Woongjin Coway 1Q 12 IR Presentation
Disclaimer This presentation contains historical information of the company which should not be regarded as an indication of the future performance or results. This presentation also contains forward-looking statements that are, by the nature, subject to significant risks and uncertainties. These forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance or results. Actual results may differ materially from information contained in the forward-looking statements as a results of a number of factors beyond our control.
Contents 1. Earnings Release 1Q 12 Revenue / Profits 2. Division Results and Strategies Domestic home appliance business Overseas business Cosmetics business New product release 3. Appendix Revenue and Profits Revenue breakdown Cost of goods sold SGnA and other operating incomes (expenses) Balance sheet and Net debt Rental and lump-sum sales volume Rental and membership accounts
Earnings release 1Q 12 Revenue / Profits
1. Revenue and Profits [ Earnings Release 1Q 12] Revenue of KW442.4 bn and OP of KW64.4 bn (+10.6%, and +14.0%,YoY) Revenue Operating profits [Unit: KW bn] [Unit: KW bn/ : Margin] 399.8 442.4 56.5 64.4 14.1% 14.6% 1Q 11 1Q 12 1Q 11 1Q 12 < 5 >
Division Results and Strategies Domestic home appliance business Overseas business Cosmetics business New product release
2-1. Domestic home appliance business [Division Results and Strategies ] 5,201 Mild net account increase due to the outflow of old membership subscribers. Strong growth rebound from March 5,484 5,452 1Q 11 1Q 12 4Q 11 330 313 285 1Q 11 1Q 12 4Q 11 31.8 32.7 [Unit: 000] 31.9 1Q 11 1Q 12 4Q 11 PPC [Unit: 000] [Unit: 000] [Unit: KW bn] Net account - 32K net account increase in 1Q12 - The increased outflow from old membership accounts from Jan. to Feb. due to the intended demarketing (40K dropped) - Rebounded from March and strong increase in April Rental sales 1.56 1.58 1.56 1.58 1.58 1.52 1.581 1.46 1.52 1.44 1.45 1.46 - The rental sales of 1Q 12 decreased by 13.6%, YoY - High base effects of 1Q 11 (Kettle type WP, humidifying AP launch) - The adjustment of new product release date : Compact size WP and Desktop ice cube generating WP launch in 2Q 12 Lump-sum sales - The lump-sum sales of 1Q 12 increased by 2.8%, YoY - Steady sales of outsourced items : health care and kitchen goods [Unit: 000] Churn rate 1.15% 1.09% 1.05% 1.00% 1.01% 5.4 6.8 19 36 Jan. Feb. Mar. Apr. 08 09 10 11 1Q 12 < 7 > 08 09 10 11 1Q 12
2-2. Overseas business-odm, Dealer [Division Results and Strategies ] The export revenue of 1Q 12 recorded KW30 bn (+64%, YoY) (ODM and dealers: KW19.6 bn, Subsidiaries : KW10.4 bn) Exports (ODM,Dealer) [Unit: KW bn] Philips ODM [Unit: KW bn] 11.9 19.6 2.6 7.0 1Q 11 1Q 12 1Q 11 1Q 12 Exchange rate(2012) : 1,131 (USD/KRW) Strong sales in 1Q 12 due to the expansion of ODM deals Soaring air purifier sales driven by large ODM contracts such as Phillips and Lowe s < 8 > Sales of 1Q 12 increased by 171%,YoY (Parent : KW 5.25 bn, China: KW 1.72 bn) Increased new products(humidifying AP, etc.) sales contribution Production efficiency improvement at Guangzhou, China manufacturing facility
