sale		100.00		373,366		373,366
POSCO YAMATO VINA STEEL JOINT STOCK COMPANY	Vietnam	Steel manufacturing and sales		51.00		130,526		130,526
Others (29 companies)						529,080		510,079

						6,393,082		6,373,337

					W	13,061,283		12,082,203

(*1)	During the nine-month period ended September 30, 2021, the Company acquired W 688,076 million in additional subsidiary investment shares by participating in POSCO CHEMICAL CO., LTD’s paid-in capital increase.

(*2)

The Company classified POSCO M-TECH and POSCO O&M Co., Ltd. as the investments in a subsidiary, considering additional facts and circumstances, such as the relative size of the voting rights held by the Company and the degree of diversification of other voting rights holders, although the Company holds less than half of the voting rights of POSCO M-TECH and POSCO O&M Co., Ltd.

(*3)

As of December 31, 2020, the investments in a subsidiary amounting to W30,148 million were provided as collateral in relation to the loan agreement of Busan E&E Co., Ltd. On the other hand, during the nine-month period ended September 30, 2021, Busan E&E Co., Ltd. repaid the liability and the collateral is released.

(*4)	During the nine-month period ended September 30, 2021, the Company established POSCO Lithium Solution Co., Ltd.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Details of associates and their carrying amounts as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)							December 31,
			September 30, 2021				2020
	Country	Principal operations	Ownership (%)		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	Korea	Mine investment		34.43	W	169,316		169,316
SNNC	Korea	STS material manufacturing and sales		49.00		100,655		100,655
QSONE Co.,Ltd.	Korea	Real estate rental business		50.00		85,550		85,550
Others (8 companies)						23,606		22,977

						379,127		378,498

[Foreign]
Nickel Mining Company SAS	New Caledonia	Raw material manufacturing and sales		49.00		189,197		189,197
9404-5515 Quebec Inc.(* 1)	Canada	Mine investment		10.40		124,341		124,341
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd	China	Tinplate manufacturing and sales		24.00		11,003		11,003
FQM Australia Holdings Pty Ltd(* 2)	Australia	Nickel manufacturing and sales		30.00		106,621		—
Others (6 companies)						39,644		39,671

						470,806		364,212

					W	849,933		742,710

(*1)	As of September 30, 2021, it was classified as an associate even though the Company’s ownership percentage is less than 20% since the Company has significant influence over the investee when considering the structure of its Board of Directors and others.

(*2)	During the nine-month period ended September 30, 2021, the Company acquired shares of FQM Australia Holdings Pty Ltd.

(c)	Details of joint ventures and their carrying amounts as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)							December 31,
			September 30, 2021				2020
	Country	Principal operations	Ownership (%)		Book value		Book value
Roy Hill Holdings Pty Ltd(* 1)	Australia	Mine development		10.00	W	1,225,464		1,225,464
CSP - Compania Siderurgica do Pecem	Brazil	Steel manufacturing and sales		20.00		315,896		296,720
POSCO-NPS Niobium LLC	USA	Mine development		50.00		364,609		364,609
KOBRASCO	Brazil	Steel materials manufacturing and sales		50.00		98,962		98,962
Others (3 companies)						72,484		72,484

					W	2,077,415		2,058,239

(*1)	As of September 30, 2021 and December 31, 2020, the investments in joint ventures amounting to W1,225,464 million were provided as collateral in relation to loans from project financing of Roy Hill Holdings Pty Ltd.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

10. Investment Property, Net

Changes in the carrying amount of investment property for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

(a)	For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		*Depreciation(1)**			*Transfer(2)**		Ending
Land	W	89,848		—			37		89,885
Buildings		51,417		(3,037	)		1,120		49,500
Structures		8,352		(453	)		6		7,905

	W	149,617		(3,490	)		1,163		147,290

(*1)	The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*2)	Mainly includes assets transferred from property, plant and equipment in relation to changes in rental ratio and the purpose of use.

(b)	For the year ended December 31, 2020


(in millions of Won)	Beginning		*Depreciation(1)**			*Transfer(2)**			Ending
Land	W	91,738		—			(1,890	)		89,848
Buildings		57,228		(4,033	)		(1,778	)		51,417
Structures		9,111		(609	)		(150	)		8,352

	W	158,077		(4,642	)		(3,818	)		149,617

(*1)	The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*2)	Mainly includes assets transferred from property, plant and equipment in relation to changes in rental ratio and the purpose of use.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

11. Property, Plant and Equipment, Net

Changes in the carrying amount of property, plant and equipment for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

(a)	For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Impairment(1)**			*Others(2)**			Ending
Land	W	1,401,605		—		(15	)		—			—			(5,524	)		1,396,066
Buildings		2,080,843		356		(317	)		(154,369	)		(595	)		161,049			2,086,967
Structures		2,073,097		402		(1,070	)		(136,236	)		(4	)		69,682			2,005,871
Machinery and equipment		12,651,431		19,995		(11,707	)		(1,358,245	)		(2,514	)		472,203			11,771,163
Vehicles		14,486		1,059		(4	)		(5,417	)		—			2,099			12,223
Tools		24,333		2,184		(7	)		(8,388	)		—			1,217			19,339
Furniture and fixtures		44,426		4,512		(149	)		(12,284	)		—			29,102			65,607
Lease assets		331,588		123,688		—			(34,382	)		—			33,922			454,816
Construction-in-progress		1,595,123		1,118,771		—			—			—			(751,622	)		1,962,272

	W	20,216,932		1,270,967		(13,269	)		(1,709,321	)		(3,113	)		12,128			19,774,324

(*1)	During the nine-month period ended September 30, 2021, the Company recognized impairment losses on individual assets that were shut down due to the fire or other loss.

(*2)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

(b)	For the year ended December 31, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Impairment(1)**			*Others(2)**			Ending
Land	W	1,398,081		—		(6	)		—			—			3,530			1,401,605
Buildings		2,100,503		3,144		(2,397	)		(207,818	)		(271	)		187,682			2,080,843
Structures		2,030,853		4,037		(6,349	)		(174,343	)		(883	)		219,782			2,073,097
Machinery and equipment		12,602,435		48,747		(22,913	)		(1,796,038	)		(9,422	)		1,828,622			12,651,431
Vehicles		9,951		1,497		(8	)		(6,571	)		—			9,617			14,486
Tools		27,288		4,007		(3	)		(12,052	)		—			5,093			24,333
Furniture and fixtures		38,329		4,399		(179	)		(11,811	)		—			13,688			44,426
Lease assets		262,368		21,920		—			(60,358	)		—			107,658			331,588
Construction-in-progress		1,662,391		2,406,273		(4,872	)		—			(17,270	)		(2,451,399	)		1,595,123

	W	20,132,199		2,494,024		(36,727	)		(2,268,991	)		(27,846	)		(75,727	)		20,216,932

(*1)

(*2)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(c)	Information on lease agreements for which the Company is a lessee is as follows:

Right-of-use assets

①

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the nine-month period ended September 30, 2021 were as follows.


