Table of Contents. Corporate Overview 2004 Results. - Sales - Operating Profit. - Household Products. -Cosmetics Target

Transcription

1 2005

2 Table of Contents Corporate Overview 2004 Results - Sales - Operating Profit - Household Products -Cosmetics 2005 Target - Business Target & Strategy - Household Products -Cosmetics - Overseas Business Appendix - Recent Developments - Key Financials This report has been prepared on an unaudited basis and may be subject to changes.

3 Corporate Overview Since its foundation in 1947, LG Household & Health Care has grown to become the leading household products and cosmetics company in Korea. History 1947 Established as Lucky Chemical Industrial Co. Business Portfolio (2004) 1954 Produced Korea s first toothpaste Lucky 1969 IPO 1974 Changed corporate name to Lucky 1979 Established Lucky R&D Center 100=KRW953bn 6 Major Products (62%) Toothpaste Shampoo Soap 1980 Established Cheongju Plant 1984 Launched cosmetics business 1995 Changed corporate name to LG Chemical 2001 Demerged from LG Chemical and Household Products (70%) Raw Material (11%) Laundry Detergent Dishwashing Detergent Fabric Softener Established LG Household & Health Care (27%) Toothbrush, Hair Dye, Air Freshener, etc. Shareholder Structure (As of End-2004) LG Corp. Foreigner Institution Individual Stake 34% 44% 12% 10% Employees Cosmetics (30%) Mass (72%) Prestige (28%) Specialty, Discount, Online, etc. Dept. Store, Door-to-Door Number 2,795 2,900 2,738 2,458 1/9

4 2004 Results LG Household & Health Care Sales decreased by 9.9% y-o-y, posting KRW 953bn, due to weak domestic demand and changes in the distribution landscape. Sales (KRW bn) Analysis Cosmetics Household Products Household Products 1,095 1,032 1, Negative sales growth following the discontinuance of non-core businesses - Reduction in marketing spending (35%) (34%) (30%) (30%) Cosmetics - Market shrinkage as a result of weak consumer confidence (65%) (66%) (70%) (70%) - Rapid growth of the extreme low-end market and an increase in returned goods - Restructuring of the new door-to-door channel - Reduction in marketing spending 2/9

5 2004 Results LG Household & Health Care Operating profit declined y-o-y, recording KRW55bn, in spite of various cost-cutting efforts. Operating Profit (Margin) 10.4% 9.0% (KRW bn) Analysis Household Products % 5.7% - Decrease in profit driven by sales decline - Reduction in COGS and SG&A Cosmetics - Profit decline as a result of sales decline Diminishing sales in the specialty shop channel (2003: 43% 2004: 32%) - Reduction in COGS and SG&A 3/9

6 2004 Results (Household Products) Household Products Ongoing economic difficulties and aggressive restructuring led to weaker than expected 2004 results. Sales & Operating Profit (KRW bn) Market Share (2004) 68 (10.0%) 71 (9.8%) 65 (8.9%) 50 (7.5%) Toothpaste L G Aekyung Pacific Shampoo Soap L G P&G Pacific Unilever L G Pacific Aekyung Unilever Laundry L G Detergent L G Aekyung CJ Dishwashing Detergent L G Aekyung CJ Fabric Softener 기타 L G Pigeon Oxy /9

7 2004 Results (Cosmetics) Cosmetics Weak consumption and the rapid growth of the extreme low-end market led to a decline in sales in spite of turnaround efforts and brand restructuring. (2003: 27 brands 2004: 16 brands) Sales & Operating Profit (KRW bn) Sales by Channel (%) 40 (10.9%) 27 (7.1%) (1.2%) (1.6%) 284 Prestige Market Mass Market Exports, etc. Old D2D New D2D Dept. Store Home Shopping Online Discount Store Specialty Shop /9

