Table of Contents
The Company
2~
Business Review
8 ~ 13
Financial Highlights
14 ~ 16
7
For a Better Life
The Company
Corporate Overview
Demerger
Corporate Structure
Corporate Strategy
Business Results & Targets
Corporate Overview
Founded in 1947, LG Household & Health Care (“LG H&H”) has been a basis
for the growth of LG Chemical and LG Group. Since 2001’s demerger, LG H&H
now focuses on the household and cosmetics business.
History
 1947 Established as Lucky Chemical Industrial Co.
 1954 Produced Korea’s first toothpaste “Lucky”
Business
 2001 Sales *
= KRW 1,111 bn
 2001 Overseas Sales ** = U$
103 mn
 1969 Went Public
[ Sales Breakdown ]
 1974 Changed corporate name to “Lucky”
and built Ulsan Plant
 1979 Built Lucky R&D Center
 1980 Built Cheongju Plant
 1984 Commercialized Cosmetics
• Skin Care
• Make-up
• Men’s
Cosmetics
37%
Household
Products
63%
 1995 Changed corporate name to “LG Chemical”
 2001 Demerged from LG Chemical and established
as LG Household & Health Care
* Including pre-demerger 1Q results
** Exports + Overseas Subsidiaries’ sales
• Toothpaste
• Shampoo
• Soap
• Laundry Detergent
• Kitchen Detergent
• Fabric Softener
3/17
Demerger
With the demerger in April 2001, LG H&H’s corporate value and shareholder
value should continue to increase.
Structure
Positive Effects
 Concentrate on core business
Old LG Chemical
Petrochem
Equity
Investments
Electronic Industrial
Materials Materials
Biotech
Household
Products &
Cosmetics
DEMERGER
• Holding Company
• Equity Investments
• Biotechnology
• Business Subsidiary
• Petrochemicals
• Industrial Materials, etc.
 Respond quickly to customers’ needs
Corporate and shareholder values
to increase continuously
LGCI
LG Chem
 Enhance management transparency
[ Market Value ]
LG H&H
LG H&H
• Business Subsidiary
• Household Products
• Cosmetics
KRW186bn
552.69
Demerger(Apr.’01)
KOSPI
KRW451bn
143%
693.70
26%
Dec.’01
4/17
Company Structure
A CEO with professional background and 2,808 employees form the best
company structure throughout R&D, production, sales, and logistics.
LG H&H’s major shareholder is LGCI.
Organization
People
 Myeong Jae Cho, CEO
R&D
- Born in 1945
• Household Products Research Institute
• Cosmetics Research Institute
• Design Research Institute
• Packaging Development Institute
• LG H&H R&D Shanghai
- B.A., Seoul National University
- 1969 Joined Lucky Chemical Industrial Co.
- 1997 Charge of H&H Business
- Present CEO of LG H&H
• Cheongju Plant
Production
• Ulsan/Naju Plant
 Board of Directors
– Household Products Production
• 4 Overseas JVs
- 3 outside directors out of all 6 directors
 Employees : 2,808 people
(End of ’01)
Sales
Employees
1,235
Production
1,081
R&D
295
 Shareholder Structure
Ratio
– Household Products/Cosmetics Production
Admin.
(End of ’01)
Retail
28.7%
14.2%
10.3%
• Operation by region/distribution channel
• 1,235 Sales personnel
• 2 Overseas Subsidiaries
197
LGCI Foreigner Institute
46.8%
Sales
Logistics
• 13 Logistics Centers
• Sales Agents - 190 for Household Products
220 for Cosmetics
5/17
Corporate Strategy
Our goal is to become a Super-Excellent Household & Health Care Company by
enhancing profitable growth, revitalizing business portfolio, and strengthening
market leadership based on「SIGMA 21st」.