2-2. Overseas business-subsidiaries [Division Results and Strategies ] Export to overseas subsidiaries increased by (+61.1%, YoY) Reaching the meaningful number of rental accounts in Malaysian Export to subsidiaries 6.5 10.4 [Unit: KW bn] US Malaysian 12.0 3.2 8.8 Subsidiaries result Revenue [Unit: KW bn] 18.1 6.8 11.3 Total account 82 23 59 [Unit: 000 account] 139 43 96 1Q 11 1Q 12 Strong revenue growth driven by US and Malaysian subsidiaries sales growth - Sales increase in US : +154%, YoY - Sales increase in Malaysia : +59%, YoY < 9 > 1Q 11 1Q 12 1Q 11 1Q 12 Malaysia : reaching scalability & turnaround US : improving profitability OPM(%) 1Q 12 2012(E) Malaysia 3% 6.0% US -6.6% -3.3% Overseas total account exceeded 174K - Malaysia : 96K, profit generating scale - US : 43K (+82%, YoY)
2-3. Cosmetics business [Division Results and Strategies ] Korea : Revenue of KW 16.8 bn, Operating loss decreased to KW 2.7 bn (-49%,YoY) China : Recorded +4.7% revenue growth, YoY with 19% OPM Korea China [Unit: KW bn] [Unit: RMB 000] 17.4 16.8 15.3 55,857 58,465 62,014-5.2-2.7-5.3 14,729 26.4% 10,909 18.7% 11,994 19.3% 1Q 11 1Q 12 4Q 11 1Q 11 1Q 12 4Q 11 Operating loss decreased in 1Q 12 Strong sales after Launching K-Line - 24% revenue contribution in 1Q 12 - Expect strong sales growth due to the starting TV ads. and promotions Slow revenue growth due to the unfavorable economic downturn and the stabilization of the organization Sales channel and geographical area expansion (home shopping, department stores, etc.) < 10 >
< 11 > 2-4. New product release [Division Results and Strategies ] Successful new product launch (expansion of product lineups and enhancing functionality) Release world first full functional compact size WP Water purifier Dehumidifier - Compact size (width : 18 cm), suitable for narrow space *New technology adoption : Slim size of water tank removing hot water tank/compressor - 15,000 units sold out within 11 days - The most sales item in April (25% sales contribution) Expansion of AP product lineups - Large capacity of dehumidifying (15l/per day) - Adopting CARES filter system - 9,000 units sold out in April (Sales : KW 3.5 bn) Cosmetics K- Line Sold out in home shopping channel (Jan. & Feb.) Soaring sales after launching in direct/door to door channel - Co-work with Ko Hyun Jung(model), Care lineup(moisture/elastic) - Moisture serum (mist type, anion water, and rich absorption) - Elastic cream (balm type, melting by heat on palm)
