New Initiative

Clean and Beautiful

Highlight

◆ started its operation as Rakhee Chemical Industry in 1947 and has evolved as ‘a company of the Korean people’ which offers wide range of products from personal/home care products(tooth- paste, soap, shampoo, detergents, and etc.) to cosmetics,

◆ played a role as a footstep of the constant growth of LG Group including LG Chemical with dominant market position and stable earning growth,

◆ recorded annual sales growth rate of 8% and maintained operating margin of 10% despite the financial crisis(1998~2000) of Korea owing to its continuous commercialization of differentiated products supported by extensive R&D activities and total logistics which integrate production, sales, and distribution,

◆ demerged from LG Chemical as a new entity specialized in household products and cosmetics,

◆ will elevate corporate value and maximize shareholder value as a dominant player with incomparable competitiveness, and

will pave the way towards a Super-Excellent Household & Health Care Company realizing customers’ dreams to be clean, healthy, and beautiful while enriching lives of consumers, shareholders, and employees, always with them.

LG Household & Heath Care

Ⅰ. The Company

Ⅱ. Vision

Ⅲ. Corporate Strategies and Growth Target

Ⅳ. Business Results and Strategies

Ⅴ. Financial Highlight

Outline

Ⅰ. The Company

Company Profile

Established in 1947, LG H&H has positioned itself as the largest company inthe domestic household products and cosmetics markets.

■ Brief History Yr 1947 Rakhee Chemical Industry established → Yr 1954 Produced ‘Lucky toothpaste’ → Yr 1966 Commercialized synthetic detergents → Yr 1969 Went public → Yr 1974 Changed corporate name to ‘Lucky’ and established Ulsan plant → Yr 1980 Built Cheongju Plant → Yr 1984 Commercialized cosmetics → Yr 1995 Changed corporate name to ‘LG Chemical’ → Yr 2001 Demerged from LG Chemical and established as LG H&H

■ Business Domains · Household Products : Personal Care, Home Care · Cosmetics : Basic Care, Make-up & Special Care

■ Plant : Cheongju Plant(household products, cosmetics), Ulsan Plant(household products)

■ Distribution Network : 14 warehouse centers, 180 sales agents for household products and 200 for cosmetics

■ Number of Employees : 3,400

■ Overseas Subsidiaries

· Manufacturing Subsidiary - 2 in China(toothpaste, cosmetics), 3 in Southeast Asia(shampoo, cosmetics)

· Sales Subsidiary - 1 in China and 1 in USA(household products, cosmetics)

· R&D Subsidiary - 1 in China(natural substance)

1/14

Business Domain

LG H&H engages in household products and cosmetics businesses, securing market presence as the dominant leader.

2/14

Household Products(Since 1954)

PersonalCare

Home Care

Basic Care

Cosmetics(Since 1984)

Make up & Special Care

&

■ Toothpaste■ Soap■ Shampoo/Conditioner■ Diaper

■ Laundry Detergents■ Kitchen Detergents(Dish-washing)■ Fabric Softener

■ Cleansing■ Essence■ Skin Toner/Softener■ Cream

■ Foundation, Powder■ Two Way Cake, Lipstick■ Whitening■ Wrinkle Care

‘LacVert’

‘ISA KNOX’

‘OHUI’

‘HERCYNA’

‘Retem’

• ‘Bamboo Salt Urdex’, ‘Clinx’• ‘Say’, ‘Sense’• ‘Double Rich’, ‘Novid’• ‘Maman’

• ‘One Scoop’• ‘Pon Pon’, ‘Safe’• ‘Sayfran’

Major Products Major Brands

Results

Over the past 3 years, sales has shown CAGR of 8.5% and recurring profit will surge to exceed krw 100 bn by 2001.

Sales & EBITDA

Sales

EBITDA

‘98 ‘99 ‘00 ‘01(E)

816884

965

1,062

(krw bn)

(krw bn)

Recurring Profit & Margin

Profit

Margin

‘98 ‘99 ‘00 ‘01(E)

(krw bn)

31

61

79

105

(%)

3/14

133

154

124121

8.19.9

3.7

6.9

Core Competence

From NPD* to logistics, LG H&H has been accumulating core competencies to create values and will further enhance them to be world-class.