(in millions of Won)	Beginning		Acquisitions		Depreciation			*Others(1)**			Ending
Land	W	8,703		—		(226	)		—			8,477
Buildings		71,431		3,471		(5,433	)		—			69,469
Structures		59,221		—		(3,909	)		—			55,312
Machinery and equipment		54,698		—		(6,146	)		37,124			85,676
Vehicles		6,255		—		(375	)		—			5,880
Ships		106,555		120,217		(12,536	)		—			214,236
Furniture and fixtures		24,725		—		(5,757	)		(3,202	)		15,766

	W	331,588		123,688		(34,382	)		33,922			454,816

(*1)	Increased due to the revised lease term of machinery and equipment.

②

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the year ended December 31, 2020, were as follows.


(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Land	W	—		8,853		(150	)		—			8,703
Buildings		71,921		6,075		(6,565	)		—			71,431
Structures		64,434		—		(5,213	)		—			59,221
Machinery and equipment		60,198		—		(5,500	)		—			54,698
Vehicles		6,755		—		(500	)		—			6,255
Ships		24,082		111,537		(29,064	)		—			106,555
Furniture and fixtures		34,978		6,992		(13,366	)		(3,879	)		24,725

	W	262,368		133,457		(60,358	)		(3,879	)		331,588

Amount recognized in profit or loss

The amounts recognized in profit or loss related to leases for the three-month and the nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month periods				For the nine-month periods
	ended September 30				ended September 30
	2021		2020		2021		2020
Interest on lease liabilities	W	3,011		2,675		9,221		7,731
Expenses related to short-term leases		916		821		2,548		2,711
Expenses related to leases of low-value assets		1,373		1,459		4,587		4,848

	W	5,300		4,955		16,356		15,290

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

12. Intangible Assets, Net

Changes in the carrying amount of intangible assets for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

(a)	For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			*Impairment(2)**			*Transfer(3)**			Ending
Intellectual property rights	W	22,758		—		(485	)		(4,492	)		—			4,384			22,165
Membership(*1)		81,795		3,690		(727	)		—			—			—			84,758
Development expense		224,854		293		—			(57,707	)		—			13,685			181,125
Port facilities usage rights		233,447		—		—			(16,924	)		—			—			216,523
Construction-in-progress		34,924		16,677		(4,770	)		—			—			(14,880	)		31,951
Other intangible assets		24,148		4,684		(10,030	)		(3,110	)		(7,180	)		4,665			13,177

	W	621,926		25,344		(16,012	)		(82,233	)		(7,180	)		7,854			549,699

(*1)	Economic useful life of memberships is indefinite.

(*2)	During the nine-month periods ended September 30, 2021, the Company decided to sell a portion of paid-in emission rights and recognized impairment loss which is the difference between carrying amount and net fair value.

(*3)	Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, and others.

(b)	For the year ended December 31, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			*Transfer(2)**			Ending
Intellectual property rights	W	24,545		—		(3,609	)		(6,140	)		7,962			22,758
Membership(*1)		82,657		—		(862	)		—			—			81,795
Development expense		86,023		1,579		(16	)		(50,827	)		188,095			224,854
Port facilities usage rights		278,072		—		—			(44,625	)		—			233,447
Construction-in-progress		137,273		88,376		—			—			(190,725	)		34,924
Other intangible assets		100,345		19,785		(61,446	)		(5,334	)		(29,202	)		24,148

		W708,915		109,740		(65,933	)		(106,926	)		(23,870	)		621,926

(*1)	Economic useful life of memberships is indefinite.

(*2)	Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment and others.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

13. Other Assets

Other assets as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Advance payments	W	3,957		4,263
Prepaid expenses		44,219		26,011
Emission rights purchased from the market		5,242		20,224

	W	53,418		50,498

Non-current
Long-term prepaid expenses	W	3,835		4,312
Others(*1)		75,344		103,266

	W	79,179		107,578

(*1)

As of September 30, 2021 and December 31, 2020, the Company recognized tax assets amounting to W54,102 million and W100,852 million, respectively, based on the Company’s best estimate of the income tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years’ tax audits and claim for rectification are finalized.

14. Borrowings

(a)	Borrowings as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Short-term borrowings
Short-term borrowings	W	1,138,529			1,029,363
Current portion of debentures		518,727			1,379,739
Less: Current portion of discount on debentures issued		(225	)		(710	)

	W	1,657,031			2,408,392

Long-term borrowings
Long-term borrowings	W	1,209			1,110
Debentures		7,436,460			5,373,840
Less: Discount on debentures issued		(23,112	)		(28,006	)

	W	7,414,557			5,346,944

(b)	Short-term borrowings as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	Lenders	Issuance date	Maturity date	Annual interest rate (%)	September 30, 2021		December 31, 2020
Transfers of account receivables that do not qualify for derecognition	—	—	—	—	W	384,376		520,310
Borrowings in Foreign Trade	MUFG and others	2021.07.15~ 2021.09.28	2021.10.13~ 2021.12.27	0.49~0.68		754,153		509,053

					W	1,138,529		1,029,363

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(c)	Current portion of debentures as of September 30, 2021 and December 31, 2020 are as follows:

(in millions of Won)

Lenders

Issuance
date

Maturity
date

Annual
interest rate (%)

September 30, 2021

December 31, 2020

Debentures

Domestic debentures 304-2 and the other

2011.11.28~

2019.07.17

2021.11.28~

2022.07.17

1.61~4.12

359,822

459,811

Foreign debentures

Japan Yen Private Bonds

2011.12.22

2021.12.22

2.70

158,680

919,218

518,502

1,379,029

(d)	Long-term borrowings and others excluding current portion, as of September 30, 2021 and December 31, 2020 are as follows:

(in millions of Won)

Lenders

Issuance
date

Maturity
date

Annual
interest rate (%)

September 30, 2021

December 31, 2020

Foreign borrowings

KOREA ENERGY AGENCY

2007.12.27~
2008.12.29

2022.12.29

3 year

Government bond

1,209

1,110

Debentures

Domestic debentures 306-3 and others

2013.10.04~
2021.09.16

2022.10.14~
2029.10.16

1.56~3.64

2,345,988

2,046,166

Foreign debentures

Global debentures 4 and others

2018.08.01~
2020.01.17

2022.11.22~
2025.01.17

0.50~4.00

3,559,211

3,299,668

Exchangeable bonds(*1)

Foreign currency exchangeable bonds

2021.09.01

2026.09.01

—

1,508,149

—

7,414,557

5,346,944

(*1)	The major conditions of the exchangeable bonds issued by the Company on September 1, 2021 are as follows:


