LG Chem Ltd. · KRX:051910
LG Chem — Non-Deal Roadshow (October 2004)
32 slides from LG Chem's roadshow presentation, October 2004
Slide 1: Future for you - LG Chem, October 2004
_ Future for you October 2004 @ LG Chem ES te
Slide 2: Table of Contents
Table of Contents Overview 1 Financial Highlights 7 Business Operations 10 LG Chem’s Vision 18 Appendix 19
Slide 3: History of LG Chem
History of LG Chem Overview Jan 1947 Established as Lucky Chemical Industrial Corporation Jan 1961 Launched vinyl flooring production Sep 1976 Commissioned Yeosu PVC resin plant Nov 1978 Commissioned Yeosu ABS resin plant Jan 1983 Commissioned Cheongju window profile plant Oct 1994 Commissioned Daej
Slide 4: Business Portfolio
Business Portfolio Overview Information & Electronic Materials Information Information Information & && Electronic Electronic Electronic Materials Materials Materials 12% 37% 39% 34% Chemicals & Industrial Industrial Polymers Chemicals Materials Chemicals Chemicals && & Materials 55% 33% Polymers 28
Slide 5: Market Position
Market Position Overview Chemicals & Polymers Industrial Materials (Unit : KMT) • Dominant No.1 Market Share in the domestic market - Building & Decorative Materials (50%) 1,800 - Automotive Parts (30%) 1,340 • Globally competitive products (Global M/S) 1,100 - High-gloss Sheet (66%) 800 PVC - Adver
Slide 6: Target Market
Target Market Overview Sales Contribution by Market (’03) Overseas Business by Region • China - Primarily focused on Chemicals & Polymers products 5,673 billion through exports as well as local production - Expand capacity of battery & polarizer businesses 45% China Export 34% • US & Europe Asia - E
Slide 7: China Operations and Vision
China Operations and Vision Overview Direct Investments in China Vision Products Ownership Capacity(pa) ’03 Sales (U$ mn) Top 5 Chemical Company in China by ’08 PVC 1) 75% 340 KMT 206 ☞ Sales : U$ 4.5 bil, OP margin : 6.4% by 2008 ABS 2) 75% 300 KMT 297 EP Compounding 100% 20 KMT 5.1 Business Prospe
Slide 8: China Strategy & Business Direction
China Strategy & Business Direction Overview Chemicals & Polymers Industrial Materials • Secure a sustainable competitiveness • Develop products with high competitiveness in China - Cost leadership by vertical integration - PVC Window frames and High-gloss sheets - Market leadership - Differentiatin
Slide 9: Financial Highlights - Earnings
Financial Highlights Earnings Non-consolidated Earnings (KRW billion) Sales & Operating Profit ( KRW billion) Ach Sales ’03 ’04(E) ’04 1H (’04 1H) O/P Margin 6,706 Sales 5,673 6,706 3,363 50% Domestic 3,756 4,192 2,102 50% 5,673 Export 1,917 2,514 1,261 50% 8.8% Operating Profit 479 592 303 51% 8.4%
Slide 10: Financial Highlights - Balance Sheet
Financial Highlights B/S (KRW billion) Balance Sheet ’03.12 ’04.1H ’04.12(E) Borrowings Assets 4,761.7 5,273.7 5,472.0 Borrowings(KRW trillion) Net Debt/Equity (%) Liabilities 2,947.1 3,343.6 3,342.3 3 Borrowings 1,706.0 2,153.2 2,076.2 97.5 100 Shareholders’ Equity 1,814.6 1,930.1 2,129.7 94.0 Paid
Slide 11: Financial Highlights - Consolidated
Financial Highlights Earnings Consolidated B/S (KRW billion) Consolidated I/S (KRW billion) ’03 ’04 1H ’04(E) ’03 ’04 1H ’04(E) Asset 5,835 6,322 6,800 Sales 6,897 4,184 8,089 Operating Profit 678 454 848 Liability 3,618 3,966 4,200 (%) (9.8) (10.8) (10.5) I/S Borrowings 2,330 2,654 2,700 B/S Recurr
Slide 12: Chemicals & Polymers Business Overview