2-4. New product release The mattress sales of 5,000 units per month and the total number of accounts exceeded 20K Sales/Accounts trend [Division Results and Strategies ] Mattress care service The number of accounts Sales volume 10,579 13,965 [Unit: EA/account] 20,255 5,665 Rental & Lump-sum sales + Mattress care service 2,790 3,427 Restonic brand + Brand diversification Jan. Feb. Mar. Successful launch, becoming 5 th rental item MS ranked at 3 rd in sales - Sales volume : 11,882 EA /total accounts 20K - Sales volume of 12(E) : 50,000 EA + Projection of sales growth (3 years) [Unit: KW bn] 1st year 2nd years 3rd years Case 1 23.6 77.4 161.5 Case 2 38.9 129.6 272.2 *Case 1(monthly):rental(4,000EA),membership(10,000EA),lump-sum(600EA) Case 2(monthly):rental(6,000EA),membership(20,000EA),lump-sum(900EA) < 12 > Launching of mattress care service - 53,500 service request calls within 4 days - Hiring service providers (March : 102 April: 580 personnels) Diversification of mattress brand(2h 12) - Adding different mattress brands
Appendix Revenue and Profits Revenue break down Cost of goods sold SGnA and other operating incomes (expenses) Balance sheet and Net debt Rental and lump-sum sales volume Rental and membership accounts
3-1. Revenue and Profits [Appendix] [Unit :KW bn, %] 1Q 12 4Q 11 QoQ 1Q 11 YoY Revenue 442.4 444.0-0.4% 399.8 10.6% Operating Profits 64.4 62.8 2.5% 56.5 14.0% Margin 14.6% 14.1% 14.1% Recurring Profits 55.6 55.2 0.7% 50.4 10.3% Margin 12.6% 12.4% 12.6% Net Income 41.2 47.1-12.5% 38.8 6.4% Margin 9.3% 10.6% 9.7% EBITDA 115.5 109.5 5.5% 101.0 14.4% Margin 26.1% 24.7% 25.3% Revenue Operating Income EBITDA [Unit: KW bn] [Unit: KW bn/ : Margin] [Unit: KW bn/ : Margin] 444.0 442.4 399.8 62.8 64.4 56.5 109.5 115.5 101.0 14.1% 14.6% 14.1% 24.7% 26.1% 25.3% 4Q 11 1Q 12 1Q 11 4Q 11 1Q 12 1Q 11 < 14 > 4Q 11 1Q 12 1Q 11
3-1. Revenue breakdown [Appendix] Revenue 1Q 12 4Q 11 QoQ 1Q 11 YoY Rental related 355.1 353.7 0.4% 327.1 8.5% Rental 316.3 312.9 1.1% 288.0 9.8% Membership 38.8 40.8-4.9% 39.1-0.9% Lump-sum 32.7 31.9 2.6% 31.8 2.8% Cosmetics 16.8 15.3 9.7% 17.4-3.3% Exports 30.0 32.3-7.3% 18.3 63.5% Others 7.8 10.8-27.8% 5.1 51.8% Total 442.4 444.0-0.4% 399.8 10.6% Rental Membership Lump-sum Exports Cosmetics Others 7% 수출 4% 6% 일시불 8% 멤버쉽 9% 10% 화장품 4% 7% 2% Revenue contribution (YoY) 4% 5% 1% 8% 10% 72% 렌탈 72% 71% [Unit : KW bn] 1Q 12 < < 15 15 > > 1Q 11
3-2. Cost of goods sold [Appendix] [Unit : KW bn] COGS 1Q 12 4Q 11 QoQ 1Q 11 YoY Rental related 101.5 100.1 1.3% 95.0 6.8% Rental 89.1 87.6 1.8% 82.5 8.0% (% of Revenue) 28.2% 28.0% 28.7% Membership 12.3 12.5-1.6% 12.5-1.1% (% of Revenue) 31.8% 30.8% 31.9% Lump-sum 12.9 16.6-21.9% 10.2 26.7% Cosmetics 2.7 2.8-5.3% 2.9-8.1% Exports 23.6 25.2-6.2% 14.7 60.5% Others 4.7 5.7-17.4% 2.6 84.1% Total 145.4 150.4-3.3% 125.4 16.0% (% of Revenue) 32.9% 33.9% 31.4% < 16 >
