lg h&h 2012_4q earnings presentation
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HEALTHY BEAUTIFUL REFRESHING
LG HOUSEHOLD & HEALTH CARE
January 22, 2013
LG Household & Health Care
Results for 2012
CONTENTS
Audit of these results is still in progress. Figures in this disclosure are subject to change during the auditing process.
• 2012 Sales and Operating Profit
• 4Q 2012 Sales and Operating Profit
• 2012 Results by Business
- Healthy
- Beautiful
- Refreshing
• Summary Financial Statements
• 2013 Business Plan
Despite global economic downturn and intensified competition, all business units showed strong growth. Total company
in 2012 delivered 3.90 trillion won in sales (12.7% growth yoy), and 446 bn won in operating profit (20.4% growth yoy)
under the new accounting change on other operating gain or loss. (456 bn won before the change)
228
370
95
126
183
08 10 09 11
2,826
3,456
1,033
1,968
2,216
07
1,172
347
06
12.7%
12
3,896
08 10 09 11 07 06 12
20.4%
446
2012 Results
(Accounting change on other
operating gain or loss*) (Unit: bn won)
Sales Operating Profit
7-Year Trend
2006-2008: K-GAAP, 2009~2012: K-IFRS
2012 Sales and Operating Profit
* Under the new accounting change, other operating gain or
loss is included in non-operating gain or loss
1/7
Sales 3,456 3,896 12.7%
Operating Profit 370 446 20.4%
Recurring Profit 372 430 15.6%
Net Profit 272 312 14.9%
2011 2012 Increase(Unit: bn won)
07 08 10 09
6.2%
11
70
75
21
29
34
07 08 10 09 11
691
831
295
479
525
06
15 06
242
7.1%
12
890
12
79
4Q 2012 Sales and Operating Profit
(Unit: bn won)
4Q Sales 4Q Operating Profit
7-Year Trend
Total company in 4Q 2012 performance was driven by strong cosmetics business, delivered 890 bn won in sales
(7.1% growth yoy), and 79 bn won in operating profit (6.2% growth yoy) under the new accounting change on other
operating gain or loss. Sales has increased for thirty consecutive quarters since 3Q 2005, and operating profit has
increased for thirty-two consecutive quarters since 1Q 2005; beating historic high results every quarter.
2006-2008: K-GAAP, 2009~2012: K-IFRS 2/7
4Q 2012 Results
(Accounting change on other
operating gain or loss*)
* Previously, other operating gain or loss was included in
operating profit. After the accounting change, other operating
gain or loss is included in non-operating gain or loss
Sales 831 890 7.1%
Operating Profit 75 79 6.2%
Recurring Profit 70 77 9.9%
Net Profit 48 54 12.1%
Increase(Unit: bn won) 4Q 2011 4Q 2012
Despite depressed consumption sentiment and weak raw material business performance from fluctuating raw material prices, sales increased 6.8% yoy to 1.27 trillion won and operating profit increased 6.7% yoy to 144 bn won. Excluding raw material business, sales increased 7.8% yoy and operating profit increased 12.3% yoy, growing much faster than the market and continuously enhancing market dominance.
Major categories, led by five mega brands - Elastine, Tech, Perioe, Saffron, and Bodyfit, continued solid growth. Leader position is further strengthened with various new products focused on consumer lifestyle changes, such as: (1) ‘HAN.IP laundry detergent’, light laundry detergent for clothes wore only once, (2) ‘Elastine Perfume Shampoo’, scent-focused shampoo, and (3) ‘Tech OK Soluble Sheet Laundry Detergent’, sheet-type laundry detergent that dissolves in water.
Joint venture with No.1 US green household brand, Method, was established. Moreover, Method and No.1 Europe green brand, ECOVER, were merged. This move enables LG H&H to pioneer premium green trend in Korean household goods market with No.1 US and Europe brands.
HEALTHY
2012
+6.7%
1,266 1,185
2011 2012
144
+6.8%
2011 135
2012 Results by Business - Healthy
Operating Profit
Sales
(Unit: bn won)
(Unit: bn won)
3/7
BEAUTIFUL
+25.3%
1,479 1,227
2011 2012
212
+20.5%
2011 169
2012 Results by Business - Beautiful
Operating Profit
Sales
(Unit: bn won)
(Unit: bn won)
Prestige Masstige Mass OHUI, Whoo, SU:M, Belif,
Frostine, Chungyunjin, Stefany, Others
IsaKnox, LacVert, Sooryehan,
Vonin, Beyond, Others
THEFACESHOP, VDI
(Unit: bn won)
Through various product innovations and practical overseas expansion, sales increased 20.5% yoy to 1.48 trillion won and operating profit increased 25.3% yoy to 212 bn won. Operating profit margin reached 14.3% with 0.5%p expansion.
