Amid Difficulties

LG Household & Health Care Vice Chairman Cha Suk-yong.
LG Household & Health Care Vice Chairman Cha Suk-yong.

 

Although the Chinese government is increasing the scope of its retaliatory measures against Korean companies and their products in a move to reaffirm its hostility and opposition toward the deployment of the U.S. antimissile defense system “Terminal High Altitude Area Defence (THAAD),” LG Household & Health Care (H&H) posted record profits last year due to the continuous popularity of its luxury cosmetics brands “Whoo” and “Sum” in China and the stable profits in the household goods and beverage sectors.

LG H&H announced on January 24 that it posted 6.09 trillion won (US$5.22 billion) in sales, 880.9 billion won (US$755.17 million) in operating profits and 579.2 billion won (US$496.53 million) in net profits last year, achieving the best-ever performance. Its sales increased 14.4 percent from a year earlier, while its operating profits and net profits grew 28.8 percent and 23.1 percent, respectively. The figures in the fourth quarter alone also reached a record high. The sales and operating profits stood at 1.46 trillion won (US$1.25 billion) and 177.9 billion won (US$152.51 million), up 9.7 percent and 20.7 percent from a year ago, respectively. The company’s year-on-year sales increased for 46 quarters in a row after the third quarter of 2005, while its operating profits grew for the 47th consecutive quarter since the first quarter of 2005.

These achievements were driven by LG H&H’s premium strategy for cosmetics and household and personal care goods and its portfolio diversification strategy. As its luxury cosmetics brand “Whoo” has been very popular among Chinese with a concept of cosmetics for a queen, its sales surpassed 1.2 trillion won (US$1.03 billion) in 14 years after the release at the fastest pace among single domestic cosmetics brands, up 49 percent from a year earlier.

The company’s another high-end brand “Sum” also turned over 343.1 billion won (US$294.13 million) after it opened its store in a department store in China this year for the first time. The figure increased 82 percent from the same period a year ago. The portion of luxury cosmetics sales in the company’s total cosmetics portfolio reached 70 percent last year and the sales growth of luxury cosmetics alone stood at 40 percent. For the cosmetics business, LG H&H recorded sales of 3.16 trillion won (US$2.71 billion) and operating profits of 578.1 billion won (US$495.59 million) last year, up 24.6 percent and 42.9 percent, respectively.

The stable growth in the household and personal care goods and beverage sectors also boosted its sales. LG H&H established a joint venture LG Farouk Co. with Farouk Systems, a U.S.-based company that manufactures high quality professional hair care products, last year. The company also increased its ratio of operating profit to sales from 11.3 percent to 11.7 percent after acquiring the Asia Pacific business of Reach, a dental care brand owned by the global health care giant Johnson & Johnson Inc. (J&J). Its sales and operating profits in household and personal care products were 1.59 trillion won (US$1.37 billion) and 186.9 billion won (US$160.22 million), showing a 5.4 percent and 9.1 percent increase from a year ago. The company’s sales in the beverage business also grew 4.8 percent to 1.34 trillion won (US$1.15 billion), while the operating profits rose 7.1 percent to 115.9 billion won (US$99.36 million).

 

 

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