Chemicals & Polymers Chemicals & Polymers Business Overview Business Outlook Earnings (KRW billion) ’04 1H Review • Sales has improved on the back of healthy demand 3,678 and tight supply, despite weak Korean domestic economy 3,261 • Uncertainties in the market and volatile raw materials PVC/ 35 cau
Slide 13: Chemicals & Polymers - Business Outlook
Chemicals & Polymers Chemicals & Polymers Strategy Business Outlook Market Portfolio Domestic Market Share 942 285 388 165 (Unit : kMT) PVC 65% 20% 15% ABS 30% 50% 20% LG LDPE* 60% 25% 15% 75% 54% 50% Acrylate 60% 20% 20% 23% PVC ABS LDPE Acrylate Domestic China Others • 2003, Volume Based • 2003, V
Slide 14: Chemicals & Polymers - Business Strategy
Chemicals & Polymers Chemicals & Polymers Strategy Business Strategy Vertical Integration Specialty Products Self Sufficiency of Key Raw Materials Specialty Products Proportion 14% 82% 100% 12% 64% 8% 9% 10% 77% 50% 5% 33% 2% 2% '04 '08 SM* VCM EDC '03 '04 '05 '06 P&P ABS/PS * Hyundai PC No.1 Includ
Slide 15: Industrial Materials Business Overview
Industrial Materials Business Overview Earnings (KRW billion) ’04 1H Review • Delay in the domestic economic recovery and the overall 2,033 depressed consumer sentiment worsened profitability 1,960 21 • Sluggish domestic construction industry dampened Building& Decorative Materials Living 19 23 • Di
Slide 16: Industrial Materials Strategy
Industrial Materials Strategy Business Strategy World-class Products No. 1 Market Share in the domestic market High-gloss Sheet - Maintain No. 1 position by introducing high value-added, high functional and environment-friendly products Foster World-class products - Shift product mix toward glob
Slide 17: I & E Materials Business Overview
I & E Materials Business Overview Earnings (KRW billion) ’04 1H Review • Strong end market 1,283 - Rapid shift to high-end handsets and growth of Notebook PCs demand - Growing demand for high-performance polarizer for monitors and TVs 699 • Change in asset life 52 - Depreciation : 33 bn (’03)→ 117 b
Slide 18: I & E Materials - Batteries
I & E Materials Batteries Battery Business Strategic Focus 20% (3rd) • Product Differentiation 12% - Develop high-energy density products by strengthening R&D (4th) - Secure quality differentiation 850 7% (5th) • Expanding Customer Base Market 585 Share - Become the 1st supplier for existing custome
Slide 19: I & E Materials - Optical Materials
I & E Materials Optical Materials Optical Materials Business Strategic Focus 23% • Leading Edge Products (2nd) 21% - Introduce highly durable, innovative products by strengthening R&D Market (2nd) Share - Become the leader in the LCD TV market (Polarizers) 17% (2nd) 737 137 • Capacity Expansion Sale
Slide 20: LG Chem's Vision: No.1 LG
LG Chem’s Vision 「 No.1 LG」 Future Prospects Sales (KRW trillion) % R 22 CAG To be a global leader – Exceeding customer expectations 15.0 through advanced technologies 6.9 8.1 and innovative solutions, and ’03 ’04(E) ’08(E) earning the trust of stakeholders * Consolidated sales Operating Profit (KRW
Slide 21: Business Performance (Divisional)
Business Performance (Divisional) Appendix ( KRW billion) Sales Operating Profit ’03 1H ’03 ’04 1H ’04 (E) ’03 1H ’03 ’04 1H ’04 (E) Chemicals & Polymers 1,634.8 3,261.3 1,925.3 3,677.8 110.8 228.1 195.7 351.0 PVC & Plasticizers 609.1 1,220.1 711.6 57.2 105.4 96.3 Acrylates 160.4 321.0 206.3 16.4 43
Slide 22: CAPEX Plan