		Foreign currency exchangeable bonds
Type of bond		Exchangeable bonds
Aggregate principal amount		EUR 1,065,900,000
Interest rate		- Coupon rate : - - Yield to maturity : (0.78%)
Maturity date		September 1, 2026
Redemption		- Redemption at maturity: Outstanding bond principal, which is not repaid early or which call option is not exercised on, is repaid at maturity as a lump sum - Prepayment: The issuer has call option and the bondholders have put option
Exchange rate		100%
Exchange price (Won/share)		494,450
Underlying shares		Registered common shares(treasury shares)
Exchange period		From October 12, 2021 to August 22, 2026
Adjustments for exchange price		Adjusting the exchang price according to the terms and conditions of the bond in the events of reason for adjusting the exchange price such as, bonus issue, share split, share consolidation, change of share type, issuance of options or warranties to shareholders, share dividend, cash dividend, rights issue under the market price
Put option by bondholders		- 3 years(September 1, 2024) from the closing date - In the event of a change of control of the Company - Where the shares issued by the Company are delisted (or suspended for more than 30 consecutive trading days)
Call option by the issuer		- Share price(based on closing price) is higher than 130% of exchange price for more than 20 trading days during 30 consecutive trading days in a row, after 3 years (September 1, 2024) from the closing day to 30 business days before the maturity of bonds - When the outstanding balance of outstanding bonds is less than 10% of the total issuance(Clean Up Call) - Where additional reasons for tax burden arise due to the amendment of relevant laws and regulations, etc

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

15. Other Payables

Other payables as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Accounts payable	W	368,797		606,902
Accrued expenses		458,018		412,976
Dividend payable		1,801		1,854
Lease liabilities		47,844		94,904
Withholdings		13,154		10,687

	W	889,614		1,127,323

Non-current
Long-term accrued expenses	W	39		54
Lease liabilities		402,243		217,458
Long-term withholdings		699		3,100

	W	402,981		220,612

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

16. Other Financial Liabilities

Other financial liabilities as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Derivative liabilities	W	6,993		3,087
Financial guarantee liabilities		9,592		9,701

	W	16,585		12,788

Non-current
Derivative liabilities	W	—		92,273
Financial guarantee liabilities		23,422		29,881

	W	23,422		122,154

17. Provisions

(a)	Provisions as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021				December 31, 2020
	Current		Non-current		Current		Non-current
Provision for bonus payments(*1,2)	W	7,979		37,120		14,518		34,461
Provision for restoration(*3)		6,449		7,693		5,136		12,425
Provision for legal contingencies and claims		1,875		—		4,937		2,052
Emission liabilities(*4)		32,330		—		20,224		—
Provision for product warranties(*5)		24,312		6,568		18,789		3,664

	W	72,945		51,381		63,604		52,602

(*1)	Represents the provision for bonuses limited to 33%~67% of annual salaries for executives.

(*2)	The Company estimated the present value of estimated future cash payments about the long-term service award, based on actuarial measurement.

(*3)

Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery as provisions for restoration as of September 30, 2021. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied discount rates of 1.73%~2.01% to assess present value of these costs.

(*4)	The Company has recognized emission liabilities for greenhouse gas emissions exceeding the quantity of free quota emission rights expected to be submitted as of September 30, 2021.

(*5)	As of September 30, 2021, the Company recognized the expected claim cost to be charged as a provision.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Changes in provisions for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:

1)	For the nine-month period ended September 30, 2021


(in millions of Won)	Beginning		Increase		Reversal			Utilization			Ending
Provision for bonus payments	W	48,979		14,519		—			(18,399	)		45,099
Provision for restoration		17,561		223		(108	)		(3,534	)		14,142
Provision for legal contingencies and claims		6,989		1,875		(2,052	)		(4,937	)		1,875
Emission liabilities		20,224		32,330		(19,391	)		(833	)		32,330
Provision for Product Warranties		22,453		22,894		—			(14,467	)		30,880

	W	116,206		71,841		(21,551	)		(42,170	)		124,326

2)	For the year ended December 31, 2020


(in millions of Won)	Beginning		Increase		Reversal			Utilization			Ending
Provision for bonus payments	W	49,836		25,853		—			(26,710	)		48,979
Provision for restoration		22,725		363		(340	)		(5,187	)		17,561
Provision for legal contingencies and claims		2,388		4,937		(285	)		(51	)		6,989
Emission liabilities		—		20,648		(424	)		—			20,224
Provision for Product Warranties		—		48,137		—			(25,684	)		22,453

	W	74,949		99,938		(1,049	)		(57,632	)		116,206

18. Employee Benefits

(a)	Defined contribution plans

The expense related to post-employment benefit plans under defined contribution plans for the three-month and the nine-month periods ended September 30, 2021 and 2020 were as follows:

(in millions of Won)

For the three-month periods
ended September 30

For the nine-month periods
ended September 30

2021

2020

2021

2020

Expense related to post-employment benefit plans
under defined contribution plans

10,127

8,789

27,756

27,696

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Defined benefit plans

1)	The amounts recognized in relation to net defined benefit liabilities(assets) in the statements of financial position as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Present value of funded obligations	W	1,401,861			1,378,597
Fair value of plan assets		(1,379,302	)		(1,455,098	)

Net defined benefit liabilities (assets)	W	22,559			(76,501	)

2)	Changes in present value of defined benefit obligations for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Defined benefit obligation at the beginning of period	W	1,378,597			1,435,942
Current service costs		92,835			125,706
Interest costs		21,669			27,712
Remeasurement		14,936			(74,678	)
Amount transferred from associate		—			1,104
Benefits paid		(106,176	)		(137,189	)

Defined benefit obligation at the end of period	W	1,401,861			1,378,597

3)	Changes in the fair value of plan assets for the nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Fair value of plan assets at the beginning of period	W	1,455,098			1,381,796
Interest on plan assets		23,359			27,227
Remeasurement of plan assets		(4,223	)		(450	)
Contributions to plan assets		—			178,000
Amount transferred from associate		—			1,104
Benefits paid		(94,932	)		(132,579	)

Fair value of plan assets at the end of period	W	1,379,302			1,455,098

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

4)	The amounts recognized in the statement of comprehensive income for the three-month and the nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2021			2020		2021			2020
Current service costs	W	31,554			29,949		92,835			93,508
Net interest costs		(563	)		121		(1,690	)		364

	W	30,991			30,070		91,145			93,872

19. Other Liabilities

Other liabilities as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Current
Advances received	W	16,826		41,901
Withholdings		44,045		24,253
Unearned revenue		52,649		14,522

	W	113,520		80,676

Non-current
Unearned revenue	W	502		525

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

20. Financial Instruments

(a)	Classification and fair value of financial instruments

The carrying amount and the fair values of financial assets and financial liabilities by fair value hierarchy as of September 30, 2021 and December 31, 2020 are as follows:

①

September 30, 2021


			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	188,620		—		188,620		—		188,620
Short-term financial instruments		7,777,216		—		7,777,216		—		7,777,216
Long-term financial instruments		272,825		—		272,825		—		272,825
Debt securities		4,750		—		—		4,750		4,750
Other securities		90,359		—		—		90,359		90,359
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		1,121,925		1,036,151		—		85,774		1,121,925
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		2,423,235		—		—		—		—
Trade accounts and notes receivable		6,104,896		—		—		—		—
Debt securities		50,000		—		—		—		—
Other receivables		588,673		—		—		—		—
Deposit instruments		1,496,629		—		—		—		—

	W	20,121,128		1,036,151		8,238,661		182,883		9,457,695

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	6,993		—		6,993		—		6,993
Borrowings		1,508,149		1,508,149		—		—		1,508,149
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		2,096,900		—		—		—		—
Borrowings		7,563,439		—		7,729,242		—		7,729,242
Financial guarantee liabilities		33,014		—		—		—		—
Others		1,260,450		—		—		—		—

	W	12,468,945		1,508,149		7,736,235		—		9,244,384

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates carrying amounts.

