updated on sept. 22, 2003 2002 to 2003. corporate overview founded in 1947, lg household &...
TRANSCRIPT
Corporate Overview
Founded in 1947, LG Household & Health Care(“LG H&H”) has been the basis of growth for
LG Chemical and LG Group. Since its demerger from LG Chemical in 2001, LG H&H has become
the leading household and health care company in Korea.
1 / 11
Major Products & BrandsHistory & Sales Breakdown
Cosmetics: 34% HouseholdProducts: 66%
Toothpaste
Shampoo
Soap
Laundry Detergent
Kitchen Detergent
Fabric Softener
2002 Sales: KRW 1,102 bn*
Skin Care
Color Cosmetics
Functional Cosmetics
Men’s Care
Household Products
1947 Established as Lucky Chemical Industrial Co.
1954 Produced Korea’s first toothpaste “Lucky”
1969 IPO
1974 Changed corporate name to “Lucky”
1979 Established Lucky R&D Center
1980 Established Cheongju Plant
1984 Launched cosmetics business
1995 Changed corporate name to “LG Chemical”
2001 Demerged from LG Chemical and
established LG Household & Health Care
* The sales amounts are net of sales incentive expenses
Cosmetics
Demerger
With the demerger, management transparency and shareholder value will continue to increase.
2 / 11
Structure
• Household• Cosmetics
• Petrochem• Industrial Materials, etc.
• Biotechnology
LG Life ScienceLG H&H
Concentrate on core businesses
Enhance management transparency
Respond quickly to customer’s needs
Rise in Corporate & Shareholder value
Positive Effects
2001 2002
KOSPILG Chem 100
250
100 = Market Cap. on 25 Apr. 2001 KRW 186 bn / KOSPI 556
KRW 454 bn
759p
EquityInvestment
Old LG Chemical
Petrochem
IndustrialMaterials
HouseholdProducts &Cosmetics
Biotech
ElectronicMaterials
Demerger
2003
(As of Aug. 2003)LGCI
+LGEI
• Chemical Biz• Investments
• Electronic BizInvestments
LG
• Investments
LG H&H
【 Market Capitalization 】500
Corporate Structure
(End of June 2003)
R & D
Product/Design/Packaging Research CTRs
Production
4 plants & 4 overseas J/Vs
ConsumersConsumers
AgentsAgents
Direct SalesDoor to Door
Sales
Direct SalesDoor to Door
Sales
SupermarketsSpecialty ShopsSupermarkets
Specialty Shops
Discount StoresDepartment StoresConvenient Stores
Discount StoresDepartment StoresConvenient Stores
Sales Production R&D Admin
Number 1,586 808 297 209
Utilizing EVA & TSR as management standards, 2,900 employees are working together to enhance
corporate value. In addition, advanced R&D, production, logistics & sales network are contributing
to our competitiveness.
3 / 11
OrganizationManagement/Shareholders
BOD
- 8 directors including 4 outside directors
Management Standard
- EVA : ROIC - WACC (2002 : 11%)
- TSR : Weighted Average Share Price Increase (2002 : 25%) Employees
- 2,900 People
Shareholder Structure
- LG, the holding company, is a major shareholder
Logistics
10 logistics centers
(End of Aug. 2003)
LG Foreigner Others
Stake 34% 38% 28%
Corporate Strategy, Business Results & Targets
As a leading home care and personal care company, LG H&H will enhance market leadership by restructuring, strengthening brand competitiveness and improving organizational competency.
4 / 11
(65%)
(35%)
(66%)
(34%)
2001 2002 2003(e)
108(10.4%)
1,032
1,102
(KRW bn)
• Restructuring
• Strengthening brand competitiveness
• Improving organizational competency
▽0.2%
1)
7%
99(8.9%)
Corporate Strategy Business Results & Targets
Enhance Market Leadership by
HouseholdProducts
Cosmetics
OperatingIncome(Margin)
Note1) Sales amounts are net of sales incentive expenses(’01: KRW 79bn, ’02: KRW 86bn). The 2002 financial report includes 2001 & 2002 special bonuses( KRW 8bn & 9bn respectively).