3-3. SGnA and other operating incomes (expenses) [Appendix] [Unit : KW bn] SGnA 1Q 12 4Q 11 QoQ 1Q 11 YoY P/L Analysis( YoY) Salary related 52.2 47.2 10.6% 49.9 4.6% Welfare expenses 10.1 8.7 15.5% 7.2 39.6% SGnA (%) of Revenue : 49% (-2.2%p, YoY) *1Q 11: 51.2% SGnA Sales commissions 77.2 77.3-0.1% 70.6 9.3% Amortization 1.7 1.6 5.8% 1.9-9.8% Advertisements 11.0 13.5-18.8% 12.2-9.6% Fees & commissions 20.6 22.1-6.4% 18.2 13.4% Others 44.6 49.9-10.5% 44.8-0.5% Total 217.4 220.3-1.3% 204.8 6.2% 1. Salary related 1) KW 52.2 bn (+4.6%,YoY) 2) Increased KW +5.2 bn, YoY (+9.1%,YoY) considering transfer accounts from salary to welfare account 2. Sales commission 1) KW 77.2 bn (KW +6.6 bn, +9.3%, YoY) 2) Rental sales :+9.8%, Lump-sum sales :+2.8% 3. Advertisement 1) KW 11.0bn (KW -1.2 bn, -9.6%,YoY) 2) The effect of Ad. cost saving in cosmetics Other operating incomes Other operating expenses 0.3 0.3-17.2% 0.1 85.0% 15.4 10.9 41.5% 13.2 16.1% (% of Revenue) 49.1% 49.6% 51.2% < 17 > 4. Fees & Commissions 1) KW 20.6bn(KW +2.4 bn, +13.4%, YoY) 2) increased logistics costs
3-4. Balance sheet [Appendix] [Unit : KW bn] Mar. 12 Dec. 12 <Assets> 1,633.9 1,576.5 Current Assets 561.5 511.5 Cash and Cash equivalents 116.1 64.9 Inventories 66.9 73.0 Non-current Assets 1,072.4 1,065.0 PPE 540.5 534.7 Affiliates and subsidiaries 238.6 236.9 Investment 24.3 23.8 Intangible assets 155.9 156.0 <Liabilities> 921.2 828.1 Current Liabilities 620.3 534.3 Short-term borrowings 265.0 164.8 Debenture (Less than 1 year) 20.0 110.0 Non-current Liabilities 300.9 293.8 Long-term borrowings 90.0 90.0 Bonds 175.0 176.7 <Stockholder s Equity> 712.7 748.4 Liability / Equity 129.2% 1)99.2% 110.6% 1)84.2% Net debt / Equity 60.9% 1)39.8% 63.7% 1)43.1% 1) Considering treasury shares < 18 >
3-5. Rental and Lump-sum sales volume [Appendix] Rental 1Q 12 4Q 11 QoQ 1Q 11 YoY Water purifier 129,290 147,594-12.4% 132,824-2.7% Air purifier 52,729 62,986-16.3% 78,545-32.9% Bidet 69,398 72,163-3.8% 88,112-21.2% Water softener 20,963 19,357 8.3% 27,948-25.0% Food waste disposer 2,261 3,888-41.8% 2,189 3.3% Mattress 10,102 7,296 38.5% - - Others - - - 15-100.0% Total 284,743 313,284-9.1% 329,633-13.6% Lump-sum 1Q 12 4Q 11 QoQ 1Q 11 YoY Water purifier 6,212 7,826-20.6% 9,869-37.1% Air purifier 8,441 13,044-35.3% 12,837-34.2% Bidet 8,619 9,094-5.2% 12,026-28.3% Water softener 1,868 1,726 8.2% 2,275-17.9% Food waste disposer 1,087 2,316-53.1% 1,500-27.5% Mattress 1,780 618 188.0% - - Others 22,435 18,819 19.2% 17,613 27.4% Total 50,442 53,443-5.6% 56,120-10.1% < 19 > [Unit: EA] [Unit: EA]
3-6. Rental and membership accounts [Appendix] Accounts 1Q 12 4Q 11 QoQ 1Q 11 YoY Rental 4,479,979 4,450,003 0.7% 4,233,969 5.8% Water purifier 2,214,387 2,215,652-0.1% 2,109,582 5.0% Air purifier 760,227 755,757 0.6% 721,181 5.4% Bidet 1,144,508 1,128,310 1.4% 1,064,508 7.5% Water softener 316,422 315,338 0.3% 312,274 1.3% Food waste disposer 27,243 27,571-1.2% 26,208 3.9% Mattress 17,040 7,208 136.4% - - Others 152 167-9.0% 216-29.6% Membership 1,003,644 1,002,006 0.2% 966,986 3.8% Total 5,483,623 5,452,009 0.6% 5,200,955 5.4% [Unit: EA] Net accounts increase Churn rate 140000 120000 100000 [Unit : Accounts] 118,208 1.08% 1.06% 1.04% 1.06% 80000 60000 40000 20000 0 40,976 31,614 4Q'11 1Q'12 1Q'11 < < 20 20 > > 1.02% 1.00% 0.98% 0.96% 0.94% 0.92% 1.01% 1.01% 4Q'11 1Q'12 1Q'11