LG H&H Announces Record Quarterly Performance with 23.6% and 22.2% Year-on-Year Increases in Sales and Net Profit, Respectively

■ On a year-on-year basis, operating profit increased across all businesses: 13.6% in household goods, 20.9% in cosmetics, and 26.9% in beverage.

■ The overseas cosmetics business achieved rapid growh with a 364% increase in operating profit. The company expanded its business into China and Japan by establishing partnerships with Heng Cheng and Aeon.

■ Haitai Beverage is projected to make its first profit in six years thanks to the completion of restructuring efforts and the rearrangement of brand portfolio and channel strategy.

LG Household & Health Care (LG H&H) Ltd. (CEO: Suk Cha) announced its highest quarterly results for the first quarter with KRW 829.6 billion in sales, KRW 110.5 billion in operating profit, and KRW 78.2 billion in net profit, which posted 23.6%, 18.8%, and 22.2% year-on-year increases, respectively.

On a year-on-year basis, sales have risen for 23 consecutive quarters since the third quarter of 2005, and operating profit for 25 consecutive quarters since the first quarter of 2005.

LG H&H achieved the best financial result to date since its establishment, having registered an operating profit of more than KRW 100 billion thanks to a balanced, robust growth in operating profit across all businesses including household goods (13.6%), cosmetics (20.9%) and beverage (26.9%).

In the overseas cosmetics business, operating profit rose sharply by 364.2% year-on-year as the company’s Chinese subsidiary began its full operation this year after completing the restructuring process in 2010. TheFaceShop, which established patnerships with Heng Cheng in China* and Aeon in Japan** to expand its business overseas, has accelerated its efforts in overseas markets since April.

Haitai Beverage, which was acquired by LG H&H in January 2011, finalized its restructuring endeavors for higher efficiency in the first quarter, and strengthened its growth platform by reforming its brand portfolio and channel strategy. This will help Haitai Beverages become profitable again, after six consecutive years of losses prior to the acquisition.

[1Q 2011 Results by Business]

▲ In household goods, sales amounted to KRW 308.7 billion and operating profit reached KRW 40.1 billion, 19.8% and 13.6% year-on-year increases, respectively. The growth was especially notable in the sanitary product (+23%) and fabric softener (+29%) sectors. In particular, the company accounted for 43% of the fabric softner market, becoming number one for the first time in 32 years since its entry into the market.

▲ In cosmetics, sales rose by 15.5% to KRW 313.4 billion and operating profit by 20.9% to KRW 56.3 billion year-on-year, respectively. In the prestige segment, more focus on ‘Whoo’ and ‘Su:m’ brands contributed to 17% and 69% year-on-year increases, respectively. Herbal cosmetics brand ‘Belif,’ launched in August 2010, opened five additional counters in department stores in one quarter alone to reach 7 counters in total, rapidly expanding its business in department stores.

Overseas cosmetics business sales increased 11.8% year-on-year to KRW 23.8 billion, and operating profit increased 364.2% year-on-year to KRW 2.2 billion. TheFaceShop concluded master franchise agreements with two major cosmetics distributors, Heng Cheng* of China and Aeon** of Japan, and initiated aggressively more active engagement in its international business from April onwards.

▲ With steady growth in both carbonated and non-carbonated beverages, the beverage business increased 46.3% year-on-year to KRW 207.4 billion in sales and operating profit increased 26.9% year-on-year to KRW 14.1 billion. Sales excluding Haitai Beverage products reported high year-on-year growth of 22.7%.

Carbonated beverage sales grew 15.8% year-on-year on the back of the positive performance of leading brands, Coca-Cola and Fanta. Non-carbonated beverage rapidly grew 33.2% year-on-year with expansion of Powerade, Glaceau Vitamin Water, and Georgia Coffee. Thanks to the securing of various prominent water sources and water brands, the sales in the bottled water category rose by 17.5%.

Haitai Beverage, which was acquired by LG H&H in January 2011, completed its restructuring efforts for efficiency and improved its brand portfolio and channel strategy in the first quarter, laying the groundwork for future growth. Through aggressive engagement in the second quarter, the expansion of new brands from Coca-Cola, the profitable business of distributing refrigerated juice, and higher efficiency in logistics, Haitai Beverage is anticipated to become profitable after six years of losses.