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The Company 2 ~ 7 Business Review 8 ~ 13

Table of Contents. The Company 2 ~ 7 Business Review 8 ~ 13 Financial Highlights 14 ~ 16. For a Better Life. The Company. Corporate Overview Demerger Corporate Structure Corporate Strategy

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The Company 2 ~ 7 Business Review 8 ~ 13

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  1. Table of Contents • The Company 2 ~ 7 • Business Review 8 ~ 13 • Financial Highlights 14 ~ 16 For a Better Life

  2. The Company • Corporate Overview • Demerger • Corporate Structure • Corporate Strategy • Business Results & Targets

  3. Corporate Overview Founded in 1947, LG Household & Health Care (“LG H&H”) has been a basis for the growth of LG Chemical and LG Group. Since 2001’s demerger, LG H&H now focuses on the household and cosmetics business. History Business • 1947 Established as Lucky Chemical Industrial Co. • 1954 Produced Korea’s first toothpaste “Lucky” • 1969 Went Public • 1974 Changed corporate name to “Lucky” and built Ulsan Plant • 1979 Built Lucky R&D Center • 1980 Built Cheongju Plant • 1984 Commercialized Cosmetics • 1995 Changed corporate name to “LG Chemical” • 2001 Demerged from LG Chemical and established as LG Household & Health Care • 2001 Sales = KRW 1,111 bn • 2001 Overseas Sales = U$ 103 mn * ** [ Sales Breakdown ] • Skin Care • Make-up • Men’s Cosmetics 37% Household Products 63% • Toothpaste • Shampoo • Soap • Laundry Detergent • Kitchen Detergent • Fabric Softener * Including pre-demerger 1Q results ** Exports + Overseas Subsidiaries’ sales 3/17

  4. Demerger With the demerger in April 2001, LG H&H’s corporate value and shareholder value should continue to increase. Structure Positive Effects • Concentrate on core business • Enhance management transparency • Respond quickly to customers’ needs Old LG Chemical Industrial Materials Electronic Materials Petrochem Equity Investments Household Products & Cosmetics Biotech DEMERGER Corporate and shareholder values to increase continuously LGCI • Holding Company • Equity Investments • Biotechnology [ Market Value ] KRW451bn LG H&H 143% KRW186bn 693.70 LG H&H LG Chem KOSPI 552.69 26% • Business Subsidiary • Household Products • Cosmetics • Business Subsidiary • Petrochemicals • Industrial Materials, etc. Demerger(Apr.’01) Dec.’01 4/17

  5. Company Structure A CEO with professional background and 2,808 employees form the best company structure throughout R&D, production, sales, and logistics. LG H&H’s major shareholder is LGCI. Organization People • Myeong Jae Cho, CEO - Born in 1945 - B.A., Seoul National University - 1969 Joined Lucky Chemical Industrial Co. - 1997 Charge of H&H Business - Present CEO of LG H&H • Board of Directors - 3 outside directors out of all 6 directors • Employees : 2,808 people • Shareholder Structure • Household Products Research Institute • Cosmetics Research Institute • Design Research Institute • Packaging Development Institute • LG H&H R&D Shanghai R&D • Cheongju Plant • – Household Products/Cosmetics Production • Ulsan/Naju Plant • – Household Products Production • 4 Overseas JVs Production • Operation by region/distribution channel • 1,235 Sales personnel • 2 Overseas Subsidiaries (End of ’01) Sales Sales Production R&D Admin. Employees • 13Logistics Centers • Sales Agents - 190 for Household Products • 220 for Cosmetics (End of ’01) Logistics LGCI Foreigner Institute Retail Ratio 5/17

