Press Release

LG H&H Earns 58.7 Billion Won in 2nd-Quarter Profit

⊆ In beverages, sales and operating profit soared 18.3 percent and 68.4 percent, respectively, on the back of a strong performance by the newly launched Fanta Shaker along with a strategy to expand distribution channels.

⊆ In household products, sales and operating profit rose 4.7 percent and 30.2 percent, respectively, as a result of strengthened premium lines and brand consolidation.

⊆ In cosmetics, sales and operating profit grew by 18.6 percent and 37.2 percent, respectively, based on the continued growth of prestige brands and successful upscaling of mass-market brands.

LG Household and Health Care (LG H&H) reported consolidated financial results today for the second quarter of 2009. According to the report, sales rose 13.3 percent to 548.1 billion won ($438.4 million) and operating profit jumped 42 percent to 58.7 billion won ($46.9 million), compared to the same period in 2008.

Though the April-June quarter is traditionally an off-season quarter for the company, LG H&H’s operating profit hit a record high during the quarter, the 18th consecutive quarter of double-digit year-on-year growth in operating profit. Sales continued to rise for 16 quarters in a row since the third quarter of 2005.

LG H&H said it began to grow more rapidly in sales, operating profit and operating margin in 2008 as it benefited from the rising fortunes of the Coca-Cola Beverage Company, which it acquired at the end of 2007.

For the first-half of this year, consolidated sales totaled 1,090 billion won ($872 million), a 12.8 percent jump from a year earlier. Operating profit soared 28.3 percent to 126.5 billion won ($101.2 million) on a consolidated basis.

Quarterly Performance by Division

⊂ Household Products:

The household products division posted a rise of 3.4 percentage points in the market share of key brands. The gain resulted from the division’s on-going efforts to increase the share of premium products in its product portfolio and consolidate brands into fewer but stronger ones. Sales climbed 4.7 percent from the year-ago period to reach 203.6 billion won ($162.8 million) and operating profit rose 30.2 percent to 17.4 billion won ($13.9 million).

Sales of the environmentally friendly body care brand Beyond and the sanitary napkin Body Fit soared 33 percent and 39 percent, respectively. Tech Sheet, a laundry detergent sheet introduced in the second quarter, is gaining ground among consumers thanks to its innovative packaging and exceptional performance.

⊂ Cosmetics:

Sales increased 18.6 percent to 157.5 billion won ($126 million), and operating profit soared 37.2 percent to 25.1 billion won ($20 million). Operating profit margin was 16 percent. The driving force behind the impressive business results includes the steady growth of prestige brands (e.g. O HUI, Whoo, SU:M) and the successful upscaling of mass-market products (e.g. ISA KNOX, SooRyeHan, LacVert, VONIN). Indeed, the recently launched fermentation-based line SU:M saw a 67 percent rise in sales from the second quarter last year.

In door-to-door sales―a major distribution channel for the company’s cosmetic products, the number of sales people soared 20 percent from the end of last year to total 10,466. In addition, there was a steady rise in the share of LG H&H products on the shelves of the multi-brand chain Beautiplex: the share increased to 72 percent from 65 percent during the same period last year. This led to a 20 percent increase in the number of stores to reach 886, a substantial contribution to the sales of mass-market products.

⊂ Beverage:

Aided by the wide range of beverage brands, the additions of many new products coupled with the expansion of distribution channels, the beverage business performed markedly better in the second quarter. Compared with the year-ago period, sales gained 18.3 percent to reach 166.1 billion won ($132.8 million) and operating profit soared 68.4 percent to 19.5 billion won ($15.6 million). Likewise, operating margin jumped from 8.2 percent to 11.7 percent.

Sales of carbonated drinks soared 18.6 percent with Fanta Shaker earning 8.5 billion won ($6.8 million) in sales in the second quarter alone and the newly launched DK gaining ground in the clear soda market. In non-carbonated drinks, sales improved by 19.9 percent owing to the release of new premium brands such as Glaceau Vitamin Water and the high-quality coffee brand illy, in addition to the strong sales of existing brands such as Georgia Coffee and POWERADE. Korea is the first Asian market where Coca-Cola’s Glaceau Vitamin Water―one of the most popular beverages in the world―was launched.