Leading Home Care and Personal Care Company
Devoted to the pursuit of beauty, dreams and the betterment of life
(68%)
(32%)
80(7.3%
)
1,100
5 / 11
Strengthening market leadership
Customer
Focus on brand, image and perceived quality
Greater consumer needs for high-functional products
Promotion becoming more important
Channel
Continuous growth of discount stores
Expansion and diversification of online sales
Competitor
Foreign: Expansion of M/S and product categories
Local: Focus on certain categories and
penetration into niche markets
Business StrategyHousehold Products
Business Environment
Enhancing competitiveness in growing channels
Developing sustainable growth engines
Strategy
Changes in consumer preferences, more intense competition and channel reshuffling are expected. However, LG H&H will enhance market leadership in major product categories and develop new growth engines for the future.
【 19 Categories 】
【 6 Major Categories 】 : 59% of Sales
37
24
39
37
27
36
Discount Stores
Agents
Direct Sales
2001 2002
Sales BreakdownCategory
Sales
OperatingIncome(Margin)
L G 36
Toothpaste L G 47
Aekyung
19Others
Pacific19
Shampoo L G 28
P&G19
Soap L G 37
Unilever
14 OthersPacific
16
LaundryDetergent
Aekyung27
CJ22
Others
KitchenDetergent
L G 44 Others
CJ15
Aekyung33
FabricSoftener
L G 31
Pigeon49
Oxy15
Others
L G 37
686
2001 2002 2003(e)
68(10.0%)
735
Sales of KRW 735bn and operating profit of KRW 72bn was reached in 2002, an increase of 7% and 5% year-on-year respectively. Despite intense competition, LG H&H has maintained market leadership.
49 20 17 Others
27 18 20 Others
40 15 12 Others11
36 27 Others21
43 34 Others15
(2001)
6 / 11
31 47 Others16
Sales & M/S
(%)Market ShareSales (KRW bn)
Pacific18
7%
Note1)
* Including inter-company transaction
72(9.7%)
Note1) The sales amounts are net of sales incentive expenses(’01: KRW 28bn, ’02: KRW 34bn). 2002 financial report includes 2001 & 2002 special bonuses( KRW 4bn & 5bn respectively).
Aekyung
10
OthersUnilever
15
Aekyung
12
3%
753
66(8.8%)
(2002)
7 / 11
Building “Power Brands”
Different Strategy for Each Channel
R&D and Design Capability Enhancement
Greater consumer preference for premium & foreign brands
Diversification of products and brands according to
consumer needs
Larger and more modernized specialty shops
Growth of discount stores and department stores
More intense competition in door-to-door sales
Foreign: New entry and penetration into diverse channels
Local: Major players are positioned in multiple channels
Minor players are mainly niche players
Cosmetics Business Strategy
Changes in distribution channels and aggressive marketing from foreign and local competitors are expected. LG H&H will secure growth momentum by building “Power Brands” and establishing a different strategy for each distribution channel.
Business Environment Strategy
Customer
Channel
Competitor
Specialty Shops & Discount Stores
- Volume and profit driver - Aggressive marketing and channel development
Department Stores
- Strategic development as a premium channel
New door-to-door channel
- Change of business model and restructuring
Old door-to-door channel
- Business model improvements and gradual expansion
40(10.9%)
8 / 11
Sales
2001 2002 2003(e)
366
383
Sales by Channel (%)
5%
New type
Departmentstores
Discountstores
Specialtyshops
Old type
Others
PremiumMarket
MassMarket
2001 20022000
【 LG H&H M/S 】 【 15% 】 【 16% 】 【 15% 】
Sales (KRW bn)Note1)
* Including inter-company transactions
27(7.1%)
Sales of KRW 383bn and operating profit of KRW 27bn was reached in 2002, a growth of 5% and ▽32% year-on-year respectively. Market share declined slightly.