②

December 31, 2020


			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	18,549		—		18,549		—		18,549
Short-term financial instruments		8,116,381		—		8,116,381		—		8,116,381
Debt securities		8,050		—		—		8,050		8,050
Other securities		67,161		—		—		67,161		67,161
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		980,706		644,616		—		336,090		980,706
Debt securities		1,687		—		—		1,687		1,687
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		1,822,660		—		—		—		—
Trade accounts and notes receivable		3,685,573		—		—		—		—
Debt securities		150,000		—		—		—		—
Other receivables		272,846		—		—		—		—
Deposit instruments		1,337,915		—		—		—		—

	W	16,463,528		644,616		8,134,930		414,988		9,194,534

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	95,360		—		95,360		—		95,360
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		1,258,470		—		—		—		—
Borrowings		7,755,336		—		8,026,373		—		8,026,373
Financial guarantee liabilities		39,582		—		—		—		—
Others		1,335,672		—		—		—		—

	W	10,484,420		—		8,121,733		—		8,121,733

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates carrying amounts.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

Financial liabilities were recognized in connection with financial guarantee contracts as of September 30, 2021. The details of the amount of guarantees provided are as follows:


(in millions of Won)		Guarantee limit					Guarantee amount
Guarantee beneficiary	Financial institution	Foreign currency			Won equivalent		Foreign currency		Won equivalent
Subsidiaries
POSCO Maharashtra	SC		USD	19,784,000		23,442		19,784,000		23,442
Steel Private Limited	SMBC		USD	35,000,000		41,472		35,000,000		41,472
	DBS		USD	35,000,000		41,472		35,000,000		41,472
	BNP		USD	30,000,000		35,547		30,000,000		35,547
	Citi		USD	20,000,000		23,698		20,000,000		23,698
POSCO ASSAN TST	BNP		USD	24,527,500		29,063		22,074,750		26,156
STEEL INDUSTRY	SOCIETE GENERALE		USD	42,000,000		49,766		37,800,000		44,789
	Citi		USD	40,000,000		47,396		36,000,000		42,656
	ING		USD	40,000,000		47,396		36,000,000		42,656
POSCO Asia Co., Ltd.	Credit Agricole		USD	50,000,000		59,245		50,000,000		59,245
	Mizuho		USD	50,000,000		59,245		50,000,000		59,245
POSCO MEXICO S.A. DE C.V	Citi BANAMEX		USD	30,000,000		35,547		30,000,000		35,547
	BOA		USD	30,000,000		35,547		30,000,000		35,547
	SMBC		USD	20,000,000		23,698		20,000,000		23,698
	MIZUHO		USD	20,000,000		23,698		20,000,000		23,698
	ANZ		USD	20,000,000		23,698		20,000,000		23,698
POSCO-VIETNAM Co., Ltd.	SMBC		USD	50,000,000		59,245		35,897,436		42,535
	Credit Agricole		USD	40,000,000		47,396		35,897,436		42,535
	MUFG		USD	26,000,000		30,807		32,307,692		38,281
	Citi		USD	20,000,000		23,698		17,948,718		21,267
	MIZUHO		USD	20,000,000		23,698		17,948,718		21,267
PT. KRAKATAU POSCO	Export-Import Bank of Korea		USD	567,000,000		671,838		297,216,652		352,172
	SMBC		USD	290,000,000		343,621		178,499,087		211,504
	BTMU		USD	119,000,000		141,003		61,466,087		72,831
	MIZUHO		USD	165,000,000		195,509		96,234,783		114,029
	SCB		USD	107,800,000		127,732		56,867,087		67,382
	Credit Suisse AG		USD	91,000,000		107,826		47,003,478		55,694
	HSBC		USD	221,000,000		261,863		138,003,478		163,520
	SC		USD	110,000,000		130,339		77,000,000		91,237
	MUFG		USD	60,000,000		71,094		42,000,000		49,766
	ANZ		USD	103,500,000		122,637		60,150,391		71,272
	BOA		USD	105,000,000		124,415		67,078,261		79,481
	The Tokyo Star Bank, Ltd		USD	21,000,000		24,883		10,846,957		12,853
POSCO COATED STEEL	Citi		THB	801,000,000		27,963		731,107,253		25,523
(THAILAND) CO., LTD.	ANZ		THB	1,175,000,000		41,019		1,072,473,187		37,440
	MUFG		THB	1,175,000,000		41,019		1,072,473,187		37,440
	SC		THB	1,175,000,000		41,019		1,072,473,187		37,440
	The Great & Co.		THB	1,175,000,000		41,019		1,072,473,187		37,440
Associates
LLP POSUK Titanium	SMBC		USD	13,500,000		15,996		13,500,000		15,996
Nickel Mining Company SAS	SMBC		EUR	46,000,000		63,218		46,000,000		63,218
Joint ventures
CSP - Compania	Export-Import Bank of Korea		USD	182,000,000		215,652		160,279,849		189,916
Siderurgica do Pecem	Santander		USD	47,600,000		56,401		41,232,192		48,856
	BNP		USD	47,600,000		56,401		41,232,192		48,856
	MIZUHO		USD	47,600,000		56,401		41,232,192		48,856
	Credit Agricole		USD	20,000,000		23,698		17,324,457		20,528
	SOCIETE GENERALE		USD	20,000,000		23,698		15,245,507		18,064
	KfW		USD	20,000,000		23,698		15,245,507		18,064
	BBVA Seoul		USD	17,600,000		20,854		17,324,457		20,528
	ING		USD	17,600,000		20,854		17,324,457		20,528
	BNDES		BRL	464,060,000		101,532		464,060,000		101,532

			USD	3,056,111,500		3,621,187		2,143,965,821		2,540,384
			EUR	46,000,000		63,218		46,000,000		63,218
			THB	5,501,000,000		192,039		5,021,000,001		175,283
			BRL	464,060,000		101,532		464,060,000		101,532

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

Finance income and costs by category of financial instrument for the nine-month periods ended September 30, 2021 and 2020 were as follows:

①

For the nine-month period ended September 30, 2021


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend *income(1)**		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	89,939			—		—			523		73,660		—			164,122			—
Financial assets at fair value through other comprehensive income		—			43,973		—			91		—		—			44,064			103,205
Financial assets measured at amortized cost		11,348			—		244,812			—		—		—			256,160			—
Financial liabilities at fair value through profit or loss		—			—		(1,141	)		9,093		214,206		(15,876	)		206,282			—
Financial liabilities measured at amortized cost		(117,818	)		—		(481,455	)		—		—		4,408			(594,865	)		—

	W	(16,531	)		43,973		(237,784	)		9,707		287,866		(11,468	)		75,763			103,205

(*1)	Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W573,756 million for the nine-month period ended September 30, 2021.

