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2002 to 2003. Updated on Sept. 22, 2003. 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

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2002 to 2003

Updated on Sept. 22, 2003


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.

Major Products & Brands

History & Sales Breakdown

Cosmetics

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

  • Skin Care

  • Color

  • Cosmetics

  • Functional

  • Cosmetics

  • Men’s Care

Household

Products

  • Toothpaste

  • Shampoo

  • Soap

  • Laundry

  • Detergent

  • Kitchen

  • Detergent

  • Fabric Softener

2002 Sales: KRW 1,102 bn*

Household

Products: 66%

Cosmetics: 34%

* The sales amounts are net of sales incentive expenses

1 / 11


Demerger

With the demerger, management transparency and shareholder value will continue to increase.

Structure

Positive Effects

Concentrate on core businesses

Enhance management transparency

Respond quickly to customer’s needs

Old LG Chemical

Electronic

Materials

Industrial

Materials

Petrochem

Equity

Investment

Household

Products &

Cosmetics

Biotech

Rise in Corporate & Shareholder value

Demerger

(As of Aug. 2003)

LGEI

LG

LGCI

【 Market Capitalization 】

500

+

  • Electronic Biz

  • Investments

  • Investments

  • Chemical Biz

  • Investments

KRW 454 bn

LG H&H

250

759p

KOSPI

LG Chem

LG H&H

LG Life Science

100

  • Biotechnology

  • Petrochem

  • Industrial

  • Materials, etc.

  • Household

  • Cosmetics

2001

2003

2002

100 = Market Cap. on 25 Apr. 2001 KRW 186 bn / KOSPI 556

2 / 11


Corporate Structure

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.

Organization

Management/Shareholders

BOD

- 8 directors including 4 outside directors

R & D

Product/Design/Packaging Research CTRs

  • Management Standard

  • - EVA : ROIC - WACC (2002 : 11%)

  • TSR : Weighted Average Share Price Increase

  • (2002 : 25%)

Production

4 plants & 4 overseas J/Vs

Employees

- 2,900 People

Logistics

10 logistics centers

(End of June 2003)

Agents

Discount Stores

Department Stores

Convenient Stores

Direct Sales

Door to Door

Sales

Shareholder Structure

- LG, the holding company, is a major shareholder

Supermarkets

Specialty Shops

(End of Aug. 2003)

Consumers

3 / 11


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.

1)

Business Results & Targets

Corporate Strategy

(KRW bn)

108

(10.4%)

99

(8.9%)

80

(7.3%)

Leading Home Care and Personal Care Company

Devoted to the pursuit of beauty, dreams and the betterment of life

Operating

Income

(Margin)

1,100

1,102

▽0.2%

1,032

7%

Enhance Market Leadership by

(32%)

(34%)

(35%)

Cosmetics

  • Restructuring

  • Strengthening brand competitiveness

  • Improving organizational competency

(68%)

(66%)

Household

Products

(65%)

2001

2002

2003(e)

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).

4 / 11


Household Products

Business 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.

Business Environment

Strategy

Customer

  • Strengthening market leadership

  • Focus on brand, image and perceived quality

  • Greater consumer needs for high-functional products

  • Promotion becoming more important

  • Enhancing competitiveness in growing channels

  • Developing sustainable growth engines

Competitor

  • Foreign: Expansion of M/S and product categories

  • Local: Focus on certain categories and

  • penetration into niche markets

Category

Sales Breakdown

24

27

【19 Categories】

Discount

Stores

39

36

【6 Major Categories】

: 59% of Sales

Agents

Channel

37

37

  • Continuous growth of discount stores

  • Expansion and diversification of online sales

Direct

Sales

2001

2002

5 / 11


Sales & M/S

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.

Sales

Note1)

Market Share

(KRW bn)

(%)

49

20

17

Others

72

(9.7%)

(2001)

66

(8.8%)

L G

47

Aekyung

19

68

(10.0%)

Pacific

19

Toothpaste

(2002)

Others

Operating

Income

(Margin)

27

18

20

Others

Aekyung 12

L G

28

Pacific

18

P&G

19

Unilever

15

753

Shampoo

Others

735

3%

686

40

15

12

11

Others

7%

L G

37

Pacific

16

Aekyung

10

Soap

Unilever

14

Sales

Others

36

27

21

Others

L G

36

L G

37

CJ

22

Aekyung

27

Laundry

Detergent

Others

43

34

15

Others

L G

44

Kitchen

Detergent

Aekyung

33

CJ

15

Others

31

47

16

Others

L G

31

Fabric

Softener

Oxy

15

Pigeon

49

Others

2001

2002

2003(e)

* Including inter-company transaction

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).

6 / 11


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.