Super-Excellent
Household & Health Care Company
Enhance
Profitable
Growth
Revitalize
Business
Portfolio
Strengthen
Market
Leadership
Pursuing
super
excellence of
current
business
Cultivating
growth engine
for the future
Continuously
developing core
competences
 Achieving world-best productivity and quality
 Continuous restructuring
 Efficient allocation of management resources
 Strengthening dominant player position in
domestic household products market
 Penetrating the cosmetics market aggressively
 Accelerating globalization
 Reinforcing product development skills
 Building brand equity
SIGMA 21st
Super Excellence, Informatization, Globalization,
Management by Knowledge, Action Leadership
 Improving customer satisfaction through CRM*
*Customer Relation Management
6/17
Business Results & Targets
We target KRW 1.2 tn in sales with 10.5% of operating margin and increase
of sales contribution of cosmetics.
Results & Target
203
(KRW bn)
(12.5%)
128
108
Operating
Profit
(9.7%)
(Margin)
1,220
1,111
Cosmetics
Household
Products
37%
CAGR : 10%
49%
39%
*
**
Overseas
1,620
(10.5%)
63%
61%
51%
’01
’02(E)
’05(E)
U$ 103mn
(12%)
U$ 129mn
(14%)
CAGR : 20%
U$ 228mn
(19%)
* Including sales from Sorbitol business divested in Apr.’01
** Exports + Overseas Subsidiaries’ sales
7/17
Business Review
Household Products
- Business Strategy
- Sales & M/S
Cosmetics
- Business Strategy
- Sales & M/S
Overseas Business
1. Business Strategy
Household Products
Our goal is to strengthen dominant position in the market by focusing on key
product/brand/distribution channel and developing sustainable growth engines.
Strengthen No.1 Position
in Domestic Market
■
Enhance Market Leadership
through Selection & Focus
Concentrate resources on core product categories
- shampoo/toothpaste/fabric softener
■
Cultivate strategic brands in 6 product categories
- Perioe/Elastine/Say/One Scoop/Natural Pon/Saffron
■
Increase number of big brands with annual sales over KRW 10 bn
- ’01: 16 big brands
Set Channel Strategies
Corresponding to Changes
in Distribution
’02: 18 big brands
■
Carry out marketing activities aggressively in discount stores
- Concentration of resource
■
Develop strategic models in new channels for early mover’s advantage
■
Speedy settlement in new category markets
- hair dyes/anti-hair loss)
■
Differentiate overseas business strategy by regional market
Develop Sustainable Growth
Engines Continuously
- Developed market (US/Japan) and developing market (Mexico)
9/17
2. Sales & M/S
Ensuring stable growth, the household products business enjoys an unwavering
no. 1 position in the domestic market.
Sales
Market Share
(KRW bn)
Operating
Profit
(Margin)
94
(11.3%)
68
(9.7%)
704
79
(10.7%)
830
740
(%)
 Toothpaste
 Shampoo
 Soap
CAGR : 4%
 Laundry
Detergent
Sales
 Kitchen
Detergent
 Fabric
Softener
’01
’02(E)
’05(E)
LG
49
LG
27
LG
40
LG
36
LG
43
LG
31
Pacific
20
Pacific P&G
18
20
Aekyung
17
Aekyung
Others
Others
14
Pacific Unilever Aekyung
12
15
Aekyung
27
Aekyung
34
Pigeon
47
11 Others
CJ
21
Others
CJ
15
Others
Oxy
Others
16
☞ Neilson Data (’01)
10/17
1. 사업전략
1. Business Strategy
Cosmetics
Our goal is to strengthen growth momentum to be no.1 in cosmetics by
expanding leading brands / products and differentiating strategies by distribution
channel / region.
