S&P Global Ratings has downgraded Posco Holdings' (KRX:005490) and Posco's long-term issuer credit ratings and long-term issue credit ratings to BBB+ from A-, according to a recent release.
Posco Holdings could face cash flow pressure over the next two years given the Korean company's high capital expenditure, focused on offshore steel expansion, and a weak operating environment.
S&P forecasts an adjusted debt-to-EBITDA ratio of 2.3x for 2026 and 2.1x for 2027, compared to 2.4x in 2025.
Despite some recovery in steel profitability and greater infrastructure contributions, a capex drive could lead to higher debt and a delay in deleveraging, S&P said.
The outlook is stable, stemming from the company's modest operating recoveries over the next one to two years despite increased capex.
A potential rise in domestic steel prices and narrower losses in the electric vehicle battery materials segment could also provide some profitability relief, S&P said.
S&P does not see significant erosion in the credit profiles of subsidiaries Posco and Posco International (KRX:047050), especially given Posco's leverage base that is better than the parent's and Posco International's use of internal cash flow to purchase upstream palm oil producer Sampoerna Agri Resources.
Material changes in the company's profitability, cash flow, or adjusted debt-to-EBITDA ratio could prompt future rating actions, S&P said.
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