4/14* NPD : New Product Development

NPD

- Operate self-designed NPD Process and 7 NPD principles

- Integrate tech and brand by MGPD

- Effectuate R&D with ‘Vitality Index’

Prompt development of new productssupported by intense R&D

Customer Relations

- Develop new services and sales promotions as a leading company

- Implement various programs to vitalize customer-oriented activities

(STAR, JUMP, CORE Program,and etc.)

Differentiated service offering andcustomer satisfaction enlargement

Marketing

- Brand management through deep analysis of customer and market

- Carry out inexpensive marketing as the market leader

- Combine customer data and improve advertising & promotion skills

Top-ranking brand equity and expanding big brand

Logistics

- Improve operation of infra system (for control of inventories and cost )

- Co-work with distributors

Win-Win strategy of ECR* with customers and cost reduction

* ECR: Efficient Consumer Response

Core Competencies

Ⅱ. VISION

Vision

With world best productivity and quality

With world class profitability

and financial structure

With highly qualified human resources

of utmost market value

Super Excellence

Super Excellence

A Super-Excellent Household & Health Care Company to enrich customers’ lives through creating new values

A Super-Excellent Household & Health Care Company to enrich customers’ lives through creating new valuesVisionVision

S S uper Excellence I I nformatization G G lobalization M M anagement by KnowledgeA A ction Leadership

RenovationRenovationSIGMA 21st

5/14

6 Sigma Knowledge ManagementKnowledge Management Leadership

- Best quality in product, service, management,and human resource

- Breakthrough in management innovation activities

- Developing world class core competency through knowledge systematization and reproduction- Founding new business and providing high value-added products and service

- Cultivating & taking real transformational leadership

- Embodying field-based and performance-oriented culture

SIGMA 21st - Long Term Corporate Renovation Program

Focus Action Plan

6/14

• Facilitate infra systems to share knowledge

• Accumulate best practice of key knowledge

◆ Knowledge management

◆ Core competence enhancement

◆ Rationalization

◆ Revitalization

• Combine 6 sigma with existing renovation programs

• Expand higher value added products and big brands

◆ Competitiveness of distribution enhanced by IT

◆ E-biz diversification

• Implement ECR/DB Marketing/ERP

• Launch beauty care business on the internet

◆ Profitable overseas business

◆ World-class management

• Focus on selective brands by region

• Upgrade MIS of overseas subsidiary and Global R&D network

• Operate CMU/AMU • Differentiate rewards based on performance

◆ High performing culture

◆ High motivating rewards

MM anagement by Knowledge

S S uper Excellence

I I nformatization

G G lobalization

AA ction Leadership

Ⅲ. Corporate Strategies & Objectives

LG H&H will challenge the changes in market situation with 3 principal strategies.

Strategies

Customer& Market ◆ Change in consumer behavior

- Diversification of customer needs - Enhanced buying power of teenagers and expansion of silver market

◆ Sluggish market growth due to depressed economy

◆ Drastic restructuring of distributors - Convenience stores on the increase - Supermarkets/Shops to be large-sized and form sales network

Competitors ◆ Aggressive operation of multinational companies

- Household products : P&G, Unilever - Cosmetics : Shiseido, Kanebo

◆ Local makers’ selective concentration - Pacific : cosmetics, shampoo, toothpaste - Aekyung : toothpaste, detergents, cosmetics

ⅰ) Focus on profitability and cash flows

ⅱ) Acquire globally-competitive core competencies

ⅲ) Develop higher-value-added products and new businesses

Strategies

7/14

Growth Target

LG H&H is aiming at sales of CAGR 11.6% and recurring margin of 13.1% by 2003.

Sales

01(E) 03(E)

1,062

1,340

38%

42%

62%58%

(krw bn)

CAGR 11.6%

RP(Margin)

150 (11.2%)

105 (9.9%)(krw bn)

8/14

Cosmetics

HouseholdProducts

165(12.3%)

123 (11.6%)OP(Margin)

Ⅳ. Business Results and Strategies

① Results

Sales of household products has increased by 6.2 % p.a. and LG H&H is maintaining No.1 M/S in the domestic market.