②

For the nine-month period ended September 30, 2020


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend *income(1)**		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	121,351			—		—			8,148		136,514		—		266,013			—
Financial assets at fair value through other comprehensive income		—			29,363		—			—		—		—		29,363			(154,254	)
Financial assets measured at amortized cost		35,972			—		47,008			1		—		—		82,981			—
Financial liabilities at fair value through profit or loss		—			—		—			722		15,287		—		16,009			—
Financial liabilities measured at amortized cost		(171,974	)		—		(76,908	)		—		—		11,271		(237,611	)		—

	W	(14,651	)		29,363		(29,900	)		8,871		151,801		11,271		156,755			(154,254	)

(*1)	Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W192,504 million for the nine-month period ended September 30, 2020.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

Finance income and costs by category of financial instrument for the three-month periods ended September 30, 2021 and 2020 were as follows:

①

For the three-month period ended September 30, 2021


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend *income(1)**		Gain and loss on foreign currency			Gain and loss on disposal			Gain and loss on valuation		Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	31,515			—		—			(645	)		45,179		—			76,049			—
Financial assets at fair value through other comprehensive income		—			14,637		—			(1	)		—		—			14,636			(16,756	)
Financial assets measured at amortized cost		4,121			—		161,209			—			—		—			165,330			—
Financial liabilities at fair value through profit or loss		—			—		(1,141	)		(9,084	)		122,119		(15,876	)		96,018			—
Financial liabilities measured at amortized cost		(31,910	)		—		(281,895	)		—			—		1,378			(312,427	)		—

	W	3,726			14,637		(121,827	)		(9,730	)		167,298		(14,498	)		39,606			(16,756	)

(*1)	Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W171,450 million for the three-month period ended September 30, 2021.

②

For the three-month period ended September 30, 2020


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend *income(1)**		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation			Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	44,192			—		—			7,663		(86,637	)		—			(34,782	)		—
Financial assets at fair value through other comprehensive income		—			4,880		—			—		—			—			4,880			6,396
Financial assets measured at amortized cost		11,765			—		(47,907	)		1		—			—			(36,141	)		—
Financial liabilities at fair value through profit or loss		—			—		—			275		1,310			—			1,585			—
Financial liabilities measured at amortized cost		(58,166	)		—		140,540			—		—			(569	)		81,805			—

	W	(2,209	)		4,880		92,633			7,939		(85,327	)		(569	)		17,347			6,396

(*1)	Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W44,780 million for the three-month period ended September 30, 2020.

(b)	Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the separate financial statements as of and for the year ended December 31, 2020.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

21. Share Capital and Capital Surplus

(a)	Share capital as of September 30, 2021 and December 31, 2020 are as follows:


(in Won, except share information)	September 30, 2021		December 31, 2020
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Shared capital(*2)	W	482,403,125,000		482,403,125,000

(*1)	As of September 30, 2021, total shares of ADRs of 25,453,740 are equivalent to 6,363,435 of common stock.

(*2)	As of September 30, 2021, the difference between the ending balance of common stock and the par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

(b)	Capital surplus as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Share premium	W	463,825			463,825
Gain on disposal of treasury shares		796,623			796,623
Gain from merger		80,628			80,628
Loss on disposal of hybrid bonds		(1,787	)		(1,787	)

	W	1,339,289			1,339,289

22. Hybrid Bonds

Hybrid bonds classified as equity as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Rate of Interest (%)		September 30, 2021			December 31, 2020
Hybrid bond 1-2(*1)		6/13/2013		6/13/2043		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)

							W	199,384			199,384

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(*1)	Details of hybrid bonds as of September 30, 2021 are as follows:


		Hybrid bond 1-2
Maturity date		30 years (The Company has a right to extend the maturity date)

Interest rate		Issue date ~ 2023-06-12 : 4.60% Reset every 10 years as follows; • After 10 years : return on government bond (10 years) + 1.40% • After 10 years : additionally + 0.25% according to Step-up clauses • After 30 years : additionally + 0.75%

Interest payments condition		Quarterly (Optional deferral of interest payment is available to the Company)

Others		The Company can call the hybrid bond at year 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is higher than the common stockholders, but lower than other creditors. The interest accumulated but not paid on the hybrid bonds as of September 30, 2021 amounts to W 454 million.

23. Reserves

Reserves as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021			December 31, 2020
Changes in fair value of equity investments at fair value through other comprehensive income	W	(191,343	)		(296,626	)

24. Treasury Shares

Based on the Board of Directors’ resolution, the company holds treasury shares for business purposes including price stabilization. The changes in treasury shares for nine-month period ended September 30, 2021 and the year ended December 31, 2020 were as follows.


(shares, in millions of Won)	September 30, 2021				December 31, 2020
	Number of shares		Amount		Number of shares		Amount
Beginning		11,171,363	W	2,391,523		7,071,194	W	1,508,303
Acquisition of treasury shares		389,900		116,771		4,100,169		883,220

Ending		11,561,263	W	2,508,294		11,171,363	W	2,391,523

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

25. Revenue

(a)	Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2021		2020		2021		2020
Types of revenue
Sales of steel product	W	10,848,586		6,367,587		27,293,282		18,789,752
Transportation services		359,207		168,014		901,782		516,065
Others		106,931		42,286		197,459		126,749

	W	11,314,724		6,577,887		28,392,523		19,432,566

Timing of revenue recognition
Revenue recognized at a point in time	W	10,934,359		6,393,320		27,436,280		18,870,603
Revenue recognized over time		380,365		184,567		956,243		561,963

	W	11,314,724		6,577,887		28,392,523		19,432,566

(b)	Details of contract assets and liabilities from contracts with customers as of September 30, 2021 and December 31, 2020 are as follows:


(in millions of Won)	September 30, 2021		December 31, 2020
Receivables
Account receivables	W	6,104,896		3,685,573
Contract assets
Account receivables		10,238		10,418
Contract liabilities
Advance received		16,826		41,901
Unearned income		53,061		14,855

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

26. Selling and Administrative Expenses

(a)	Other administrative expenses

Other administrative expenses for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2021		2020		2021		2020
Wages and salaries	W	83,423		58,543		205,423		174,233
Expenses related to post-employment benefits		10,511		4,960		28,580		19,142
Other employee benefits		15,493		12,780		41,972		36,067
Travel		1,583		1,806		5,674		6,413
Depreciation		7,161		6,974		20,837		20,636
Amortization		3,476		8,382		29,059		26,838
Rental		11,719		11,809		37,498		36,013
Repairs		1,696		2,340		5,116		6,171
Advertising		13,766		13,804		42,595		43,188
Research & development		20,671		16,304		56,339		47,696
Service fees		51,977		43,755		126,912		121,196
Supplies		122		162		845		522
Vehicles maintenance		1,237		1,032		3,677		3,480
Industry association fee		1,024		997		4,150		4,217
Training		5,691		5,524		15,973		13,706
Conference		1,128		908		3,263		2,875
Others		7,135		5,971		27,211		25,189

	W	237,813		196,051		655,124		587,582

(b)	Selling expenses

Selling expenses for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2021		2020		2021		2020
Freight and custody	W	29,301		34,557		88,481		97,659
Operating expenses for distribution center		1,529		1,458		4,615		4,616
Sales commissions		34,096		17,711		68,109		82,499
Sales advertising		1,569		55		1,827		360
Sales promotion		330		286		976		982
Sample		235		94		706		427
Sales insurance premium		1,572		1,492		4,506		4,436