CAPEX Plan Appendix ( KRW billion) ’03 Result ’04 Plan ’04 1H Result New/Expansion 43.7 33.6 10.0 Chemicals & Maintenance 51.4 65.6 22.1 Equity Investment 11.5 26.4 3.4 Polymers Total 106.6 125.6 35.5 New/Expansion 9.4 10.0 2.2 Industrial Maintenance 39.0 50.7 18.9 Materials Equity Investment 7.5 31
Slide 23: Cash Flow
Cash Flow Appendix ( KRW billion) ’03 ’04 1H ’04(E) CASH OUT 993.3 901.8 1,287.0 Investment 841.4 260.5 720.6 Working Capital △ 78.7 291.5 128.9 Dividend Payout 110.0 128.1 128.1 Others 120.6 221.7 309.4 CASH IN 578.9 454.6 916.8 Net Income 362.1 250.5 443.2 Depreciation 256.5 161.1 333.2 Accrued Se
Slide 24: Borrowings
Borrowings Appendix ( KRW billion, %) Balance Dec.31, 2004(E) Dec. 31, 2003 June. 30, 2004 Change Total 1,706.0 2,153.2 2,076.2 447.2 (%) (100) (100) (100) KRW Currency 1,421.0 1,761.4 1,684.4 340.4 (%) (83) (82) (81) C P 65.0 321.0 256.0 244.0 C B 1,100.0 1,200.0 100.0 1,200.0 Others 256.0 240.4 △1
Slide 25: Petrochemical Cycle
Petrochemical Cycle Appendix The petrochemical business expects continued growth until 2005 or 2006, assuming continued tight supply; however thereafter, new or expanded production capacities in the Middle East would cause overall oversupply. Source : CMAI (Chemical Market Associates, Inc.) 23/30
Slide 26: Product price & Raw materials
Product price & Raw materials Appendix Vinyl Vinyl Price Price Trend Trend (Unit:U$/MT) Styrenics Styrenics Price Price Trend Trend (Unit:U$/MT) 900 1,510 841 841 1320 740 765 672 692 732 1,123 1,056 1,084 1110 607 950 948 565 568 590 896 902 514 500 850 488 423 793 698 707 746 379 371 598 499 548 2
Slide 27: Production Capacity by Product
Production Capacity by Product Appendix Petrochemicals & Polymers (unit:KMT) Performance Polymers (unit:KMT) Item Region ’03 ’04 ’08 Item Region ’03 ’04 ’08 Yeosu 560 560 620 Yeosu 500 560 640 Daesan 200 200 230 ABS China 300 320 700 PVC China 340 350 950 Total 800 880 1,340 Total 1,100 1,110 1,800
Slide 28: Korea Capacity Matrix
Korea Capacity Matrix Appendix Korea Capacity Matrix as of March 2004 Propylene(*) Propylene Butadiene Mixed C4 Ethylene Benzene Company Toluene LLDPE Xylene HDPE LDPE VCM SBR ABS EDC PVC EPS SM OX EG PA PX PP PS ('000 mtpa ) Total 5,700 3,305 435 1,762 770 3,167 1,911 2,533 445 3,830 1,416 830 1,26
Slide 29: Shareholders Information
Shareholders Information Appendix Shareholders Structure Share Information (KRW) Dec 31, 2003 August 31, 2004 Shares Price Price Market cap LG Corp. 34% Foreign Investors 38% Common 64,425,064 55,000 43,800 2,822 bn Institutional & Individual Investors Preferred 8,661,251 24,500 26,000 225 bn 28% To
Slide 30: Dividend Policy
Dividend Policy Appendix Dividend History Dividend Policy 35 35% 30% - LG Chem determines dividends on the basis of net income 30 and total earnings available for distribution. Dividend payout ratio at par 25 (Common Stock) - For 2003, LG Chem granted a dividend of 35% of the face 20 value (KRW 5,00
Slide 31: LG Holding Company Structure
LG holding Company Structure Appendix *LG *LG Corp Corp As of August 31, 2004 *KOSPI & KOSDAQ Listed Companies *LG *LG *LG *LG *LG *LG *LG *LG LG LG LG LG Household Household *DACOM *DACOM LG LG Sports Sports Chem Chem Electronics Electronics Telecom Telecom CNS CNS MMA MMA && Healthcare Healthcare
Slide 32: BOD Members
BOD Members Appendix Name Date of Birth Career Remark MA(Chemical Engineering), Hanyang University CEO No, Ki-Ho January, 1947 CEO of LG Petrochemical Re-elected *President/CEO of LG Chem BA(Business Administration), Seoul National University Director Kang, Yu-Sig November, 1948 Vice Chairman of LG