Household Products

Sales

98 99 00 01(E)

(krw bn)

541602 624

662

Market Share

L G 50.6

Pacific18.4

Aekyung16.8

Others

L G 36.5

Aekyung24.8

CJ20.9

Others

L G 45.6

Aekyung32.7

CJ14.4

Others

L G 41.0

DongSan12.5

Pacific 12.7

Others

L G 28.9

Pacific20.4

Aekyung16.5

Others

• Toothpaste

• Laundry Detergents

• Kitchen Detergents

• Soap

• Shampoo

☞ Nilson Data

(Year 2000)

9/14

Unilever

9.6

P&G15.0

- Develop hit brands and accumulate brand equity through NPD process and brand management

- Expand ECR system for new distribution channels

② Strategies

Backed by strong market position, LG H&H will elevate profitability and pioneer household products market with hit brands in a stream.

10/14

Secure leadership in major businesses and growing channels

- Develop new categories and focus on them · junior products, hair-dyes, body cleansers, anti-depilatory agents, and etc.

- Enhance wholesale distribution business · outsourcing of hit brands and strategic alliances with foreign/domestic companies

Seek growth engine for sustainable growth

- Activate TCR projects and accelerate production innovation

- Reduce manufacturing costs incessantly and allocate marketing expenses efficiently

Strengthen cost competitiveness

Cosmetics ① Results

Sales has surged by 13.3% p.a. despite the financial crisis in Korea and LG H&H’s status in cosmetics market has risen to be strong No.2 player.

Sales(krw bn)

98 99 00 01(E)

275282

341

400

Market Share

11/14

98 99 00

LG H&H→

Market Size

* Market exclusive of door-to-door sales

16.9%

15.0% 15.6%

1,6501,765

1,910

(krw bn)

LG H&H will strengthen growth momentum to be No.1 player in cosmetics byexpanding leading products and differentiating strategies by distribution channel.

② Strategies

12/14

Enhance product leadership Differentiate strategies by distribution channel

◆ Attain No.1 market shares

2000

Two-way Cake

2001

Wrinkle Care,

Whitening

2002

Lipstick

2003

Essence

◆ Increase ‘Big Brands’

◆ Cultivate ‘Blockbusters’

- LacVert or ISAKNOX to exceed krw100 bn in sales

- Over 10 brands to exceed krw 10 bn in sales respectively- ‘LacVert’, ‘ISAKNOX’, ‘HERCYNA’, ‘OHUI’, ‘Retem’, and etc.

◆ Shop

- Narrow the gap between No.1 player and LG H&H- Concentrate on ‘LacVert’ and ‘ISAKNOX’- Run clubs for shoppers

◆ Mass Market- Maintain No.1 market shares in new distributors such as large discount store- Focus on ‘Retem’

◆ Department Store

- Diversify customer DB marketing- Focus on ‘OHUI’

◆ Sales Agent

- Launch personalized marketing- Differentiate marketing by customer’s skin type

Ⅴ. Financial Status

Key Financials

(krw bn, except per share data)

2000 2001(E) 2002(E) 2003(E)

Assets 566 603 641 678

Liabilities 377 378 347 298

Shareholders' Equity 189 225 294 380

Capital Stocks 89 89 89 89

Sales 965 1,062 1,189 1,342

Operating Profit 95 123 142 165

Recurring Profit 79 105 125 150

(Recurring Margin) (8.1%) (9.9%) (10.5%) (11.2%)

Interest Expenses 27 19 17 15

Depreciation 28 30 33 35

EBITDA 134 154 174 199

Debt to Equity 200% 168% 118% 78%

Net Debt to Equity 124% 83% 48% 20%

Earning per Share 3,342 4,518 5,404 6,512

Net Assets per Share 10,370 12,438 16,320 21,179

13/14

Debt Reduction

Cash generated from business operations will be spent primarily on repayment ofborrowings.

Debt Reduction

(krw bn)

01.1Q 01(E) 02(E) 03(E)

264

186

141

77

Cash Flows

01(E) 02(E) 03(E)

128

163

88

49

139

8678

53

75

Cash-in

Cash-out

Net Cash Flows

(krw bn)

* Excluding 1Q results

*

14/14

Debt toEquity

Borrowings

219%

168%

114%

71%

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 not limited to, such factors

as general economic conditions, foreign exchange fluctuations, and any change in the relevant laws and regulations.