  6. Corporate Strategy Our goal is to become a Super-Excellent Household & Health Care Company by enhancing profitable growth, revitalizing business portfolio, and strengthening market leadership based on「SIGMA 21st」. Super-Excellent Household & Health Care Company • Achieving world-best productivity and quality • Continuous restructuring • Efficient allocation of management resources Enhance Profitable Growth Strengthen Market Leadership Revitalize Business Portfolio • Strengthening dominant player position in domestic household products market • Penetrating the cosmetics market aggressively • Accelerating globalization Pursuing super excellence of current business Continuously developing core competences Cultivating growth engine for the future • Reinforcing product development skills • Building brand equity • Improving customer satisfaction through CRM* SIGMA 21st Super Excellence, Informatization, Globalization, Management by Knowledge, Action Leadership *Customer Relation Management 6/17

  7. Business Results & Targets We target KRW 1.2 tn in sales with 10.5% of operating margin and increase of sales contribution of cosmetics. Results & Target 203 (12.5%) (KRW bn) 128 (10.5%) 1,620 108 (9.7%) Operating Profit (Margin) 1,220 49% CAGR : 10% 1,111 39% Cosmetics 37% * 51% Household Products 61% 63% ’05(E) ’01 ’02(E) ** U$ 103mn (12%) U$ 228mn (19%) U$ 129mn (14%) Overseas CAGR : 20% * Including sales from Sorbitol business divested in Apr.’01 ** Exports + Overseas Subsidiaries’ sales 7/17

  8. Business Review • Household Products • - Business Strategy • - Sales & M/S • Cosmetics • - Business Strategy • - Sales & M/S • Overseas Business

  9. ■ Speedy settlement in new category markets - hair dyes/anti-hair loss) ■ Differentiate overseas business strategy by regional market - Developed market (US/Japan) and developing market (Mexico) Develop Sustainable Growth Engines Continuously Household Products 1. Business Strategy Our goal is to strengthen dominant position in the market by focusing on key product/brand/distribution channel and developing sustainable growth engines. Strengthen No.1 Position in Domestic Market ■ Concentrate resources on core product categories - shampoo/toothpaste/fabric softener ■ Cultivate strategic brands in 6 product categories - Perioe/Elastine/Say/One Scoop/Natural Pon/Saffron ■ Increase number of big brands with annual sales over KRW 10 bn - ’01: 16 big brands ’02: 18 big brands Enhance Market Leadership through Selection & Focus ■ Carry out marketing activities aggressively in discount stores - Concentration of resource ■ Develop strategic models in new channels for early mover’s advantage Set Channel Strategies Corresponding to Changes in Distribution 9/17

  10. 2. Sales & M/S Ensuring stable growth, the household products business enjoys an unwavering no. 1 position in the domestic market. Sales Market Share (KRW bn) ( % ) 94 (11.3%) L G 49 Pacific 20 • Toothpaste Aekyung17 Others 79 (10.7%) 68 (9.7%) L G 27 Operating Profit (Margin) P&G 18 Pacific 20 830 Aekyung 14 • Shampoo Others 740 L G 40 704 Pacific 15 • Soap Aekyung 11 Unilever 12 Others CAGR : 4% L G 36 • Laundry Detergent CJ 21 Aekyung 27 Others Sales L G 43 • Kitchen Detergent CJ 15 Aekyung 34 Others L G 31 • Fabric Softener Pigeon 47 Oxy 16 Others ☞ Neilson Data (’01) ’05(E) ’01 ’02(E) 10/17

  11. ■ Increase number of big brands with annual sales over KRW 10 bn - ’01: 8 brands ’02: 11 brands ■ Attain no.1 M/S in specific categories - lipstick/two-way cake/powder/makeup base Increase Number of Leading Brands/Products Sales over KRW 100bn · ISAKNOX (’01) · LacVert (’02) ■ Strengthen leadership in company’s strong channels - specialty cosmetic shops/mass markets ■ Increase M/S in growing channels - direct sales/department store ■ Pursue early settlement in new channels - door-to-door/drug store/hair salon Differentiate Strategies by Distribution Channel ■ Expand overseas sales network and develop strategic markets in China and Vietnam ■ Enlarge sales channels in Russia/Saudi Arabia and establish new networks in the US market Develop Distinct Strategies by Region 1. 사업전략 Cosmetics 1. Business Strategy Our goal is to strengthen growth momentum to be no.1 in cosmetics by expanding leading brands / products and differentiating strategies by distribution channel / region. Strengthen Growth Momentum 11/17

