This year, IT service affiliates of major domestic groups such as Samsung, LG, and SK have recorded strong performances thanks to growth in businesses related to artificial intelligence (AI), but only POSCO DX under POSCO Group saw a decline of more than 20% in both sales and operating profit in the first half, resulting in negative growth. While Samsung SDS and LG CNS, which have actively targeted public projects related to AI transformation and financial clients outside of group volumes, have improved their performances, it appears that POSCO DX, which is particularly dependent on POSCO Group, has seen its performance worsen due to the weak market conditions in steel and batteries, leading to a decrease in orders related to group affiliates.
According to POSCO DX on the 8th, the company's second-quarter sales amounted to 272.857 billion won, a decrease of 22.7% compared to the same period last year. Operating profit for the same period was 17.082 billion won, down 29.8%.
On a cumulative basis for the first half of the year, sales reached 569.637 billion won, down 28.2%, and operating profit was 39.946 billion won, a decrease of 32.9%. POSCO DX said that "the decline in new orders was due to adjustments in customer investment timing caused by weakness in the upstream industry" and noted that "sales temporarily decreased due to delays in new orders."
This stands in contrast to the performances of IT service companies, including Samsung SDS, LG CNS, and SK AX, which are considered the 'big three' in the domestic IT service sector, as well as Hyundai AutoEver, LOTTE Innovate, and CJ Olive Networks, all of which have been performing well. In particular, the 'big three' experienced improvements in their second-quarter sales and operating profits due to the expansion of orders related to AX (AI transformation) in the finance and public sectors and the strong performance of cloud and data center businesses.
Samsung SDS recorded second-quarter sales of 3.512 trillion won and an operating profit of 230.2 billion won, each up 4.2% compared to the same period last year. LG CNS reported second-quarter sales of 1.4602 trillion won, an increase of 0.7%, and an operating profit of 140.8 billion won, up 2.3%. The growth of both companies' cloud and AI businesses drove their strong performances. SK AX, which is expected to announce its second-quarter results this month, is also anticipated to report double-digit sales growth.
In contrast, POSCO DX was the only IT service affiliate among major domestic groups to see double-digit declines in both sales and operating profit in the first half. This is due to the impact of investment slowdown amid poor performance across POSCO Group, leading to a reduction in orders related to IT services. In the second quarter, POSCO DX's order amount was 173.6 billion won, a decrease of 25.4% compared to the same period last year.
An industry official noted that "if the proportion of internal transactions is low, even if the performances of major group companies are poor, they can expand external businesses to make up for it; however, since POSCO DX has an internal transaction ratio exceeding 90%, its performance is bound to be affected when the group is unstable." As of the end of last year, the dependence on internal transactions for Samsung SDS was 68%, and for LG CNS, it was 54%, which is lower than the over 90% rate of POSCO DX.
A high dependence on internal transactions is a "double-edged sword" for IT service companies. When the parent company's business conditions are good, their performance improves as well; conversely, when the conditions are poor, they suffer along with it. Hyundai AutoEver, which similarly has a high dependence on internal transactions exceeding 90%, showed double-digit growth due to investment expansion by Hyundai Motor Group. Hyundai AutoEver's second-quarter sales reached 1.0412 trillion won, up 13.5% compared to the same period last year, and operating profit increased by 18.7% to 81.4 billion won.
POSCO, POSCO DX's largest client, has entered a state of emergency management due to weak global steel demand and ongoing chasms in its battery materials business. For the second quarter, consolidated sales of POSCO Holdings amounted to 17.556 trillion won, and operating profit was 607 billion won, down 5.1% and 18.7%, respectively, compared to the same period last year. It is analyzed that IT-related investments are being operated conservatively due to the deterioration in POSCO Group's performance.
In response, POSCO DX stated that "in the second half, the delayed business orders are expected to recover, and performance will rebound."