Sales
OperatingIncome(Margin)
Note1) The sales amounts are net of sales incentive expenses(’01: KRW 51bn, ’02: KRW 52bn). 2002 financial report includes 2001 & 2002 special bonuses( KRW 3bn & 3bn respectively).
ExportHome shoppingE-channel, etc.
6662
14
67
13
20 21
13
24
▽ 6%358
14(3.9%)
Overseas Business
Based on localization strategy, LG H&H actively pursues overseas business with particular emphasis on JVs in China and Southeast Asia.
9 / 11
■■
■■■■
■■
■■■■
Country/Est. : China / 1996 Business : Toothpaste Production ’03 Sales Target: U$ 12 mn
LG H&H R&D Shanghai
Country/Est. : China / 1998 Business : Natural Materials R&D
Hangzhou LG Cosmetics
Country/Est. : China / 1994 Business : Cosmetics Production ’03 Sales Target: U$ 20 mn
Beijing LG Household Chemical
LG Vina Cosmetics
LG HAI
Country/Est. : Vietnam / 1997 Business : Cosmetics Production ’03 Sales Target : U$ 19 mn
Country/Est. : U.S.A. / 1990 Business : Toothpaste/Detergent/ Cosmetics Sales
LG H&H International Trading
Country/Est. : China / 2000 Business : Shampoo/Soap/ Cosmetics etc.
■■
■■
■
■■
Cognis Rika
Country/Est. : Malaysia / 1989 Business : Fatty Alcohol Production
Production JV (4) Sales Subsidiary (2)
R&D Subsidiary (1)
Key Financials
Assets(Fixed Assets)
Liabilities(Borrowings)
Shareholders’ Equity(Capital Stocks)
Debt/EquityBorrowings/Equity
Sales
Gross Profit
Operating Income
Recurring Profit
Net Profit
E P S (KRW)
R O AR O E
678435
407173
27189
150% 64%
703428
404164
30089
135% 55%
1,102563
9996
44
2,489
6.5% 16.3%
2001 2002 2003(e)
2002 2003
647414
414205
23389
178% 88%
1,032528
108107
75
4,205
11.5%32.0%
2001*
E B I T D A
Interest Expenses
EBITDA/Interest Expenses
12712
10.7
2001 2002 2003(e)
13521
6.4
205
2001 2002 2003 (e)
178%Debt/Equity(%)
Borrowings
1,100550
8080
56
3,172
8.0% 18.8%
(KRW bn)
10 / 11
1129
12.3
Borrowings & InterestKey Financials (KRW bn)
* Including pre-demerger 1Q results
173164
150%
135%
At the end of 2002, debt-to-equity ratio declined to 150%, a 28%p decrease from 2001.
LG H&H plans to reduce the ratio to the 130% range by 2003.
Cash Flow
2001 2002 2003(e)
84 20 12Net Cash Flow
Cash Flow from Operations
Net Income
Depreciation
Working Capital
DividendOthers
Capital Expenditure
87
56
21
10
-
25
28
37
44
29
-18
-18
21
38
52
56
31
-8
-27
4
45
*
**
* Excluding 1Q 2001 results** Including disposal of assets (’01: KRW 13 bn, ’03: KRW 16 bn)
Net Cash from business operating activities is expected to be KRW 12bn in 2003.It will primarily be allocated to maintaining a stable dividend pay-out ratio, enhancing marketleadership and improving financial conditions.
11 / 11
Cash Flow (KRW bn)
Sustain Stable Dividend Pay-out Ratio
Enhance Market Leadership
Improve Financial Conditions
(Dividend)
2000 2001 2002
40
30
20
10
(%)
Pay-out ratio
Dividend Per Share(KRW)
Dividend Yield
* Pre demerger dividend of LG Chem* * Pay-out ratio excludes extraordinary loss
7501,000
1,500
* **
www.lgcare.co.kr
www.careshop.co.kr
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.