	W	68,632		55,653		169,220		190,979

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

27. Finance Income and Costs

Details of finance income and costs for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month period ended September 30					For the nine-month period ended September 30
	2021		2020			2021		2020
Finance income
Interest income(*1)	W	35,636		55,957			101,287		157,323
Dividend income		186,087		49,660			617,729		221,867
Gain on foreign currency transactions		133,373		62,252			290,297		295,081
Gain on foreign currency translations		53,720		(2,711	)		94,744		24,628
Gain on valuation of derivatives		158,979		(83,424	)		279,548		153,704
Gain on transactions of derivatives		1,801		5,921			20,152		6,564
Others		17,264		2,814			22,843		16,154

	W	586,860		90,469			1,426,600		875,321

Finance costs
Interest expenses	W	31,910		58,166			117,818		171,974
Loss on foreign currency transactions		123,843		71,772			292,447		207,969
Loss on foreign currency translations		185,077		(104,864	)		330,379		141,640
Others		34,974		3,268			36,437		4,479

	W	375,804		28,342			777,081		526,062

(*1)	Interest income calculated using the effective interest method for the nine-month periods ended September 30, 2021 and 2020 were W11,348 million and W35,972 million, respectively.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

28. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2021		2020			2021		2020
Other non-operating income
Gain on disposals of property, plant and equipment	W	1,343		1,157			7,029		7,211
Gain on disposals of subsidiaries, associates and joint ventures		—		2,447			—		24,354
Gain on disposals of assets held for sale		960		(4,454	)		46,697		22,488
Reversal of other provisions		—		—			2,052		284
Gain on insurance proceeds		1,504		2,882			3,808		9,768
Gain on disposals of emission rights		—		—			—		24,566
Others(*1)		13,056		6,808			69,168		25,892

	W	16,863		8,840			128,754		114,563

Other non-operating expenses
Loss on disposals of property, plant and equipment	W	23,948		30,797			70,218		125,031
Impairment loss on property, plant and equipment		—		309			3,113		22,997
Impairment loss on investment in subsidiaries, associates and joint ventures		—		1,000			1,500		1,000
Donations		15,224		5,600			17,350		17,309
Impairment loss on assets held for sale		—		148			—		9,093
Impairment loss on intangible assets		—		—			7,180		—
Others		9,600		14,928			43,846		53,296

	W	48,772		52,782			143,207		228,726

(*1)	During the nine-month period ended September 30, 2021, the Company recognized W48,773 million of non-operating income for refund of other than corporate tax as a result of administrative litigation for tax audits.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

29. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows (excluding finance costs and income tax expenses):


	For the three-month periods ended September 30					For the nine-month periods ended September 30
(in millions of Won)	2021			2020		2021			2020
Changes in inventories(*1)	W	(592,055	)		63,477		(977,900	)		450,758
Raw materials and consumables used		6,743,186			4,216,703		16,858,719			11,940,849
Employee benefits expenses		588,044			455,160		1,492,677			1,352,294
Outsourced processing cost		689,078			560,791		1,898,583			1,788,247
Depreciation(*2)		566,219			571,557		1,712,811			1,698,104
Amortization		27,365			23,151		82,233			74,002
Electricity and water expenses		81,495			59,686		240,962			176,237
Service fees		76,191			63,710		189,710			183,338
Rental		24,686			20,986		68,856			63,894
Advertising		13,766			13,804		42,595			43,188
Freight and custody expenses		280,680			178,593		720,355			559,097
Sales commissions		34,096			17,711		68,109			82,499
Loss on disposals of property, plant and equipment		23,948			30,797		70,218			125,031
Impairment loss on property, plant and equipment		—			310		3,113			22,997
Other expenses		511,521			92,161		1,088,779			489,377

	W	9,068,220			6,368,597		23,559,820			19,049,912

(*1)	Changes in inventories are the changes in product, semi-finished products and by-products.

(*2)	Includes depreciation of investment property.

30. Income Taxes

The effective tax rates of the Company for the nine-month periods ended September 30, 2021 and 2020 were 26.74% and 24.34%, respectively.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

31. Earnings per Share

(a)	Basic earnings per share for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in Won, except share information)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2021			2020			2021			2020
Profit for the period	W	1,840,068,246,557			180,809,542,496			4,110,403,352,867			640,475,843,825
Interests of hybrid bonds, net of tax		(1,681,205,479	)		(1,681,205,479	)		(4,988,794,519	)		(5,007,068,492	)
Weighted-average number of common shares outstanding(*1)		75,625,572			79,230,216			75,719,934			79,784,098
Basic earnings per share	W	24,309			2,261			54,218			7,965

(*1)	The weighted-average number of common shares used to calculate basic earnings per share are as follows:


(shares)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2021			2020			2021			2020
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(11,561,263	)		(7,956,619	)		(11,466,901	)		(7,402,737	)

Weighted-average number of common shares outstanding		75,625,572			79,230,216			75,719,934			79,784,098

(b)	Diluted earnings per share for the three month and nine-month periods ended September 30, 2021 and 2020 were as follows:


(in Won, except share information)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2021			2020			2021			2020
Profit for the period	W	1,840,068,246,557			180,809,542,496			4,110,403,352,867			640,475,843,825
Interests of hybrid bonds, net of tax		(1,681,205,479	)		(1,681,205,479	)		(4,988,794,519	)		(5,007,068,492	)
Gain or loss from exchange rate on and revaluation of exchangeable bonds		(10,273,058,805	)		—			(10,273,058,805	)		—
Adjusted weighted-average number of common shares(*1)		76,581,815			79,230,216			76,042,185			79,784,098
Diluted earnings per share	W	23,871			2,261			53,854			7,965

(*1)	The weighted-average number of common shares used to calculate diluted earnings per share are as follows:


(shares)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2021		2020		2021		2020
Weighted-average number of common shares outstanding		75,625,572		79,230,216		75,719,934		79,784,098
Weighted-average number of potential common share		956,243		—		322,251		—

Adjusted weighted-average number of common shares		76,581,815		79,230,216		76,042,185		79,784,098

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

32. Related Party Transactions

(a)	Significant transactions with related companies for the nine-month periods ended September 30, 2021 and 2020 were as follows:

