LG H&H Announces Record Performance in 2Q 2011 with Sales up 22.7% and Operating Profit up 17.6%

■ LG H&H maintained robust growth, exceeding KRW 100 billion in operating profit for two consecutive quarters.

■ Haitai Beverage, which posted KRW 60.7 billion in sales and KRW 4 billion in operating profit, successfully turning around from six consecutive years of losses it suffered prior to the acquisition.

LG Household & Health Care (LG H&H) Ltd. (CEO: Suk Cha) announced its second quarter business results on July 25. The company recorded KRW 866 billion in sales, KRW 100.5 billion in operating profit, and KRW 68.4 billion in net profit, 22.7%, 17.6%, and 16.7% year-on-year increases, respectively.

The figures indicated that on a year-on-year basis, sales continued to grow for 24 consecutive quarters since the third quarter of 2005. Operating profit has increased for 26 consecutive quarters since the first quarter of 2005.

After surpassing KRW 100 billion in operating profit for the first time in the first quarter of 2011, LG H&H once again exceeded KRW 100 billion for the operating profit in the second quarter of 2011. This positive business result is attributed to steady growth in both sales and operating profits across all businesses including household goods, cosmetics, and beverages.

In particular, Haitai Beverage, whose acquisition was concluded in January 2011, has restructured the production lines and the sales organization while achieving business improvement in the sales of its major brands such as Sunny-10 and Sunkist. This contributed to the rapid turnaround from six years of losses with KRW 60.7 billion in sales and KRW 4 billion in operating profit.

On a year-on-year basis, business performance for the first half year delivered KRW 1 trillion 695.5 billion in sales, KRW 211.1 billion in operating profit and KRW 146.6 billion in net profit, 23.2%, 18.3% and 19.6% year-on-year increases, respectively.

[2Q 2011 Results by Business]

▲ In household goods, sales amounted to KRW 266.5 billion and operating profit reached KRW 22.3 billion, 16.9% and 18.8% year-on-year increases, respectively. The body care category grew 70% year-on-year on the back of the strong performance from the new brand ‘On: The Body.’ Fabric softener ‘Saffron’ expanded its market share to 44%, strengthening its number one position, which it had attained in the first quarter of 2011. Unicharm sanitary napkin sales showed steady growth with a 23% year-on-year increase.

The company launched various products with unique value propositions, such as ‘Perioe 46 cm,’ an oral hygiene brand specialized for bad breath removal; ‘ReEn Mogangbichaek,’ a highly-effective hair-loss prevention shampoo; and ‘Toddien White Cloud,’ a premium baby diaper product with improved air-permeability.

▲ In cosmetics, sales grew to KRW 312.6 billion with an operating profit of 47.1 billion, posting 11.1% and 8.0% year-on-year gains, respectively. Prestige brands, ‘Whoo’ and ‘Su:m’ led the growth with increases of 12% and 39%, respectively, and natural herbal cosmetics brand, ‘Belif,’ which was launched in August 2010, is rapidly gaining traction in nine domestic department stores, as well as in overseas markets, including the United Kingdom, Singapore, and Vietnam.

In addition, product accessibility and availability have been improved through coverage expansion across all channels. Following the first quarter, the number of beauty consultants in the door-to-door sales channel has expanded by 493 in the second quarter, while masstige BeautIJ stores and TheFaceShop opened 36 and 23 additional stores, respectively.

TheFaceShop has stepped up its overseas expansion since April 2011, especially in China and Japan. HengCheng, a cosmetics retailer with considerable experience in Chinese markets, opened 35 stores over the last two months, while TheFaceShop products became available in 45 Colourmix stores. A major Japanese cosmetics retailer, AEON, opened approximately 30 stores within just one month since its establishment of partnership in June 2011. The brand has laid the foundation for serious growth in the second half.

▲ Beverages delivered rapid growth with KRW 286.9 billion in sales and KRW 31.1 billion in operating profit, 46.1% and 34.7% year-on-year increases, respectively. Carbonated beverage sales grew 7% year-on-year with strong growth of Coca-Cola and Sprite brands. Non-carbonated beverage grew 31% year-on-year in sales, led by Powerade (+28%), Georgia Coffee (+35 %), and Glaceau Vitamin Water (+44%).

World-wide isotonic sports drink brand, ‘Aquarius,’ was introduced at home; various products were launched, such as refrigerated juice ‘Minute Maid: The Origin’ and new ‘Focus’ flavor for the Glaceau Vitamin Water brand.

In the meantime, Haitai Beverage, which was acquired by LG H&H in January 2011, achieved the rapid turnaround in profitability from six consecutive losses prior to the acquisition, as a result of the successful restructuring of production line and sales organization, as well as the sales improvement in major brands, such as Sunny 10 and Sunkist.