Strategy

Business Environment

Customer

  • Building “Power Brands”

  • Greater consumer preference for premium & foreign brands

  • Diversification of products and brands according to

  • consumer needs

  • Different Strategy for Each Channel

  • R&D and Design Capability Enhancement

Competitor

  • Foreign: New entry and penetration into diverse channels

  • Local: Major players are positioned in multiple channels

  • Minor players are mainly niche players

  • Specialty Shops & Discount Stores

  • - Volume and profit driver

  • - Aggressive marketing and channel development

  • Department Stores

  • - Strategic development as a premium channel

Channel

  • New door-to-door channel

  • - Change of business model and restructuring

  • Larger and more modernized specialty shops

  • Growth of discount stores and department stores

  • More intense competition in door-to-door sales

  • Old door-to-door channel

  • - Business model improvements and gradual expansion

7 / 11


Sales

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 by Channel

Sales

Note1)

(%)

(KRW bn)

【LG H&H M/S 】

【 15% 】

【 16% 】

【 15% 】

40

(10.9%)

27

(7.1%)

Export

Home shopping

E-channel, etc.

Operating

Income

(Margin)

Others

13

13

14

14

(3.9%)

Old type

20

21

24

Premium

Market

New type

383

Department

stores

366

358

5%

▽ 6%

Sales

67

66

Discount

stores

62

Mass

Market

Specialty

shops

2001

2002

2003(e)

2000

2002

2001

* Including inter-company transactions

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).

8 / 11


Overseas Business

Based on localization strategy, LG H&H actively pursues overseas business with particular emphasis on JVs in China and Southeast Asia.

Beijing LG Household Chemical

LG H&H International Trading

  • Country/Est. : China / 1996

  • Business : Toothpaste Production

  • ’03 Sales Target: U$ 12 mn

  • Country/Est. : China / 2000

  • Business : Shampoo/Soap/

    Cosmetics etc.

LG H&H R&D Shanghai

  • Country/Est. : China / 1998

  • Business : Natural Materials R&D

Production JV (4)

LG HAI

Sales Subsidiary (2)

  • Country/Est. : U.S.A. / 1990

  • Business : Toothpaste/Detergent/

    Cosmetics Sales

R&D Subsidiary (1)

Hangzhou LG Cosmetics

  • Country/Est. : China / 1994

  • Business : Cosmetics Production

  • ’03 Sales Target: U$ 20 mn

LG Vina Cosmetics

Cognis Rika

  • Country/Est. : Vietnam / 1997

  • Business : Cosmetics Production

  • ’03 Sales Target : U$ 19 mn

  • Country/Est. : Malaysia / 1989

  • Business : Fatty Alcohol Production

9 / 11


Key Financials

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.

Borrowings & Interest

Key Financials

(KRW bn)

(KRW bn)

2001

2002

2003(e)

2001

2002

2003(e)

E B I T D A

Interest Expenses

EBITDA/Interest Expenses

112

9

12.3

127

12

10.7

678

435

407

173

271

89

150%

64%

703

428

404

164

300

89

135%

55%

135

21

6.4

647

414

414

205

233

89

178%

88%

Assets

(Fixed Assets)

Liabilities

(Borrowings)

Shareholders’ Equity

(Capital Stocks)

Debt/Equity

Borrowings/Equity

178%

Debt/Equity

(%)

150%

135%

2001*

2002

2003

Borrowings

205

Sales

Gross Profit

Operating Income

Recurring Profit

Net Profit

E P S (KRW)

R O A

R O E

1,032

528

108

107

75

4,205

11.5%

32.0%

1,102

563

99

96

44

2,489

6.5%

16.3%

1,100

550

80

80

56

3,172

8.0%

18.8%

173

164

2001 2002 2003 (e)

* Including pre-demerger 1Q results

10 / 11


Cash Flow

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 market

leadership and improving financial conditions.

Cash Flow

(KRW bn)

*

2001

2002

2003(e)

(Dividend)

Cash Flow from Operations

Net Income

Depreciation

Working Capital

Dividend

Others

Capital Expenditure

87

56

21

10

-

25

28

37

44

29

-18

-18

21

38

52

56

31

-8

-27

4

45

(%)

40

30

20

10

Pay-out ratio

1,500

Dividend Per Share

(KRW)

**

1,000

750

Dividend Yield

2000 2001 2002

*

*

*

Net Cash Flow

84

20

12

* Excluding 1Q 2001 results

** Including disposal of assets (’01: KRW 13 bn, ’03: KRW 16 bn)

* Pre demerger dividend of LG Chem

* * Pay-out ratio excludes extraordinary loss

Sustain Stable Dividend Pay-out Ratio

Enhance Market Leadership

Improve Financial Conditions

11 / 11


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.

www.lgcare.co.kr

www.careshop.co.kr


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