For the nine-month period ended September 30, 2021


(in millions of Won)	*Sales and others(1)**				*Purchase and others(2)**
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
*Subsidiaries(3)**
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	4,315		11,094		—		286,992		109		26,431
POSCO COATED & COLOR STEEL Co., Ltd.		500,645		2,085		—		—		28,782		506
POSCO ICT(*4)		1,266		4,992		—		159,334		32,213		134,074
eNtoB Corporation		11		—		236,803		37,730		69		15,298
POSCO CHEMICAL CO., LTD		216,689		26,579		341,790		7,836		223,159		2,799
POSCO ENERGY CO., LTD.		4,184		1,426		6,992		—		—		20,512
POSCO SPS		570,632		—		—		—		32,355		635
POSCO INTERNATIONAL Corporation		6,962,982		54,331		867,793		—		541		5,241
POSCO Thainox Public Company Limited		228,192		—		—		—		—		20
POSCO Canada Ltd.		—		796		148,558		—		—		—
POSCO Asia Co., Ltd.		19,142		50		417		—		—		1,539
Qingdao Pohang Stainless Steel Co., Ltd.		131,173		—		—		—		—		—
POSCO JAPAN Co., Ltd.		1,130,531		1		20,315		287		—		2,959
POSCO-VIETNAM Co., Ltd.		307,224		339		—		—		—		27
POSCO MEXICO S.A. DE C.V.		320,811		111		—		—		—		506
POSCO Maharashtra Steel Private Limited		646,802		259		—		—		—		132
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		118,655		—		—		—		—		—
POSCO VST CO., LTD.		152,119		—		—		—		—		20
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		853		1,212,212		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		194,535		183		8		—		—		10
Others		1,017,908		53,865		157,818		42,778		193,551		95,205

		12,527,816		156,964		2,992,706		534,957		510,779		305,914

*Associates and joint ventures(3)**
SNNC		50,311		2,342		519,658		—		—		107
POSCO-SAMSUNG-Slovakia Processing Center		54,594		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		383,689		1,630,448		—		—		—
Others		32,442		25,239		76,194		—		—		33,194

		137,347		411,270		2,226,300		—		—		33,301

	W	12,665,163		568,234		5,219,006		534,957		510,779		339,215

(*1)	Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)	Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)	As of September 30, 2021, the Company provided guarantees to related companies (Note 20).

(*4)	Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

For the nine-month period ended September 30, 2020


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	5,168		11,107		15		543,484		60		17,773
POSCO COATED & COLOR STEEL Co., Ltd.		309,338		1,819		—		—		21,466		249
POSCO ICT		2,088		4,992		—		248,039		30,951		131,887
eNtoB Corporation		11		60		160,906		24,852		55		17,884
POSCO CHEMICAL CO., LTD		200,730		29,911		342,948		16,219		226,595		4,551
POSCO ENERGY CO., LTD.		2,196		2,117		12,374		3		—		16,709
POSCO SPS		258,464		—		—		—		20,994		715
POSCO INTERNATIONAL Corporation		4,246,418		55,558		233,450		—		11,371		3,293
POSCO Thainox Public Company Limited		226,231		137		3,454		—		—		—
POSCO Canada Ltd.		—		978		129,666		—		—		—
POSCO Asia Co., Ltd.		1,161,489		1,002		114,796		3,229		1,174		2,765
Qingdao Pohang Stainless Steel Co., Ltd.		105,037		66		—		—		—		196
POSCO JAPAN Co., Ltd.		776,819		—		29,582		4,947		—		2,428
POSCO-VIETNAM Co., Ltd.		182,844		239		—		—		—		59
POSCO MEXICO S.A. DE C.V.		107,763		158		—		—		—		304
POSCO Maharashtra Steel Private Limited		210,679		1,543		—		—		—		282
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		82,663		—		—		—		—		—
POSCO VST CO., LTD.		163,085		204		—		—		—		123
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		1,039		395,961		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		180,043		213		2,314		—		—		18
Others		595,485		20,180		53,327		33,263		176,502		91,337

		8,816,551		131,323		1,478,793		874,036		489,168		290,573

Associates and joint ventures
SNNC		4,333		4,103		372,068		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		29,429		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		940,725		—		—		—
Others		25,714		61,990		47,704		84,839		4,086		36,145

		59,476		105,205		1,360,497		84,839		4,086		36,145

	W	8,876,027		236,528		2,839,290		958,875		493,254		326,718

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	Significant transactions with related companies for the three-month periods ended September 30, 2021 and 2020 were as follows:

For the three-month period ended September 30, 2021


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	1,519		12		—		84,257		40		12,950
POSCO COATED & COLOR STEEL Co., Ltd.		209,472		—		—		—		11,436		75
POSCO ICT		429		—		—		65,204		11,385		43,657
eNtoB Corporation		4		—		100,009		16,123		48		5,695
POSCO CHEMICAL CO., LTD		87,944		5,133		115,469		2,281		75,739		503
POSCO ENERGY CO., LTD.		970		460		3,454		—		—		9,313
POSCO SPS		232,942		—		—		—		10,950		196
POSCO INTERNATIONAL Corporation		2,740,847		—		443,365		—		—		2,402
POSCO Thainox Public Company Limited		78,008		—		—		—		—		—
POSCO Canada Ltd.		—		115		66,813		—		—		—
POSCO Asia Co., Ltd.		5		18		—		—		—		834
Qingdao Pohang Stainless Steel Co., Ltd.		49,771		—		—		—		—		—
POSCO JAPAN Co., Ltd.		408,035		—		5,993		—		—		1,915
POSCO-VIETNAM Co., Ltd.		119,680		—		—		—		—		27
POSCO MEXICO S.A. DE C.V.		123,634		40		—		—		—		420
POSCO Maharashtra Steel Private Limited		268,945		79		—		—		—		31
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		52,008		—		—		—		—		—
POSCO VST CO., LTD.		55,872		—		—		—		—		12
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		—		465,531		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		73,591		73		—		—		—		—
Others		359,051		1,275		97,692		17,567		71,322		41,583

		4,862,727		7,205		1,298,326		185,432		180,920		119,613

Associates and joint ventures
SNNC		30,259		—		224,001		—		—		54
POSCO-SAMSUNG-Slovakia Processing Center		23,401		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		127,551		589,980		—		—		—
Others		10,102		1,664		29,022		—		—		13,361

		63,762		129,215		843,003		—		—		13,415

	W	4,926,489		136,420		2,141,329		185,432		180,920		133,028

For the three-month period ended September 30, 2020


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	1,620		11		—		101,179		—		4,938
POSCO COATED & COLOR STEEL Co., Ltd.		103,572		124		—		—		6,290		41
POSCO ICT		659		1		—		63,729		10,010		44,219
eNtoB Corporation		4		—		47,528		6,004		27		5,391
POSCO CHEMICAL CO., LTD		56,264		5,141		113,227		3,389		72,171		189
POSCO ENERGY CO., LTD.		643		901		2,379		—		—		5,599
POSCO SPS		125,566		—		—		—		10,578		293
POSCO INTERNATIONAL Corporation		1,450,981		1,227		122,652		—		—		1,210
POSCO Thainox Public Company Limited		119,514		—		—		—		—		—
POSCO Canada Ltd.		—		162		38,861		—		—		—
POSCO Asia Co., Ltd.		441,511		37		33,125		957		12		1,346
Qingdao Pohang Stainless Steel Co., Ltd.		34,269		—		—		—		—		20
POSCO JAPAN Co., Ltd.		227,977		—		13,162		1,988		—		1,340
POSCO-VIETNAM Co., Ltd.		81,739		16		—		—		—		39
POSCO MEXICO S.A. DE C.V.		39,189		59		—		—		—		—
POSCO Maharashtra Steel Private Limited		56,925		696		—		—		—		97
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,018		—		—		—		—		—
POSCO VST CO., LTD.		30,869		148		—		—		—		103
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		235		104,312		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		59,984		—		—		—		—		—
Others		179,113		2,209		14,535		7,683		58,361		33,709