8 2005 Target LG Household & Health Care LG H&H is targeting KRW1.03tr in sales and KRW66bn in operating profit which will be achieved by restructuring, strengthening brand competitiveness and enhancing organizational capability. Sales & Operating Profit Cosmetics (KRW bn) Corporate Strategy Household Products 54 (5.7%) 953 (30%) 66 (6.4%) 1,030 (29%) Strengthening Market Leadership Restructuring Strengthening brand competitiveness (70%) (71%) Enhancing organizational capability (E) 6/9

9 2005 Target (Household Products) Household Products Brand, quality and cost competitiveness will be enhanced to solidify our leadership position in the household products market. Sales & Operating Profit (KRW bn) Strategy 50 (7.6%) (8.3%) (E) Select & Focus Strengthening market leadership in six major product categories - Concentration and more effective use of resources Enhancing the efficiency of brand management - Simplification SKU rationalization and product launch adjustment - Cost cutting and efficient capacity utilization - Cost-efficient advertising Gaining competitiveness in growing channels 7/9

10 2005 Target (Cosmetics) Cosmetics Channel leadership will be secured by increasing investment in distribution and strong brands will be built by focusing on three top brands and developing hit products. Sales & Operating Profit (KRW bn) Strategy 4 (1.6%) (1.9%) 310 Securing channel leadership - Increase investment in mass channel distribution system - Promote growth of prestige channel Building strong brands - Focus on marketing three top brands (IsaKnox, LacVert, Ohui) - Develop highly functional hit products (E) 8/9

11 2005 Target Market presence in China and South East Asia will be solidified by focusing on substantial growth and developing strong brands. Overseas Business Beijing LGHousehold Chemical (1996) LG HAI (1990) Hangzhou LG Cosmetics (1994) LG Vina Cosmetics (1997) LG H&H International Trading (2004) Cognis Rika (1989) Overseas Investment J/V Beijing LG Household Chemical Hangzhou LG Cosmetics LG Vina Cosmetics Cognis Rika Major Business Household Products Cosmetics Household/Cosmetics Fatty Alcohol 9/9 Equity Stake 2005 Sales(Million (Million) 78% 82% 60% 20% $12.7 $17.5 $31.0 _

12 Appendix 1. Recent Developments The appointment of a new CEO will be an opportunity for reform and new businesses will promote future growth. New CEO CEO Suk Cha - Vast professional experience in the consumer products sector - Best qualified to solidify market leadership - Highly recognized for outstanding management skills Academic & Work Experience President & CEO, Haitai Confectionary & Foods Co., Ltd President & CEO, P&G Korea President & CEO, Ssang Yong Paper Co Procter & Gamble Co. Cincinnati, Ohio Indiana University, School of Law Cornell University, MBA State University of New York B.S. Accounting, AICPA New Business Expansion of Raw Material Business - Exclusive surfactant research infrastructure - Stable demand (LG Chem, etc.) Sales Target: KRW100bn Beautiplex - Masstige Multi-Brand Shop - Wide range of products including semi-luxury MNC brands - Professional nail care services - Number of stores: 2004: : 250 1/3

13 Appendix 2. Key Financials Balance Sheet Assets Current assets Long-term assets Liabilities Current liabilities Long-term liabilities Shareholders Equity Capital Stock Total liabilities-to-equity Net borrowings-to-equity (KRW, bn) % 71% % 53% % 42% % 31% Income Statement (KRW, bn) Sales COGS Gross Profit , , SG & A Operating Income Non-op. income/expense Recurring Income Net Income /3

14 Appendix 2. Key Financials (Continued) Cash Flow Statement Cash flows from operating activities Net income Depreciation Working capital Cash flows from investing activities CAPEX Cash flows from financing activities Payment of cash dividends Payment of borrowings (KRW, bn) Net increase in cash Dividends Dividend per share (KRW) Dividend payout ratio (%) Dividend yield (%) , , , /3

15 Thank you! This presentation contains forward looking statements which are based on management s assumptions and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in this presentation. Potential risks and uncertainties include, but are limited to, such factors as general economic conditions, foreign exchange fluctuations, and any change in the relevant laws and regulations.