Existing brands continued to show stable growth, and new brands delivered an outstanding growth in the prestige segment. Each brand fostered star product, strengthening each brand’s RTB (reason to believe). Six prestige brands expanded 29 department store counters in 2012.
In the masstige segment, eco-brand ‘Beyond’ showed strong growth as demand for natural cosmetics grew, rolling out road shops since October. BEAUTÉ de Beautiplex reached 1,068 stores in total.
In the mass segment, TheFaceShop(TFS) sales increased 24.9% yoy, with strong growth from both domestic and overseas. Also, recently launched a new color brand shop ‘VDL’ (Violet Dream Luminous) already opened 6 stores in two months.
Overseas business, on top of strong growth of TFS and acquisition of Ginza Stefany, is continuously increasing its sales portion from 9% in 2011 to16% in 2012.
2011 2012
428 531
24%
2011 2012
474 506
7%
2011 2012
326
442
36%
4/7
Refreshing business sales increased 10.3% yoy to1.15 trillion won, and operating profit increased 35.8% yoy to 89 bn won despite economic down. Growth was led by expanding range of consumer choice through product innovations and coverage expansion.
Coca-Cola Beverage sales increased 9.2% yoy to 910 bn won.
Carbonated beverage sales grew 8.9% yoy through well-balanced performance of major brands, Coca-Cola, Sprite, and Fanta from continued package innovation.
Non-carbonated beverage grew 14.1% yoy. In particular, creation of new demand with Glaceau Vitamin Water, Georgia Coffee, Powerade, and mineral water were accepted by consumers very well.
Haitai Beverage sales increased 14.7% yoy to 241 bn won. Sales increased and synergy between Coca-Cola and Haitai Beverage were created from successful main brand renewals and efficient restructuring of sales organization.
REFRESHING
2012
+35.8%
1,151 1,044
2011 2012
89
+10.3%
2011 66
2012 Results by Business - Refreshing
Operating Profit
Sales
(Unit: bn won)
(Unit: bn won)
5/7
(Unit: bn won) 2011 Year-end
Assets 2,369 2,764
Cash & Cash Equivalent 92 65
Accounts Receivable 327 370
Inventories 306 317
PPE 1,602 1,972
Tangible Asset 855 1,031
Intangible Asset 664 841
Liabilities 1,308 1,493
Accounts Payable 231 168
Other Payables 151 180
Borrowings 565 727
Short Term Borrowings 183 416
Long Term Borrowings 382 312
Total Shareholders' Equity 1,061 1,272
Shareholders' Equity 89 89
Capital Surplus 97 97
Accumulated Other
Comprehensive Income0 -32
Retained Earnings 884 1,120
Other Capital -72 -73
Minority Interest 63 70
Debt-to-equity Ratio 123% 117%
2012 Year-end
Summary Financial Statements (Reflected accounting change on other operating gain or loss)
Income Statement Balance Sheets
6/7
(Unit: bn won) 2011 2012
Sales 3,456 3,896
COGS 1,736 1,903
Gross Profit 1,720 1,993
SG&A and Others 1,350 1,547
Operating Profit 370 446
Non-Operating Loss -2 15
Recurring Profit 372 430
Income Tax 101 118
Net Profit 272 312
2013 Business Plan
2013 business environment will be tougher as: (1) China is expecting limited economic growth, which will influence total
Korean economy, (2) exchange rate will be unfavorable, which will directly impact export competitiveness, and (3) raw
material prices are expected to continue its upward trend. At difficult times like this, it is vital to focus more on
consumers and strive to strengthen market leadership. 2013 sales guidance for total company is 17% growth yoy, and
operating profit guidance for total company is 20% growth yoy.
Firstly, further expand business globally to a bigger market
Competitors lie everywhere world-wide, not only in Korea. Going forward, LG H&H will build business headquarters in
global major markets and expand globally.
Secondly, prestige brands should be more prestigious and value brands should be more value focused
Regular products cannot create value in this bipolarized market. A product should either be prestige or be value
focused. Need to select and focus on certain brands that are prestigious, and magnify value on value brands. Through
these activities, LG H&H can outdo global products.
Thirdly, provide ‘satisfactory experience’, not just a product
Recent heavy price competition is making most of products commoditized. Also, most of LG H&H’s business model
currently is contacting consumers indirectly through other retails. Going forward, we will go beyond simply selling
products, and will prepare to provide the most satisfactory experience to consumers.
Fourthly, strengthen risk management
LG H&H was able to continue its strong growth despite economic downturn because we were prepared. Even though
bigger hardship is confronted in the future, LG H&H would have prepared itself through continuous risk management
and efficiently focusing only on consumer value creating oriented work. 7/7
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