		3,035,417		10,967		489,781		184,929		157,449		98,534

Associates and joint ventures
SNNC		1,432		625		153,008		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		12,275		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		315,180		—		—		—
Others		11,317		7,016		17,834		—		—		10,366

		25,024		46,753		486,022		—		—		10,366

	W	3,060,441		57,720		975,803		184,929		157,449		108,900

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(c)	The related account balances of significant transactions with related companies as of September 30, 2021 and December 31, 2020 are as follows:

September 30, 2021


(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,269		4		4,273		—		38,461		314		38,775
POSCO COATED & COLOR STEEL Co., Ltd.		110,729		—		110,729		—		6		6,246		6,252
POSCO ICT		166		—		166		2,999		48,750		24,970		76,719
eNtoB Corporation		—		—		—		649		24,717		—		25,366
POSCO CHEMICAL CO., LTD		29,433		4,093		33,526		12,596		49,911		17,810		80,317
POSCO ENERGY CO., LTD.		1,092		8		1,100		—		2,051		11,288		13,339
POSCO SPS		127,313		—		127,313		14		1,343		4,911		6,268
POSCO INTERNATIONAL Corporation		1,215,427		10		1,215,437		5,047		523		502		6,072
POSCO Thainox Public Company Limited		57,404		—		57,404		—		—		—		—
POSCO Asia Co., Ltd.		—		718		718		—		—		—		—
Qingdao Pohang Stainless Steel Co., Ltd.		27,134		—		27,134		—		—		—		—
POSCO MEXICO S.A. DE C.V.		151,673		791		152,464		—		—		—		—
POSCO Maharashtra Steel Private Limited		420,910		1,606		422,516		—		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		266,356		1,478		267,834		—		—		—		—
Others		589,136		18,938		608,074		114,754		37,832		82,586		235,172

		3,001,042		27,646		3,028,688		136,059		203,594		148,627		488,280

Associates and joint ventures
SNNC		3,772		60		3,832		50,612		7		—		50,619
Roy Hill Holdings Pty Ltd		—		127,551		127,551		413,548		—		—		413,548
Others		665		23,585		24,250		4,998		973		—		5,971

		4,437		151,196		155,633		469,158		980		—		470,138

	W	3,005,479		178,842		3,184,321		605,217		204,574		148,627		958,418

December 31, 2020


(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	6,010		11		6,021		—		81,608		394		82,002
POSCO COATED & COLOR STEEL Co., Ltd.		63,520		—		63,520		—		180		3,709		3,889
POSCO ICT		245		1		246		2,820		118,720		31,411		152,951
eNtoB Corporation		—		—		—		1,361		35,846		18		37,225
POSCO CHEMICAL CO., LTD		19,406		3,434		22,840		13,066		55,515		18,531		87,112
POSCO ENERGY CO., LTD.		261		122		383		—		2,995		12,508		15,503
POSCO SPS		72,009		—		72,009		—		2,352		4,175		6,527
POSCO INTERNATIONAL Corporation		534,531		—		534,531		2,713		—		—		2,713
POSCO Thainox Public Company Limited		39,920		—		39,920		—		—		—		—
POSCO Asia Co., Ltd.		239,847		898		240,745		3,958		258		—		4,216
Qingdao Pohang Stainless Steel Co., Ltd.		25,838		—		25,838		—		—		—		—
POSCO MEXICO S.A. DE C.V.		71,307		397		71,704		—		—		—		—
POSCO Maharashtra Steel Private Limited		173,285		2,006		175,291		—		—		—		—
POSCO ASSAN TST STEEL INDUSTRY		258,563		1,845		260,408		—		—		—		—
Others		227,288		28,117		255,405		41,564		30,433		82,716		154,713

		1,732,030		36,831		1,768,861		65,482		327,907		153,462		546,851

Associates and joint ventures
SNNC		106		228		334		33,380		—		—		33,380
Roy Hill Holdings Pty Ltd		—		52,076		52,076		201,924		—		—		201,924
Others		818		17,882		18,700		6,704		—		—		6,704

		924		70,186		71,110		242,008		—		—		242,008

	W	1,732,954		107,017		1,839,971		307,490		327,907		153,462		788,859

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(d)	For the nine-month periods ended September 30, 2021 and 2020, details of compensation to key management officers were as follows:


(in millions of Won)	September 30, 2021		September 30, 2020
Short-term benefits	W	33,115		31,687
Long-term benefits		4,530		3,192
Retirement benefits		11,320		5,425

	W	48,965		40,304

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

33. Commitments and Contingencies

(a)	Commitments

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of September 30, 2021, 41 million tons of iron ore and 6 million tons of coal remained to be purchased under such long-term contracts.

The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

The Company entered into consecutive voyage charter (CVC) contract for the transportation of raw materials. As of September 30, 2021, there are 38 vessels under contract and the average remaining contract period is about 9 years.

As of September 30, 2021, the Company entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowing, which is limited up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowing depends on the success of the project. The Company is not liable for the repayment of full or part of the money borrowed if the respective project fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements. As of September 30, 2021, the ending balance of the borrowing amounts to USD 1.02 million.

The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO ENERGY CO., LTD.

The Company has deposited 2,932,480 treasury shares for exchange with the Korea Securities Depository in relation to foreign currency exchangeable bonds as of September 30, 2021.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2021

(Unaudited)

(b)	As of September 30, 2021, the Company has provided three blank checks to KOREA ENERGY AGENCY as collateral for long-term foreign currency borrowings.

(c)	Litigation in progress

The Company is involved in 36 lawsuits aggregating to W72.6 billion as defendant as of September 30, 2021, which arise from the ordinary course of business such as claim for confirmation of employee status. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company does not believe it has a present obligation as of September 30, 2021.

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the nine-month periods ended September 30, 2021 and 2020 were as follows:


(in millions of Won)	September 30, 2021			September 30, 2020
Trade accounts and notes receivable, net	W	(2,363,173	)		278,234
Other accounts receivable		(64,636	)		111,238
Accrued revenues		17,797			—
Inventories		(2,428,017	)		1,138,481
Prepaid expenses		(18,407	)		(16,945	)
Other current assets		(117	)		(2,821	)
Long-term guarantee deposits		309			(318	)
Derivative assets		632			9,719
Other non-current assets		(18,154	)		1,329
Trade accounts and notes payable		816,686			485,595
Other accounts payable		(159,873	)		(72,903	)
Accrued expenses		68,239			(48,006	)
Advances received		(1,625	)		1,680
Withholdings		19,792			1,844
Unearned revenue		38,104			(5,414	)
Other current liabilities		(29,477	)		(22,760	)
Derivative liabliities		15,090			8,905
Payments of severance benefits		(106,174	)		(105,397	)
Plan assets		94,932			36,811
Other non-current liabilities		2,659			(6,951	)

	W	(4,115,413	)		1,792,321

35. Events after the Reporting Period

Pursuant to the resolution of the Board of Directors on November 5, 2021, the Company decided to pay interim cash dividends of W5,000 per common share (total dividend: W378.1 billion).