Strengthen Growth
Momentum
■
Increase Number of
Leading Brands/Products
Increase number of big brands with annual sales over KRW 10 bn
- ’01: 8 brands
’02: 11 brands
Sales over KRW 100bn
· ISAKNOX (’01)
· LacVert (’02)
■
Attain no.1 M/S in specific categories
- lipstick/two-way cake/powder/makeup base
■
Strengthen leadership in company’s strong channels
- specialty cosmetic shops/mass markets
Differentiate Strategies
by Distribution Channel
■
Increase M/S in growing channels
- direct sales/department store
■
Pursue early settlement in new channels
- door-to-door/drug store/hair salon
Develop Distinct
Strategies by Region
■
Expand overseas sales network and develop strategic markets in
China and Vietnam
■
Enlarge sales channels in Russia/Saudi Arabia and establish
new networks in the US market
11/17
2. Sales & M/S
Sales and profit contribution of Cosmetics has grown significantly along
with market share increase.
Sales
Market Share
(KRW bn)
108
(13.7%)
Operating
Profit
40
(9.8%)
2,060
[Market Size]
(KRW bn)
1,910
50
(10.4%)
1,765
790
(Margin)
480
407
CAGR : 18%
Sales
[LG H&H M/S]
’01
’02(E)
’05(E)
16%
17%
’99
’00
19%
’01
12/17
Overseas Business
Based on distinct strategies by region, 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
 Country / Est. : China / 2000
 Business : Toothpaste Production
 Business : Shampoo / Soap
/ Cosmetics Sales
 ’02 Sales Target : U$ 11 mn
 ’02 Sales Target : U$ 14 mn
LG H&H R&D Shanghai
■
■
■■
■
 Country / Est. : China / 1998
 Business : Natural Materials R&D
LG HAI
 Country / Est. : USA / 1990
 Business : Toothpaste / Detergent
/ Cosmetics Sales
 ’02 Sales Target : U$ 15 mn
■■
■
Hangzhou LG Cosmetics
 Country / Est. : China / 1994
 Business : Cosmetics Production
 ’02 Sales Target : U$ 15 mn
LG Vina Cosmetics
 Country / Est. : Vietnam / 1997
 Business : Cosmetics Production
■
■
Production JV (4)
Sales Subsidiary (2)
■
R&D Subsidiary (1)
 ’02 Sales Target : U$ 16 mn
13/17
Financial Highlights
Key Financials
Cash Flow
Key Financials
Backed by strong business results, financial conditions are improving
significantly through drastic debt reduction.
[ Key Financials ]
Apr.’01
(Demerger)
Assets
(Fixed Assets)
Liabilities
(Borrowings)
Shareholders’ Equity
(Capital Stocks)
Debt/Equity
Borrowings/Equity
611
402
419
264
192
89
219%
138%
’01
647
414
414
205
233
89
178%
88%
’01
Sales
Gross Profit
Operating Income
Recurring Profit
Net Profit
E P S (KRW)
R O A
R O E
1,111
607
108
107
75
4,770
11.6%
32.2%
(KRW bn)
[ Borrowings and Interest ]
’02(E)
685
417
398
160
287
89
139%
56%
’02(E)
1,220
665
128
120
83
5,176
12.3%
29.3%
’01
EBITDA
Interest Expenses
EBITDA/Interest Expenses
Debt/Equity
(%)
135
21
6.4
(KRW bn)
’02(E)
158
14
11.0
219%
178%
264
139%
205
Borrowings
(KRW bn)
160
Apr.’01
’01
’02(E)
(Demerger)
* Including pre-demerger 1Q results
15/17
Cash Flow
Net cash from business operating activities is expected at KRW 45bn in 2002.
It will primarily be allocated to improving financial conditions, enhancing
market leadership, and paying dividend.
[ Cash Flow ]
Apr~Dec'01
(KRW bn)
[ Usage ]
'02(E)
Improve Financial Condition
Cash flow from business
87
85
Net earnings
56
83
Depreciation
21
29
Working capital
10
△ 9
△18 *
Dividend
Capital expenditure
28
50
Disposal of assets
13
-
Others
12
10
84
45
Net cash flow
Enhance Market Leadership
Sustain High Dividend
Payout Ratio
* Dividend for fiscal year 2001.
16/17
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.
For a Better Life