  12. 2. Sales & M/S Sales and profit contribution of Cosmetics has grown significantly along with market share increase. Sales Market Share (KRW bn) 2,060 108 (13.7%) [Market Size] (KRW bn) 1,910 50 (10.4%) 40 (9.8%) 1,765 Operating Profit (Margin) 790 480 407 CAGR : 18% Sales [LG H&H M/S] 19% 17% 16% ’01 ’02(E) ’05(E) ’99 ’00 ’01 12/17

  13. Overseas Business Based on distinct strategies by region, LG H&H actively pursues overseas business with particular emphasis on JVs in China and Southeast Asia. Beijing LG Household Chemical LG H&H International Trading • Country / Est. : China / 1996 • Business : Toothpaste Production • ’02 Sales Target : U$ 14 mn • Country / Est. : China / 2000 • Business : Shampoo / Soap / Cosmetics Sales • ’02 Sales Target : U$ 11 mn LG H&H R&D Shanghai ■ ■ • Country / Est. : China / 1998 • Business : Natural Materials R&D LG HAI ■ ■ ■ • Country / Est. : USA / 1990 • Business : Toothpaste / Detergent / Cosmetics Sales • ’02 Sales Target : U$ 15 mn ■ ■ ■ Hangzhou LG Cosmetics • Country / Est. : China / 1994 • Business : Cosmetics Production • ’02 Sales Target : U$ 15 mn LG Vina Cosmetics • Country / Est. : Vietnam / 1997 • Business : Cosmetics Production • ’02 Sales Target : U$ 16 mn Production JV (4) ■ Sales Subsidiary (2) ■ R&D Subsidiary (1) ■ 13/17

  14. Financial Highlights • Key Financials • Cash Flow

  15. Apr.’01 (Demerger) ’01 611 402 419 264 192 89 219% 138% 647 414 414 205 233 89 178% 88% 219% 178% 264 139% ’01 205 1,111 607 108 107 75 4,770 11.6% 32.2% 160 Key Financials Backed by strong business results, financial conditions are improving significantly through drastic debt reduction. [ Key Financials ] [ Borrowings and Interest ] (KRW bn) (KRW bn) ’02(E) ’01 ’02(E) Assets (Fixed Assets) Liabilities (Borrowings) Shareholders’ Equity (Capital Stocks) Debt/Equity Borrowings/Equity 685 417 398 160 287 89 139% 56% E B I T D A Interest Expenses EBITDA/Interest Expenses 158 14 11.0 135 21 6.4 Debt/Equity (%) Borrowings (KRW bn) ’02(E) Sales Gross Profit Operating Income Recurring Profit Net Profit E P S (KRW) R O A R O E 1,220 665 128 120 83 5,176 12.3% 29.3% Apr.’01 ’01 ’02(E) (Demerger) * Including pre-demerger 1Q results 15/17

  16. Cash Flow Net cash from business operating activities is expected at KRW 45bn in 2002. It will primarily be allocated to improving financial conditions, enhancing market leadership, and paying dividend. [ Usage ] [ Cash Flow ] (KRW bn) Improve Financial Condition Enhance Market Leadership Sustain High Dividend Payout Ratio * * Dividend for fiscal year 2001. 16/17

  17. Thank you! This presentation contains forward looking statements which are based on management’s assumptions and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in this presentation. Potential risks and uncertainties include, but are limited to, such factors as general economic conditions, foreign exchange fluctuations, and any change in the relevant laws and regulations.

  18. For a Better Life

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